What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-08 · 188 added, 146 removed, 477 unchanged (41% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(in thousands, except per share amounts)

32 unchanged sentences

Authorized 1,000,000 shares;

issued and outstanding 224,756 and 220,978 shares at June 30, 2022 and December 31, 2021, respectively

issued and outstanding 225,916 and 220,978 shares at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended June 30,

Six Months Ended June 30,

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share amounts)

10 unchanged sentences

Sales, general and administrative

Merger-related expenses

Change in fair value of contingent consideration

1 unchanged sentence

Operating loss

Loss from Continuation Advances from Illumina

Loss from Continuation Advances

Interest expense

Other income (expense), net

Other comprehensive loss:

Unrealized loss on investments

Comprehensive loss

Net loss per share:

Weighted average shares outstanding used in calculating net loss per share:

Loss before benefit from income taxes

Benefit from income taxes

Net (loss) income

Other comprehensive (loss) income:

Unrealized (loss) gain on investments

Comprehensive (loss) income

Net (loss) income per share:

Weighted average shares outstanding used in calculating net (loss) income per share:

See accompanying notes to the condensed consolidated financial statements.

5 unchanged sentences

(Loss) Income

For the three months ended June 30, 2022

Balance at March 31, 2022

For the three months ended September 30, 2022

Balance at June 30, 2022

( 1,370,985 )

2 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

( 1,447,956 )

For the three months ended June 30, 2021

Balance at March 31, 2021

For the three months ended September 30, 2021

Balance at June 30, 2021

( 1,165,305 )

Other comprehensive loss

Other comprehensive income

Issuance of common stock in conjunction with equity plans

Issuance of common stock in Private Placement, net of issuance costs

Issuance of common stock in acquisition of Omniome

Stock-based compensation expense

Balance at June 30, 2021

Balance at September 30, 2021

( 1,148,763 )

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Balance at December 31, 2021

3 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

( 1,447,956 )

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

Balance at December 31, 2020

2 unchanged sentences

Issuance of common stock in conjunction with equity plans

Issuance of common stock in Private Placement, net of issuance costs

Issuance of common stock in acquisition of Omniome

Stock-based compensation expense

Balance at June 30, 2021

Balance at September 30, 2021

( 1,148,763 )

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

6 unchanged sentences

Stock-based compensation

Amortization from investment premium

Amortization of premium and accretion of discount on marketable securities, net

Deferred income taxes

Change in the estimated fair value of contingent consideration

11 unchanged sentences

Purchase of property and equipment

Cash paid for purchase of Circulomics, net of cash acquired

Cash paid for purchase of Omniome, net of cash acquired

Purchase of investments

1 unchanged sentence

Maturities of investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

1 unchanged sentence

Proceeds from issuance of Convertible Senior Notes, net of issuance costs

Proceeds from issuance of common stock under equity offerings, net of issuance costs

Proceeds from issuance of common stock from equity plans

1 unchanged sentence

Net cash provided by financing activities

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

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

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

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Cash and cash equivalents at end of period

Restricted cash at end of period

Cash and cash equivalents and restricted cash at end of period

Cash, cash equivalents, and restricted cash at end of period

Supplemental disclosure of non-cash investing and financing activities

Issuance of common stock in acquisition of Omniome

See accompanying notes to the condensed consolidated financial statements.

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Certain information and footnote disclosures typically included in our audited financial statements have been condensed or omitted.

The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the December 31, 2021 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state our financial position, results of operations, comprehensive income (loss), and cash flows for the period, but are not necessarily indicative of the results to be expected for the entire year or any future periods.

The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the December 31, 2021 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state our financial position, results of operations, comprehensive (loss) income, and cash flows for the period, but are not necessarily indicative of the results to be expected for the entire year or any future periods.

All intercompany transactions and balances have been eliminated.

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On an ongoing basis, we evaluate our significant estimates including, but not limited to, the valuation of inventory, the determination of stand-alone selling prices for revenue recognition, the fair value of contingent consideration, the valuation of acquired intangible assets, the fair value of certain equity awards, the useful lives assigned to long-lived assets, the computation of provisions for income taxes, the borrowing rate used in calculating the operating lease right-of-use assets and operating lease liabilities, the probability associated with variable payments under partnership development agreements, and the valuations related to our convertible senior notes.

While the extent of the potential impact of the ongoing COVID-19 pandemic on our business is highly uncertain, we considered information available related to assumptions and estimates used to determine the results reported and asset valuations as of June 30, 2022.

While the extent of the potential impact of the current macroeconomic conditions and ongoing COVID-19 pandemic on our business is highly uncertain, we considered information available related to assumptions and estimates used to determine the results reported and asset valuations as of September 30, 2022.

Actual results could differ materially from these estimates.

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We evaluate our available-for-sale investments in unrealized loss positions and assess whether the unrealized loss is credit-related.

Unrealized gains and losses that are not credit-related are recognized in accumulated other comprehensive (loss) income in stockholders’ equity.

Realized gains and losses, expected credit losses, as well as interest income, on available-for-sale securities are also reported in other income, net.

Unrealized gains and losses that are not credit-related are recognized in accumulated other

comprehensive (loss) income in stockholders’ equity.

Realized gains and losses, expected credit losses, as well as interest income, on available-for-sale securities are also reported in other income (expense), net.

The cost used in the determination of gains and losses of securities sold is based on the specific identification method.

The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity.

Premium and discount amortization is recorded in other income, net.

Premium and discount amortization is recorded in other income (expense), net.

Our investment portfolio at any point in time contains investments in cash deposits, money market funds, commercial paper, corporate debt securities and U.S.

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Concentration and Other Risks

For the three months ended June 30, 2022, one customer accounted for approximately 11 % of total revenue during the period.

For the six months ended June 30, 2022, no customers exceeded 10%.

For the three and six months ended June 30, 2021, one customer accounted for approximately 17 % and 14 % of total revenue during the period.

For the three and nine months ended September 30, 2022, one customer accounted for approximately 13 % and 11 % of total revenue during the period.

For the three and nine months ended September 30, 2021, one customer accounted for approximately 17 % and 15 % of total revenue during the period.

No other customers exceeded 10% during those periods.

As of June 30, 2022, 57 % of our accounts receivable were from domestic customers, compared to 53 % as of December 31, 2021.

As of June 30, 2022, one customer represented 11 % of our accounts receivable, while no customer represented 10% or greater of our net accounts receivable as of December 31, 2021.

As of September 30, 2022, 54 % of our accounts receivable were from domestic customers, compared to 53 % as of December 31, 2021.

As of September 30, 2022, one customer represented 10 % of our accounts receivable, while no customer represented 10% or greater of our net accounts receivable as of December 31, 2021.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

There are no accounting standards updates (“ASUs”) that have been recently adopted.

Significant Accounting Policies

There have been no changes to our significant accounting policies as disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, however, as a result of certain changes to the standard contractual terms and conditions with customers implemented during the quarter ended March 31, 2022, we concluded that a change in the application of our accounting policy, in accordance with ASC 606, was appropriate.

There have been no changes to our significant accounting policies as disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

however, as a result of certain changes to the standard contractual terms and conditions with customers implemented during the quarter ended March 31, 2022, we concluded that a change in the application of our accounting policy, in accordance with ASC 606, was appropriate.

Specifically, we modified the standard contractual terms with customers during the first quarter of 2022, to reflect transfer of title and risk of loss and right to invoice upon delivery.

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On September 20, 2021, we completed our acquisition of Omniome, Inc.

(“Omniome”), a San Diego-based company developing a highly differentiated, proprietary short-read DNA sequencing platform capable of delivering high accuracy.

(“Omniome”), a San Diego-based company, to obtain their proprietary short-read DNA sequencing platform capable of delivering high accuracy (the “Omniome acquisition”).

In connection with the Omniome acquisition, all outstanding equity securities of Omniome were cancelled in exchange for approximately $ 315.7 million in cash, 8,911,580 shares of our common stock with a fair value of $ 249.4 million and contingent consideration with a fair value of $ 168.6 million.

The fair value of the 8,911,580 common shares issued was determined based on the closing market price of PacBio’s common shares on the acquisition date.

In addition, approximately $ 18.9 million, comprised of $ 7.4 million of cash, 226,811 shares of our common stock with a fair value of $ 6.3 million, and $ 5.2 million related to contingent consideration, was accounted for as a one-time post acquisition stock-based compensation expense.

This stock-based compensation expense was due to accelerated vesting of Omniome stock awards in connection with the acquisition.

In connection with the acquisition, contingent consideration of $ 200 million (composed of $ 100 million in cash and $ 100 million in shares of our common stock) is due upon the achievement of a milestone, defined as the first commercial shipment to a customer of a nucleotide sequencing platform, comprising both an instrument and related consumables, that utilizes SBB technology.

The number of shares of stock to be issued will be determined using the volume-weighted average of the trading prices of our common stock for the twenty trading days ending with and including the trading day that is two days immediately prior to the achievement of the milestone.

The number of shares of stock to be issued will be determined using the volume-weighted average of the trading prices of our common stock for the twenty trading days ending with and

including the trading day that is two days immediately prior to the achievement of the milestone.

Of the $ 100 million in shares of our common stock to be issued as part of the milestone, $ 4.1 million was attributable to stock options issued by PacBio in replacement of Omniome’s unvested options as part of the transaction.

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The potential outcomes are discounted to present value at a discount rate equal to the sum of the term-matched risk-free-interest rate plus PacBio’s credit spread.

The total consideration transferred for the acquisition is as follows (in thousands):

Total cash paid

Fair value of share consideration

Fair value of contingent consideration

Stock-based compensation expense excluded from consideration transferred

Total consideration transferred

The acquisition was accounted for as a business combination and, accordingly, the total fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values on the acquisition date.

The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):

As of December 31, 2021, the major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):

Cash and cash equivalents

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Total consideration transferred

We expect to finalize the purchase price allocation within 12 months of the acquisition date.

We will recognize adjustments to the preliminary amounts with a corresponding adjustment to goodwill in the reporting period in which the adjustments to the preliminary amounts are determined, which we expect to be primarily due to the review of certain tax attributes.

During the year ended December 31, 2021, we recorded a measurement period adjustment of $ 1.6 million to decrease goodwill and a corresponding $ 0.4 million to decrease the deferred tax liability on the Consolidated Balance Sheet, and a $ 1.2 million decrease to our benefit from income taxes on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The measurement period adjustment was due to new information that became available to us upon the completion of the IRC Section 382 Tax Study, where we identified additional net operating losses that are available to us from acquired assets.

Refer to Note 9 – Income Taxes , in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information .

The goodwill recognized was primarily attributable to the assembled workforce and synergies that are expected to occur from the integration of Omniome and is not deductible for income tax purposes.

We incurred costs related to the Omniome acquisition of approximately $ 11.6 million during the three and nine months ended September 30, 2021, which are included in merger-related costs on the Consolidated Statement of Operations and Comprehensive (Loss) Income.

No significant merger-related costs were incurred during the three and nine months ended September 30, 2022.

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented as if Omniome had been acquired as of the beginning of 2020, giving effect on a pro forma basis to the purchase accounting adjustments such as $ 11.6 million of PacBio acquisition-related costs, $ 18.9 million of stock-based compensation expense related to acceleration of certain Omniome stock options not attributable to pre-combination service, and a $ 92.2 million one-time income tax benefit from the reduction

of our deferred tax asset valuation allowance resulting from the Omniome acquisition, as well as a pro forma adjustment to reflect $ 16.7 million of Omniome’s acquisition-related costs.

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of the consolidated results of the combined business had the acquisition actually occurred at the beginning of 2020 or the results of future operations of the combined business.

The following table summarizes the unaudited pro forma financial information (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2021

Pro forma total revenue

Pro forma net loss

Our consolidated financial statements include the results of operations for Omniome beginning September 20, 2021.

Revenues of $ 0 and a net loss of $ 1.6 million from the acquired Omniome business have been included in our Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021.

Circulomics, Inc.

On July 20, 2021, we acquired Circulomics Inc.

(“Circulomics”), a Maryland-based biotechnology company focused on delivering highly differentiated sample preparation products that enable genomic workflows.

(“Circulomics”), a Maryland-based biotechnology company focused on delivering highly differentiated sample preparation products that enable genomic workflows (the “Circulomics acquisition”).

We paid $ 29.5 million in cash in exchange for all outstanding shares of common stock of Circulomics.

We allocated the consideration transferred to the identifiable assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the acquisition.

We allocated the consideration transferred to the identifiable assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the Circulomics acquisition.

The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):

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Total consideration transferred

The excess of the value of consideration paid over the aggregate fair value of those net assets has been recorded as goodwill.

We recognized goodwill of $ 19.3 million, which is primarily attributable to the synergies expected from capabilities in extraction and sample preparation and is not deductible for income tax purposes.

We recorded $ 11.4 million for the fair value of acquired intangible assets, which consist of developed technology and customer relationships.

INVITAE COLLABORATIO N

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however, such feedback will not be contractually required, and Invitae has no contractual right to participate in decisions regarding the development program for such new sequencing systems.

Our development plans for such new sequencing systems will be at our discretion and pursuant to our own internal processes and programs.

Our development plans for such new sequencing systems will be at our

discretion and pursuant to our own internal processes and programs.

Invitae will not be contractually obligated to reimburse us for development costs under the Amended and Restated Agreement.

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Any remaining unused credits will be recognized when they expire.

During the three months ended June 30, 2022, Invitae purchased certain currently available instruments, for which $ 3.7 million of revenue was recognized as Product Revenue on the Condensed Consolidated Statements of Operations and Comprehensive Loss under the terms of the Amended and Restated Agreement.

During the three and nine months ended September 30, 2022, Invitae purchased certain currently available instruments, for which $ 0 and $ 3.7 million, respectively, of revenue was recognized as Product Revenue on the Condensed Consolidated Statements of Operations and Comprehensive Loss under the terms of the Amended and Restated Agreement.

As of December 31, 2021, we have recognized payments received from Invitae of $ 23.5 million in deferred revenue, non-current, on the Consolidated Balance Sheet.

As of June 30, 2022, $ 21.4 million of deferred revenue, current, is recorded on the Condensed Consolidated Balance Sheet relating to all future performance obligations under the Amended and Restated Agreement.

As of September 30, 2022, $ 21.4 million of deferred revenue, current, is recorded on the Condensed Consolidated Balance Sheet relating to all future performance obligations under the Amended and Restated Agreement.

TERMINATION OF MERGER WITH ILLUMINA

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table sets forth the fair value of our financial assets and liabilities that were measured on a recurring basis as of June 30, 2022 and December 31, 2021 respectively:

June 30, 2022

The following table sets forth the fair value of our financial assets and liabilities that were measured on a recurring basis as of September 30, 2022 and December 31, 2021 respectively (in thousands):

September 30, 2022

December 31, 2021

(in thousands)

Cash and cash equivalents

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risk-free rate and the estimated subordinated credit spread for B- and B credit rating, which range from 10.5 % to 10.9 %.

An increase in the discount rates used can also result in the decrease in the fair value of liability, which was the primary factor in the $ 6.5 million decrease in liability at June 30, 2022.

An increase in the discount rates used can also result in the decrease in the fair value of liability, which was the primary factor for the $ 2.2 million decrease in liability at September 30, 2022.

Changes in our estimated subordinated credit spread can result in changes in the fair value of the contingent consideration liability, where a lower credit spread may result in an increased liability valuation.

Changes in the estimated fair value of the contingent consideration liability for the six months ended June 30, 2022 were as follows:

(in thousands)

Changes in the estimated fair value of the contingent consideration liability for the nine months ended September 30, 2022 were as follows (in thousands):

Beginning balance as of December 31, 2021

Change in estimated fair value

Ending balance as of June 30, 2022

Changes to the fair value are recorded as the Change in fair value of contingent consideration in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

For the six months ended June 30, 2022, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year.

The following tables summarize our cash, cash equivalents and investments as of June 30, 2022 and December 31, 2021:

As of June 30, 2022

(in thousands)

Ending balance as of September 30, 2022

Changes to the fair value are recorded as Change in fair value of contingent consideration in the Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income.

For the nine months ended September 30, 2022, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year.

The following tables summarize our cash, cash equivalents and investments (in thousands):

As of September 30, 2022

Cash and cash equivalents

7 unchanged sentences

As of December 31, 2021

(in thousands)

Cash and cash equivalents

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Long-term restricted cash

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of June 30, 2022:

(in thousands)

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of September 30, 2022 (in thousands):

Due in one year or less

4 unchanged sentences

Short-term Restricted Cash

As of June 30, 2022 and December 31, 2021, the short-term restricted cash balance was $ 0.3 million and $ 0.5 million, respectively, which was comprised of security deposits for the credit cards of employees.

As of September 30, 2022 and December 31, 2021, the short-term restricted cash balance was $ 0.3 million and $ 0.5 million, respectively, which was comprised of security deposits for the credit cards of employees.

Inventory, net

As of June 30, 2022 and December 31, 2021, our inventory, net, consisted of the following components:

(in thousands)

As of September 30, 2022 and December 31, 2021, our inventory, net, consisted of the following components (in thousands):

September 30,

Purchased materials

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Subsequently, pursuant to the terms of the O’Brien Lease, beginning on May 1, 2019, the amount of the letter of credit was reduced by $ 0.5 million each year thereafter on May 1.

As such, $ 2.5 million and $ 3.0 million was recorded in long-term restricted cash related to the O’Brien Lease in the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively.

As such, $ 2.5 million and $ 3.0 million was recorded in long-term restricted cash related to the O’Brien Lease in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

In connection with the acquisition of Omniome in September 2021, we acquired $ 1.6 million of long-term restricted cash related to a letter of credit established for a facility lease.

Long-term restricted cash related to this facility was $ 0 and $ 1.6 million in the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively.

At June 30, 2022, we had an additional $ 0.4 million in long-term restricted cash primarily related to a letter of credit established for a facility lease.

Long-term restricted cash related to this facility was $ 0 and $ 1.6 million in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, we had an additional $ 0.4 million in long-term restricted cash primarily related to a letter of credit established for a facility lease.

Intangible Assets and Goodwill

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Upon completion of the development, we will begin to amortize the asset over the life of the product, or record an impairment charge if the asset is determined to be impaired.

In addition to IPR&D, we had the following definite-lived intangible assets from business acquisitions (in thousands, except years):

As of June 30, 2022

In addition to IPR&D, definite-lived intangible assets from business acquisitions included the following (in thousands, except years):

As of September 30, 2022

As of December 31, 2021

1 unchanged sentence

Customer relationships

The estimated future amortization expense of acquisition-related intangible assets with definite lives is estimated as follows:

(in thousands)

The estimated future amortization expense of acquisition-related intangible assets with definite lives is estimated as follows (in thousands):

Remainder of 2022

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Deferred Revenue

As of June 30, 2022, we had a total of $ 33.9 million of deferred revenue, $ 32.1 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae as described in Note 3.

As of September 30, 2022, we had a total of $ 32.5 million of deferred revenue, $ 30.7 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae as described in Note 3.

Invitae Collaboration in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The deferred revenue, non-current balance of $ 1.8 million primarily relates to deferred service contract revenues and is scheduled to be recognized in the next 5 years.

Revenue recorded in the six months ended June 30, 2022 includes $ 9.2 million of previously deferred revenue that was included in deferred revenue as of December 31, 2021.

Contract assets as of June 30, 2022 and December 31, 2021 were not material.

As of June 30, 2022, we had a total of $ 0.6 million of deferred commissions included in prepaid expenses and other current assets which is recognized as sales, general and administrative expense as the related revenue is recognized.

Revenue recorded in the nine months ended September 30, 2022 includes $ 11.5 million of previously deferred revenue that was included in deferred revenue as of December 31, 2021.

Contract assets as of September 30, 2022 and December 31, 2021 were not material.

As of September 30, 2022, we had a total of $ 0.6 million of deferred commissions included in prepaid expenses and other current assets which is recognized as sales, general and administrative expense as the related revenue is recognized.

Costs to obtain a contract are expensed as incurred if the amortization period would have been a year or less.

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Changes in the reserve for product warranties were as follows for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Balance at beginning of period

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Borrowings on the term loan facility were used to fund Omniome’s purchases of equipment, which serves as collateral.

Each term loan has a term of 43

months and bears a fixed interest rate of approximately 17 % annually.

Each term loan has a term of 43 months and bears a fixed interest rate of approximately 17 % annually.

The fee for the elective option to prepay all, but not less than all, of the borrowed amounts at any time after the 24 th month and before the 43 rd month after the commencement date, is 4 % of the outstanding loan balance.

Payments are made in equal monthly installments including principal and interest.

The following table presents the future principal payments on the term loans:

(in thousands)

The following table presents the future principal payments on the term loans (in thousands):

Remainder of 2022

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We incurred issuance costs related to the Notes of approximately $ 4.5 million, which were recorded as debt issuance cost and are presented as a reduction to the Notes on our Consolidated Balance Sheets and are amortized to interest expense using the effective interest method over the term of the Notes, resulting in an effective interest rate of 1.6 %.

As of June 30, 2022 and December 31, 2021, the net carrying amount of the liability for the Notes is recorded as convertible senior notes, net, in the Condensed Consolidated Balance Sheets as follows:

(in thousands)

As of September 30, 2022 and December 31, 2021, the net carrying amount of the liability for the Notes is recorded as convertible senior notes, net, in the Condensed Consolidated Balance Sheets as follows (in thousands):

September 30,

Principal amount

1 unchanged sentence

Net carrying amount

For the three and six months ended June 30, 2022, interest expense for the Notes was as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

For the three and nine months ended September 30, 2022, interest expense for the Notes was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Contractual interest expense

1 unchanged sentence

Total interest expense

As of June 30, 2022, the estimated fair value (Level 2) of the Notes was $ 559.8 million.

As of September 30, 2022, the estimated fair value (Level 2) of the Notes was $ 554.4 million.

The fair value of the Notes is estimated using a pricing model that is primarily affected by the trading price of our common stock and market interest rates.

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In one IPR, all challenged claims were found unpatentable including PGI’s core device claims.

In the second IPR, the board did not find the disputed claims unpatentable.

In the second IPR, the

board did not find the disputed claims unpatentable.

We are appealing the decision in the second IPR to the U.S.

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Following the final decision on the IPRs described above, on February 2, 2022, the judge ordered that the PGI District Court matter be reopened.

We plan to vigorously defend against the remaining claims.

However, in a subsequent order dated September 15, 2022, the judge stayed the PGI District Court matter pending a final decision in the Federal Circuit appeal of the IPRs.

Proceedings in China

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Other Proceedings

From time to time, we may also be involved in a variety of other claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes, employment and other matters that

arise in the normal course of our business.

In addition, third parties may, from time to time, assert claims against us in the form of letters and other communications.

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To the extent that any such indemnification obligations apply to the lawsuits described above, any associated expenses incurred are included within the related accrued litigation expense amounts.

No additional liability associated with such indemnification obligations has been recorded as of June 30, 2022 and December 31, 2021.

No additional liability associated with such indemnification obligations has been recorded as of September 30, 2022 and December 31, 2021.

STOCKHOLDERS’ EQUITY

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On August 4, 2020, stockholders approved the 2020 Plan and reserved 11,000,000 shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

On December 2, 2020, the Board of Directors (the “Board”) adopted the Inducement Plan and reserved 2,500,000 shares of our common stock for issuance pursuant to equity awards granted under the Inducement Plan.

On December 2, 2020, the Board of Directors (the “Board”) adopted the Inducement Plan and reserved 2,500,000 shares of our common stock for issua nce pursuant to equity awards granted under the Inducement Plan.

On April 18, 2021 and November 22, 2021, the Board amended the Inducement Plan to reserve an additional 750,000 and 360,000 shares, respectively.

8 unchanged sentences

On May 25, 2022, stockholders approved an amendment to the 2020 Plan and we reserved an additional 18,000,000 shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

As of June 30, 2022, we had 19.5 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

As of September 30, 2022, we had 18.7 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

Stock Options

Time-based Stock Options

The following table summarizes stock option activity for time-based awards for the six months ended June 30, 2022 (in thousands, except per share amounts):

Stock Options Outstanding

The following table summarizes stock option activity for time-based awards for the nine months ended September 30, 2022 (shares in thousands):

Exercise price

1 unchanged sentence

Outstanding at December 31, 2021

Outstanding at June 30, 2022

Outstanding at September 30, 2022

Performance-based Stock Options

The following table summarizes stock option activity for performance-based awards for the six months ended June 30, 2022 (in thousands, except per share amounts):

Stock Options Outstanding

The following table summarizes stock option activity for performance-based awards for the nine months ended September 30, 2022 (shares in thousands):

Exercise price

1 unchanged sentence

Outstanding at December 31, 2021

Outstanding at June 30, 2022

For the three and six months ended June 30, 2022, we recognized stock-based compensation expense of $ 7.0 million and $ 14.5 million, respectively, related to time-based and performance-based options.

Outstanding at September 30, 2022

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 6.4 million and $ 20.9 million, respectively, related to time-based and performance-based options.

Restricted Stock Units (“RSUs”)

The following table summarizes the time-based RSU activity for the six months ended June 30, 2022 (in thousands, except per share amounts):

The following table summarizes the time-based RSU activity for the nine months ended September 30, 2022 (shares in thousands):

Weighted average

Outstanding at December 31, 2021

Outstanding at June 30, 2022

For the three and six months ended June 30, 2022, we recognized stock-based compensation expense of $ 9.7 million and $ 21.6 million, respectively, related to restricted stock units.

Outstanding at September 30, 2022

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 10.3 million and $ 31.9 million, respectively, related to restricted stock units.

Employee Stock Purchase Plan (“ESPP”)

Shares issued under our ESPP were 1,316,923 and 983,180 during the six months ended June 30, 2022 and 2021, respectively.

Shares issued under our ESPP were 1,878,168 and 1,913,968 during the nine months ended September 30, 2022 and 2021, respectively.

In February 2022, an additional 4.0 million shares were reserved under the ESPP.

As of June 30, 2022, 10,493,750 shares of our common stock remain available for issuance under our ESPP.

For the three and six months ended June 30, 2022, we recognized stock-based compensation expense of $ 2.3 million and $ 5.6 million, respectively, related to our ESPP.

As of September 30, 2022, 9,932,505 shares of our common stock remain available for issuance under our ESPP.

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 2.3 million and $ 7.9 million, respectively, related to our ESPP.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

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Sales, general and administrative

Merger-related expenses - stock-settled

Merger-related expenses - milestone

Stock-based compensation

Merger-related expenses - cash-settled

Total stock-based compensation expense

1 unchanged sentence

We estimate the fair value of stock options granted using the Black-Scholes valuation method and a single option award approach.

When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference the observable market prices of our stock.

This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

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Treasury constant maturities issued with a term equivalent to the expected terms.

Stock Options

We estimated the fair value of employee stock options using the Black-Scholes option pricing model.

The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.

When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference the observable market prices of our stock.

For the three and six months ended June 30, 2022 and 2021, the fair value of employee stock options was estimated using the following weighted average assumptions:

Three Months Ended June 30,

Six Months Ended June 30,

For the three and nine months ended September 30, 2022 and 2021, the fair value of employee stock options was estimated using the following assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

Expected term in years

3 unchanged sentences

0.41 % - 3.66 %

0.05 % — 0.74 %

Dividend yield

Weighted average grant date fair value per share

We estimate the fair value of shares to be issued under the ESPP using the Black-Scholes option pricing model.

For the three and six months ended June 30, 2022 and 2021, the fair value of shares to be issued under the ESPP was estimated using the following assumptions:

Six Months Ended June 30,

For the three and nine months ended September 30, 2022 and 2021, the fair value of shares to be issued under the ESPP was estimated using the following assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

Expected term in years

3 unchanged sentences

0.06 % — 0.20 %

0.60% — 3.51%

0.06 % — 0.20 %

Dividend yield

3 unchanged sentences

Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding and potential shares assuming the dilutive effect of the convertible senior notes, using the if-converted method, and outstanding stock options, restricted stock units and common stock issuable pursuant to our employee stock purchase plan, or ESPP, using the treasury stock method.

The following table presents the calculation of the basic and diluted net loss per share amounts presented in the Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Weighted average shares used in computing basic net loss

Basic net loss per share

The following table presents the calculation of the basic and diluted net (loss) income per share amounts presented in the Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net (loss) income

Weighted average shares used in computing basic net (loss) income

Basic net (loss) income per share

Weighted average shares used in computing basic net (loss) income per share

weighted average stock options

weighted average restricted stock units

weighted average common stock issuable pursuant to our ESPP

Weighted average shares used in computing diluted net loss per share

Diluted net loss per share

The following outstanding shares issuable upon conversion of the convertible senior notes, common stock options, restricted stock units (“RSUs”), with time-based vesting and performance-based vesting and ESPP shares expected to be purchased, were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

Stockholders’ Equity in Part I, Item 1 of this Quarterly Report on Form 10-Q for detailed information on RSUs with time-based vesting and RSUs with performance-based vesting.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Diluted net (loss) income per share

The following outstanding shares issuable upon conversion of the convertible senior notes, common stock options, restricted stock units (“RSUs”), with time-based vesting and performance-based vesting and ESPP shares expected to be purchased, were excluded from the computation of diluted net (loss) income per share for the three and nine months ended September 30, 2022 and 2021 as the effect would be anti-dilutive or to reduce the net loss per share (in thousands).

Three Months Ended

Nine Months Ended

September 30,

Shares issuable upon conversion of convertible senior notes

Options to purchase common stock

These potentially 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.

Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same.

As described in Note 2.

Business Acquisition s in Part I, Item 1 of this Quarterly Report on Form 10-Q, the contingently issuable shares would be due upon the achievement of a milestone.

A summary of our revenue by geographic location for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Stockholders’ Equity in Part I, Item 1 of this Quarterly Report on Form 10-Q for detailed information on RSUs with time-based vesting and RSUs with performance-based vesting .

A summary of our revenue by geographic location for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Europe, Middle East and Africa

A summary of our revenue by category for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

A summary of our revenue by category for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Instrument revenue

4 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements