What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-23 · 628 added, 371 removed, 505 unchanged (66% of the section changed)

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Index to Consolidated Financial Statements

Report s of Independent Registered Public Accounting Fir ms

Reports of Independent Registered Public Accounting Firm (BDO USA, LLP;

San Diego, California;

PCAOB ID# 243 )

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

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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.

We have audited the accompanying consolidated balance sheets of Bionano Genomics, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years 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, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2022 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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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.

We conducted our audits 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.

Our audits 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.

Our audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of BioDiscovery, LLC.

As described in Note 14 to the Company’s consolidated financial statements, the Company acquired 100% of BioDiscovery, LLC.

for a purchase price of $74.8 million.

As a result of the acquisition, management was required to determine estimated fair values of the assets acquired, including certain identifiable intangible assets, and liabilities assumed.

We identified the determination of fair values of the identifiable intangible assets as a critical audit matter.

Management applied significant judgment in determining the unobservable inputs including revenue and expense forecasts and discount rates utilized.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Assessing the reasonableness of the revenue and expense forecasts through:

(i) evaluating historical performance of the target entity, and (ii) assessing financial projections against industry metrics and peer-group companies.

• Testing samples of opening balance sheet amounts by tracing to supporting documentation, including evaluating that the transactions were recorded in the appropriate period.

• Utilizing personnel with specialized knowledge and skill in valuation to assist in:

(i) assessing the reasonableness of the discount rates incorporated into the various valuation models, and (ii) performing independent estimates to evaluate the potential effect of changes in the significant assumptions.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2020.

San Diego, California

March 23, 2021

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

San Diego, CA

March 1, 2022

We have served as the Company’s auditor since 2017.

In 2020 we became the predecessor auditor.

BIONANO GENOMICS, INC.

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Cash and cash equivalents $ 24,571,000 $ 38,449,000

Investments 226,041,000 —

Accounts receivable, net of allowance for doubtful accounts of $ 690,000 and $ 2,119,000 as of December 31, 2021 and 2020, respectively

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Property and equipment, net 10,318,000 4,910,000

Operating lease right-of-use assets 6,691,000 —

Finance lease right-of-use assets, related party 3,926,000 —

Intangible assets, net 26,842,000 1,475,000

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Contract liabilities 684,000 416,000

Current portion of long-term debt — 20,084,945

Operating lease liability 1,467,000 —

Finance lease liability, related party 299,000 —

Total current liabilities 21,840,000 8,945,000

Operating lease liability, net of current portion 5,288,000 —

Finance lease liability, net of current portion, related party 3,642,000 —

Contingent consideration 9,066,000 —

Long-term debt, net of current portion — 16,325,000

Long-term contract liabilities 146,000 98,000

Other non-current liabilities — 44,479

Total liabilities $ 39,982,000 $ 25,368,000

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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

Preferred stock, $ 0.0001 par value;

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

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

289,602,000 and 189,953,000 shares issued and outstanding at December 31, 2021 and 2020, respectively

29,000 19,000

Additional paid-in capital 553,747,000 178,747,000

Accumulated deficit ( 216,119,000 ) ( 143,684,000 )

Accumulated other comprehensive loss ( 539,000 ) —

Total stockholders’ equity 337,118,000 35,082,000

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Consolidated Statements of Operations

Year Ended December 31,

Years Ended December 31,

Product revenue $ 11,695,000 $ 6,230,000

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Other expenses

Interest income 236,000 —

Interest expense ( 927,000 ) ( 2,519,000 )

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

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

Other expenses ( 6,943 ) ( 299,424 )

Total other expenses ( 2,525,836 ) ( 3,919,116 )

Other income (expenses) ( 59,000 ) ( 7,000 )

Total other income (expense) ( 1,051,000 ) ( 2,526,000 )

Loss before income taxes ( 78,152,000 ) ( 41,077,000 )

Provision for income taxes ( 29,193 ) ( 21,048 )

Benefit (provision) for income taxes 5,717,000 ( 29,000 )

Net loss $ ( 72,435,000 ) $ ( 41,106,000 )

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BIONANO GENOMICS, INC.

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Comprehensive Loss

Years Ended December 31,

$ ( 72,435,000 ) $ ( 41,106,000 )

Unrealized (loss) on investment securities

( 539,000 ) —

Comprehensive Loss $ ( 72,974,000 ) $ ( 41,106,000 )

See accompanying notes to the consolidated financial statements.

BIONANO GENOMICS, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

Capital Accumulated

Deficit Total

Deficit Accumulated Other Comprehensive Loss Total

Stockholders’ Equity

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Balance at January 1, 2020 34,274,000 $ 3,000 $ 106,188,000 $ ( 102,578,000 ) $ — $ 3,613,000

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 1,000 — 1,000 — — 1,000

Issue stock for covenant waiver 572,917 57 504,110 — 504,167

Reduce warrant exercise price for covenant waiver — — 45,787 — 45,787

Stock-based compensation expense — — 1,554,000 — — 1,554,000

Issue common stock, net of issuance costs 43,921,000 5,000 37,930,000 — — 37,935,000

Issue stock for employee stock purchase plan 88,000 — 40,000 — — 40,000

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

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

Issue stock for warrant exercises 104,628,000 10,000 28,635,000 — — 28,645,000

Issue stock for acquisition 6,168,000 1,000 4,099,000 — — 4,100,000

Net loss — — — ( 41,106,000 ) — ( 41,106,000 )

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

Balance at December 31, 2020 189,953,000 $ 19,000 $ 178,747,000 $ ( 143,684,000 ) $ — $ 35,082,000

Stock option exercises 479,000 — 602,000 — — 602,000

Issue stock for covenant waiver 872,601 87 299,913 — 300,000

Stock-based compensation expense — — 9,719,000 — — 9,719,000

Issue common stock, net of issuance costs 80,178,000 8,000 341,015,000 — — 341,023,000

Issue stock for warrant exercises 10,794,000 1,000 9,417,000 — — 9,418,000

Issue stock for employee stock purchase plan 300,000 — 89,000 — — 89,000

Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes 169,000 — — — — —

Issue stock for acquisition 7,729,000 1,000 14,158,000 — — 14,159,000

Stock warrant exercises

104,627,686 10,463 28,634,762 — 28,645,225

Net loss — — — ( 72,435,000 ) — ( 72,435,000 )

Other comprehensive loss — — — — ( 539,000 ) ( 539,000 )

Balance at December 31, 2021 289,602,000 $ 29,000 $ 553,747,000 $ ( 216,119,000 ) $ ( 539,000 ) $ 337,118,000

189,952,944 $ 18,995 $ 178,747,028 $ ( 143,683,849 ) $ 35,082,174

See accompanying notes to the consolidated financial statements.

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Consolidated Statements of Cash Flows

Year Ended December 31,

Years Ended December 31,

Operating activities:

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Depreciation and amortization expense 3,351,000 1,479,000

Amortization of financing lease right-of-use asset 19,000 —

Amortization of interest on securities 329,000 —

Non-cash interest expense 205,000 1,264,000

Non-cash lease expense 671,000 —

Settlement of interest on debt ( 1,235,000 ) —

Benefit from deferred income taxes ( 5,777,000 ) —

Stock-based compensation 9,719,000 1,554,000

Provision for bad debt expense — 1,809,000

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

Inventory impairment — 126,000

Loss on debt extinguishment 1,480,000 —

Loss on disposal of fixed assets — 11,918

Cost of leased equipment sold to customer 568,000 —

Client warranty exchange of fixed asset 539,000 —

Change in fair value of contingent consideration 66,000 —

Changes in operating assets and liabilities (net of assets acquired and liabilities assumed in acquisition)

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Lineagen acquisition, net of cash acquired — ( 2,450,000 )

BioDiscovery acquisition, net of cash acquired ( 49,086,000 ) —

Purchases of property and equipment ( 822,000 ) —

Construction in process ( 638,000 ) —

Payment of initial direct costs on lease ( 607,000 ) —

Purchase of available for sale securities ( 313,392,000 ) —

Sale and maturities of available for sale securities 86,483,000 —

Net cash used in investing activities ( 278,062,000 ) ( 2,450,000 )

Financing activities:

Proceeds from issuance of debt, net of issuance costs — 19,134,424

Repayment of term-loan debt ( 15,000,000 ) ( 5,000,000 )

Principal payments of financing lease liability ( 5,000 ) —

Proceeds from PPP Loan — 1,774,000

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Net cash provided by financing activities 336,111,000 61,902,000

Net increase in cash and cash equivalents 21,137,337 788,644

Net increase (decrease) in cash and cash equivalents ( 13,878,000 ) 21,138,000

Cash and cash equivalents at beginning of period 38,449,000 17,311,000

Cash and cash equivalents at end of period $ 24,571,000 $ 38,449,000

Years Ended December 31,

Supplemental disclosure of cash flow information

Cash paid for interest $ 1,910,000 $ 1,252,000

Cash paid for operating lease liabilities $ 447,000 $ —

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 $ —

Fair value of common stock issued related to Lineagen acquisition $ — $ 4,100,000

Fair value of common stock issued related to BioDiscovery acquisition $ 14,159,000 $ —

Contingent consideration related to BioDiscovery acquisition $ 9,000,000 $ —

Operating lease liabilities resulting from obtaining and modifying right-of-use assets $ 4,751,000 $ —

Transfer of instruments and servers from inventory into property and equipment, net $ 6,857,000 $ 4,224,000

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

Stock issued for services $ 15,000 $ —

Issue stock for covenant waiver $ — $ 300,000

Reduce warrant exercise price for covenant waiver $ — $ 45,787

Supplemental disclosure of cash flow information

Interest paid $ 1,251,535 $ 1,277,184

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

See accompanying notes to the consolidated financial statements.

BIONANO GENOMICS, INC.

Notes to the Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Organization and Operations

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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.

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

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.

(collectively, with its consolidated subsidiaries, the “Company”) is a provider of genome analysis solutions that can enable researchers and clinicians to reveal answers to challenging questions in biology and medicine.

The Company’s mission is to transform the way the world sees the genome through optical genome mapping (“OGM”) solutions, diagnostic services and software.

The Company offers OGM solutions for applications across basic, translational and clinical research.

Through its Lineagen, Inc.

(“Lineagen”) business, the Company also provides diagnostic testing for patients with clinical presentations consistent with autism spectrum disorder and other neurodevelopmental disabilities.

Through its BioDiscovery, LLC.

(“BioDiscovery”) business, the Company also offers an industry-leading, platform-agnostic software solution, which integrates next-generation sequencing and microarray data designed to provide analysis, visualization, interpretation and reporting of copy number variants, single-nucleotide variants and absence of heterozygosity across the genome in one consolidated view.

As of December 31, 2021, the Company had approximately $ 24.6 million in cash and cash equivalents, $ 226.0 million in short term investments, and working capital of $ 250.6 million as a result of common stock offerings executed in the quarters ended December 31, 2020, March 31, 2021, and September 30, 2021.

In February 2021, we applied for forgiveness of our PPP Loan of approximately $ 1.8 million, and in March 2021, the PPP Loan, including all accrued interest, was forgiven in full.

During the year ended December 31, 2021, the outstanding term loan under the Innovatus LSA 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, cash equivalents and available-for-sale securities 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.

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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.

If restrictions related to COVID-19 persist, the Company could see supply chain disruptions that impact its ability to produce its products and may cause the Company to make strategic determinations regarding, among other things, the cost and quality of the components and supplies it acquires.

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.

Despite reporting an increase in revenue for the year ended December 31, 2021 when compared to the same period in 2020, the Company believes travel restrictions and overall reduced activity had a continued negative impact on the Company’s financial results.

Given the continued evolution of the COVID-19 pandemic and the related complexities and uncertainties associated with the additional variants, 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.

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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.

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, stock-based compensation expense, and related valuation allowances.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates.

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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

assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the acquisition date.

Business Combinations

In August 2020, Alta Merger Sub, Inc., a wholly owned subsidiary of the Company (“Lineagen 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 “Lineagen Merger Agreement”).

Pursuant to the terms and conditions of the Lineagen Merger Agreement, Lineagen Merger Sub merged with and into Lineagen (the “Lineagen Merger”) whereupon the separate corporate existence of Lineagen Merger Sub ceased, with Lineagen continuing as the surviving corporation of the Lineagen Merger as a wholly owned subsidiary of the Company.

In October 2021, Starship Merger Sub I, Inc., a wholly owned subsidiary of the Company (“BioDiscovery Merger Sub I”), Starship Merger Sub II, LLC, a California limited liability company (“BioDiscovery Merger Sub II”), BioDiscovery, Inc., a California corporation (“Former BioDiscovery”), and Soheil Shams, solely in his capacity as the securityholders’ representative, entered into an Agreement and Plan of Merger (the “BioDiscovery Merger Agreement”), pursuant to which the Company agreed to acquire Former BioDiscovery.

Pursuant to the terms and conditions of the BioDiscovery Merger Agreement, BioDiscovery Merger Sub I merged with and into Former BioDiscovery (“BioDiscovery Merger I”), whereupon the separate corporate existence of BioDiscovery Merger Sub I ceased, with Former BioDiscovery continuing as the surviving corporation of BioDiscovery Merger I and a wholly owned subsidiary of the Company.

Immediately after BioDiscovery Merger I, pursuant to the terms and conditions of the BioDiscovery Merger Agreement, Former BioDiscovery merged with and into BioDiscovery Merger Sub II (“BioDiscovery Merger II”), whereupon the separate corporate existence of Former BioDiscovery ceased, with BioDiscovery Merger Sub II continuing as the surviving company of BioDiscovery Merger II and a wholly owned subsidiary of the Company.

Concurrent with BioDiscovery Merger II, BioDiscovery Merger Sub II changed its name to that of our current subsidiary, BioDiscovery, LLC.

The Company accounted for its acquisitions of Lineagen and BioDiscovery 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 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.

The Company estimated the fair value of identifiable intangible assets acquired with the assistance of 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.

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The Company believes that it is not exposed to any significant credit risk on cash and cash equivalents.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis.

Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

ASC 820, “Fair Value Measurements and Disclosures”, defines and establishes a framework for measuring fair value and expands disclosures about fair value measurements.

In accordance with ASC 820, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.

Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date.

Level 2 – Assets and liabilities whose values are based on quoted prices for similar attributes in active markets;

quoted prices in markets where trading occurs infrequently;

and inputs other than quoted prices that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Investment Securities

All investments have been classified as “available-for-sale” and are carried at fair value as determined based upon quoted market prices or pricing models for similar securities at period end.

Investments with contractual maturities less than 12 months at the balance sheet date are considered short-term investments.

Investments with contractual maturities beyond one year are also classified as short-term due to the Company’s ability to liquidate the investment for use in operations within the next 12 months.

Realized gains and losses on investment securities are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

The Company has not realized any significant gains or losses on sales of available-for-sale investment securities during any of the periods presented.

As all the Company’s investment holdings are in the form of debt securities, unrealized gains and losses that are determined to be temporary in nature are reported as a component of accumulated other comprehensive income (loss).

A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security.

Interest income is recognized when earned, as are the amortization of purchase premiums and accretion of purchase discounts on investment securities.

Concentrations

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Accounts Receivable

2021 December 31,

Accounts receivable, net:

Accounts receivable, trade $ 5,624,000 $ 4,894,000

Less allowance for doubtful accounts ( 690,000 ) ( 2,119,000 )

$ 4,934,000 $ 2,775,000

The Company extends credit to its customers in the normal course of business.

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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.

During the year ended December 31, 2021, the Company recorded a recovery of bad debt expense of $ 108,000 , which

is included in selling, general and administrative expenses.

During the year ended December 31, 2020, the Company recorded bad debt expense of $ 1.8 million which was 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 10.0% 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.

As of December 31, 2021, no customers met or exceeded 10% 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.

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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:

The components of inventories, net of reserve, are as follows:

Raw materials $ 745,000 $ 2,282,000

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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.

As a result of the Lineagen and BioDiscovery acquisitions the Company recorded intangible assets, which consist of trade name intangibles, customer relationship intangibles, and a developed technology intangible, which are 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.

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Substantially all of the Company's long-lived assets are located in the U.S.

Contingent Consideration

We recorded contingent consideration resulting from a business combination at its fair value on the acquisition date.

On a quarterly basis, we revalue this obligation and record any increase or decrease in fair value as an adjustment to the consolidated statement of operations.

Changes to the fair value of the contingent consideration obligation may result from changes to the

discount rate, the passage of time, changes in our estimate of the likelihood, or timing of achieving the criteria for payment of the contingent consideration.

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.

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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.

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During the years ended December 31, 2021 and 2020, the Company recognized no impairment losses on goodwill.

Beginning in 2021, the Company determines if an arrangement is, or contains, a lease at the inception of the arrangement.

Right-of-use (“ROU”) assets represent our right to use an underlying asset during the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheets, while finance leases are included in finance lease right-of-use assets and finance lease liabilities.

Lease assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term.

The Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments.

The ROU assets also include any prepaid or accrued lease payments and is adjusted for lease incentives and initial direct costs.

Lease terms may include options to extend or terminate the lease which are recognized when it is reasonably certain that the Company will exercise that option.

Leases with terms of 12 months or less are not recorded on the balance sheet.

Lease expense is recognized on a straight-line basis over the lease terms, or in some cases, the useful life of the underlying asset.

Variable lease payments are excluded from the measurement of ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

The Company accounts for the lease and non-lease components as a single lease component for all classes of underlying assets.

Deferred Rent

The Company’s operating leases include incentives in the form of rent abatements and leasehold improvement allowances, as well as fixed annual rent escalations.

The Company recognizes the aggregate rental expense, after considering incentives and stipulated rent escalations, on a straight-line basis over the lease term.

Prior to January 1, 2021, the difference between rent expense and amounts paid under the lease was recorded as deferred rent in the accompanying consolidated balance sheets.

Revenue Recognition

Revenue by Source

Year Ended December 31,

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,

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 generates revenue primarily from the sale of products and services.

The Company considers revenue to be earned when all of the following criteria are met:

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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

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.

The Company recognizes a receivable when we have an unconditional right to payment, which is generally at the time of delivery of software, consumables and instruments, including any extended warranties, or at the time 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.

Revenue is recorded net of discounts and sales tax.

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.

Employee sales commissions are recorded as selling, general and administrative expenses when incurred as the amortization period for such costs, if capitalized, would have been one year or less.

Product revenue recognition

Product revenue consists of sales of our Saphyr system and related consumables.

These products are sold primarily through a direct sales force, and within international markets, there is more reliance on distributors.

As such the Company's performance obligation related to product sales is satisfied at a point in time.

Rental revenue related to the reagent rental program recognized over-time totaled $ 0.2 million and $ 0.1 million during the years ended December 31, 2021 and 2020, respectively.

Service and other revenue recognition

Service and other revenue primarily consist of revenue from diagnostic testing services, the sale of software, and license maintenance agreements, and support, repair and maintenance services and extended warranties on Saphyr systems.

Revenue from the completion of diagnostic testing services is initially recorded at the estimated consideration the Company expects to receive from contractual and non-contractual payors, and is subject to adjustment based on the amount actually collected.

The Company performs its obligation under a contract with a customer by processing diagnostic tests and communicating the test results, which the Company has determined is the point at which control is transferred to the customer for revenue recognition purposes.

Revenue from the sale of software is recognized at the point-in-time the software license is transferred to the customer, or for hosting arrangements, on a usage basis as the customer processes the number of genetic samples purchased with the software.

Revenue related to license maintenance agreements is recognized over-time based on the contract term.

Revenue recognized over-time related to license maintenance agreements totaled $ 0.1 million during the year ended December 31, 2021.

There was no revenue recognized related to license maintenance agreements during the year ended December 31, 2020.

Service revenue related to repairs and customer sample evaluations is recognized as the services are performed based on the specific nature of the service.

Warranty and maintenance revenue recognized over-time totaled $ 0.6 million and $ 0.5 million during the years ended December 31, 2021 and 2020, respectively, which was included in service and other revenue.

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.

As of December 31, 2021, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was $ 0.8 million.

These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations, as well as obligations related to software under hosting arrangements.

The Company expects to recognize approximately 82.4 % of this amount as revenue in 2022, 13.8 % in 2023, 2.3 % in 2024 and 1.5 % in 2025 and thereafter.

We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred.

Warranty expense is recorded as a component of cost of product revenue.

The Company's liability for product warranties provided under its agreements with customers was $ 0.2 million and $ 0.2 million as of December 31, 2021 and 2020, respectively.

Warranty expense recorded in cost of goods sold totaled $ 0.5 million and $ 0.4 million during the years ended December 31, 2021 and 2020, respectively.

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.

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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.

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.

The Company recognized revenue of $ 0.4 million and $ 0.4 million during the years ended December 31, 2021 and 2020, respectively, which was included in the contract liability balance at the end of the previous year.

Distributor Transactions

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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.

To-date, the Company 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.

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.

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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

would be anti-dilutive to the net loss per share.

Restricted stock is treated as outstanding for accounting purposes.

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,

Years Ended December 31,

Common stock options 12,765,000 5,290,000

Common warrants 4,356,000 15,174,000

Unvested restricted stock 5,006,000 —

RSUs 361,000 —

PSUs 290,000 —

Total 22,778,000 20,464,000

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.

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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.

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 August 2020, the FASB issued ASU No.

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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.

Fair Value Measurements

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.

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASC 842”) which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements.

ASC 842 establishes a right-of-use model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

ASC 842 also requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The standard was adopted

on January 1, 2021, as the Company lost its status as an Emerging Growth Company effective December 31, 2021, and therefore was required to adopt the standard for the year ending December 31, 2021, using the modified retrospective method.

Under this transition method, the Company recognized and measured leases that existed at the adoption date in the consolidated balance sheet as of January 1, 2021.

In connection with the adoption of ASC 842, the Company elected the package of practical expedients requiring no reassessment of whether any expired or existing contracts contain leases, the lease classification of any expired or existing leases, or initial direct costs for any existing leases.

The Company also made accounting policy elections not to apply the recognition requirements under ASC 842 to any short-term leases and to account for each separate lease and associated non-lease components as a single lease component for all the Company’s leases.

Adoption of ASC 842 resulted in recognition of operating lease assets and liabilities of approximately $ 2.1 million and $ 2.1 million, respectively, as of January 1, 2021, related to the lease of office and laboratory space.

The comparative prior period information continues to be reported under ASC 840.

The adoption of this new accounting standard resulted in increased qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases.

For further details, see Note 11, Commitments and Contingencies.

The adoption of the new standard did not materially impact the Company’s consolidated results of operations or cash flows.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities From Contracts With Customers.

This ASU requires an acquirer to account for revenue contracts acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

Prior to ASU 2021-08, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts, at fair value on the acquisition date.

The guidance is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively to business combinations occurring on or after the effective date.

Early adoption is permitted.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company adopted ASU 2021-08 on October 1, 2021, and applied the ASU prospectively to its acquisition that occurred in 2021.

Revenue from Contracts with Customers

Revenue by Source

Years Ended December 31,

Instruments $ 5,887,000 $ 3,085,000

Consumables 5,808,000 3,145,000

Total product revenue 11,695,000 6,230,000

Services and other 6,286,000 2,273,000

Total revenue $ 17,981,000 $ 8,503,000

Revenue by Geographic Location

Years Ended December 31,

North America $ 9,329,000 52 % $ 4,489,000 53 %

EMEIA 5,604,000 31 % 3,163,000 37 %

Asia Pacific 3,048,000 17 % 851,000 10 %

Total $ 17,981,000 100 % $ 8,503,000 100 %

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, 2021 and 2020, sales in the United States represented 46 % and 42 % of revenues, respectively.

During the year ended December 31, 2021, sales in China accounted for 11 % of total revenue.

No other countries represented greater than 10% of revenue during the years ended December 31, 2021 and 2020.

Investments and 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.

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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.

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.

The carrying value of the Company’s long-term debt approximates its fair value due to the market rate of interest which was determined to be a Level 2 measurement.

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.

The Company holds investment securities that consist of highly liquid, investment grade debt securities.

The Company determines the fair value of its investment securities based upon one or more valuations reported by its investment accounting and reporting service provider.

The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service.

Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis in the Consolidated Balance Sheets:

December 31, 2021

Total Fair Value and Carrying Value on Balance Sheet Fair Value Measurement Category

Level 1 Level 2 Level 3

Commercial Paper $ 100,860,000 $ — $ 100,860,000 $ —

Corporate Notes/Bonds 125,181,000 — 125,181,000 —

Total Investments:

$ 226,041,000 $ — $ 226,041,000 $ —

Money Market Funds $ 11,126,000 $ 11,126,000 $ — $ —

Contingent consideration $ 9,066,000 $ — $ — $ 9,066,000

Money Market Funds are classified as cash equivalents on the balance sheet.

The fair value of the contingent consideration liability is reassessed on a quarterly basis using the income approach.

Assumptions used to estimate the acquisition date fair value of the contingent consideration include the probability of achieving certain milestones and a discount rate of 3.2 %.

The fair value measurement of the contingent consideration is based on significant inputs not observed in the market (Level 3 inputs).

Significant inputs used in the measurement include probabilities of achieving the remaining milestones, which depend on the milestone risk profile.

The change in fair value of the contingent consideration during the year ended December 31, 2021 was due to the passage of time.

Changes in estimated fair value of contingent consideration liability in the year ended December 31, 2021 is as follows:

Consideration

Balance as of December 31, 2020

Liability recorded as a result of current period acquisition 9,000,000

Change in estimated fair value, recorded in selling, general and administrative expenses 66,000

Cash payments —

Balance as of December 31, 2021

The Company did not hold any investments as of December 31, 2020.

As of December 31, 2021, the Company held 57 securities in an unrealized loss position for a period of less than 12 months resulting in an unrealized loss of $ 0.5 million included in other comprehensive income during the year ended December 31, 2021.

None of the Company’s available-for-sale investment securities were in a material unrealized loss position at December 31, 2021.

As such, the Company has not recognized any impairment in its financial statements related to its available-for-sale investment securities.

During the year ended December 31, 2021, the Company received proceeds of $ 86.5 million relating to sales and maturities of its available for sale securities, and recognized a loss of $ 8,000 in other income relating to the sale of these securities.

Amounts are reclassified out of accumulated other comprehensive income into earnings using the specific identification method.

As of December 31, 2021, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities:

Commercial Paper Corporate Notes/Bonds

Amortized Cost

Unrealized loss

Amortized Cost

Unrealized loss

Less than 1 year $ 100,929,000 $ ( 69,000 ) $ 41,173,000 $ ( 61,000 )

Due after one year through five years — — 84,478,000 ( 409,000 )

Total $ 100,929,000 $ ( 69,000 ) $ 125,651,000 $ ( 470,000 )

Included in interest income for the year ended December 31, 2021 was interest income related to the Company’s available for sale securities of $ 0.4 million.

All interest income related to the available for sale securities in 2021 related to year ended December 31, 2021.

All available-for-sale securities are classified as current assets, even if the maturity when acquired by the Company is greater than one year due to the ability to liquidate within the next 12 months.

Prepaid Expenses and Other Current Assets

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Prepaid insurance 1,461,000 642,000

Interest receivable 387,000 —

Other current assets 2,348,000 462,000

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$ 10,318,000 $ 4,910,000

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.

For the years ended December 31, 2021 and 2020, the Company recorded depreciation expense of $ 1.9 million and $ 1.4 million, respectively, which includes an allocation to cost of revenue of $ 0.9 million, $ 0.5 million, and $ 41,000 respectively.

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 )

Intangible assets that are subject to amortization consisted of the following at December 31, 2021 and 2020:

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Trade name $ 1,630,000 $ ( 210,000 ) $ 1,420,000 $ 630,000 $ ( 42,000 ) $ 588,000

Customer relationships 3,950,000 ( 378,000 ) 3,572,000 950,000 ( 63,000 ) 887,000

Developed technology 22,800,000 ( 950,000 ) 21,850,000 — — —

Intangibles, net $ 28,380,000 $ ( 1,538,000 ) $ 26,842,000 $ 1,580,000 $ ( 105,000 ) $ 1,475,000

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.

The Company recorded amortization expense for intangible assets of $ 1.4 million and $ 0.1 million for the years ended December 31, 2021 and 2020 respectively, in selling, general and administrative expenses.

The customer relationships and trade name intangibles from the Lineagen acquisition are both being amortized on a straight-line basis over their estimated useful lives of 5 years, and have remaining amortization periods of 3.6 years.

The customer relationships, developed technology and trademark intangibles from the BioDiscovery acquisition are being amortized on a straight-line basis over their estimated useful lives of 5 years, and have remaining amortization periods of 4.8 years.

Future amortization expense of intangible assets is as follows:

2025 and thereafter 210,667

2022 $ 5,676,000

2023 5,676,000

2024 5,676,000

2025 5,571,000

2026 4,243,000

Total $ 26,842,000

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Compensation expenses $ 4,529,000 $ 3,251,000

Deferred rent — 266,282

Goods received not invoiced 1,073,000 567,000

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Professional fees and royalties 288,000 247,000

Warranty liabilities 175,000 113,000

Interest — 98,000

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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.

On April 17, 2020, the Company received the PPP Loan proceeds of approximately $ 1.8 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (the “SBA”).

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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.

A gain on forgiveness of Paycheck Protection Program loan of $ 1.8 million was recognized during the year ended December 31, 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, “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.

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 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.

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 % 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:

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

As of December 31, 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 Company recorded a loss on debt extinguishment of $ 2.1 million.

The LSA also provided 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.

The LSA was collateralized by substantially all of the Company’s assets, including its intellectual property.

The LSA required 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.

The LSA also included 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.

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 0.2 million shares of its common stock at an exercise price of $ 4.63 per share, which has a term of 10 years.

These warrants were equity classified and their respective fair value was recorded as a discount to the debt.

The warrants were exercised during the year end December 31, 2021.

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.

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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.

Also pursuant to the waiver letter, as consideration for the prospective breach of a liquidity covenant, the Company agreed to issue to Innovatus 0.6 million shares of the Company's common stock.

As a result of the amendment and shares issued, the Company recognized $ 0.6 million 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.

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(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

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.

For example, the Second Amendment provides for a cure 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 $ 0.2 million and a prepayment fee of $ 0.1 million, 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 10 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.

In addition, the Company issued 0.9 million shares of its common stock to Innovatus to satisfy the $ 0.2 million waiver fee and the $ 0.1 million prepayment fee due under the Second Amendment.

As a result of the amendment and shares issued, the Company recognized $ 0.3 million 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.

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As of December 31, 2020, the Company was in compliance with the covenants under the Innovatus LSA.

The Innovatus LSA was paid in full and terminated in 2021.

Summary of Debt Obligations

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

2020 December 31,

The Company had no debt as of December 31, 2021.

The carrying value of the Company’s debt as of December 31, 2020 was as follows:

Term Loans $ 15,981,000

Revolver — 1,497,955

PPP Loan 1,775,000

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Total carrying value of debt $ 16,326,000

As of December 31, 2020, future minimum scheduled principal payments for the Term Loans are as follows:

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.

Stockholders’ Equity

Stockholders’ Equity and Stock-Based Compensation

The Company is currently authorized to issue up to 400 million shares of $ 0.0001 par value common stock.

All issued shares of common stock are entitled to vote on a 1 share/1 vote basis .

Preferred Stock

The Company is currently authorized to issue up to 10 million shares of $ 0.0001 par value preferred stock.

No preferred stock has been issued to date.

Sale of Common Stock

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;

• 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.

In April 2020, the Company completed an underwritten public offering of 16.9 million shares of its common stock and, to certain investors, pre-funded warrants to purchase 37.7 million shares of its common stock, and accompanying common warrants to purchase up to an aggregate of 54.5 million 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.

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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 33.4 million shares of common stock, including 4.4 million 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.

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 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.

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

The gross proceeds were approximately $ 101.8 million before deducting underwriting discounts and commissions and other offering expenses of $ 0.3 million.

On January 25, 2021, the Company completed an underwritten public offering of 38.3 million shares of common stock, including 5.0 million 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 to us were approximately $ 230.0 million before deducting underwriting discounts and commissions and other offering expenses of $ 0.4 million.

Shelf Registration Statements;

Ladenburg and Cowen At-the-Market Facilities

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 million of the Company’s securities, including up to $ 40 million of common stock pursuant to an At Market Issuance Sales Agreement, with Ladenburg Thalmann & Co.

acting as sales agent (the “Ladenburg ATM”).

During October through December 2020, the Company sold 27.0 million 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 $ 0.6 million.

In January 2021, the Company sold an additional 6.3 million 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 $ 0.4 million.

The Company terminated the Ladenburg ATM in March 2021.

On January 19, 2021, the Company filed an automatically effective shelf registration statement on Form S-3 with the SEC as a “well-known seasoned issuer,” allowing for the Company to issue an indeterminate number or amount of its securities from time to time in one or more offerings.

On March 23, 2021, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) 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 “Cowen ATM”) .

The Company agreed to 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.

In August and September 2021, the Company sold 2.3 million shares of common stock under the Cowen ATM at an average share price of $ 6.15 per share, and received gross proceeds of approximately $ 13.9 million before deducting offering costs of $ 0.6 million .

Stock Warrants

A summary of the Company’s warrant activity for the year ended December 31, 2021 was as follows:

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Outstanding at January 1, 2020 24,406,000 $ 1.76 4.82 $ 7,933,000

32,023,503 $ 0.57 4.84

( 11,678,458 ) $ 0.07 $ 10,457,345

( 1,502 ) $ 59.90

Granted 95,396,000 0.22 4.28 —

Exercised ( 104,628,000 ) 0.28 — 56,780,000

Canceled — 59.90 — —

Outstanding at December 31, 2020

15,174,000 $ 2.34 3.76 $ 26,841,000

( 104,627,695 ) $ 0.28 $ 56,779,739

( 241 ) $ 59.90

Granted — — — —

Exercised ( 10,794,000 ) 0.88 58,191,000

Canceled ( 24,000 ) 3.29 — —

Outstanding at December 31, 2021

4,356,000 $ 5.96 1.76 $ 785,000

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 .

In March 2020, the Company entered into a Warrants Amendment and Agreement with certain holders of warrants that were exercisable for 3.2 million shares of common stock.

The agreement reduced the exercise price of existing warrants from $ 0.86 per share to $ 0.75 per share, which were exercised following the amendment, in addition to issuing 3.2 million new warrants at an exercise price per share of $ 1.06 that were exercised in the year ended December 31, 2021.

2018 Equity Incentive Plan

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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.

The Company has initially reserved 1.5 million shares of common stock for issuance under the 2018 Plan, which is the sum of (1) 1.0 million 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.

As of December 31, 2021, 6.2 million shares of common stock were authorized for future grants under the 2018 Plan.

2020 Inducement Plan

In August 2020, the Company’s Board and its stockholders adopted the 2020 Inducement Plan and amended by the Board on October 6, 2021.

Under the 2020 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 2.1 million shares of common stock for issuance under the 2020 Plan.

An additional 1.0 million of shares of common stock was reserved for issuance under the Inducement Plan for a total of 3.1 million shares pursuant to an amendment to the Inducement Plan approved by the board of directors on October 6, 2021.

As of December 31, 2021, there were approximately 0.7 million shares of common stock authorized for future grants under the 2020 Plan.

Stock Options

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Shares of Stock under Stock Options Weighted-

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, 2020

5,290,000 $ 1.91 8.7 $ 10,178,000

Granted 9,108,000 6.54

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Outstanding at December 31, 2021

Vested and expected to vest at December 31, 2020 5,261,148 $ 1.91 8.7 $ 10,127,495

12,765,000 4.97 8.9 7,891,000

Vested and exercisable at December 31, 2021

3,389,000 $ 3.53 8.1 $ 4,428,000

The weighted-average grant date fair value of stock option grants during the years ended December 31, 2021 and 2020 was $ 4.35 and $ 0.44 , respectively.

The total intrinsic value of the stock options exercised during the years ended December 31, 2021 and 2020 were $ 2.5 million and $ 7,000 , 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.

Restricted Stock

A restricted stock award in the amount of 5.0 million shares with a grant date fair value of $ 5.20 a share was granted as part of the acquisition of BioDiscovery.

One-third of the Restricted Shares will vest on October 18, 2022 and one-twelfth of the Restricted Shares shall vest every three months following October 18, 2022, subject to continuous service of a key employee.

The weighted average remaining contractual term for the restricted stock is 2.8 years as of December 31, 2021.

The fair value of the restricted stock award is based on the market value of common stock as of the date of grant and is amortized to expense over the respective vesting period or the service period.

Restricted Stock Units and Performance Stock Units

The Company issues restricted stock units (RSU) and performance stock units (PSU).

The Company grants restricted stock pursuant to the 2018 Stock Plan and satisfy such grants through the issuance of new shares.

RSUs are share awards that, upon vesting, will deliver to the holder shares of our common stock.

RSUs generally vest over a two-year period with equal vesting annually.

We issue PSUs for which the number of shares issuable at the end of a four-year performance period is based on our performance relative to specified revenue targets and continued employment through the vesting period.

Restricted stock activity was as follows:

Stock Units Weighted- Average Grant Date Fair Value per Share

Outstanding at January 1, 2021 — $ —

Granted 540,000 4.75

Released ( 179,000 ) 4.76

Forfeited — —

Outstanding at December 31, 2021 361,000 $ 4.74

The total intrinsic value of the RSUs that vested was $ 0.9 million during fiscal 2021, determined as of the date of vesting.

The weighted average remaining contractual term for the RSUs is 1.4 years as of December 31, 2021.

Performance stock activity was as follows:

Stock Units Weighted- Average Grant Date Fair Value per Share

Outstanding at January 1, 2021 — $ —

Granted 290,000 4.74

Forfeited — —

Outstanding at December 31, 2021 290,000 $ 4.74

The weighted average remaining contractual term for the PSUs is 3.4 years as of December 31, 2021

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense for the years ended December 31, 2021 and 2020 was as follows:

Year Ended December 31,

Years Ended December 31,

Research and development $ 3,531,000 $ 375,000

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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,

Years Ended December 31,

Risk-free interest rate 1.1 % .6 %

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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

simplified method for estimating the expected term as provided by the Securities and Exchange Commission.

As a result, the Company uses the 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.

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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.

Unrecognized Stock-Based Compensation Expense

As of December 31, 2021, the unrecognized compensation expense for all non-vested share-based awards was $ 59.2 million and is expected to be recognized as expense over a weighted-average period of 3.1 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.

A total of 0.2 million shares of common stock were initially reserved for issuance under the ESPP.

or (3) a lesser number of shares as determined by the Board.

As of December 31, 2021, 0.2 million shares of common stock were authorized for future grants under the ESPP.

Executive Option Grants

On February 15, 2022, the compensation committee of the Company’s board of directors granted various executive officers stock options to purchase an aggregate of 4.3 million shares of common stock at an exercise price of $ 2.18 a share, in each case with an effective grant date and vesting commencement date of February 15, 2022 (the “Grant Date”).

These stock option grants were issued from the 2018 Stock Plan.

The shares subject to the option shall vest monthly over 48 months beginning on the one-month anniversary of the Grant Date, such that the option shall be fully vested and exercisable on the four-year anniversary of the Grant Date.

Commitments and Contingencies

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:

Operating leases

The Company leases approximately 35,823 square feet of office, laboratory, and manufacturing space in two buildings at our headquarters in San Diego, California, with the lease for all rented space expiring December 31, 2025.

In December 2021, the Company executed a new lease for approximately 11,978 additional square feet square feet of office and laboratory space in San Diego, California that expires in January 2026.

In January 2022, the Company executed a new lease for an additional 5,278 square feet of office and laboratory space in San Diego, California that expires in January 2026.

Rent payments for the additional space are $ 16,000 each month through December 2022, and increases annually according to the Company’s lease agreement.

In August 2020, through the acquisition of Lineagen, the Company obtained a lease for approximately 9,710 square feet of office space in a Salt Lake City, Utah under a non-cancelable operating lease that expires in December 2026.

Finance lease

In October 2021, through the acquisition of BioDiscovery, the Company obtained a finance lease of 4,786 square feet of office space in El Segundo, California that expires in February 2041.

The portion of the future payments designated as principal repayment and related interest was classified as a finance lease obligation on our consolidated balance sheets.

Refer to Note 15.

Related Party Transactions for additional information.

Supplemental information

For all leases, the Company has the ability to enter into renewal negotiations, prior to the lease end date, with no specific terms.

At this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal period has been excluded from the aforementioned ROU asset and lease liability measurements.

The leases are subject to variable charges for common area maintenance and other costs that are determined based on actual costs and includes certain lease incentives such as tenant improvement allowances.

The base rent for the leases is subject to an annual increase each year.

Rent expense is being recognized on a straight-line basis over the term of the lease.

The Company’s estimated incremental borrowing rate of 7.1 % was used in its present value calculations as the operating and finance leases do not have a stated rate and the implicit rate was not readily determinable.

In determining the incremental borrowing rate, the Company considered the interest rate of the Term Loans as well as publicly available data for discount rates used by peer companies.

Supplemental information pertaining to the Company’s leases in which the Company is lessee for the year ended December 31, 2021 is as follows:

Cash payments included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 447,000

Operating cash flows from finance leases $ 47,000

Financing cash flows from finance leases $ 5,000

Weighted-average remaining lease term:

Operating leases 4.1 years

Finance leases 19.2 years

Weighted-average discount rate:

Operating leases 7.1 %

Finance leases 7.1 %

Noncash lease liabilities resulting from obtaining right-of-use assets

Operating leases $ 4,751,000

The following table provides the components of the Company’s lease cost:

Year Ended December 31,

Operating leases

Operating lease costs 1

$ 1,118,000 $ 887,000

Variable lease costs 386,000 —

Total rent expense 1,504,000 887,000

Finance lease

Amortization of right of use assets 19,000 —

Interest on lease liabilities 47,000 —

Total finance lease costs 66,000 —

Gross sublease income ( 18,000 ) ( 422,000 )

Total lease costs $ 1,552,000 $ 465,000

1 Rent expense and sublease income for the year ended December 31, 2020 reflects accounting treatment under ASC 840.

The future minimum payments under non-cancellable operating and finance leases as of December 31, 2021, are as follows:

Operating Leases Finance Lease

2022 $ 1,881,000 $ 314,000

2023 1,950,000 322,000

2024 2,011,000 330,000

2025 2,088,000 338,000

2026 232,000 346,000

Thereafter — 5,949,000

Total future lease payments 8,162,000 7,599,000

imputed interest ( 1,407,000 ) ( 3,658,000 )

Total lease liabilities $ 6,755,000 $ 3,941,000

Prior to the adoption of ASC Topic 842, future minimum rental payments under operating leases as of December 31, 2020, were as follows:

Year Ending December 31, Total Payments

2021 $ 734,000

2025 and thereafter 729,000

Total minimum lease payments $ 3,464,000

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 Company has a contractual commitment with a supplier to purchase $ 0.3 million of products every month for an initial term of two years beginning in May 2021 until May 2023.

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.

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.

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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.

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.

Contingent Consideration

As part of the Merger Agreement related to the acquisition of BioDiscovery, the Company agreed to pay a milestone payment of $ 10.0 million in cash contingent on the achievement of a commercial milestone within eighteen months of the acquisition date.

The Company determined the fair value of the milestone consideration using a scenario-based technique, as the trigger for payment is event driven.

The outcome of the milestone consideration is binary, meaning the milestone is either achieved or not achieved, and the only other variable factor is the timing of when the milestone is achieved.

The Company determined it is highly likely that the milestone will be achieved and therefore used a 95% probability factor which is applied to the $ 10.0 million milestone consideration.

Based on these valuation assumptions, a contingent liability of $ 9.0 million was recognized on the acquisition date.

As of December 31, 2021, the fair value of the milestone consideration was determined to be $ 9.1 million.

The change in fair value of $ 0.1 million was recorded in selling, general and administrative expense in the consolidated statement of operations for the year ended December 31, 2021.

The domestic and foreign components of income (loss) from continuing operations are as follows:

Years Ended December 31,

Year Ended December 31,

Domestic $ ( 78,356,000 ) $ ( 41,191,000 )

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The provision for domestic and foreign income taxes is as follows:

Years Ended December 31,

Year Ended December 31,

Federal $ — $ —

Foreign 39,000 24,000

State and local 21,000 5,000

Income tax provision $ 29,193 $ 21,048

Total current income tax provision (benefit) $ 60,000 $ 29,000

Federal $ ( 4,055,000 ) $ —

State and local ( 1,722,000 ) —

Total deferred income tax provision (benefit) ( 5,777,000 ) —

Income tax provision (benefit) $ ( 5,717,000 ) $ 29,000

Reconciliations of the income tax computed at the federal statutory tax rate to the expense for income taxes are as follows:

Year Ended December 31,

Income taxes at statutory rate $ ( 16,413,000 ) $ ( 8,626,000 )

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Change in valuation allowance 12,879,000 9,816,000

Section 162(m) 966,000 —

Other permanent differences ( 165,000 ) ( 67,000 )

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Other ( 16,000 ) ( 4,000 )

Income tax expense $ 29,193 $ 21,048

Income tax expense (benefit) $ ( 5,717,000 ) $ 29,000

Significant components of the Company’s deferred tax assets at December 31, 2021 and 2020 are as follows:

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Research and development credits 6,911,000 5,671,000

Stock-based compensation 849,000 450,000

ASC 842 - lease liability 2,517,000 —

Other 1,457,000 2,148,000

Total 70,272,770 48,194,877

Total gross 93,133,000 70,623,000

Deferred tax liabilities:

Amortization ( 7,478,000 ) ( 350,000 )

ASC 842 - ROU asset ( 2,504,000 ) —

valuation allowance ( 83,151,000 ) ( 70,273,000 )

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The remaining federal tax loss carryforwards of $ 164.3 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,

respectively.

As of December 31, 2021, the Company also has federal and California research credit carryforwards of $ 6.7 million and $ 6.1 million, respectively.

The federal research credit carryforwards begin to expire in 2027 unless previously utilized.

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A valuation allowance of $ 83.2 million, and $ 70.3 million as of December 31, 2021, and 2020, 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.

The Company acquired BioDiscovery, LLC.

an entity designated for income tax purposes as a corporation in a plan of reorganization within the meaning of Section 368(a)(1)(A) on October 18, 2021.

Under ASC 805-740, the Company recorded deferred tax liabilities of $ 5.8 million related to customer lists, patents/trademarks, developed technology, and fixed assets as part of the business combination.

As the deferred tax liability recorded in the business combination constitutes a source of future taxable income, the Company recorded a decrease to its valuation allowance against its deferred tax assets of $ 5.8 million as a deferred income tax benefit.

Utilization of the net operating losses and R&D credit carryforwards are 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 will 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.

The Company last performed a 382 study during 2013 and since this date there have been changes in ownership that will limit the Company's ability to utilize the net operating loss and R&D credit carryforwards.

The Company is in the process of refreshing its 382 study but the results of that analysis are unknown as of the issuance date of these consolidated financial statements.

The completion of the 382 study could result in material reductions to deferred tax assets and related valuation allowance disclosed above.

However, the Company had not utilized any of the net operating losses and R&D credits during the years ended December 31, 2021 and 2020.

Reconciliations of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, are as follows:

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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, 2021 and 2020.

The Company is subject to taxation in the United States and the United Kingdom.

The Company is subject to taxation in the United States, the United Kingdom and China.

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.

Employee Benefits

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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.

Acquisition of Lineagen

The Company expensed matching contributions of $ 0.83 million and $ 0.46 million for the years ended December 31, 2021 and 2020, respectively.

Lineagen Acquisition

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.

Paul, Ph.D., solely in his capacity as exclusive agent and attorney-in-fact of the security-holders of Lineagen, entered into the Lineagen Merger Agreement.

Pursuant to the terms and conditions of the Lineagen 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.

Pursuant to the terms of the Lineagen 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).

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”) were held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Lineagen Merger Agreement.

Also as consideration for the Merger, pursuant to the Lineagen 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 Lineagen 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.

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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:

During the fourth quarter of 2020, the Company recorded a $ 0.2 million 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 2021.

The following is the purchase price for the acquisition of Lineagen:

Cash (a) $ 1,940,000

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Shares common stock issued as consideration (c) 6,167,510

Estimated shares of common stock to be returned to the Company (c) ( 138,247 )

Shares of common stock 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

Value of common stock consideration (c) $ 4,100,000

Total 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.

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:

(c) The total number of shares of the Company’s common stock issued as consideration for the Merger was 6,167,510 shares.

The total number of Merger Shares was subject to adjustment for cash, accounts receivable, unpaid indebtedness, unpaid transaction expenses and certain other liabilities of Lineagen.

The value of the common stock consideration and the total purchase price incorporated the return of 138,247 Escrowed Shares to the Company.

The total 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

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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.

The Company recognized approximately $ 1.5 million of acquisition-related transaction 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.

As the Company began integrating Lineagen’s operations with its existing operations during the fourth quarter of 2020, it is not practical or meaningful to distinguish Lineagen’s expenses or net income or loss from that of the combined operations for 2020.

BioDiscovery Acquisition

In October 2021, the Company completed the acquisition of BioDiscovery, LLC., pursuant to the BioDiscovery Merger Agreement.

BioDiscovery's solutions for analysis, interpretation and reporting of genomics data is expected to accelerate and broaden Bionano’s market leadership in digital cytogenetics and comprehensive genome analysis.

Pursuant to BioDiscovery Merger Agreement, the Company paid upfront consideration consisting of a combination of approximately $ 52.3 million in cash and $ 40.0 million in shares of Company common stock.

Approximately $ 26.0 million worth of the shares of the Company’s common stock issued pursuant to the upfront consideration are subject to vesting based on continued service, subject to the terms and conditions of a stock restriction agreement.

Accordingly, the restricted stock is being accounted for as compensation over the requisite service period, and is not included in the purchase price.

The upfront consideration is subject to adjustment for, among other things, cash, unpaid indebtedness, unpaid transaction expenses and working capital relative to a target.

Under the BioDiscovery Merger Agreement, the Company has also agreed to pay a milestone payment of $ 10.0 million in cash based on the achievement of certain commercial milestones.

Cash of $ 2.5 million will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the BioDiscovery Merger Agreement.

The Company accounted for its acquisition of BioDiscovery 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 BioDiscovery 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.

Per the terms of the BioDiscovery Merger Agreement, the purchase price is still subject to adjustment for the final determination of cash, unpaid indebtedness, unpaid transaction expenses and working capital, as well for deferred and current tax assets and liabilities

The following is the estimated purchase price for the acquisition of BioDiscovery:

Cash $ 52,291,000

Estimated fair value of milestone consideration $ 9,000,000

Estimated return of cash to buyer from escrow $ ( 694,000 )

Shares common stock issued as consideration 2,723,000

Stock price per share on closing date $ 5.20

Value of estimated common stock consideration $ 14,159,000

Total estimated purchase price $ 74,756,000

The total estimated purchase price was allocated to BioDiscovery’s tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded as goodwill, as follows:

Cash and cash equivalents $ 3,205,000

Accounts receivable 1,782,000

Right-of-use assets 3,987,000

Other assets 213,000

Intangible assets 26,800,000

Goodwill 48,987,000

Accounts payable and other accrued liabilities ( 193,000 )

Right-of-use liabilities (short-term and long-term) ( 3,987,000 )

Deferred tax liability ( 5,777,000 )

Contract liabilities ( 261,000 )

Net assets acquired $ 74,756,000

The acquisition date fair values of identifiable intangible assets acquired are as following:

Customer relationships $ 3,000,000

Developed technology 22,800,000

Tradename 1,000,000

Fair value of identifiable intangible assets $ 26,800,000

The Company uses the income approach to derive the fair value of the identified intangible assets acquired.

This approach calculates fair value by estimating future cash flows attributable to the assets and then discounting these cash flows to a present value using a risk-adjusted discount rate.

The developed technology, 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 transaction costs, including financial advisor fees, legal expenses and accounting fees during the year ended December 31, 2021.

These costs are included in the consolidated statement of operations in selling, general and administrative expense.

The Company reported approximately $ 1.1 million of revenue generated by BioDiscovery in its consolidated statement of operations from the date of acquisition through December 31, 2021.

As the Company began integrating BioDiscovery’s operations with its existing operations during the fourth quarter of 2021, it is not practical or meaningful to distinguish BioDiscovery’s expenses or net income or loss from that of the combine operations.

Pro forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company, Lineagen, and BioDiscovery as if the companies had been combined as of the beginning of the year prior to the acquisition.

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Lineagen and BioDiscovery to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied at the beginning of the year prior to the acquisition.

The following 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 acquisitions had taken place as of January 1, 2019 and January 1, 2020, respectively.

Years Ended December 31,

3 unchanged sentences

$ ( 0.28 ) $ ( 0.43 )

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.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Related Party Transactions

Through the acquisition of BioDiscovery in October 2021, the Company inherited a building lease with a landlord owned by BioDiscovery’s former Director and Chief Executive Officer, who is now the Company’s Chief Informatics Officer.

The Company recorded $ 0.1 million in finance lease costs related to this lease for the year ended December 31, 2021.

Refer to Note 11.

Commitments and Contingencies for future commitments pertaining to this finance lease.

CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data