What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-15 compared with 2022-03-11 · 343 added, 197 removed, 606 unchanged (47% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of 908 Devices Inc.

and its subsidiary (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity, and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

22 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 1,750 and $ 25 , respectively

Accounts receivable, net of allowance for doubtful accounts of $ 25 and $ 1,750 at December 31, 2022 and December 31, 2021

Prepaid expenses and other current assets

2 unchanged sentences

Property and equipment, net

Intangible assets, net

Other long-term assets

5 unchanged sentences

Operating lease liabilities

Current portion of long-term debt

Total current liabilities

Long-term debt, net of discount and current portion

Long-term debt

Operating lease liabilities, net of current portion

Deferred revenue, net of current portion

Deferred income taxes

Other long-term liabilities

8 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

3 unchanged sentences

908 DEVICES INC.

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

13 unchanged sentences

Other income (expense):

Interest income

Interest expense

Other income (expense), net

Total other expense, net

Net loss and comprehensive loss

Accretion of redeemable convertible preferred stock to redemption value

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders

Other income, net

Total other income (expense), net

Net loss per share

Basic and diluted

Weighted average common shares outstanding

Basic and diluted

The accompanying notes are an integral part of these consolidated financial statements.

908 DEVICES INC.

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Comprehensive Loss

(in thousands)

Year Ended December 31,

Other comprehensive income (loss)

Foreign currency translation adjustment

Total other comprehensive (income) loss

Comprehensive loss

908 DEVICES INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Redeemable Convertible

Preferred Stock

Comprehensive

Stockholders'

Equity (Deficit)

Balances at December 31, 2020

Accretion of redeemable convertible preferred stock to redemption value

Conversion of preferred stock to common stock upon initial public offering

( 23,905,267 )

Issuance of common stock upon initial public offering, net of issuance costs of $ 2,472

Conversion of preferred stock warrants into common stock warrants upon initial public offering

Issuance of common stock upon exercise of common stock warrants

Issuance of common stock upon exercise of stock options

Issuance of common stock, net of issuance costs of $ 376

Stock-based compensation expense

Vesting of restricted stock units

Balances at December 31, 2021

Issuance of common stock upon exercise of stock options

Issuance of common stock, net of issuance costs of $ 376

Stock-based compensation expense

Issuance of common stock upon ESPP purchase

Vesting of restricted stock units

Foreign currency translation adjustments

Balances at December 31, 2022

8 unchanged sentences

Stock-based compensation expense

Change in fair value of preferred stock warrant liability

Change in fair value of commercial services agreement liability – related party

Noncash interest expense and loss on extinguishment of debt

1 unchanged sentence

Provision for doubtful accounts

Change in fair value of contingent consideration

Deferred income tax

Changes in operating assets and liabilities:

7 unchanged sentences

Other long-term liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Acquisitions, net of cash acquired

Net cash used in investing activities

1 unchanged sentence

Proceeds from public offerings, net of underwriting discounts and commissions

Payments for withholding taxes on vested awards

Proceeds from issuance of common stock

Payments of public offering costs

Proceeds from issuance of common stock upon option exercise

Proceeds from borrowings on revolving line of credit

Repayment of borrowings on revolving line of credit

Repayment on revolving line of credit

Repayment of notes payable

Payments of debt issuance costs

Proceeds from Paycheck Protection Program loan

Repayment of Paycheck Protection Program loan

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Effect of foreign exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Public offering costs included in accounts payable and accrued expenses

Property and equipment included in account payable

Transfers of inventory to property and equipment

Accretion of redeemable convertible preferred stock to redemption value

Conversion of convertible preferred stock to common stock upon initial public offering

Reclassification of warrant liability to equity upon initial public offering

Reconciliation of cash, cash equivalents and restricted cash:

1 unchanged sentence

Restricted cash included in prepaid expenses and other current assets

Restricted cash included in other long-term assets

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

14 unchanged sentences

In March 2020, the World Health Organization declared the global novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic.

The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its future financial condition and operations.

The impact of the COVID-19 coronavirus outbreak on the Company’s financial performance will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions.

These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted.

If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be materially adversely affected.

Future impacts to the Company’s business as a result of COVID-19 could include disruptions to the Company’s manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts;

labor shortages;

decreased productivity and unavailability of materials or components;

limitations on its employees’ and customers’ ability to travel, and delays in shipments to and from affected countries and within the United States.

While the Company maintains an inventory of finished products and raw materials used in its products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture its products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture its products.

An additional potential impact to the Company’s business is the negative impact to the Company’s customers’ and potential customer’s inability to make investments and timely payments for purchased products as a result of allocating resources to address COVID-19 issues.

The impact of this pandemic has been and may continue to be extensive in many aspects of society, which has resulted in and may continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

While the Company maintains an inventory of finished products and raw materials used in its products, as the situation around COVID-19, including any variants thereof, evolves further, the pandemic could lead to shortages in the raw materials necessary to manufacture its products.

An additional potential impact to the Company’s business is the negative impact to the Company’s customers’ and potential customer’s ability to make investments and timely payments for purchased products as a result of allocating resources to address COVID-19 issues or in response to the rising inflation.

Underwritten Public Offerings

On December 22, 2020, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold 7,475,000 shares of common stock, inclusive of 975,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares.

1 unchanged sentence

Upon the closing of the IPO, all of the shares of the Company’s outstanding redeemable convertible preferred stock then outstanding automatically converted into 14,691,929 shares of common stock.

On November 15, 2021, the Company completed an underwritten public offering, pursuant to which it issued and sold 3,150,000 shares of common stock at a public offering price of $ 32.00 per share.

On November 15, 2021, the Company completed an underwritten public offering, pursuant to which it issued and sold 3,150,000 shares of common stock at a public offering price of $ 32.00 per share ( “ November 2021 Offering”).

The Company received net proceeds of $ 94.4 million after deducting underwriting discounts and commissions and other offering costs.

The Company acquired TRACE Analytics GmbH, located in Braunschweig, Germany (“Trace”) in August 2022.

In February 2023, Trace formally changed its name to 908 Devices GmbH.

Trace is a leading provider of online analysis systems for biotech applications in research, development, and production.

Trace’s products are used for monitoring and

control of complex processes in industrial pharmaceutical productions under continuous measurement conditions.

With the acquisition of Trace, the Company has acquired enabling sampling technology that it expects to integrate within future product offerings.

See Note 17, Acquisition , for further information.

Basis of Presentation

1 unchanged sentence

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, 908 Devices Securities Corporation.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 908 Devices Securities Corporation, 908 Devices (Shanghai) Technology Co., Ltd.

All intercompany balances and transactions have been eliminated.

12 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the valuation of inventory and the valuation of common stock and stock-based awards.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition and accounts receivable, the valuation of inventory, fair value of assets acquired and liabilities assumed in acquisitions and the valuation of stock-based awards.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of March 11, 2022, the date of issuance of these consolidated financial statements.

Due to the rising inflation and higher interest rates, there has been uncertainty and disruption in the global economy and financial markets.

The Company is not aware of any specific event or circumstance that would require further updates to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of these consolidated financial statements.

These estimates may change, as new events occur and additional information is obtained.

4 unchanged sentences

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

The Company maintains its cash and cash equivalents with two financial

institutions that management believes to be of high credit quality.

The Company has not experienced any other-than-temporary losses with respect to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company’s cash and cash equivalents and restricted cash are maintained in bank deposit accounts and money market funds that regularly exceed federally insured limits.

The Company is exposed to credit risk on its cash, cash equivalents and restricted cash in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (“FDIC”).

Please refer to Note 19 for further discussion regarding the potential impacts of the closure of the Company’s two financial institutions at which the Company currently hold deposits.

Significant customers are those that accounted for 10 % or more of the Company’s total revenue or accounts receivable.

1 unchanged sentence

As of December 31, 2022, two customers accounted for 20 % and 12 % of gross accounts receivable.

As of December 31, 2020, three customers accounted for 27 %, 11 % and 11 %, respectively, of gross accounts receivable.

The credit and economic conditions within countries in Europe, Middle East and Africa that the Company does business with have been weak in recent years.

These conditions have continued to deteriorate as a result of COVID-19 and may continue to increase the average length of time that it takes to collect on the accounts receivables outstanding in these countries.

As of December 31, 2021, the gross accounts receivable balance from these countries amounted to $ 3.0 million, of which $ 1.7 million is more than 90 days past due and for which the Company has provided for an allowance for doubtful accounts of $ 1.7 million.

As of December 31, 2021, two customers accounted for 63 % and 11 %, respectively, of gross accounts receivable.

Certain of the components included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers.

Although the Company seeks to reduce dependence on those limited sources of suppliers and manufacturers, the partial or complete loss of certain of these sources, or the requirement to establish a new supplier for the components, could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.

Deferred Financing Costs

Deferred financing costs related to a recognized debt liability are recorded as a reduction of the carrying amount of the debt liability and amortized to interest expense using the effective interest method over the repayment term of the debt.

Cash Equivalents

6 unchanged sentences

During the year ended December 31, 2021, the Company deemed certain receivables from a customer in the Middle East uncollectible due to credit and economic conditions, including the impact of COVID-19, and recorded a provision for bad debts of $ 1.7 million.

As of December 31, 2021 and 2020, the Company’s allowance for doubtful accounts were $ 1.8 million and less than $ 0.1 million, respectively.

During the year ended December 31, 2022, the Company concluded that the receivable was uncollectable and offset the invoices against the provision for bad debts.

As of December 31, 2022 and 2021, the Company’s allowance for doubtful accounts were less than $ 0.1 million and $ 1.8 million, respectively.

Inventory is valued at the lower of cost or net realizable value.

5 unchanged sentences

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year.

The Company has determined that certain sales incentive programs meet the requirements to be capitalized.

The Company has determined that certain sales incentive

programs meet the requirements to be capitalized.

Total capitalized costs to obtain a contract were not significant during the periods presented and are included in other current assets and other long-term assets in the Company’s consolidated balance sheets.

24 unchanged sentences

Expenditures for repairs and maintenance are charged to expense as incurred.

When a device is used as demonstration equipment, such device is reclassified from inventory to demonstration equipment under property and equipment and begins to depreciate over its estimated useful life.

The Company does not refurbish such device or reverse transfer the device to inventory.

Impairment of Long-Lived Assets

2 unchanged sentences

Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.

If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts

of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value.

impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value.

An impairment loss can be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount.

14 unchanged sentences

● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents are carried at fair value, determined according to the fair value hierarchy described above (see Note 3).

The carrying values of the Company’s accounts receivable, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The Company's financial instruments consist primarily of accounts receivable, accounts payable, accrued expenses and contingent consideration.

The Company’s cash equivalents are carried at fair value, determined according to the fair value hierarchy described above (see Note 3, Fair value measurements ).

The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The carrying value of the Company’s long-term debt approximates its fair value (a level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

The Company’s contingent consideration is measured at its fair value at each balance sheet date using unobservable inputs in the valuation methodology (a level 3 measurement).

Goodwill and Intangible Assets

Goodwill is not amortized, but is evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable.

In assessing the recoverability of goodwill, the Company must make assumptions regarding the estimated future cash flows, and other factors, to

determine the fair value of these assets.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges against these assets in the reporting period in which the impairment is determined.

The Company tests goodwill for impairment at the reporting unit level, which is the operating segment, in the fourth quarter of every year.

The Company has the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the quantitative assessment.

If as a result of the quantitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required.

The quantitative goodwill impairment test requires management to estimate and compare the fair value of the reporting unit with its carrying value.

If the fair value of the reporting unit exceeds the carrying value of the net assets, goodwill is not impaired.

If the fair value of the reporting unit is less than the carrying value, the difference is recorded as an impairment loss up to the amount of goodwill.

Intangible assets with a finite useful life are recorded at cost, net of accumulated amortization and are amortized on a straight-line basis over their estimated useful lives as follows:

Customer Relationships

Developed Technology

The Company reviews other long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or an asset group may not be recoverable.

In evaluating long-lived assets for recoverability, the Company estimates the future cash flows that are expected from the use of each asset group.

Impairment losses are measured and recorded for the excess of an asset's carrying value over its fair value.

To determine the fair value of long-lived assets, the Company utilizes the valuation technique or techniques deemed most appropriate based on the nature of the asset or asset group, which may include the use of quoted market prices, prices for similar assets or other valuation techniques such as discounted future cash flows or earnings.

Foreign currency

The Company translates assets and liabilities of its foreign subsidiaries at rates in effect at the end of the reporting period.

Revenues and expenses are translated at average rates in effect during the reporting period.

Translation adjustments are included in accumulated other comprehensive loss.

Product Warranties

4 unchanged sentences

The Company evaluates its warranty accrual at the end of each reporting period and makes adjustments as necessary.

Classification and Accretion of Redeemable Convertible Preferred Stock

In periods prior to the IPO, the Company classified redeemable convertible preferred stock outside of stockholders’ equity (deficit) because the shares contained certain redemption features that were not solely within the control of the Company.

Costs incurred in connection with the issuance of each series of redeemable convertible preferred stock were recorded as a reduction of gross proceeds from issuance.

The Company recorded periodic accretion to the values of its outstanding redeemable convertible preferred stock such that the carrying value of the redeemable convertible preferred stock would equal to the redemption value at the earliest date of redemption.

Adjustments to the carrying values of the redeemable convertible preferred stock at each reporting date resulted in an increase or decrease to net income (loss) attributable to common stockholders.

Preferred Stock Warrant Liability

The Company classified warrants for the purchase of shares of its redeemable convertible preferred stock (see Notes 3 and 9) as a liability on its consolidated balance sheets as these warrants were freestanding financial instruments that could have required the Company to transfer assets upon exercise.

The warrant liability was initially recorded at fair value upon the date of issuance of each warrant and was subsequently remeasured to fair value at each reporting date.

Changes in the fair value of the warrant liability were recognized as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

On December 22, 2020, immediately prior to the closing of the IPO, these warrants were converted into warrants to purchase common stock and the fair value of the warrant liability at that time was reclassified to common stock.

As a result, subsequent to the closing of the IPO, the Company no longer remeasures the fair value of the warrant liabilities at each reporting date.

Segment Information

2 unchanged sentences

Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the Company’s chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance.

The Company has determined that its chief operating decision maker is its Chief Executive Officer.

All of the Company’s long-lived assets are held in the United States.

The Company has determined that its chief

operating decision maker is its Chief Executive Officer.

See Note 18, Segment Reporting and Geographic Data , for disclosure of tangible assets by Geographic locations.

Revenue Recognition

7 unchanged sentences

The Company derives product and service revenue primarily from the sale of handheld and desktop products and related consumables and services.

Revenue is recognized when control of the promised products, consumables or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to

be entitled to in exchange for those products, consumables or services (the transaction price).

Revenue is recognized when control of the promised products, consumables or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products, consumables or services (the transaction price).

A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of accounting under ASC 606.

27 unchanged sentences

Such deferred revenue amounts related to product and service revenue are expected to be recognized in the future as follows (in thousands):

Year Ended December 31,

Deferred revenue expected to be recognized in:

2 unchanged sentences

Three years and beyond

As of December 31, 2021, the Company’s wholly- or partially-unsatisfied performance obligations totaled $ 7.6 million related to product and service agreements entered prior to year end, which the Company expects to recognize through 2024.

License and Contract Revenue

20 unchanged sentences

The Company includes the unconstrained amount of consideration in the transaction price.

The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative

revenue recognized will not occur.

The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur.

At the end of each subsequent reporting period, as required under ASC 606, the Company re-evaluates the estimated consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

2 unchanged sentences

The Company includes contract assets within prepaid and other current assets in the accompanying consolidated balance sheet.

The Company had contract assets related to contract or license revenue totaling $ 0.2 million and less than $ 0.1 million, respectively, for the years ended December 31, 2021 and 2020.

The Company had contract assets related to contract or license revenue totaling $ 0.4 million and $ 0.2 million, respectively, for the years ended December 31, 2022 and 2021.

Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer.

As of December 31, 2021, the Company had contract liabilities totaling $ 2.6 million related to contract and license revenue, which the Company expects to recognize during the years ended December 31, 2022 and 2023.

As of December 31, 2020, the Company had contract liabilities totaling $ 2.8 million related to contract and license revenue, of which the Company recognized $ 0.2 million during the year ended December 31, 2021.

As of December 31, 2022, the Company had contract liabilities totaling $ 2.5 million related to contract and license revenue, which the Company expects to recognize in 2024 and beyond.

As of December 31, 2021, the Company had contract liabilities totaling $ 2.6 million related to contract and license revenue, of which the Company recognized $ 0.1 million in 2022.

The Company recognizes deferred revenue by first allocating from the beginning deferred revenue balance to the extent that the beginning deferred revenue balance exceeds the revenue to be recognized.

Billings during the period are added to the deferred revenue balance to be recognized in future periods.

As of December 31, 2021, the Company’s wholly- or partially-unsatisfied performance obligations totaled $ 0.7 million related to contract and license agreements entered into prior to year end, which the Company expects to recognize during the years ended December 31, 2022 and 2023.

As of December 31, 2022, the Company’s wholly- or partially-unsatisfied performance obligations totaled $ 0.3 million related to contract and license agreements entered prior to period end, which the Company expects to recognize in 2023.

Distribution Channels

21 unchanged sentences

Year Ended December 31,

United States

Europe, Middle East and Africa

Americas other

International sales are comprised of product and service revenue, with all license and contract revenue being attributable to North America.

19 unchanged sentences

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders.

For the years ended December 31, 2021 and 2020, there was no difference between net loss and comprehensive loss.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that are excluded from net loss as these amounts are recorded directly as an adjustment to shareholders' equity, net of tax.

The Company's other comprehensive income was composed of foreign currency translation adjustments.

Net Income (Loss) per Share

Prior to the closing of the IPO, the Company followed the two-class method when computing net income (loss) per share, as the Company had issued shares that meet the definition of participating securities.

The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Subsequent to the closing of its IPO, the Company only has one class of shares outstanding and basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period.

Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period, including potential

dilutive common shares assuming the dilutive effect of outstanding stock awards.

The Company has one class of shares outstanding and basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period.

Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number

of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of any potential dilutive securities outstanding for the fiscal year.

Potential dilutive securities include warrants, stock options, restricted stock units, and shares to be purchased under the Company’s employee stock purchase plan.

For periods in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company reported a net loss attributable to common stockholders for each of the years ended December 31, 2021 and 2020.

Business combination

Under the acquisition method of accounting, the Company generally recognizes the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition.

The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management.

The excess consideration over the aggregate value of tangible and intangible assets, net of liabilities assumed, is recorded as goodwill.

These valuations require significant estimates and assumptions, especially with respect to intangible assets.

The Company estimates the fair value of the contingent consideration earnouts using the Monte Carlo Simulation or probability weighted scenario depending on the nature of the contingent consideration and updates the fair value of the contingent consideration at each reporting period based on the estimated probability of achieving the earnout targets and applying a discount rate that captures the risk associated with the expected contingent payments.

To the extent that these estimates change in the future regarding the likelihood of achieving these targets, the Company may need to record material adjustments to its accrued contingent consideration.

Such changes in the fair value of contingent consideration are recorded as contingent consideration expense or income in the consolidated statements of operations.

The Company uses the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology.

This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value.

The Company bases its assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, probabilities of customer renewals, etc.

The Company bases the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors.

The Company believes the estimated purchased customer relationships, developed technology, software and trade name amounts determined represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

7 unchanged sentences

The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, which are considered appropriate as well as the related net interest and penalties.

The provision for

income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, which are considered appropriate as well as the related net interest and penalties.

In August 2022, the U.S.

Inflation Reduction Act (the Act) was enacted into law.

The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives and a corporate alternative minimum tax that generally applies to U.S.

corporations with adjusted financial statement income in excess of $1.0 billion.

We do not expect the Act to have a material impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which eliminates, modifies, and adds disclosure requirements on fair value measurements.

The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment.

The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its FV, not to exceed the carrying amount of goodwill.

The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company early adopted the guidance on November 1, 2022 and did not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (ASC 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various areas related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

For public entities the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years.

For non-public entities, the guidance is effective for annual reporting periods beginning after December 15, 2021 and for interim periods within years beginning after December 15, 2022, with early adoption permitted.

The Company adopted the guidance as on January 1, 2022 and the adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements

9 unchanged sentences

2019-10, which deferred the effective date for non-public entities to annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

application is allowed.

The Company is currently assessing the date of the adoption and the impact of the adoption of this guidance on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (ASC 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various areas related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

For public entities the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years.

The Company is currently evaluating the impact of this standard on its consolidated financial statements.

Early application is allowed.

The Company is in process of adopting new accounting guidance regarding the accounting for credit losses as of January 1, 2023.

This new accounting guidance requires the Company to move from an incurred loss model to a current expected credit loss (“CECL”) model.

The adoption of this standard is not expected to have a material impact on the Company’s balance sheets, results of operations or cash flows.

Fair Value Measurements

1 unchanged sentence

Fair Value Measurements at December 31, 2022 Using:

Cash equivalents:

Money market funds

Cash equivalents - Money market funds

Other current liabilities:

Acquisition-related contingent consideration

Acquisition-related contingent consideration - pension liability

Other long-term liabilities:

Acquisition-related contingent consideration

Total liabilities measured at fair value

Fair Value Measurements at December 31, 2021 Using:

1 unchanged sentence

Money market funds

Money Market Funds

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

There were no transfers into or out of Level 3 during the years ended December 31, 2021 and 2020.

There were no transfers into or out of Level 3 during the year ended December 31, 2022 or 2021.

Contingent Consideration

Acquisition-related contingent consideration is measured and reported at fair value using the Monte Carlo simulation method or probability weighted scenario based on the unobservable inputs, which are significant to the fair value and classified within Level 3 of the fair value hierarchy.

The amount is contingent based on the acquired business’ performance for the milestones ranging from the date of acquisition to June 30, 2024.

The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain technological integration targets, forecasted results or targets, volatility, and discount rates.

The total maximum payments due relate to the technological integration and revenue targets is approximately $ 2 million, of which the value as of December 31, 2022 is approximately $ 0.9 million.

The payment contingent on the seller completing the assignment of the pension liability is $ 0.9 million.

The weighted average probability of achieving the technology integration target is approximately 95 % .

The average estimated revenue volatility and discount rate are approximately 40.9 % and 23.0 % , respectively.

Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively.

The following table provides a roll-forward of the fair value of the Company’s contingent consideration, for which fair value is determined using Level 3 inputs (in thousands):

Balances as of December 31, 2021

Acquisition date fair value of contingent consideration - earnout

Acquisition date fair value of contingent consideration - pension liability

Accretion - earnout

Balance as of December 31, 2022

Please refer to Note 17, Acquisition , for further detail.

Changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized in our consolidated statements of operations until the arrangement is settled.

Inventory consisted of the following (in thousands):

2 unchanged sentences

Finished goods

During the years ended December 31, 2022 and 2021, the Company made non-cash transfers of demonstration equipment from inventory to property and equipment of $ 0.9 million and $ 0.9 million, respectively.

Goodwill and Intangible Assets, net

As of December 31, 2022, the carrying amount of goodwill was $ 10.1 million.

The following is a rollforward of the Company’s goodwill balance (in thousands):

Year Ended December 31,

Balances at beginning of period

Goodwill acquired

Foreign currency impact

Balances at end of period

The Company performed its annual impairment evaluation using both a quantitative and qualitative approach at November 1, 2022, and concluded it was more likely than not that goodwill has not been impaired.

Based on the most recent quantitative analysis the fair values of the Company’s reporting unit was greater than their carrying amounts and, therefore, no impairment was required.

No further triggering events were identified subsequent to our annual impairment evaluation.

The Company has not recorded any cumulative impairments of goodwill.

Intangible Assets, net

Intangible assets, net consists of the following (in thousands):

December 31, 2022

Accumulated Amortization

Translation adjustments

Net Book Value

Customer Relationships

Developed Technology

Amortization expense for intangible assets was recorded in the following expense categories of its consolidated statements of operations (in thousands):

Product and service cost of revenue

Selling, general and administrative expenses

Estimated future amortization expense for the intangible assets as of December 31, 2022 are as following (in thousands):

Property and Equipment, Net

3 unchanged sentences

Furniture and fixtures

Construction in progress

Leasehold improvements

6 unchanged sentences

Accrued professional fees

Contingent consideration

Accrued other

9 unchanged sentences

Current portion of long-term debt

Long-term debt, net of current portion

Debt discount, net of accretion

1 unchanged sentence

Loan and Security Agreements

As of December 31, 2020, the Company had outstanding borrowings under a Loan and Security Agreement, as amended (the “2019 Loan”) with a financial institution (the “Lender”).

On March 11, 2021, the Company entered into an

Amended and Restated Loan and Security Agreement, (the “2021 Revolver”), with the Lender to replace the 2019 Loan.

2021 Revolver

On March 11, 2021, the Company entered into an Amended and Restated Loan and Security Agreement (the “2021 Revolver”) to replace a Loan and Security Agreement, as amended (the “2019 Loan”).

This agreement created a revolving line of credit totaling $ 25.0 million and eliminated the existing term loan.

2 unchanged sentences

The 2021 Revolver subjects the Company to various customary covenants, including requirements as to financial reporting and financial covenants (including an unrestricted minimum cash level of $ 10.0 million), and restrictions on the Company’s ability to dispose of its business or property, to change its line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on the Company’s property, to pay any dividends or make other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to enter into in-bound licensing agreements, to engage in transactions with affiliates, and to encumber the Company’s intellectual property.

Events of default under the 2021 Revolver include failure to make payments when due, insolvency events, failure to comply with covenants or material adverse events with respect to the Company.

Events of default under the 2021 Revolver include failure to make payments when due, insolvency events, failure to

comply with covenants or material adverse events with respect to the Company.

Upon the occurrence of an event of default and until such event of default is no longer continuing, the annual interest rate will be 5.0 % above the otherwise applicable rate.

As of December 31, 2021, the Company was in compliance with all financial covenants under the 2021 Revolver.

The total long-term debt under the 2021 Revolver of $ 15 million is due in 2024.

The terms of the 2021 Revolver required that the existing term loan outstanding under the 2019 Loan be repaid with an advance under the line of credit.

Accordingly, on March 11, 2021, the Company used $ 14.5 million of proceeds from the revolving line of credit to repay all amounts then due on the existing term loan.

The Company accounted for the transaction as a debt extinguishment and recorded a loss on extinguishment of $ 0.2 million, which was included in interest expense in the condensed consolidated statements of operations and comprehensive loss.

In accordance with the applicable accounting standards, a short-term debt obligation should be excluded from current liabilities if the entity has both the intent and ability to refinance the obligation on a long-term basis.

The intent and ability can be demonstrated by the issuance of a long-term obligation to refinance the short-term obligation on a long-term basis after the date of an entity’s balance sheet but before that balance sheet is issued.

Due to the initial drawdown of the 2021 Revolver to repay the amount outstanding under the 2019 Loan, the Company classified $ 14.5 million of debt outstanding as of December 31, 2020 as long-term debt, net of current portion.

Principal amounts totaling $ 0.5 million paid in the first quarter of 2021 prior to entering the 2021 Revolver were classified as current portion of long-term debt as of December 31, 2020.

Paycheck Protection Program Loan

On April 18, 2020, the Company issued a Promissory Note to Signature Bank, pursuant to which it received loan proceeds of $ 2.2 million (the “Loan”) provided under the Paycheck Protection Program established under the Coronavirus Aid, Relief, and Economic Security Act and guaranteed by the U.S.

Small Business Administration (the “Paycheck Protection Program”).

However, based on updated guidance related to this program, the Company repaid the Loan on May 4, 2020.

The Loan was unsecured, was scheduled to mature on April 18, 2022, had a fixed interest rate of 1.0% per annum and was subject to the standard terms and conditions applicable to loans administered under the Paycheck Protection Program.

In connection with its lease agreement and debt agreements, the Company had outstanding warrants to purchase Preferred Stock as of December 31, 2019.

The Company classified all of its Preferred Stock warrants as a liability on its consolidated balance sheets because these warrants were freestanding financial instruments that could have required the Company to transfer assets upon exercise.

Upon the closing of the IPO in December 2020, the Company’s outstanding warrants to purchase Preferred Stock automatically became warrants to purchase an aggregate of 154,634 shares of common stock.

The liability associated with each of these warrants was initially recorded at fair value upon the issuance

date of each warrant and, subsequent to the closing of the IPO on December 22, 2020, the Company no longer remeasures the fair value of the warrant liability at each reporting date.

In December 2020, holders of 61,931 warrants completed a cashless exercise of the warrants, resulting in the Company’s issuance of 55,994 shares of common stock.

The Company accounted for the transaction as a debt extinguishment and recorded a loss on extinguishment of $ 0.2 million, which was included in interest expense in the consolidated statements of operations and comprehensive loss.

On November 2, 2022, the Company satisfied in full all of its outstanding obligations and voluntarily terminated the 2021 Revolver.

The Company did not incur any early termination penalties in connection with the termination of the 2021 Revolver.

The amount outstanding under the 2021 Revolver was fully repaid in October 2022 and no amounts were outstanding upon termination of the 2021 Revolver.

2022 Loan Revolver

On November 2, 2022, the Company entered into a Loan and Security Agreement (the “2022 Revolver”), by and between, the Company, as borrower, and Silicon Valley Bank (“SVB”), as lender.

The 2022 Revolver provides for a revolving line of credit of up to $ 35.0 million.

The Company is permitted to make interest-only payments on the revolving line of credit through November 2, 2025, at which time all outstanding indebtedness shall be immediately due and payable.

The outstanding principal amount of any advance shall accrue interest at a floating rate per annum equal to the greater of (i) three and one-half percent ( 3.50 %) and (ii) the “prime rate” as published in The Wall Street Journal for the relevant period minus one-half percent ( 0.50 %).

The Company’s obligations under the 2022 Revolver are secured by substantially all of the Company’s assets, excluding its intellectual property, which is subject to a negative pledge.

The revolving line of credit under the 2022 Revolver terminates on November 2, 2025.

As of December 31, 2022, the outstanding principal balance under the 2022 Revolver is $ 15.0 million, which was repaid in full on January 4, 2023.

The interest rate applicable to borrowing under the 2022 Revolver was 7.0 % as of December 31, 2022.

The 2022 Revolver also contains certain financial covenants, including a requirement that the amount of unrestricted and unencumbered cash minus advances under the 2022 Revolver, is not less than the amount equal to the greater of (i) $ 10.0 million or (ii) nine (9) months of cash burn.

The 2022 Revolver contains customary representations and warranties, as well as certain non-financial covenants, including limitations on, among other things, the Company’s ability to change the principal nature of its business, dispose of the Company’s business or property, engage in any change of control transaction, merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, incur additional indebtedness or liens, pay dividends or make other distributions on capital stock, redeem the Company’s capital stock, engage in transactions with affiliates or otherwise encumber the Company’s intellectual property, maintain no more than $ 3.6 million in non-SVB accounts at any point in time, in each case, subject to customary exceptions.

As of March 14, 2023, the Company has no amounts outstanding under the 2022 Revolver.

The ability to access the 2022 Revolver will be dependent on the Company maintaining compliance with certain financial covenants, including maintaining the appropriate amount of deposits with SVB, and SVB being able to fulfill its obligations if the Company were to draw down under the 2022 Revolver.

Please refer to Note 19 for further discussion regarding the potential impacts of the closure of SVB.

Post-Retirement benefit Obligations

Defined Benefit Plan

The Company maintains foreign pension plan for a Trace employee in Germany, which grants periodic post-retirement payment for one employee.

In connection with recording the initial purchase accounting of Trace in August 2022, the Company assumed this pension liability of $ 0.9 million.

The Company also recorded an equal and offsetting indemnification asset in the initial purchase accounting resulting in no net impact to the overall purchase price allocation.

As of December 31, 2022, the Company and the employee are in the process of discharging or transferring this pension liability from Trace, at which point, the liability and related indemnification asset will be removed from the Company’s consolidated balance sheet.

Further disclosures of the measurement of the pension liabilities are not considered material.

See Note 3, Fair Value Measurements, and Note 17, Acquisition, for further information.

The Company did not contribute to the plan in the year ended December 31, 2022.

As of December 31, 2022 and 2021, the Company had outstanding warrants for the purchase of 92,703 shares of common stock at an exercise price of $ 9.17 per share, of which warrants for the purchase of 49,078 shares and 43,625 shares expire in 2027 and 2028, respectively.

5 unchanged sentences

Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

Reverse Stock Split

On December 11, 2020, the Company effected a one -for-1.6271 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s Preferred Stock.

Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the Preferred Stock conversion ratios.

Public Offerings

On December 22, 2020, the Company completed its IPO, pursuant to which it issued and sold 7,475,000 shares of common stock, inclusive of 975,000 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The aggregate net proceeds received by the Company from the IPO were $ 136.6 million, after deducting underwriting discounts and commissions and other offering costs.

Upon the closing of the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically converted into 14,691,929 shares of common stock.

Upon the closing of the IPO in December 2020, all 23,905,267 shares of the Company’s outstanding Preferred Stock automatically converted into 14,691,929 shares of common stock and, therefore, there was no outstanding Preferred Stock at December 31, 2020.

On November 15, 2021, the Company completed an underwritten public offering, pursuant to which it issued and sold 3,150,000 shares of common stock at a public offering price of $ 32.00 per share.

2 unchanged sentences

2012 Stock Option and Grant Plan

The Company’s 2012 Stock Option and Grant Plan (the “2012 Plan”) provided for the Company to sell or issue incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors and non-employee consultants of the Company.

and other stock-based awards to employees, directors, and non-employee consultants of the Company.

The 2012 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors.

11 unchanged sentences

On November 23, 2020, the Company’s board of directors adopted, and on December 11, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on December 17, 2020.

A total of 288,857 shares of common stock of the Company are reserved for issuance under the 2020 ESPP.

The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on each January 1 thereafter through January 1, 2030, by the least of (i) 307,295 shares of our common stock, (ii) 1 % of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2020 ESPP.

As of December 31, 2022, 558,836 shares remained available for issuance under the 2020 ESPP.

On November 1, 2021, the first 6-month offering period under the 2020 ESPP commenced, which period shall run through April 30, 2022, at which time the first issuances under the 2020 ESPP are expected to take place.

The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2022 and each January 1 thereafter through January 1, 2030, by the least of (i) 307,295 shares of our common stock, (ii) 1 % of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2020 ESPP.

During the year ended December 31, 2022 and 2021, the Company issued 56,486 shares and no shares, respectively, under the 2020 ESPP plan.

On January 1, 2023, the number of shares reserved and available for issuance under the 2020 ESPP automatically increased by 307,295 shares.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model.

The Company historically has been a private company and has limited company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

The fair value of stock option grants and stock-based compensation associated with the 2020 ESPP is estimated using the Black-Scholes option-pricing model.

For stock options valued, the Company estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies due to limited company-specific historical and implied volatility information.

For stock-based compensation associated with the 2020 ESPP, the Company estimated its expected stock volatility based on the volatility of its own traded stock price.

For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the

award for time periods approximately equal to the expected term of the award.

Treasury yield curve in effect at the time of grant of the award for time periods equal to the expected term of the award.

Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

5 unchanged sentences

Expected term (in years)

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of 2020 ESPP granted:

Year Ended December 31,

Risk-free interest rate

Expected volatility

Expected dividend yield

Expected term (in years)

The following table summarizes the Company’s option activity for the fiscal year ended December 31, 2022:

12 unchanged sentences

Unvested at end of period

The weighted average grant date fair value for RSUs granted for the years ended December 31, 2022 and 2021 was $ 15.21 and $ 36.43 , respectively.

The aggregate intrinsic value of the RSUs vested and released for the years ended December 31, 2022 and 2021 was $ 0.9 million and less than $ 0.1 million, respectively.

The remaining unrecognized compensation expense for outstanding restricted stock units as of December 31, 2022 was $ 13.8 million and the weighted-average period over which this cost will expected to be recognized is 3.1 years.

The total fair value of restricted stock units vested in fiscal year 2021 was less than $ 0.1 million as of December 31, 2021.

Stock-Based Compensation

4 unchanged sentences

Selling, general and administrative expenses

The Company has operating leases for real estate.

Lease expiration dates range between 2023 and 2028.

The Company has leases for office space and certain equipment.

All of the leases recorded on the consolidated balance sheets as ROU assets are operating leases.

The Company’s leases have remaining lease terms ranging from less than one year to approximately four years .

The Company’s leases have remaining lease terms ranging from less than one year to approximately seven years .

Some of the leases include options to extend the lease for up to two years and these options were not included for the purpose of determining the right-of-use assets and associated lease liabilities as the Company determined that the renewal of these leases is not reasonably certain.

5 unchanged sentences

The annualized base rent will increase by 2.5 % annually on the anniversary of the commencement date.

The Company is obligated to pay its portion of real estate taxes and costs related to the premise, including costs of operations, maintenance, repair, replacement and management of the new leased premises.

The Company is obligated to pay its portion of

real estate taxes and costs related to the premise, including costs of operations, maintenance, repair, replacement and management of the new leased premises.

The Company had a facility lease in California for approximately 1,500 square feet that expired in February 2021.

1 unchanged sentence

In October 2020, the Company entered into an extension agreement for the North Carolina lease to extend it for an additional two years until November 2022.

In October 2022, the Company entered into an extension agreement for the North Carolina lease to extend until June 2023.

In July 2022, the Company entered into a new operating lease agreement in Morrisville, North Carolina (the “New NC Lease”), to expand the Company’s research and development activities focused on its desktop offerings and enable the ability to standup an additional manufacturing site for the Company.

The New NC Lease is for approximately 13,300 rentable square feet and occupancy is expected in the first half of 2023.

The New NC Lease is for a term of 88 months with total lease costs of approximately $ 4.0 million, which will be commenced upon occupancy of the facility.

In October 2022, Trace entered into a new operating lease agreement in Braunschweig, Germany, as its existing lease was expiring and to increase the existing manufacturing site and set up European base of operations for the Company.

The lease in Braunschweig is for approximately 7,500 rentable square feet and commenced in January 2023.

The lease in Braunschweig is for a term of 60 months with total lease costs of approximately $ 0.4 million.

The components of lease expense under ASC 842 were as follows (in thousands):

15 unchanged sentences

imputed interest

Leases commencing in 2023

Total operating lease liabilities

Commitments and Contingencies

Operating Leases

The Company’s commitments under its leases are described in Note 13.

8 unchanged sentences

This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

Company contributions to the plan may be made at the

discretion of the board of directors.

The Company started matching contributions under the plan in 2021 and made or accrued contributions of $ 0.1 million for the year ended December 31, 2021.

Company contributions to the plan may be made at the discretion of the board of directors.

The Company made contributions of $ 0.5 million and $ 0.1 million for the year ended December 31, 2022 and 2021, respectively.

Contingent Consideration – Earnout and Pension Liability

The Company agreed to pay three milestone based earnouts under the Trace purchase agreement for the total potential payout of $ 2.0 million.

Milestones are based on target revenues, and technical integration of Trace systems and knowledge, and range from the closing date of August 3, 2022 to June 30, 2024.

In addition, the Company withheld $ 0.9 million of consideration.

See Note 17, Acquisition .

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with its executive officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services as directors or officers.

addition, the Company has entered into indemnification agreements with its executive officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services as directors or officers.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.

5 unchanged sentences

The Company expenses as incurred the costs related to such legal proceedings.

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):

Year Ended December 31,

Net loss and comprehensive loss

Accretion of redeemable convertible preferred stock to redemption value

Net loss attributable to common stockholders

Weighted average common shares outstanding basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

The Company’s basic and diluted net loss per share was $ 1.07 and $ 0.79 for the years ended December 31, 2022 and 2021 , respectively.

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

5 unchanged sentences

During the years ended December 31, 2022 and 2021, the Company did not record income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year, due to its uncertainty of realizing a benefit from those items.

The Company does not have any foreign operations and therefore, has not provided for any foreign taxes.

A reconciliation of the U.S.

14 unchanged sentences

Accrued expenses and other

Capitalization under Section 174(a)

Total deferred tax assets

1 unchanged sentence

Right-of-use asset

Intangible assets

Total deferred tax liabilities

Valuation allowance

Net deferred tax assets

As of December 31, 2021, the Company had U.S.

federal and state net operating loss carryforwards of $ 80.4 million and $ 52.3 million, respectively, which may be available to offset future taxable income and begin to expire in 2032 and 2025, respectively, of which $ 46.0 million of federal net operating losses do not expire.

Net deferred tax liabilities

As of December 31, 2022, the Company had gross federal and state operating loss carryforwards of $ 92.3 million and $ 64.0 million, respectively, which may be available to offset future taxable income and begin to expire in 2032 and 2025, respectively, of which $ 57.9 million of federal gross operating losses do not expire.

As of December 31, 2022, the Company also had U.S.

4 unchanged sentences

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit

carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

The Company conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception through March 1, 2022 and has determined that t wo historic ownership changes have occurred as defined by Section 382 .

Both ownership changes are not expected to have a material impact to the Company’s net operating loss carryforwards or research and development tax credit carryforwards as these net operating losses and tax credit carryforwards may be utilized, subject to annual limitation, assuming sufficient taxable income is generated before expiration.

The Company assessed that $ 17.5 million of costs related to specified research and development to be capitalized during the year ended December 31, 2022 under the IRC Section 174(a), which was amended by Tax Cuts and Job Act in 2018.

Based on the significant pre-tax loss incurred during 2022, the Company has recorded corresponding valuation allowance to offset $ 3.9 million deferred tax impact due to this assessment.

The Company has not conducted a study to document qualified activities for research and development tax credits generated.

3 unchanged sentences

Management has considered the Company’s history of cumulative net operating losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets.

Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2021 and 2020.

Management reevaluates the positive and negative evidence at each reporting period.

Accordingly, as of December 31 2022, a full valuation allowance has been established against the net deferred tax assets, except for $ 2.7 million deferred tax liabilities recorded under our foreign jurisdiction, and a full valuation allowance has been established against the net deferred tax assets as of December 31, 2021.

Management revaluates the positive and negative evidence at each reporting period.

Changes in the valuation allowance for deferred tax assets related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards and were as follows (in thousands):

10 unchanged sentences

however, carryforward attributes that were generated prior to 2019 may still be adjusted upon examination by federal, state, or local tax authorities if they either have been or will be used in a future period.

The Company is currently under examination by the Internal Revenue Service for the year ending December 31, 2018.

No material adjustments have been proposed to date.

The Company has completed the examination by the Internal Revenue Service for the year ending December 31, 2018 and no material adjustments have been proposed as the result of the audit.

The Company has not received notice of examination by any other jurisdictions for any other tax year open under statute.

Related Party Transactions

Commercial Services Agreement

In 2015, the Company entered into a commercial services agreement with one of its preferred stock investors under which the investor became eligible for payment of $ 1.5 million upon the achievement of certain sales and marketing milestones by December 31, 2016.

Payment of the milestones was only upon the occurrence of a deemed liquidation event prior to an IPO.

The Company accounted for the commercial services agreement liability as a financial instrument that may have required a transfer of assets because of the liquidation features.

The liability was remeasured to fair value at each reporting period based on the probability of the occurrence of a deemed liquidation event.

Upon the closing of the Company’s IPO in December 2020, the obligation was resolved, and the Company was no longer required to pay such milestone payments.

Accordingly, the Company recorded other income of $ 0.8 million during the year ended December 31, 2020 to reduce the fair value of the liability to zero .

On August 3, 2022, the Company entered into a share purchase and transfer agreement and completed its acquisition of 100 % of the registered share capital of Trace, for total purchase price consideration of $ 17.3 million, comprised of (i) a $ 14.4 million initial cash payment, (ii) up to $ 2.0 million contingent cash consideration upon achievement of certain milestones over a twenty four month period and (iii) $ 0.9 million contingent pension liability holdback to be released upon discharging or transferring of such liability from Trace.

Trace is a leading provider of online analysis systems for biotech applications in research, development, and production.

Trace’s products are used for monitoring and controlling of complex processes in industrial pharmaceutical productions under continuous measurement conditions.

The Company expects to integrate acquired sampling technology within future product offerings.

The Company has accounted for the acquisition of Trace as a purchase of a business under U.S.

Under the acquisition method of accounting, the assets acquired and liabilities assumed from Trace have been recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company.

The Company has preliminarily allocated the purchase price to the net tangible and intangible assets based on their estimated fair values as of August 3, 2022.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2022.

Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquired intangible assets, assumed pension liability, indemnification assets, goodwill

and income taxes among other items.

The completion of the valuation will occur no later than one year from the acquisition date.

The following table presents the preliminary allocation of the acquisition date purchase consideration for the transaction including the contingent consideration and the preliminary allocation of the purchase consideration (in thousands):

Consideration Transferred:

Net cash and working capital adjustment

Contingent consideration - pension liability

Contingent consideration - earnout

Total consideration transferred

Assets acquired and liabilities assumed:

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Property and equipment, net

Intangible assets

Customer Relationships

Developed Technology

Indemnification assets

Pension liability

Accounts payable, accrued expenses and other current liabilities

Deferred tax liability, net

Other liabilities

The excess of the purchase price over the fair value of the acquired businesses' net assets represents cost and revenue synergies specific to the companies, and has been allocated to goodwill, which is not tax deductible.

Intangible assets acquired have finite life and are amortized per our accounting policy.

See Note 2 for the amortization periods.

Revenue and net loss related to Trace’s operations was $ 0.8 million and $ 0.1 million, respectively, for the period following the acquisition date through December 31, 2022, and is included in the Company’s consolidated statements of operations.

The following unaudited pro forma information presents the consolidated results of operations of the Company and Trace for the year ended December 31, 2022 and 2021 as if the acquisition of Trace had been completed on January 1, 2021 and have been calculated after applying the Company’s accounting policies.

These pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments that reflect pro forma results of operations, such as increased amortization for the fair value of acquired intangible assets, transaction related costs that were incurred in 2022 related to the acquisition which are reflected in the pro forma results for 2021, and consequential adjustments relating to the tax effect of these adjustments in combining the Company and Trace businesses.

The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of the Company and Trace.

Accordingly, these unaudited pro forma results are

presented for informational purposes only and are not necessarily indicative of the results of operations that would have been achieved had the acquisition occurred as of January 1, 2021, nor are they intended to represent or be indicative of future results of operations (in thousands):

Revenue (unaudited)

Pre-tax loss (unaudited)

Segment Reporting and Geographic Data

The Company has determined that it operates in one segment (see Note 2).

See Note 2 for revenue by country.

Long-lived assets by geography are summarized as follows (in thousands):

Long-lived assets (1) by country:

United States

All other countries

Total long-lived assets

(1) Long-lived assets exclude goodwill, other intangible assets and other assets.

Subsequent Event

Grant of Restricted Stock Units and Stock Options under the 2020 Plan

On March 1, 2022, the Company granted 555,173 restricted stock units to employees under the 2020 Stock Plan.

On March 1, 2023, the Company granted 1,076,037 restricted stock units and performance based stock units to employees under the 2020 Stock Plan.

The restricted stock units vest over a four -year period.

4 unchanged sentences

The total fair value of these stock options at the grant date was $ 1.9 million using the Black-Scholes option pricing model, and the value is being amortized as stock compensation expense over the vesting term.

Closure of Financial Institutions

On March 10, 2023, SVB, one of our financial institutions, was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

Similarly, Signature Bank, one of our other financial institutions, was closed on March 12, 2023 by its New York charter authority.

At the time of closing, the Company had substantially all of its cash and cash equivalents at SVB and Signature Bank, and all of its restricted cash of $ 0.2 million supporting two outstanding letters of credit at SVB.

Based upon the announcement on March 12, 2023, from the U.S.

Department of the Treasury, the U.S.

Federal Reserve and the FDIC, the Company expects to have access to all of its deposits at both SVB and Signature Bank.

As of March 14, 2023, the Company maintains the 2022 Revolver with SVB and had no balances outstanding as of the recent

closure of SVB.

The ability to access the 2022 Revolver will be dependent on the Company maintaining compliance with certain financial covenants, including maintaining the appropriate amount of deposits with SVB, maintaining the minimum cash requirement, and SVB being able to fulfill its obligations if the Company were to draw down under the 2022 Revolver.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data