What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-07 · 159 added, 119 removed, 241 unchanged (54% 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 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.

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 nine months ended September 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 5, 2024.

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

• 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.

• Grew our installed base to 368 as of September 30, 2024, an increase of approximately 22% from a total installed base of 301 as of September 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 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.

• Sold 7,835 flowcells in the three-month period ended September 30, 2024, an increase of approximately 27% from 6,176 flowcells sold in the same quarter of 2023.

Sold 22,249 flowcells in the nine-month period ended September 30, 2024, an increase of approximately 20% from 18,464 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 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 in the Middle East, related sanctions, and 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 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.

During the nine months ended September 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.

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Recent Developments

In March 2024, we announced a cost savings plan that aims to reduce annualized operating expenses by approximately $35.0 to $40.0 million starting in the second half of 2024.

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

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.

In March 2024 and September 2024, we announced restructuring plans that aim to reduce annualized operating expenses by approximately $35.0 to $40.0 million starting in the second half of 2024, and by an additional $25.0 million to $30.0 million beginning in the fourth quarter of 2024, respectively.

As part of the plans, we reduced our overall headcount by approximately 120 and 83 employees, respectively.

The Company has substantially completed the reductions in force as of September 30, 2024.

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

These measures were 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 included elsewhere in this Quarterly Report for additional information.

As part of the plans we have also made a change in our business strategy and refocused our efforts on the current installed base of OGM systems with less emphasis on new placements of OGM systems and more emphasis on ensuring customers are able to maximize their utilization of the OGM systems.

Financial Overview

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Sales of our VIA software, which provides customers with solutions for analysis, interpretation and reporting of genomic data, are made on a subscription basis.

We generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through Bionano Laboratories, as well as services performed related to customer sample evaluations using an OGM system.

We generate service revenue from the sale of diagnostic testing services through Bionano Laboratories, as well as services performed related to customer sample evaluations using an OGM system.

Other revenue consists of warranty and other service-based revenue, including support, repair and maintenance services.

We anticipate that our change in business strategy to focus on driving utilization and adoption of OGM from our existing installed base, with less emphasis on new placements of our OGM systems would slow the pace of our revenue growth when compared to historical growth rates.

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

The following table presents our revenue for the periods indicated:

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

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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Research and development expenses consist of salaries and other personnel costs, stock-based compensation, research supplies, third-party development costs for new products, materials for prototypes, equipment depreciation, and allocated overhead costs that include facility and other overhead costs.

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

We have made substantial investments in research and development since our inception.

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

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We have incurred losses in each year since our inception.

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:

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

Our net loss was $44.2 million and $91.9 million for the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, we had an accumulated deficit of $673.1 million.

While we have implemented restructuring plans in March and September 2024, we expect to continue to incur significant expenses and operating losses as we:

• continue our sales and marketing efforts to maintain sales of our existing products;

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

• enter into collaboration arrangements, if any;

• add operational, financial and management information systems;

• maintain operational, financial and management information systems;

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

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.

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 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 sufficient additional financing in the very near term we will 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.

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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.

There can be no assurances that any transactions will be available to us or completed and if we are not able to raise sufficient additional capital in the very near term to fund our operation, we may 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

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

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

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

Product revenue $ 6,021,000 $ 6,456,000 $ (435,000) (7) %

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Selling, general and administrative 9,464,000 24,896,000 (15,432,000) (62) %

Goodwill impairment

— 77,280,000 (77,280,000) (100) %

Intangible assets and other long-lived assets impairment

19,504,000 — 19,504,000 100 %

Restructuring costs

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Net loss $ (44,246,000) $ (112,566,000) $ 68,320,000 (61) %

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.

Product revenue decreased by $0.4 million, or 7%, to $6.0 million for the three months ended September 30, 2024 compared to $6.5 million for the same period in 2023.

The decrease in product revenue was driven by a $0.9 million or 39% decrease in instrument revenue, a $0.4 million or 23% decrease in software revenue, and partially offset by an increase of $0.9 million or 35% in consumables revenue.

In September 2024 Bionano announced a change in its business strategy which would allow the company to become a more capital-efficient business.

Our focus is on driving utilization and adoption of OGM from our

existing installed base, with less emphasis on new placements of our OGM systems.

We anticipate that this change in strategy would slow the pace of our revenue growth when compared to historical growth rates.

Service and other revenue decreased by $2.8 million, or 98%, to $0.1 million for the three months ended September 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.

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.

Cost of product revenue increased by 179%, to $14.3 million for the three months ended September 30, 2024, compared to $5.1 million for the three months ended September 30, 2023.

The increase in cost of product revenue was primarily due to $9.8 million in total expenses recognized to write-off excess Saphyr instrument spare parts and other obsolete inventory for $7.2 million, as well as dispose of reagent rentals that were underutilized for $2.6 million .

We expect cost of product revenue to fluctuate with the volume of product sales.

Cost of service and other revenue decreased by $1.2 million, or 82%, to $0.3 million for the three months ended September 30, 2024, compared to $1.5 million for the three months ended September 30, 2023.

The decrease in cost of service and other revenue was 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

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

Gross profit (loss):

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Total gross margin (139) % 30 %

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.

Product gross profit decreased by $9.6 million, or 709%, to $8.2 million for the three months ended September 30, 2024, compared to $1.4 million for the three months ended September 30, 2023.

The decrease in product gross profit was primarily due to $9.8 million in total expenses recognized to write-off excess Saphyr instrument spare parts and other obsolete inventory for $7.2 million as well as dispose of reagent rentals that were underutilized for $2.6 million .

We expect cost of product revenue to fluctuate with the volume of product sales.

Service and other gross profit decreased by $1.6 million, or 115%, to $0.2 million for the three months ended September 30, 2024, compared to $1.4 million for the three months ended September 30, 2023.

The decrease in service and other gross profit was impacted by a $0.5 million write-down of aged receivables tied to discontinued clinical service offerings from Bionano Laboratories.

The write-down was treated as a reversal of revenue.

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.

Research and development (“R&D”) expenses decreased by $9.1 million, or 66%, to $4.7 million for the three months ended September 30, 2024 compared to $13.8 million for the same period in 2023.

The decrease was partially due to decreases of $4.6 million in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024, and of $2.6 million in professional and consulting fees including decreases in costs incurred to support clinical research studies, Stratys development, foundry expenses, and cloud computing.

We also reduced our internal consumption of inventory, materials and supplies by $1.4 million.

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

Selling, general and administrative (“SG&A”) expenses decreased by $15.4 million, or 62%, to $9.5 million for the three months ended September 30, 2024 compared to $24.9 million for the same period in 2023.

The decrease was primarily due to a $6.3 million decrease in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024, a $6.1 million decrease in the gain/loss recorded on fair value of the contingent consideration due for BioDiscovery and Purigen milestones, a $3.2 million decrease in professional and consulting fees which is primarily marketing, software and legal expenses, and $0.6 million decrease in travel and entertainment.

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

Goodwill impairment

Goodwill of $77.3 million was fully impaired during the three months ended September 30, 2023.

Intangible assets and other long-lived assets impairment

The Company recognized a $19.5 million loss on intangible assets and other long-lived assets impairment during the three months ended September 30, 2024 due to our restructuring initiatives and change in business strategy.

The Company recognized no additional impairment losses during the three months ended September 30, 2023.

See Note 1 (Organization and Basis of Presentation) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion on the impairment charges that were recorded during the quarter.

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.

Restructuring costs were $1.8 million for the three months ended September 30, 2024, as a result of our cost saving initiatives announced in March and September 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.

Interest income was $0.4 million for the three months ended September 30, 2024, as compared to $0.7 million for the same period in 2023.

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

Other income (expense) was $0.7 million for the three months ended September 30, 2024, as compared to $45,000 for the same period in 2023.

The increase is primarily driven by an increase in the change in fair value (net gain) of $0.6 million for the convertible debentures.

See Note 5 (Debt) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion on debt transactions that took effect during the year.

Comparison of the Nine Months Ended September 30, 2024 and 2023

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

Nine Months Ended September 30, Period-to-Period Change

Product revenue $ 19,359,000 $ 18,512,000 $ 847,000 5 %

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Selling, general and administrative 40,109,000 77,809,000 (37,700,000) (48) %

Goodwill impairment

— 77,280,000 (77,280,000) (100) %

Intangible assets and other long-lived assets impairment

19,951,000 — 19,951,000 100 %

Restructuring costs

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Net loss $ (91,892,000) $ (188,602,000) $ 96,710,000 (51) %

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.

Product revenue increased by $0.8 million, or 5%, to $19.4 million for the nine months ended September 30, 2024, compared to $18.5 million for the same period in 2023.

The increase in product revenue was driven by a $1.7 million or 22% increase in sales of consumables and an increase of $0.5 million or 13% of software, partially offset by a $1.4 million or 21% 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.

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.

In September 2024, we announced a change in its business strategy which would allow the company to become a more capital-efficient business.

Our focus is on driving utilization and adoption of OGM from our existing installed base, with less emphasis on new placements of our OGM systems.

We anticipated that this change in strategy would slow the pace of our revenue growth when compared to historical growth rates.

Service and other revenue decreased by $3.6 million or 53% for the nine months ended September 30, 2024, 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 $1.7 million in revenues for the nine months ended September 30, 2024 compared to $5.1 million for the same period in 2023.

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 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.

Cost of product revenue increased by $10.1 million, or 74%, to $23.9 million for the nine months ended September 30, 2024, compared to $13.7 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 $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.

In addition, during the three months ended September 30, 2024, $9.8 million in total expenses recognized to write-off excess Saphyr instrument spare parts and other obsolete inventory for $7.2 million as well as dispose of reagent rentals that were underutilized for $2.6 million .

We expect cost of product revenue to fluctuate with the volume of product sales.

Cost of service and other revenue decreased by $2.8 million, or 61%, to $1.8 million for the nine months ended September 30, 2024, compared to $4.6 million for the same period in 2023.

The decrease in cost of service and other revenue was 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

Six Months Ended June 30,

Nine Months Ended September 30,

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

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Total gross margin (13) % 28 %

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.

Product gross profit decreased by $9.3 million, or 194%, to $4.5 million for the nine months ended September 30, 2024, compared to $4.8 million for the same period in 2023.

Service and other gross profit decreased by $0.9 million, or 37%, to $1.5 million for the nine months ended September 30, 2024, compared to $2.3 million for the same period in 2023.

T he decrease in service and other gross profit was primarily due 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

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.

R&D expenses decreased by $21.0 million, or 50%, to $21.3 million for the nine months ended September 30, 2024 compared to $42.3 million for the same period in 2023.

The decrease was partially due to decreases of $11.1 million in salaries, wages and benefits driven by headcount reductions announced throughout 2023 and 2024 and $6.2 million in professional and consulting fees, including decreases in 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 our internal consumption of inventory, materials and supplies by $2.5 million.

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

Selling, General and Administrative Expenses

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.

SG&A expenses decreased by $37.7 million, or 48%, to $40.1 million for the nine months ended September 30, 2024 compared to $77.8 million for the same period in 2023.

The decrease was primarily due to a $16.1 million decrease in salaries, wages and benefits driven by headcount reductions announced in 2023 and 2024, a $13.4 million decrease in the gain/loss recorded on fair value of the contingent consideration due for Purigen and BioDiscovery milestones, a $7.4 million decrease in professional and consulting fees which is primarily marketing, software, and legal expenses, and a $1.7 million decrease in travel and entertainment.

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

Goodwill impairment

Goodwill of $77.3 million was fully impaired during the nine months ended September 30, 2023.

Intangible assets and other long-lived assets impairment

The Company recognized $20.0 million in impairment losses on intangible assets and other long-lived assets during the nine months ended September 30, 2024 due to our restructuring initiatives and change in business strategy.

The Company recognized no additional impairment losses during the nine months ended September 30, 2023.

Restructuring Costs

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.

Restructuring costs were $7.6 million for the nine months ended September 30, 2024, as a result of our cost saving initiatives announced in March and September 2024.

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

Interest Income

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.

Interest income was $1.9 million for the nine months ended September 30, 2024, as compared to $2.1 million for the same period in 2023.

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 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.

Other expense was $1.7 million for the nine months ended September 30, 2024 compared to $0.3 million for the same period in 2023.

The decrease was 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, an increase in the change in fair value (net gain) of $2.0 million for the convertible notes, purchase option, and convertible debentures, and an increase in interest expense of $1.5 million.

Liquidity and Capital Resources

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

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.

We incurred net losses of $91.9 million and $188.6 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of $673.1 million, cash and cash equivalents of $8.8 million, $11.4 million in restricted cash and short-term investments of $3.2 million.

In connection with the Debentures (as defined below), the amount we are required to hold as restricted cash or restricted investments 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 six months ended June 30, 2024, we incurred negative cash flows from operating activities of $49.1 million.

In the nine months ended September 30, 2024, we incurred negative cash flows from operating activities of $62.4 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.

Revenue from our commercial operations has increased due to increased demand for our product offerings and our acquisition of BioDiscovery and Purigen.

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.

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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.

As of September 30, 2024, the Company reported $15.0 million of Debentures at fair value, which is classified as current on the unaudited condensed consolidated balance sheet.

Through September 30, 2024, the Company paid $0.8 million in interest and $3.0 million in principal redemption amounts on the Debentures.

As of September 30, 2024, the Company may be required to redeem up to $3.0 million of principal and expects to pay an additional $0.4 million in interest on the Debentures in the fourth quarter of 2024.

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

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”):

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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.

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 the fourth quarter of 2024.

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 are expected to be 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 stockholder approval), before deducting placement agent fees and other offering expenses payable by the Company.

Based on our current business plans, we will continue to require additional capital in the very near term to fund our operating expenses and capital expenditure requirements, or we may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the United States Bankruptcy Code.

If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain and trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings, if any.

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.

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.

Future Capital Requirements

We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, additional research and development expenses associated with expanding and proving the utility of our offerings, expenses associated with continuing to build out our corporate infrastructure, enhancements to information technology, and expenses associated with being a public company.

We expect such expenditures to continue throughout 2024.

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.

We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, additional research and development expenses associated with expanding and proving the utility of our offerings, expenses associated with continuing to build out our corporate infrastructure, enhancements to information technology, restructuring and advisory fees, and expenses associated with being a public company.

We expect such expenditures to continue throughout the balance of 2024.

As of September 30, 2024, we had $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 restricted investments 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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See Note 1 (Organization and Basis of Presentation) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information.

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.

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.

The following table sets forth the cash flow from operating, investing and financing activities for the periods presented:

Net cash provided by (used in):

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities $ (62,418,000) $ (95,402,000)

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As discussed above, we anticipate our available cash balance will not be sufficient for the next twelve months from the issuance of this report.

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.

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

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 $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.

Our recent restructuring activities are anticipated to reduce the cash used in operating activities over the next 12 months;

however, our financial condition may result in certain additional restructuring or advisory expenses which may result in our corporate expenditures increasing, potentially materially, and we may observe fluctuations in the cash used in operating activities on a quarterly basis to sustain our current commercial offerings.

Net cash used in operating activities was $62.4 million during the nine months ended September 30, 2024 as compared to $95.4 million during the same period in 2023.

The decrease in cash used in operating activities of $33.0 million was primarily attributed to a decrease in our net loss and a decrease in cash used for inventory purchases over that time, consistent with the cost saving initiatives that were initiated in May of 2023

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 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.

During the nine months ended September 30, 2024, cash provided by investing activities was $70.8 million, as compared to $79.5 million provided by investing activities during the same period in 2023.

The decrease in cash provided by investing activities of $8.7 million was primarily attributed to the maturity of $285.3 million in available for sale securities which was offset by a purchase of available for sale securities of $214.3 million during the nine months ended September 30, 2024, compared to the maturity of $84.9 million in available for sale securities offset by a purchase of $4.5 million of available for sale securities during the same period in 2023.

Financing Activities

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.

Net cash used in financing activities was $17.6 million during the nine months ended September 30, 2024 as compared to net cash provided by financing activities of $45.3 million during the same period in 2023, a decrease of $62.9 million.

During the nine months ended September 30, 2024, the Company made principal payments of $61.0 million and payments on debt extinguishment costs of $5.4 million towards the High Trail convertible notes payable which was offset by approximately $18.0 million in gross proceeds from the issuance of the JGB convertible debentures and $37.7 million in gross proceeds from executing sales under our at-the-market facility with Cowen and Company, LLC (“Cowen”) as compared to $46.4 million during the same period in 2023.

Capital Resources

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.

As of September 30, 2024, we had approximately $8.8 million in cash and cash equivalents, $3.2 million in short-term investments , $11.4 million in restricted cash and restricted investments and working capital of $14.0 million.

The amount we are required to hold as restricted cash or restricted investments 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 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.

During the nine months ended September 30, 2024, we sold approximately 14.2 million shares of common stock under the Cowen ATM and received gross proceeds of approximately $17.7 million before deducting offering costs of $0.4 million.

Contingent Consideration

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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.

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.

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.

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

During the nine months ended September 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