What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-03 · 224 added, 298 removed, 330 unchanged (61% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

2023 December 31,

2 unchanged sentences

Investments 91,704,000 108,095,000

Accounts receivable, net of allowance for doubtful accounts of $ 496,000 and $ 690,000 as of September 30, 2022 and December 31, 2021, respectively

5,829,000 4,934,000

Accounts receivable, net 6,780,000 7,022,000

Inventory 33,113,000 29,761,000

1 unchanged sentence

Total current assets 142,557,000 157,298,000

Restricted cash 400,000 400,000

Property and equipment, net 19,050,000 18,029,000

Operating lease right-of-use assets 7,062,000 7,222,000

Finance lease right-of-use assets, related party 3,759,000 3,926,000

Finance lease right-of-use assets 3,657,000 3,707,000

Intangible assets, net 39,351,000 41,143,000

8 unchanged sentences

Operating lease liability 2,235,000 2,260,000

Finance lease liability, related party 288,000 299,000

Finance lease liability 282,000 285,000

Contingent consideration 9,461,000 9,382,000

1 unchanged sentence

Operating lease liability, net of current portion 5,043,000 5,504,000

Finance lease liability, net of current portion, related party 3,626,000 3,642,000

Contingent consideration — 9,066,000

Finance lease liability, net of current portion 3,612,000 3,619,000

Contingent consideration, net of current portion 13,680,000 12,970,000

Long-term contract liabilities 194,000 127,000

3 unchanged sentences

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at September 30, 2022 and December 31, 2021;

296,900,000 and 289,602,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

10,000,000 shares authorized and no shares issued or outstanding as of March 31, 2023 and December 31, 2022

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at March 31, 2023 and December 31, 2022;

306,790,000 and 297,183,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

31,000 30,000

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Product revenue $ 5,447,000 $ 4,206,000

13 unchanged sentences

Interest expense ( 76,000 ) ( 77,000 )

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

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

Other income (expense) 117,000 ( 33,000 )

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30, 2022

$ ( 37,124,000 ) $ ( 29,952,000 )

$ ( 31,809,000 ) $ ( 20,753,000 ) $ ( 93,919,000 ) $ ( 49,486,000 )

Other comprehensive loss:

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

1 unchanged sentence

Foreign currency translation adjustments 36,000 —

Other comprehensive loss $ 96,000 $ ( 116,000 ) $ ( 1,283,000 ) $ ( 116,000 )

Other comprehensive income (loss) $ 459,000 $ ( 1,098,000 )

Total comprehensive loss $ ( 36,665,000 ) $ ( 31,050,000 )

9 unchanged sentences

Stock-based compensation expense — — 5,102,000 — — 5,102,000

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

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 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

Stock option exercises 209,000 — 242,000 — — 242,000

Stock-based compensation expense — — 2,788,000 — — 2,788,000

Issue common stock, net of issuance costs 2,178,000 — 13,537,000 — — 13,537,000

Issue stock for warrant exercises — — 1,000 — — 1,000

Net loss — — — ( 20,753,000 ) — ( 20,753,000 )

Other comprehensive income (loss) — — — — ( 116,000 ) ( 116,000 )

Balance at September 30, 2021 281,441,000 $ 28,000 $ 534,823,000 $ ( 193,170,000 ) $ ( 116,000 ) $ 341,565,000

Balance at January 1, 2023 297,183,000 $ 30,000 $ 599,207,000 $ ( 348,715,000 ) $ ( 1,124,000 ) $ 249,398,000

1 unchanged sentence

Stock-based compensation expense — — 3,882,000 — — 3,882,000

Issue common stock, net of issuance costs 9,500,000 1,000 14,848,000 — — 14,849,000

Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes 65,000 — — — — —

2 unchanged sentences

Balance at March 31, 2023 306,790,000 $ 31,000 $ 617,960,000 $ ( 385,839,000 ) $ ( 665,000 ) $ 231,487,000

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 income (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

Stock option exercises 132,000 — 111,000 — — 111,000

Stock-based compensation expense — — 6,059,000 — — 6,059,000

Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes 67,000 — — — — —

Issue common stock, net of issuance costs 6,640,000 1,000 22,550,000 — — 22,551,000

Net loss — — — ( 31,809,000 ) — ( 31,809,000 )

Other comprehensive income (loss) — — — — 96,000 96,000

Balance at September 30, 2022 296,900,000 $ 30,000 $ 593,572,000 $ ( 310,038,000 ) $ ( 1,822,000 ) $ 281,742,000

See accompanying notes to the unaudited condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

Operating activities:

3 unchanged sentences

Amortization of financing lease right-of-use asset 51,000 29,000

Amortization of interest on securities 695,000 —

Amortization (accretion) of interest on securities ( 82,000 ) 299,000

Non-cash lease expense 113,000 299,000

Non-cash interest expense — 178,000

Net realized loss (gain) on investments 7,000 —

Stock-based compensation 3,882,000 5,102,000

Provision for bad debt expense 33,000 —

Change in fair value of contingent consideration 789,000 79,000

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

Loss on debt extinguishment — 2,076,000

Cost of leased equipment sold to customer 88,000 —

3 unchanged sentences

Prepaid expenses and other current assets 471,000 ( 323,000 )

Other assets ( 372,000 ) ( 48,000 )

Accounts payable 3,017,000 ( 3,168,000 )

8 unchanged sentences

Sale of property and equipment — 27,000

Net cash provided by / (used in) investing activities 71,157,000 ( 185,552,000 )

Net cash provided by investing activities 16,528,000 31,964,000

Financing activities:

Repayment of term-loan debt — ( 17,010,000 )

Principal payments of financing lease liability ( 26,000 ) —

Principal payments on financing lease liability ( 10,000 ) ( 8,000 )

Proceeds from sale of common stock 15,229,000 —

Offering expenses on sale of common stock ( 380,000 ) —

Proceeds from sale of common stock under employee stock purchase plan 75,000 65,000

Proceeds from warrant and option exercises 23,000 15,000

Net cash provided by financing activities 14,862,000 7,000

Effect of exchange rates on cash and cash equivalents ( 124,000 ) —

Net increase in cash and cash equivalents 3,595,000 102,287,000

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

Cash and cash equivalents at end of period $ 28,166,000 $ 140,736,000

Effect of exchange rates on cash, cash equivalents and restricted cash 36,000 —

Net decrease in cash, cash equivalents and restricted cash ( 987,000 ) ( 523,000 )

Cash, cash equivalents and restricted cash at beginning of period 5,491,000 24,571,000

Cash, cash equivalents and restricted cash at end of period $ 4,504,000 $ 24,048,000

Reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the total amounts reported on the unaudited condensed consolidated statements of cash flows

Cash and cash equivalents 4,104,000 24,048,000

Restricted cash 400,000 —

Total cash, cash equivalents and restricted cash at end of period 4,504,000 24,048,000

Supplemental cash flow disclosures:

2 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Transfer of instruments and servers from property and equipment into inventory $ — $ 544,000

Transfer of instruments and servers from inventory to property and equipment, net $ 2,356,000 $ 2,056,000

Property and equipment included in accounts payable $ 230,000 $ —

Construction in progress included in accounts payable $ 106,000 $ —

Operating lease liabilities resulting from obtaining right-of-use assets $ — $ 513,000

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

Stock issued for services $ — $ 15,000

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

See accompanying notes to the unaudited condensed consolidated financial statements

5 unchanged sentences

(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, and for other applications including bioprocessing.

The Company offers optical genome mapping (“OGM”) solutions for applications across basic, translational and clinical research, and for other applications including bioprocessing.

Through its Lineagen, Inc.

(doing business as Bionano Laboratories, “Bionano Laboratories”) 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.

Through its BioDiscovery, LLC (“BioDiscovery”) business, the Company also offers 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.

Through our Purigen Biosystems Inc.

(“Purigen”) business, we offer nucleic acid extraction and purification solutions using proprietary isotachophoresis (“ITP”) technology.

Basis of Presentation

3 unchanged sentences

All intercompany transactions and balances have been eliminated.

The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods.

These interim unaudited 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, 2022.

2 unchanged sentences

These reclassifications had no effect on the reported results of operations.

As of September 30, 2022, the Company had approximately $ 28.2 million in cash and cash equivalents, $ 152.0 million in available for sale investment securities, and working capital of $ 184.7 million as a result of common stock offerings executed in the quarters ended December 31, 2020, March 31, 2021, September 30, 2021, and September 30, 2022.

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 adverse geopolitical and macroeconomic events, such as the continued impact of COVID-19, 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 nine months ended September 30, 2022 when compared to the same period in 2021, the Company experienced supply chain constraints that

negatively impacted the Company’s first, second and third 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 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 nine months ended September 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 nine months ended September 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.

Liquidity and Going Concern

The Company has experienced recurring net losses from operations, negative cash flows from operating activities, and accumulated deficit since its inception and expects to continue to incur net losses into the foreseeable future.

As of March 31, 2023, the Company had approximately $ 4.1 million in cash and cash equivalents, $ 91.7 million in short term investments, and working capital of $ 104.4 million.

The Company has an accumulated deficit of $ 385.8 million as of March 31, 2023.

During the three months ended March 31, 2023, the Company used $ 32.4 million cash in operations.

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 has prepared cash flows forecasts which indicate that based on the Company’s expected operating losses and negative cash flows, there is substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the unaudited condensed consolidated financial statements for the three months ended March 31, 2023, are issued.

Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding.

Management’s plans to raise additional capital to fulfill its operating and

capital requirements for at least 12 months include public or private equity or debt financings.

However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all.

Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.

The unaudited condensed consolidated 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.

Significant Accounting Policies

During the three and nine months ended September 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.

During the three months ended March 31, 2023, 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, 2022.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 audited 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, 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 unaudited condensed consolidated financial statements and related disclosures .

For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses.

For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities.

The Company adopted ASU 2016-13 as of January 1, 2023.

The cumulative effect of applying the new credit loss standard was not material and, therefore, did not result in an adjustment to retained earnings.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related financial statement disclosures.

In accordance with ASU 2016-13, the Company no longer evaluates whether its available-for-sale debt securities in an unrealized loss position are other than temporarily impaired.

Instead, the Company assesses whether such unrealized loss positions are credit-related.

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other income through an allowance account.

Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive income.

Net Loss Per Share

2 unchanged sentences

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.

The Company’s potentially dilutive securities which include outstanding warrants to purchase stock, restricted stock units (“RSUs”), performance stock units (“PSUs”), 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.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding because all potentially dilutive securities were anti-dilutive.

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):

September 30,

2022 September 30,

2023 March 31,

Stock options 32,013,000 21,531,000

6 unchanged sentences

Revenue by Source

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Instruments $ 1,896,000 $ 1,596,000

Consumables 2,235,000 1,520,000

Software 1,316,000 1,090,000

Total product revenue 5,447,000 4,206,000

1 unchanged sentence

Total revenue $ 7,415,000 $ 5,696,000

The Company has revised the classification of its revenue between the categories in the table above for the March 31, 2022 statement of operations.

In the March 31, 2022 statement of operations, “software” was included in “service and other.”

Revenue by Geographic Location

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

$ % $ % $ % $ %

Three Months Ended March 31,

Americas $ 3,444,000 47 % $ 3,328,000 58 %

9 unchanged sentences

The impact of this change on prior period disclosures is immaterial.

For the three months ended September 30, 2022 and 2021, the United States represented 41.8 % and 44.2 % of total revenue, respectively.

For the three months ended September 30, 2022 and 2021, China represented 13.4 % and 17.9 % of total revenue, respectively.

Additionally, for the three months ended September 30, 2021, Canada represented 10.8 % of total revenue.

For the nine months ended September 30, 2022 and 2021, the United States represented 41.3 % and 50.0 % of total revenue, respectively.

For the nine months ended September 30, 2022, China represented 13.1 % of total revenue.

No other countries represented greater than 10% of revenue during the three and nine months ended September 30, 2022 and 2021.

For the three months ended March 31, 2023 and 2022, the United States represented 41.2 % and 45.0 % of total revenue, respectively.

No other countries represented greater than 10% of revenue during the three months ended March 31, 2023 and 2022.

Remaining Performance Obligations

As of September 30, 2022, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $ 1.1 million.

As of March 31, 2023, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $ 1.3 million.

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

1 unchanged sentence

Warranty revenue is included in service and other revenue.

The Company recognized revenue of approximately $ 0.1 million and $ 0.1 million during the three months ended September 30, 2022 and 2021, respectively, and revenue of approximately $ 0.6 million and $ 0.3 million during the nine months ended September 30, 2022 and 2021, respectively, which was included in the contract liability balance at the end of the previous year.

The Company recognized revenue of approximately $ 0.7 million and $ 0.3 million during the three months ended March 31, 2023 and 2022, respectively, which was included in the contract liability balance at the end of the previous year.

Balance Sheet Account Details

Accounts Receivable

September 30,

Accounts Receivable and Allowance for Credit Losses

2023 December 31,

1 unchanged sentence

Accounts receivable, trade $ 7,030,000 $ 7,315,000

Less allowance for doubtful accounts ( 496,000 ) ( 690,000 )

Allowance for credit losses ( 250,000 ) ( 293,000 )

$ 6,780,000 $ 7,022,000

Changes to the allowance for credit losses during the three months ended March 31, 2023 were as follows:

Allowance for Credit Losses

Balance as of January 1, 2023 $ ( 293,000 )

Provision for expected credit loss ( 5,000 )

Write-offs and payments 48,000

Balance as of March 31, 2023

$ ( 250,000 )

The Company's adoption of ASU No.

2016-13, Financial Instruments - Credit Losses, included an assessment of our aged trade receivables balances and their underlying credit risk characteristics.

Our evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.

The components of inventories are as follows:

September 30,

2023 December 31,

4 unchanged sentences

$ 33,113,000 $ 29,761,000

Beginning with the third quarter for the year ended December 31, 2022, the Company revised its classification of its inventory between the categories in the table above.

The Company has revised the classification for the December 31, 2021 balance sheet .

Intangible Assets

Intangible assets that are subject to amortization consisted of the following for the periods presented:

September 30, 2022

March 31, 2023

December 31, 2022

4 unchanged sentences

Intangibles, net $ 48,380,000 $ ( 9,131,000 ) $ 39,249,000 $ 48,380,000 $ ( 7,339,000 ) $ 41,041,000

Intangible assets not subject to amortization totaled $ 0.1 million at March 31, 2023 and December 31, 2022, and related to the Company’s domain name.

Accrued Expenses

Accrued expenses consist of the following:

September 30,

2023 December 31,

Compensation expenses $ 6,349,000 $ 7,002,000

Goods received not invoiced 1,805,000 1,073,000

Customer deposits 17,000 17,000

1 unchanged sentence

Insurance 326,000 613,000

Accrued royalties 82,000 288,000

Professional fees and royalties 96,000 210,000

Warranty liabilities 591,000 489,000

2 unchanged sentences

Total $ 9,250,000 $ 10,552,000

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 nine months ended September 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 nine months ended September 30, 2021 totaled approximately $ 0.9 million.

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.

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

During October 2020 through January 2021, the Company sold approximately 33.3 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.

Cowen At-the-Market Facility

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, which was amended on March 9, 2023 to decrease the maximum aggregate offering price to $ 200.0 million for sales made on and after the date of the amendment (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.

In August 2022, the Company sold approximately 6.6 million shares of common stock under the Cowen ATM at an average share price of $ 3.46 per share, and received gross proceeds of approximately $ 23.1 million before deducting offering costs of $ 0.6 million.

During the first quarter of 2023, the Company sold approximately 9.5 million shares of common stock under the Cowen ATM at an average share price of $ 1.60 per share, and received gross proceeds of approximately $ 15.2 million before deducting offering costs of $ 0.4 million.

Stock Warrants

A summary of the Company’s warrant activity during the nine months ended September 30, 2022 was as follows:

A summary of the Company’s warrant activity during the three months ended March 31, 2023 was as follows:

Shares of Stock under Warrants Weighted-

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Canceled — — — —

Outstanding at September 30, 2022

Outstanding at March 31, 2023

4,356,000 $ 5.96 0.52 $ 156,000

Stock Options

A summary of the Company’s stock option activity during the nine months ended September 30, 2022 was as follows:

A summary of the Company’s stock option activity during the three months ended March 31, 2023 was as follows:

Shares of Stock under Stock Options Weighted-

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Canceled ( 1,088,000 ) 3.37 —

Outstanding at September 30, 2022

Outstanding at March 31, 2023

32,013,000 $ 2.80 8.84 $ 1,147,000

Vested and exercisable at September 30, 2022

Vested and exercisable at March 31, 2023

9,149,000 $ 3.56 7.89 $ 892,000

For the three months ended September 30, 2022, the weighted-average grant date fair value of stock options granted was $ 1.43 per share.

For the nine months ended September 30, 2022, the weighted-average grant date fair value of stock options granted was $ 1.34 per share.

For the three months ended March 31, 2023, the weighted-average grant date fair value of stock options granted was $ 1.07 per share.

Stock-Based Compensation

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Cost of product revenue $ 102,000 $ —

Cost of service and other revenue 44,000 —

Research and development 1,357,000 3,328,000

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Risk-free interest rate 4.0 % 1.9 %

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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 2.1 years as of September 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.

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

The fair value of the restricted stock award was based on the market value of common stock as of the date of grant and was amortized to stock-based compensation expense over the service period.

On October 4, 2022, the restricted stock award was modified due to the change in employment status of the key employee from full time to emeritus.

As a result of the modification, the restricted stock award vested in full on October 4, 2022.

The award was revalued on the modification date, resulting in a modified grant date fair value of $ 2.04 a share.

The award was revalued on the modification date, resulting in a modified grant date fair value of $ 2.04 a share ($ 15.8 million less than the initial grant date fair value of the award).

The fair value of the modified restricted stock award was based on the market value of common stock as of the modification date.

Restricted Stock Units and Performance Stock Units

The following table summarizes restricted share unit (“RSU”) activity during the nine months ended September 30, 2022:

The following table summarizes RSU activity during the three months ended March 31, 2023:

Stock Units Weighted- Average Grant Date Fair Value per Share

Outstanding at January 1, 2023 96,000 $ 4.74

Granted 2,461,000 1.63

Released ( 65,000 ) 4.74

Forfeited ( 35,000 ) 1.63

Outstanding at September 30, 2022

Outstanding at March 31, 2023

2,457,000 $ 1.67

The total intrinsic value of the RSUs that vested during the nine months ended September 30, 2022 was $ 0.9 million, determined as of the date of vesting.

The weighted average remaining contractual term for the RSUs is 0.6 years as of September 30, 2022.

The following table summarizes performance share unit (“PSU”) activity during the nine months ended September 30, 2022:

The total intrinsic value of the RSUs that vested during the three months ended March 31, 2023 was $ 0.3 million, determined as of the date of vesting.

The weighted average remaining contractual term for the RSUs is 3.5 years as of March 31, 2023.

The following table summarizes PSU activity during the three months ended March 31, 2023:

Stock Units Weighted- Average Grant Date Fair Value per Share

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Forfeited — —

Outstanding at September 30, 2022

Outstanding at March 31, 2023

290,000 $ 4.74

The weighted average remaining contractual term for the PSUs is 2.6 years as of September 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 weighted average remaining contractual term for the PSUs is 2.1 years as of March 31, 2023.

Executive Option Grants and RSUs

On February 15, 2023, the compensation committee of the Company’s board of directors granted various executive officers stock options to purchase an aggregate of 3.3 million shares of common stock at an exercise price of $ 1.63 per share, and RSUs amounting to 0.7 million shares of common stock at a grant date fair value of $ 1.63 per share, in each case with an effective grant date and vesting commencement date of February 15, 2023 (the “Grant Date”).

These stock option grants and RSUs were issued from the 2018 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.

The RSUs shall vest annually over four years beginning one year after the Grant Date, and the balance of the shares vest in a series of three successive equal annual installments measured from the first anniversary of the Grant Date, such that the RSU shall be fully vested on the four-year anniversary of the Grant Date.

Series A Preferred Stock

On April 13, 2023, the Company entered into an agreement with David Barker, the Chair of the Company’s board of directors, pursuant to which the Company agreed to issue and sell one share of the Company’s Series A Preferred Stock, par value $ 0.0001 per share for a purchase price of $ 100.00 .

The closing of the sale and purchase of the share of Series A Preferred was completed on April 13, 2023.

The share of Series A Preferred will have 3.0 billion votes, but has the right to vote only on a proposal submitted to the stockholders of the Company to adopt an amendment, or a series of alternate amendments, to the Company’s Amended and Restated Certificate of Incorporation, as amended, to combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock at a ratio specified in or determined in accordance with the terms of such amendment or series of alternate amendments (“Reverse Stock Split Proposal”), and will have no voting rights (i) except with respect to a Reverse Stock Split Proposal and the votes of the share of Series A Preferred are required to be cast for and against such Reverse Stock Split Proposal in the same proportion as shares of Common Stock are voted for and against such Reverse Stock Split Proposal (with any shares of Common Stock that are not voted, whether due to abstentions, broker non-votes or otherwise not counted as votes for or against a Reverse Stock Split Proposal) and (ii) unless the holders of one-third (1/3rd) of the outstanding shares of Common Stock are present and vote, in person or by proxy, at the meeting of stockholders at which a Reverse Stock Split Proposal is submitted for stockholder approval (or any adjournment thereof).

The share of Series A Preferred will vote together with the Common Stock as a single class on a Reverse Stock Split Proposal.

The Series A Preferred has no other voting rights, except as may be required by the General Corporation Law of the State of Delaware.

The outstanding share of Series A Preferred will be redeemed in whole, but not in part, for a redemption price of $ 100.00 , payable out of funds lawfully available therefor, (i) if such redemption is ordered by the Company’s Board of Directors in its sole discretion, automatically and effective on such time and date specified by the Board of Directors in its sole discretion, or (ii) automatically immediately following the approval by the stockholders of a Reverse Stock Split Proposal.

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 September 30, 2022 and December 31, 2021.

The operating lease right-of-use asset and operating lease liability as of September 30, 2022 and December 31, 2021 are as follows:

September 30, 2022 December 31, 2021

Operating lease right-of-use assets $ 6,030,000 $ 6,691,000

Operating lease liability

Current 1,784,000 1,467,000

Non-current 4,694,000 5,288,000

Total operating lease liability $ 6,478,000 $ 6,755,000

For the three and nine months ended September 30, 2022, the Company recorded $ 0.5 million and $ 1.5 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.

For the three and nine months ended

September 30, 2021, the Company recorded $ 0.3 million and $ 0.8 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 September 30, 2022 and December 31, 2021 are as follows:

September 30, 2022 December 31, 2021

Finance lease right-of-use assets $ 3,759,000 $ 3,926,000

Finance lease liability

Current 288,000 299,000

Non-current 3,626,000 3,642,000

Total finance lease liability $ 3,914,000 $ 3,941,000

For the three and nine months ended September 30, 2022, the Company recorded $ 0.1 million and $ 0.4 million, respectively, in expense related to its finance lease.

The Company did no t hold a finance lease as of September 30, 2021.

The future minimum payments under non-cancellable operating and finance leases as of September 30, 2022, are as follows:

The Company has entered into various operating lease agreements and a finance lease agreement, primarily relating to our office, laboratory, and manufacturing space.

See Note 11 – Commitments and Contingencies, subsection titled “Leases”, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for information regarding the Company’s lease agreements.

The future minimum payments under non-cancellable operating and finance leases as of March 31, 2023, are as follows:

Operating Leases Finance Lease

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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.

The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the unaudited condensed consolidated financial statements.

An estimated loss contingency is accrued in the unaudited condensed consolidated 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.

1 unchanged sentence

See Note 8 to our unaudited condensed consolidated financial statements for a discussion of the contingent consideration liability.

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 unaudited 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.

Purigen Acquisition

In November 2022, the Company completed the acquisition of Purigen Biosystems, Inc.

for approximately $ 32.0 million in cash and up to an aggregate of $ 32.0 million in cash payable based on the achievement of certain milestones.

Cash of $ 1.2 million will be held in an escrow fund for purposes of satisfying any post-closing purchase price adjustments and indemnification claims under the Purigen Merger Agreement.

The purchase price allocation for the acquisition of Purigen 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 first quarter of 2022, the Company recorded an increase to the value of acquired contract liabilities in the amount of $ 0.1 million, with the offset recorded to goodwill.

During the three months ended September 30, 2022, the Company recorded an increase to the value of acquired contract liabilities in the amount of $ 0.2 million, 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:

Per the terms of the Purigen 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 Purigen:

Cash $ 32,034,000

Estimated fair value of milestone consideration 12,970,000

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

Estimated return of cash to buyer from escrow ( 90,000 )

Total estimated purchase price $ 44,914,000

The total estimated purchase price was allocated to Purigen’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 & cash equivalents $ 290,000

Accounts receivable 259,000

Right-of-use assets 3,987,000

Other assets 213,000

Inventory 944,000

Prepaid expenses and other current assets 184,000

Property and equipment, net 805,000

Restricted cash 400,000

Operating lease right-of-use assets 1,636,000

Other long-term assets 533,000

Intangible assets 20,000,000

1 unchanged sentence

Accounts payable and other accrued liabilities ( 1,152,000 )

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

Deferred tax liability ( 5,777,000 )

Contract liabilities ( 568,000 )

Operating lease liability (short-term and long-term) ( 1,636,000 )

Net assets acquired $ 44,914,000

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

Customer relationships $ 3,000,000

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

Developed technology $ 18,800,000

Customer relationships 200,000

Tradename 1,000,000

2 unchanged sentences

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 .

The customer relationships and trade name intangibles are being amortized on a straight-line basis over their estimated useful lives of 5 years.

The developed technology intangible is being amortized on a straight-line basis over its estimated useful live of 15 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.

As the Company began integrating Purigen’s operations with its existing operations during the fourth quarter of 2022, it is not practical or meaningful to distinguish Purigen’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.

Nine Months Ended September 30, Three Months Ended September 30,

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Purigen 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 Purigen 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.

Three Months Ended March 31,

Revenue $ 6,220,000

1 unchanged sentence

Basic and diluted net loss per share

$ ( 0.19 ) $ ( 0.07 )

Investments and Fair Value Measurements

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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 September 30, 2022 and December 31, 2021:

September 30, 2022

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022:

March 31, 2023

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

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Corporate notes/bonds 86,094,000 — 86,094,000 —

Securities of government sponsored entities 1,981,000 1,981,000

Total investments:

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Contingent consideration $ 22,352,000 $ — $ — $ 22,352,000

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

As of September 30, 2022 and December 31, 2021, the Company held 51 and 57 securities in an unrealized loss position, respectively.

As of September 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 nine month period ended September 30, 2022 was due to the passage of time.

During the nine months ended September 30, 2022, the milestone consideration liability was reclassified from non-current liabilities to current liabilities.

Changes in estimated fair value of contingent consideration liability in the nine months ended September 30, 2022 is as follows:

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

Contingent Consideration

Contingent consideration relates to the acquisitions of BioDiscovery and Purigen.

The outcome of the milestone consideration for all contingent consideration liabilities is binary, meaning the milestones are either achieved or not achieved, and the only other variable factor is the timing of when the milestones are achieved.

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

These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value.

The fair value of the BioDiscovery contingent consideration liability is reassessed on a quarterly basis using a probability weighted model.

Assumptions used to estimate the acquisition date fair value of the contingent consideration related to the acquisition of BioDiscovery include the probability of achieving, or changes in timing, of certain milestones, and a discount rate.

As of March 31, 2023 a discount rate of 3 % was used.

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

The Company determined it is highly likely that the milestone related to the BioDiscovery acquisition 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 months ended March 31, 2023 was due to the passage of time.

Contingent consideration liabilities related to the Purigen milestones are related to the achievement of two independent milestones with aggregate possible milestone payments totaling $ 32.0 million.

The fair value of the Purigen milestones are reassessed on a quarterly basis using a probability weighted model and a Monte Carlo Simulation.

Assumptions used to estimate the acquisition date fair value of the milestones using a probability weighted model include the probability of achieving, or changes in timing, of independent milestones, and a discount rate of 15 %.

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

The Company determined the likelihood of each independent milestone and used probability factors ranging from 20 % to 80 % which were applied to the individual payments.

A Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.

Changes in estimated fair value of contingent consideration liability in the three months ended March 31, 2023 is as follows:

Consideration

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Cash payments —

Balance as of September 30, 2022

As of September 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 $ 48,477,000 $ ( 128,000 ) $ 78,864,000 $ ( 1,220,000 ) $ 5,993,000 $ ( 2,000 )

Due after one year through five years — — 18,376,000 ( 325,000 ) 1,997,000 ( 8,000 )

Balance as of March 31, 2023

Available for Sale Investments

The Company invests its excess cash in U.S.

Treasury and agency securities, corporate debt securities, and commercial paper, which are classified as available-for-sale investments.

These investments are carried at fair value and are included in the tables below.

The Company records an allowance for credit losses when unrealized losses are due to credit-related factors.

At each reporting date, the Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors.

The Company evaluates, among others, whether the Company has the intention to sell any of these investments and whether it is not more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis.

Neither of these criteria were met in any period presented.

The credit ratings of the securities held remain of the highest quality.

Moreover, 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.

Based on this evaluation, as of March 31, 2023 and December 31, 2022, the Company determined that unrealized losses of the below securities were primarily attributable to changes in interest rates and non-credit related factors.

As such, no allowances for credit losses were recorded during these periods.

As of March 31, 2023 and December 31, 2022, the Company held 17 and 16 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months.

As of March 31, 2023 and December 31, 2022, the Company held 19 and 24 securities, respectively, which have been in an unrealized loss position for a period of greater than 12 months.

Realized gains and losses are calculated using the specific identification method and recorded in other income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.

The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

Interest receivable as of March 31, 2023 and December 31, 2022 was $ 0.6 million and $ 0.5 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

As of March 31, 2023, the following table summarizes the amortized cost and the unrealized gains/losses of the available for sale securities:

Remaining Contractual Maturity (in years) Amortized Cost Unrealized Gains Unrealized Losses Aggregate Estimated Fair Value

Commercial paper Less than 1 $ 15,259,000 $ — $ ( 43,000 ) $ 15,216,000

Corporate notes/bonds Less than 1 68,739,000 — ( 561,000 ) 68,178,000

Securities of government sponsored entities Less than 1 1,998,000 — ( 10,000 ) 1,988,000

Total maturity less than 1 year $ 85,996,000 $ — $ ( 614,000 ) $ 85,382,000

Corporate notes/bonds 1 to 5 6,372,000 — ( 50,000 ) 6,322,000

Total $ 92,368,000 $ — $ ( 664,000 ) $ 91,704,000

As of December 31, 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 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 ) — —

Remaining Contractual Maturity (in years) Amortized Cost Unrealized Gains Unrealized Losses Aggregate Estimated Fair Value

Commercial paper Less than 1 $ 20,093,000 $ — $ ( 73,000 ) $ 20,020,000

Corporate notes/bonds Less than 1 72,823,000 1,000 ( 911,000 ) 71,913,000

Securities of government sponsored entities Less than 1 1,998,000 — ( 16,000 ) 1,982,000

Total maturity less than 1 year $ 94,914,000 $ 1,000 $ ( 1,000,000 ) $ 93,915,000

Corporate notes/bonds 1 to 5 14,268,000 — ( 88,000 ) 14,180,000

Total $ 109,182,000 $ 1,000 $ ( 1,088,000 ) $ 108,095,000

Included in interest income for the three-month period ended September 30, 2022 was interest income related to the Company’s available for sale securities of $ 0.4 million.

Included in interest income for the nine-month period ended September 30, 2022 was interest income related to the Company’s available for sale securities of $ 0.7 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.

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 served as the Company’s Chief Informatics Officer from the date of the acquisition through October 2022, and now serves as Chief Informatics Officer, Emeritus.

The Company recorded $ 0.1 million in finance lease costs related to this lease for the three-month period ended September 30, 2022.

The Company recorded $ 0.4 million in finance lease costs related to this lease for the nine-month period ended September 30, 2022.

As of March 31, 2023, the following table summarizes available-for-sale securities in an unrealized loss position with no credit losses reported:

Less Than 12 Months 12 Months or Greater Total

Gross Unrealized Loss

Commercial paper $ 15,216,000 $ ( 43,000 ) $ — $ — $ 15,216,000 $ ( 43,000 )

Corporate Notes/Bonds 11,687,000 ( 40,000 ) 62,813,000 ( 571,000 ) 74,500,000 ( 611,000 )

Securities of Government Sponsored Entities 1,988,000 ( 10,000 ) — — 1,988,000 ( 10,000 )

Total $ 28,891,000 $ ( 93,000 ) $ 62,813,000 $ ( 571,000 ) $ 91,704,000 $ ( 664,000 )

As of December 31, 2022, the following table summarizes available-for-sale securities in an unrealized loss position with no credit losses reported:

Less Than 12 Months 12 Months or Greater Total

Gross Unrealized Loss

Commercial paper $ 20,020,000 $ ( 73,000 ) $ — $ — $ 20,020,000 $ ( 73,000 )

Corporate Notes/Bonds 9,661,000 ( 27,000 ) 74,452,000 ( 972,000 ) 84,113,000 ( 999,000 )

Securities of Government Sponsored Entities 1,981,000 ( 16,000 ) — — 1,981,000 ( 16,000 )

Total $ 31,662,000 $ ( 116,000 ) $ 74,452,000 $ ( 972,000 ) $ 106,114,000 $ ( 1,088,000 )

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

What changed 10-Q

Item 1. Financial Statements