Bionano Genomics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS BIONANO GENOMICS, INC. Condensed Consolidated Balance Sheets (Unaudited) June 30, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 27,159,000 $ 24,571,000 Investments 160,178,000 226,041,000 Accounts receivable, net of allowance for doubtful accounts of $ 463,000 and $ 690,000 as of June 30, 2022 and December 31, 2021, respectively 4,851,000 4,934,000 Inventory 20,591,000 12,387,000 Prepaid expenses and other current assets 3,509,000 4,481,000 Total current assets 216,288,000 272,414,000 Property and equipment, net 13,923,000 10,318,000 Operating lease right-of-use assets 6,431,000 6,691,000 Finance lease right-of-use assets, related party 3,810,000 3,926,000 Intangible assets, net 24,005,000 26,842,000 Goodwill 56,254,000 56,160,000 Other long-term assets 841,000 749,000 Total assets $ 321,552,000 $ 377,100,000 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 7,695,000 $ 9,696,000 Accrued expenses 7,760,000 9,694,000 Contract liabilities 1,180,000 684,000 Operating lease liability 1,757,000 1,467,000 Finance lease liability, related party 292,000 299,000 Contingent consideration 9,224,000 — Total current liabilities 27,908,000 21,840,000 Operating lease liability, net of current portion 5,075,000 5,288,000 Finance lease liability, net of current portion, related party 3,632,000 3,642,000 Contingent consideration — 9,066,000 Long-term contract liabilities 203,000 146,000 Total liabilities 36,818,000 39,982,000 Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of June 30, 2022 and December 31, 2021 — — Common stock, $ 0.0001 par value, 400,000,000 shares authorized at June 30, 2022 and December 31, 2021; 290,061,000 and 289,602,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 29,000 29,000 Additional paid-in capital 564,852,000 553,747,000 Accumulated deficit ( 278,229,000 ) ( 216,119,000 ) Accumulated other comprehensive loss ( 1,918,000 ) ( 539,000 ) Total stockholders’ equity 284,734,000 337,118,000 Total liabilities and stockholders’ equity $ 321,552,000 $ 377,100,000 See accompanying notes to the unaudited condensed consolidated financial statements 3 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue: Product revenue $ 3,913,000 $ 2,496,000 $ 7,029,000 $ 4,545,000 Service and other revenue 2,757,000 1,360,000 5,337,000 2,479,000 Total revenue 6,670,000 3,856,000 12,366,000 7,024,000 Cost of revenue: Cost of product revenue 3,973,000 1,869,000 7,549,000 3,383,000 Cost of service and other revenue 1,226,000 548,000 2,485,000 1,159,000 Total cost of revenue 5,199,000 2,417,000 10,034,000 4,542,000 Operating expenses: Research and development 11,767,000 4,086,000 22,296,000 6,765,000 Selling, general and administrative 21,783,000 13,829,000 42,060,000 23,357,000 Total operating expenses 33,550,000 17,915,000 64,356,000 30,122,000 Loss from operations ( 32,079,000 ) ( 16,476,000 ) ( 62,024,000 ) ( 27,640,000 ) Other income (expense): Interest income 192,000 58,000 301,000 123,000 Interest expense ( 74,000 ) ( 268,000 ) ( 151,000 ) ( 871,000 ) Gain on forgiveness of Paycheck Protection Program loan — — — 1,775,000 Loss on debt extinguishment — ( 2,076,000 ) — ( 2,076,000 ) Other income (expense) ( 156,000 ) ( 15,000 ) ( 188,000 ) ( 29,000 ) Total other income (expense) ( 38,000 ) ( 2,301,000 ) ( 38,000 ) ( 1,078,000 ) Loss before income taxes ( 32,117,000 ) ( 18,777,000 ) ( 62,062,000 ) ( 28,718,000 ) Benefit (provision) for income taxes ( 41,000 ) ( 9,000 ) ( 50,000 ) ( 15,000 ) Net loss $ ( 32,158,000 ) $ ( 18,786,000 ) $ ( 62,112,000 ) $ ( 28,733,000 ) Net loss per share, basic and diluted $ ( 0.11 ) $ ( 0.07 ) $ ( 0.22 ) $ ( 0.11 ) Weighted-average common shares outstanding basic and diluted 285,554,000 278,898,000 285,086,000 271,460,000 See accompanying notes to the unaudited condensed consolidated financial statements. 4 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2022 2021 2022 2021 Net Loss: $ ( 32,158,000 ) $ ( 18,786,000 ) $ ( 62,112,000 ) $ ( 28,733,000 ) Unrealized (loss) on investment securities ( 281,000 ) — ( 1,379,000 ) — Comprehensive Loss $ ( 32,439,000 ) $ ( 18,786,000 ) $ ( 63,491,000 ) $ ( 28,733,000 ) See accompanying notes to the unaudited condensed consolidated financial statements. 5 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit) Shares Amount Balance at January 1, 2021 189,953,000 $ 19,000 $ 178,747,000 $ ( 143,684,000 ) $ — $ 35,082,000 Stock option exercises 102,000 — 333,000 — — 333,000 Stock-based compensation expense — — 371,000 — — 371,000 Issue common stock, net of issuance costs 78,000,000 8,000 327,478,000 — — 327,486,000 Issue stock for warrant exercises 10,739,000 1,000 9,392,000 — — 9,393,000 Net loss — — — ( 9,947,000 ) — ( 9,947,000 ) Balance at March 31, 2021 278,794,000 $ 28,000 $ 516,321,000 $ ( 153,631,000 ) $ — $ 362,718,000 Stock option exercises 60,000 — 89,000 — — 89,000 Stock-based compensation expense — — 1,758,000 — — 1,758,000 Issue stock for employee stock purchase plan 150,000 — 65,000 — — 65,000 Issue stock for warrant exercises 50,000 — 22,000 — — 22,000 Net loss — — — ( 18,786,000 ) — ( 18,786,000 ) Balance at June 30, 2021 279,054,000 28,000 518,255,000 ( 172,417,000 ) — 345,866,000 Balance at January 1, 2022 289,602,000 $ 29,000 $ 553,747,000 $ ( 216,119,000 ) $ ( 539,000 ) $ 337,118,000 Stock option exercises 21,000 — 15,000 — — 15,000 Stock-based compensation expense — — 5,102,000 — — 5,102,000 Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes 65,000 — — — — — Net loss — — — ( 29,952,000 ) — ( 29,952,000 ) Other comprehensive loss — — — — ( 1,098,000 ) ( 1,098,000 ) Balance at March 31, 2022 289,688,000 $ 29,000 $ 558,864,000 $ ( 246,071,000 ) $ ( 1,637,000 ) $ 311,185,000 Stock option exercises 249,000 — 136,000 — — 136,000 Stock-based compensation expense — — 5,777,000 — — 5,777,000 Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes ( 26,000 ) — — — — — Issue stock for employee stock purchase plan 150,000 — 75,000 — — 75,000 Net loss — — — ( 32,158,000 ) — ( 32,158,000 ) Other comprehensive loss — — — — ( 281,000 ) ( 281,000 ) Balance at June 30, 2022 290,061,000 $ 29,000 $ 564,852,000 $ ( 278,229,000 ) $ ( 1,918,000 ) $ 284,734,000 See accompanying notes to the unaudited condensed consolidated financial statements 6 Table of Contents BIONANO GENOMICS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2022 2021 Operating activities: Net loss $ ( 62,112,000 ) $ ( 28,733,000 ) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization expense 4,475,000 964,000 Amortization of financing lease right-of-use asset 117,000 — Amortization of interest on securities 551,000 — Non-cash lease expense 337,000 — Non-cash interest expense — 383,000 Stock-based compensation 10,878,000 2,129,000 Change in fair value of contingent consideration 158,000 — Gain on forgiveness of PPP Loan — ( 1,775,000 ) Loss on debt extinguishment — 2,076,000 Cost of leased equipment sold to customer 204,000 — Changes in operating assets and liabilities: Accounts receivable 24,000 ( 63,000 ) Inventory ( 12,095,000 ) ( 3,605,000 ) Prepaid expenses and other current assets 186,000 400,000 Accounts payable ( 2,072,000 ) 816,000 Accrued expenses and contract liabilities ( 1,477,000 ) 1,085,000 Net cash used in operating activities ( 60,826,000 ) ( 26,323,000 ) Investing Activities: BioDiscovery acquisition, return of purchase consideration from escrow 694,000 — Purchases of property and equipment ( 371,000 ) ( 76,000 ) Purchase of available for sale securities ( 29,541,000 ) — Sale and maturity of available for sale securities 93,475,000 — Construction in progress ( 1,080,000 ) — Sale of property and equipment 27,000 126,000 Net cash provided by / (used in) investing activities 63,204,000 50,000 Financing activities: Repayment of term-loan debt — ( 17,010,000 ) Principal payments of financing lease liability ( 17,000 ) — Proceeds from sale of common stock — 328,635,000 Offering expenses on sale of common stock — ( 1,149,000 ) Proceeds from sale of common stock under employee stock purchase plan 75,000 65,000 Proceeds from warrant and option exercises 152,000 9,837,000 Net cash provided by financing activities 210,000 320,378,000 Net increase in cash and cash equivalents 2,588,000 294,105,000 Cash and cash equivalents at beginning of period 24,571,000 38,449,000 Cash and cash equivalents at end of period $ 27,159,000 $ 332,554,000 Supplemental cash flow disclosures: Cash paid for interest $ 139,000 $ 487,000 Cash paid for operating lease liabilities $ 695,000 $ 422,000 Supplemental disclosure of non-cash investing and financing activities: Transfer of instruments and servers from inventory to property and equipment, net $ 3,890,000 $ 2,035,000 Operating lease liabilities resulting from obtaining right-of-use assets $ 517,000 $ 2,013,000 Forgiveness of PPP Loan $ — $ 1,775,000 Warrant exercise pursuant to cashless exercise $ — $ 129,000 See accompanying notes to the unaudited condensed consolidated financial statements 7 Table of Contents BIONANO GENOMICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Basis of Presentation Description of Business Bionano Genomics, Inc. (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. Basis of Presentation The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting purposes. The condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, changes in equity, and comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances have been eliminated. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Liquidity As of June 30, 2022, the Company had approximately $ 27.2 million in cash and cash equivalents, $ 160.2 million in available for sale investment securities, and working capital of $ 188.4 million as a result of common stock offerings executed in the quarters ended December 31, 2020, March 31, 2021, and September 30, 2021. 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 12 months. However, the Company expects to continue to incur net losses for the foreseeable future. The Company plans to continue to fund its losses from operations and capital funding needs through a combination of equity offerings, debt financings or other sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, potentially harming the Company’s business. COVID-19 and Other Geopolitical Events The Company is subject to additional risks and uncertainties as a result of the continued spread of COVID-19, adverse macroeconomic events, such as the ongoing conflict between Ukraine and Russia and related sanctions, and uncertain market conditions, including higher inflation and supply chain disruptions, which could continue to have a material impact on the Company’s business and financial results. The Company closely monitors and complies with various applicable guidelines and legal requirements in the jurisdictions in which it operates, which may continue to result in reduced business operations in response to new or existing stay-at-home orders, travel restrictions and other social distancing measures. If restrictions related to COVID-19 persist, the Company could see additional 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 may also see negative effects on study enrollment in its ongoing or future studies. At various times throughout the pandemic, the Company has been unable to visit certain customer sites to support installation or service of its OGM systems. The Company’s manufacturing partners, suppliers, and customers, have implemented similar operational reductions. Despite reporting an increase in revenue for the three and six months ended June 30, 2022 when compared to the same period in 2021, the Company experienced supply chain constraints that negatively impacted the Company’s first and second quarter 2021 and 2022 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. The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may 8 Table of Contents present strategy, operational, talent recruiting and retention and workplace culture challenges that may adversely affect its business. Following the recent invasion of Ukraine by Russia, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity globally. In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia and possible future punitive measures that may be implemented, as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia and related sanctions, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity on acceptable terms, in both Europe and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing military conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. During the three and six months ended June 30, 2022, the Company experienced supply chain challenges, which it largely attributes to the COVID-19 pandemic and the general disruptions from the ongoing conflict between Ukraine and Russia and related sanctions. While neither the COVID-19 pandemic nor the Ukraine-Russia conflict prevented the Company from operating its business during the three and six months ended June 30, 2022, it experienced increased cost to secure certain component parts in its products and to produce its products at its contract manufacturers. The Company expects these increased costs to remain high as the COVID-19 pandemic, the Ukraine-Russia conflict and their respective effects persist. As global economic conditions recover from the COVID-19 pandemic, the Ukraine-Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that these and related events could have on the Company’s business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. For instance, product demand may be reduced due to an economic recession, rising inflation rates, labor shortages, a decrease in corporate capital expenditures, prolonged unemployment, reduction in consumer confidence, adverse macroeconomic events, or any similar negative economic condition. Further, the travel restrictions on the Company’s business have limited its ability to support its global and domestic operations, including providing installation and training and customer service, which has and may continue to slow the pace of its commercial strategy, sales and marketing efforts. These negative effects could have a material impact on the Company’s operations, business, earnings, and liquidity. Significant Accounting Policies During the three and six months ended June 30, 2022, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Recently Issued But Not Yet Adopted Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13) , which amends the impairment model by requiring entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available for sale debt securities. The standard is effective for the company beginning in the first quarter of 2023, with early adoption permitted. The Company is currently evaluating the expected impact of ASU 2016-13 on its financial statements. Recently Adopted Accounting Pronouncements 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. The adoption of this new accounting standard resulted in increased qualitative and quantitative disclosures regarding the amount, 9 Table of Contents timing, and uncertainty of cash flows arising from leases. For further details, see Note 7, Commitments and Contingencies. The adoption of the new standard did not materially impact the Company’s consolidated results of operations. 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’s adoption of this accounting standard on January 1, 2022, did not have a material impact on the Company’s consolidated financial statements and related disclosures . 2. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive. Pre-funded warrants from the Company’s follow-on offering have been treated as if they were common shares outstanding on the date of issuance. The Company’s potentially dilutive securities which include outstanding warrants to purchase stock and outstanding stock options under the Company’s equity incentive plans have been excluded from the computation of diluted net loss per share as they 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 attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares): June 30, 2022 June 30, 2021 Stock options 23,585,000 9,550,000 Unvested restricted stock 3,841,000 — Warrants 4,356,000 4,361,000 RSUs 230,000 530,000 PSUs 290,000 290,000 Total 32,302,000 14,731,000 3. Revenue Recognition Revenue by Source Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Instruments $ 2,446,000 $ 1,158,000 $ 4,042,000 $ 2,040,000 Consumables 1,467,000 1,338,000 2,987,000 2,505,000 Total product revenue 3,913,000 2,496,000 7,029,000 4,545,000 Service and other 2,757,000 1,360,000 5,337,000 2,479,000 Total revenue $ 6,670,000 $ 3,856,000 $ 12,366,000 $ 7,024,000 Revenue by Geographic Location Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 $ % $ % $ % $ % Americas $ 2,611,000 39 % $ 2,365,000 61 % $ 5,940,000 48 % $ 3,872,000 55 % EMEIA 2,609,000 39 % 940,000 25 % 4,348,000 35 % 2,518,000 36 % Asia Pacific 1,450,000 22 % 551,000 14 % 2,078,000 17 % 634,000 9 % Total $ 6,670,000 100 % $ 3,856,000 100 % $ 12,366,000 100 % $ 7,024,000 100 % The table above provides revenue from contracts with customers by source and geographic region (based on the customer’s billing address) on a disaggregated basis. Americas consists of North America and South America. EMEIA consists of Europe, the Middle East, India and Africa. Asia Pacific includes China, Japan, South Korea, Singapore and Australia. For the three months ended June 30, 2022 and 2021, the United States represented 37.4 % and 59.5 % of total revenue, respectively. For the 10 Table of Contents six months ended June 30, 2022 and 2021, the United States represented 40.9 % and 53.1 % of total revenue, respectively. For the three and six months ended June 30, 2022, China represented 19.3 % and 12.9 % of total revenue, respectively. No other countries represented greater than 10% of revenue during the three and six months ended June 30, 2022 and 2021. Remaining Performance Obligations As of June 30, 2022, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $ 1.4 million. These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations. The Company expects to recognize approximately 59.3 % of this amount as revenue during the remainder of 2022, 32.6 % in 2023, and 8.1 % in 2024 and thereafter. Warranty revenue is included in service and other revenue. The Company recognized revenue of approximately $ 0.2 million and $ 0.1 million during the three months ended June 30, 2022 and 2021, respectively, and revenue of approximately $ 0.5 million and $ 0.2 million during the six months ended June 30, 2022 and 2021, respectively, which was included in the contract liability balance at the end of the previous year. 4. Balance Sheet Account Details Accounts Receivable June 30, 2022 December 31, 2021 Accounts receivable, net: Accounts receivable, trade $ 5,314,000 $ 5,624,000 Less allowance for doubtful accounts ( 463,000 ) ( 690,000 ) $ 4,851,000 $ 4,934,000 Inventory The components of inventories are as follows: June 30, 2022 December 31, 2021 Inventory: Raw materials $ 837,000 $ 745,000 Finished goods 19,754,000 11,642,000 $ 20,591,000 $ 12,387,000 Intangible Assets Intangible assets that are subject to amortization consisted of the following for the periods presented: June 30, 2022 December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trade name $ 1,630,000 $ ( 372,000 ) $ 1,258,000 $ 1,630,000 $ ( 210,000 ) $ 1,420,000 Customer relationships 3,950,000 ( 773,000 ) 3,177,000 3,950,000 ( 378,000 ) 3,572,000 Developed technology 22,800,000 ( 3,230,000 ) 19,570,000 22,800,000 ( 950,000 ) 21,850,000 Intangibles, net $ 28,380,000 $ ( 4,375,000 ) $ 24,005,000 $ 28,380,000 $ ( 1,538,000 ) $ 26,842,000 11 Table of Contents Accrued Expenses Accrued expenses consist of the following: June 30, 2022 December 31, 2021 Compensation expenses $ 4,861,000 $ 4,529,000 Goods received not invoiced 1,238,000 1,073,000 Customer deposits 73,000 826,000 Taxes payable 722,000 677,000 Insurance — 1,011,000 Professional fees and royalties 368,000 288,000 Warranty liabilities 175,000 175,000 Accrued clinical study fees 169,000 1,000 Other 154,000 1,114,000 Total $ 7,760,000 $ 9,694,000 5. Debt Paycheck Protection Program 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”). In February 2021, the Company applied for forgiveness of the PPP Loan, and in March 2021, the PPP Loan, including all accrued interest, was forgiven in full. A gain on forgiveness of Paycheck Protection Program loan of $ 1.8 million was recognized during the six months ended June 30, 2021. Innovatus Loan and Security Agreement In May 2021, the outstanding term loan with Innovatus (“Innovatus LSA”) was paid in full, including all accrued interest, the end of term fee, and a prepayment fee for a total of approximately $ 17.0 million. Interest expense recognized during the three and six months ended June 30, 2021 totaled approximately $ 0.3 million and $ 0.9 million, respectively. 6. Stockholders’ Equity and Stock-Based Compensation Follow-on Public Offerings On January 12, 2021 and January 25, 2021, the Company completed an underwritten public offering of 33.4 million and 38.3 million shares of common stock, respectively. The price to the public in the offerings on January 12, 2021 and January 15, 2021 was $ 3.05 and $ 6.00 per share, respectively. The net proceeds to the Company from the offerings, after deducting the underwriting discounts and commissions and other offering expenses, were $ 101.5 million and $ 229.6 million, respectively. 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. Inc. acting as sales agent (the “Ladenburg ATM”). During October 2020 through January 2021, the Company sold approximately 27.0 million shares of common stock under the Ladenburg ATM and received net proceeds of $ 38.0 million after deducting aggregate offering costs. 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. As of June 30, 2022, as a consequence of the Company’s re-qualification as a “smaller reporting company,” the Company may lose “well-known seasoned issuer” status at the time it files its Annual Report on Form 10-K for the fiscal year ending December 31, 2022 if the worldwide market value of its voting and non-voting common equity held by its non-affiliates does not equal $700.0 million or more, calculated as of a date within 60 days prior to filing such report. If that were to occur and the Company were no longer considered a well-known seasoned issuer, the Company anticipates needing to amend its automatically effective shelf registration statement on Form S-3 prior to its filing of such annual report (or earlier if required by the Securities Act or the rules and regulations of the SEC) in order to sell securities under that Form S-3 on an ongoing basis. 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 12 Table of Contents $ 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 approximately 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. There were no sales of common stock under the Cowen ATM from January 1, 2022 to June 30, 2022. Stock Warrants A summary of the Company’s warrant activity during the six months ended June 30, 2022 was as follows: Shares of Stock under Warrants Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2022 4,356,000 $ 5.96 1.76 $ 785,000 Granted — — — — Exercised — — — — Canceled — — — — Outstanding at June 30, 2022 4,356,000 $ 5.96 1.27 $ 246,000 Stock Options A summary of the Company’s stock option activity during the six months ended June 30, 2022 was as follows: Shares of Stock under Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2022 12,765,000 $ 4.97 8.9 $ 7,891,000 Granted 12,797,000 2.11 — — Exercised ( 270,000 ) 0.59 — 302,000 Canceled ( 1,708,000 ) 5.00 — — Outstanding at June 30, 2022 23,584,000 $ 3.47 9.08 $ 2,053,000 Vested and exercisable at June 30, 2022 4,976,000 $ 3.90 7.96 $ 1,327,000 For the three months ended June 30, 2022, the weighted-average grant date fair value of stock options granted was $ 1.17 per share. For the six months ended June 30, 2022, the weighted-average grant date fair value of stock options granted was $ 1.33 per share. Stock-Based Compensation The Company recognized stock-based compensation expense for the periods presented as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Research and development $ 3,468,000 $ 384,000 $ 6,795,000 $ 465,000 General and administrative 2,309,000 1,374,000 4,084,000 1,664,000 Total stock-based compensation expense $ 5,777,000 $ 1,758,000 $ 10,879,000 $ 2,129,000 13 Table of Contents The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants during the periods presented were as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Risk-free interest rate 2.8 % 1.1 % 2.1 % 1.1 % Expected volatility 70.6 % 80.4 % 70.2 % 80.4 % Expected term (in years) 5.7 6.0 6.0 6.0 Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 % Restricted Stock 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 2.3 years as of June 30, 2022. 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 following table summarizes restricted share unit (“RSU”) activity during the six months ended June 30, 2022: Stock Units Weighted- Average Grant Date Fair Value per Share Outstanding at January 1, 2022 361,000 $ 4.74 Granted — — Released ( 131,000 ) 4.74 Forfeited — — Outstanding at June 30, 2022 230,000 $ 4.74 The total intrinsic value of the RSUs that vested during the six months ended June 30, 2022 was $ 0.6 million, determined as of the date of vesting. The weighted average remaining contractual term for the RSUs is 0.9 years as of June 30, 2022. The following table summarizes performance share unit (“PSU”) activity during the six months ended June 30, 2022: Stock Units Weighted- Average Grant Date Fair Value per Share Outstanding at January 1, 2021 290,000 $ 4.74 Granted — — Released — — Forfeited — — Outstanding at June 30, 2022 290,000 $ 4.74 The weighted average remaining contractual term for the PSUs is 2.9 years as of June 30, 2022. 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 14 Table of Contents 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. 7. Commitments and Contingencies The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company has determined a weighted-average discount rate of 7 % as of June 30, 2022 and December 31, 2021. The operating lease right-of-use asset and operating lease liability as of June 30, 2022 and December 31, 2021 are as follows: June 30, 2022 December 31, 2021 Operating lease right-of-use assets $ 6,431,000 $ 6,691,000 Operating lease liability Current 1,757,000 1,467,000 Non-current 5,075,000 5,288,000 Total operating lease liability $ 6,832,000 $ 6,755,000 For the three and six months ended June 30, 2022, the Company recorded $ 0.5 million and $ 1.0 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances. For the three and six months ended June 30, 2021, the Company recorded $ 0.3 million and $ 0.5 million respectively, in expense related to operating leases, including amortized tenant improvement allowances. The finance lease right-of-use asset and finance lease liability as of June 30, 2022 and December 31, 2021 are as follows: June 30, 2022 December 31, 2021 Finance lease right-of-use assets $ 3,810,000 $ 3,926,000 Finance lease liability Current 292,000 299,000 Non-current 3,632,000 3,642,000 Total finance lease liability $ 3,924,000 $ 3,941,000 For the three and six months ended June 30, 2022, the Company recorded $ 0.1 million and $ 0.3 million, respectively, in expense related to its finance lease. The Company did no t hold a finance lease as of June 30, 2021. The future minimum payments under non-cancellable operating and finance leases as of June 30, 2022, are as follows: Operating Leases Finance Lease Remainder of 2022 $ 1,036,000 $ 158,000 2023 2,149,000 322,000 2024 2,219,000 330,000 2025 2,305,000 338,000 2026 232,000 347,000 Thereafter — 5,949,000 Total future lease payments 7,941,000 7,444,000 Less: imputed interest ( 1,109,000 ) ( 3,520,000 ) Total lease liabilities $ 6,832,000 $ 3,924,000 15 Table of Contents Litigation From time to time, the Company may be subject to potential liabilities under various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of the business. The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any material loss exposure as it is not a defendant in any claims or legal actions. Contingent Consideration See Note 9 to our condensed consolidated financial statements for a discussion of the contingent consideration liability. 8. Acquisitions BioDiscovery Acquisition In October 2021, the Company completed the acquisition of BioDiscovery, LLC, for a combination of approximately $ 52.3 million in cash, $ 40.0 million in shares of Company common stock, and $ 10.0 million in cash payable based on the achievement of certain milestones. Of the $ 40.0 million in shares of Company common stock, approximately $ 26.0 million is subject to vesting based on continuous service. See Note 6 to our condensed consolidated financial statements for a discussion of the restricted stock vesting terms and accounting treatment. 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. During the first quarter of 2022, the Company recorded an increase to the value of acquired contract liabilities in the amount of $ 94,000 , with the offset recorded to goodwill. The purchase price is still subject to adjustment for the final determination of deferred and current tax assets and liabilities. The following is the purchase price for the acquisition of BioDiscovery: Cash $ 52,291,000 Estimated fair value of milestone consideration $ 9,000,000 Return of cash to buyer from escrow $ ( 694,000 ) Shares of 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 purchase price $ 74,756,000 The total 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 49,081,000 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 ( 355,000 ) Net assets acquired $ 74,756,000 The acquisition date fair values of identifiable intangible assets acquired are as follows: 16 Table of Contents 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. 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 combined operations. Pro forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company 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 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, 2020. Six Months Ended June 30, Three Months Ended June 30, 2021 2021 Revenue $ 9,467,000 $ 5,313,000 Net loss ( 30,479,000 ) ( 19,320,000 ) Basic and diluted net loss per share $ ( 0.11 ) $ ( 0.07 ) 9. Investments and Fair Value Measurements 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 as of June 30, 2022 and December 31, 2021: 17 Table of Contents June 30, 2022 Total Fair Value and Carrying Value on Balance Sheet Fair Value Measurement Category Level 1 Level 2 Level 3 Assets: Commercial Paper $ 56,809,000 $ — $ 56,809,000 $ — Corporate Notes/Bonds 100,384,000 — 100,384,000 — Securities of Government Sponsored Entities 2,985,000 $ — 2,985,000 $ — Total Investments: $ 160,178,000 $ — $ 160,178,000 $ — Money Market Funds $ 15,923,000 $ 15,923,000 $ — $ — Liabilities: Contingent consideration $ 9,224,000 $ — $ — $ 9,224,000 December 31, 2021 Total Fair Value and Carrying Value on Balance Sheet Fair Value Measurement Category Level 1 Level 2 Level 3 Assets: 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 $ — $ — Liabilities: Contingent consideration $ 9,066,000 $ 9,066,000 Money Market Funds are classified as cash equivalents on the balance sheet. As of June 30, 2022 and December 31, 2021, the Company held 47 and 57 securities in an unrealized loss position, respectively. As of June 30, 2022 and December 31, 2021, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company does not believe the unrealized losses incurred during the period are due to credit-related factors. The credit ratings of the securities held remain of high quality, and the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. As such, the Company has not recognized any impairment in its financial statements related to its available for sale investment securities. 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 %. The fair value measurement of the contingent consideration is based on significant inputs not observed in the market (Level 3 inputs). 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. The change in fair value of the contingent consideration during the three and six month period ended June 30, 2022 was due to the passage of time. During the three months ended June 30, 2022, the milestone consideration liability was reclassified from non-current liabilities to current liabilities. 18 Table of Contents Changes in estimated fair value of contingent consideration liability in the six months ended June 30, 2022 is as follows: Contingent Consideration Liability (Level 3 Measurement) Balance as of January 1, 2021 $ 9,066,000 Liability recorded as a result of current period acquisition — Change in estimated fair value, recorded in selling, general and administrative expenses 158,000 Cash payments — Balance as of June 30, 2022 $ 9,224,000 As of June 30, 2022, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities: Commercial Paper Corporate Notes/Bonds Securities of Government Sponsored Entities Amortized Cost Unrealized gains (losses) Amortized Cost Unrealized gains (losses) Amortized Cost Unrealized gains (losses) Less than 1 year $ 57,070,000 $ ( 261,000 ) $ 65,045,000 $ ( 909,000 ) $ 2,986,000 $ ( 1,000 ) Due after one year through five years — — 36,997,000 ( 749,000 ) — — Total $ 57,070,000 $ ( 261,000 ) $ 102,042,000 $ ( 1,658,000 ) $ 2,986,000 $ ( 1,000 ) 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 Securities of Government Sponsored Entities Amortized Cost Unrealized loss Amortized Cost Unrealized loss Amortized Cost Unrealized gains (losses) 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 three-month period ended June 30, 2022 was interest income related to the Company’s available for sale securities of $ 0.2 million. Included in interest income for the six-month period ended June 30, 2022 was interest income related to the Company’s available for sale securities of $ 0.3 million. 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. 10. 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 three-month period ended June 30, 2022. The Company recorded $ 0.3 million in finance lease costs related to this lease for the six-month period ended June 30, 2022. 19 Table of Contents