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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-03-17 · 154 added, 155 removed, 297 unchanged (51% of the section changed)

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We are a premier life science technology company that designs, develops, and manufactures advanced sequencing solutions that enable scientists and clinical researchers to improve their understanding of the genome and ultimately, resolve genetically complex problems.

Our products and technology under development stem from two highly differentiated core technologies focused on accuracy, quality, and completeness, which include our HiFi long-read sequencing technology and our Sequencing by Binding (SBB) short-read sequencing technology.

Our products address solutions across a broad set of applications including human genetics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

Long-read sequencing was recognized by the journal Nature Methods as its “method of the year” for 2022 for its contributions to biological understanding and future potential.

Long-read sequencing has been applied to produce telomere-to-telomere genomes of humans, pangenome references, and has been recognized for its ability to provide more complete views of human variation .

Our products and technology, which include our HiFi long-read sequencing technology, address a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

Our focus is on creating some of the world’s most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes.

Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, CROs, pharmaceutical companies, and agricultural companies.

Recent Developments

On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of the Asset Purchase Agreement, pursuant to which, among other matters, Buyer acquired certain intellectual property and other assets related to our short-read DNA sequencing technology and related clustering, sequencing reagent, and detection technologies.

As consideration for the Asset Sale, Buyer paid us $50.0 million in cash and assumed certain liabilities.

In addition, Buyer granted us a non-exclusive license to certain intellectual property included in the purchased assets.

In connection with the Asset Sale, Buyer will pay at our direction 4% of the net proceeds from the Purchase Price to the former equity holders of Apton related to the waiver of all remaining milestone obligations associated with our purchase of Apton in August 2023, which payment is expected in the first quarter of 2026.

As a result, we received approximately $48.1 million in net cash proceeds from the Asset Sale.

Fiscal 2025 Form 10-K

Strategic Objectives

Though challenging, 2024 was a productive year for PacBio as we launched products, improved our financial flexibility, and made progress in reducing cash burn.

Looking ahead to 2025, our main objectives are to grow revenue and expand gross margins through the following four activities:

• Enabling the full-scale release of the Vega benchtop platform to broaden our market reach.

We believe this platform broadens the long-read market opportunity.

• Accelerating samples onto the Revio platform via SPRQ chemistry and application kits.

The SPRQ chemistry enables the sub-$500 HiFi genome, improves methylation detection capabilities, and achieves a 75% reduction in DNA input requirements for human whole genome sequencing.

These features can drive more samples onto HiFi sequencing than ever before.

• Investing in future product launches to diversify our offerings.

We continue to develop sequencing systems designed to increase throughput and lower the cost to sequence a genome, which we believe will allow us to address an even larger part of the market.

Additionally, we continue to develop kitted-solutions, like our Kinnex Full-length RNA kits and PureTarget, and enhance our on-market sequencers with products like SPRQ chemistry to drive more sequencing volume.

• Progressing our clinical strategy to improve outcomes and create durability.

In 2024 Revio was increasingly being used in LDT and clinical research settings to consolidate multiple tests and address complex genetic challenges.

We continue to believe that with the capabilities of our HiFi chemistry and SMRT technology, we can be a market leader in whole-genome clinical sequencing.

Looking ahead to 2026, our main objectives are to grow revenue and expand gross margins through the following five activities.

These initiatives are designed to improve the economics of HiFi sequencing, expand adoption across clinical and research markets, and drive durable growth across our platform portfolio.

• Accelerate samples onto the Revio platform through SPRQ-Nx chemistry and application kits.

SPRQ-Nx is designed to lower the cost of sequencing and improve sequencing efficiency, which we believe will support higher throughput, increased sample volumes, and broader adoption of HiFi sequencing in large-scale research studies and clinical applications.

• Expand the capabilities of the Vega benchtop platform to broaden our market reach.

We plan to enable faster run times and enhanced user experience through software improvements, which are intended to support broader adoption and improve the overall economics of HiFi sequencing.

• Progress our clinical strategy to improve outcomes and create durability.

Revio is increasingly being adopted in laboratory-developed test ("LDT") and clinical research settings, supporting consolidation of multiple tests, addressing complex genetic challenges, and driving sustained utilization of HiFi sequencing.

• Advance data-driven interpretation through scalable HiFi datasets and analytics.

We are focused on leveraging the accuracy of HiFi sequencing and growing datasets to support advanced data analysis and AI-assisted interpretation approaches.

Collaborative initiatives such as the HiFi Solves Global Consortium are designed to aggregate large, well-characterized HiFi datasets, which we believe can support improved understanding of complex genetic variation and disease biology while maintaining expert oversight.

• Invest in future product launches to drive platform innovation.

We continue to develop sequencing solutions designed to increase throughput, simplify workflows, lower the cost to sequence a genome, and enhance downstream data analysis and interpretation capabilities, which we believe will allow us to address a larger portion of the market.

We continue to believe that with the capabilities of our technology, we can be a market leader in whole-genome clinical sequencing.

Leading institutions have adopted our products to study rare and inherited disease.

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compared to $154.0 M in the prior year

representing 24% of gross margin

compared to $37.3 M in the prior year

compared to $474.3 M in the prior year

compared to $389.9 M last year

• Revenue decreased $46.5 million, or 23%, to $154.0 million for the year ended December 31, 2024, as compared to $200.5 million for the year ended December 31, 2023.

Revenue was comprised of $65.8 million in instrument revenue, approximately $70.3 million in consumables revenue and $17.9 million in service and other revenue for the year ended December 31, 2024.

The decrease was primarily due to lower Revio unit sales and lower average selling prices, which was partially offset by higher consumable sales.

While we do not expect Vega to meaningfully impact Revio sales, we are mindful that there may be some cases where potential customers take more time to assess our new offerings, which may prolong some sales cycles.

We ended the year with cumulative shipments of 270 Revio systems.

• Revenue was comprised of approximately $82.0 million in consumables revenue, $53.8 million in instrument revenue, and $24.2 million in service and other revenue for the year ended December 31, 2025.

Revenue was comprised $70.3 million in consumables revenue, $65.8 million in instrument revenue, and $17.9 million in service and other revenue for the year ended December 31, 2024.

The increase in total revenue was primarily due to higher consumable sales, Vega instrument sales, and

Fiscal 2025 Form 10-K

• Gross profit decreased for the year ended December 31, 2024, primarily due to the decrease in revenue described above, $4.4 million of restructuring charges, and an increase of $7.4 million in amortization of acquired intangible assets, partially offset by lower inventory adjustments.

During the year ended December 31, 2023 we recognized an increase of approximately $4.6 million of inventory adjustments primarily related to excess consumables inventory resulting from faster-than-expected decline in demand of Sequel II/IIe consumables due primarily to a faster than expected ramp on the Revio system.

Gross margins may also be affected by product mix, manufacturing efficiencies, warranty cost improvements, average selling price fluctuations, future product launches, changes to inventory reserves, and costs of raw materials.

• Loss from operations increased $139.8 million or 42%, to $474.3 million for the year ended December 31, 2024, as compared to $334.5 million for the year ended December 31, 2023.

Operating expenses increased $124.3 million primarily driven by $184.5 million of impairment charges, $20.8 million of restructuring charges, and an increase of $11.8 million in amortization of acquired intangible assets, partially offset by a $15.9 million decrease in the change in the fair value of the contingent consideration, a $9.0 million decrease in non-recurring merger-related costs, and a decrease in research and development expenses primarily driven by a decrease in personnel and related expenses due to restructuring activities.

service and other revenue, partially offset by lower Revio instrument sales as compared to the prior year.

• Gross profit increased for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The increase was primarily driven by higher consumable volumes, which drove a more favorable product mix.

Gross margins may be affected by product mix, manufacturing efficiencies, changes in warranty costs, average selling price fluctuations, future product launches, changes to inventory reserves, costs of raw materials, and tariffs.

• Loss from operations increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to $383.1 million of restructuring-related costs.

Restructuring in Part II, Item 8 of this Annual Report on Form 10-K for additional information about restructuring activities.

These restructuring-related costs were partially offset by a $169.5 million decrease in impairment charges and a $17.9 million change in fair value of contingent consideration.

As a result of the restructuring, core operating expenses, consisting of research and development and sales, general and administrative expenses, decreased by $71.1 million.

• Cash, cash equivalents, and investments were $279.5 million at December 31, 2025, which represents a 28% decrease compared to the balance of $389.9 million at December 31, 2024.

The decrease in cash includes approximately $50.2 million of payments made in conjunction with the convertible notes exchange transaction in November 2024.

The median sales cycle for Revio instrument purchases continues to be elongated.

We believe this has been caused by, among other reasons, the uncertainty surrounding the funding for new capital equipment, in particular, uncertainty in the United States related to NIH and academic funding;

procurement delays;

small-to-mid-size existing customers yet to increase their sample volumes to drive an upgrade to Revio;

new customers, which have shown they have longer sales cycles compared to existing PacBio customers;

and sample volumes materializing slower than expected for some potential Revio customers.

We believe our consumables revenue was also impacted primarily by slower-than-expected ramp-up in sequencing by our small- to mid-sized customers, many of whom are new to PacBio;

sample delays impacting sequencing volume at certain large customers;

and some service providers in China operating at lower utilization as a result of the difficult funding environment.

We believe that our sales cycles for Revio instruments continues to be elongated due to, among other reasons, continued capital funding constraints in academic and research markets, procurement timing considerations, and longer adoption cycles among new customers, which have affected the timing of certain instrument orders.

Macroeconomic dynamics impacting the Company in the future may include rising inflation, geopolitical tensions, volatile capital markets, tariffs, uncertainty in the United States related to NIH and academic funding, and fluctuating exchange rates.

These factors could continue to impact our revenues and results of operations in future periods;

however, the magnitude and duration of these impacts is uncertain and inherently unpredictable.

however, the magnitude and duration of these impacts is highly uncertain and inherently unpredictable.

On an ongoing basis, we evaluate our significant estimates, including those related to the valuation of goodwill, indefinite-lived and finite-lived assets.

However, these estimates could change in future periods based on events or changes in circumstances, which could result in material future impairment charges.

We recorded $184.5 million of impairment charges during the year ended December 31, 2024.

We recorded $15.0 million of impairment charges during the first quarter of 2025.

See additional discussion below in Results of Operations, as well as Note 4.

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A discussion of the changes in our results of operations between the years ended December 31, 2024 and December 31, 2023 , has been omitted from this Annual Report on Form 10-K but may be found in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the Securities and Exchange Commission on February 28, 2024 , which is incorporated herein by reference, and is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.pacb.com).

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024 , filed with the Securities and Exchange Commission on March 17, 2025 , which is incorporated herein by reference, and is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.pacb.com).

Comparison of the Years Ended December 31, 2025 and 2024

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Impairment charges 15,000 184,500 (169,500) (92 %)

Merger-related expenses — 9,042 (9,042) (100) %

Change in fair value of contingent consideration (850) 15,060 (15,910) (106 %)

Amortization of acquired intangible assets 364,541 18,006 346,535 1,925 %

Change in fair value of contingent consideration (18,700) (850) (17,850) 2,100 %

Total operating expense 599,641 511,595 88,046 17 %

Operating loss (553,861) (474,313) (79,548) 17 %

Loss on extinguishment of debt — (2,033) 2,033 (100 %)

Gain on debt restructuring — 154,407 (154,407) (100 %)

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(546,058) (309,535) (236,523) 76 %

Income tax provision (benefit) 316 (11,424) 11,740 (103 %)

Income tax provision

318 316 2 1 %

$ (546,376) $ (309,851) $ (236,525) 76 %

Fiscal 2025 Form 10-K

Total Revenue

Total revenue decreased $46.5 million, or 23%, to $154.0 million for the year ended December 31, 2024, as compared to $200.5 million for the year ended December 31, 2023.

The decrease in product revenue resulted primarily from a decrease of $54.7 million in instrument revenue, partially offset by an increase of approximately $6.9 million in consumable revenue.

Service and other revenue increased approximately $1.3 million to $17.9 million for the year ended December 31, 2024 as compared to $16.6 million for the year ended December 31, 2023.

Instrument Revenue

Instrument revenue decreased $54.7 million, or 45%, to $65.8 million for the year ended December 31, 2024, as compared to $120.5 million for the year ended December 31, 2023, primarily due to the sale of 97 Revio systems during the year ended December 31, 2024 compared to 173 Revio systems during the year ended December 31, 2023.

Total revenue increased $6.0 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

Product revenue decreased slightly compared to prior year.

Instrument revenue decreased $12.0 million, or 18% and consumables revenue increased $11.6 million, or 16%.

Service and other revenue increased $6.4 million, or 36%, primarily driven by an increase in Revio service contracts.

Consumables Revenue

Consumables revenue increased approximately $6.9 million, or 11%, to $70.3 million for the year ended December 31, 2024, as compared to $63.4 million for the year ended December 31, 2023.

The increase in consumable sales was primarily due to higher Revio consumables and library preparation sales attributable to the growth in the Revio instrument installed base, partially offset by a decline in Sequel II and IIe consumables as customers transition to Revio.

We expect Revio consumable sales to increase as the installed base grows.

While we expect to see a decline in Sequel II and IIe consumable sales resulting from the product transition, there is uncertainty as to the rate at which these sales will decline.

The increase in consumables revenue for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was primarily driven by higher Revio consumables sales, reflecting the continued expansion of the Revio instrument installed base.

Looking ahead, we expect consumables revenue to increase as we execute against our strategic objectives and expand utilization of our sequencing platforms.

This growth is expected to be driven by a growing installed base of Revio and Vega instruments, enhancing platform economics that support higher throughput, and broader adoption across research and clinical research applications.

In addition, continued investments in chemistry, application kits, and workflow enhancements are intended to expand addressable applications and increase consumables usage per instrument over time.

Instrument Revenue

Instrument revenue decreased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to a lower number of Revio systems sold—61 units during the year ended December 31, 2025 compared to 97 Revio systems during the year ended December 31, 2024.

This decline primarily reflects variability in customer purchasing behavior resulting from uncertainty surrounding the funding for new capital equipment, particularly among academic and research institutions.

The decrease was partially offset by sales of Vega systems, with 140 units sold during the year ended December 31, 2025 following its commercial launch in the fourth quarter of 2024.

We expect that instrument revenue may fluctuate based on timing of customer purchasing decisions, sales mix, and funding dynamics.

Fiscal 2025 Form 10-K

Cost of Revenue, Gross Profit, and Gross Margin

Cost of product revenue decreased $35.3 million, or 28%, for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily driven by the decrease in revenue described above and lower inventory adjustments.

During the year ended December 31, 2023, we recognized an increase of approximately $4.6 million of inventory adjustments primarily related to excess consumables inventory resulting from faster-than-expected decline in demand of Sequel II/IIe consumables due primarily to a faster than expected ramp on the Revio system.

These decreases were partially offset by restructuring charges in cost of revenue of $4.4 million, including $3.6 million of charges for excess inventory due to a decrease in internal demand relating to the expense reduction initiatives during the year ended December 31, 2024.

Cost of revenue included amortization attributable to acquired intangible assets of $9.4 million and $2.0 million that are related to sales generating activities during the years ended December 31, 2024 and 2023, respectively.

Cost of revenue included share-based compensation expense of $5.7 million and $5.4 million during the years ended December 31, 2024 and 2023, respectively.

The loss on purchase commitment was $1.0 million and $3.4 million for the years ended December 31, 2024 and 2023, respectively.

The purchase commitment loss is based on an estimate of future excess inventory related to supply agreements, for which we do not expect to have related sales.

Gross profit decreased $15.5 million, or 29% to $37.3 million for the year ended December 31, 2024, compared to $52.8 million for the year ended December 31, 2023.

Gross margin was 24% for the year ended December 31, 2024, compared to gross margin of 26% for the year ended December 31, 2023.

The decrease was primarily due to the decrease in revenue described above, restructuring charges, and an increase of $7.4 million in amortization of acquired intangible assets, partially offset by lower inventory adjustments.

Cost of Revenue and Gross Profit

Total cost of revenue decreased $2.5 million, or 2%, during the year ended December 31, 2025, compared to the year ended December 31, 2024 primarily due to more favorable product mix driven by higher consumable sales and a decrease in amortization of acquired intangible assets.

These decreases were partially offset by $8.1 million of excess inventory charges resulting from reduced external demand and $3.9 million of estimated losses on purchase commitments associated with anticipated excess inventory in connection with the Company’s expense reduction and strategic initiatives.

Excess inventory charges were $3.6 million for the year ended December 31, 2024.

Total cost of revenue included share-based compensation expense of $3.8 million and $5.7 million during the years ended December 31, 2025 and 2024, respectively.

Gross profit increased $8.5 million, or 23%, for the year ended December 31, 2025, compared to the year ended December 31, 2024 driven by higher consumable volumes and the resulting improvement in product mix, partially offset by restructuring-related charges.

Restructuring in Part II, Item 8 of this Annual Report on Form 10-K for additional information about restructuring activities.

Research and Development Expense

Research and development expense decreased by $52.2 million, or 28%, to $134.9 million for the year ended December 31, 2024, compared to $187.2 million for the year ended December 31, 2023.

The decrease was primarily driven by a decrease in personnel and related expenses due to restructuring activities, as well as the transition of products from development to commercialization.

We incurred restructuring charges of $5.9 million, primarily related to employee separation benefits during the year ended December 31, 2024.

Research and development expense decreased by $37.6 million, or 28%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

The decrease was primarily driven by a decrease in personnel and related expenses, including share-based compensation expense, lower product development costs due to the transition of launched products from development to commercialization, and lower restructuring-related charges, partially offset by an increase in future product development activities.

We recorded $2.8 million of restructuring-related charges during the year ended December 31, 2025 compared to $5.9 million for the year ended December 31, 2024.

Research and development expense included share-based compensation of $11.2 million and $19.2 million during the years ended December 31, 2025 and 2024, respectively.

Sales, General, and Administrative Expense

Sales, general and administrative expense increased by $5.2 million, or 3%, to $175.0 million for the year ended December 31, 2024, compared to $169.8 million for the year ended December 31, 2023.

The increase was primarily driven by restructuring charges of $14.9 million, primarily related to employee separation benefits and lease-related costs during the year ended December 31, 2024, partially offset by a decrease in personnel expenses.

We expect to incur an additional $0.9 million of remaining estimated restructuring costs through 2025 relating to the actions taken in 2024.

Sales, general and administrative expense decreased by $33.5 million, or 19%, during the year ended December 31, 2025, compared to the year ended December 31, 2024.

The decrease was primarily due to a decrease in personnel and related expenses, including share-based compensation expense, and lower restructuring-related charges.

We recorded $6.1 million of restructuring-related charges during the year ended December 31, 2025 compared to $14.9 million for the year ended December 31, 2024.

Sales, general, and administrative expense included share-based compensation expenses of $26.6 million and $46.2 million during the years ended December 31, 2025 and 2024, respectively.

Impairment Charges

We identified indicators of impairment primarily relating to significant declines in our stock price and market capitalization compared to net book value, increases in the carrying value of the reporting unit, and changes in the amount and timing of expected future cash flows due to macroeconomic headwinds, among others, and performed interim impairment tests during the year ended December 31, 2024.

The impairment tests showed the carrying amounts of our goodwill and in-process research and development ("IPR&D") exceeded fair values.

As a result, we recorded $184.5 million of impairment charges for the year ended December 31, 2024.

We recorded impairment charges of $15.0 million during the first quarter of 2025, related to in-process research and development (“IPR&D”).

These charges resulted from an interim impairment assessment performed in response to identified indicators of impairment during the period.

The impairment test concluded that the fair value of our IPR&D assets was $0.

Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Fiscal 2024 Form 10-K

Merger-Related Expenses

Merger-related expenses of $9.0 million during the year ended December 31, 2023, consist of $4.9 million of transaction costs arising from the acquisition of Apton, $2.8 million of compensation expense resulting from the liquidity event bonus plan in connection with the Apton acquisition, and $1.3 million of share-based compensation expense resulting from the acceleration of certain equity awards in connection with the Apton acquisition.

We recognized $1.3 million of share-based compensation expense for the acceleration that was not attributable to pre-combination services.

We recorded impairment charges of $184.5 million during the year ended December 31, 2024 including $144.5 million of goodwill and $40.0 million of IPR&D as a result of quantitative interim impairment tests.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets of $18.0 million and $6.2 million during the years ended December 31, 2024 and 2023, respectively, consists of amortization expense attributable to acquired intangible assets that are not directly related to sales generating activities.

Amortization of acquired intangible assets during the year ended December 31, 2025 included $359.3 million of accelerated amortization recorded during the first quarter of 2025 which was related to developed technology from the 2021 Omniome acquisition, reflecting our revised estimate that the asset will no longer generate economic benefit.

We expect significantly lower amortization expense in future periods.

Fiscal 2025 Form 10-K

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration during the year ended December 31, 2024, represents the remeasurement impact of the Apton contingent consideration due upon the achievement of the milestone.

Change in fair value of contingent consideration during the year ended December 31, 2023, represents the remeasurement impact of the Omniome and Apton contingent consideration liability due upon the achievement of the respective milestone.

The Omniome milestone was achieved in September 2023.

Loss on Extinguishment of Debt

Loss on extinguishment of debt of $2.0 million during the year ended December 31, 2023, represents the loss resulting from the difference in the fair value of the 2030 Notes and the principal, in addition to the write-off of the unamortized debt issuance costs on the portion of the 2028 Notes that were exchanged as part of the debt modification during the year ended December 31, 2023.

During the first quarter of 2025 we recognized a change in fair value of contingent consideration of $18.7 million, resulting in a contingent consideration liability of $0.

This was primarily due to management's decision to cease development of the high-throughput short-read system, the associated changes in expected future revenues, and the requirement that the milestone event occur prior to the five-year anniversary of the acquisition closing date.

On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of the Asset Purchase Agreement.

See Note 12 .

Subsequent Events in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Gain on Debt Restructuring

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Interest Expense

Interest expense for the year ended December 31, 2024 was $13.4 million compared to $14.3 million for the year ended December 31, 2023 and was primarily comprised of interest on the Notes.

Interest expense during the years ended December 31, 2025 and 2024 was primarily comprised of interest on the convertible senior notes.

The decrease was due to lower convertible notes balances as a result of the notes exchange transaction in November 2024.

Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Other Income, Net

The decrease in other income, net was primarily driven by lower investment income due to lower cash and investment balances.

Fiscal 2024 Form 10-K

Income Tax Provision (Benefit)

We recorded an income tax provision of $0.3 million for the year ended December 31, 2024.

A deferred income tax benefit of $11.4 million for the year ended December 31, 2023, is related to the release of the valuation allowance for deferred tax assets due to the recognition of deferred tax liabilities in connection with the Apton acquisition.

Accordingly, this benefit from income taxes is reflected on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

We maintain a valuation allowance on the net deferred tax assets of our U.S.

entities as we have concluded that it is more likely than not that we will not realize our deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

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We have historically incurred, and expect to continue to incur, operating losses and generate negative cash flows from operations on an annual basis due to the investments we intend to make as described in Results of Operations above, and as a result, we may require additional capital resources to execute our strategic initiatives to grow our business.

We approved and implemented certain efficiency and expense reduction initiatives during 2024.

We approved and implemented certain efficiency and expense reduction initiatives during 2025 and 2024.

These expense reduction initiatives included workforce reductions, facilities downsizing and a refined pipeline of development programs.

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As of December 31, 2025, we had $279.5 million in cash, cash equivalents, and investments, compared to $389.9 million at December 31, 2024.

The decrease was primarily attributable to $206.1 million cash used in operating activities during the year ended December 31, 2024 and an additional $50.2 million of payments made in conjunction with the convertible notes exchange transaction in November 2024.

The decrease was primarily attributable to $111.2 million cash used in operating activities during the year ended December 31, 2025.

Fiscal 2025 Form 10-K

Convertible Senior Notes

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The 2030 Notes will mature on December 15, 2030, subject to earlier conversion, redemption, or repurchase.

Fiscal 2024 Form 10-K

In November 2024, we entered into an exchange agreement with SBN, pursuant to which we agreed to exchange the remaining approximately $459.0 million in aggregate principal amount of 2028 Notes outstanding for (i) $200.0 million aggregate principal amount of the 2029 Notes, (ii) 20,451,570 shares of common stock (the “Exchange Shares”) and (iii) $50.0 million of cash.

The exchange and issuances closed on November 21, 2024 (the “Closing Date”).

The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes are subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the Exchange Transaction;

The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes were subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the Exchange Transaction;

the lock-up restrictions will terminate immediately prior to the consummation of any change in control of the Company.

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Additionally, on November 21, 2024, in connection with the issuance of the 2029 Notes, the Company and SBN entered into the Letter Agreement pursuant to which the Company and SBN agreed that, for so long as SBN and its affiliates hold at least $180 million aggregate principal amount of the 2029 Notes, the Company and its subsidiaries are subject to certain negative covenants that restrict the Company’s and its subsidiaries’ ability to incur additional indebtedness and create liens, in each case, subject to the exceptions set forth in the Letter Agreement, including exceptions which permit the Company to incur up to $75 million in aggregate principal amount of secured indebtedness pursuant to Credit Facilities (as defined in the Letter Agreement).

In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes.

Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for further details.

In addition, the Letter Agreement restricts the ability of the Company and its subsidiaries from guaranteeing any

Fiscal 2025 Form 10-K

indebtedness or incurring certain indebtedness outside of the ordinary course of business unless, in each case, the Company and its subsidiaries concurrently provide a guarantee of the Company’s obligations under the 2029 Notes.

Convertible Senior Notes in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Additional Capital Requirements

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Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

• As described in more detail in Note 7 - Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K we signed a Supply Agreement, which was most recently amended in September 2024, with a supplier for the purchase of certain products over the period of 2023 through 2027.

As part of the Supply Agreement, we made a $9.0 million deposit during the year ended December 31, 2022, and an additional deposit of $6.0 million in 2023, to secure the supply of certain products through the term of the contract.

$3.0 million was refunded to us during the year ended December 31, 2024.

If we breach the minimum volume purchase commitment during any applicable year, the supplier is entitled to retain a portion or all of the deposit corresponding to that year.

If we terminate the Supply Agreement before January 15, 2027, Supplier will refund the remaining balance of the Deposit.

If the supplier breaches its minimum volume supply commitment during any applicable year or portions thereof, our remedies include termination, pursuit of damages, or pursuit of specific performance.

• As described in Note 7 - Commitments and Contingencies in Part II, Item 8 of this Annual Report on Form 10-K, we have a Supply Agreement, that includes minimum annual purchase commitments for certain products through 2031.

To secure supply under the agreement, we paid deposits totaling $15.0 million, of which $4.0 million and $3.0 million were refunded in 2025 and 2024, respectively.

The supplier may retain all or a portion of the deposit if we fail to meet our minimum purchase commitments.

• As described in Note 4 - Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K the Company entered into an agreement to acquire certain developed technology and related intellectual property from The Chinese University of Hong Kong for a total consideration of $9.7 million.

In addition, the Company entered into a license agreement for complementary developed technology during the three months ended March 31, 2025.

Both the acquired technology and license are classified as intangible assets and are being amortized over an estimated useful life of three years.

As of December 31, 2025, $5.0 million of these intangible assets remained unpaid.

This amount is included in accrued liabilities on the condensed consolidated balance sheets and is expected to be paid in 2026.

• Our research and development expenditures of $97.3 million in 2025 and $134.9 million in 2024.

While we expect to continue our investment in research and development in 2025, including enhancements of our existing products, and continued development of other new technology and products, we expect research and development expenses to decline in 2025 as compared to the year ended December 31, 2024 due to recent product transitions.

We expect to continue our investment in research and development in 2026, including enhancements of our existing products, and continued development of other new technology and products.

• Cash outflows for capital expenditures of $2.7 million in 2025 and $6.2 million in 2024.

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• Amounts related to future lease payments for operating lease obligations at December 31, 2025, totaling $98.2 million, with $4.0 million expected to be paid within the next 12 months.

See Note 12 .

Subsequent Events in Part II, Item 8 of this Annual Report on Form 10-K for further details on our lease amendment entered into on March 7, 2025.

• Payments related to licensing and other arrangements, which are cancellable license agreements with third parties for certain patent rights and technology.

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The future license maintenance fees and minimum royalty payments under the license agreements are not deemed to be material.

• Payments related to acquisitions.

See “ — Contingent Consideration ” below for further details on potential payments related to our recent acquisitions.

Our future capital requirements and the adequacy of our available funds will depend on many factors, including:

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If economic, financial, business, or other factors adversely affect our ability to fund our projected operating cash requirements, we may be required to obtain funding through traditional or alternative sources of financing.

Raising additional funds may result in dilution to existing shareholders.

We cannot be certain that funds will be available on favorable terms, or at all.

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Cash provided by investing activities 115,448 124,004

Cash (used in) provided by financing activities (42,987) 108,891

Net decrease in cash, cash equivalents and restricted cash $ (125,041) $ (145,678)

Cash provided by (used in) financing activities

3,428 (42,987)

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

$ 7,667 $ (125,041)

Operating Activities

Our primary uses of cash in operating activities include the development of future products and product enhancements, manufacturing, and support functions related to our sales, general, and administrative activities.

Cash used in operating activities for the year ended December 31, 2025, of $111.2 million was due primarily to a $546.4 million net loss that included non-cash items such as impairment charges of $15.0 million, share-based compensation of $41.7 million, amortization of intangible assets of $369.4 million, depreciation of $13.0 million, amortization of right-of-use assets of $4.0 million, and $4.4 million from changes in net operating assets and liabilities primarily driven by a decrease in prepaid expenses and other assets as well as increases in accrued expenses and accounts payable partially offset by increases in accounts receivable and inventory.

These changes in non-cash items were partially offset by an $18.7 million decrease in the change in the fair value of the contingent consideration and accretion of discount and amortization of premium on marketable securities, net of $4.4 million.

Cash used in operating activities for the year ended December 31, 2024, of $206.1 million was due primarily to a $309.9 million net loss that included non-cash items such as impairment charges of $184.5 million, share-based compensation of $71.0 million, amortization of intangible assets of $27.4 million, depreciation of $13.8 million, and amortization of right-of-use assets of $12.2 million, offset by a gain on debt restructuring of $154.4 million, and accretion of discount and amortization of premium on marketable securities, net of $13.0 million.

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These uses of cash were partially offset by a decrease of $9.1 million in accounts receivable, net.

Cash used in operating activities for the year ended December 31, 2023, of $259.2 million was due primarily to a $306.7 million net loss that was partially offset by non-cash items such as share-based compensation of $72.1 million, a change in the estimated fair value of contingent consideration of $15.1 million, depreciation of $11.5 million, inventory provision of $10.6 million, amortization of intangible assets of $8.3 million, and amortization of right-of-use assets of $6.8 million, offset by accretion of discount and amortization of premium on marketable securities, net of $12.8 million, and deferred income taxes of $11.4 million.

Cash flow impact from changes in net operating assets and liabilities of $59.0 million, was primarily attributable to increases of $17.8 million in accounts receivable, net, $13.8 million in inventory, net, $9.0 million in prepaid expenses and other assets, and decreases of $14.9 million in contingent consideration liability, $10.4 million in deferred revenue, and $8.8 million in operating lease liabilities, partially offset by increases of $13.1 million in accrued expenses, and $2.4 million in other liabilities.

Investing Activities

Our investing activities consist primarily of purchases, sales and maturities of investments as well as capital expenditures.

Cash provided by investing activities for the year ended December 31, 2024, was due primarily to maturities of investments of $594.0 million partially offset by purchases of investments of $498.6 million and capital expenditures of $6.2 million.

Cash provided by investing activities for the year ended December 31, 2025, was due primarily to maturities of investments of $340.1 million partially offset by purchases of investments of $216.9 million, $5.0 million in purchases of intangible assets, and capital expenditures of $2.7 million.

Fiscal 2025 Form 10-K

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Financing Activities

Cash provided by financing activities during the year ended December 31, 2025 resulted from $3.4 million of proceeds from the issuance of common stock through our equity compensation plans.

Cash used in financing activities during the year ended December 31, 2024, was primarily due to payments made in conjunction with the convertible notes exchange of $50.2 million partially offset by proceeds of $7.7 million from the issuance of common stock through our equity compensation plans.

Cash provided by financing activities during the year ended December 31, 2023, resulted from net proceeds from issuance of common stock under equity offerings of $189.2 million, proceeds of $15.3 million from the issuance of common stock through our equity compensation plans, partially offset by $86.4 million due to the payment of contingent consideration, $7.4 million due to the payment of debt issuance costs, and $1.8 million due to the payment of notes payable.

OFF-BALANCE SHEET ARRANGEMENTS

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements.

Fiscal 2024 Form 10-K

Revenue Recognition

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service and other revenue consist primarily of revenue earned from product maintenance agreements.

Fiscal 2025 Form 10-K

We account for a contract with a customer when there is a legally enforceable contract between us and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable.

Revenues are recognized when control of the promised goods are transferred to our customers, or services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Revenues are recognized when control of the promised goods is transferred to our customers, or services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Invoicing typically occurs upon shipment, or delivery in the case of an instrument, and payment is typically due within 30 days from invoice.

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Revenue from development agreements generally includes upfront and milestone payments.

Revenue for these agreements is recognized when each distinct performance obligation is satisfied.

Revenue for these agreements is recognized when each separate performance obligation is satisfied.

We may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations.

We determine whether each product or service is distinct, in order to identify the performance obligations in the contract and allocate the contract transaction price among the distinct performance obligations.

A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.

A product or service is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.

We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

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The consideration for contracts with multiple performance obligations is allocated between separate performance obligations based on their individual standalone selling price.

We determine the best estimate of standalone selling price using historical average selling prices combined with an assessment of current market conditions.

We determine the best estimate of standalone selling price primarily using historical average selling prices combined with an assessment of current market conditions.

If the standalone selling price is not directly observable, we rely on estimates by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, internal costs, profit objectives, pricing practices, and other observable inputs.

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Where we expect, at contract inception, the timing of payments to be consistent with the transfer of goods or services or the contract duration to be one year or less, we do not adjust the transaction price for the effects of a significant financing component.

We periodically modify existing contracts with customers, which could change the scope or the price of the contract, or both.

Modification of existing contracts with customers could change the scope or the price of the contract, or both.

When a contract modification occurs, we exercise judgment to determine if the modification should be accounted for as:

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Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, allocation of revenue to the remaining performance obligations and determination of the period of recognition for each identified performance obligation.

Fiscal 2024 Form 10-K

Certain of our agreements provide options to customers which can be exercised at a future date, such as the option to purchase our product at discounted prices, among others.

In accounting for customer options, we determine whether an option is a material right and this may require us to exercise judgment.

If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right and, therefore, a performance obligation.

If the contract gives the customer the option to acquire additional goods or services at their normal standalone selling prices, we would likely determine that the option is not a material right and, therefore, account for it when the customer exercises the option.

If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option is considered a material right and, therefore, a performance obligation.

If the standalone selling price of the option is not directly observable, an estimated standalone selling price is utilized which considers adjustments for discounts that the customer could receive without exercising the option and the likelihood that the option will be exercised.

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Employee sales commissions are generally recorded as selling, general, and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less.

Fiscal 2025 Form 10-K

Inventories are stated at the lower of cost or net realizable value.

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Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs.

Determining net realizable value of inventories involves numerous judgements, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories.

Determining net realizable value of inventories involves judgements, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories.

We make inventory purchases and commitments to meet future shipment schedules based on forecasted demand for our products.

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Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in operating expenses on our consolidated statements of operations and comprehensive loss.

Fiscal 2024 Form 10-K

We typically use the discounted cash flow method to value our acquired intangible assets.

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If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended.

We capitalize in-process research and development ("IPR&D"), which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.

We capitalize IPR&D, which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.

Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life.

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Any adjustments identified after the measurement period are recorded on our consolidated statements of operations and comprehensive loss.

Fiscal 2025 Form 10-K

We acquired $55.0 million of IPR&D, and $52.3 million of goodwill in connection with the acquisition of Apton Biosystems, Inc.

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Goodwill and other intangible assets with indefinite useful lives (i.e., IPR&D) are not amortized, however they are tested annually for impairment, as of the first day of the second and third quarter of our fiscal year, respectively, and whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than the carrying value.

Events that would indicate impairment and trigger an interim impairment test include, but are not limited to, unexpected adverse business conditions, weak demand for a specific product line or business, economic factors, shifting focus to certain lines of business, unanticipated technological changes or competitive activities, loss of key personnel, changes in business strategy and acts by governments or courts.

Events that could indicate impairment and trigger an interim impairment test include, but are not limited to, adverse changes in business or economic conditions, lower-than-expected performance of a product line or business, changes in strategic direction, unanticipated technological or competitive developments, loss of key personnel, and actions by governments or courts.

We perform our goodwill impairment analysis at the reporting unit level.

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We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.

Fiscal 2024 Form 10-K

Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth expectations and a discount rate of 12.0 %.

The discount rate was based on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors.

The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value.

An increase of 100 basis points to the discount rate used in our assessment would have resulted in additional goodwill impairment of approximately $ 95 million.

The assessed fair value was deemed reasonable based on a market capitalization reconciliation.

We recognized $144.5 million of impairment charges to goodwill during the year ended December 31, 2024, as a result of quantitative interim impairment tests.

Based primarily on the decline in our stock price and overall market capitalization during the first quarter of 2025, driven in part by macroeconomic uncertainties, as well as our updated strategic plans and restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and ceasing development of our high-throughput short-read platform, we concluded that changes to the timing and amount of expected future cash flows, among other factors, indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount, requiring an interim goodwill impairment assessment.

As a result of the quantitative interim impairment test performed as of March 31, 2025, we concluded that there was no impairment, as the estimated fair value of the entity-level reporting unit exceeded the carrying value.

To determine the fair value of the entity-level reporting unit as of March 31, 2025, we performed our impairment test using a combination of an income approach and a market approach to determine the fair value of the reporting unit.

The income approach utilized estimated discounted cash flows, while the market approach utilized comparable company information.

Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0%.

The discount rate was based on the weighted average cost of capital, determined using market, industry data, and related risk factors.

The assumptions used were inherently subject to uncertainty.

The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and management judgment.

The assessed fair value was deemed reasonable based on a market capitalization reconciliation and a supportable control premium.

We performed our annual assessment for goodwill impairment in the second quarter of 2025, noting no impairment.

Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Fiscal 2025 Form 10-K

During the IPR&D impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D is less than the carrying amount.

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There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made.

Significant estimates and assumptions used in the income approach during the fourth quarter of 2024, included revenue growth assumptions, a discount rate of 14.0 %, and an obsolescence factor of 13 years.

The carrying value of the IPR&D exceeded its estimated fair value, and we recorded an impairment of $ 40.0 million in the fourth quarter of 2024, primarily due to a decrease in projected cash flows.

An increase of 100 basis points to the discount rate used in our analysis would have resulted in additional IPR&D impairment of approximately $ 5 million.

A decrease of one year to the obsolescence factor used in our analysis would have resulted in additional IPR&D impairment of approximately $ 5 million.

We recognized a $40.0 million impairment charge during the year ended December 31, 2024 as a result of a quantitative interim impairment test.

During the first quarter of 2025, based on our decision to cease development of the high-throughput short-read sequencing platform, which would utilize the IPR&D, and the resulting changes to the expected future cash flows, among other factors, we concluded that it was more likely than not that the fair value of the IPR&D was less than its carrying amount, requiring an interim impairment assessment.

Using a discounted cash flow model under the income approach, we determined the fair value was $0 and recorded a $15.0 million impairment charge.

The decline in the fair value of the IPR&D to $0 as of March 31, 2025 resulted primarily from changes in the timing of expected future cash flows as compared to the fair value as of December 31, 2024, driven by the restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and resulted in ceasing development of our high-throughput short-read sequencing platform.

The impairment charge is included on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2025.

Significant estimates and assumptions used in the income approach include timing of future cash flows, revenue growth assumptions, a selected discount rate of 14.0%, and a selected obsolescence factor of 11 years.

The discount rate was based primarily on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors.

The assessment is a level 3 measurement due to its reliance on certain unobservable inputs and management judgment.

The assumptions used were inherently subject to uncertainty.

Balance Sheet Components in Part II, Item 8 of this Annual Report on Form 10-K for further information.

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They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.

For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, or if there is a delay in development of the IPR&D or lower projected sales, we may be required to record future impairment charges for goodwill and intangible assets with indefinite lives.

For example, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our reporting unit, we may be required to record future impairment charges for goodwill.

Impairment charges could materially decrease our future results of operations and result in lower asset values on our balance sheet.

Intangible Assets and Other Finite-Lived Assets — Impairment Assessment

We capitalize finite-lived intangibles assets and generally amortize them on a straight-line basis over the estimated useful lives.

We capitalize finite-lived intangible assets and generally amortize such assets on a straight-line basis over their estimated useful lives.

We review intangible assets with finite lives and other finite-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

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Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to net book value, significant changes in the ability of an asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset.

In order to estimate the fair values of identifiable intangible assets with finite lives and other finite-lived assets, we estimate the present value of future cash flows from those assets.

The key assumptions that we use in our

Fiscal 2025 Form 10-K

cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.

In order to estimate the fair values of identifiable intangible assets with finite lives and other finite-lived assets, we estimate the present value of future cash flows from those assets.

The key assumptions that we use in our cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.

Management judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows.

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Business Acquisitions in Part II, Item 8 of this Annual Report on Form 10-K for further information.

The contingent consideration liability was measured at fair value as of the acquisition date and is remeasured periodically at each reporting date, with changes in fair value recorded as change in fair value of contingent consideration on our consolidated statements of operations and comprehensive loss.

For the Apton contingent consideration, the initial measurement and post-acquisition remeasurement required estimates and assumptions using a Monte Carlo simulation to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate to determine the total fair value of the contingent consideration payment as of each reporting period.

This method requires significant management judgment, including risk-adjusted forecasted revenues for products and services leveraging Apton's technology and an estimated credit spread.

Assumptions and estimates about future values are complex and often subjective.

Future changes in our estimates could result in expenses or gains.

For the Omniome contingent consideration, the initial measurement and post-acquisition remeasurement required estimates and assumptions using a scenario-based method that considers a range of potential outcomes of milestone achievement dates and assigned probabilities of occurrence for each outcome.

Outcomes were discounted to present value, which was then weighted by the probability of each scenario to determine the total fair value of the contingent consideration payment as of each reporting period.

This method requires significant management judgment, including the probability of achieving certain future milestones and discount rates.

We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the five-year anniversary of the closing date of the acquisition.

The key input used in the determination of the fair value included projected revenues of the high-throughput short-read products and services leveraging Apton's technology.

Primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event must occur prior to the five-year anniversary of the closing date of the acquisition, the estimated fair value of the contingent consideration liability is $0.

An increase in the fair value of the liability may result from changes in projected revenues, including accelerated timing or higher expected amounts, and from decreases in discount rates, including the risk-free rate and the estimated subordinated credit spread for a CCC credit rating.

Refer to Note 3.

Financial Instruments for further discussion on valuation assumptions.

Financial Instruments in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on valuation assumptions.

On January 30, 2026, we completed a disposition of assets to Buyer in accordance with the terms of an Asset Purchase Agreement.

Subsequent Events in Part II, Item 8 of this Annual Report on Form 10-K for further details.

RECENT ACCOUNTING PRONOUNCEMENTS

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

What changed 10-K

Item 7. Management’s Discussion and Analysis