What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-09 · 217 added, 206 removed, 130 unchanged (76% 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 condensed consolidated financial statements and the notes to those statements included elsewhere in this Form 10-Q.

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 Standard BioTools Inc.

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

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management.

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You should read this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.

Fluidigm®, the Fluidigm logo, Access Array™, Acculift™, Advanta™, Atlas™, Biomark™, Bringing new insights to life™, C1™, Callisto™, Cell-ID™, CyTOF®, CyTOF XT™, CyTOF XT logo, D3™, Delta Gene™, Direct™, Digital Array™, Dynamic Array™, EP1™, EQ™, FC1™, Flex Six™, Flow Conductor™, GeckoGrip™, Helios™, High-Precision 96.96 Genotyping™, HTI™, Hyperion™, IMC™, Imaging Mass Cytometry™, Immune Profiling Assay™, Juno™, Maxpar®, MCD™, MSL®, Nanoflex™, Open App™, Pathsetter™, Polaris™, qdPCR 37K™, Script Builder™, Script Hub™, Singular™, SNP Trace™, and SNP Type™ are trademarks or registered trademarks of Fluidigm Corporation.

Standard BioTools™, the Standard BioTools logo, Fluidigm®, the Fluidigm logo, Access Array™, Acculift™, Advanta™, Atlas™, Biomark™, Bringing new insights to life™, C1™, Callisto™, Cell-ID™, CyTOF®, CyTOF XT™, CyTOF XT logo, D3™, Delta Gene™, Direct™, Digital Array™, Dynamic Array™, EP1™, EQ™, FC1™, Flex Six™, Flow Conductor™, GeckoGrip™, Helios™, High-Precision 96.96 Genotyping™, HTI™, Hyperion™, IMC™, Imaging Mass Cytometry™, Immune Profiling Assay™, Juno™, Maxpar®, MCD™, MSL®, Nanoflex™, Open App™, Pathsetter™, Polaris™, qdPCR 37K™, Script Builder™, Script Hub™, Singular™, SNP Trace™, and SNP Type™ are trademarks or registered trademarks of Standard BioTools Inc.

Other service marks, trademarks and trade names referred to in this quarterly report on Form 10-Q are the property of their respective owners.

___________________________

Unless the context requires otherwise, references in this Form 10-Q to “Fluidigm,” the “Company,” “we,” “us,” and “our” refer to Fluidigm Corporation and its subsidiaries.

Fluidigm improves life by driving meaningful insights in health and disease.

Our innovative technologies explore the biological complexities of disease to advance human health through research, diagnostics and clinical applications.

We create, manufacture, and market a range of products and services, including instruments, consumables, reagents and software that are used by researchers and clinical labs worldwide.

Our customers are leading academic and government laboratories, as well as pharmaceutical, biotechnology, plant and animal research organizations, and clinical laboratories worldwide.

Together with our customers, we strive to increase the quality of life for all.

Unless the context requires otherwise, references in this Form 10-Q to “Standard BioTools” the “Company,” “we,” “us,” and “our” refer to Standard BioTools Inc.

and its subsidiaries.

Our MD&A is organized in the following sections:

• Recent Developments

• Critical Accounting Policies, Significant Judgments and Estimates

• Recent Accounting Changes and Accounting Pronouncements

• Results of Operations

• Liquidity and Capital Resources

Standard BioTools Inc., previously known as Fluidigm Corporation, is driven by a bold vision – unleashing tools to accelerate breakthroughs in human health.

Standard BioTools has an established portfolio of essential, standardized next-generation technologies that help biomedical researchers develop medicines faster and better.

As a leading solutions provider, we provide reliable and repeatable insights in health and disease using our proprietary mass cytometry and microfluidics technologies that help transform scientific discoveries into better patient outcomes.

We work with leading academic,

government, pharmaceutical, biotechnology, plant and animal research, and clinical laboratories worldwide, focusing on the most pressing needs in translational and clinical research, including oncology, immunology, and immunotherapy.

We distribute our systems through our direct sales force and support organizations located in North America, Europe, and Asia-Pacific, and through distributors or sales agents in several European, Latin American, Middle Eastern, and Asia-Pacific countries.

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 for the nine months ended September 30, 2021 was $92.3 million, compared to $93.5 million for the nine months ended September 30, 2020.

We have incurred significant net losses since our inception in 1999 and, as of September 30, 2021, our accumulated deficit was $726.6 million.

Our total revenue for the three months ended March 31, 2022 was $26.5 million and $32.8 million for the three months ended March 31, 2021.

We have incurred significant net losses since our inception in 1999 and, as of March 31, 2022, our accumulated deficit was $812.3 million.

Recent Developments

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 each of the first three quarters of 2021, compared to the third and fourth quarters of 2020.

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 COVID-19 pandemic, refer to Part II, Item 1A.

Risk Factors of this Form 10-Q.

In addition to the continuing impacts of the COVID-19 pandemic and its aftermath on our business, our financial results for the third quarter of 2021 were negatively impacted by supply chain issues, China trade restrictions, and the ongoing slowdown in the Asia-Pacific region.

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

Shortages of certain components resulted in our being unable to fulfill all of our customer orders during the quarter.

We expect to work through these orders over the next few quarters, 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.

The third quarter of 2021 also saw continued COVID-related shutdowns in Japan.

Th ese shutdowns, in addition to shipment delays in China due to the Chinese government’s delay in issuing import tax exemptions for our products, adversely impacted our financial results in the Asia-Pacific region.

We are undertaking a review, with the assistance of outside financial, operating, and legal advisors, of various options to maximize stockholder value with regard to strategic alternatives, cost and capital structure, and operations and supply chain.

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 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 June 1, 2024, then the maturity date of the Term Loan Facility will be on June 1, 2024.

There were no borrowings outstanding under the Revolving Credit Facility at September 30, 2021 and the Term Loan Facility was fully drawn as of September 30, 2021.

Private Placement Issuance

On January 23, 2022, we entered into (i) a Loan Agreement (the Casdin Bridge 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 Bridge Loan Agreement, and together with the Casdin Bridge Loan Agreement, the Bridge Loan Agreements) and each a Bridge Loan) 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 provided for a $12.5 million term loan to the Company.

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

The Bridge Loans automatically converted into Series B Preferred Stock, defined below, upon the completion of the Preferred Equity Financing, defined below.

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

Also on January 23, 2022, we 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 our stockholders, we issued and sold an aggregate of $225 million of convertible preferred stock on April 4, 2022, 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 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 per share to Viking (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 proceeds of the Preferred Equity Financing will be used for expenses related to the Private Placement Issuance, as well as working capital, general corporate purposes and potential future merger and acquisition opportunities that we may identify from time to time.

Our board of directors (the Board) called a meeting (Special Meeting) to ask our 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, (Common Stock) of the Company that we are authorized to issue from two hundred million (200,000,000) shares to four hundred million (400,000,000) shares and to change our name to Standard BioTools Inc.

(the Charter Amendment Proposal);

(ii) a proposal to approve, in accordance with Nasdaq Listing Rule 5635, 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 (the Private Placement Issuance Proposal);

and (iii) a proposal to adjourn the Special Meeting if the Special Meeting were convened and a quorum were present, but there were not sufficient votes to approve the Charter Amendment Proposal and the Private Placement Issuance Proposal (the Adjournment Proposal, and, together with the Private Placement Issuance Proposal and the Charter Amendment Proposal, the Stockholder Proposals).

Each of the Private Placement Issuance Proposal and Charter Amendment Proposal were conditioned on the approval of the other proposal, and neither proposal would take effect unless both were approved by our stockholders.

Our stockholders approved the Charter Amendment Proposal and Private Placement Issuance Proposal on April 1, 2022.

The Private Placement Issuance closed on April 4, 2022.

On April 1, 2022, the Company filed with the Secretary of State of the State of Delaware (i) the Charter Amendment, (ii) the Series B-1 Preferred Stock Certificate of Designations to establish the preferences, limitations and relative rights of the Series B-1 Preferred Stock and (iii) the Series B-2 Preferred Stock Certificate of Designations to establish the preferences,

limitations and relative rights of the Series B-2 Preferred Stock.

The Charter Amendment, Series B-1 Certificate of Designations and Series B-2 Certificate of Designations became effective upon filing.

On April 4, 2022, following stockholder approval of the Charter Amendment Proposal and the Private Placement Issuance Proposal, we received $225 million, before expenses, and issued 225,000 shares of Series B Preferred Stock, pursuant to the Purchase Agreements.

The Bridge Loans converted into 30,559 shares of Series B Preferred Stock.

With the approval of the proposals, our name was changed to Standard BioTools Inc.

Shortly after the closing of the Private Placement Issuance we also changed our ticker symbol for our common stock to LAB.

Upon the closing of the Private Placement Issuance, Dr.

Michael Egholm was appointed as the Company’s President and Chief Executive Officer and as a member of the Board of Directors.

Business Update

The capital from the Private Placement Issuance is expected to help fuel a realization of identified growth and cost opportunities and allow for new growth drivers as we pursue and consolidate complementary technologies across the life science ecosystem.

• Achieving significantly greater breadth and scale .

With a strong platform and deeply experienced management team, we will strive to accelerate growth both organically and, importantly, inorganically to deliver breadth and scale to the Company.

• Optimizing the cost structure .

As we work toward our goal of being sustainably cash flow positive, we intend to have a leaner general and administrative expense structure and a sales and marketing spend that is better aligned to support high-growth areas.

• Leveraging a larger menu to expanding customer base.

We expect to direct sales and marketing towards expanding our relationships deeper into the life science ecosystem, including large biopharma, emerging biotech, and diagnostic companies and the broader contract research organization and contract manufacturing organization service provider network.

• Accelerating growth in mass cytometry .

With particular emphasis on expanding our CyTOF and Imaging Mass Cytometry™ platforms to further support translational and clinical research, we intend to simplify the design and execution of deep cell profiling, standardize sample analysis with reproducible workflows and automation, and significantly advance capabilities for novel therapeutic development.

• Realizing and rationalizing opportunities in targeted high-profit areas within microfluidics .

We plan to focus on targeted end-applications (e.g., proteomics, biomarker analysis) and key partnerships (e.g., Olink® Bioscience) while rationalizing business processes and execution .

In the audited consolidated financial statements and the related notes for the year ended December 31, 2021 included in our annual report on Form 10-K, filed with the SEC on March 8, 2022, we disclosed that we had performed an assessment to determine whether there were conditions or events, considered in the aggregate, that raised 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.

We believed that our then-current level of cash and cash equivalents, together with committed financing facilities, were not sufficient to fund ongoing operations for at least the twelve-month period after the financial statements were issued.

Since then, we have closed the $225 million Series B Preferred Equity Financing, as discussed in Note 3.

The financing, which was contingent upon stockholder approval, was previously disclosed in Note 18 to our audited financial statements included in our 2021 annual report on Form 10-K.

The completion of this investment has eliminated the doubt about the Company’s ability to continue as a going concern.

See Note 3 and Note 17 for additional discussion.

Critical Accounting Policies, Significant Judgments and Estimates

Our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q are prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures.

The preparation of these condensed financial statements in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed 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 evaluate our estimates and assumptions on an ongoing basis.

To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

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

Accounting matters that rely on forecasted financial information included, but were not limited to, our inventory, and related reserves, and the carrying value of goodwill and other long-lived assets and liabilities.

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

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 also use significant judgment in determining the fair value of financial instruments, including debt and equity instruments.

Recent Accounting Changes and Accounting Pronouncements

Adoption of New Accounting Guidance

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.

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.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

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

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

We adopted ASU 2020-06 effective January 1, 2022.

The adoption of ASU 2020-06 did not have an impact on our 2014 and 2019 Convertible Notes.

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 adopted ASU 2021-10 effective January 1, 2022.

The adoption of ASU 2021-10 did not have a material impact on our financial statements.

Recent Accounting Pronouncements

Results of Operations

The following table presents comparative and common size condensed consolidated statements of operations data for the three and nine months ended September 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

The following table presents our historical condensed consolidated statements of operations data for the three months ended March 31, 2022 and 2021, and as a percentage of total revenue (in thousands):

Three Months Ended March 31,

Revenue $ 26,504 100 % $ 32,794 100 %

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Interest expense (1,030) (4) (887) (2)

Surplus funding from NIH contract 5,000 18 — — 5,000 5 — —

Loss on forward sale of Series B Preferred Stock (37,792) (143) — —

Unrealized loss on bridge loans (10,655) (40) — —

Other income (expense), net 118 — (285) (1)

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Net loss $ (76,288) (288) % $ (18,821) (57) %

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

We generate revenue primarily from sales of our products and services, and by entering 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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Development Revenue .

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

Under the Development Agreement, Fluidigm developed products based on our 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 ongoing annual payments of $0.4 million for sustaining efforts.

We recognized $0.1 million and $3.2 million of development revenue during the three months ended September 30, 2021 and 2020, respectively.

We recognized $2.4 million and $6.2 million during the nine months ended September 30, 2021 and 2020, respectively.

Cumulatively, through September 30, 2021 , we recognized $11.2 million of revenue from the Development Agreement.

We recognized revenue associated with the Development Agreement using an input method which determines the extent of our progress toward satisfaction of our performance obligations by comparing actual costs incurred to date to the total expected

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

On March 31, 2020, we entered into an OEM Supply and Development Agreement (Development Agreement) with a customer to develop products based on our microfluidics technology.

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

During the three months ended March 31, 2022, we recognized $0.1 million of development revenue associated with these fees.

During the three months ended March 31, 2021, we recognized $1.5 million of revenue from the project.

Costs associated with the Development Agreement were recorded in research and development expense in the condensed 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 ended in the third quarter of 2021.

Costs associated with grant agreements have been recorded in research and development expense in the condensed consolidated statement of operations.

License and Royalty Revenue .

In March 2020, we entered into an agreement to settle intellectual property infringement cla ims, under which we received a $3.5 million payment in exchange for a perpetual license to 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 customer represented more than 10% of total revenue for the three and nine months ended September 30, 2021.

Revenue from one customer exceeded 10% of total revenue for both the three and nine months ended September 30, 2020.

Revenue from our five largest customers represented 21% and 31% of total revenue for the three months ended September 30, 2021 and 2020, respectively.

Revenue from our five largest customers represented 22% and 23% of total revenue for the nine months ended September 30, 2021 and 2020, respectively.

The following table presents our total revenue disaggregated by source for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change

2021 2020 2021 2020

During the three months ended March 31, 2021, we recognized $0.3 million of grant revenue by providing research and development services under a contractual arrangement we entered into in the second half of 2019.

The contract was completed during the third quarter of 2021.

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

License 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.

During the three months ended March 31, 2022, we entered into an agreement to settle intellectual property infringement claims and received a $0.3 million payment in exchange for a license to certain of our intellectual property.

No single customer represented more than 10% of our total revenue for the three months ended March 31, 2022.

Revenue from one customer exceeded 10% of total revenue for the three months ended March 31, 2021.

Revenue from our five largest customers represented 21% and 27% of total revenue for the three months ended March 31, 2022 and 2021, respectively.

The following table presents our revenue disaggregated by source for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-over-Year Change

Instruments $ 7,523 28 % $ 7,708 24 % (2) %

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Grant revenue — — 300 1 (100) %

License revenue — — — — — % 93 — 3,163 3 (97) %

License revenue 268 2 — — NA

Total revenue $ 26,504 100 % $ 32,794 100 % (19) %

The following table presents our total revenue disaggregated by geographic area for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change

2021 2020 2021 2020

The following table presents our total revenue by geographic area for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-over-Year Change

Americas $ 12,930 49 % $ 18,523 56 % (30) %

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Total Revenue

Three months ended September 30, 2021

Total revenue decreased by $11.4 million, or 28%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily driven by a decline of COVID-19-related product revenue of $7.9 million and the impact of lower instrument pricing of $1.4 million.

In addition, development revenue declined as we completed the development phase of the Development Agreement.

Americas revenue decreased by $10.6 million, or 45%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The year over year decline is primarily attributable to a reduction in product revenue driven by the sharp decline in the demand for COVID-19 testing products.

Development revenue also declined by $3.1 million as we completed the development phase of the Development Agreement.

In Asia-Pacific, revenue decreased by $2.0 million, or 27.0%, primarily due to lower unit sales of instruments, lower average selling prices on instruments and product mix variability.

Japan experienced significant disruptions from COVID-19-related shutdowns, and our business in China continued to be impacted by the government failing to resolve tax permit issues.

EMEA revenue increased by $1.3 million driven by higher mass cytometry instruments .

A weaker dollar contributed 1.1 percentage points of the 14 percentage point increase in EMEA revenue.

Foreign exchange had an immaterial impact on total company revenues.

Nine months ended September 30, 2021

Total revenue decreased by $1.2 million, or 1%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, driven primarily by lower development, license and grant revenue, partially offset by higher product and service revenue.

Americas revenue declined by $4.8 million, or 9%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, driven by lower unit sales of instruments and lower development, grant and license revenue, partially offset by higher consumable and service revenue.

The decline in instrument revenue is attributable to reduced demand for analytical test instruments used in COVID-19 test applications.

The reduction in development and grant revenue reflects decelerating project activity as the underlying contracts neared completion, while the reduction in license revenue is attributable to the non-recurring nature of last year’s settlement agreement.

In Asia-Pacific, revenue decreased by 8% primarily due to lower unit sales of instruments, partially offset by increased consumable and service revenues.

EMEA revenue increased by $5.0 million, driven by higher unit sales of instruments.

A weaker dollar contributed 5.4 percentage points of the 21 percentage point increase in EMEA revenue.

Changes in foreign exchange contributed 1.4 percentage points to the change in total company revenues.

Total revenue decreased by $6.3 million, or 19%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily driven by a decline in consumables revenue and development revenue.

A weaker dollar negatively impacted Company total revenues by 1.1 percentage points .

Americas revenue decreased by $5.6 million, or 30%, for the three months ended March 31, 2022 compared to th e three months ended March 31, 2021.

The decline is primarily attributable to a reduction in product revenue driven by the sharp decline in the demand for COVID-19 testing products and by a $1.4 million decline in development revenue.

EMEA revenue decreased by $0.5 million driven by a decline in mass cytometry instruments, and partially offset by an increase in microfluidics instruments revenue primarily from products launched in the second half of 2021 .

A weaker dollar contributed 4.0 percentage points of the 5.8 percentage point decrease in EMEA revenue.

In Asia-Pacific, revenue decreased by $0.2 million, or 3.2%, primarily due to a decline in consumables revenue, which was largely offset by an increase in instruments revenue.

Product and Service Revenue .

The following table presents our revenue disaggregated by target market and by source for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-Over-Year Change Nine Months Ended September 30, Year-over-Year Change

2021 2020 2021 2020

The following tables present the split of product and service revenue between mass cytometry and microfluidics product categories and as a percentage of the respective category’s total product and service revenue for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-Over-Year Change

Mass cytometry:

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Total product and service revenue $ 12,618 100% $ 16,992 100% (26)%

Mass cytometry revenue increased during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The year-over-year increase was primarily attributable to sales of the new CyTOF XT instrument, which was released in May 2021, partially offset by lower sales of our Helios instrument and consumables.

The decline in Microfluidics revenue during the three months ended September 30, 2021 compared to the three months ended September 30, 2020 is directly attributable to reduced demand for COVID-19 testing products.

Mass cytometry revenue increased for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Product revenue increased $1.6 million primarily due to sales of CyTOF XT that was launched in May 2021 and growth in our imaging platforms partially offset by lower Helios sales.

Service revenue increased $2.3 million.

Microfluidics revenue increased during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The year over year increase is primarily attributable to higher consumables revenue from COVID-19 test products, which received FDA Emergency Use Authorization in August 2020, partially offset by higher 2020 sales of instrument systems for COVID testing.

Mass cytometry revenue decreased by $0.5 million, or 4%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The year-over-year decrease was primarily attributable to an overall decrease in legacy mass cytometry instruments revenue, partially offset by an increase in revenue from CyTOF XT instruments, which were released in May 2021.

The decline in microfluidics revenue of $4.4 million, or 26%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is directly attributable to reduced demand for our COVID-19 testing products, partially offset by revenues from new BioMark O and BioMark X instruments, which were both released in the second half of 2021.

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, Gross Profit and Margin

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

Cost of product revenue includes manufacturing costs incurred in the production process, including component materials, labor and overhead, installation, packaging, and delivery costs.

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Our cost of service revenue and related service margin may fluctuate depending on the variability in material and labor costs of servicing instruments.

The following table presents our product and service cost, product and service gross profit and product and service margin for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change

2021 2020 2021 2020

The following table presents our product and service cost, product and service gross profit, and product and service margin for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-over-Year Change

Cost of product revenue $ 12,339 $ 11,663 6 %

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Product and service gross profit $ 11,881 $ 17,261 (31) %

Product and service margin 46.9 % 58.9 % (12.0) ppt 51.0 % 55.6 % (4.6) ppt

Product and service margin decreased by 12.0 percentage points for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Fixed depreciation and amortization costs on a lower revenue base contributed 2.6 percentage points to the decline in product and service margins for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Other factors, including unfavorable product mix from lower COVID-19 consumables sales in 2021 vs 2020 coupled with a new product transition cycle, lower capacity utilization for consumables, and lower average selling prices on mass cytometry instruments, further reduced product and service margin by 9.4 percentage points for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Product and service margin decreased by 4.6 percentage points for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Higher provisions for excess and obsolete inventory primarily related to COVID-19 testing consumables products reduced product and service margin by 0.9 percentage points.

Other factors, including lower capacity utilization for consumables manufacturing, lower average selling prices for mass cytometry instruments, and new product transition cycles further reduced product and service margin by 4.4 percentage points.

Fixed depreciation and amortization costs on a higher revenue base partially offset these increases, positively impacting product and service margin by 0.7 percentage points.

Product and service margin 45.4 % 55.7 % (10.3) ppt

Product and service margin decreased by 10.3 percentage points for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Products introduced in the second half of 2021, which have lower average gross margins, reduced product and service margins by 2.4 percentage points for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Higher inventory reserves and warranty costs contributed 2.2 percentage points and 1.7 percentage points, respectively, to the decline in product and service margins.

Fixed depreciation and amortization costs on a lower revenue base contributed 2.4 percentage points to the decline in product and service margins for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Other factors, including unfavorable product mix from lower COVID-19 consumables sales in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, coupled with the impact of lower plant utilization for mass cytometry products account for the majority of the remaining decline in product and service gross margins for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Operating Expenses

The following table presents our operating expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change

2021 2020 2021 2020

The following table presents our operating expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-over-Year Change

Research and development $ 8,865 $ 10,753 (18) %

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

Research and development expense increased by $1.1 million, or 13%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Compensation and benefit costs increased by $0.9 million, primarily due to the absence of the 2020 COVID-19 related subsidies received by certain of our foreign subsidiaries.

Consulting costs increased by $0.2 million due to development and grant related projects.

Research and development expense increased by $4.1 million, or 16%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Compensation and benefit costs increased by $2.7 million, primarily due to the absence of the 2020 temporary salary reductions and government subsidies.

Consulting costs increased by $1.1 million driven by development and grant related projects.

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

Accordingly, these expenses may increase in future periods.

Research and development expense decreased by $1.9 million, or 18%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 as the year-ago period includes development costs related to products that were launched in the second half of 2021.

Selling, General and Administrative

Selling, general and administrative expense consists primarily of personnel costs for our sales and marketing, business development, finance, legal, human resources, information technology, and general management, as well as professional services, such as legal and accounting services.

Selling, general and administrative expense increased by $1.4 million, or 6%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Salaries and benefits costs increased by $0.6 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to the absence of COVID-19 related government subsidies.

Consulting costs increased by $1.0 million due to higher market research expenses.

Travel and advertising and promotion expense together increased by $1.1 million reflecting a return to more normal spending levels following 2020 expense declines due to the COVID-19 pandemic.

Lower commissions, legal expenses and other costs partially offset these cost increases.

Selling, general and administrative expense increased by $10.0 million, or 15%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Salaries and benefits costs increased by $4.5 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the absence of the 2020 temporary salary reductions and COVID-19 related government subsidies, higher headcount and annual merit increases.

Consulting costs increased by $2.4 million due to higher market research expenses and the use of contract employees to fill open positions.

Commissions increased by $0.8 million, reflecting the impact of higher product sales, while travel and advertising and promotion expense together increased by $1.5 million , reflecting a return to more normal spending levels following 2020 expense declines due to the COVID-19 pandemic.

Stock-based compensation costs increased by $1.2 million for the nine months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to retention awards granted in the second quarter of 2020.

These increases were partially offset by decreases in a variety of smaller items.

Interest Expense and Other Income (Expense), Net

The following table presents these items for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change

Selling, general and administrative expense increased by $3.3 million, or 12%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The increase was primarily due to $3.4 million of costs associated with the Private Placement Issuance, and $1.2 million of severance costs for our former CEO.

Litigation costs decreased by $1.1 million due to the resolution of patent infringement claims.

Selling, general and administrative expenses for the rest of 2022 will be negatively impacted by costs associated with approximately $5.0 million of cash retention bonuses and approximately $2.9 million of stock-based compensation that will pay out over the next year through the first quarter of 2023.

Interest Expense and Other Non-Operating Items

The following table presents these items for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31, Year-over-Year Change

Interest expense $ (1,030) $ (887) 16 %

Surplus funding from NIH contract 5,000 — NA 5,000 — NA

Loss on forward sale of Series B Preferred Stock (37,792) — NA

Unrealized loss on bridge loans (10,655) — NA

Other income (expense), net 118 (285) (141) %

Total $ (49,359) $ (1,172) 4112 %

Interest expense is comprised primarily of interest on our convertible debt and new Term Loan Facility.

The increase in the interest expense for the three months ended September 30, 2021 compared to the prior year is due to our new Term Loan Facility.

For the three months ended September 30, 2021, we recognized $5.0 million of proceeds under the NIH Contract in excess of amounts expected to be spent for capital expenditures and operating expenses.

O ther income, net consisted primarily of $0.3 million from the settlement of an insurance claim.

For the nine months ended September 30, 2021, we recognized $5.0 million of proceeds under the NIH Contract in excess of amounts expected to be spent for capital expenditures and operating expenses.

Other income, net included $0.5 million from the settlement of insurance claims.

Other income, net for the nine months ended September 30, 2021 also includes a $9 thousand loss associated with the February 2021 repurchase of the 2014 Notes.

I nterest expense i s comprised primarily of interest on our convertible debt and Term Loan Facility.

The increase in interest expense for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is due primarily to our Term Loan Facility.

The Purchase Agreements, which promised to exchange 225,000 shares of Series B Preferred Stock for $225 million at a future date, accounted for as forward sales contracts at fair value in accordance with ASC 480 because the Series B Preferred Stock includes certain contingent redemption features which created an obligation for the Company to repurchase its shares.

The fair value of the forward sales contracts was determined using a Monte Carlo Simulation (MCS) analysis.

Given the convertibility of the Series B Preferred Stock into cash or our common stock under several scenarios, the MCS analysis simulated the value of the Series B Preferred Stock under numerous scenarios, reflecting the impact of the various conversion and redemption provisions of the Series B Preferred Stock.

The fair value of 225,000 shares of Series B Preferred Stock was $262.8 million as of March 31, 2022.

The increase in the fair value of the Series B Preferred Stock from January 23, 2022 to March 31, 2022 reflects the increase in the price of our common stock price since the inception of the contracts and the change in the value of the various conversion rights and key provisions discussed below.

The loss of $37.8 million on the forward sale of the Series B Preferred Stock represents the difference between the fair value of the Series B Preferred Stock of $262.8 million and the $225.0 million of cash to be received.

Applying the guidance in ASC 825 to the Bridge Loans, we have elected to record the Bridge Loans at their fair value, given the short period of time in which the Bridge Loans were expected to be outstanding.

The Unrealized Loss on the Bridge Loans reflects the entire change in the value of the Bridge Loans as a single line item on the condensed consolidated statement of operations, including the portion attributable to accrued interest.

Accordingly, we have recognized no interest expense on the Bridge Loans for the three months ended March 31, 2022.

The fair value of the Bridge Loans is largely driven by the value of our common stock and the value of the Series B Preferred Stock into which they were converted.

The Unrealized Loss on the Bridge Loans of $10.7 million was largely driven by an increase in the value in the price of our common stock from $2.84 per share at inception to $3.59 per share as of March 31, 2022 and, to a lesser extent, by the impact of the change in value of the various conversion options of the Series B Preferred Stock.

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 $1.4 million for an effective tax rate of 9.3%, for the three months ended September 30, 2021.

In the three months ended September 30, 2020, we recorded a tax benefit of $0.2 million for an effective tax rate of 3.9%.

Higher losses in certain of foreign operations in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 resulted in a higher tax benefit for our foreign operations for the three months ended September 30, 2021.

For the nine months ended September 30, 2021, we recorded a tax benefit of $3.6 million, resulting in an effective tax rate of 6.8%.

For the nine months ended September 30, 2020, we recorded a tax benefit of $2.1 million, resulting in an effective rate of 5.6%.

The increased tax benefit for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily attributable to discrete items, in addition to the higher losses and corresponding tax benefit in certain parts of our foreign operations.

We recorded a tax benefit of $0.6 million, or an effective tax rate of 0.7%, for the three months ended March 31, 2022.

In the three months ended March 31, 2021, we recorded a tax benefit of $1.7 million, or an effective tax rate of 8.2%.

Lower losses in certain of our foreign operations in the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021 resulted in a lower tax benefit for our foreign operations for the three months ended March 31, 2022.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2021, our principal sources of liquidity consisted of $29.3 million of cash and cash equivalents, as well as $1.0 million of restricted cash and $10.3 million of availability under our Revolving Credit Facility.

The following table presents a comparative summary of our cash flows for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

As of March 31, 2022, our principal sources of liquidity consisted of $30.0 million of cash and cash equivalents, as well as $1.0 million of restricted cash and $8.4 million of availability under the Revolving Credit Facility.

The following table presents our cash flow summary for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Cash flow summary:

Net cash used in operating activities $ (15,590) $ (12,901)

Net cash provided by (used in) investing activities (10,801) 40,797

Net cash used in investing activities (868) (4,923)

Net cash provided by (used in) financing activities 18,075 (1,026)

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Net increase (decrease) in cash, cash equivalents and restricted cash $ 1,532 $ (18,776)

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.

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 3 and Note 9 within our condensed consolidated financial statements for information about our short-term and long-term debt obligations and the Private Placement Issuance.

See Note 10 within our condensed consolidated financial statements for information about our lease obligations, and see Note 16 within our condensed consolidated financial statements included elsewhere in this Form 10-Q for information about our various contractual and legally binding purchase commitments to purchase goods and services.

Other than as disclosed above, there have been no material changes during the three months ended March 31, 2022 to our contractual obligations disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2021.

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 purchasing requirements are not current 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.

Net Cash Used in Operating Activities

We derive cash flows from operations primarily from cash collected from the sale of our products and services, development arrangements, 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 our business.

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 for the nine months ended September 30, 2021 was $37.1 million and consisted of net loss of $49.8 million, less non-cash items of $25.8 million and cash used in assets and liabilities, net, of $13.0 million.

Non-cash items included stock-based compensation expense of $11.7 million, amortization of developed technology of $8.9 million, depreciation and amortization of $2.7 million, provisions for excess and obsolete inventory of $1.5 million, lease amortization of $0.4 million, and a variety of smaller items.

The cash used in assets and liabilities, net was primarily attributable to a $5.4 million reduction of accrued compensation and related benefits from bonus payments made in the first quarter of 2021, a reduction of deferred revenue of $2.3 million, a reduction of other liabilities of $8.0 million, an increase in prepaid expenses and other assets of $2.7 million, and an increase of inventories, net of $7.5 million.

These uses of funds were partially offset by a reduction of accounts receivable, net, of $11.4 million, and an increase in accounts payable of $1.4 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was $11.7 million and consisted of net loss of $35.0 million, less non-cash items of $25.4 million, partially offset by a net increase in assets and liabilities of $2.1 million.

Non-cash items primarily included amortization of developed technology of $8.9 million, stock-based compensation expense of $10.4 million, depreciation and amortization of $3.0 million, lease amortization of $1.9 million, and a variety of smaller items.

The cash used by assets and liabilities was primarily due to an increase in inventories of $6.8 million, an increase in prepaid expenses and other assets of $2.4 million, primarily comprised of payments to vendors involved with our facility expansion in Singapore, partially offset by a decrease in accounts receivable, net of $1.0 million, an increase in accounts payable of $5.0 million, and an increase in deferred revenue of $1.3 million.

Net Cash Provided by (Used in) Investing Activities

Our primary investing activities consist of purchases, sales, and maturities of our short-term investments and to a much lesser extent, capital expenditures for manufacturing, laboratory, computer equipment and software to support our infrastructure and workforce.

We expect to continue to incur costs for capital expenditures to expand capacity under the NIH Contract, improve manufacturing efficiencies and strengthen information technology and network security.

Net cash used in operating activities for the three months ended March 31, 2022 was $15.6 million and consisted of net loss of $76.3 million, less non-cash items of $57.6 million and cash provided by assets and liabilities, net, of $3.1 million.

Non-cash items included a loss on forward sale of Series B Preferred Stock of $37.8 million , an unrealized loss on the Bridge Loans of $10.7 million, st ock-based compensation expense of $4.0 million, amortization of developed technology of $3.0 million, depreciation and amortization of $1.0 million, provision for excess and obsolete inventory of $0.9 million, and a variety of smaller items.

The net decrease in assets and liabilities was primarily attributable to a $3.0 million increase of accrued compensation and related benefits due to an increase in severance and retention bonuses, a reduction of accounts receivable, net of $2.9 million, and an increase of accounts payable of $1.9 million.

These decreases were partially offset by an increase in inventories, net of $3.6 million, and a decrease of other liabilities of $1.3 million.

Net Cash Used in Investing Activities

Our primary investing activities consist of purchases, sales, and maturities of ou r short-term investments and capital expenditures for manufacturing, laboratory, computer equipment and software to support our infrastructure and workforce.

We expect to continue to incur costs for capital expenditures to improve manufacturing efficiencies and strengthen information technology and network security.

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

Net cash used in investing activities for the nine months ended September 30, 2021 was $10.8 million.

Net cash used in investing activities for the three months ended March 31, 2022 was $0.9 million.

Capital expenditures of $0.9 million were incurred primarily to expand our microfluidics IFC production capacity in Singapore related to the NIH Contract.

We received $2.0 million from the NIH under the terms of the agreement to fund the facility expansion.

Net cash provided by investing activities for the nine months ended September 30, 2020 was $40.8 million, which included $11.2 million of proceeds from the NIH contract under the terms of the agreement to fund the facility expansion, $31.8 million of proceeds from maturities of investments, and $5.0 million of proceeds from the sale of investments, partially offset by the $5.2 million expenditure associated with the acquisition of InstruNor AS and $2.0 million of capital expenditures.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities totaled $8.7 million during the nine months ended September 30, 2021.

The principal source of cash was $10 million of advances drawn against our new Term Loan Facility with Silicon Valley Bank.

Other sources include $0.7 million of ESPP proceeds and $0.2 million of proceeds from the exercise of stock options.

Partially offsetting these sources was $1.7 million of withholding tax payments related to the net share settlement of equity awards and the $0.5 million repurchase of 2014 Notes completed in February 2021.

During the nine months ended September 30, 2020, we generated $20.4 million of cash from financing activities, principally from the $20.2 million “at the market” equity offering.

Net cash provided by financing activities totaled $18.1 million during the three months ended March 31, 2022.

The principal source of cash was proceeds from the $25.0 million Bridge Loans, which occurred as part of the Private Placement Issuance.

This was partially offset by repayments of $6.8 million of advances under the Revolving Credit Facility.

Capital Resources

At September 30, 2021 and December 31, 2020, our working capital, excluding deferred revenues and restricted cash, was $39.0 million and $76.9 million, respectively, including cash and cash equivalents of $29.3 million and $68.5 million, respectively.

We had no investments as of September 30, 2021 and December 31, 2020.

At March 31, 2022 and December 31, 2021, our working capital, excluding deferred revenues, current and deferred grant income, current, and restricted cash, was $41.9 million and $38.0 million, respectively, including cash and cash equivalents of $30.0 million and $28.5 million, respectively.

We had no investments as of March 31, 2022 and December 31, 2021.

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.

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 us to repurchase all or a portion of their 2014 Notes on each of 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 as of March 31, 2022.

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.

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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.

In March 2020, we entered into an Open Market Sale Agreement (Sale Agreement) with Jefferies to sell shares of our common stock having aggregate sales proceeds of up to $50,000,000, from time to time, through an at-the-market (ATM) 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, pursuant to the Sale Agreement.

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.

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).

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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 September 30, 2021, the balance outstanding on the Term Loan Facility was $10.0 million.

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 4.0% 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.

in the event the principal amount of our convertible debt exceeds $0.6 million as o f 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 March 31, 2022, the balance outstanding on the Term Loan Facility was $10.1 million .

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.

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

As of September 30, 2021, total availability under the Revolving Credit Facility was $10.3 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 Credit Agreement.

As of March 31, 2022, tota l availability under the Revolving Credit Facility was $8.4 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 Facility as of March 31, 2022.

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

We believe our existing cash, cash equivalents, and investments, along with funding available from the Revolving Credit Facility, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

However, because we have experienced lower than expected cash generated from operating activities, we anticipate continued near-term supply chain constraints and ongoing uncertainty regarding COVID-19-related lab closures and resolution of tax permit issues in China, and we may also experience greater than expected cost of revenue, we may need to raise additional capital to fund our operations.

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.

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.

Contractual Obligations and Commitments

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

In the second quarter of 2021, we entered into an agreement to extend our current lease in Singapore from June 2022 to June 2027.

Please see Note 9 to our condensed consolidated financial statements for a discussion of our lease obligations.

Other than as disclosed above, there have been no material changes during the nine months ended September 30, 2021 to our contractual obligations disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2020.

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.

On January 23, 2022, we entered into $25 million of Bridge Loans Agreements with Casdin and Viking.

On April 4, 2022, we completed the Private Placement Issuance, receiving $225 million of funding in exchange for the issuance of 225,000 shares of Series B Preferred Stock.

The Bridge Loans also automatically converted into 30,559 shares of Series B Preferred Stock on April 4, 2022.

The rights, preferences and privileges of the Series B Preferred Stock are set forth in the Series B-1 Certificate of Designations and Series B-2 Certificate of Designations.

The Series B Preferred Stock ranks senior to our common stock with respect to dividend rights, redemption rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

The holders of Series B Preferred Stock will be entitled to participate in all dividends declared on our common stock on an as-converted basis, on the terms and subject to the conditions set forth in the Series B Certificates of Designations.

The following is a brief summary of the conversion rights and other key provisions of the Series B Preferred Stock:

Holder Voluntary Conversion Rights

The Series B Preferred Stock is convertible at the option of the holders thereof at any time into a number of shares of Common Stock equal to the Conversion Rate (as defined in the Series B Certificates of Designations), which is initially 294.1176 shares of common stock per share of Series B Preferred Stock, in each case subject to certain adjustments and limitations on conversion.

Issuer Call Provision

At any time after the fifth anniversary of the closing of the Private Placement Issuance, if the last reported sale price of the Common Stock is greater than 250% of the Conversion Price (as defined in the Series B Certificates of Designations) as of such time for at least 20 consecutive trading days immediately preceding the date of the notice of mandatory conversion, we may elect to convert all of the outstanding shares of Series B Preferred Stock into shares of common stock.

Issuer Redemption Provision

After the seventh anniversary of the closing of the Private Placement Issuance, subject to certain conditions, we may, at our option, redeem all of the outstanding shares of Series B Preferred Stock at a redemption price per share of Series B Preferred Stock, payable in cash, equal to the Liquidation Preference.

Change of Control Provisions

If we undergo certain change of control transactions, each holder of outstanding shares of Series B Preferred Stock will have the option, subject to the holder’s right to convert all or a portion of the shares of Series B Preferred Stock held by such holder into Common Stock prior to such redemption, to require us to purchase all or a portion of such holder’s outstanding shares of Series B Preferred Stock that have not been converted into Common Stock at a purchase price per share of Series B Preferred Stock, payable in cash, equal to the greater of (A) the Liquidation Preference of such share of Series B Preferred Stock, and (B) the amount of cash and/or other assets that such holder would have been entitled to receive if such holder had converted such share of Series B Preferred Stock into Common Stock immediately prior to the change of control transaction (Change of Control Put).

In the event of a change of control in which we are anticipated to merge with another person and will not be the surviving corporation or if the Common Stock will no longer be listed on a U.S.

national securities exchange, we will have a right to redeem, subject to the holder’s right to convert into Common Stock prior to such redemption, all of such holder’s shares of Series B Preferred Stock, or if a holder exercises the Change of Control Put in part, the remainder of such holder’s shares of

Series B Preferred Stock, at a redemption price per share payable in cash, equal to the greater of (A) the Liquidation Preference of such share of Series B Preferred Stock, and (B) the amount of cash and/or other assets that the holder would have received if such holder had converted such share of Series B Preferred Stock into Common Stock immediately prior to the change of control transaction.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the Series B Preferred Stock has a liquidation preference equal to the greater of (i) the Liquidation Preference (as defined in the Certificate of Designations, currently $3.40) and (ii) the amount per share of Series B Preferred Stock that such holder would have received had all holders of Series B Preferred Stock, immediately prior to such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, converted all shares of Series B Preferred Stock into Common Stock pursuant to the terms of the Series B Certificates of Designations (without regard to any limitations on conversion contained therein).

We believe our existing cash, cash equivalents, and investments, along with funding available from Private Placement Issuance and the Revolving Credit Facility, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis