What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 186 added, 87 removed, 174 unchanged (61% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (“Quarterly Report”) and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023, (“Annual Report”), filed with the Securities and Exchange Commission, (“SEC”), on March 9, 2023.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2024 (“Quarterly Report”) and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023, (“Annual Report”), filed with the Securities and Exchange Commission, (“SEC”), on March 9, 2023.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Bionano Genomics, Inc.

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We offer OGM solutions for applications across basic, translational and clinical research, and for other applications including bioprocessing.

Through our Bionano Laboratories business, we also provide diagnostic testing for patients with clinical presentations consistent with autism spectrum disorder and other neurodevelopmental disabilities.

Through our BioDiscovery business, we offer 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 our Purigen business, we offer nucleic acid extraction and purification solutions using proprietary ITP technology.

We offer a platform-agnostic software solution, which integrates next-generation sequencing, microarray and OGM 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.

The Company also offers nucleic acid extraction and purification solutions using proprietary isotachophoresis ITP technology.

Through our Bionano Laboratories business, we also provide OGM-based diagnostic testing services.

Recent Highlights

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In executing on our commercialization strategy, we expanded the utilization of our OGM systems and:

• Grew our installed base to 347 as of March 31, 2024, an increase of approximately 34% from a total installed base of 259 as of March 31, 2023.

• Grew our installed base to 363 as of June 30, 2024, an increase of approximately 29% from a total installed base of 281 as of June 30, 2023.

Installed base represents the global number of OGM instruments installed at end-customer locations and therefore having the technology to process OGM.

• Sold 8,249 flowcells in the three-month period ended March 31, 2024, an increase of approximately 58% from 5,226 flowcells sold in the same quarter of 2023.

The OGM cartridge is the consumable that packages nanochannel arrays for DNA linearization.

• Sold 6,165 flowcells in the three-month period ended June 30, 2024, a decrease of approximately 13% from 7,062 flowcells sold in the same quarter of 2023.

Sold 14,414 flowcells in the six-month period ended June 30, 2024, an

increase of approximately 12% from 12,888 flowcells sold in the same period of 2023.The OGM cartridge is the consumable that packages nanochannel arrays for DNA linearization.

In its current form, the OGM cartridge can comprise - one, two or three flowcells per cartridge.

Flowcells sold refers to the units of genome mapping consumables used for analyzing one genome, purchased by customers to process samples for optical genome mapping.

The decrease in flowcells was partially due to the slowdown in regular routine use from customers transitioning from Saphyr to Stratys as well as related to three of our OEM partners in China who underperformed against their purchasing commitments during the three months ended June 30, 2024.

Macroeconomic and Geopolitical Developments

We are subject to additional risks and uncertainties as a result of adverse geopolitical and macroeconomic developments, such as recent and potential future bank failures, the ongoing conflict between Ukraine and Russia and related sanctions, the Israel-Hamas war, any effects of global pandemics and uncertain market conditions, including inflation and supply chain disruptions, which could continue to have a material impact on our business and financial results.

For example, we are anticipating a potential protracted slowdown in our Asia Pacific business due to funding headwinds in the region, which are negatively impacting these manufacturing partners who are reliant on government funding,and are awaiting approval from the NMPA.

We closely monitor and comply with various applicable guidelines and legal requirements in the jurisdictions in which we operate.

In the past, we have experienced supply chain challenges, attributable to such adverse geopolitical and macroeconomic developments including increased costs to secure certain component parts in our products and to produce our products at our contract manufacturers.

During the three months ended March 31, 2024, we did not experience material increases in our supply chain costs, but we may experience such increases in future fiscal periods.

During the six months ended June 30, 2024, we did not experience material increases in our supply chain costs, but we may experience such increases in future fiscal periods.

We expect our costs to remain high for the foreseeable future.

As global economic conditions recover, 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 our 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, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic developments, or any similar

negative economic condition.

For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, high inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic developments, or any similar negative economic condition.

These negative effects could have a material impact on our operations, business, earnings, and liquidity.

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As part of the plan, we reduced our overall headcount by approximately 120 employees.

In addition, Bionano Laboratories will phase out over time the offering of certain testing services related to neurodevelopmental disorders, including autism spectrum disorders and other disorders of childhood development.

The Company has substantially completed the reduction in force as of June 30, 2024.

In addition, on March 1, 2024, we decided to phase out the offering by Bionano Laboratories of certain testing services related to related to neurodevelopmental disorders, including autism spectrum disorders and other disorders of childhood development.

These cost-saving measures are incremental to the cost saving initiatives previously announced in May 2023 and October 2023.

See Note 7 (Commitments and Contingencies) to our unaudited condensed consolidated financial statements for additional information.

See Note 7 (Commitments and Contingencies) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information.

Financial Overview

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The following table presents our revenue for the periods indicated:

Three Months Ended March 31,

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

2024 2023 2024 2023

Product revenue $ 6,510,000 $ 6,609,000 $ 13,338,000 $ 12,056,000

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

Three Months Ended March 31,

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

2024 2023 2024 2023

$ % $ % $ % $ %

Americas $ 3,386,000 44 % $ 4,313,000 50 % $ 8,076,000 49 % $ 7,757,000 48 %

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We have made substantial investments in research and development since our inception, and plan to continue to make investments in the future.

Our research and development efforts have focused primarily on the tasks required to support development and commercialization of new and existing products.

Our research and development efforts have focused primarily on the tasks required to support development and commercialization of existing products.

We believe that our continued investment in research and development is essential to our long-term competitive position.

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We have incurred losses in each year since our inception.

Our net loss was $31.4 million for the three months ended March 31, 2024.

As of March 31, 2024, we had an accumulated deficit of $612.6 million.

Our net loss was $16.2 million and $47.6 million for the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, we had an accumulated deficit of $628.9 million.

We expect to continue to incur significant expenses and operating losses as we:

• expand our sales and marketing efforts to further commercialize our products;

• continue our sales and marketing efforts to further commercialize our products;

• continue research and development efforts to improve our existing products;

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• incur increased costs as a result of operating as a public company.

Accordingly, based on recurring losses from operations incurred since inception, the expectation of continued operating losses, and the need to raise additional capital to finance our future operations, we determined that there is substantial doubt about our ability to continue as a going concern within 12 months of this Quarterly Report.

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, Period-to-Period Change

ability to continue as a going concern within 12 months after the date that the financial statements included in this Quarterly Report are issued.

We will continue to seek to raise additional capital, but without additional financing we may not be able to continue as a going concern.

If we are unable to continue as a going concern, we may have to reorganize or liquidate our business and may receive less than the value at which those assets are carried on our consolidated financial statements, and investors may lose all or a part of their investment.

The board of directors (the “Board”) has established a strategy committee to work with the Company and outside advisors in evaluating our options and considering alternatives that we believe will maximize stakeholder value, including any of the following or a combination thereof:

debt financing, equity investments, combinations with other companies, or the sale of all or part of the company.

There can be no assurances that any transactions will be completed and if we are not able to raise sufficient additional capital to fund our future operation, we may potentially seek relief available under applicable insolvency laws.

We do not intend to make further announcements regarding this process unless and until the Board approves a specific transaction or otherwise determines that further disclosure is appropriate.

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table sets forth our results of operations for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30, Period-to-Period Change

Product revenue $ 6,510,000 $ 6,609,000 $ (99,000) (1) %

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Interest income 457,000 689,000 (232,000) (34) %

Interest expense (122,000) (76,000) (46,000) 61 %

Other income (expenses)

363,000 (330,000) 693,000 (210) %

Total other income (expenses) 820,000 359,000 461,000 128 %

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Net loss $ (16,224,000) $ (38,912,000) $ 22,688,000 (58) %

Product revenue increased by $1.4 million, or 25%, to $6.8 million for the three months ended March 31, 2024 compared to $5.4 million for the same period in 2023.

The increase in product revenue was driven by increased sales of consumables with expansion of the install base and software sales.

Product revenue decreased by $0.1 million, or 1%, to $6.5 million for the three months ended June 30, 2024 compared to $6.6 million for the same period in 2023.

The decrease in product revenue was driven by a $0.2 million or 8% decrease in instrument revenue, a $0.4 million or 13% decrease in consumables revenue, and was partially offset by an increase of $0.5 million or 39% of software revenue.

Despite decreased product revenue for the three months ended June 30, 2024, we expect product revenue to continue to increase as market awareness and published data of OGM utility increases, along with continued efficiencies gained in the OGM workflow through research and development.

Service and other revenue decreased by $0.8 million, or 39%, to $1.3 million for the three months ended June 30, 2024 when compared to the same period in 2023 which is the result of discontinuing sales of certain clinical service offerings from Bionano Laboratories effective March 2024.

Such clinical service offerings from Bionano Laboratories contributed $0.7 million in revenues for the three months ended June 30, 2024.

We expect service and other revenue to continue to decrease over the remainder of 2024 as a result of phasing out these offerings.

Cost of Revenue

Cost of product revenue decreased by 1%, to $4.7 million for the three months ended June 30, 2024, compared to $4.8 million for the three months ended June 30, 2023.

The decrease in cost of product revenue was due to a shift in the product mix, with a lower contribution from instrument and consumable sales partially offset by increased contribution from software sales.

We expect cost of product revenue to increase as product revenues increase.

Cost of service and other revenue decreased $1.1 million, or 70%, to $0.5 million for the three months ended June 30, 2024, compared to $1.6 million for the three months ended June 30, 2023.

The decrease in cost of service and other revenue is primarily due to discontinuing sales of certain clinical service offerings from Bionano Laboratories effective March 2024.

We expect cost of service and other revenue to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Gross Profit, and Gross Margin

Three Months Ended June 30, Period-to-Period Change Period-to-Period Percentage Change

Gross profit (loss):

Product $ 1,807,000 $ 1,857,000 $ (50,000) (3)%

Service and other 778,000 451,000 327,000 73%

Total gross profit $ 2,585,000 $ 2,308,000 $ 277,000 12%

Gross margin:

Product 28 % 28 %

Service and other 62 % 22 %

Total gross margin 33 % 27 %

Product gross profit decreased $0.1 million, or 3%, to $1.8 million for the three months ended June 30, 2024, compared to $1.9 million for the three months ended June 30, 2023.

The decrease in product gross profit was due to the decrease in consumable sales partially offset by the increase in software sales.

Service and other gross profit increased by $0.3 million, or 73%, to $0.8 million for the three months ended June 30, 2024, compared to $0.5 million for the three months ended June 30, 2023.

The increase in service and other gross profit was primarily due to the decrease in cost of sales related to discontinuing sales of certain clinical service offerings from Bionano Laboratories effective March 2024.

We expect service and other gross profit to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Research and Development Expenses

Research and development (“R&D”) expenses decreased by $7.8 million, or 53%, to $6.8 million for the three months ended June 30, 2024 compared to $14.6 million for the same period in 2023.

The decrease is partially due to decreases of $4.3 million in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024, and of $2.1 million in professional and consulting fees including costs incurred to support clinical research studies, Stratys development, foundry expenses, and cloud computing.

We also reduced our consumption of inventory and materials and supply by $1.3 million of non-inventory materials and supply.

We anticipate that R&D expenses will decrease for the remainder of 2024 as a result of our cost savings initiatives announced in March 2024.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses decreased by $15.4 million, or 57%, to $11.6 million for the three months ended June 30, 2024 compared to $26.9 million for the same period in 2023.

The decrease is primarily due to a $6.0 million decrease in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024, a $2.7 million decrease in professional and consulting fees which is primarily marketing-related expenses and software maintenance, a $2.1 million decrease in administration and other expenses which includes the gain/loss recorded on fair value of the contingent consideration due for BioDiscovery and Purigen milestones, and $0.9 million decrease in travel entertainment.

We anticipate that SG&A expenses will decrease for the remainder of 2024 as a result of our cost savings initiatives announced in March 2024.

Restructuring Costs

Restructuring costs were $1.2 million for the three months ended June 30, 2024, as a result of our cost savings initiatives announced in March 2024.

We had no expenses that were classified as restructuring costs during the same period in 2023.

Interest Income

Interest income decreased by $0.2 million, or 34%, to $0.5 million for the three months ended June 30, 2024, as compared to $0.7 million for the same period in 2023 resulting from positive returns on investments.

The decrease is the result of a reduction in investments offset by higher returns.

Other income (expense)

Other income (expense) increased by $0.7 million , or (210)%, to $0.4 million for the three months ended June 30, 2024 compared to $(0.3) million for the same period in 2023.

The increase is driven by a net gain on the extinguishment of the High Trail Note and Purchase Option of $4.0 million , offset by a loss recorded on the issuance of the JGB Debentures of $1.9 million , and an increase in interest expense of $1.4 million .

See Note 5 (Debt) for further discussion on debt transactions that took effect during the quarter.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table sets forth our results of operations for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30, Period-to-Period Change

Product revenue $ 13,338,000 $ 12,056,000 $ 1,282,000 11 %

Service and other revenue 3,202,000 4,021,000 (819,000) (20) %

Total revenue 16,540,000 16,077,000 463,000 3 %

Cost of revenue:

Cost of product revenue 9,607,000 8,610,000 997,000 12 %

Cost of service and other revenue 1,525,000 3,090,000 (1,565,000) (51) %

Total cost of revenue 11,132,000 11,700,000 (568,000) (5) %

Operating expenses:

Research and development 16,608,000 28,547,000 (11,939,000) (42) %

Selling, general and administrative 31,092,000 52,913,000 (21,821,000) (41) %

Restructuring costs

5,847,000 — 5,847,000 100 %

Total operating expenses 53,547,000 81,460,000 (27,913,000) (34) %

Loss from operations (48,139,000) (77,083,000) 28,944,000 (38) %

Other income (expenses):

Interest income 1,500,000 1,392,000 108,000 8 %

Other income (expenses)

(998,000) (288,000) (710,000) 247 %

Total other income (expenses) 502,000 1,104,000 (602,000) (55) %

Loss before income taxes (47,637,000) (75,979,000) 28,342,000 (37) %

Provision for income taxes (9,000) (59,000) 50,000 (85) %

Net loss $ (47,646,000) $ (76,038,000) $ 28,392,000 (37) %

Product revenue increased by $1.3 million, or 11%, to $13.3 million for the six months ended June 30, 2024 compared to $12.1 million for the same period in 2023.

The increase in product revenue was driven by a $0.8 million or 16% increase in sales of consumables and an increase of $0.9 million or 36% of software, partially offset by a $0.5 million or 11% decrease in instrument sale s.

We believe increased demand for our OGM systems was primarily driven by increased market awareness and additional published data demonstrating the utility of OGM.

We expect product revenue to increase as market awareness and published data of OGM utility increases, along with continued efficiencies gained in the OGM workflow through research and development, and the acquisitions of BioDiscovery and Purigen.

There was no material change in service and other revenue for the three months ended March 31, 2024 when compared to the same period in 2023.

We expect service and other revenue to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Service and other revenue decreased $0.8 million or 20% for the s ix months ended June 30, 2024 when compared to the same period in 2023.

We expect service and other revenue to continue to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Cost of Revenue

Cost of product revenue increased by $1.0 million, or 27%, to $4.9 million for the three months ended March 31, 2024, compared to $3.9 million for the three months ended March 31, 2023.

The increase in cost of product revenue was due to higher sales of instruments and consumables.

Cost of product revenue increased by $1.0 million, or 12%, to $9.6 million for the six months ended June 30, 2024, compared to $8.6 million for the same period in 2023.

The increase in cost of product revenue was due to higher sales of consumables offset by lower sales of instruments.

We expect cost of product revenue to continue to increase as product revenues increase.

Cost of service and other revenue decreased $0.4 million, or 30%, to $1.0 million for the three months ended March 31, 2024, compared to $1.5 million for the three months ended March 31, 2023.

The decrease in cost of service and other revenue is primarily due to a decrease in product warranty and maintenance costs.

Cost of service and other revenue decreased $1.6 million, or 51%, to $1.5 million for the six months ended June 30, 2024, compared to $3.1 million for the same period in 2023.

The decrease in cost of service and other revenue is primarily due to discontinuing sales of certain clinical service offerings from Bionano Laboratories effective March 2024.

We expect cost of service and other revenue to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Gross Profit, and Gross Margin

Three Months Ended March 31, Period-to-Period Change Period-to-Period Percentage Change

Six Months Ended June 30,

Period-to-Period Change Period-to-Period Percentage Change

Gross profit (loss):

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Total gross margin 33 % 27 %

Product gross profit increased $0.3 million, or 21%, to $1.9 million for the three months ended March 31, 2024, compared to $1.6 million for the three months ended March 31, 2023.

The increase in product gross profit was primarily due to higher sales of consumables and software.

Service and other gross profit increased by $0.4 million, or 87%, to $0.9 million for the three months ended March 31, 2024, compared to $0.5 million for the three months ended March 31, 2023.

The increase in service and other gross profit was primarily due to a decrease in product warranty and maintenance costs.

Product gross profit increased $0.3 million, or 8%, to $3.7 million for the six months ended June 30, 2024, compared to $3.4 million for the same period in 2023.

The increase in product gross profit was primarily due to higher sales of consumables and software, offset by a decrease in instrument sales.

Service and other gross profit increased by $0.7 million, or 80%, to $1.7 million for the six months ended June 30, 2024, compared to $0.9 million for the same period in 2023.

T he increase in service and other gross profit was primarily due to the decrease in cost of sales related to discontinuing sales of certain clinical service offerings from Bionano Laboratories effective March 2024.

We expect service and other gross profit to decrease over the remainder of 2024 as a result of our decision to phase out certain clinical service offerings from Bionano Laboratories.

Research and Development Expenses

Research and development (“R&D”) expenses decreased by $4.2 million, or 30%, to $9.8 million for the three months ended March 31, 2024 compared to $13.9 million for the same period in 2023.

The decrease is primarily due to a decrease of $1.5 million in professional and consulting fees including costs incurred to support clinical research studies and Stratys development, a decrease of $2.2 million in salaries, wages and benefits driven by headcount reductions announced in 2023, and a decrease of $0.5 million of information technology costs.

R&D expenses decreased by $11.9 million, or 42%, to $16.6 million for the six months ended June 30, 2024 compared to $28.5 million for the same period in 2023.

The decrease is partially due to decreases of $6.5 million in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024 and $3.6 million in professional and consulting fees including costs incurred to support clinical research studies, Stratys development, foundry expenses, and cloud computing.

Lastly, we reduced information technology and rent and facility costs by $0.6 million and we reduced the internal consumption of inventory and materials and supply by $1.1 million.

We anticipate that R&D expenses will decrease for the remainder of 2024 as a result of our cost savings initiatives announced in March 2024.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses decreased by $6.4 million, or 25%, to $19.5 million for the three months ended March 31, 2024 compared to $26.0 million for the same period in 2023.

The decrease is primarily due to a $3.9 million decrease in salaries, wages and benefits driven by headcount reductions announced in 2023, a $1.5 million decrease in primarily marketing-related expenses and a $0.8 million decrease in administration and other expenses which includes the gain/loss recorded on fair value of the contingent consideration due for Purigen milestones and is offset by intangible impairment charges recorded to our non-OGM Bionano Laboratories asset group.

SG&A expenses decreased by $21.8 million, or 41%, to $31.1 million for the six months ended June 30, 2024 compared to $52.9 million for the same period in 2023.

The decrease is primarily due to a $9.8 million decrease in salaries, wages and benefits driven by headcount reductions announced in 2023 and 2024, a $4.2 million decrease in primarily marketing-related expenses and a $2.9 million decrease in administration and other expenses which includes the gain/loss recorded on fair value of the contingent consideration due for Purigen and BioDiscovery milestones and is offset by intangible impairment charges recorded to our non-OGM Bionano Laboratories asset group.

We anticipate that SG&A expenses will decrease for the remainder of 2024 as a result of our cost savings initiatives announced in March 2024.

Restructuring Costs

Restructuring costs were $4.6 million for the three months ended March 31, 2024, as a result of our cost savings initiatives announced in March 2024.

We had no restructuring costs during the same period in 2023.

Restructuring costs were $5.8 million for the six months ended June 30, 2024, as a result of our cost savings initiatives announced in March 2024.We had no expenses that were classified as restructuring costs during the same period in 2023.

Interest Income

Interest income increased by $0.3 million, or 48%, to $1.0 million for the three months ended March 31, 2024, as compared to $0.7 million for the same period in 2023 resulting from positive returns on investments.

Interest income increased by $0.1 million, or 8%, to $1.5 million for the six months ended June 30, 2024, as compared to $1.4 million for the same period in 2023 resulting from positive returns on investments.

Other income (expense)

Other income (expenses) decreased by $1.4 million, or 1,159%, to $(1.2) million for the three months ended March 31, 2024, as compared to other income of $0.1 million for the same period in 2023.

The change is primarily due to the change in fair value adjustments and interest payments related to the High Trail transaction.

Other income (expense) increased by $0.7 million, or 247%, to $1.0 million for the six months ended June 30, 2024 compared to $0.3 million for the same period in 2023.

The increase is driven by a net gain on the extinguishment of the High Trail Note and Purchase Option of $4.0 million, offset by a loss recorded on the issuance of the JGB Debentures of $1.9 million, and an increase in interest expense of $1.5 million.

See Note 5 (Debt) for further discussion on debt transactions that took effect during the quarter.

Liquidity and Capital Resources

Since our inception, we have incurred net losses and negative cash flows from operations.

Since our inception, we have incurred recurring net losses from operations, negative cash flows from operating activities and accumulated deficit.

We have primarily generated cash flows from sales of equity securities and debt financings.

We incurred net losses of $31.4 million and $93.9 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of $612.6 million, cash and cash equivalents of $15.8 million, $24.8 million in restricted cash and cash equivalents and restricted short-term investments and available for sale investment securities of $12.6 million.

The amount we are required to hold as restricted cash and cash investments and restricted short-term investments is reduced as the outstanding principal amount of the Notes is paid.

We incurred net losses of $47.6 million and $76.0 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $628.9 million, cash and cash equivalents of $10.4 million, $11.4 million in restricted cash and short-term investment securities of $8.5 million.

The amount we are required to hold as restricted cash is equal to the lesser of (a) $11.0 million and (b) the then outstanding principal balance of the Debentures.

Sources of Liquidity and Capital Resources

In the three months ended March 31, 2024, we incurred negative cash flows from operating activities of $28.1 million.

In the six months ended June 30, 2024, we incurred negative cash flows from operating activities of $49.1 million.

We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations.

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See Note 6 (Stockholder’s Equity and Stock-Based Compensation) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of our recent equity activity for more information.

On October 13, 2023, we completed a registered offering (the “Registered Offering”) of senior secured convertible notes payable due 2025 (the “Registered Notes”) and warrants (the “Registered Warrants”) and a concurrent private placement (the “Private Placement”) of senior secured convertible notes payable due 2025 (the “Private Placement Notes” and, together with the Registered Notes, the “Notes”) and warrants (the “Private Placement Warrants” and, together with the Registered Warrants, the “Warrants”) and received net proceeds from the sale of the Notes and the Registered Warrants of approximately $75.6 million, after deducting the estimated Offering and Private Placement expenses and placement agent fees.

$35.0 million of the proceeds of the Private Placement Notes was deposited into a restricted account subject to an account control agreement that only permits funds to be released once per calendar month upon the satisfaction of certain funding conditions specified in the Notes.

The Amendment (as defined below) reduces the amount required to be held as restricted cash and removes the need for us to meet certain funding conditions before being able to access such funds.

On February 27, 2024, we entered into a letter agreement (the “Letter Agreement”) and an Amendment to the Registered Notes (the “Amendment”), with the purchaser of the Registered Notes which provided reduction (i) of the minimum liquidity covenant from $50.0 million, and (ii) of the restricted cash covenant from $35.0 million, to the amount equal to the sum of (iii) the outstanding principal amount of the Registered Notes plus (iv) approximately $0.7 million, which will be further reduced as the remaining principal on the Registered Notes are retired.

We also redeemed the outstanding $17.0 million of the Private Placement Notes for a redemption payment of approximately $19.6 million and a retirement fee of $3.2 million paid concurrently and $10.7 million of the Registered Notes for a redemption payment of approximately $12.3 million.

See Note 5 (High Trail Agreement) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on the Notes and Warrants.

As of March 31, 2024, we had $29.1 million of Notes at fair value, which is classified as current.

The holder may require us to redeem the $24.3 million outstanding principal amount of the Notes at a redemption price of 115% of the principal amount (the “Repayment Price”) or $28.0 million in 2024.

On January 1, 2024, and February 1, 2024, the holders redeemed an aggregate of $9.0 million principal of the Notes, for a Repayment Price of $10.4 million.

In February 2024, in connection with the Letter Agreement and Amendment we redeemed an aggregate of $27.7 million principal amount of Notes for a total redemption payment of approximately $31.8 million, together with a retirement fee of approximately $3.2 million.

Following the redemptions we have $24.3 million of principal of the Notes outstanding as of March 31, 2024.

On April 20, 2024, and May 1, 2024, the holders redeemed an aggregate of $9.0 million of principal, at the Repayment Price of $10.4 million.

On April 4, 2024,we entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”), pursuant to which we agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “Registered Direct Offering”):

On October 13, 2023, we completed a registered offering (the “October 2023 Registered Offering”) of senior secured convertible notes payable due 2025 (the “High Trail Registered Notes”) and warrants (the “Registered Warrants”) and a concurrent private placement (the “October 2023 Private Placement” and together with the October 2023 Registered Offering, the “October 2023 Offering”) of senior secured convertible notes payable due 2025 (the “High Trail Private Placement Notes” and, together with the High Trail Registered Notes, the “High Trail Notes”) and warrants (the “Private Placement Warrants” and, together with the Registered Warrants, the “Warrants”) and received net proceeds from the sale of the High Trail Notes and the Registered Warrants of approximately $75.6 million, after deducting the offering expenses and placement agent fees.

On February 27, 2024, we entered into a letter agreement (the “Letter Agreement”) and an Amendment to the Registered Notes (the “Amendment”), with the purchaser of the High Trail Registered Notes which provided reduction (i) of the minimum liquidity covenant from $50.0 million, and (ii) of the restricted cash covenant from $35.0 million, to the amount equal to the sum of (iii) the outstanding principal amount of the High Trail Registered Notes plus (iv) approximately $0.7 million, which will be further reduced as the remaining principal on the High Trail Registered Notes are retired.

We also redeemed the outstanding $17.0 million of the High Trail Private Placement Notes for a redemption payment of approximately $19.6 million and a retirement fee of $3.2 million paid concurrently and $10.7 million of the High Trail Registered Notes for a redemption payment of approximately $12.3 million.

On March 1, 2024, we redeemed $27.7 million aggregate principal amount of the High Trail Notes at a redemption price of 115% of the outstanding principal (the “Repayment Price”) or $31.8 million, and for the period January 1, 2024 through May 1, 2024, redeemed an additional $18.0 million aggregate principal amount of the High Trail Notes at the holders’ option at the Repayment Price for an aggregate of $20.7 million.

On May 24, 2024, we entered into a securities purchase agreement with certain accredited investors (the “Holders”) and JGB Collateral LLC, as collateral agent for the Holders, for the sale by the Company in a private placement (the “JGB Debentures Offering”) of:

• 2.25 million shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and

• Senior Secured Convertible Debentures in the aggregate principal amount of $20.0 million (the “Debentures”), for an aggregate purchase price of $18.0 million.

The closing of the JGB Debentures Offering occurred on May 24, 2024.

In connection with the closing of the JGB Debentures Offering, the Company received net proceeds of approximately $16.6 million, after payment of placement agent fees, and other offering expenses.

The Company used the proceeds received to fully redeem the outstanding balance due under the High Trail Note of approximately $17.6 million, as amended (see further discussion below).

On May 23, 2024, in connection with the JGB Debentures Offering, the Company entered into a redemption agreement with High Trail (“HT Agreement”).

Pursuant to the HT Agreement, the Company agreed to redeem the entire outstanding principal amount of $15.3 million under the High Trail Note at a redemption price of 115% for a total redemption payment of $17.6 million (the “Redemption Payment”).

Upon High Trail’s receipt of the Redemption Payment on May 24, 2024, the High Trail Note and related Option were cancelled.

In addition, the Company agreed to pay High Trail a retirement fee of $2.2 million and to reimburse High Trail for all of its reasonable and documented out-of-pocket expenses incurred with the release and termination of security interests relating to the High Trail Note.

As of June 30, 2024, the Company reported $19.4 million of Debentures at fair value, of which $19.4 million is classified as current and represents twelve months’ principal redemption payments at the holder’s option.

Through June 30, 2024, the Company paid $0.2 million in interest and no principal amounts on the Debentures.

As of June 30, 2024, the Company may be required to redeem up to $6.0 million of principal and expects to pay an additional $1.4 million in interest on the Debentures in 2024.

See Note 5 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further information on the Notes and Warrants.

On April 4, 2024, we entered into a securities purchase agreement (the “April Purchase Agreement”) with certain institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “April 2024 Registered Direct Offering”):

(i) an aggregate of 6.5 million shares of common stock, (ii) pre-funded warrants to purchase up to an aggregate of 2.2 million shares of common stock and (iii) warrants to purchase up to 8.7 million shares of common stock.

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The combined purchase price of each pre-funded warrant and accompanying warrant was $1.14 (equal to the combined purchase price per share of common stock and accompanying warrant, minus $0.001).

We received gross proceeds from the Registered Direct Offering of approximately $10.0 million, before deducting placement agent fees and other offering expenses of $0.7 million.

Based on our current business plans, we believe the net proceeds from the financings above together with our existing cash and cash equivalents and short-term investments, will be sufficient to fund our operating expenses and capital expenditure requirements into at least the third quarter of 2024.

This estimate assumes the inclusion of the amount equal to the sum of (i) the outstanding principal amount of the Registered Notes plus (ii) approximately $0.7 million that we are required to hold as restricted cash in an account control agreement under the terms of the Registered Notes.

We received gross proceeds from the April 2024 Registered Direct Offering of approximately $10.0 million, before deducting placement agent fees and other offering expenses of $0.7 million.

On July 4, 2024, we entered into a securities purchase agreement (the “July 2024 Purchase Agreement”) with certain institutional investors, pursuant to which we agreed to issue and sell, (i) in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “July 2024 Registered Direct Offering”):

(a) an aggregate of 11.7 million shares of our common stock, and (b) pre-funded warrants to purchase up to an aggregate of 5.8 million shares of Common Stock, and (ii) in a concurrent private placement (the “Private Placement” and together with the Registered Direct Offering, the “July 2024 Offering”), Series A warrants to purchase up to an aggregate of 17.5 million shares of Common Stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 17.5 million shares of Common Stock (the “Series B Warrants”, and together with the Series A Warrants, the “Purchase Warrants”).

Each share of Common Stock and each Pre-Funded Warrant sold pursuant to the Purchase Agreement will be accompanied by one Series A Warrant and one Series B Warrant.

The combined purchase price of each share of Common Stock and accompanying Purchase Warrants is $0.571 per share.

The combined purchase price of each Pre-Funded Warrant and accompanying Purchase Warrants is $0.571 (equal to the combined purchase price per share of Common Stock and accompanying Purchase Warrants, minus $0.001).

We received gross proceeds from the July 2024 Offering of approximately $10.0 million (excluding up to $20.0 million of aggregate gross proceeds that may be received in the future upon the cash exercise of the Purchase Warrants issued in the Private Placement which is contingent upon stockholder approval), before deducting placement agent fees and other offering expenses of $0.7 million.

This estimate assumes the inclusion of the amount equal to the outstanding principal amount of the Debentures.

Our existing cash and cash equivalents and short-term investments, will not be sufficient for us to achieve cash-flow break even and we expect to need to seek additional capital based on strategic consideration alternatives in the future.

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We expect such expenditures to continue throughout 2024.

We had $15.8 million in cash and cash equivalents, $12.6 million in available for sale securities and $24.8 million in restricted cash and cash equivalents and restricted short-term investments as of March 31, 2024.

The amount we are required to hold as restricted cash and cash investments and restricted short-term investments is reduced as the outstanding principal amount of the Notes is paid.

We had $10.4 million in cash and cash equivalents, $8.5 million in short-term investments and $11.4 million in restricted cash as of June 30, 2024.

The amount we are required to hold as restricted cash is equal to the lesser of (a) $11.0 million and (b) the then outstanding principal balance of the Debentures.

Based on recurring losses from operations incurred since inception and the expectation of continued operating losses, we anticipate our available cash balance will not be sufficient to operate our business for the next twelve months from the issuance of this Quarterly Report.

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Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability to achieve our intended business objectives.

In addition, our estimate as to the sufficiency of our current cash, cash equivalents and available for sale securities, and our current operating plan as discussed above are based on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we currently anticipate.

In addition, our estimate as to the sufficiency of our current cash, cash equivalents and short-term investments and our current operating plan as discussed above are based on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we currently anticipate.

See Note 1 (Organization and Basis of Presentation) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information.

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Net cash provided by (used in):

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities $ (49,109,000) $ (69,109,000)

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We plan to raise additional capital to fulfill our operating and capital requirements for at least 12 months through equity or debt financings, however, we may not be able to secure such financing in a timely manner or on favorable terms, if it all.

See Note 5 (High Trail Agreement) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of our recent debt financing.

See Note 5 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of our recent debt financing.

We anticipate that our cash used in operating activities will decrease over the next 12 to 24 months;

however, we may observe fluctuations in the cash used in operating activities on a quarterly basis to sustain the expansion of our commercial offerings.

Net cash used in operating activities was $28.1 million during the three months ended March 31, 2024 as compared to $32.4 million during the same period in 2023.

The decrease in cash used in operating activities of $4.3 million was primarily attributed to a decrease in our net loss in the current quarter offset by an increase in our working capital usage.

Net cash used in operating activities was $49.1 million during the six months ended June 30, 2024 as compared to $69.1 million during the same period in 2023.

The decrease in cash used in operating activities of $20.0 million was primarily attributed to a decrease in our net loss in the current quarter and decrease in our working capital usage as a result of our cost savings initiatives announced in March 2024.

Investing Activities

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We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.

During the three months ended March 31, 2024, cash provided by investing activities was $47.6 million, as compared to $16.5 million provided by investing activities during the same period in 2023.

The increase in cash provided by investing activities of $31.1 million was primarily attributed to the maturity of $158.2 million in available for sale securities which was partially offset by a purchase of available for sale securities of $110.6 million during the three months ended March 31, 2024, compared to the maturity of $16.9 million in available for sale securities during the same period in 2023.

During the six months ended June 30, 2024, cash provided by investing activities was $76.2 million, as compared to $46.1 million provided by

investing activities during the same period in 2023.

The increase in cash provided by investing activities of $30.1 million was primarily attributed to the maturity of $227.9 million in available for sale securities which was offset by a purchase of available for sale securities of $151.6 million during the six months ended June 30, 2024, compared to the maturity of $46.9 million in available for sale securities during the same period in 2023.

Financing Activities

Net cash used in financing activities was $21.6 million during the three months ended March 31, 2024 as compared to net cash provided by financing activities of $14.9 million during the same period in 2023, a decrease of $36.5 million.

During the three months ended March 31, 2024, the Company made payments of $36.7 million towards the convertible notes payable which was slightly offset by approximately $15.4 million in gross proceeds from executing sales under our at-the-market facility with Cowen and Company, LLC (“Cowen”) as compared to $15.2 million during the same period in 2023.

Net cash used in financing activities was $23.6 million during the six months ended June 30, 2024 as compared to net cash provided by financing activities of $32.7 million during the same period in 2023, a decrease of $56.3 million.

During the six months ended June 30, 2024, the Company made payments of $61.0 million towards the convertible notes payable which was offset by approximately $18.0 million in gross proceeds from the issuance of convertible debentures and $27.6 million in gross proceeds from executing sales under our at-the-market facility with Cowen and Company, LLC (“Cowen”) as compared to $33.5 million during the same period in 2023.

Capital Resources

As of March 31, 2024, we had approximately $15.8 million in cash and cash equivalents, available for sale securities of $12.6 million, $24.8 million in restricted cash and cash equivalents and restricted short-term investments and working capital of $27.1 million.

The amount we are required to hold as restricted cash and cash investments and restricted short-term investments is reduced as the outstanding principal amount of the Notes is paid.

As of June 30, 2024, we had approximately $10.4 million in cash and cash equivalents, short-term investments of $8.5 million, $11.4 million in restricted cash and working capital of $23.4 million.

The amount we are required to hold as restricted cash is equal to the lesser of (a) $11.0 million and (b) the then outstanding principal balance of the Debentures.

We have in place a Sales Agreement with Cowen (the “Cowen ATM”), as amended, pursuant to which we may offer and sell from time to time up to $200.0 million of shares from the date of the amendment going forward through or to Cowen, acting as sales agent or principal.

During the three months ended March 31, 2024, we sold approximately 11.8 million shares of common

stock under the Cowen ATM and received gross proceeds of approximately $15.4 million before deducting offering costs of $0.4 million.

During the six months ended June 30, 2024, we sold approximately 14.0 million shares of common stock under the Cowen ATM and received gross proceeds of approximately $17.6 million before deducting offering costs of $0.4 million.

Contingent Consideration

As part of the merger agreement related to the acquisition of Purigen, we agreed to pay two independent milestone payments up to an aggregate of $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.

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

We determined the likelihood of each independent milestone and used probability factors ranging from 0% to 49% which were applied to the individual payments.

At March 31, 2024, a Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.

Based on these valuation assumptions, the fair value of the contingent consideration liabilities was determined to be $10.3 million as of March 31, 2024.

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

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

At June 30, 2024, we determined the likelihood of the first milestone to be 0% and reduced the fair value of the contingent consideration accordingly.

For the second milestone, we performed a Monte Carlo Simulation to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.

Based on these valuation assumptions, the fair value of the contingent consideration liabilities was determined to be $5.8 million as of June 30, 2024.

Contractual Obligations

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As described further in Note 1, (Organization and Basis of Presentation) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, effective January 1, 2024, the Company changed its estimates of the useful lives of the Company’s Saphyr and Stratys instruments to better reflect the estimated period during which these assets will remain in service.

During the three months ended March 31, 2024, there have been no changes to our critical accounting policies and estimates as described in our Annual Report.

During the six months ended June 30, 2024, there have been no changes to our critical accounting policies and estimates as described in our Annual Report.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis