What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-07 · 268 added, 153 removed, 627 unchanged (40% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

2024 December 31,

5 unchanged sentences

Prepaid expenses and other current assets 4,387,000 6,019,000

Restricted cash

Restricted investments

11,000,000 35,117,000

Total current assets 46,980,000 140,118,000

15 unchanged sentences

Purchase option liability (at fair value) — 8,534,000

Convertible notes payable (at fair value) 19,359,000 69,803,000

Convertible debentures and High Trail notes payable (at fair value)

14,953,000 69,803,000

Total current liabilities 32,950,000 100,028,000

2 unchanged sentences

Contingent consideration

5,774,000 10,890,000

Long-term contract liabilities 263,000 154,000

3 unchanged sentences

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized at June 30, 2024 and December 31, 2023;

no shares issued and outstanding at June 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at June 30, 2024 and December 31, 2023;

70,776,000 and 45,752,000 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

10,000,000 shares authorized at September 30, 2024 and December 31, 2023;

no shares issued and outstanding at September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value, 400,000,000 shares authorized at September 30, 2024 and December 31, 2023;

88,468,000 and 45,752,000 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 720,425,000 677,337,000

Accumulated deficit ( 673,100,000 ) ( 581,208,000 )

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

1,534,000 23,000

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

9 unchanged sentences

Selling, general and administrative 9,464,000 24,896,000 40,109,000 77,809,000

Goodwill impairment

— 77,280,000 — 77,280,000

Intangible assets and other long-lived assets impairment

19,504,000 — 19,951,000 —

Restructuring costs

8 unchanged sentences

Loss before income taxes ( 44,222,000 ) ( 112,527,000 ) ( 91,860,000 ) ( 188,504,000 )

Benefit (provision) for income taxes ( 26,000 ) ( 33,000 ) ( 9,000 ) ( 59,000 )

Provision for income taxes

( 24,000 ) ( 39,000 ) ( 32,000 ) ( 98,000 )

Net loss $ ( 44,246,000 ) $ ( 112,566,000 ) $ ( 91,892,000 ) $ ( 188,602,000 )

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

1 unchanged sentence

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities

Unrealized gain on investment securities

10,000 227,000 12,000 1,014,000

Change in fair value attributable to instrument-specific credit risk

1,503,000 — 1,503,000 —

Foreign currency translation adjustments 24,000 ( 10,000 ) ( 4,000 ) 17,000

Other comprehensive income (loss) $ 13,000 $ 355,000 $ ( 26,000 ) $ 814,000

Other comprehensive income

$ 1,537,000 $ 217,000 $ 1,511,000 $ 1,031,000

Total comprehensive loss $ ( 42,709,000 ) $ ( 112,349,000 ) $ ( 90,381,000 ) $ ( 187,571,000 )

4 unchanged sentences

Capital Accumulated

Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit)

Deficit Accumulated Other Comprehensive Income (Loss)

Total Stockholders’ Equity (Deficit)

Shares Amount

5 unchanged sentences

Net loss — — — ( 37,124,000 ) — ( 37,124,000 )

Other comprehensive income (loss) — — — — 459,000 459,000

Other comprehensive income

— — — — 459,000 459,000

Balance at March 31, 2023 30,679,000 $ 3,000 $ 617,987,000 $ ( 385,839,000 ) $ ( 665,000 ) $ 231,486,000

6 unchanged sentences

Net loss — — — ( 38,912,000 ) — ( 38,912,000 )

Other comprehensive income (loss) — — — — 355,000 355,000

Other comprehensive income

— — — — 355,000 355,000

Balance at June 30, 2023 33,240,000 $ 3,000 $ 639,814,000 $ ( 424,751,000 ) $ ( 310,000 ) $ 214,756,000

Stock-based compensation expense — — 3,992,000 — — 3,992,000

Issue common stock, net of issuance costs 2,109,000 — 12,661,000 — — 12,661,000

Issue stock for warrant exercises — — — — — —

Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes — — ( 61,000 ) — — ( 61,000 )

Net loss — — — ( 112,566,000 ) — ( 112,566,000 )

Other comprehensive income

— — — — 217,000 217,000

Balance at September 30, 2023

35,349,000 $ 3,000 $ 656,406,000 $ ( 537,317,000 ) $ ( 93,000 ) $ 118,999,000

Balance at January 1, 2024

12 unchanged sentences

Net loss — — — ( 16,224,000 ) — ( 16,224,000 )

Other comprehensive income (loss) — — — — 13,000 13,000

Other comprehensive income

— — — — 13,000 13,000

Balance at June 30, 2024

70,776,000 $ 7,000 $ 709,187,000 $ ( 628,854,000 ) $ ( 3,000 ) $ 80,337,000

Stock option exercises — — — — — —

Stock-based compensation expense — — 2,202,000 — — 2,202,000

Issue common stock, net of issuance costs 11,865,000 1,000 9,034,000 — — 9,035,000

Issue stock for warrant exercises 5,813,000 1,000 2,000 — — 3,000

Issuance of common stock due to the vesting of restricted stock units, net of shares withheld to cover taxes 14,000 — — — — —

Net loss — — — ( 44,246,000 ) — ( 44,246,000 )

Other comprehensive income

— — — — 1,537,000 1,537,000

Balance at September 30, 2024

88,468,000 $ 9,000 $ 720,425,000 $ ( 673,100,000 ) $ 1,534,000 $ 48,868,000

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

2 unchanged sentences

Depreciation and amortization expense 11,624,000 10,112,000

Goodwill impairment

Inventory write-offs

Amortization of financing lease right-of-use asset 153,000 153,000

Amortization (accretion) of interest on securities ( 912,000 ) ( 226,000 )

Accretion of interest on securities

( 1,176,000 ) ( 309,000 )

Non-cash lease expense ( 2,000 ) 38,000

Gain on lease modification ( 73,000 ) —

Net realized loss (gain) on investments 18,000 23,000

Net realized loss on investments

18,000 23,000

Stock-based compensation 7,800,000 11,806,000

4 unchanged sentences

Gain on High Trail extinguishment ( 3,965,000 ) —

Loss on intangible asset impairment 448,000 —

Impairment of internal-use software

Loss on intangible assets and other long-lived assets impairment

Loss on ROU asset impairment

Loss on property and equipment disposal 1,404,000 —

13 unchanged sentences

Sale and maturity of available for sale securities 285,268,000 84,866,000

Construction in progress

Net cash provided by investing activities 70,842,000 79,531,000

10 unchanged sentences

( 61,001,000 ) —

Payments on convertible debentures

( 3,000,000 ) —

Debt issuance costs on sale of convertible debentures

18 unchanged sentences

Property and equipment included in accounts payable $ — $ 434,000

Construction in progress included in accounts payable $ — $ 65,000

See accompanying notes to the unaudited condensed consolidated financial statements.

8 unchanged sentences

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

Through its Lineagen, Inc.

(doing business as Bionano Laboratories, “Bionano Laboratories”) business, the Company also provides OGM-based diagnostic testing services.

Through its Bionano Laboratories, (“Bionano Laboratories”) business, the Company also provides OGM-based diagnostic testing services.

Reverse Stock Split

9 unchanged sentences

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, 2023.

Reclassifications

Certain amounts reported in prior years have been reclassified to conform with the presentation in the current year.

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

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 June 30, 2024, the Company had approximately $ 10.4 million in cash and cash equivalents, $ 8.5 million in short-term investments and $ 11.4 million in restricted cash.

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 (as defined in Note 5 (Debt) below).

The Company has an accumulated deficit of $ 628.9 million as of June 30, 2024.

During the six months ended June 30, 2024, the Company used $ 49.1 million cash in operations.

On March 1, 2024, the Company redeemed $ 27.7 million aggregate principal amount of the convertible notes previously issued to High Trail Special Situations LLC (“High Trail”) pursuant to that certain securities purchase agreement in October 2023 (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 23, 2024, in connection with the Debentures offering discussed below, the Company fully redeemed the outstanding aggregate principal amount of $ 15.3 million under the High Trail Notes at the Repayment Price for an aggregate of $ 17.6 million, and the High Trail Notes were cancelled.

In addition, the Company paid High Trail aggregate retirement fees of $ 5.4 million related to the Notes’ redemptions.

See Note 5 (Debt) for additional information.

On May 24, 2024, the Company issued $ 20.0 million of Debentures for $ 18.0 million in gross proceeds and paid debt costs of $ 1.4 million.

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) for additional information.

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 product development 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 six months ended June 30, 2024, are issued.

As of September 30, 2024, the Company had approximately $ 8.8 million in cash and cash equivalents, $ 3.2 million in short-term investments and $ 11.4 million in restricted cash and investments.

The amount we are required to hold as restricted cash or investments is equal to the lesser of (a) $ 11.0 million and (b) the then outstanding principal balance of the Debentures (as defined in Note 5 (Debt) below).

As of September 30, 2024 the Company had $ 17.0 million of principal outstanding under the Debentures (see Note 5 (Debt)) and an accumulated deficit of $ 673.1 million.

During the nine months ended September 30, 2024, the Company used $ 62.4 million of 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 product development and commercialization efforts.

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.

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

unable to raise sufficient additional capital in the very near term, it may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the United States Bankruptcy Code.

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.

1 unchanged sentence

Significant Accounting Policies

During the three and six months ended June 30, 2024, there were no material 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, 2023.

During the three and nine months ended September 30, 2024, there were no material 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, 2023.

Restructuring

The Company’s restructuring expense consists primarily of actions taken in May and October 2023 (the “2023 Workforce Reduction”) and March 2024 in order to reduce costs and improve operations and manufacturing efficiency.

The Company’s restructuring expense consists primarily of actions taken in May and October 2023 (the “2023 Workforce Reductions”) and March and September 2024 (the “2024 Workforce Reductions”) in order to reduce costs and improve operations and manufacturing efficiency.

Severance-related costs were accounted for as a one-time termination benefit communicated by period end without an additional service component, so the charge represents the total amount expected to be incurred.

As a result of reducing facility costs and discretionary spending unrelated to headcount and combined with the cost savings from the 2023 Workforce Reduction and March 2024, such plans are intended to decrease expenses and maintain a streamlined organization to support its business.

In connection with the Company’s restructuring initiatives, the Company entered into a lease termination agreement on February 28, 2024 with the landlord for the facility in Salt Lake City that will result in a one-time termination fee of approximately $ 0.2 million in the third quarter of 2024.

As a result of reducing facility costs and discretionary spending unrelated to headcount and combined with the cost savings from the 2023 Workforce Reductions and 2024 Workforce Reductions, such plans are intended to decrease expenses and maintain a streamlined organization to support its business.

In connection with the Company’s restructuring initiatives, the Company entered into a lease termination agreement on February 28, 2024 with the landlord for the facility in Salt Lake City that resulted in a one-time termination fee of approximately $ 0.2 million in the third quarter of 2024.

The Company continued to lease the property through June 2024.

The Company accounted for the lease amendment as a lease modification and recorded a gain of $ 0.1 million during the three months ended March 31, 2024.

On March 1, 2024, the Company’s board of directors approved a cost savings plan, including a reduction in force, that it expects to reduce its annualized operating expenses.

This cost savings plan is incremental to the 2023 Workforce Reduction.

As part of the plan, the Company reduced its overall headcount by approximately 120 employees.

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

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 estimates of costs and expenses that the Company expects to incur in connection with the reduction in force are subject to a number of assumptions and actual results may differ materially.

On March 1, 2024, and September 4, 2024, the Company’s board of directors approved restructuring plans, including reductions in force, that it expects to reduce the Company’s annualized operating expenses.

The 2024 Workforce Reductions were incremental to the 2023 Workforce Reductions.

As part of the 2024 Workforce Reductions, the Company reduced its overall headcount by approximately 120 and 83 employees in March and September, respectively.

The Company has substantially completed the reduction in force from the 2024 Workforce Reductions as of October 4, 2024.

In addition, as of September 30, 2024, Bionano Laboratories has phased out the offering of certain testing services related to neurodevelopmental disorders, including autism spectrum disorders, and other disorders of childhood development.

The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in force.

See Note 7 (Commitments and Contingencies) for additional information.

Impairment of In-Process Internal-Use Software

In-process internal-use software or cloud computing arrangements are reviewed for impairment if indicators of potential impairment exist.

In September 2024, Bionano announced a change in its business strategy to focus on driving utilization and adoption of OGM from the Company’s existing installed base, with less emphasis on new placements of the Company’s OGM systems, which resulted in a change in the manner in which the Company’s in-process internally developed software would be used;

therefore, it became probable that the software would not be placed into service.

The Company fully impaired the project, and recorded a loss of $ 1.3 million included in intangible assets and other long-lived assets impairments on the unaudited condensed consolidated statement of operations during the three and nine months ended September 30, 2024.

No impairment loss to the Company’s internal-use software was recorded during the same period in 2023.

The Company’s in-process internal-use software was recorded in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

Impairment of Long-Lived Assets (including Finite-Lived Intangible Assets)

4 unchanged sentences

by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense.

During the six months ended June 30, 2024, the Company experienced a triggering event as a result of the restructuring initiatives that required an evaluation of our non-OGM Bionano Laboratories asset group for impairment.

During the three months ended March 31, 2024, the Company experienced a triggering event as a result of the restructuring initiatives announced in March 2024 that required an evaluation of its non-OGM Bionano Laboratories asset group for impairment.

The Company performed a recoverability test and concluded that the non-OGM Bionano Laboratories long-lived assets were not recoverable;

therefore, the Company measured the impairment loss and fully impaired the intangible assets acquired through the acquisition of Lineagen, consisting of its trade name and customer relationship intangible assets.

The Company recognized an impairment loss of $ 0.4 million during the six months ended June 30, 2024.

No impairment losses were recorded for the three months ended June 30, 2024 or during the three or six months ended June 30, 2023.

The Company recognized an impairment loss of $ 0.4 million during the three months ended March 31, 2024.

During the three months ended September 30, 2024, the Company experienced a triggering event and identified indicators of impairment in all of its asset groups as a result of the restructuring initiatives and change in business strategy announced in September 2024.

The Company assessed the recoverability of each asset group and concluded the legacy OGM Bionano and Purigen asset groups were not recoverable.

Therefore, the Company was required to perform an impairment analysis to determine the fair value of the legacy OGM Bionano and Purigen asset groups as further described below.

The Company evaluated the fair value of the finite-lived assets of the legacy OGM Bionano asset group.

The Company evaluated the fair value of the reagent rental instruments based on expected sales price and recorded an impairment loss of $ 2.6 million.

The estimates and assumptions used in the assessment of the reagent rental instrument impairments represent Level 2 measurements because they are supported by quoted prices for similar assets in markets where trading occurs.

The impairment loss associated with these reagent rental instruments was recorded to cost of product revenue in the Company’s unaudited condensed consolidated statement of operations.

Underperforming assets that were subject to impairment are included in the install base.

The Company evaluated the fair value of the finite-lived intangible assets of the Purigen asset group, consisting of the Purigen trade name, customer relationships and developed technology, as well as the operating lease right-of-use asset and related office equipment and leasehold improvements.

To estimate the fair value of the intangible assets, the Company utilized the discounted cash flow method to estimate the fair value of the asset group.

The Company identified that no projected after-tax cash flows would be generated from the Purigen intangible assets and that the cost to maintain and sell the Purigen products exceeded the expected revenue to be generated from the asset group.

The carrying value of the Purigen intangible assets therefore exceeded its fair value and the Company recorded an impairment loss of $ 17.3 million for the intangible assets.

The Company estimated the fair value of the right-of-use asset and related office equipment and leasehold improvements for the Pleasanton, California facility and recorded an impairment loss of $ 0.8 million.

The fair value of the right-of-use asset and related office equipment and leasehold improvements was estimated using the discounted future cash flow methods, which includes estimates and assumptions for future sublease rental rates that reflect current sublease market conditions as well as discount rates.

The Company also recorded $ 0.1 million of leasehold improvements and office equipment impairments related to the Pleasanton, California facility.

The estimates and assumptions used in the assessment of intangible assets, right-of-use assets and related office equipment and leasehold improvement impairments represent Level 3 measurements because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value.

The impairment losses were recognized in intangible assets and other long-lived assets impairment in the unaudited condensed consolidated statement of operations.

No impairment losses were recorded during the three or nine months ended September 30, 2023.

The Company reviews its inventories for classification purposes.

The value of inventories not expected to be realized in cash, sold or consumed during the next 12 months are classified as non-current within other long-term assets.

As of June 30, 2024, $ 3.7 million of inventories were included in other long-term assets.

As of September 30, 2024, $ 2.0 million of inventories were included in other long-term assets.

During the three months ended September 30, 2024, the Company recorded a $ 7.2 million write-off of its Saphyr instrument spare parts and other obsolete inventory as a result of the Company’s restructuring initiatives and change in business strategy announced in September 2024.

Loss on disposal of property and equipment

Loss on disposal of property and equipment includes the net book value of assets that have been abandoned or retired and consists primarily of our leasehold improvements, furniture, equipment and fixtures that were abandoned and disposed of in the normal course of business.

We recorded a loss on disposal of property and equipment of $ 1.4 million as of September 30, 2024.

Change in depreciable lives of property and equipment

1 unchanged sentence

This review indicated that the actual lives of the Company’s Saphyr and Stratys instruments were longer than the estimated useful lives used for depreciation purposes in the Company’s unaudited condensed consolidated financial statements.

As a result, 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.

As a result, 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.

The estimated useful lives of the Company’s Saphyr and Stratys instruments were increased from 5 to 7 years.

The effect of this change in estimate reduced depreciation expense by $ 0.5 million.

The effect of this change in estimate reduced depreciation expense by $ 0.5 million for the fiscal year 2024.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies.

The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires additional disclosure about specific expense categories in the notes to financial statements.

The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures.

In November 2023, the FASB issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating this ASU to determine its impact on the Company’s consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures.

Two primary enhancements related to this ASU include disaggregating existing income tax disclosures relating to the effective tax rate reconciliation and income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period.

The Pre-Funded Warrants (as defined below) issued in the April 2024 Registered Direct Offering (as defined below) were exercised in full and included in the weighted-average number of common shares outstanding (See Note 6 (Stockholder’s Equity and Stock-Based Compensation) for further information).

The Pre-Funded Warrants (as defined below) issued in the April 2024 Registered Direct Offering and the July 2024 Registered Direct Offering (each as defined below) were exercised in full and included in the weighted-average number of common shares outstanding (See Note 6 (Stockholder’s Equity and Stock-Based Compensation) for further information).

Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period.

3 unchanged sentences

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):

2024 June 30,

September 30,

2024 September 30,

Stock options 3,782,000 3,527,000

Warrants 65,456,000 40,000

Convertible notes payable into common stock 10,000,000 —

Convertible debentures into common stock

RSUs 413,000 266,000

3 unchanged sentences

Revenue by Source

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

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

2024 2023 2024 2023

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Revenue by Geographic Location

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

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

2024 2023 2024 2023

8 unchanged sentences

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

For the three months ended June 30, 2024 and 2023, the United States represented 38.6 % and 39.1 % of total revenue, respectively.

For the six months ended June 30, 2024 and 2023, the United States represented 40.7 % and 40.1 % of total revenue, respectively.

For the three and six months ended June 30, 2023, China represented 15.0 % and 10.2 % of total revenue, respectively.

No other countries represented greater than 10% of revenue during the three and six months ended June 30, 2024 and 2023.

For the three months ended September 30, 2024 and 2023, the United States represented 32.3 % and 51.2 % of total revenue, respectively.

For the nine months ended September 30, 2024 and 2023, the United States represented 38.3 % and 44.2 % of total revenue, respectively.

For the nine months ended September 30, 2023, China represented 10.3 % of total revenue.

No other countries represented greater than 10% of total revenue during the three and nine months ended September 30, 2024 and 2023.

Remaining Performance Obligations

As of June 30, 2024, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $ 1.4 million.

As of September 30, 2024, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $ 1.5 million.

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

1 unchanged sentence

Warranty revenue is included in service and other revenue.

The Company recognized revenue of approximately $ 0.4 million and $ 0.4 million during the three months ended June 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period, and revenue of approximately $ 1.0 million and $ 1.1 million during the six months ended June 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period.

The Company recognized revenue of approximately $ 0.6 million and $ 0.2 million during the three months ended September 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period, and revenue of approximately $ 1.3 million and $ 1.3 million during the nine months ended September 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period.

Balance Sheet Account Details

Accounts Receivable and Allowance for Credit Losses

September 30,

2024 December 31,

4 unchanged sentences

$ 5,316,000 $ 9,319,000 $ 7,022,000

Changes to the allowance for credit losses during the six months ended June 30, 2024 and 2023 were as follows:

Changes to the allowance for credit losses during the nine months ended September 30, 2024 and 2023 were as follows:

Allowance for Credit Losses

1 unchanged sentence

Provision for expected credit loss ( 98,000 )

Balance as of June 30, 2023

Balance as of September 30, 2023

$ ( 354,000 )

2 unchanged sentences

Provision for expected credit loss ( 9,000 )

Balance as of June 30, 2024

Balance as of September 30, 2024

$ ( 204,000 )

2 unchanged sentences

The components of inventories are as follows:

September 30,

2024 December 31,

10 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

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Intangibles, net $ 26,800,000 $ ( 15,857,000 ) $ 10,943,000 $ 48,380,000 $ ( 14,508,000 ) $ 33,872,000

Intangible assets not subject to amortization totaled $ 0.1 million at June 30, 2024 and December 31, 2023, and related to the Company’s domain name.

Intangible assets not subject to amortization totaled $ 0.1 million at September 30, 2024 and December 31, 2023, and related to the Company’s domain name.

See Note 1 (Organization and Basis of Presentation) for further discussion on the impairment charges impacting the Company’s intangible assets in the period.

Accrued Expenses

Accrued expenses consist of the following:

September 30,

2024 December 31,

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Total $ 5,883,000 $ 8,089,000

*Compensation expenses include restructuring costs of $ 0.4 million as of June 30, 2024.

*Compensation expenses include restructuring costs of $ 1.0 million as of September 30, 2024.

Refer to Note 7 (Commitments and Contingencies).

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The Debentures mature on May 24, 2026, and have an interest rate of 11 % per annum payable monthly on the last business day of each calendar month.

As of June 30, 2024, the Company has paid the Holders $ 0.2 million in interest, which is included in the change in fair value within other income (expense), net.

As of September 30, 2024, the Company has paid the Holders $ 0.8 million in interest, which is included in the change in fair value within other income (expense), net.

The Company recorded the Debentures at their fair value at issuance of $ 19.9 million, per the fair value option under ASC 825 (refer to Note 8 (Investments and Fair Value Measurements)) and they will be measured on a recurring basis and adjusted through other income and expense, net.

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The table below shows the amount of potential redemptions each year until the maturity of the Debentures.

As of September 30, 2024, the Company has paid the Holders $ 3.0 million in principal redemptions.

The Company may redeem the Debentures, subject to certain Equity Conditions (as defined in the Debentures), at any time by paying an amount equal to the entire outstanding principal amount of the Debenture, plus all accrued and unpaid interest, plus the applicable Company Redemption Premium (as defined in the Debentures, the “Premium”) plus any other amounts due and payable under the Debentures.

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Notwithstanding the foregoing, the Company will not effect any conversion under the Debentures to the extent that such conversion would cause the holder’s beneficial ownership of the Company’s common stock to exceed 4.99 % (or 9.99 % at the election of the holder) of the Company’s issued and outstanding common stock.

Under the Debentures, the Company must at all times maintain a cash balance equal to the lesser of (a) $ 11.0 million and (b) the then outstanding principal balance of the Debentures, in a blocked account.

Under the Debentures, the Company must at all times maintain a cash or restricted investments balance equal to the lesser of (a) $ 11.0 million and (b) the then outstanding principal balance of the Debentures, in a blocked account.

In addition, for as long as any portion of the Debentures remain outstanding, the Company is generally restricted from:

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and other customary restrictive covenants.

The Debentures also set forth certain customary events of default after which the Debentures may be declared immediately due

and payable, including certain types of bankruptcy or insolvency events of default involving the Company and its subsidiaries, and in the event of a change of control or fundamental transaction as defined in the Debentures.

As of June 30, 2024 the Company had $ 20.0 million of principal outstanding under the Debentures reported at fair value of $ 19.4 million (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

The Debentures also set forth certain customary events of default after which the Debentures may be

declared immediately due and payable, including certain types of bankruptcy or insolvency events of default involving the Company and its subsidiaries, and in the event of a change of control or fundamental transaction as defined in the Debentures.

As of September 30, 2024 the Company had $ 17.0 million of principal outstanding under the Debentures reported at fair value of $ 15.0 million (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

Principal balance, January 1, 2024

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Redemption payments of principal

Notes principal balance, June 30, 2024

( 3,000,000 )

Debentures principal balance, September 30, 2024

High Trail Agreement & Amendment

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The Company recognized a loss on the extinguishment of the High Trail Note of $ 1.1 million, and a gain on the extinguishment of the Purchase Option (as defined in Note 7 (Commitments and Contingencies) below) of $ 5.1 million, for a net gain of $ 4.0 million, which is recorded in other income (expense) on the unaudited condensed consolidated statement of operations.

As of June 30, 2024, the Company had no principal outstanding under the High Trail Note (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

As of September 30, 2024, the Company had no principal outstanding under the High Trail Note (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

Principal balance, January 1, 2024

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The following is a summary of the charges included within other income (expense), net on the unaudited condensed consolidated statement of operations:

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

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

2024 2023 2024 2023

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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.

During the six months ended June 30, 2024, the Company sold approximately 14.0 million shares of common stock under the Cowen ATM at an average share price of $ 1.26 per share, and received gross proceeds of approximately $ 17.6 million before deducting offering costs of $ 0.4 million.

During the nine months ended September 30, 2024, the Company sold approximately 14.2 million shares of common stock under the Cowen ATM at an average share price of $ 1.25 per share, and received gross proceeds of approximately $ 17.7 million before deducting offering costs of $ 0.4 million.

In October 2024, the Company sold approximately 3.6 million shares of common stock under the Cowen ATM at an average share price of $ 0.34 per share, and received gross proceeds of approximately $ 1.2 million before deducting offering costs of approximately $31,000.

Stock Warrants

A summary of the Company’s warrant activity during the six months ended June 30, 2024 was as follows:

A summary of the Company’s warrant activity during the nine months ended September 30, 2024 was as follows:

Shares of Stock under Warrants Weighted-

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Canceled — — — —

Outstanding at June 30, 2024

Outstanding at September 30, 2024

65,456,000 $ 1.89 1.94 $ —

Stock Options

A summary of the Company’s stock option activity during the six months ended June 30, 2024 was as follows:

A summary of the Company’s stock option activity during the nine months ended September 30, 2024 was as follows:

Shares of Stock under Stock Options Weighted-

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Canceled ( 1,390,000 ) 17.12 —

Outstanding and expected to vest at June 30, 2024

Outstanding and expected to vest at September 30, 2024

3,782,000 $ 15.59 7.66 $ —

Vested and exercisable at June 30, 2024

Vested and exercisable at September 30, 2024

1,729,000 $ 25.72 6.42 $ —

For the three months ended June 30, 2024, the weighted-average grant date fair value of stock options granted was $ 0.67 per share.

For the six months ended June 30, 2024, the weighted-average grant date fair value of stock options granted was $ 0.67 per share.

For the three months ended September 30, 2024, the weighted-average grant date fair value of stock options granted was $ 0.44 per share.

For the nine months ended September 30, 2024, the weighted-average grant date fair value of stock options granted was $ 0.67 per share.

Stock-Based Compensation

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Restricted Stock Units and Performance Stock Units

The following table summarizes RSU activity during the six months ended June 30, 2024:

The following table summarizes RSU activity during the nine months ended September 30, 2024:

Stock Units Weighted- Average Grant Date Fair Value per Share

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Forfeited ( 164,000 ) 6.15

Outstanding at June 30, 2024

Outstanding at September 30, 2024

413,000 $ 4.44

The total fair value of the RSUs that vested during the six months ended June 30, 2024 was $ 0.8 million, determined as of the date of vesting.

The weighted average remaining contractual term for the RSUs is 3.5 years as of June 30, 2024.

The following table summarizes PSU activity during the six months ended June 30, 2024:

The total fair value of the RSUs that vested during the nine months ended September 30, 2024 was $ 0.8 million, determined as of the date of vesting.

The weighted average remaining contractual term for the RSUs is 3.3 years as of September 30, 2024.

The following table summarizes PSU activity during the nine months ended September 30, 2024:

Stock Units Weighted- Average Grant Date Fair Value per Share

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Forfeited — —

Outstanding at June 30, 2024

Outstanding at September 30, 2024

29,000 $ 47.40

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expense was accelerated as of December 31, 2023.

As a result of the accelerated vesting terms, the weighted average remaining contractual term for the PSUs is 0 years as of June 30, 2024.

As a result of the accelerated vesting terms, the weighted average remaining contractual term for the PSUs is 0 years as of September 30, 2024.

Registered Direct Offerings

On April 4, 2024, the Company entered into a securities purchase agreement (the “April 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company 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 the Company’s common stock, (ii) pre-funded warrants to purchase up to an aggregate of 2.2 million shares of common stock (the “April Pre-Funded Warrants”), and (iii) warrants to purchase up to 8.7 million shares of common stock (the “April Purchase Warrants”).

(i) an aggregate of approximately 6.5 million shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to an aggregate of approximately 2.2 million shares of common stock (the “April Pre-Funded Warrants”), and (iii) warrants to purchase up to approximately 8.7 million shares of common stock (the “April Purchase Warrants”).

The combined purchase price of each share of common stock and accompanying April Purchase Warrant is $ 1.15 per share.

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On July 4, 2024, the Company entered into a securities purchase agreement (the “July 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company 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 the Company’s common stock, , and (b) pre-funded warrants to purchase up to an aggregate of 5.8 million shares of common stock (the “July Pre-Funded Warrants”), and (ii) in a concurrent private placement (the “Private Placement” and together with the July 2024 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 “July Purchase Warrants”).

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

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

Each share of common stock and each July Pre-Funded Warrant sold pursuant to the July 2024 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 July Purchase Warrants is $ 0.571 per share.

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

The gross proceeds to the Company from the July 2024 Offering was 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 July Purchase Warrants issued in the Private Placement), before deducting placement agent fees and other offering expenses payable by the Company.

The gross proceeds to the Company from the July 2024 Offering was 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 July Purchase Warrants issued in the Private Placement which is contingent upon the July Stockholder Approval described below), before deducting placement agent fees and other offering expenses payable by the Company.

The Company received net proceeds of $ 9.3 million after deducting placement agent fees and other offering expenses of $ 0.7 million payable by the Company.

Each July Purchase Warrant is exercisable for one share of common stock at an exercise price of $ 0.571 per share beginning on the effective date of stockholder approval of the issuance of the shares of common stock upon exercise of the July Purchase Warrants (the “Stockholder Approval”).

The Series A Warrants will expire on the earlier of (i) the 24-month anniversary of the Stockholder Approval and (ii) 60 days following the later of (a) the date of the public announcement of the occurrence of a medical administrative contractor (including, without limitation, Molecular Diagnostic Services), issuing a final local coverage determination for optical genome mapping for hematological malignancies and (b) the date of the Stockholder Approval.

The Series B Warrants will expire on the earlier of (i) the five-year anniversary of the Stockholder Approval and (ii) six months following the later of (a) the date of the public announcement of the occurrence of the Company receiving clearance from the U.S.

Food and Drug Administration for an optical genome mapping system for any indication and (b) the date of the Stockholder Approval.

The Series A Warrants will expire on the earlier of (i) the 24-month anniversary of the July Stockholder Approval and (ii) 60 days following the later of (a) the date of the public announcement of the occurrence of a medical administrative contractor (including, without limitation, Molecular Diagnostic Services), issuing a final local coverage determination for optical genome mapping for hematological malignancies and (b) the date of the July Stockholder Approval.

The Series B Warrants will expire on the earlier of (i) the five-year anniversary of the July Stockholder Approval and (ii) six months following the later of (a) the date of the public announcement of the occurrence of the Company receiving clearance from the U.S.

Food and Drug Administration for an optical genome mapping system for any indication and (b) the date of the July Stockholder Approval.

Each July Pre-Funded Warrant is exercisable for one share of common stock at an exercise price of $ 0.001 per share.

The July Pre-Funded Warrants were immediately exercisable and were exercised in full as of September 30, 2024.

The Company adjourned its reconvened Special Meeting of Stockholders originally held on October 2, 2024 and subsequently adjourned to October 30, 2024 (the “Special Meeting”) because a quorum was not present at the time of the reconvened meeting.

The Special Meeting will reconvene on November 27, 2024 to seek stockholder approval for the issuance of the shares of common stock upon exercise of the July Purchase Warrants.

On October 30, 2024, the Company entered into a securities purchase agreement (the “October 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “October 2024 Offering”):

(i) an aggregate of approximately 9.9 million shares (the “Shares”) of the Company’s common stock, (ii) Series C warrants to purchase up to an aggregate of approximately 9.9 million shares of the Company’s common stock (the “Series C Warrants”) and (iii) Series D warrants to purchase up to an aggregate of approximately 9.9 million shares of the Company’s common stock (the “Series D Warrants”, and together with the Series C Warrants, the (“October Purchase Warrants”).

Each share of common stock sold pursuant to the October 2024 Purchase Agreement will be accompanied by one Series C Warrant to purchase one share of common stock and one Series D Warrant to purchase one share of common stock .

The Shares and the October Purchase Warrants are immediately separable and will be issued separately.

The combined purchase price of each Share and accompanying October Purchase Warrants is $ 0.304 per share.

The gross proceeds to the Company from the October 2024 Offering were approximately $ 3.0 million (excluding up to approximately $ 6.0 million of aggregate gross proceeds that may be received in the future upon the cash exercise of the October Purchase Warrants, which is contingent upon the October Stockholder Approval described below), before deducting placement agent fees and other offering expenses payable by the Company.

Each October Purchase Warrant is exercisable for one share of common stock at an exercise price of $ 0.304 per share beginning on the effective date of stockholder approval of the issuance of the shares of common stock upon exercise of the October Purchase Warrants (the “October Stockholder Approval”) .

The Series C Warrants will expire on the five-year anniversary of the October Stockholder Approval.

The Series D Warrants will expire on the 18-month anniversary of the October Stockholder Approval.

Commitments and Contingencies

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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, 2023 for information regarding the Company’s lease agreements.

The future minimum payments under non-cancellable operating and finance leases as of June 30, 2024, are as follows:

The future minimum payments under non-cancellable operating and finance leases as of September 30, 2024, are as follows:

Operating Leases Finance Lease

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Restructuring

The workforce reduction described in Note 1 (Organization and Basis of Presentation) resulted in total restructuring charges of approximately $ 4.4 million , comprised primarily of severance payments and wages for the 60-day notice period in accordance with the California Worked Adjustment and Retraining Notification (WARN) Act.

The following is a summary of restructuring charges associated with the reduction in force for the three and six months ended June 30, 2024 including severance, impairment, and other exit related costs:

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

The 2024 Workforce Reductions described in Note 1 (Organization and Basis of Presentation) resulted in total restructuring charges of approximately $ 5.6 million , comprised primarily of severance payments and wages for the 60-day notice period in accordance with the California Worked Adjustment and Retraining Notification (WARN) Act.

The following is a summary of restructuring charges associated with the reduction in force for the three and nine months ended September 30, 2024 including severance and other exit related costs:

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

$ 1,050,000 $ 5,475,000

1 unchanged sentence

720,000 1,767,000

500,000 1,047,000

Total restructuring charges including in operating expenses

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$ 1,909,000 $ 7,773,000

The following restructuring liability activity was recorded in connection with the reduction in force for the six months ended June 30, 2024 including within accrued expenses on the unaudited condensed consolidated financial statements:

The following restructuring liability activity was recorded in connection with the reductions in force for the nine months ended September 30, 2024 included within accrued expenses on the unaudited condensed consolidated financial statements:

Accrued restructuring as of January 1, 2024

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( 6,828,000 )

Accrued restructuring as of June 30, 2024

Accrued restructuring as of September 30, 2024

From time to time, the Company may be subject to potential liabilities under various claims and legal actions that are pending or may be asserted.

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

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

June 30, 2024

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

September 30, 2024

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

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$ 6,430,000 $ 6,430,000 $ — $ —

Money market funds classified as restricted cash

treasuries classified as restricted investments

11,000,000 — 11,000,000 —

Contingent consideration $ 5,774,000 $ — $ — $ 5,774,000

Total restricted investments:

$ 11,000,000 $ — $ 11,000,000 $ —

Convertible notes payable $ 14,953,000 $ — $ — $ 14,953,000

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Commercial paper classified as restricted investments 5,432,000 — 5,432,000 —

5,432,000 — 5,432,000 —

treasuries classified as restricted investments 29,685,000 — 29,685,000 —

29,685,000 — 29,685,000 —

Total restricted investments:

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Convertible notes payable $ 69,803,000 $ — $ — $ 69,803,000

$ 69,803,000 $ — $ — $ 69,803,000

Purchase option liability $ 8,534,000 $ — $ — $ 8,534,000

$ 8,534,000 $ — $ — $ 8,534,000

Contingent Consideration

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Contingent consideration liabilities related to the Purigen acquisition 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 fair value of the milestones using a probability weighted model include the probability of achieving independent milestones, anticipated payment date and a discount rate of 14.4 % and 13.2 % as of June 30, 2024 and December 31, 2023, respectively.

The Company determines the likelihood of each milestone payment which is then applied to the individual payments over the five-year milestone terms.

As of June 30, 2024, the Company assessed the probability of meeting the first milestone at 0 % which resulted in a reduction in the contingent consideration liability.

As of September 30, 2024, the Company concluded that the probability of achievement of the two independent milestones was 0 % which resulted in a reduction in the contingent consideration liability to zero.

The fair value of the Purigen contingent consideration as of December 31, 2023 was $ 10.9 million.

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

The Company determined the likelihood of each milestone payment which is then applied to the individual payments over the five-year milestone terms.

The probability factors as of December 31, 2023 ranged from 9 % to 49 %.

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

Assumptions include the projected units, revenue discount rates of

8 % and 7 % and discount rates of 14.4 % and 13.2 % as of June 30, 2024 and December 31, 2023, respectively.

The fair value of the Purigen contingent consideration as of June 30, 2024 and December 31, 2023 was $ 5.8 million and $ 10.9 million, respectively.

Convertible debentures payable, convertible notes payable and purchase option liability

June 30, 2024

Assumptions include the projected units, revenue discount rates of 7 % and discount rates of 13.2 % as of December 31, 2023.

JGB Convertible debentures payable, High Trail convertible notes payable and purchase option liability

As of September 30, 2024, the fair value of the JGB convertible debentures maturing in 2026, which were issued on May 24, 2024, was estimated using a scenario-based analysis using a 66.7 % probability attributed to a going concern scenario and 33.3 % attributed to a dissolution scenario.

For the going concern scenario, the fair value was estimated using a lattice model, consistent with previous periods.

The key input assumptions utilized in the going concern scenario are summarized in the table below:

September 30, 2024

December 31, 2023

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3.81 % 4.92 %

The June 30, 2024 assumptions in the table above reflect the convertible debentures payable, which were issued on May 24, 2024.

The September 30, 2024 assumptions in the table above reflect the JGB convertible debentures payable .

For December 31, 2023, the table reflects a weighted average of assumptions based on the fair value of the convertible notes payable from the High Trail Agreement (refer to Note 5 (Debt)).

The volatility is based on an analysis of the Company and its peers’ historical stock price, the risk-free rate is based on US treasury yields, the equity discount rate is based on term-specific US treasury yields, and the debt discount rate is based on the Company’s credit rating.

In connection with the Notes, the purchaser was granted an option (the “Purchase Option”) which expired on the maturity date of the Notes to purchase up to an additional $ 25.0 million aggregate principal amount of private placement notes (the “Subsequently Purchased Notes”) and warrants (refer to Note 5 (Debt)).

The estimated fair value of the Purchase Option as of the valuation date was assessed as the difference in the aggregate indicated value of the Subsequently Purchased Notes and the consideration to be paid upon exercising the option which was estimated to be $ 0.0 million and $ 8.5 million at June 30, 2024 and December 31, 2023, respectively.

In the dissolution scenario, the fair value of the JGB convertible debentures was estimated based on an expected recovery rate of 75 % considering certain restricted cash allocable to principal redemption repayments.

The key input assumptions utilized in the dissolution scenario are summarized in the table below:

September 30, 2024

Risk-free interest rate

Expected term to repayment (years)

Dissolution discount rate

The risk-free rate is based on US treasury yields;

the expected term to repayment is based on management’s best estimate calculated by reducing the outstanding principal balance of the debentures as of September 30, 2024 from the $ 11.0 million in restricted cash and investments;

and the dissolution discount rate is based on an analysis of comparable yields for debt instruments with similar credit ratings.

In connection with the High Trail Notes, the purchaser was granted an option (the “Purchase Option”) which expired on the maturity date of the High Trail Notes to purchase up to an additional $ 25.0 million aggregate principal amount of private placement notes (the “Subsequently Purchased Notes”) and warrants (refer to Note 5 (Debt)).

The outstanding amount of the High Trail Notes was redeemed on May 24, 2024, and the Purchase Option rights no longer exist.

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Equity discount rate

Changes in estimated fair value of contingent consideration liability, convertible debentures payable, convertible notes payable and option liability in the six months ended June 30, 2024 are as follows:

Changes in estimated fair value of contingent consideration liability, convertible debentures payable, convertible notes payable and option liability in the nine months ended September 30, 2024 are as follows:

Consideration

Debentures Payable (Level 3 Measurement)

Notes Payable (Level 3 Measurement)

Notes Payable (Level 3 Measurement) Option

(Level 3 Measurement)

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Change in estimated fair value, recorded in selling, general and administrative expenses ( 10,890,000 ) — — —

Changes in estimated fair value, recorded in other income (expense), net

Change in estimated fair value, recorded in other income (expense), net

— ( 434,000 ) ( 4,524,000 ) ( 3,474,000 )

Change in fair value attributable to instrument-specific credit risk recorded in other comprehensive income (loss)

— ( 1,503,000 ) — —

Cash payments

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— — 1,095,000 ( 5,060,000 )

Balance as of June 30, 2024

Balance as of September 30, 2024

$ — $ 14,953,000 $ — $ —

Changes in estimated fair value of contingent consideration liability in the six months ended June 30, 2023 is as follows:

We evaluated the change in fair value attributable to instrument-specific credit risk as the excess of the total change in fair value over the change in fair value attributable to changes in the valuation model described above and determined that the total change in fair value of $ 1.5 million for the three months ended September 30, 2024 was attributable to instrument-specific credit risk which is recorded in other comprehensive income (loss).

Changes in estimated fair value of contingent consideration liability in the nine months ended September 30, 2023 is as follows:

Consideration

1 unchanged sentence

Change in estimated fair value, recorded in selling, general and administrative expenses 2,528,000

Balance as of June 30, 2023

Balance as of September 30, 2023

Available for Sale Investments

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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 June 30, 2024 and December 31, 2023, the Company determined that unrealized losses of the below securities were primarily attributable to changes in interest rates and non-credit related factors.

Based on this evaluation, as of September 30, 2024 and December 31, 2023, 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 June 30, 2024 and December 31, 2023, the Company held 4 and 15 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months.

As of June 30, 2024 and December 31, 2023, the Company held 0 and 2 securities, respectively, which have been in an unrealized loss position for a period of greater than 12 months.

As of September 30, 2024 and December 31, 2023, the Company held 2 and 15 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months.

As of September 30, 2024 and December 31, 2023, the Company held 0 and 2 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.

During the six months ended June 30, 2024, the Company sold 18 of its available for sale securities and received proceeds of $ 33.3 million.

During the six months ended June 30, 2024, the Company recognized a loss of $ 0.018 million in other income relating to the maturity of its securities.

During the nine months ended September 30, 2024, the Company sold 18 of its available for sale securities and received proceeds of $ 33.3 million.

During the nine months ended September 30, 2024, the Company recognized an immaterial loss in other income relating to the maturity of its securities.

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

Interest receivable as of June 30, 2024 and December 31, 2023 was $ 0.1 million and $ 0.3 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

As of June 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within investments:

Interest receivable as of September 30, 2024 was immaterial and as of December 31, 2023 was $ 0.3 million.

Interest receivable is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

As of September 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within investments:

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

1 unchanged sentence

Total maturity less than 1 year $ 3,160,000 $ — $ — $ 3,160,000

As of June 30, 2024, the amortized cost and the unrealized gains (losses) of the available for sale securities listed as restricted investments was zero.

As of September 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within restricted investments:

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

Less than 1 10,998,000 2,000 — 11,000,000

Total maturity less than 1 year $ 10,998,000 $ 2,000 $ — $ 11,000,000

As of December 31, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within investments:

3 unchanged sentences

Total maturity less than 1 year $ 48,828,000 $ 4,000 $ ( 9,000 ) $ 48,823,000

As of December 31, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities listed as restricted investments:

As of December 31, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within restricted investments:

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

2 unchanged sentences

Total maturity less than 1 year $ 35,117,000 $ 5,000 $ ( 5,000 ) $ 35,117,000

As of June 30, 2024, the following table summarizes available-for-sale securities in an unrealized loss position:

As of September 30, 2024, the following table summarizes available-for-sale securities in an unrealized loss position:

Less Than 12 Months 12 Months or Greater Total

4 unchanged sentences

Total $ 3,160,000 $ — $ — $ — $ 3,160,000 $ —

As of June 30, 2024, the available-for-sale securities listed as restricted investments in an unrealized loss position was zero .

As of September 30, 2024, the available-for-sale securities listed as restricted investments in an unrealized loss position was zero .

As of December 31, 2023, the following table summarizes available-for-sale securities in an unrealized loss position:

14 unchanged sentences

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