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Item 7. Management’s Discussion and Analysis

2022-03-08 compared with 2021-02-25 · 278 added, 309 removed, 276 unchanged (68% of the section changed)

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

The following discussion and analysis should be read together with our consolidated financial statements and the notes to those statements included elsewhere in this Form 10-K.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of Fluidigm.

MD&A is provided as a supplement to, and should be read together with our consolidated financial statements and the notes to those statements included elsewhere in this Form 10-K.

This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections about Fluidigm and our industry.

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Our manufacturing operations are located in Singapore and Canada.

Our facility in Singapore manufactures our microfluidics instruments, which are assembled by our contract manufacturer located within our Singapore facility.

All of our microfluidic products are fabricated at our Singapore facility.

Our facility in Singapore manufactures our integrated fluidic circuits (IFCs) as well as our microfluidics instruments, which are assembled by our contract manufacturer located within our Singapore facility.

Our mass cytometry instruments, assays and reagents are manufactured at our facility in Canada.

We also use U.S.-based third-party contract manufacturers for reagent manufacturing.

Our total revenue was $138.1 million in 2020, of which $122.5 million was product and service revenue;

$117.2 million in 2019, of which $116.7 million was product and service revenue and $113.0 million in 2018, which was entirely product and service revenue.

In 2021 , we manufactured microfluidics reagents in our facilities in Canada and South San Francisco as well as through U.S.-based th ird-party contract manufacturers for reagent manufacturing.

Our total revenue was $130.6 million in 2021 compared to $138.1 million and $117.2 million in 2020 and 2019, respectively.

Product and service revenue was $126.3 million in 2021 compared to $122.5 million and $116.7 million in 2020 and 2019, respectively.

We have incurred significant net losses since our inception in 1999 and, as of December 31, 2021, our accumulated deficit was $736.0 million.

Recent Developments

We have been responding to the COVID-19 pandemic by taking steps to protect our employees, support our customers, and manage our liquidity.

As Fluidigm is a designated essential business, some of our essential workers have been working at our laboratories and offices, and in some cases, at customer sites, while our administrative employees have been working from home.

We have implemented health and safety practices in accordance with evolving government and public health agency guidelines in all of our facilities around the world, including maintaining social distancing and enhanced cleaning protocols, facilities modifications, temperature checks in some locations, and usage of face masks and other personal protective equipment where appropriate.

Other operational adjustments made in response to COVID-19 include increased stocking levels of raw materials and proactive supplier management.

We have taken steps to help keep our workforce healthy and safe, and to ensure a strong data security and internal control environment.

While Fluidigm is a designated essential business, widespread global adoption of work-from-home and shelter-in-place orders resulted in a significant slowdown in customer activities.

We also saw near-term COVID-19-related priorities temporarily displace longer term projects and research activities.

As customers have returned to work, we have seen some customer ordering recover, but the timing of complete recovery remains uncertain given additional waves of infection and the need to distribute vaccines.

We estimate that about 10% of our customers are either closed or working at reduced capacity as of the end of 2020 because of the COVID-19 pandemic, compared to 60% to 70% in the first quarter and an estimated 30% to 40% of our global academic research community either remaining closed or working at a slower pace at the end of the second quarter.

Although most of our customers are working, they have not returned to pre-pandemic levels of activity.

We believe the impact of COVID-19 on our customers has resulted in the delay of sales of our mass cytometry instrument systems to future periods.

In August 2020, we received Emergency Use Authorization (EUA) from the U.S.

Food and Drug Administration (FDA) for our Advanta™ Dx SARS-CoV-2 RT-PCR Assay, a newly developed, extraction-free saliva-based test to detect nucleic acid from the SARS-CoV-2 virus, designed to be run on the Fluidigm® Biomark™ HD microfluidics platform.

In January 2021, we received the CE-IVD mark for our saliva-based Advanta Dx SARS-CoV-2 Assay allowing for commercial sales of this CE-IVD commercial kit in Europe.

In addition, Fluidigm is actively supporting customers who are developing lab-developed tests,

as well as customers who are providing COVID-19 diagnostic tests outside of the U.S.

The development of COVID-19 related applications has positively impacted sales of our microfluidics instruments, consumables, and mass cytometry reagents.

We believe our microfluidics and mass cytometry capabilities can play a significant role in virus detection as well as in immune profiling of patients and populations.

Furthermore, we believe our technologies and solutions will be important to the durable response from government and medical institutions to be prepared for future outbreaks.

Despite these opportunities, there is still uncertainty regarding the impact of COVID-19 on the global economy, our customers, and our business over the near term.

Also, though we are now able to sell our Advanta Dx SARS-CoV-2 Assay for diagnostic use and certain clinical laboratory customers are developing lab developed tests using our technology, our experience selling into diagnostic markets is limited and we face significant competition.

Many of our target customers in these markets do not have significant prior experience using Fluidigm instruments and consumables and require validation steps and assistance in establishing, integrating and scaling up testing programs using our technology and products.

Also, many such laboratories have experience working with certain of our competitors for diagnostic testing, and we have faced, and expect to continue to face, complex sales processes and competition in the COVID-19 testing market.

We expect to seek collaborations with third parties to meet the challenges associated with penetrating these markets.

We have actively sought government funding to support our investment to expand our diagnostics capabilities for microfluidics.

In September 2020, we executed a contract with the National Institutes of Health (NIH) for a project under the NIH Rapid Acceleration of Diagnostics (RADx) program (collectively the NIH Contract).

The RADx program provides grants to support a range of new lab-based and point-of-care tests that could significantly increase the number, type and availability of COVID-19 tests.

The NIH Contract has a total value of up to $34.0 million upon the achievement of certain milestones.

Through December 31, 2020, we have achieved milestones and received funding of $25.4 million.

Proceeds from the NIH Contract will be used primarily to expand production capacity for COVID-19 testing with Fluidigm microfluidics technology and, to a lesser extent, to reimburse research and development costs.

We have spent approximately $10.2 million for capital expenditures through December 31, 2020 for the expansion of our Singapore facility as a result of the NIH Contract.

We expected to complete the NIH Contract and related spending for the expansion in 2021.

The NIH has the right to terminate the NIH Contract for convenience.

In the event of termination for convenience, Fluidigm will be paid a percentage of the NIH Contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges.

In the event of termination for cause due to our default, NIH is not liable for supplies or services not accepted.

If we fail to deliver within the time specified in the NIH Contract and the delay is due to Fluidigm’s fault or negligence, we are required to pay liquidated damages in the amount of 33% of the amount(s) already disbursed to date under the NIH Contract within six months from the date of termination.

We have not paid, and do not currently expect to pay any liquidated damages and are in compliance with the terms of the contract.

We are working with the NIH continuously to ensure we are in compliance with the contract requirements and milestones.

In March 2020, we entered into an Open Market Sale Agreement (Sale Agreement) with Jefferies LLC (Jefferies) to sell shares of our common stock having aggregate sales proceeds of up to $50 million, from time to time, through an at-the-market equity offering program under which Jefferies acts as sales agent.

During the third quarter of 2020, we sold 2.5 million shares of our common stock, $0.001 par value per share, pursuant to the Sale Agreement, for aggregate gross proceeds of $20.9 million.

Our net proceeds were approximately $20.1 million, after deducting related expenses, including commissions of approximately $0.6 million and issuance costs of approximately $0.2 million.

In this period of uncertainty, we are actively managing our operating expenses and cash flows in response to the evolving market conditions.

In addition, we implemented reductions in our operating expense structure including temporary salary reductions which began in the second quarter and ended in the third quarter of 2020 and constrained hiring until our business returned to more normal volumes.

We have also taken advantage of various government programs available to us.

For example, we have applied for or received wage subsidies in certain countries.

In the U.S., the Coronavirus Aid, Relief and Economic Security (CARES) Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, and other tax-related provisions.

As a result, we have been preserving cash by deferring payment of U.S.

payroll taxes.

We are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations.

For additional information on the various risks posed by the pandemic, refer to Part I, Item 1A.

Risk Factors of this Form 10-K.

In 2020, we were awarded the NIH Contract under the RADx program to support the expansion of our production capacity and throughput capabilities for COVID-19 testing with our microfluidics technology.

As of December 31, 2021, we have achieved the required milestones and have received the total NIH Contract value of $34.0 million.

Proceeds from the NIH Contract have been primarily used for capital expenditures to expand production capacity and, to a lesser extent, to offset applicable operating costs.

With the funding from the NIH Contract, IFC manufactur ing capacity increased from 12,000 IFCs per month to 36,000 IFCs per month in our Singapore facility.

As vaccines and alternative testing options for the coronavirus have become more available and the perceived threat of the pandemic began to recede in 2021, the demand for our COVID-19 testing products slowed, resulting in a corresponding decline in COVID-19 testing revenue in 2021, compared to the third and fourth quarters of 2020.

The pandemic also negatively impacted our base business revenue, which excludes COVID-19 related revenue.

It is difficult to predict the impact of new strains of the coronavirus on our business or the impact they may have on the research priorities of our customers.

For additional information on the various risks posed by the pandemic, refer to Part I, Item 1A- Risk Factors of this Form 10-K.

Global logistics and supply chain disruptions resulted in component delays and supply con straints with some of our suppliers.

While some of these issues have been resolved, shortages of certain components have resulted in longer component order lead times to meet future demand.

We expect to be able to meet product demand in 2022, but continued supply disruptions of components or materials or our inability to obtain components, materials, or assembly services from alternate sources could impact our ability to meet the ongoing demand of our customers.

On August 2, 2021, the Company amended its Loan and Security Agreement dated as of August 2, 2018, between the Company and Silicon Valley Bank (SVB) (the Amendment).

The Amendment extends the maturity date of our $15.0 million revolving credit facility (Revolving Credit Facility) by one year, to August 2, 2023, and also provides for a term loan facility in an aggregate principal amount of $10.0 million (the Term Loan Facility).

The stated maturity date of the Term Loan Facility is July 1, 2025, however if, as of June 1, 2024, the principal amount of our convertible debt exceeds $0.6 million or if the maturity date of our 2019 Notes has not been extended beyond January 1, 2026, then the maturity date of the Term Loan Facility will be

on June 1, 2024.

There were $6.8 million of advances outstanding under the Revolving Credit Facility at December 31, 2021.

The Term Loan Facility was fully drawn as of December 31, 2021.

Strategic Investment Transaction

On January 23, 2022, the Company entered into (i) a Loan Agreement (the Casdin Loan Agreement) with Casdin Private Growth Equity Fund II, L.P.

and Casdin Partners Master Fund, L.P.

(collectively, Casdin) and (ii) a Loan Agreement (the Viking Loan Agreement, and together with the Casdin Loan Agreement, the Bridge Loan Agreements) with Viking Global Opportunities Illiquid Investments Sub-Master LP and Viking Global Opportunities Drawdown (Aggregator) LP (collectively, Viking and, together with Casdin, the Purchasers and each, a Purchaser).

Each Bridge Loan Agreement provides for a $12.5 million term loan to the Company (each, a Bridge Loan and collectively, the Bridge Loans).

Subject to approval by the Company’s stockholders, upon the issuance of the shares of Series B Preferred Stock (as defined below) pursuant to the Purchase Agreements (as defined below), the Bridge Loans will be automatically converted into a number of shares of Series B-1 Preferred Stock (as defined below) or Series B-2 Preferred Stock (as defined below), as applicable, in accordance with the terms of the Bridge Loan Agreements.

The Bridge Loans were fully drawn on January 24, 2022.

The proceeds of the Bridge Loans may be used for working capital and general corporate purposes.

Also on January 23, 2022, the Company entered into separate Series B Convertible Preferred Stock Purchase Agreements (the Purchase Agreements) with each of the Purchasers pursuant to which, among other things, at the closing of the transactions contemplated thereby, and on the terms and subject to the conditions set forth therein, including the approval of the Company’s stockholders, the Company will issue and sell an aggregate of $225 million of convertible preferred stock, consisting of:

(i) 112,500 shares of the Company's Series B-1 Convertible Preferred Stock, par value $0.001 per share (the Series B-1 Preferred Stock), at a purchase price of $1,000.00 per share to Casdin, and (ii) 112,500 shares of the Company’s Series B-2 Convertible Preferred Stock, par value $0.001 per share (the Series B-2 Preferred Stock, and together with the Series B-1 Preferred Stock, the Series B Preferred Stock) at a purchase price of $1,000.00 per share to Viking (clauses (i) and (ii), the Preferred Equity Financing, and together with the issuance of shares of Series B Preferred Stock in connection with the conversion of the Bridge Loans, the Private Placement Issuance).

The Series B Preferred Stock to be purchased by Casdin and Viking pursuant to the Purchase Agreements is in addition to any Series B Preferred Stock to be issued upon conversion of outstanding amounts under the Bridge Loan Agreements.

The proceeds of the Preferred Equity Transactions will be used by the Company for expenses related to the Preferred Equity Transactions, as well as working capital, general corporate purposes and merger and acquisition opportunities that the Company may identify from time to time.

In connection with the Private Placement Issuance, the Company will change its name to “Standard BioTools Inc.” and Dr.

Michael Egholm will be appointed as the Company’s President and Chief Executive Officer and as a member of our Board of Directors (the Board), each occurring upon the closing of the transactions contemplated by the Purchase Agreements (Closing).

Egholm will succeed Chris Linthwaite, who will continue as the Company’s Chief Executive Officer until the earlier of the Closing or May 15, 2022.

The Closing is subject to customary closing conditions for a transaction of this nature, including approval by the Company’s stockholders of the issuance of the Series B Preferred Stock in connection with the Private Placement Issuance.

Each Private Placement Issuance is also conditioned on the substantially contemporaneous consummation of the other Private Placement Issuance.

The Company’s Board has called a special meeting to be held on March 25, 2022 (the Special Meeting) to ask the Company’s stockholders to consider, vote upon and approve (i) a proposal to amend the Company’s Eighth Amended and Restated Certificate of Incorporation (the Charter) to, among other things, increase the number of shares of common stock, par value $0.001 per share, of the Company (Common Stock) that the Company is authorized to issue from two hundred million (200,000,000) shares to four hundred million (400,000,000) shares and to change the Company’s name to Standard BioTools Inc.

(together, the Charter Amendment Proposal);

and (ii) to approve the issuance of (A) the Series B-1 Preferred Stock and the Series B-2 Preferred Stock pursuant to the Purchase Agreements, (B) the Series B-1 Preferred Stock and the Series B-2 Preferred Stock issuable pursuant to the terms of the Bridge Loan Agreements and (C) the Common Stock issuable upon the conversion of the Series B Preferred Stock (clauses (A) through (C), the Private Placement Issuance Proposal).

The Private Placement Issuance Proposal is conditioned on the approval of the Charter Amendment Proposal.

The Charter Amendment Proposal is conditioned on the approval of the Private Placement Issuance Proposal.

If both proposals do not receive the requisite vote for approval, neither the Charter Amendment Proposal nor the Private Placement Issuance Proposal will take effect.

The parties have agreed that they will not be obligated to close the Private Placement Issuance if the Charter Amendment Proposal has not been approved at the Special Meeting.

If the Charter Amendment Proposal and the Private Placement Issuance Proposal are not approved by the Company’s stockholders at the Special Meeting or the Purchase Agreements otherwise terminated, then the Bridge Loans will become

convertible, at each lender’s option, into Common Stock at an initial conversion rate of 352.1126 shares of Common Stock per $1,000 of conversion amount, subject to the cap set forth in the Bridge Loan Agreements.

The conversion rate is subject to customary adjustments as set forth in the Bridge Loan Agreements.

The Bridge Loans bear interest (i) from and including the effective date of the Bridge Loan Agreements to but excluding March 1, 2022, at 10%, (ii) from and including March 1, 2022 to but excluding June 1, 2022, at 12%, (iii) from and including June 1, 2022 to but excluding September 1, 2022, at 14%, and (iv) from and including September 1, 2022 and thereafter, at 16%.

Interest accrues daily and is payable in kind by adding the accrued interest to the outstanding principal amount on the last date of each month.

The Bridge Loans mature on the 91st calendar day after the latest maturity date of the loans borrowed under the Company’s Loan and Security Agreement, dated as of August 2, 2018, with Silicon Valley Bank, and the principal, together with accrued and unpaid interest, is due on the maturity date.

Going Concern

For this annual report, we performed an assessment to determine whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least the twelve-month period following the date the financial statements were issued.

As of December 31, 2021, we had $29.5 million in cash, cash equivalents and restricted cash.

Due to an extended strategic review process related to the pending Private Placement Issuance, we were unable in 2021 to implement certain cash management actions, including potential financing and/or cost reduction initiatives.

Further, we have incurred, and expect to continue to incur, negative cash flows in pursuit of our business plans for at least the twelve-month period following the date the financial statements were issued.

As a result, we believe that our current level of cash and cash equivalents, together with committed financing facilities, are not sufficient to fund ongoing operations for at least the twelve-month period following the date the financial statements were issued.

The existence of these conditions raises substantial doubt about our ability to continue as a going concern for the twelve-month period following the date the financial statements were issued.

Our ability to continue as a going concern is dependent upon our success in obtaining additional equity or debt financing, attaining further operating efficiencies, reducing expenditures and ultimately, generating significant revenue growth.

We are evaluating strategies to obtain the required additional funding for future operations including the potential consummation of the $225 million Private Placement Issuance, which is contingent on stockholder approval and satisfaction of customary closing conditions.

In the event the proposed investment does not occur, we would need to obtain the required additional funding for future operations from alternative sources.

These sources may include, but are not limited to, equity financing, debt or other financing arrangements, and restructuring of operations to grow revenues and decrease expenses.

Our plans to raise additional capital, including our ability to consummate the Private Placement Issuance, or take the other actions to address the doubt regarding our ability to continue as a going concern, may not be successful.

There can be no assurance that we would be able to obtain additional liquidity when needed or under acceptable terms, if at all.

Our financial results discussed below do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Critical Accounting Policies, Significant Judgments and Estimates

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

We base our estimates on historical experience and on various other

assumptions believed to be reasonable, which together form the basis for making judgments about the carrying values of assets and liabilities.

The full extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on numerous evolving factors including, but not limited to, the magnitude and duration of the pandemic, the extent to which it will impact worldwide macroeconomic conditions, including the speed of recovery, and governmental and business reactions to the pandemic.

We assessed certain accounting matters that generally require consideration of forecasted financial information, including the unknown impact of COVID-19 as of December 31, 2020.

These accounting matters included, but were not limited to, our allowance for doubtful accounts and credit losses, inventory and related reserves and the carrying value of goodwill and other long-lived assets.

We base our estimates on historical experience and on various other assumptions believed to be reasonable, which together form the basis for making judgments about the carrying values of assets and liabilities.

We assessed certain accounting matters that generally require consideration of forecasted financial information, including the unknown impact of COVID-19 pandemic.

These accounting matters included, but were not limited to, our inventory and related reserves, and the carrying value of goodwill and other long-lived assets.

Actual results could differ materially from these estimates and could have a material adverse effect on our consolidated financial statements.

We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies.

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We generate revenue primarily from the sale of our products and services.

Product revenue is derived from the sale of instruments and consumables, assays and reagents.

Product revenue is derived from the sale of instruments and consumables, including IFCs, assays and reagents.

Service revenue is primarily derived from the sale of instrument service contracts, repairs, installation, training and other specialized product support services.

We also generate revenue from development agreements, license and royalty agreements and grants.

We also generate revenue from product development agreements, license and royalty agreements and grants.

Revenue is reported net of any sales, use and value-added taxes we collect from customers as required by government authorities.

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Standalone selling prices (SSP) are generally determined using observable data from recent transactions.

In cases where sufficient data is not available, we estimate a product’s SSP by using a cost plus a margin approach or by applying a discount to the product’s list price.

In cases where sufficient data is not available, we estimate a product’s SSP using a cost plus a margin approach or by applying a discount to the product’s list price.

Product Revenue

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Invoices are generally issued at shipment and generally become due in 30 to 60 days.

We sometimes perform shipping and handling activities after control of the product passes to the customer.

We have made an accounting policy election to account for these activities as product fulfillment activities rather than as separate performance obligations.

Service Revenue

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Development Revenue

The Company has entered and may continue to enter into development agreements with third parties that provide for up-front and periodic milestone payments.

We have entered and may continue to enter into development agreements with third parties that provide for up-front and periodic milestone payments.

Our development agreements may include more than one performance obligation.

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We assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.

In arrangements where we satisfy performance obligation(s) over time, we recognize development revenue typically using an input method based on our costs incurred relative to the total expected cost which determines the extent of our progress toward completion.

In arrangements where we satisfy performance obligation(s) over time, we recognize development revenue using an input method that determines the extent of our progress toward completion by comparing the actual costs incurred to the total expected cost.

As part of the accounting for these arrangements, we develop estimates and assumptions that require judgment to determine the transaction price and progress towards completion.

We review our estimate of the transaction price and progress toward completion based on the best information available to recognize the cumulative progress toward completion as of the end of each reporting period, and make revisions to such estimates as necessary.

We also generate revenue from development or collaboration agreements that do not include upfront or milestone-based payments and generally recognize revenue on these types of agreements based on the timing of development activities.

We review these estimates at the end of each reporting period using the best available information, revise the estimates as necessary, and recognize revenue commensurate with our progress toward completion.

We may also generate revenue from development or collaboration agreements that do not include upfront or milestone-based payments.

For these types of arrangements, we generally recognize revenue over time as the development services are provided.

Other Revenue

Other revenue consists of license and royalty revenue and grant revenue.

Other revenue consists of license revenue, royalty revenue, and grant revenue.

We recognize revenue from license agreements when the license is transferred to the customer and the customer is able to use and benefit from the license.

For contracts that include sales-based royalties, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied.

In March 2020, we entered into an agreement to settle intellectual property infringement claims, in which we received a $3.5 million payment in exchange for a perpetual license under certain Fluidigm intellectual property.

The settlement is considered a multiple-element arrangement with each element accounted for individually.

Accordingly, $3.1 million of the proceeds was recognized as license revenue and $0.4 million was offset against legal costs.

We receive grants from various entities to perform research and development activities over contractually defined periods.

Grant revenue is not accounted for under ASC 606 Revenue from Contracts with Customers, as the grant agreement is not with a customer.

As there is no authoritative U.S.

GAAP guidance for grants awarded to for-profit entities, we have applied the guidance in ASC 958 Not-for-Profit Entities by analogy.

Revenue is generally recognized provided that the conditions under which the grants were provided have been met and any remaining performance obligations are perfunctory.

Product Warranties

We generally provide a one-year warranty on our instruments.

We accrue for estimated warranty obligations at the time of product shipment.

We periodically review our warranty liability and record adjustments based on the terms of warranties provided to customers, and historical and anticipated warranty claim experience.

We generally provide a one-year warranty on our instruments and establish a liability for the estimated cost of the obligation at the time the product is shipped.

We periodically review our warranty liability and record adjustments based on specific terms provided to customers and our overall historical experience with usage.

This expense is recorded as a component of cost of product revenue in the consolidated statements of operations.

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Applying the revenue recognition practices discussed above often requires significant judgment.

Judgment is required when identifying performance obligations, estimating SSP and allocating purchase consideration in multi-element arrangements and estimating the future amount of our warranty obligations.

Significant judgment is also required when interpreting commercial terms and determining when control of goods and services passes to the customer.

Significant judgment is required when interpreting commercial terms in sales agreements and determining when control of goods and services passes to the customer.

Judgment is also required when identifying performance obligations, estimating SSP and allocating purchase consideration in agreements that include multiple performance obligations.

Any material changes created by errors in judgment could have a material effect on our operating results and overall financial condition.

Accounts Receivable

Accounts Receivable, net

Trade accounts receivable are recorded at net invoice value.

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We evaluate such allowances on a regular basis and adjust them as needed.

To reduce credit risk, we perform credit evaluations of our customers.

We generally do not require collateral to support credit sales.

Judgment is required in determining the amounts of any such allowances.

Inventories, net

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We regularly review inventory for excess and obsolete products and components.

Provisions for slow-moving, excess, and obsolete inventories are recorded when required to reduce inventory values to their estimated net realizable values based on product life cycle, development plans, product expiration, and quality issues.

Significant judgment is required in determining provisions for slow-moving, excess, and obsolete inventories which are recorded when required to reduce inventory values to their estimated net realizable values based on product life cycle, development plans, product expiration, and quality issues.

We determine if an arrangement is a lease, or contains a lease, at inception.

Operating leases are included in operating lease right-of-use (ROU) assets, net and current and non-current operating lease liabilities in our consolidated balance sheets.

assets represent our right-to-use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets represent our right-to-use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

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Business Combinations, Goodwill, Intangible Assets and Other Long-Lived Assets

We have completed acquisitions of businesses in the past and may acquire additional businesses or technologies in the future.

We have completed acquisitions of businesses in t he past and may acquire additional businesses or technologies in the future.

The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition.

We allocate the purchase price, which is the sum of the consideration provided in a business combination, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values.

The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies and estimates of future revenue.

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The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.

Judgment is needed to assess the factors that could indicate an impairment of our intangible assets.

Goodwill and intangible assets with indefinite lives are not subject to amortization but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable.

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If the carrying value of the reporting unit exceeds its fair value, then an impairment loss equal to the difference would be recorded to goodwill.

There were no indications of impairment in 2020.

We did not recognize any impairment of goodwill for any of the periods presented herein.

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If impairment is indicated, we estimate the asset’s fair value using future discounted cash flows associated with the use of the asset and adjust the carrying value of the asset accordingly.

In the fourth quarter of 2019, we recognized an impairment charge of $0.4 million on patents and licenses that were not used in then current products and were not expected to be used in future product offerings.

We did not recognize any impairment of intangibles for 2021 or 2020.

In 2019, we recognized an impairment charge of $0.4 million on patents and licenses that were not used in the current products and were not expected to be used in future product offerings.

Deferred Grant Income

In September 2020, we executed the NIH Contract.

The NIH Contract has a total value of up to $34.0 million upon the achievement of certain milestones.

Proceeds from the NIH Contract will be used primarily to expand production capacity for COVID-19 testing with Fluidigm microfluidics technology and, to a lesser extent, to offset applicable operating expenses.

In September 2020, we executed a definitive contract with the National Institutes of Health (NIH) for a project under the NIH Rapid Acceleration of Diagnostics (RADx) program.

The definitive contract, which amended the letter contract we entered into with NIH in July 2020 (collectively the NIH Contract), has a total value of up to $34.0 million upon the achievement of certain milestones, which were achieved and accepted by the NIH as of December 31, 2021.

Proceeds from the NIH Contract have been and will be used primarily to expand production capacity and throughput capabilities.

Accounting for the NIH Contract does not fall under ASC 606, Revenue from Contracts with Customers, as the NIH will not benefit directly from our expansion or product development.

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Under IAS 20, grant proceeds are recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received.

With the NIH Contract, this occurs when either each milestone has been accepted by NIH or management concludes the conditions of the grant have been substantially met.

Deferred income related to production capacity expansion will be amortized over the period of depreciation for the related assets as a reduction of depreciation expense.

Deferred income related to reimbursement of operating expenses is recorded as a reduction of those expenses incurred to date.

Convertible Notes

In February 2014, we closed an underwritten public offering of $201.3 million aggregate principal amount of our 2014 Notes.

In March 2018, we entered into separate privately negotiated transactions with certain holders of our 2014 Notes to exchange $150.0 million in aggregate principal amount of the 2014 Notes for 2.75% Exchange Convertible Senior Notes due 2034 (2018 Notes).

Following the exchange, approximately $51.3 million in aggregate principal amount of the 2014 Notes remained outstanding, together with $150.0 million in aggregate principal amount of the 2018 Notes.

As the 2018 Notes were convertible, at our election, into cash, shares of our common stock, or a combination of cash and shares of our common stock, we accounted for the 2018 Notes under the cash conversion guidance in ASC 470, whereby the embedded conversion option in the 2018 Notes was separated and accounted for in equity.

The embedded conversion option value was calculated as the difference between (i) the total fair value of the 2018 Notes and (ii) the fair value of a similar debt instrument excluding the embedded conversion option.

We determined an embedded conversion option value of $29.3 million, which was recorded in additional paid-in-capital and reduced the carrying value of the 2018 Notes.

The resulting discount on the 2018 Notes was amortized over the expected term of the 2018 Notes, using the effective interest method through the first note holder put date, of February 6, 2023.

In the first quarter of 2019, the 2018 Notes were converted into approximately 19.5 million shares of common stock and the 2018 Notes were retired.

We recorded a loss of $9.0 million on the retirement of the 2018 Notes.

This amount represented the difference between the fair value of the bonds converted and the carrying value of the bonds at the time of conversion, including unamortized premiums, discounts and debt issuance costs.

With the NIH Contract, this occurred when either each milestone was accepted by NIH or management concluded the conditions of the grant were substantially met.

Deferred grant income related to production capacity expansion is being amortized over the period of depreciation for the related assets as a reduction of depreciation expense.

Grant income related to reimbursement of operating costs is recorded as a reduction of those expenses incurred to date.

Grant proceeds that exceed the cost of the capital expenditures and expenses expected to be incurred are recorded in other non-operating income.

Term Loan, net

On August 2, 2021, we entered into a Fourth Agreement to our Loan and Security Agreement (the Amendment) with Silicon Valley Bank.

The Amendment extended the maturity date of our $15.0 million Revolving Credit Facility by one year, to August 2, 2023, and provided for a term loan facility in an aggregate principal amount up to $10.0 million (Term Loan Facility).

As of December 31, 2021, the Term Loan Facility was fully drawn.

Interest is payable monthly and principal balances are required to be repaid in 24 equal monthly installments beginning on August 1, 2023.

In addition, a final payment equal to 6.5% of the original principal amount of each advance is due on the earlier of the maturity date or the date the advance is repaid.

The final payment is being accreted to the carrying value of the term loan through the expected maturity of July 1, 2025 using the effective interest method.

Debt issuance costs were recorded as an offset to the carrying value of the loan and are amortized over the expected term using the effective interest method.

The carrying value of the term loan includes the outstanding principal amount and the cumulative accreted final payment, less unamortized debt issuance costs.

Amortization of the debt issuance costs and accretion of the final payment are reflected in interest expense.

Convertible Notes, net

In February 2014, we closed an underwritten public offering of $201.3 million aggregate principal amount of our 2.75% Senior Convertible Notes due 2034 (2014 Notes).

In March 2018, we entered into separate privately negotiated transactions with certain holders of our 2014 Notes to exchange $150.0 million in aggregate principal amount of the 2014 Notes for our 2.75% Exchange Convertible Senior Notes due 2034 (2018 Notes).

In the first quarter of 2019, the 2018 Notes were converted into 19.5 million shares of our common stock and the 2018 Notes were retired.

We recorded a loss of $9.0 million on the retirement of the 2018 Notes at conversion in the first quarter of 2019.

We determined the fair value of the 2018 Notes using valuation techniques that required us to make assumptions related to the implied discount rate.

In November 2019, we closed a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of $55.0 million aggregate principal amount of our 2019 Notes.

The majority of the issuance proceeds were used to retire approximately $50.2 million of aggregate principal amount of our 2014 Notes, leaving approximately $1.1 million of aggregate principal amount of our 2014 Notes outstanding.

We recorded a loss of $3.0 million on the extinguishment of the 2014 Notes.

In November 2019, we closed a private placement for $55.0 million aggregate principal amount of our 5.25% Senior Convertible Notes due 2024 (2019 Notes).

The majority of the issuance proceeds were used to retire approximately $50.2 million of aggregate principal amount of our 2014 Notes.

We recorded a loss of $3.0 million on the extinguishment of the 2014 Notes in the fourth quarter of 2019.

This amount represented the difference between the fair value of the 2019 Notes used to extinguish the debt and the carrying value of the 2014 Notes, including unamortized debt issuance costs.

As the 2019 Notes do not provide for a cash conversion feature, the 2019 Notes are recorded as debt in their entirety in accordance with ASC 470.

For the 2014, 2018 and 2019 Notes, offering-related costs, including underwriting costs, were capitalized as debt issuance costs, recorded as an offset to the carrying value of the related Notes, and are amortized over the expected term of the related Notes using the effective interest method.

As provided by the indenture governing the 2014 Notes, in February 2021, holders of $0.5 million of the 2014 Notes required us to repurchase their notes at 100% of the principal amount plus accrued and unpaid interest.

We recorded a loss of $9 thousand on the extinguishment of those notes, representing the difference between the price paid to extinguish the 2014 Notes and their carrying value, including unamortized debt issuance costs.

Offering-related costs, including underwriting costs, on the 2014 Notes and 2019 Notes were capitalized as debt issuance costs, recorded as an offset to the carrying value of the related Notes, and are amortized over the expected term of the related Notes using the effective interest method.

Stock-Based Compensation

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For RSUs, fair value is measured based on the closing fair market value of our common stock on the date of grant.

For PSUs with a market condition, we used a Monte Carlo simulation pricing model to incorporate the market condition effects at our grant date.

For PSUs with performance conditions,

stock-based compensation expense is recognized over the requisite service period when the achievement of each individual performance goal becomes probable.

For PSUs with a market condition, we use a Monte Carlo simulation pricing model to incorporate the market condition effects at our grant date.

The Monte Carlo pricing model requires inputs which are subjective and generally requires judgment by us.

For PSUs with performance conditions, stock-based compensation expense is recognized over the requisite service period when the achievement of each individual performance goal becomes probable.

The fair value of options and stock purchases under ESPP on the grant date is estimated using the Black-Scholes option-pricing model, which requires the use of certain subjective assumptions, including expected term, volatility, risk-free interest rate and the fair value of our common stock.

These assumptions generally require significant judgment.

These assumptions generally require judgment.

We determine the expected volatility based on our historical stock price volatility generally commensurate with the estimated expected term of the stock awards.

The expected term of an award is based on historical forfeiture experience, exercise activity, and the terms and conditions of the stock awards.

The expected term of an award is based on historical forfeiture experience, exercise activity, and the terms and

conditions of the stock awards.

The risk-free interest rate is based on the U.S.

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We use the asset and liability method to account for income taxes.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets.

Our provision for income taxes primarily consists of foreign tax expense/benefit.

As part of the process of preparing our consolidated financial statements, we continuously monitor the circumstances impacting the expected realization of our deferred tax assets for each jurisdiction.

We consider all available evidence, including historical operating results in each jurisdiction, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.

A valuation allowance is established to reduce our deferred tax assets to the amount that is more likely than not to be realized.

These deferred tax assets primarily consist of net operating loss carryforwards and research and development tax credits.

We intend to maintain such valuation allowance until sufficient evidence exists to support its reduction.

Our deferred tax liabilities primarily consist of book and tax basis differences in fixed assets and acquired identifiable intangible assets.

Valuation allowances are provided when the expected realization of deferred tax assets does not meet a “more likely than not” criterion.

We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates.

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Any interest and penalties related to uncertain tax positions are reflected in the income tax provision.

At December 31, 2017, we changed our permanent reinvestment assertion and will not permanently reinvest our foreign earnings outside the United States.

The cash generated from some of our foreign subsidiaries may be used domestically to fund operations.

Any domestic foreign withholding tax and state taxes that may be due upon future repatriation of earnings is not expected to be significant.

Recent Accounting Changes and Accounting Pronouncements

Adoption of New Accounting Guidanc e

In August 2018, the FASB issued Accounting Standard Update (ASU) 2018-15-Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) which establishes new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement.

The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software.

The new guidance was effective for fiscal years beginning after December 15, 2019.

The adoption of the new guidance did not have a significant impact on our financial results.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

The ASU eliminates the requirement for an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge.

Instead, an entity performs its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value.

The ASU was effective for annual and interim goodwill impairment testing

performed for our fiscal year beginning January 1, 2020.

I n November 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this update improve consistent application of and simplify U.S.

GAAP for Topic 740 by clarifying and amending existing guidance for, among other items, intra-period allocation, reporting tax law changes and losses in interim periods, state and local taxes not fully based on income and recognition of deferred tax liability related to certain transactions.

There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations.

The new guidance is effective for fiscal years beginning after December 15, 2020.

The adoption of the new guidance did not have a significant impact on our financial results.

The FASB issued two ASUs related to financial instruments – credit losses.

The ASUs issued were:

(i) in June 2016, ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, and (ii) in November 2018, ASU 2018-19-Codification Improvements to Topic 326, Financial Instruments-Credit Losses.

ASU 2016-13 is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leasing standard.

These ASUs were effective for fiscal years beginning after December 15, 2019, and interim periods within those years.

The modified retrospective method was required upon adoption.

The new guidance was effective for fiscal years beginning after December 15, 2019.

The adoption of the new guidance resulted in an adjustment of approximately $0.1 million to reduce the accumulated deficit component of stockholders’ equity and decrease current assets by the same amount in our consolidated balance sheet.

Recent Accounting Pronouncements

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Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The amendment to this ASU reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification, which is expected to result in more convertible instruments being accounted for as a single unit, rather than being bifurcated between debt and equity.

The new guidance is effective for fiscal years beginning after December 15, 2021.

We are currently evaluating the impact of adoption of the new guidance on our consolidated financial statements.

In November 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes.

The amendments in this update improve consistent application of and simplify GAAP for Topic 740 by clarifying and amending existing guidance for, among other items, intra-period allocation, reporting tax law changes and losses in interim periods, state and local taxes not fully based on income and recognition of deferred tax liability related to certain transactions.

There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations.

The amendments in this update reduce the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification, which is expected to result in more convertible instruments being accounted for as a single unit, rather than being bifurcated between debt and equity.

The new guidance is effective for fiscal years beginning after December 15, 2021.

The adoption of the new guidance is not expected to have a significant impact on our financial results.

In November 2021, the FASB issued ASU 2021-10-Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

The amendment is effective for annual periods beginning after December 15, 2021.

The amendment establishes financial disclosure requirements for business entities that receive government assistance that they account for by analogizing to a grant or contribution model because there is no specific authoritative guidance under U.S.

GAAP that applies to the transaction.

Entities that receive this type of assistance should include the following information in their annual report:

(1) the nature of the transaction, (2) the significant terms and conditions, (3) the accounting treatment, (4) the line items on the balance sheet and income statement that are affected along with (5) the respective amounts that have been recorded.

We are currently evaluating the impact the new standard will have on the disclosures included in our consolidated financial statements.

Results of Operations

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Interest expense (3,823) (3) (3,572) (3) (4,279) (4)

Surplus funding from NIH Contract 7,140 7 — — — —

Loss from extinguishment of debt (9) — — — (12,020) (10)

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Net loss $ (59,237) (45) % $ (53,020) (38) % $ (64,790) (55) %

We generate revenue primarily from sales of our products and services, development agreements, license and royalty agreements, and grants.

We generate revenue primarily from the sale of our products and services and by e ntering into product development agreements, license and royalty agreements, and grants.

Our product revenue consists of sales of instruments and consumables.

Consumables revenue are largely driven by the size of our installed base of instruments and the annual level of pull-through per instrument.

Consumables revenue is largely driven by the size of our installed base of instruments and the annual level of pull-through per instrument.

Service revenue is linked to the sales and active installed base of our instruments as our service revenue primarily consists of post-warranty service contracts, preventive maintenance plans, instrument parts, installation and training.

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Effective March 31, 2020, we signed an OEM Supply and Development Agreement (Development Agreement) with a customer.

Under the Development Agreement, Fluidigm will develop products based on our microfluidics technology.

The Development Agreement provides up-front and periodic milestone payments of up to $11.7 million during the development stage.

The development stage is expected to last approximately one year from the date of the Development Agreement.

We recognized $8.8 million of development revenue from this agreement for the year ended December 31, 2020.

We recognize revenue under the Development Agreement using an input method based on our costs incurred relative to the total expected cost which determines the extent of our progress toward satisfaction of our obligations under the agreement.

Costs associated with the Development Agreement are recorded in research and development expense.

Under the Development Agreement, Fluidigm developed products based on its microfluidics technology.

The Development Agreement provided up-front and periodic milestone payments during the development stage, which was completed in the third quarter of 2021, and on-going annual payments of $0.4 million for sustaining efforts.

We recognized $2.6 million and $8.8 million of development revenue from the agreement for the years ended December 31, 2021 and 2020, respectively.

Costs associated with the Development Agreement were recorded in research and development expense in the consolidated statement of operations.

Grant Revenue .

We receive grants to perform research and development activities over contractually defined periods.

Grant revenue in the current year is attributable to a grant agreement entered into in the second half of 2019, which is expected to end in the first half of 2021.

Costs associated with grant agreements are recorded in research and development expense.

License and Royalty Revenue .

In March 2020, we entered into an agreement to settle intellectual property infringement claims and received a $3.5 million payment in exchange for a perpetual license under certain of our intellectual property.

The settlement is considered a multiple-element arrangement with each element accounted for individually.

Accordingly, $3.1 million of the proceeds was recognized as license revenue and $0.4 million was offset against legal costs.

No single customer represented more than 10% of our total revenue for 2020, 2019, or 2018.

Revenue from our five largest customers was 23% of total revenue for 2020 and 17% for both the years ended December 31, 2019 and 2018.

Grant revenue is attributable to a grant agreement entered into in the second half of 2019, which was completed in the third quarter of 2021.

Costs associated with the arrangement were recorded in research and development expense in the consolidated statement of operations.

License Revenue .

In March 2020, we entered into an agreement to settle intellectual property infringement claims and received a $3.5 million payment in exchange for a perpetual license to certain of our intellectual property.

The settlement was accounted for as a multi-element arrangement.

Accordingly, $3.1 million of the proceeds was recognized in 2020 as license revenue and $0.4 million was offset against legal costs.

No single customer represented more than 10% of our total revenue for 2021 and 2020.

Revenue from our five largest customers was 23% for both the years ended December 31, 2021 and 2020, respectively.

The following table presents our revenue by source for the years ended December 31, 2021, 2020, and 2019, and as a percentage of total revenue for the respective years (in thousands):

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Product and service revenue 126,293 97 122,523 88 116,693 100 3 % 5 %

Development revenue 8,865 6 — — — — NA NA

Grant revenue 3,593 3 550 — — — 553 % NA

License revenue 3,163 3 — — — — NA NA

Development revenue 2,559 2 8,865 6 — — (71) % NA

Grant revenue 1,582 1 3,593 3 550 — (56) % 553 %

License revenue 147 — 3,163 3 — — (95) % NA

Total revenue $ 130,581 100 % $ 138,144 100 % $ 117,243 100 % (5) % 18 %

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Asia-Pacific revenue includes sales to customers in China of $12.5 million, $11.1 million and $15.4 million for 2021, 2020 and 2019, respectively.

There was no foreign country or jurisdiction with sales in excess of 10% of total revenue in 2020.

Except for China, no other foreign country or jurisdiction had sales in excess of 10% of our total revenue during the years 2019 and 2018.

There was no foreign country or jurisdiction with sales in excess of 10% of total revenue in 2021, 2020, and 2019, except for China in 2019.

The following section includes management discussion and analysis for the fiscal year ended December 31, 2021.

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Total Revenue.

Total revenue increased by $20.9 million or 18%, to $138.1 million for 2020 compared to $117.2 million for 2019.

Americas revenue increased by 59%, driven by sales of our Advanta Dx SARS-CoV-2 RT-PCR test and related sales of microfluidics instruments;

development revenue;

and grant revenue;

partially offset by lower mass cytometry product sales.

COVID-19 microfluidics revenues only partially offset lower mass cytometry instrument revenues for EMEA, resulting in a 6% decline in EMEA revenues.

Stronger European currencies in 2020 compared to 2019 added approximately 2% to EMEA's reported revenues.

The 15% decrease in Asia-Pacific revenues is due to decreases in revenue in all product categories due to the pandemic and shelter-in-place orders.

On a company-wide basis, stronger foreign exchange rates positively impacted revenues by less than 1% for 2020 compared to 2019.

Total revenue decreased by $7.6 million, or 5%, for the twelve months ended December 31, 2021, compared to the twelve months ended December 31, 2020, driven primarily by lower development, grant and license revenue, partially offset by higher service revenue.

Product revenue was essentially unchanged year over year.

Americas revenue declined by $10.7 million, or 14%, for the twelve months ended December 31, 2021, compared to the twelve months ended December 31, 2020, driven by lower development, grant and license revenue, and lower unit sales of instruments, partially offset by higher consumables and service revenue.

The decline in instrument revenue in 2021 is attributable to reduced demand for the analytical test instruments used in COVID-19 test applications following the initial wave of investments by testing laboratories in 2020 .

The reduction in development revenue and grant revenue reflects the completion of the underlying contracts in 2021 and the associated deceleration of project activity.

The reduction in license revenue is attributable to the non-recurring nature of the 2020 settlement agreement discussed above.

In Asia-Pacific, revenue decreased by $1.8 million, or 7%, primarily due to lower unit sales of mass cytometry instruments, partially offset by increased microfluidics consumable revenues.

EMEA revenue increased by $4.9 million, or 13%, primarily driven by higher unit sales of mass cytometry instruments.

A weaker U.S.

dollar contributed 2.6 percentage points of the 13 percentage point increase in EMEA revenue in 2021 .

Changes in foreign exchange rates increased total company revenues by 0.7 percentage points for the year ended December 31, 2021, compared to the year ended December 31, 2020.

Product and Service Revenue

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Total product and service revenue $ 58,636 100 % $ 60,391 100 % $ 43,373 100 % (3) % 39 %

The decline in mass cytometry instrument revenue was primarily attributable to lower volumes of instrument sales due to ordering delays created by lab closures in response to the COVID-19 pandemic and, to a lesser extent, the impact of lower average unit selling prices on mass cytometry instruments.

Customers are also shifting their resources to COVID-19 related projects.

Mass cytometry consumables revenues benefited from COVID-19 immune profiling studies.

Microfluidics revenues increased due to sales of our newly developed SARS-CoV-2 diagnostic test and related sales of instrument systems.

Diagnostic revenue, comprised of both consumables and instruments was $22.4 million in 2020, and more than offset the decline in other microfluidics revenue caused by a pandemic-related slowdown in key account activity.

The COVID-19 pandemic is still ongoing, and although we expect it to dissipate in 2021 as vaccinations proliferate worldwide, the timing and pace of the recovery remain uncertain.

Reallocations of research budgets to COVID-related projects that started in 2020 are still in place as we enter 2021, and these continuing budget reallocations and any other pandemic-related impacts may result in variability in sequential quarterly revenue growth.

Mass cytometry product and service revenue increased $5.5 million, or 9%, for the twelve months ended December 31, 2021, compared to the twelve months ended December 31, 2020.

Product revenue increased $2.4 million, or 5%, primarily due to sales of the new CyTOF XT system, which was launched in May 2021, along with growth in our imaging platforms, partially offset by lower Helios sales.

Lower average unit selling prices partially offset the increased unit volume of mass cytometry instruments by $4.3 million.

Service revenue increased $3.1 million, or 20%, year over year, driven by the growing number of service contracts and mass cytometry instrument installations.

Microfluidics product and service revenue decreased $1.8 million, or 3%, during the twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020.

The decline in 2021 is attributable to lower COVID-19 testing revenue, primarily lower instrument revenue.

Excluding COVID-19 related revenue, base microfluidics product and service revenue increased $6.7 million, or 18%, due to the launch of our OEM instrument and higher consumables revenue.

We expect the average selling prices of our products to fluctuate over time based on market conditions, product mix, and currency fluctuations.

Product and Service Cost, Product and Service Gross Profit, and Product and Service Margin

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Product and service gross profit $ 65,085 $ 67,705 $ 63,729 (4) % 6 %

Product and service margin 55.3 % 54.6 % 54.6 % 0.7 ppts — ppts.

Product and service margin increased by 0.7 percentage points during 2020 compared to 2019.

The impact of spreading fixed depreciation and amortization over a higher revenue base contributed 0.6 percentage points of the improvement in margin.

The impact of lower average unit selling prices on mass cytometry instruments was offset by lower service costs and lower production costs associated with mass cytometry consumables.

Product and service margin was unchanged in 2019 compared to the prior year.

Higher capacity utilization, as well as the impact of spreading fixed depreciation and amortization over a higher revenue base, was offset by higher inventory reserves, unfavorable product mix and lower average selling prices on mass cytometry products.

Product and service margin 51.5 % 55.3 % 54.6 % (3.8) ppts.

Product and service margin decreased by 3.8 percentage points for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Product and service margins were impacted by lower average selling prices for mass cytometry instruments, unfavorable product mix from sales of our OEM instrument and lower COVID-19 consumables sales, and the absence of COVID-19 related government subsidies.

Operating Expenses

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We have made substantial investments in research and development since our inception and expect to continue to do so.

We believe that our continued investment in research and development is essential to our long-term competitive position and that these expenses may increase in future periods.

Research and development expense increased by $1.5 million, or 4%, to $37.9 million for 2021 compared to $36.5 million for 2020.

Increases are primarily due to higher compensation costs, including higher employee incentive compensation and stock-based compensation costs, and outside service costs related to development and grant projects.

Proceeds of the NIH Contract offset $1.4 million of research and development costs.

Salaries and benefit costs increased primarily due to the absence of 2020 temporary salary reductions and COVID-19 related government subsidies, as well as higher headcount and merit increases, partially offset by lower variable employee compensation.

Consulting costs increased by $0.8 million due to projects related to development agreements and grants.

Selling, General and Administrative

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Selling, general and administrative expense increased by $1.0 million, or 1%, to $98.9 million for 2021 compared to $97.9 million for 2020.

The increase in expense is primarily attributable to higher compensation costs, including higher employee incentive compensation and stock-based compensation, and higher legal costs.

In addition, we incurred $4.9 million of increased facilities costs reflecting costs associated with our new lease, effective March 2020, for our corporate headquarters and related moving expenses.

Lease rates had increased since entering into our previous, now expired, lease.

Travel costs fell

$3.6 million compared to the prior period, while costs related to trade shows and other events fell $1.9 million due to the cancellation of in-person events in light of the COVID-19 pandemic.

Interest Expense, Loss from Extinguishment of Debt and Other Income, Net

Marketing expenses increased $2.8 million primarily due to marketing campaigns and market research to support new product launches.

Sales expenses increased $1.9 million driven by higher compensation and benefits as well as higher travel as we returned to more normal pre-COVID-19 pandemic spending levels.

Partially offsetting these increases were lower general and administrative costs.

General and administrative expenses fell primarily due to lower variable compensation and lower litigation costs.

Interest Expense and Other Non-Operating Items

The following table presents these items for each year presented (in thousands):

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Interest expense $ (3,823) $ (3,572) $ (4,279) (7) % 17 %

Surplus funding from NIH Contract 7,140 — — NA NA

Loss from extinguishment of debt (9) — (12,020) NA (100) %

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Total $ 3,799 $ (3,065) $ (14,866) 224 % 79 %

In November 2019, we issued $55.0 million aggregate principal amount of our 2019 Notes.

Net proceeds of the 2019 Notes issuance were used primarily to retire $50.2 million aggregate principal amount of our 2014 Notes.

The 2019 Notes have an effective interest rate of 6.2% compared to the 2014 Notes, which have an effective interest rate 3.0%.

In February 2014, we closed an underwritten public offering of $201.3 million aggregate principal amount of our 2014 Notes.

The 2018 Notes had an effective interest rate of 12.3%.

In the first quarter of 2019, the 2018 Notes were converted into 19.5 million shares of our common stock and the 2018 Notes were retired.

We recognized a loss of $9.0 million on the conversion of 2018 Notes, which was included in loss on extinguishment of debt.

This amount represents the difference between the fair value of the bonds converted and the carrying value of the bonds at the time of conversion.

Interest expense of $3.6 million for the twelve months ended December 31, 2020 consists primarily of interest on $55.0 million of 2019 Notes, while interest expense of $4.3 million for the twelve months ended December 31, 2019 included both the interest on $51.3 million of 2014 Notes and a partial quarter of interest expense on $150.0 million of 2018 Notes, which accrued at an effective rate of 12.3%.

The lower interest expense of $3.6 million for the twelve months ended December 31, 2020 compared to $4.3 million for the twelve months ended December 31, 2019 reflects the impact of higher debt balances and higher interest rates for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2020.

The increase in interest expense for the twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020 is due to the $10.0 million Term Loans which commenced in August 2021.

In 2021, we recognized $7.1 million of proceeds unde r the NIH Contract in excess of amounts expected to be spent for capital expenditures and operating expenses.

In February 2021, as provided by the indenture governing the 2014 Notes, holders of $0.5 million of the 2014 Notes required us to repurchase their notes at 100% of the principal amount plus accrued and unpaid interest.

Other income, net primarily consists of interest income and gains or losses on foreign exchange.

Other income, net, of $0.5 million for 2020 is primarily attributable to $0.2 million of interest income, and $0.2 million of foreign exchange gains.

Other income, net, of $0.5 million for 2021 is primarily attributable to the settlement of claims, partially offset by $0.2 million of foreign exchange losses.

Income Tax Benefit

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Depending on the relative value of these components, we can have either a tax benefit or expense for any given period.

We recorded a tax benefit of $1.1 million, or an effective tax rate benefit of 2.0%, for the year ended December 31, 2020.

The tax benefit was principally due to the amortization of our acquisition-related deferred tax liabilities, partially offset by a provision from our foreign operations.

Liquidity and Capital Resources

We recorded a tax benefit of $4.4 million, or an effective tax rate benefit of 6.9%, for the year ended December 31, 2021 compared to a tax benefit of $1.1 million, or an effective tax rate benefit of 2.0%, for the year ended December 31, 2020.

The tax benefit in both years was principally due to the tax benefit from the amortization of our acquisition-related deferred tax liabilities of $3.1 million.

The increased benefit in 2021 compared to 2020 was due to lower current year profits and increased tax benefits on capital expenditures and research activities in certain of our foreign operations, as well as adjustments related to the finalization of 2020 tax returns.

Liquidity, Capital Resources and Going Concern

Sources of Liquidity

As of December 31, 2020, our principal sources of liquidity consisted of $68.5 million of cash and cash equivalents, as well as $1.0 million of restricted cash and $15.0 million of availability under our Revolving Credit Facility.

As of December 31, 2021, our principal sources of liquidity consisted of $28.5 million of cash and cash equivalents, as well as $1.0 million of restricted cash.

The borrowing base under our Revolving Credit Facility was $9.4 million.

With advances outstanding of $6.8 million, availability under the Revolving Credit Facility was $2.5 million as of December 31, 2021.

Purchase obligations consist of contractual and legally binding commitments to purchase goods and services.

The majority of our contracts are cancellable with little or no notice or penalty.

However, once a vendor has incurred costs to fulfill a contract with us, and which costs cannot be otherwise deployed, we are liable for those costs upon cancellation.

For example, if a supplier has purchased raw materials to produce a good for us, and those goods cannot be returned or otherwise used by our vendor, we are obligated to reimburse them for the costs they incurred .

These include purchase commitments with our contract manufacturers and suppliers.

As of December 31, 2021, these purchase commitments totaled $20.4 million.

In addition, we have certain non-cancellable commitments with service providers that are not material in the aggregate.

As of December 31, 2021, we had contractual purchase commitments for capital expenditures of $1.6 million for 2022, and we expect our total capital expenditures to be above that amount.

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services.

For example, see Note 9 Debt within our

consolidated financial statements for information about our short-term and long-term debt obligations and see Note 10 Leases within our consolidated financial statements for information about our lease obligations.

Note 17 Commitments and Contingencies within our consolidated financial statements included elsewhere in this Annual Report contains information about our various contractual and legally binding purchase commitments to purchase goods and services discussed above.

The expected timing of payments of our obligations is estimated based on current information.

Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations.

In addition, some of our future purchasing needs are not current contractual obligations and are therefore not included in the amounts above.

For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons.

We have entered into several license and patent agreements.

Under these agreements, we pay annual license maintenance fees, non-refundable license issuance fees, and royalties as a percentage of net sales for the sale or sublicense of products using the licensed technology.

Future payments related to these license agreements have not been included in the contractual obligations table above as the period of time over which the future license payments will be required to be made, and the amount of such payments, are indeterminable.

We do not expect the license payments to be material in any particular year.

The following table presents our cash flow summary for each year presented (in thousands):

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Net cash provided by financing activities 15,959 20,857 2,790

Effect of foreign exchange rate fluctuations on cash and cash equivalents (21) 385 56

Net increase (decrease) in cash, cash equivalents and restricted cash $ (40,069) $ 45,800 $ (71,665)

Net Cash Used in Operating Activities.

We derive cash flows from operations primarily from cash collected from the sale of our products and services, and license agreements and grants.

We derive cash flows from operations primarily from cash collected from the sale of our products and services, license agreements and grants.

Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses and working capital to support the business.

We have historically experienced negative cash flows from operating activities as we have expanded our business and built our infrastructure domestically and internationally.

Net cash used in operating activities in 2020 was $15.4 million and consisted of net loss of $53.0 million less non-cash adjustments of $35.2 million, and a net increase in assets and liabilities of $2.4 million.

Non-cash items include stock-based compensation expense of $14.5 million, amortization of developed technology of $11.9 million, depreciation and amortization of $4.0 million, and lease amortization of $2.0 million.

Increases in inventories and accounts receivable balances represent working capital increases due to higher revenues.

Higher incentive compensation and other accruals largely offset these increases.

Net cash used in operating activities in 2019 was $35.2 million and consisted of net loss of $64.8 million less non-cash adjustments of $43.2 million, and a net increase in assets and liabilities of $13.6 million.

Non-cash items primarily included a loss from extinguishment of debt of $12.0 million, amortization of developed technology of $11.2 million, stock-based compensation expense of $11.4 million, and depreciation and amortization of $4.6 million.

Net cash used in operating activities in 2021 was $44.1 million and consisted of net loss of $59.2 million, less non-cash items of $35.1 million and cash used in assets and liabilities, net, of $19.9 million.

Non-cash items included stock-based compensation expense and depreciation and amortization.

The cash used in assets and liabilities, net was primarily attributable to a reduction of accrued compensation and liabilities of $8.7 million from bonus payments made in the first quarter of 2021, and an increase in inventories, net of $4.8 million.

Net cash used in operating activities in 2020 was $15.4 million and consisted of net loss of $53.0 million less non-cash adjustments of $35.2 million, and a net cash provided by assets and liabilities of $2.4 million.

Increases in inventories, net and accounts receivable, net balances represent working capital increases due to higher revenues were more than offset by higher incentive compensation and other accruals.

Net cash used in operating activities in 2019 was $35.2 million and consisted of net loss of $64.8 million less non-cash adjustments of $43.2 million, and a net cash used in assets and liabilities of $13.6 million.

Non-cash items primarily included a loss from extinguishment of debt of $12.0 million as well as stock-based compensation and depreciation and amortization.

The net increase in assets and liabilities was primarily due to lower accrued liabilities for retention bonuses and other variable compensation.

Net cash used in operating activities in 2018 was $25.2 million and consisted of net loss of $59.0 million less non-cash adjustments of $37.4 million, and a net reduction in assets and liabilities of $3.6 million.

Non-cash items primarily included amortization of developed technology of $11.2 million, stock-based compensation of $11.0 million and depreciation and amortization of $5.4 million.

The net increase in assets and liabilities was primarily due to lower accrued liabilities for retention bonuses.

Net Cash Provided by (Used in) Investing Activities.

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However, we may choose to decrease or defer certain capital expenditures and development activities, while further optimizing our organization.

Net cash provided by investing activities in 2020 was $40.0 million and includes $36.8 million of proceeds from the sales and maturities of investments as well as $21.0 million of proceeds from the NIH Contract, reflecting the portion

of the proceeds from the NIH Contract attributable to the capacity expansion.

Net cash used in investing activities in 2021 was $11.9 million.

Capital expenditures of $13.3 million were incurred primarily to expand our microfluidics IFC production capacity in Singapore related to the NIH Contract.

Total proceeds from the NIH Contract were $8.6 million in 2021, of which $1.3 million is expected to be used for the Singapore facility expansion.

These inflows were partially offset by capital expenditures of $12.7 million, including $10.2 million of capital expenditures funded by the NIH Contract to expand our Singapore manufacturing facility, and $5.2 million of net cash paid for the InstruNor acquisition .

Total proceeds from the NIH Contract are expected to be $34.0 million, of which we received $25.4 million in 2020.

We expect to incur the balance of the capital expenditures for the manufacturing capacity expansion and receive the remaining proceeds from the NIH, subject to satisfactory completion of all remaining milestones, in 2021.

Total proceeds from the NIH Contract received were $25.4 million in 2020.

Net cash used in investing activities in 2019 was $39.3 million, which included purchases of investments of $62.4 million and capital expenditures of $2.5 million to support our commercial and manufacturing operations, partially offset by proceeds from maturities of investments of $25.6 million.

Net cash provided by investing activities in 2018 was $4.7 million, which included proceeds from maturities of investments of $6.5 million, partially offset by purchases of investments of $1.5 million, and capital expenditures of $0.4 million to support our commercial and manufacturing operations.

Net Cash Provided by Financing Activities.

Net cash provided by financing activities totaled $16.0 million in 2021.

The principal sources of cash were $10.0 million of advances drawn against our new Term Loan Facility with Silicon Valley Bank, advances under the revolving credit agreement of $6.8 million, and $1.3 million of ESPP proceeds.

Partially offsetting these sources was $1.8 million of withholding tax payments related to net share settlement of equity awards and the $0.5 million repurchase of 2014 Notes in February 2021.

We generated cash from financing activities of $20.9 million during 2020.

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Payments of debt and equity issuance costs of $1.9 million were partially offset by cash inflows from equity programs.

We generated cash from financing activities of $57.7 million during 2018, and approximately $59.5 million was generated from a public offering of our common stock.

The remainder reflects the proceeds from stock option exercises and ESPP purchases, offset by debt and equity issuance costs and payments of taxes for the net settlement of equity awards.

Capital Resources.

At December 31, 2020 and December 31, 2019, our working capital, excluding deferred revenues and restricted cash, was $76.9 million and $74.0 million, respectively, including cash and cash equivalents of $68.5 million and $21.7 million, respectively, and short-term investments of $37.0 million at December 31, 2019.

In February 2014, we closed an underwritten public offering of $201.3 million in aggregate principal amount of our 2014 Notes.

In March 2018, we entered into privately negotiated transactions with certain holders of our 2014 Notes to exchange $150.0 million in aggregate principal amount of the 2014 Notes for $150.0 million in aggregate principal amount of 2018 Notes.

Following the exchange transactions, approximately $51.3 million in aggregate principal amount of 2014 Notes remained outstanding.

In the first quarter of 2019, we received notices from holders of the 2018 Notes electing to voluntarily convert approximately $138.1 million in aggregate principal amount of the 2018 Notes.

In February 2019, we notified trustee U.S.

Bank National Association of our intention to exercise our issuer’s conversion option with respect to the remaining approximately $11.9 million in aggregate principal amount of 2018 Notes.

In total, $150.0 million of the 2018 Notes were converted into approximately 19.5 million shares of our common stock and the 2018 Notes were retired.

In November 2019, we closed a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of $55.0 million aggregate principal amount of 2019 Notes.

Net proceeds of the 2019 Notes issuance were $52.7 million, after deductions for commissions and other debt issuance costs.

$51.8 million of the proceeds was used to retire $50.2 million aggregate principal amount of our 2014 Notes, leaving $1.1 million of aggregate principal amount of our 2014 Notes outstanding.

The remaining cash proceeds from the issuance of the 2019 Notes were used for general corporate purposes.

The private placement of the 2019 Notes, and concurrent repurchase of a portion of the 2014 Notes, had the effect of refinancing a portion of the Company’s outstanding debt under the 2014 Notes to December 2024.

Capital Resources and Going Concern

At December 31, 2021 and December 31, 2020, our working capital, excluding deferred revenues, current, and deferred grant income, current and restricted cash, was $38.0 million and $79.8 million, respectively, including cash and cash equivalents of $28.5 million and $68.5 million, respectively.

We had no short-term investments at December 31, 2021 and December 31, 2020.

In February 2014, we closed an underwritten public offering of our 2014 Notes.

Pursuant to the Indenture governing the 2014 Notes, holders of the 2014 Notes have the right, subject to certain conditions specified in such indenture, to require the Company to repurchase all or a portion of their 2014 Notes on each of February 6, 2021, February 6, 2024, and February 6, 2029, at a repurchase price in cash equal to 100% of the principal amount of the 2014 Notes plus accrued and unpaid interest.

On February 6, 2021, holders of $0.5 million of the 2014 Notes caused us to repurchase their notes in accordance with this provision leaving $0.6 million of 2014 Notes outstanding at December 31, 2021.

In November 2019, we closed a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of $55.0 million aggregate principal amount of our 2019 Notes.

The 2019 Notes bear interest at 5.25% per annum, payable semiannually on June 1 and December 1 of each year, beginning on June 1, 2020.

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On or after December 1, 2022, if the price of the Company’s common stock has equaled or exceeded 130% of the Conversion Price then in effect for a specified number of days, we may, at our option, elect to convert the 2019 Notes in whole but not in part into shares of the Company, determined in accordance with the terms of the indenture.

The foregoing summaries of the 2014 Notes, the 2018 Notes, the 2019 Notes and the exchange transactions completed in March 2018 and November 2019 are not complete and are qualified in their entirety by the applicable indentures, forms of global notes, and other agreements and documents filed with the SEC.

On August 2, 2018, we entered into our Revolving Credit Facility with SVB, with a maturity date of August 2, 2020.

The Revolving Credit Facility is collateralized by substantially all our property, other than intellectual property.

Outstanding loans

under the Revolving Credit Facility bear interest, at the greater of (i) prime rate plus 0.50% or (ii) 5.50%.

Amounts drawn under the Revolving Credit Facility will be used for working capital and general corporate purposes.

On April 21, 2020, we entered into the Third Amendment to Loan and Security Agreement with SVB (the Amendment), which amends the Revolving Credit Agreement.

The Amendment extends the maturity date by two years, to August 2, 2022.

We also amended the interest rate to be the greater of (i) prime rate (as customarily defined), plus 0.50%, floating, and (ii) 5.25%.

Interest on any outstanding loans continues to be due and payable monthly and the principal balance is due at maturity though loans can be prepaid at any time without penalty.

Annual administration fees are unchanged.

The Amendment also includes various administrative changes.

As of December 31, 2020, total availability under the Revolving Credit Facility was $15.0 million.

We currently have no outstanding debt under the Revolving Credit Facility, and we are in compliance with all the terms and conditions of the Revolving Credit Agreement governing the Revolving Credit Facility.

The foregoing summaries of the 2014 Notes and the 2019 Notes are not complete and are qualified in their entirety by the applicable indentures, forms of global notes, and other agreements and documents filed with the SEC.

On August 2, 2018, we entered into a Loan and Security Agreement with SVB (the Credit Agreement) for our Revolving Credit Facility, which provides for secured revolving loans in an aggregate amount of up to $15.0 million.

In August 2021, we

amended our Revolving Credit Facility to extend the maturity date to August 2, 2023 and to provide for a new $10.0 million Term Loan Facility (the Term Loan Facility and, together with the Revolving Credit Facility, the Credit Facility).

The Credit Facility is collateralized by substantially all our property, other than intellectual property.

The maturity date of the Term Loan Facility is July 1, 2025, subject to the following condition:

in the event the principal amount of our convertible debt exceeds $0.6 million as of June 1, 2024 or if the maturity date of our 2019 Notes has not been extended beyond January 1, 2026 by that date, then the maturity date of the Term Loan Facility will be June 1, 2024.

As of December 31, 2021, the Term Loan Facility was fully drawn.

Interest on the term loan accrues on the outstanding principal amount thereof at the greater of (i) a floating per annum rate equal to three quarters of one percentage point (0.75%) above the prime rate (as customarily defined), or 4% with a final payment equal to 6.5% of the aggregate original principal amounts of each term loan advance due on the earlier of the maturity date of the Term Loan Facility, the acceleration of the term loan advances or any prepayment of a term loan advance.

Interest is payable monthly.

The principal amount of the term loan advances is repayable beginning on August 1, 2023, in twenty-four equal monthly installments of principal plus monthly payments of accrued interest.

The Amendment also added a financial covenant to the Credit Facility, requiring us to maintain a minimum Adjusted Quick Ratio (as defined in the Amendment) of at least 1.25 to 1.00.

As of December 31, 2021, the total borrowing base under the Revolving Credit Facility was $9.4 million.

We had $6.8 million drawn, leaving $2.5 million available.

We were in compliance with all the terms and conditions of the Revolving Credit Agreement governing the Revolving Credit Facility as of December 31, 2021, except in one instance where non-compliance was subsequently waived.

See Note 9 to our consolidated financial statements for more information about the Revolving Credit Facility.

We believe our existing cash, cash equivalents, and investments will be sufficient to meet our working capital and capital expenditure needs for at least the next 18 months.

However, we may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue, or operating expenses, and we may need to raise additional capital to fund our operations, further our research and development activities, or acquire or invest in a business.

Our future funding requirements will depend on many factors, including market acceptance of our products, the cost of our research and development activities, the cost of filing and prosecuting patent applications, the cost associated with litigation or disputes relating to intellectual property rights or otherwise, the cost and timing of regulatory clearances or approvals, if any, the cost and timing of establishing additional sales, marketing, and distribution capabilities, the cost and timing of establishing additional technical support capabilities, and the effect of competing technological and market developments.

In the future, we may acquire businesses or technologies from third parties, and we may decide to raise additional capital through debt or equity financing to the extent we believe this is necessary to successfully complete these acquisitions.

If we require additional funds in the future, we may not be able to obtain such funds on acceptable terms, or at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic.

If we raise additional funds by issuing equity securities, our stockholders could experience dilution.

Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.

Any additional debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize.

We also may have to reduce marketing, customer support, research and development, or other resources devoted to our products.

Off-Balance Sheet Arrangements

Since our inception, we have not had any off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC’s Regulation S-K.

Contractual Obligations and Commitments

The following summarizes our contractual obligations as of December 31, 2020 (in thousands):

Payments Due by Period

Total Less than 1

Year 1-3 Years 3-5 Years Thereafter

Debt obligations $ 67,851 $ 3,411 $ 5,807 $ 57,920 $ 713

Operating lease obligations, net 68,272 7,565 14,205 14,594 31,908

Purchase obligations 12,928 12,928 — — —

Total $ 149,051 $ 23,904 $ 20,012 $ 72,514 $ 32,621

Debt obligations include the principal amount of the Notes and interest payments to be made under the Notes.

Although the 2014 and 2019 Notes mature in 2034 and 2024, respectively, they can be converted into shares of our common stock prior to maturity if certain conditions are met.

In addition, holders of the 2014 Notes may require us to repurchase all or a portion of their 2014 Notes on each of February 6, 2021, February 6, 2024, and February 6, 2029, at a repurchase price in cash equal to 100% of the principal amount of the 2014 Notes plus accrued and unpaid interest.

On February 6, 2021, holders of $0.5 million

of the 2014 Notes caused us to repurchase their notes in accordance with this provision.

This repayment is reflected in the above commitments schedule as due in less than one year.

See Note 9 to our consolidated financial statements for additional information regarding the terms of the Notes.

Our operating lease obligations primarily relate to leases for our corporate headquarters and leases for manufacturing and office space for our foreign subsidiaries.

We currently lease facilities and equipment under non-cancellable lease agreements expiring at various times through 2027.

Our lease payments are expensed on a straight-line basis over the life of the leases.

Rental expense under operating leases, net of amortization of lease incentive, totaled $9.7 million, $6.1 million and $5.0 million, for 2020, 2019, and 2018 respectively.

Purchase obligations consist of contractual and legally binding commitments to purchase goods and services.

The majority of our contracts are cancellable with little or no notice or penalty.

However, once a vendor has incurred costs to fulfill a contract with us, and which costs cannot be otherwise deployed, we are liable for those costs upon cancellation.

Purchase obligations also includes $10.4 million for capital expenditures related to the NIH Contract.

We have entered into several license and patent agreements.

We do not expect the license payments to be material in any particular year.

Since our inception, we have financed our negative cash flow from operations primarily through equity offerings and the issuance of debt instruments.

As of December 31, 2021, we had $29.5 million in cash, cash equivalents and restricted cash.

Further, we have incurred, and expect to continue to incur, significant costs in pursuit of our business plans.

The existence of these conditions raises substantial doubt about our ability to continue as a going concern for at least the twelve-month period following the date the financial statements were issued.

Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures and ultimately, generate significant revenue growth.

Our plans to raise additional capital, including our ability to consummate the Private Placement Issuance, or take other actions to address the doubt regarding our ability to continue as a going concern, may not be successful.

There can be no assurance that the Company would be able to obtain additional liquidity when needed or under acceptable terms, if at all.

Refer to “Risk Factors – As disclosed in footnote two of our consolidated financial statements, and referenced in our independent registered public accounting firm’s report, we believe that our current level of cash and cash equivalents, together with committed financing facilities, are not sufficient to fund ongoing operations for at least the twelve-month period after the financial statements were issued.

The existence of these conditions raises substantial doubt about our ability to continue as a “going concern” for at least the twelve-month period following the date the financial statements were issued..’”

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-K

Item 7. Management’s Discussion and Analysis