What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-26 compared with 2020-02-27 · 687 added, 856 removed, 430 unchanged (78% of the section changed)

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders

Equity (Deficit)

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

Consolidated Statements of Cash Flows

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Opinion on the Financial Statements

We have audited the

accompanying consolidated balance sheets of 10x Genomics, Inc.

(the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and

stockholders equity (deficit) and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended

December 31, 2019, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of 10x Genomics, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842)

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for leases as a result of the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842), and the amendments in ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements, on January 1, 2020, using a modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Companys financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not

required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of

expressing an opinion on the effectiveness of the Companys internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test

basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Revenue Recognition

Description of the Matter For the year ended December 31, 2020, the Company recognized revenues of $298.8 million from the sale of products and services.

As discussed in Note 2 to the consolidated financial statements, the Company recognizes revenue when control of the products and services is transferred to its customers in an amount that reflects the consideration it expects to receive from its customers in exchange for those products and services.

Auditing the Company’s revenue recognition can be challenging due to certain sales transactions including multiple products and services.

Judgement is involved to determine the distinct performance obligations, the allocation of consideration using stand-alone selling price, and the timing of revenue recognition.

How We Addressed the Matter in Our Audit Our audit procedures over the determination of the distinct performance obligations, the allocation of consideration using stand-alone selling price and the timing of revenue recognition included, among others, for a sample of individual sales transactions, we inspected the executed customer contract, identified the distinct performance obligation(s) in the contract, and calculated the transaction price.

In addition, we compared the performance obligations identified and transaction price calculated to those identified and calculated by management.

We evaluated the Company’s allocation of the transaction price to the performance obligations using stand-alone selling price and determined the timing of revenue recognition based on third-party evidence of transfer of control of the goods to the customer.

/s/ Ernst & Young LLP

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February 26, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of 10x Genomics, Inc.

Opinion on Internal Control over Financial Reporting

We have audited 10x Genomics, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, 10x Genomics, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Redwood City, California

February 26, 2021

10x Genomics, Inc.

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Cash and cash equivalents $ 663,603 $ 424,166

Restricted cash 16,567 —

Accounts receivable, net 51,208 33,371

Inventory 29,959 15,270

Prepaid expenses and other current assets 13,029 8,033

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Restricted cash 8,474 52,327

Liabilities, convertible preferred stock and stockholders equity (deficit)

Operating lease right-of-use assets 46,983 —

Other assets 26,678 23,935

Total assets $ 929,341 $ 605,923

Liabilities and stockholders’ equity

Current liabilities:

Accrued contingent liabilities $ 44,173 $ —

Accounts payable 4,709 13,028

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Deferred revenue, current 4,472 3,297

Operating lease liabilities 5,936 —

Total current liabilities 118,126 63,049

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Accrued license fee, noncurrent 11,171 16,251

Deferred revenue, noncurrent

Deferred rent, noncurrent — 16,120

Operating lease liabilities, noncurrent 57,042 —

Other noncurrent liabilities 3,930 1,925

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Commitments and contingencies (Note 7)

Convertible preferred stock, $0.00001 par value, no shares authorized and no shares issued and

outstanding as of December 31, 2019;

67,904,871 shares authorized and 67,704,278 shares issued and outstanding as of December 31, 2018;

aggregate liquidation preference of $242,588 as of December 31, 2018

Stockholders equity (deficit):

Stockholders' equity:

Preferred stock, $ 0.00001 par value;

100,000,000 shares authorized, no shares issued and

outstanding as of December 31, 2019;

no shares authorized, issued or outstanding as of December 31, 2018

100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020 and December 31, 2019

Common stock, $ 0.00001 par value;

1,100,000,000 shares authorized and 96,241,596 shares issued and

outstanding as of December 31, 2019;

190,955,000 shares authorized and 14,549,801 shares issued and outstanding as of December 31, 2018

1,100,000,000 shares authorized, 108,485,909 and 96,241,596 shares issued and outstanding as of December 31, 2020 and 2019

Additional paid-in capital 1,544,218 682,494

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Accumulated other comprehensive loss ( 50 ) ( 46 )

Total stockholders equity (deficit)

Total liabilities, convertible preferred stock and stockholders equity (deficit)

Total stockholders’ equity 739,072 420,083

Total liabilities and stockholders’ equity $ 929,341 $ 605,923

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

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Year Ended December 31,

2020 2019 2018

Revenue $ 298,845 $ 245,893 $ 146,313

Cost of revenue 58,468 61,033 28,661

Gross profit 240,377 184,860 117,652

Operating expenses:

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Other income (expense), net 1,337 ( 186 ) ( 249 )

Loss on extinguishment of debt ( 1,521 ) — —

Total other expense ( 334 ) ( 460 ) ( 1,634 )

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Provision for income taxes 8,255 218 87

Net loss $ ( 542,731 ) $ ( 31,251 ) $ ( 112,485 )

Other comprehensive loss:

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(In thousands, except share data)

Preferred Stock

Preferred Stock Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Stockholders’

Balance as of December 31, 2016

Issuance of Series C convertible preferred stock, net of issuance costs

Issuance of Class A common stock upon exercise of options

Repurchase of unvested Class A common stock related to early exercised options

Vesting of shares subject to repurchase, including early exercised options

Stock-based compensation

Other comprehensive loss

Shares Amount Shares Amount

Balance as of December 31, 2017 59,730,213 $ 158,414 12,883,930 $ 1 $ 6,136 $ ( 118,631 ) $ ( 15 ) $ ( 112,509 )

Issuance of Series D convertible preferred stock, net of issuance costs 5,224,658 49,878 — — — — — —

Issuance of Series D-1 convertible preferred stock, net

of issuance costs

Issuance of Series D-1 convertible preferred stock, net of issuance costs 2,749,407 34,952 — — — — — —

Issuance of Class A common stock upon exercise of options — — 1,508,762 — 1,173 — — 1,173

Issuance of Class A common stock for in-process

research and development

Issuance of Class A common stock for in-process research and development — — 157,109 — 792 — — 792

Vesting of shares subject to repurchase, including early exercised options — — — — 256 — — 256

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Stock-based compensation — — — — 2,658 — — 2,658

Net loss — — — — — ( 112,485 ) — ( 112,485 )

Other comprehensive loss — — — — — — ( 22 ) ( 22 )

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Conversion of convertible preferred stock into Class B common stock ( 67,704,278 ) ( 243,244 ) 67,704,278 1 243,243 — — 243,244

Issuance of Class A common stock upon initial public offering, net of issuance

Issuance of Class A common stock upon initial public offering, net of issuance costs — — 11,500,000 — 410,824 — — 410,824

Cashless exercise of Class A common stock warrants — — 261,024 — — — — —

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Stock-based compensation — — — — 13,333 — — 13,333

Net loss — — — — — ( 31,251 ) — ( 31,251 )

Other comprehensive loss — — — — — — ( 9 ) ( 9 )

Balance as of December 31, 2019 — — 96,241,596 2 682,494 ( 262,367 ) ( 46 ) 420,083

Issuance of Class A common stock related to equity awards — — 5,742,931 — 23,743 — — 23,743

Sale of Class A common stock — — 4,600,000 — 482,267 — — 482,267

Issuance of Class A common stock for asset acquisition — — 1,901,382 — 306,000 — — 306,000

Vesting of shares subject to repurchase, including early exercised options — — — — 247 — — 247

Stock-based compensation — — — — 49,467 — — 49,467

Net loss — — — — — ( 542,731 ) — ( 542,731 )

Other comprehensive loss — — — — — — ( 4 ) ( 4 )

Balance as of December 31, 2020 — $ — 108,485,909 $ 2 $ 1,544,218 $ ( 805,098 ) $ ( 50 ) $ 739,072

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

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Year Ended December 31,

2020 2019 2018

Operating activities:

Net loss $ ( 542,731 ) $ ( 31,251 ) $ ( 112,485 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

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Stock-based compensation 48,626 13,333 2,658

Class A common stock issued for in-process research

and development

Amortization of right-of-use assets 5,009 — —

Loss on extinguishment of debt 1,521 — —

Class A common stock issued for in-process research and development 306,000 — 792

Loss on disposal of property and equipment 29 614 251

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Accounts receivable ( 17,847 ) ( 5,284 ) ( 14,747 )

Inventory ( 14,601 ) ( 6,699 ) ( 3,732 )

Prepaid expenses and other current assets ( 5,265 ) ( 3,535 ) ( 2,429 )

Other assets ( 2,686 ) ( 251 ) ( 999 )

Accounts payable ( 7,770 ) 4,901 2,587

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Deferred rent, noncurrent — 12,730 3,328

Operating lease liability ( 4,832 ) — —

Other noncurrent liabilities ( 3,771 ) 547 33

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities ( 217,898 ) 34,627 ( 76,409 )

Investing activities:

Purchases of property and equipment ( 36,666 ) ( 42,742 ) ( 6,284 )

Purchases of intangible assets

Acquisition of intangible assets ( 1,728 ) ( 25 ) ( 425 )

Net cash used in investing activities ( 38,394 ) ( 42,767 ) ( 6,709 )

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Payments on borrowings under revolver — ( 11,000 ) —

Payments on financing arrangement ( 5,848 ) — —

Payments on capital lease obligations — — ( 69 )

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

Proceeds from issuance of common stock upon initial and follow-on public offerings, net of issuance costs 482,267 410,824 —

Proceeds from issuance of preferred stock, net of issuance costs — — 84,830

Repurchase of unvested common stock related to early exercised shares

Proceeds from issuance of common stock upon exercise of stock options

Issuance of common stock from exercise of stock options and employee stock purchase plan purchases 23,743 3,766 1,798

Net cash provided by financing activities 468,906 414,590 105,367

Effect of exchange rates on changes in cash, cash equivalents, and restricted cash

( 463 ) ( 45 ) ( 18 )

Net increase in cash, cash equivalents, and restricted cash

212,151 406,405 22,231

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

476,493 70,088 47,857

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

$ 688,644 $ 476,493 $ 70,088

Supplemental disclosures of cash flow information:

Cash paid for interest

$ 1,670 $ 2,250 $ 1,824

Cash paid for taxes

$ 280 $ 22 $ 6

10x Genomics, Inc.

Consolidated Statements of Cash Flows (Continued)

(In thousands)

Year Ended December 31,

2020 2019 2018

Noncash investing and financing activities

Purchases of property and equipment included in accounts payable and accrued expenses and other

current liabilities

Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities $ 2,983 $ 4,492 $ 2,260

Right-of-use assets obtained in exchange for new operating lease liabilities $ 13,562 $ — $ —

Conversion of convertible preferred stock into common stock upon initial public offering $ — $ 243,244 $ —

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10x Genomics, Inc.

(the Company) was incorporated in the state of Delaware on July 2, 2012.

The Companys integrated

solutions include the Companys Chromium instruments, which are referred to as instruments, its enzymes, reagents, microfluidic chips and other consumable products, which are referred to as consumables, and software for

analyzing biological systems.

These solutions guide customers through the workflow from sample preparation to next-generation sequencing to subsequent analysis and visualization.

Each of the Companys solutions is designed to interrogate a

major class of biological information that is impactful to researchers.

(the “Company”) was incorporated in the state of Delaware on July 2, 2012 and is a life sciences technology company focused on building innovative products and solutions to interrogate, understand and master biological systems at resolution and scale that matches the complexity of biology.

The Company’s integrated solutions include the Company’s Chromium and Chromium Connect instruments, which the Company refers to as “instruments,” and the Company’s proprietary microfluidic chips, slides, reagents and other consumables for both the Company’s Visium and Chromium solutions, which the Company refers to as “consumables.” The Company bundles its software with these products to guide customers through the workflow, from sample preparation through analysis and visualization.

The Company began commercial and manufacturing operations and selling its instruments and consumables in 2015.

The Company is headquartered in Pleasanton, California and has

wholly-owned subsidiaries in Sweden, Netherlands, Singapore, Germany and China.

The Company is headquartered in Pleasanton, California and has wholly-owned subsidiaries in China, Germany, Netherlands, Singapore, Sweden and the United Kingdom.

Initial Public Offering

The Companys registration statement on Form S-1 related to its initial public offering

(IPO) was declared effective on September 11, 2019 by the Securities and Exchange Commission (SEC), and the Companys Class A common stock began trading on the Nasdaq Global Select Market on September 12,

underwriters option to purchase additional shares) at a price to the public of $39.00 per share.

Including the option exercise, the Company received aggregate net proceeds of $410.8 million after deducting offering costs, underwriting

discounts and commissions of $37.7 million.

Immediately prior to the completion of the IPO, 67,704,278 shares of convertible

preferred stock then outstanding converted into an equivalent number of shares of Class B common stock, 8,050,000 shares of Historical Class A common stock converted into an equivalent number of shares of Class B common stock, and

8,095,382 shares of Historical Class B common stock converted into an equivalent number of shares of Class A common stock.

The Company has reflected the renaming of Historical Class A common stock and Historical Class B common

stock to Class B common stock and Class A common stock, respectively, throughout the document and all instances of Class A common stock and Class B common stock reflect this change.

Immediately prior to the completion of the IPO,

the Company filed its Amended and Restated Certificate of Incorporation, which authorizes a total of 1,000,000,000 shares of Class A common stock, 100,000,000 shares of Class B common stock and 100,000,000 shares of preferred stock.

the third quarter of 2019, 484,484 shares of Class B common stock were converted to Class A common stock.

As of December 31, 2019, Class A common stock and Class B common stock issued and outstanding was 20,972,166 and

75,269,430, respectively.

Each share of Class A common stock is entitled to one vote per share.

Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on September 11, 2019 by the Securities and Exchange Commission (“SEC”), and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on September 12, 2019.

On September 16, 2019, the Company completed its IPO, in which the Company sold 11,500,000 shares of Class A common stock (which included 1,500,000 shares that were offered and sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares) at a price to the public of $ 39.00 per share.

Including the option exercise, the Company received aggregate net proceeds of $ 410.8 million after deducting offering costs, underwriting discounts and commissions of $ 37.7 million.

Follow-on Public Offering

The Company’s registration statement on Form S-1 related to its follow-on public offering was declared effective by the SEC on September 10, 2020.

The Company sold 4,600,000 shares of Class A common stock (which included 600,000 shares that were offered and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $ 110.00 per share.

Including the option exercise, the Company received aggregate net proceeds of $ 482.3 million after deducting offering costs, underwriting discounts and commissions of $ 23.8 million.

Basis of Presentation

The consolidated financial statements, which include the Companys accounts and the accounts of its wholly-owned subsidiaries, are

prepared in accordance with U.S.

The consolidated financial statements, which include the Company’s accounts and the accounts of its wholly-owned subsidiaries, are prepared in accordance with U.S.

generally accepted accounting principles (or “GAAP”).

All intercompany transactions and balances have been eliminated.

While the Company

generated positive cash flows from operations of $34.6 million for the year ended December 31, 2019, the Company has incurred significant losses and has historically had negative cash flows

from operations.

As of December 31, 2019, the Company had unrestricted cash and cash equivalents of $424.2 million and an accumulated deficit of $262.4 million.

Management expects

to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while the Company makes investments to support its anticipated growth.

The Company believes that its cash and cash equivalents

balance as of December 31, 2019 provides sufficient capital resources to continue its operations for at least 12 months from the issuance date of the accompanying consolidated financial statements.

Summary of Significant Accounting Policies

Use of Estimates

The preparation

of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent

liabilities, and the reported amounts of revenue and expense.

These judgments, estimates and assumptions are used for, but not limited to, revenue recognition, inventory valuation and write-downs, loss contingencies, accounting for assets

acquisitions and the valuation of stock-based compensation awards.

The Company bases its estimates on various factors and information, which may include, but are not limited to, history and prior experience, the Companys forecasts and future

plans, current economic conditions and information from third-party professionals that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and

liabilities and recorded amounts of expenses that are not readily apparent from other sources.

To the extent there are material differences between the Companys estimates and the actual results, the Companys future consolidated results

of operation may be affected.

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

These judgments, estimates and assumptions are used for, but not limited to, revenue recognition, inventory valuation and write-downs, loss contingencies, accounting for assets acquisitions and the valuation of stock-based compensation awards.

The Company bases its estimates on various factors and information, which may include, but are not limited to, history and prior experience, the Company’s forecasts and future plans, current economic conditions and information from third-party professionals that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources.

To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operation may be affected.

The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates.

Segment Information

The Company operates as a single operating segment.

The Companys chief operating decision maker, its Chief Executive Officer, manages the

Companys operations on a consolidated basis for the purposes of allocating resources, making operating decisions and evaluating financial performance.

The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources, making operating decisions and evaluating financial performance.

Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

Cash equivalents consist primarily of amounts invested in money market funds and are stated at fair value.

Restricted cash

mainly represents $5.0 million of cash on deposit with a financial institution as security for a letter of credit outstanding for the benefit of the landlord related to the Companys noncancelable operating lease for its corporate

headquarters (see Commitments and Contingencies below), $45.2 million of cash on deposit with a financial institution in connection with the issuance of a bond related to The 2015 Delaware Action (see Commitments

and Contingencies below), and $2.1 million of cash held in escrow related to royalties on certain sales pursuant to the terms of The 2015 Delaware Action.

The restricted cash related to the letter of credit is classified as noncurrent

restricted cash on the consolidated balance sheets based on the term of the underlying lease.

The following table provides a

reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

Short-term restricted cash of $ 16.6 million is primarily comprised of $ 16.0 million cash on deposit with a financial institution in connection with the issuance of a bond related to The 2015 Delaware Action (see “—Commitments and Contingencies” below) and $ 0.5 million related to the letter of credit classified as noncurrent restricted cash on the consolidated balance sheets based on the term of the underlying lease.

Long-term restricted cash mainly represents $ 8.5 million of cash on deposit with a financial institution as security for letters of credit outstanding for the benefit of the landlord related to the Company’s non-cancelable operating lease for its corporate headquarters (see “—Commitments and Contingencies” below).

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

Year Ended December 31,

2020 2019 2018

Cash and cash equivalents $ 663,603 $ 424,166 $ 65,080

2 unchanged sentences

Fair Value of Financial Instruments

The Company determines the fair value of an asset or liability based on the assumptions that market participants would use in pricing the asset

or liability in an orderly transaction between market participants at the measurement date.

The Company determines the fair value of an asset or liability based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction between market participants at the measurement date.

The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability.

A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those

using unobservable inputs.

A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs.

This hierarchy prioritized the inputs into three broad levels as follows:

Quoted prices in active

markets for identical instruments

Other significant observable inputs (including quoted prices in active markets for similar

Quoted prices in active markets for identical instruments

Other significant observable inputs (including quoted prices in active markets for similar instruments)

Significant unobservable inputs (including assumptions in determining the fair value of certain investments)

Money market funds are highly liquid investments and are actively traded.

The pricing information for the Companys money market

funds are readily available and can be independently validated as of the measurement date.

Money market funds are highly liquid investments which are actively traded.

The pricing information for the Company’s money market funds are readily available and can be independently validated as of the measurement date.

This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

There were no transfers between Levels 1, 2 or 3

for any of the periods presented.

There were no transfers between Levels 1, 2 or 3 for any of the periods presented.

As of December 31, 2020 and December 31, 2019, the Company held $ 600.9 million and $ 398.5 million in money market funds, respectively, with no unrealized gains or losses.

The Company has issued common stock warrants for which fair value is determined using Level 3 inputs, see discussion in Note 8.

Accounts Receivable, Net

receivable consist of amounts due from customers for the sales of products and services.

The Company reviews its accounts receivable and provides allowances of specific amounts if collectability is no longer reasonably assured based on historical

experience and specific customer collection issues.

The allowance for doubtful accounts was $0.3 million as of December 31, 2018.

There was no allowance for doubtful accounts as of December 31, 2019.

Accounts receivable consist of amounts due from customers for the sales of products and services.

The Company reviews its accounts receivable and provides allowances of specific amounts if collectability is no longer reasonably assured based on historical experience and specific customer collection issues.

There was no allowance for doubtful accounts as of December 31, 2020 and December 31, 2019.

Business Concentrations

Companys instruments are mostly assembled and tested by a single contract manufacturer in the United States.

The Companys agreement with the contract manufacturer expires in 2020 and may be terminated by either party for any reason by

providing the other party with at least 30 days written notice.

The Companys agreement with the contract manufacturer contains purchase commitments.

In addition, the Company is reliant on several suppliers for key components for its reagent

A significant disruption in the operations of the contract manufacturer or suppliers may impact the production of the Companys products for a substantial period of time, which could have a material adverse effect on its business,

financial condition and results of operations.

The Company’s instruments are mostly assembled and tested by a single contract manufacturer in Asia and the United States.

The Company’s agreement with the contract manufacturers contains purchase commitments.

In addition, the Company is reliant on several suppliers for key components for its reagent kits.

A significant disruption in the operations of the contract manufacturers or suppliers may impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on its business, financial condition and results of operations, which may be partially mitigated by the contract manufacturer's ability to relocate operations from Asia location to United States.

Concentrations

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

Companys cash and cash equivalents are primarily held with a large financial institution in the United States and deposits exceed the Federal Deposit Insurance Corporations insurance limit.

The Companys debt is with this same

financial institution.

The Company’s cash and cash equivalents are primarily held with a large financial institution in the United States and deposits exceed the Federal Deposit Insurance Corporation’s insurance limit.

The Company performs periodic evaluations of the risks associated with its investments and the relative credit standing of this financial institution.

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The Company has not experienced significant credit losses to date.

For the years ended December 31, 2019, 2018, and 2017, no

single customer represented more than 10% of revenue.

For the years ended December 31, 2020, 2019, and 2018, no single customer represented more than 10% of revenue.

As of December 31, 2020 and December 31, 2019, no single customer represented more than 10% of the Company’s outstanding accounts receivable.

Substantially all the Company’s long-lived assets are located in the United States.

Inventory is recorded

at the lower of cost, determined on a first-in, first-out basis, or net realizable value.

The Company uses judgment to analyze and determine if the

composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations.

The Company writes down specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period that it is

first recognized by using a number of factors including product expiration dates, open and unfulfilled orders and sales forecasts.

Any write-down of its inventory to net realizable value establishes a new cost basis and will be maintained even if

certain circumstances suggest that the inventory is recoverable in subsequent periods.

Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value.

The Company uses judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations.

The Company writes down specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders and sales forecasts.

Any write-down of its inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest that the inventory is recoverable in subsequent periods.

Costs associated with the write-down of inventory are recorded to cost of revenue on the Company’s consolidated statements of operations.

The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term.

ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.

As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments.

The Company gives consideration to its credit risk, term of the lease and total lease payments and adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates.

The lease terms may include options to extend or terminate the lease when the Company is reasonably certain it will exercise such options.

Lease costs for the Company’s operating leases are recognized on a straight-line basis within operating expenses and costs of goods sold over the reasonably assured lease term.

The Company has elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for any lease and non-lease components as a single lease component.

The Company has also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less.

Internal-Use Software

The Company capitalizes costs incurred to develop internal-use software within fixed assets and commencing from the first quarter of 2020, began capitalizing costs to develop hosting arrangements within other assets in the consolidated balance sheets.

Costs incurred during the preliminary planning and evaluation and post implementation stages of the project are expensed as incurred.

Costs incurred during the application development stage of the project are capitalized.

These costs are amortized on a straight-line basis over the estimated useful life of the asset.

Property and Equipment, Net

Property and equipment, net is stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method based

on the estimated useful lives of the assets.

Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased assets at the inception of the lease.

Amortization expense

is computed using the straight-line method over the shorter of the estimated useful lives of the leased assets or the period of the related lease.

Amortization of assets under capital leases is included in depreciation expense.

The estimated useful

lives of the Companys property and equipment are as follows:

Property and equipment is stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method based on the estimated useful lives of the following assets:

Useful Life (Years)

Laboratory equipment and machinery 3 - 5

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Impairment of Long-Lived Assets

The Company evaluates long-lived assets, such as property and equipment and intangible assets, for impairment whenever events or changes in

circumstances indicate that the carrying value of an asset may not be recoverable.

If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the

Company reduces the carrying amount of the assets to their estimated fair values based on a discounted cash flow approach or, when available and appropriate, to comparable market values.

There were no impairment losses recorded for the years ended

December 31, 2019 and December 31, 2018.

The Company evaluates long-lived assets, such as property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets to their estimated fair values based on a discounted cash flow approach or, when available and appropriate, to comparable market values.

There were no impairment losses recorded for the years ended December 31, 2020, 2019 and 2018.

Product Warranties

The Company generally provides a one-year warranty on its instruments.

reviews its exposure to estimated warranty obligations associated with instrument sales and establishes an accrual based on historical product failure rates and actual warranty costs incurred.

This expense is recorded as a component of cost of

revenue in the consolidated statements of operations and comprehensive loss.

The Company reviews its exposure to estimated warranty obligations associated with instrument sales and establishes an accrual based on historical product failure rates and actual warranty costs incurred.

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

Deferred Revenue

Deferred revenue consists of payments received in advance of revenue recognition primarily related to instrument service agreements, also

referred to as extended warranties.

Deferred revenue consists of payments received in advance of revenue recognition primarily related to instrument service agreements, also referred to as extended warranties.

Revenue under these agreements is recognized over the related service period.

Deferred revenue that will be recognized during the 12 months following the balance sheet date is recorded as current portion of

deferred revenue and the remaining portion is recorded as long term.

Deferred revenue expected to be recognized during the 12 months following the balance sheet date is recorded as current portion of deferred revenue and the remaining portion is recorded as long-term.

Accrued Contingent Liabilities

Accrued contingent liabilities represents the Companys estimates of possible losses on pending litigation, including related accrued

royalties that are both probable and reasonably estimable.

Accrued contingent liabilities represents the Company’s estimates of possible losses on pending litigation, including related accrued royalties that are both probable and reasonably estimable.

Revenue Recognition

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The Company’s products consist of instruments and consumables.

The revenue recognition accounting policy described below relates to revenue transactions from January 1, 2019 and onward, which are accounted for in

accordance with Accounting Standards Codification Topic 606 Revenue from Contracts with Customers

The Company recognizes

revenue when control of the products and services is transferred to its customers in an amount that reflects the consideration it expects to receive from its customers in exchange for those products and services.

This process involves identifying

the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract and recognizing revenue when the performance

obligations have been satisfied.

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.

The Company considers a performance obligation satisfied once it has 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.

Revenue from product sales is recognized when control of the product is transferred, which is generally upon

shipment to the customer.

The Company began shipping its Chromium Connect instrument during the first quarter of 2020.

Commencing on January 1, 2019, the Company recognized revenues in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers.

The Company recognizes revenue when control of the products and services is transferred to its customers in an amount that reflects the consideration it expects to receive from its customers in exchange for those products and services.

This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract and recognizing revenue when the performance obligations have been satisfied.

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.

The Company considers a performance obligation satisfied once it has 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.

Revenue from product sales is recognized when control of the product is transferred, which is generally upon shipment to the customer.

In instances where right of payment or transfer of title is contingent upon the customer’s acceptance of the product, revenue is deferred until all acceptance criteria have been met.

Instrument service agreements,

which relate to extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period.

extended warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation.

Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental

Instrument service agreements, which relate to extended warranties, are typically entered into for one-year terms, following the expiration of the standard one-year warranty period.

Revenue for extended warranties is recognized ratably over the term of the extended warranty period as a stand ready performance obligation.

Revenue is recorded net of discounts, distributor commissions and sales taxes collected on behalf of governmental authorities.

Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 45 days.

Cash received from customers in advance of product shipment or providing services is recorded as a contract

Cash received from customers in advance of product shipment or providing services is recorded as a contract liability.

The Company’s contracts with its customers generally do not include rights of return or a significant financing component.

The Company regularly enters into contracts that include various combinations of products and services which are generally distinct and

accounted for as separate performance obligations.

The Company regularly enters into contracts that include various combinations of products and services which are generally distinct and accounted for as separate performance obligations.

The transaction price is allocated to each performance obligation in proportion to its standalone selling price.

The Company determines standalone selling price using average selling prices with

consideration of current market conditions.

The Company determines standalone selling price using average selling prices with consideration of current market conditions.

If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by management, adjusted for applicable discounts.

The revenue recognition accounting policy described below relates to revenue transactions prior to

January 1, 2019, which are accounted for in accordance with Accounting Standards Codification Topic 605 Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the

price to the customer is fixed or determinable, and collectability is reasonably assured.

The Company assesses collectability based on factors such as the customers creditworthiness and past collection history, if applicable.

If collection is

not reasonably assured, revenue recognition is deferred until receipt of payment.

The Company also assesses whether a price is fixed or determinable by, among other things, reviewing contractual terms and conditions related to payment.

occurs when there is a transfer of title and risk of loss passes to the customer.

Certain of the Companys sales arrangements

involve the delivery of multiple products and services within contractually binding arrangements.

Multiple-deliverable sales transactions typically consist of the sale and delivery of one or more instruments and consumables together and may include

an instrument service agreement.

For sales arrangements that include multiple deliverables, the Company uses the stated contractual price

for its instrument service agreements as its best estimate of selling price, if and when sold, and allocates the remaining contract consideration at the inception of the contract to the other units of accounting based upon their relative selling

The Company may use its best estimate of selling price for individual deliverables when vendor specific objective evidence or third-party evidence is unavailable.

A delivered item is considered to be a separate unit of accounting when it has

value to the customer on a stand-alone basis.

The Companys products are typically delivered together or within a short time frame,

generally within one to three months of the contract date.

Instrument service agreements, which relate to extended warranties, are typically entered into for one-year terms, following the

expiration of the standard one-year warranty period.

The Companys products are generally sold without the right of return.

Amounts received before revenue recognition criteria are met are classified on

the consolidated balance sheets as deferred revenue.

Cost of Revenue

Costs of revenue primarily consist of manufacturing costs incurred in the production process, including personnel and related costs, component

materials, labor and overhead, packaging and delivery costs and allocated costs including facilities and information technology.

In addition, costs of product revenue includes royalty costs for licensed technologies included in the Companys

products, warranty costs and provisions for slow-moving and obsolete inventory.

Costs of revenue primarily consist of manufacturing costs incurred in the production process, including personnel and related costs, component materials, labor and overhead, packaging and delivery costs and allocated costs including facilities and information technology.

In addition, costs of product revenue includes royalty costs for licensed technologies included in the Company’s products, warranty costs and provisions for slow-moving and obsolete inventory.

In addition, beginning in November 2018, cost of revenue includes estimated accrued royalties related to the Bio-Rad litigation.

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Shipping and handling charged to customers are recorded as revenue.

Shipping and handling costs are included in the Companys cost of

Shipping and handling costs are included in the Company’s cost of revenue.

Research and Development

Research and development costs are expensed in the period incurred.

Research and development expense consists of personnel and related costs,

independent contractor costs, laboratory supplies, equipment maintenance, prototype and materials expenses, amortization of developed technology and intangibles and allocated costs including facilities and information technology.

See Note 3 for discussion of in-process research and development included on the

consolidated statements of operations.

Research and development expense consists of personnel and related costs, independent contractor costs, laboratory supplies, equipment maintenance, prototype and materials expenses, amortization of developed technology and intangibles and allocated costs including facilities and information technology.

See Note 3 for discussion of in-process research and development included on the consolidated statements of operations.

Advertising Costs

Advertising costs are expensed as incurred.

The Company incurred advertising costs of $1.5 million, $0.7 million, and

$0.2 million for the years ended December 31, 2019, 2018, and 2017, respectively.

The Company incurred advertising costs of $ 1.9 million, $ 1.5 million, and $ 0.7 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Stock-Based Compensation

The Company estimates the fair value of share-based payment awards granted to employees and directors on the grant date using the Black-Scholes

option-pricing model.

The fair value of share-based payment awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they

Share-based payment awards that include a service condition and a performance condition are considered expected to vest when the performance condition is probable of being met.

The Company’s stock-based compensation relates to stock options, restricted stock units (“RSUs”) and stock purchase rights under an Employee Stock Purchase Plan (“ESPP”).

Stock-based compensation expense for its stock-based awards are based on their grant date fair value.

The Company determines the fair value of RSUs based on the closing price of its stock, which is listed on Nasdaq, at the date of the grant.

The Company estimates the fair value of stock option awards granted to employees and directors on the grant date using the Black-Scholes option-pricing model.

The fair value of stock option awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they occur.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards.

These variables

include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and the expected stock price volatility over the expected term.

For all stock options granted,

the Company calculated the expected term using the simplified method for plain vanilla stock option awards.

The Company had no publicly available stock price information prior to its IPO and limited publicly available stock price

information subsequent to its IPO and therefore, the Company has used the historical volatility of the stock price of similar publicly traded peer companies.

These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and the expected stock price volatility over the expected term.

For all stock options granted, the Company calculated the expected term using the simplified method for “plain vanilla” stock option awards.

The Company had no publicly available stock price information prior to its IPO and limited publicly available stock price information subsequent to its IPO and therefore, the Company has used the historical volatility of the stock price of similar publicly traded peer companies.

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

Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.

Stock-based compensation expense for nonemployee stock options is measured based on fair market value using the Black-Scholes option pricing

model and is recorded as the options vest.

Stock-based compensation expense for nonemployee stock options is measured based on fair market value using the Black-Scholes option pricing model and is recorded as the options vest.

Prior to January 1, 2019, nonemployee stock options subject to vesting were revalued periodically over the requisite service period, which was generally the same as the vesting term of the award.

January 1, 2019, the grant date fair market value of nonemployee stock options is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period and forfeitures are recognized as they occur.

From January 1, 2019, the grant date fair market value of nonemployee stock options is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period and forfeitures are recognized as they occur.

Foreign Currency

subsidiaries where the functional currency is the local currency, assets and liabilities are translated to the U.S.

dollar using month-end exchange rates, and revenue and expenses using average

exchange rates.

For foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated to the U.S.

dollar using month-end exchange rates, and revenue and expenses using average exchange rates.

The adjustments resulting from these foreign currency translations are recorded in accumulated other comprehensive loss.

For entities where the functional currency is the U.S.

dollar, monetary assets and liabilities are remeasured using exchange rates in effect

at the balance sheet dates and non-monetary assets and liabilities are remeasured at historical exchange rates.

dollar, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet dates and non-monetary assets and liabilities are remeasured at historical exchange rates.

Revenue and expenses are remeasured at the average exchange rates for the period.

or losses from foreign currency remeasurement are included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company recognized foreign currency transaction gains of $0.1 million for the

year ended December 31, 2019, foreign currency transaction losses of $0.3 million for the year ended December 31, 2018, and foreign currency transaction gains of $0.1 million for the year ended December 31, 2017.

The Company uses the

asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing

assets and liabilities and their respective tax bases.

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

The effect on

deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date.

A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset

will not be realized.

Gains or losses from foreign currency remeasurement are included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company recognized foreign currency transaction gains of $ 1.3 million and $ 0.1 million for the years ended December 31, 2020 and December 31, 2019, respectively, and foreign currency transaction losses of $ 0.3 million for the year ended December 31, 2018.

The Company uses the asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the years in which those tax assets and liabilities are expected to be realized.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized.

The Company’s tax positions are subject to income tax audits.

The Company recognizes the tax benefit of an

uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits.

The tax benefit recognized is measured as the largest amount of benefit which is more

likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority.

The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits.

The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon settlement with the taxing authority.

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision.

The Company calculates the current and deferred income tax provision based on estimates and assumptions that could differ from the actual

results reflected in income tax returns filed in subsequent years.

The Company calculates the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years.

Adjustments based on filed income tax returns are recorded when identified.

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federal and state tax authorities.

estimate of the potential outcome of any uncertain tax issue is subject to managements assessment of the relevant risks, facts and circumstances existing at that time.

To the extent the assessment of such tax position changes, the change in

estimate is recorded in the period in which the determination is made.

The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of the relevant risks, facts and circumstances existing at that time.

To the extent the assessment of such tax position changes, the change in estimate is recorded in the period in which the determination is made.

Net Loss Per Share

Net loss per share is computed using the two-class method required for multiple classes of

common stock and participating securities.

Net loss per share is computed using the two-class method required for multiple classes of common stock and participating securities.

The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights.

As the liquidation

and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an

individual or combined basis.

The Companys participating securities included the Companys convertible preferred stock, as the

holders are entitled to receive noncumulative dividends on a pari passu basis in the event that a dividend is paid on common stock.

The Company also considers any shares issued on the early exercise of stock options subject to repurchase to be

participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock.

The holders of convertible preferred stock, as well as

the holders of early exercised shares subject to repurchase, do not have a contractual obligation to share in losses.

Basic net loss per

share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.

For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities, including

convertible preferred stock, awards under the Companys equity compensation plan and common stock warrants.

As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.

The Company’s participating securities included the Company’s convertible preferred stock, as the holders would have been entitled to receive noncumulative dividends on a pari passu basis in the event that a dividend was paid on common stock.

The Company also considers any shares issued on the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock.

The holders of convertible preferred stock, as well as the holders of early exercised shares subject to repurchase, do not have a contractual obligation to share in losses.

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.

For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities, including convertible preferred stock, awards under the Company’s equity compensation plan and common stock warrants.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding.

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

evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair

value of the gross assets acquired is concentrated in a single identifiable

asset or group of similar identifiable assets.

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

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to

whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the requirements of a business.

The Company accounts for an asset acquisition under Accounting Standards Codification (ASC), Business Combinations Topic

805, Subtopic 50 , which requires the acquiring entity in an asset acquisition to recognize net assets based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given.

If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the requirements of a business in which case the transaction is accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date, and that the fair value of acquired intangibles be recorded on the balance sheet.

Transaction costs are expensed as incurred.

Any excess of the purchase price over the assigned fair values of the net assets acquired is recorded as goodwill.

The Company accounts for an asset acquisition under ASC, Business Combinations Topic 805, Subtopic 50 , which requires the acquiring entity in an asset acquisition to recognize net assets based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given.

Goodwill is not recognized in an asset acquisition;

any excess consideration transferred over the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on

relative fair values.

any excess consideration transferred over the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on relative fair values.

In-process research and development expense is expensed as incurred provided there is no alternative future use.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or

becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired).

Upon recognition of the contingent consideration payment, the amount is included in

the cost of the acquired asset or group of assets.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired).

Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic

606) , which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition.

This standard is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for those goods or services.

The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer

contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The Company adopted this standard as of January 1, 2019 using the modified retrospective approach,

which did not have a material impact on its consolidated financial statements.

In October 2016, the FASB issued ASU No.

2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory .

This standard will require entities to recognize the income tax consequences of an intra-entity transfer of

an asset other than inventory when the transfer occurs instead of when the asset is sold.

This standard is effective for annual periods beginning after December 15, 2018.

The Company adopted this standard on January 1, 2019, which did not

have a material impact to its consolidated financial statements.

In June 2018, the FASB issued ASU

2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

This standard expands the scope of Topic 718, CompensationStock

Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

Consequently, the accounting for share-based payments to nonemployees and employees will

be substantially aligned.

This standard is effective for annual periods beginning after December 15, 2019.

The Company early adopted this standard on January 1, 2019, which did not have a material impact on its consolidated financial

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-2, Leases (Topic 842) .

This standard requires

substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted

for as operating leases.

The Company will early adopt this standard on January 1, 2020 using the optional transition method by recognizing a cumulative effect adjustment to the opening balance of accumulated deficit as of that date.

expects to recognize right-to-use assets in the range of $33 million to $43 million and corresponding lease liabilities in the range of $49 million to

$59 million at the date of adoption and does not expect the adoption to significantly impact its consolidated statement of operations and comprehensive loss or cash flows.

The Company also

expects to elect the package of practical expedients, which permits the Company to not reassess under this standard its prior conclusions about lease identification, lease classification and initial direct costs.

In addition, the Company

expects to elect the short-term lease recognition exemption for all leases that qualify.

This standard requires substantially all leases to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases.

On January 1, 2020, the Company early adopted Topic 842 using the optional transition method by recognizing a cumulative effect adjustment to the opening balance of accumulated deficit as of that date.

Results for the year ended December 31, 2020 are presented under the guidance in Topic 842.

No prior period amounts were adjusted and continue to be reported in accordance with previous lease guidance, ASC Topic 840 – Leases .

The following table summarizes the impact of Topic 842 on the Company's consolidated balance sheet as of January 1, 2020 (in thousands):

2019 Adjustments due to

the adoption of

Topic 842 January 1,

Operating lease right-of-use assets $ — $ 38,005 $ 38,005

Prepaid expenses and other current assets 8,033 ( 434 ) 7,599

Total assets $ 8,033 $ 37,571 $ 45,604

Accrued expenses and other current liabilities $ 24,448 $ ( 99 ) $ 24,349

Operating lease liabilities — 3,086 3,086

Deferred rent, noncurrent 16,120 ( 16,120 ) —

Operating lease liabilities, noncurrent — 50,704 50,704

Total liabilities $ 40,568 $ 37,571 $ 78,139

The adjustments due to the adoption of Topic 842 related to the recognition of operating lease right-of-use assets and operating lease liabilities for the Company’s existing operating leases.

In June 2016, the FASB issued ASU No.

2016-13, Credit losses (Topic 326), which sets forth a current expected credit loss (CECL) model which requires the Company to measure all expected credit losses for financial instruments

held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at

amortized cost and applies to some off-balance sheet credit exposures.

The standard is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years.

adoption is permitted.

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

In August 2018, the FASB issued ASU 2018-15, Intangibles Goodwill and Other Internal

Use Software (Subtopic 350-40) Customer s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , which aligns the accounting for

implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense.

This standard is effective for annual periods beginning after December 15, 2020, and interim periods

within annual periods beginning after December 15, 2021.

Early adoption is permitted, including adoption in any interim period.

This standard can be applied either retrospectively or prospectively to all implementation costs incurred after the

date of adoption.

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

November 2019, the FASB issued ASU 2019-08, Compensation Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) , which expands the scope of ASC Topic 718 to provide

guidance for share-based payment awards granted to a customer in conjunction with selling goods or services accounted for under Topic 606.

This standard is effective for fiscal years beginning after December 15, 2019 and interim periods within

those fiscal years.

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

December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) , which simplifies the accounting for income taxes, primarily by eliminating certain exceptions to the guidance in ASC

This ASU is effective for fiscal periods beginning after December 15, 2021.

The Company is currently evaluating this guidance and the impact it may have on the Companys consolidated financial statements.

2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) , which requires financial assets measured at amortized cost to be presented at the net amount expected to be collected and provides that credit losses relating to available-for-sale debt securities and accounts receivable should be recorded through an allowance for credit losses.

The guidance was amended through various ASUs subsequent to ASU 2016-13.

The Company calculates the allowance for credit losses as a percentage of the trade accounts receivable balance based on collection history and current economic trends that it expects will impact the level of credit losses over the life of its receivables.

The allowance is re-evaluated on a regular basis and adjusted, as required.

Trade accounts receivable are considered past due based on the contractual payment terms.

Once a trade account receivable is deemed uncollectible, it is charged against this allowance.

The Company early adopted this standard on a modified retrospective basis effective January 1, 2020.

The adoption did not have a material impact on the consolidated financial statements.

In November 2019, the FASB issued ASU 2019-8, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) , which expands the scope of ASC Topic 718 to provide guidance for share-based payment awards granted to a customer in conjunction with selling goods or services accounted for under Topic 606.

The Company early adopted this standard on January 1, 2020, which did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense.

The Company early adopted this standard on a prospective basis effective January 1, 2020.

As a result of the adoption of this standard, during the year ended December 31, 2020, the Company capitalized $ 2.8 million of implementation costs for enterprise resource planning and related software, Oracle Cloud, which went live during the third quarter of 2020.

These costs are recorded within other assets in the consolidated balance sheets and amortized on a straight-line basis over its estimated useful life.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) , which simplifies the accounting for income taxes, primarily by eliminating certain exceptions to ASC 740.

This standard is effective for fiscal periods beginning after December 15, 2021.

The Company early adopted this standard on a modified retrospective basis as of December 31, 2020 which did not have a material impact on the consolidated financial statements.

Asset Acquisitions

In November 2018, the Company purchased all of the outstanding shares of Spatial Transcriptomics Holdings AB (Spatial

Transcriptomics), for $38.6 million inclusive of acquisition costs of $0.5 million.

The patents acquired in this transaction will enable the Company to develop spatial products.

The transaction was accounted for as an asset

On October 13, 2020, the Company purchased all of the outstanding shares of ReadCoor Inc.

(“ReadCoor”), a privately held company based in Cambridge, MA, for $ 407.4 million, inclusive of $ 1.6 million of transaction costs and net of cash acquired of $ 9.2 million.

The total purchase consideration comprised of $ 101.4 million in cash and $ 306.0 million in shares of the Company's common stock.

The purchase agreement provided for the Company to issue 1,901,382 shares of the Company’s class A

common stock which was based on a contractual value of $ 250.0 million divided by the ten-day weighted average price of the Company's common stock shortly prior to the acquisition.

In determining the total purchase consideration paid for ReadCoor, these shares were valued at $ 306.0 million based on the fair value of the Company’s class A common stock on the acquisition date.

ReadCoor is developing In Situ RNA analysis technology, consisting of a suite of proprietary reagents, which aims to enable researchers to visualize spatially resolved RNA expression profiles with sub-cellular resolution throughout fresh frozen or formalin-fixed, paraffin-embedded tissue sections.

The transaction was accounted for as an asset acquisition.

In connection with this acquisition, the Company acquired an in-process research and development intangible asset of $ 406.9 million which did not have alternative future use and therefore was recognized as an expense and included as a component of in-process research and development in the consolidated statements of operations and comprehensive loss.

The Company also acquired an intangible asset of $ 0.9 million related to assembled workforce which is included in other assets in the consolidated balance sheets.

The following table summarizes the value of assets acquired and liabilities assumed (in thousands):

Assets Acquired and Liabilities Assumed

In-process research and development $ 406,911

Intangible asset 927

Other assets and liabilities, net ( 406 )

Total net assets acquired $ 407,432

On August 21, 2020, the Company purchased all of the outstanding shares of CartaNA AB (“CartaNA”), a privately held company based in Stockholm, Sweden, for $ 41.8 million, inclusive of $ 0.6 million of transaction costs and net of cash acquired of $ 1.5 million.

CartaNA is developing In Situ RNA analysis technology, consisting of a suite of proprietary reagents, which aims to enable researchers to visualize spatially resolved RNA expression profiles with sub-cellular resolution throughout fresh frozen or formalin-fixed, paraffin-embedded tissue sections.

The transaction was accounted for as an asset acquisition.

In connection with this acquisition, the Company acquired an in-process research and development intangible asset of $ 40.6 million which did not have alternative future use and therefore was recognized as an expense and included as a component of in-process research and development in the consolidated statements of operations and comprehensive loss.

The Company also acquired $ 0.8 million in intangible assets related to customer relationships and assembled workforce which are included in other assets in the consolidated balance sheets.

The following table summarizes the value of assets acquired and liabilities assumed (in thousands):

Assets Acquired and Liabilities Assumed

In-process research and development $ 40,637

Intangible assets 801

Other assets and liabilities, net 348

Total net assets acquired $ 41,786

There were no acquisitions in 2019.

In November 2018, the Company purchased all of the outstanding shares of Spatial Transcriptomics Holdings AB (“Spatial Transcriptomics”), for $ 38.6 million inclusive of acquisition costs of $ 0.5 million.

The patents acquired in this transaction have enabled the Company to develop spatial products.

The transaction was accounted for as an asset acquisition.

In connection with this acquisition, the Company acquired patents, trademarks and customer relationships.

The patents acquired were allocated a value of $ 36.9 million.

Accordingly, the Company recognized a charge of

$36.9 million related to the transaction which is included as a component of in-process research and development on the consolidated statements of operations and comprehensive loss.

The Company recognized

a total of $0.4 million in intangible assets related to acquired trademarks and customer relationships which are included in other assets on the consolidated balance sheets.

The Company must also make contingent payments to the sellers of

Spatial Transcriptomics of a low double-digit percentage of revenue from certain spatial-related technology sales for the years ended December 31, 2019 through December 31, 2022, which are subject to continuing service requirements.

continuing service

requirements pertaining to earn the contingent payments, the contingent payments have been deemed to be a compensation arrangement which will be accounted for if and when earned.

Accordingly, the Company recognized a charge of $ 36.9 million related to the transaction which is included as a component of in-process research and development on the consolidated statements of operations and comprehensive loss.

The Company recognized a total of $ 0.4 million in intangible assets related to acquired trademarks and customer relationships which are included in other assets on the consolidated balance sheets.

The Company must also make contingent payments to the sellers of Spatial Transcriptomics of a low double-digit percentage of revenue from certain spatial-related technology sales for the years ended December 31, 2019 through December 31, 2022, which are subject to continuing service requirements.

Due to continuing service requirements pertaining to earn the contingent payments, the contingent payments have been deemed to be a compensation arrangement which will be accounted for if and when earned.

The following table summarizes the value of assets acquired and liabilities assumed (in thousands):

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In March 2018, the Company acquired all of the outstanding shares of Epinomics Inc.

(Epinomics)

for $22.2 million inclusive of acquisition costs of $0.3 million.

Of this amount, $6.2 million was due upon close of the acquisition and $16.0 million was due upon the amendment and assignment of a license agreement with the

Board of Trustees of the Leland Stanford Junior University which occurred in August 2018.

The technology licenses acquired in this transaction will enable the Company to develop products for epigenetics research.

The transaction was accounted for as

an asset acquisition.

component of in-process research and development on the consolidated statements of operations and comprehensive loss.

(“Epinomics”) for $ 22.2 million inclusive of acquisition costs of $ 0.3 million.

Of this amount, $ 6.2 million was due upon close of the acquisition and $ 16.0 million was due upon the amendment and assignment of a license agreement with the Board of Trustees of the Leland Stanford Junior University which occurred in August 2018.

The technology licenses acquired in this transaction have enabled the Company to develop products for epigenetics research.

The transaction was accounted for as an asset acquisition.

As the technology licenses acquired did not have alternative future use, the Company recognized charges of $ 22.2 million during the year ended December 31, 2018 related to this transaction which are included as a component of in-process research and development on the consolidated statements of operations and comprehensive loss.

Other Financial Statement Information

Inventory was comprised

of the following (in thousands):

Inventory was comprised of the following (in thousands):

Year Ended December 31,

2 unchanged sentences

Finished goods 10,717 4,838

Inventory $ 29,959 $ 15,270

Property and Equipment, Net

9 unchanged sentences

Property and equipment, net $ 72,840 $ 48,821

Depreciation expense was $6.7 million, $3.8 million and $4.3 million for the years ended

December 31, 2019, 2018, and 2017, respectively.

Depreciation expense was $ 12.3 million, $ 6.7 million and $ 3.8 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Intangible Assets, Net

In October 2019, as part of the 2019 Becton Dickinson Settlement and Patent Cross License Agreement with Becton, Dickinson and Company and

Cellular Research, Inc.

(BD Entities), the Company was granted a worldwide royalty-free, nonexclusive license to certain intellectual property from the BD Entities for a purchase price of $25.0 million, to be paid in annual amounts

of $6.25 million over four years beginning in January 2020.

The Company recognized the present value of the annual payments of $21.1 million as a liability as of the date of the agreement, which is included within accrued expenses and

other current liabilities and accrued license fee.

The Company recognized the estimated fair value of the license received of $22.1 million as an intangible asset which is being amortized to cost of revenue over its estimated useful life.

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

Year Ended December 31,

Intangible assets, net, which are recorded within other assets in the consolidated balance sheets, consisted of the following (dollars in thousands):

December 31, 2020 December 31, 2019

Remaining Useful Life in Years Gross

Amount Accumulated

Amortization Intangibles,

Net Remaining Useful Life in Years Gross

Amount Accumulated

Amortization Intangibles,

Technology licenses 13.7 $ 22,504 $ ( 1,973 ) $ 20,531 14.7 $ 22,504 $ ( 440 ) $ 22,064

Customer relationships 3.9 805 ( 111 ) 694 5.9 204 ( 32 ) 172

Trademarks 0.9 204 ( 142 ) 62 1.9 204 ( 74 ) 130

Assembled workforce 4.8 1,128 ( 61 ) 1,067 — — —

Total intangible assets, net $ 24,641 $ ( 2,287 ) $ 22,354 $ 22,912 $ ( 546 ) $ 22,366

The estimated annual amortization of intangible assets for the next five years is shown below (in thousands):

Actual amortization expense to be reported in future periods could differ from these estimates as a result of

acquisitions, divestitures and asset impairments, among other factors.

Thereafter 13,015

Total $ 22,354

Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures and asset impairments, among other factors.

Accrued Compensation and Related Benefits

1 unchanged sentence

Year Ended December 31,

Accrued payroll and related costs $ 2,506 $ 470

Employee stock purchase program liability 1,258 1,862

Accrued bonus 5,058 6,154

Accrued commissions 3,038 2,473

Accrued acquisition-related compensation 2,213 818

Accrued vacation 1,035 435

Other 275 182

Accrued compensation and related benefits $ 15,383 $ 12,394

2 unchanged sentences

Year Ended December 31,

Accrued legal expenses

Accrued legal and related costs $ 5,704 $ 4,888

Accrued license fee 6,198 6,183

Accrued purchase consideration 4,146 —

Accrued royalties for licensed technologies 3,160 2,025

Accrued property and equipment 2,983 3,885

Accrued consulting

Accrued professional services 3,137 1,380

Product warranties 399 467

1 unchanged sentence

Taxes payable 8,649 1,087

Accrued lab supplies 1,506 534

Other 5,844 2,695

Accrued expenses and other current liabilities $ 43,453 $ 24,448

3 unchanged sentences

Beginning of period $ 467 $ 804

Additions charged to cost of revenue

Amounts charged to cost of revenue 796 741

Repairs and replacements ( 864 ) ( 1,078 )

1 unchanged sentence

Revenue and Deferred Revenue

As of December 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations

was $4.1 million, of which approximately 80% is expected to be recognized to revenue in the next 12 months, with the remainder thereafter.

These contract liabilities of $4.1 million consisted of deferred revenue related to

extended warranty service agreements, and as of December 31, 2019, the short-term portion was $3.3 million.

Revenue recorded during the year ended December 31, 2019 included $2.3 million of previously deferred

revenue that was included in contract liabilities as of the adoption date of January 1, 2019.

A summary of the change in

contract liabilities is as follows (in thousands):

Balance as of January 1

Revenue recognized that was included in the contract liability at the beginning of the

As of December 31, 2020, the aggregate amount of remaining performance obligations related to separately sold extended warranty service agreements, or allocated amounts for extended warranty service agreements bundled with sales of Chromium instruments, was $ 6.2 million, of which approximately 73 % is expected to be recognized to revenue in the next 12 months, with the remainder thereafter.

As of December 31, 2020, the short-term portion was $ 4.5 million.

Contract assets as of December 31, 2020 and December 31, 2019 were not material.

A summary of the change in contract liabilities is as follows (in thousands):

Year Ended December 31,

January 1 $ 4,131 $ 3,497

Revenue recognized that was included in the contract liability at the beginning of the year ( 3,295 ) ( 2,250 )

Revenue deferred excluding amounts recognized as revenue during the period 5,318 2,884

Balance as of December 31 $ 6,154 $ 4,131

Contract assets as of the adoption date of January 1, 2019 and December 31, 2019 were not

The following table represents revenue by source for the periods indicated (in thousands):

Year Ended December 31,

2020 2019 2018

Instruments $ 40,128 $ 34,945 $ 36,540

Consumables 252,685 206,878 107,616

Services 6,032 4,070 2,157

Total revenue $ 298,845 $ 245,893 $ 146,313

The following table presents revenue by geography based on the location of the customer for the periods

indicated (in thousands):

The following table presents revenue by geography based on the location of the customer for the periods indicated (in thousands):

Year Ended December 31,

2020 2019 2018

North America $ 159,332 $ 139,758 $ 85,132

Europe, Middle East and Africa 73,265 58,004 35,812

China 41,741 29,920 15,075

Asia-Pacific (1)

24,507 18,211 10,294

Total revenue $ 298,845 $ 245,893 $ 146,313

Revenue for the United States, which is included in North America in the table above, was 54% and 55% of

consolidated revenue for the years ended December 31, 2019 and 2018, respectively.

In September 2016, the Company entered into a loan and security agreement which includes a term loan and revolving line of credit facility, and

initially borrowed $10.6 million as a term loan, known as Tranche A.

In February 2018, the loan and security agreement was amended and restated.

Under the terms of the amended and restated loan and security agreement, amounts available under

Tranche A were increased to $30.0 million (the Amended Tranche A).

As of the date of modification, the balance outstanding under Tranche A was $10.5 million.

After giving consideration to the end of term payment, the Company

borrowed an additional $19.5 million under the Amended Tranche A.

Under the amended agreement, the Company had the option to borrow an additional $20.0 million as a term loan, known as the Amended Tranche B, beginning October 1, 2018

through June 30, 2019, or the date of an event of default if earlier, and the revolving line of credit facility was increased from $5.0 million to up to $25.0 million.

Monthly payments of interest were due under the Amended Tranche A term loan through June 30, 2019, with monthly installments of principal

and interest due for 42 months thereafter.

If the Amended Tranche B was borrowed, monthly installments of principal and interest were to be reduced to 36 months.

In June 2019, the Companys loan and security agreement was amended to extend the

Companys option to borrow the Amended Tranche B through December 31, 2019.

This extended period expired with no amounts borrowed.

Additionally, the interest-only period was extended to December 31, 2019, with monthly installments of

principal and interest due for 36 months thereafter.

The term loan accrues interest at the greater of the floating per annum rate equal to the greater of The Wall Street Journal prime rate plus 2.0% or 6.25%.

Additionally, an end of term payment is

due to the lender in the amount of $1.8 million upon maturity, prepayment or acceleration of the term loan, as amended.

The end of term payment is accreted as additional interest expense over the term of the debt using the effective interest

In connection with the amendment, the Company paid a one-time fee of $50,000 to the lender.

The term loan may be repaid prior to the maturity date, however, a prepayment fee of 3.0% of the outstanding principal balance would be due in

addition to all outstanding principal and interest, if the prepayment

is made before the first anniversary date of the loan closing date.

This prepayment fee decreased to 2.0% after the first anniversary of the loan closing date.

On the second anniversary date of

the loan closing date, the prepayment fee decreases to 1.0% of the outstanding principal amount if paid after the second anniversary and prior to the maturity date.

The loan and security agreement provides the Company with a revolving line of credit of up to $25.0 million through December 2022.

amount available on the revolving line of credit is based on 80% of eligible receivables and is subject to a borrowing base calculation.

Principal amounts outstanding under the revolving line of credit accrue interest at the greater of a floating

per annum rate equal to the greater of The Wall Street Journal prime rate plus 0.25% or 4.5% and are repayable monthly.

Upon termination of the agreement for any reason prior to the revolving credit facilitys maturity date, a termination fee

of $250,000 would be due in addition to all outstanding principal and interest.

Additionally, the revolving line of credit has a nonrefundable annual commitment fee of $62,500 payable on each anniversary date.

In August 2019, the Company borrowed

$11.0 million under the revolving line of credit.

As of December 31, 2019, no amounts were outstanding under the revolving line of credit.

In connection with the amendment of the loan and security agreement, the Company issued the lender a warrant to purchase 125,000 Class A

common shares with an exercise price per share of $1.62.

The warrants had an estimated fair value of $150,000 which was recorded as a debt discount.

The Company had previously issued warrants to purchase an aggregate of 141,099 additional

Class A common shares in connection with the loan.

Thus, following the amendment of the loan and security agreement, the Company had issued warrants to purchase an aggregate of 266,099 Class A common shares.

Amounts borrowed under the loan and security agreement are collateralized by all of the Companys assets, except for intellectual

property, but including the proceeds from the sale of any of the Companys intellectual property.

In addition, the Company provides a negative pledge regarding its intellectual property and may not encumber it without the lenders consent.

The loan and security agreement contains various covenants for reporting, protecting and obtaining adequate insurance coverage for assets collateralized and for coverage of business operations, and complying with requirements, including the payment

of all necessary taxes and fees for all federal, state and local government entities.

Immediately upon the occurrence and during the continuance of an event of default, including the noncompliance with the above covenants, the lender may increase

the interest rate per annum by 5.0% above the rate that would be otherwise applicable;

stop future loan advances;

require the Company to deposit 105% of any undrawn letters of credit, or 110% if the letter of credit was denominated in a foreign

and take control over all assets collateralizing the loan and take necessary means to protect the collateral.

The loan and security agreement contains a material adverse change clause, including terms for subjective acceleration.

The term loan borrowings were prepaid in full on February 20, 2020.

As of December 31, 2019 and as of February 20, 2020, the

Company was in compliance with all loan covenants.

Aggregate annual payments due on the term loan as of December 31, 2019, were as follows

(in thousands):

Total payments

amount representing interest

Total term loan

unamortized debt discount

Total term loan, net of debt discount

current portion

Non-current portion

(1) Asia-Pacific excludes China which is disclosed separately.

Revenue for the United States, which is included in North America in the table above, was 52 % and 54 % of consolidated revenue for the years ended December 31, 2020 and 2019, respectively.

In September 2016, the Company entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (as amended and restated in February 2018 and as further amended, restated or supplemented from time to time, the “Loan and Security Agreement”), which included a term loan and revolving line of credit.

On February 20, 2020, the Company prepaid the remaining balance of the term loan and all associated costs.

The final payment of $ 30.5 million included $ 28.3 million for the outstanding principal balance of the term loan, $ 1.8 million for an end of term payment, $ 0.3 million for early termination fees and $ 0.1 million for interest.

The prepayment resulted in a loss on extinguishment of debt of $ 1.5 million.

The non-accreted portion of the end of term payment, unamortized discounts and early termination fees were included in the calculation of the loss on extinguishment of debt.

The revolving line of credit continued to be in effect until its termination at the election of the Company on June 18, 2020.

Prior to its termination, the revolving line of credit provided the Company with credit of up to $ 25.0 million through December 2022.

The amount available on the revolving line of credit was based on 80 % of eligible receivables and was subject to a borrowing base calculation.

Principal amounts outstanding under the revolving line of credit accrued interest at a floating per annum rate equal to the greater of The Wall Street Journal prime rate plus 0.25 % or 4.5 % and were repayable monthly.

Upon termination of the revolving line of credit and the Loan and Security Agreement on June 18, 2020, the Company incurred termination fees of $ 0.3 million.

As of December 31, 2020 and December 31, 2019, there were no balances outstanding under the revolving line of credit.

Loss before provision for income taxes were as follows for the periods indicated (in thousands):

2 unchanged sentences

International ( 157,641 ) 4,642

The provision for income taxes was $0.2 million for the year ended December 31, 2019, which related

to foreign and state income taxes.

Total $ ( 534,476 ) $ ( 31,033 )

The provision for income taxes was $ 8.3 million for the year ended December 31, 2020, which related to foreign and state income taxes.

For the year ended December 31, 2019, the provision for income taxes was $ 0.2 million.

reconciliation of the federal statutory income tax provision to the effective income tax provision is as follows for the periods indicated (in thousands):

A reconciliation of the federal statutory income tax provision to the effective income tax provision is as follows for the periods indicated (in thousands):

Year Ended December 31,

1 unchanged sentence

State taxes, net ( 16,653 ) ( 2,958 )

Tax credits ( 9,453 ) ( 2,684 )

Foreign taxes 41,253 101

2 unchanged sentences

Acquisition related expenses 93,407 116

Impact of change in tax status ( 34,731 ) —

Other ( 292 ) 345

Total provision for income taxes $ 8,255 $ 218

Deferred income taxes reflect the net tax effect of temporary differences between amounts

recorded for financial reporting purposes and amounts used for tax purposes.

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes.

The major components of deferred tax assets and liabilities are as follows as of the dates indicated (in thousands):

4 unchanged sentences

Accruals and reserves 14,392 23,804

Lease liability 14,192 —

Intangibles 43,261 1,339

Stock-based compensation 6,601 1,427

Total deferred tax assets 200,916 71,409

3 unchanged sentences

Deferred tax liabilities

Fixed assets $ ( 3,750 ) $ ( 4,946 )

Right-of-use assets ( 10,388 ) —

Total deferred tax liabilities ( 14,138 ) ( 4,946 )

Net deferred taxes $ ( 75 ) $ 7

As of December 31, 2019 and 2018, the Company maintained a full valuation allowance on its domestic net

deferred tax assets.

As of December 31, 2020 and 2019, the Company maintained a full valuation allowance on its domestic net deferred tax assets.

The domestic deferred tax assets predominantly relate to operating losses and tax credits.

The domestic valuation allowance was estimated based on an assessment of both positive and negative evidence to determine whether it is

more likely than not that deferred tax assets are recoverable.

The domestic valuation allowance was estimated based on an assessment of both positive and negative evidence to determine whether it is more likely than not that deferred tax assets are recoverable.

Such assessment is required on a jurisdiction-by-jurisdiction basis.

The Companys history of

cumulative losses, along with expected future U.S.

The Company’s history of cumulative losses, along with expected future U.S.

losses, required that a full valuation allowance be recorded against all domestic net deferred tax assets.

In 2019, the Company determined it to be more likely than not that its Swedish deferred tax

assets would be realized.

Accordingly, the Company released its related foreign valuation allowance.

The Company intends to maintain a full valuation allowance on domestic net deferred tax assets until sufficient positive evidence exists to support

a reversal of the valuation allowance.

The Company intends to maintain a full valuation allowance on domestic net deferred tax assets until sufficient positive evidence exists to support a reversal of the valuation allowance.

The valuation allowance increased by $ 120.4 million and by $ 10.8 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2019, the Company had federal NOL carryforwards of approximately $110.7 million and federal tax credit

carryforwards of approximately $12.3 million.

The federal NOL carryforwards generated during and after fiscal 2018 totaling $6.5 million are carried forward indefinitely, while all others, along with the federal tax credit carryforwards,

expire in years beginning in 2032.

As of December 31, 2020, the Company had federal NOL carryforwards of approximately $ 373.7 million and federal tax credit carryforwards of approximately $ 27.6 million.

The federal NOL carryforwards generated during and after fiscal 2018

totaling $ 258.8 million are carried forward indefinitely, while all others, along with the federal tax credit carryforwards, expire in years beginning in 2032.

As of December 31, 2020, the Company had state net operating loss carryforwards of approximately $ 188.5 million, which begin to expire in 2030.

In addition, the Company had state tax credit carryforwards of

approximately $11 million, which do not expire.

The federal and state net operating losses and credit carryforwards are subject to

change of ownership limitations provided by the Internal Revenue Code and similar state provisions.

In general, if the Company experiences a greater than 50 percentage point aggregate change in ownership over a

3-year period (a Section 382 ownership change), utilization of its pre-change NOL and credit carryforwards are subject to an annual limitation.

Company completed a study through the date of the IPO to determine whether a Section 382 ownership change had occurred and determined at that time that a Section 382 ownership change occurred in 2013.

As a result, the Companys net

operating losses generated through November 1, 2013 may be subject to limitation under Section 382 of the Code.

The amount of pre-change loss carryforwards which may be subject to this limitation is

$4.8 million.

In addition, the Company had state tax credit carryforwards of approximately $ 20.9 million, which do not expire.

The federal and state net operating losses and credit carryforwards are subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions.

In general, if the Company experiences a greater than 50 percentage point aggregate change in ownership over a 3-year period (a “Section 382 ownership change”), utilization of its pre-change NOL and credit carryforwards are subject to an annual limitation.

The Company completed a study through December 31, 2020 and determined that a Section 382 ownership change occurred in 2013.

As a result, the Company’s net operating losses generated through November 1, 2013 may be subject to limitation under Section 382 of the Code.

The amount of pre-change loss carryforwards which may be subject to this limitation is $ 4.8 million.

In addition certain attributes are subject to annual limitations as a result of the acquisition of ReadCoor, which constitutes a change in ownership as defined under Section 382.

Such limitations may result in expiration of a portion of the carryforwards before utilization.

The Companys ability to use net operating loss carryforwards, research and

development credit carryforwards and other tax attributes to reduce future taxable income and liabilities may be further limited as a result of future changes in stock ownership.

As a result, if

the Company earns net taxable income, its ability to use pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal

and state taxable income may still be subject to limitations, which could potentially result in increased future tax liability.

balance of unrecognized gross tax benefits for the years ended December 31, 2019 and 2018 resulting primarily from research and development tax credits claimed on the Companys annual tax returns were as follows (in thousands):

The Company’s ability to use net operating loss carryforwards, research and development credit carryforwards and other tax attributes to reduce future taxable income and liabilities may be further limited as a result of future changes in stock ownership.

As a result, if the Company earns net taxable income, its ability to use pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income may still be subject to limitations, which could potentially result in increased future tax liability.

The total balance of unrecognized gross tax benefits for the years ended December 31, 2020 and 2019 resulting primarily from research and development tax credits claimed on the Company’s annual tax returns were as follows (in thousands):

Unrecognized tax benefits at beginning of year $ 6,410 $ 4,169

Additions based on prior year tax provisions

Reductions based on prior year tax provisions ( 311 ) —

Additions based on current year tax provisions 8,558 2,241

Unrecognized tax benefits at end of year $ 14,657 $ 6,410

The Company has not been audited by the Internal Revenue Service or any state income tax agency.

December 31, 2019, its federal returns for the years ended 2012 through the current period and state returns for the years ended 2012 through the current period are still open to examination.

The Company recognizes accrued interest and

penalties related to unrecognized tax benefits as income tax expense, in statements of comprehensive loss.

In addition, all of the net operating losses and research and development credit carry-forwards that may be used in future years are still

subject to inquiry given that the statute of limitation for these items would begin in the year of utilization.

The Company is subject to tax in the United States, various states and foreign jurisdictions.

The United States, California and Sweden are considered as major jurisdictions.

The Company has not been audited in such jurisdictions.

As of December 31, 2020, its federal and state returns for the years ended 2012 through the current period are still open to examination.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

These amounts were not material.

In addition, all of the net operating losses and research and development credit carry-forwards that may be used in future years are still subject to inquiry given that the statute of limitation for these items would begin in the year of utilization.

The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

An immaterial amount of liability related to foreign uncertain tax positions has been recorded in the Companys consolidated financial

An immaterial amount of liability related to foreign uncertain tax positions has been recorded in the Company’s consolidated financial statements.

uncertain tax positions, due to a full valuation allowance, such liabilities have been netted against deferred tax attribute carryovers.

The Company maintained undistributed earnings overseas as of December 31, 2020.

As of December 31, 2019, the Company believed the

funds held by all non-US subsidiaries will be permanently reinvested outside of the U.S.

As of December 31, 2020, the Company believed the funds held by all non-U.S.

subsidiaries will be permanently reinvested outside of the U.S.

However, if these funds were repatriated to the U.S.

or used for U.S.

operations the Company may be subject to

withholding taxes in the foreign countries.

operations the Company may be subject to withholding taxes in the foreign countries.

As a result of tax reform, the Company’s unrepatriated earnings are no longer subject to federal income tax in the U.S.

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The Tax Cuts and Jobs Act (the “Tax Act”), was enacted on December 22, 2017.

The Tax Act created a new requirement that global

intangible low-taxed income (GILTI) earned by the Companys foreign subsidiaries must be included in gross U.S.

The Tax Act created a new requirement that global intangible low-taxed income (“GILTI”) earned by the Company’s foreign subsidiaries must be included in gross U.S.

taxable income.

While the Tax Act provides for a modified territorial tax

system, beginning in 2018, GILTI provisions will be applied providing an incremental tax on low taxed foreign income.

While the Tax Act provides for a modified territorial tax system, beginning in 2018, GILTI provisions will be applied providing an incremental tax on low taxed foreign income.

The GILTI provisions require the Company to include in its U.S.

income tax return foreign subsidiary earnings in excess of an

allowable return on the foreign subsidiarys tangible assets.

income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

During 2018, the Company made an accounting policy election to treat taxes related to GILTI as a current period expense when incurred.

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Indemnification

From time to time, the

Company has entered into indemnification provisions under certain agreements in the ordinary course of business, typically with business partners, customers and suppliers.

Pursuant to these agreements, the Company may indemnify, hold harmless and

agree to reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any patent or other

intellectual property infringement claim by any third party with respect to the Companys products.

Company maintains product liability insurance coverage that would generally enable it to recover a portion of the amounts paid.

The Company has also agreed to indemnify its directors and

executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to be, made a party by reason of their service as a

director or officer (see Litigation below).

From time to time, the Company has entered into indemnification provisions under certain agreements in the ordinary course of business, typically with business partners, customers and suppliers.

Pursuant to these agreements, the Company may indemnify, hold harmless and agree to reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any patent or other intellectual property infringement claim by any third party with respect to the Company’s products.

The Company maintains product liability insurance coverage that would generally enable it to recover a portion of the amounts paid.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by them in any action or proceeding to which any of them are, or are threatened to be, made a party by reason of their service as a director or officer (see “—Litigation” below).

The Company also may be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.

Non-cancelable Purchase Commitments

The Companys contract manufacturer makes advance purchases of components based on the instrument unit forecasts and purchase orders

placed by the Company.

The Company’s contract manufacturer makes advance purchases of components based on the instrument unit forecasts and purchase orders placed by the Company.

To the extent these components are purchased by the contract manufacturer on the Company’s behalf and cannot be used by their other customers, the Company is obligated to purchase these components.

In addition, certain

supplier agreements require that the Company make minimum annual purchases under the agreements.

As of December 31, 2019, the Company has commitments to make a total of $6.4 million in purchases over the next five years.

Company has met the minimum purchase commitments.

In addition, certain supplier agreements require that the Company to make minimum annual purchases under the agreements.

As of December 31, 2020, the Company has commitments to make a total of $ 1.0 million in purchases over the next four years.

To date, the Company has met the minimum purchase commitments.

As of December 31, 2020, the Company has entered into non-cancelable arrangements for subscription software services under which the Company has an obligation to make payments aggregating to $ 10.2 million over the next five years.

Intellectual Property Licensing

October 2019, as part of the 2019 Becton Dickinson Settlement and Patent Cross License Agreement with Becton, Dickinson and Company and Cellular Research, Inc.

(BD Entities), the Company was granted a worldwide royalty-free, nonexclusive

license to certain intellectual property from the BD Entities.

In September 2020, the Company and the Board of Trustees of the Leland Stanford Junior University ("Stanford") entered into a license agreement pursuant to which the Company was granted a license to certain intellectual property from Stanford relating to single cell profiling and tissue clarification.

As the Company receives revenue related to products covered by these licenses, it is required to pay Stanford a low single-digit royalty percentage based on the net revenue of certain products during the applicable term of the licensed patents.

In October 2019, as part of the 2019 Becton Dickinson Settlement and Patent Cross License Agreement with Becton, Dickinson and Company and Cellular Research, Inc.

(“BD Entities”), the Company was granted a worldwide royalty-free, nonexclusive license to certain intellectual property from the BD Entities.

The Company recognized $ 22.1 million in technology licenses as an intangible asset with a weighted average amortization period of 15 years.

This license is classified within other

assets on the Companys consolidated balance sheet as of December 31, 2019.

This license is classified within other assets on the Company’s consolidated balance sheet as of December 31, 2020.

See the discussion of the 2019 Becton Dickinson Settlement and Patent Cross License Agreement below.

In November 2018, the Company and Prognosys Biosciences, Inc.

(Prognosys) entered into a license agreement pursuant to which the

Company was granted an exclusive license to certain intellectual property relating to spatial analysis from Prognosys.

As part of the agreement, the Company fully expensed total purchase consideration of $3.3 million comprised of cash

consideration and shares of the Companys Class A common stock.

In July 2018, the Company and The Board of Trustees of the

Leland Stanford Junior University (Stanford) entered into a license agreement pursuant to which the Company was granted an exclusive license to ATAC-seq.

As the Company receives revenue related to

products covered by these licenses, the Company is required to pay Stanford a low single-digit royalty percentage based on the net revenue of certain ATAC-seq products during the applicable term of the

licensed patents.

In September 2013, the Company and the President and Fellows of Harvard College (Harvard) entered into a

license agreement pursuant to which the Company was granted a license to certain intellectual property from Harvard.

The Company is required to pay Harvard a low single-digit royalty percentage based on the net revenue of certain products covered by

certain licensed patents during their applicable term.

The minimum commitments related to the above license arrangements aggregate to

$4.9 million as of December 31, 2019 to be paid over the next 14 years.

The Company leases its facilities under noncancelable lease agreements.

Certain of these arrangements have free rent, escalating rent payment

provisions and tenant allowances.

Under such arrangements, the Company recognizes rent expense on a straight-line basis over the noncancelable lease term and records the difference between cash rent payments and the recognition of rent expense as a

deferred rent liability within other current liabilities (current portion) and other liabilities (noncurrent portion).

maintains a letter of credit for the benefit of the landlord related to the Companys noncancelable operating lease for its corporate headquarters in the amount of $5.0 million.

Rent expense related to noncancelable operating leases was $6.8 million, $3.5 million and $1.0 million for the years ended

December 31, 2019, 2018 and 2017, respectively.

Future minimum lease payments under the leases for facilities as of

December 31, 2019, are as follows (in thousands):

2024 and thereafter

Total future minimum lease commitments

The Company is currently a defendant in the lawsuits and proceedings described below.

Other than with respect to the 2015 Delaware Action,

losses are not probable or estimable for the described below.

(“Prognosys”) entered into a license agreement pursuant to which the Company was granted an exclusive license to certain intellectual property relating to spatial analysis from Prognosys.

As part of the agreement, the Company fully expensed total purchase consideration of $ 3.3 million comprised of cash consideration and shares of the Company’s Class A common stock.

In July 2018, the Company and Stanford entered into a license agreement pursuant to which the Company was granted an exclusive license to ATAC-seq.

As the Company receives revenue related to products covered by these licenses, the Company is required to pay Stanford a low single-digit royalty percentage based on the net revenue of certain ATAC-seq products during the applicable term of the licensed patents.

In September 2013, the Company and the President and Fellows of Harvard College (“Harvard”) entered into a license agreement pursuant to which the Company was granted a license to certain intellectual property from Harvard.

The Company is required to pay Harvard a low single-digit royalty percentage based on the net revenue of certain products covered by certain licensed patents during their applicable term.

The minimum commitments related to the Company's license arrangements aggregate to $ 26.5 million as of December 31, 2020 to be paid over the next 14 years.

Lease Agreements

The Company leases office, laboratory, manufacturing, distribution and server space with lease terms ranging from 1 to 10 years.

These leases require monthly lease payments that may be subject to annual increases throughout the lease term.

Certain of these leases also include renewal options at the election of the Company to renew or extend the lease.

The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities.

The Company performed evaluations of these contracts and determined them to be operating leases.

For the year ended December 31, 2020, the Company incurred $ 8.4 million of operating lease costs and $ 0.4 million of variable lease costs.

The variable lease cost is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease cost due to the Company’s election to not separate lease and non-lease components.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2020 was $ 7.1 million and was included in net cash used in operating activities in the Company’s consolidated statements of cash flows.

The Company maintains a letter of credit for the benefit of the landlord related to the Company’s non-cancelable operating lease for its corporate headquarters in the amount of $ 4.0 million.

The maturity of the Company’s operating lease liabilities as of December 31, 2020 is as follows (in thousands):

Operating Leases

Thereafter 34,864

Total lease payments $ 78,458

imputed interest ( 15,480 )

Present value of operating lease liabilities $ 62,978

Operating lease liabilities, current $ 5,936

Operating lease liabilities, noncurrent $ 57,042

The following table summarizes additional information related to operating leases as of December 31, 2020:

Weighted-average remaining lease term:

Operating leases 8.4 years

Weighted-average discount rate:

Operating leases 4.5 %

The Company’s future undiscounted lease payments under operating leases (as defined by prior guidance) as of December 31, 2019 are as follow (in thousands):

Rent Payments

Thereafter 38,346

Total minimum lease payments $ 72,979

On November 6, 2020, the Company entered into a lease agreement with 6200 Stoneridge Mall Road Investors LLC, a Delaware limited liability company, to lease additional office building space near the Company's Pleasanton, California headquarters.

The Company intends to utilize the leased space of approximately 145,000 square feet to accommodate its future growth requirements.

The lease term will commence on January 1, 2021 consisting of various lease components expected to commence on various dates between 2021 and 2023 and is expected to terminate on June 30, 2033 with total lease payments over the lease term expected to amount to approximately $ 60.8 million, net of a tenant improvement allowance of approximately $ 10.0 million to be received 2021.

Upon lease commencement, the Company expects to recognize a right-of-use lease asset and corresponding lease liability in accordance with ASU No.

2016-2, Leases (Topic 842).

The tables above for the year ended December 31, 2020 do not include payments, lease term, or discount rates relating to this lease as the lease term had not yet commenced as of that date.

The Company will determine the classification for each lease component at the individual component's commencement date.

All lease components are expected to be classified as operating leases.

The total undiscounted lease payments for the leases commencing in fiscal years 2021, 2022 and 2023 will be nil , $ 2.0 million, and $ 4.6 million, respectively, with weighted-average expected lease terms of 12 years for 2021 and 2022, and 11 years for 2023.

Estimated undiscounted lease payments relating to the 6200 Stoneridge Mall Road lease for fiscal years ending (in thousands):

Lease payments for leases not yet commenced

Thereafter 52,039

Total undiscounted lease payments $ 70,848

Purchase of Land

On August 10, 2020, the Company entered into an Agreement for Purchase and Sale (the “Purchase Agreement”) with Equity One (West Coast Portfolio) LLC, a Florida limited liability company, for the potential acquisition of certain real property located in Pleasanton, California (the “Property”) for an aggregate cash purchase price of $ 29.4 million, subject to the completion of due diligence on the Property by the Company.

On January 22, 2021, the Company closed on the Purchase Agreement and took possession of the real Property.

The Company intends to utilize this site to accommodate its future growth requirements.

The Company is regularly subject to lawsuits, claims, arbitration proceedings, administrative actions and other legal and regulatory proceedings involving intellectual property disputes, commercial disputes, competition and other matters, and the Company may become subject to additional types of lawsuits, claims, arbitration proceedings, administrative actions, government investigations and legal and regulatory proceedings in the future.

Amongst other matters, the Company is currently a defendant in the lawsuits and proceedings described below.

In these matters, the plaintiffs are seeking damages and injunctions of sales of the

Company's products amongst other remedies.

Other than with respect to the 2015 Delaware Action, losses are not probable or estimable for the lawsuits and proceedings described below.

The 2015 Delaware Action

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(“Raindance”) and the University of Chicago filed suit against the Company in the U.S.

District Court for the District of Delaware, accusing substantially all of the Companys products of infringing certain patents.

District Court for the District of Delaware (the “Delaware Court”), accusing the Company’s legacy GEM products of infringing certain U.S.

patents owned by or exclusively licensed to Raindance (the “2015 Delaware Action”).

In May 2017, Bio-Rad Laboratories, Inc.

(“Bio-Rad”) was substituted as the plaintiff following its acquisition of Raindance.

In November 2018, a jury found that the accused products willfully infringed one or more of the asserted patents

and awarded Bio-Rad approximately $24 million in damages through June 30, 2018.

The Company has appealed the jury verdict.

Post-trial, Bio-Rad moved for a

permanent injunction, treble damages for willful infringement, attorneys fees, supplemental damages as well as pre- and post-judgment interest.

In response to the jury award, the Company established an accrual of $30.6 million as of December 31, 2018, which was recorded as an

operating expense on the consolidated statement of operations for the year ended December 31, 2018.

Additionally, beginning in the fourth quarter of 2018, the Company also began recording an accrual for estimated royalties to Bio-Rad as a cost of revenue on the consolidated statements of operations based on an estimated royalty rate of 15% of sales of the Companys Chromium instruments operating its GEM microfluidic chips and

associated consumables.

A jury trial was held in November 2018.

The jury found that the accused legacy GEM products infringed U.S.

8,304,193, 8,329,407 and 8,889,083.

The jury also concluded that the Company's infringement was willful and awarded Bio-Rad approximately $ 24 million in damages through June 30, 2018.

The Company appealed the jury verdict.

Post-trial, Bio-Rad moved for a permanent injunction, treble damages for willful infringement, attorneys’ fees, supplemental damages for the period from the second quarter of 2018 through the end of the trial as well as pre- and post-judgment interest.

In response to the jury award, the Company established an accrual of $ 30.6 million as of December 31, 2018, which was recorded as an operating expense on the consolidated statement of operations for the year ended December 31, 2018.

Additionally, beginning in the fourth quarter of 2018, the Company also began recording an accrual for estimated royalties to Bio-Rad as a cost of revenue on the consolidated statements of operations based on an estimated royalty rate of 15 % of sales of the Company’s Chromium instruments operating its legacy GEM microfluidic chips and associated consumables.

As a result, the Company recorded $ 7.4 million of royalties for the fourth quarter of 2018.

As of December 31, 2018, the Company recorded a total accrual of $38 million related to this matter which represented

the jury award plus the Companys estimate of additional damages for the period from June 30, 2018 to the trial date in November 2018 and the royalties accrued in the fourth quarter of 2018.

In July 2019, the Court awarded supplemental damages for the period from June 30, 2018

through the end of the trial in November 2018 and established the interest rates for pre- and post-judgment interest, which when combined with the original award, resulted in a $35 million preliminary

judgment in favor of Bio-Rad for damages through November 2018 and interest.

During the years ended December 31, 2019 and 2018 the Company recorded royalties of $29.2 million and $7.4 million,

respectively, as a cost of revenue and an additional $1.5 and $30.6 million during the years ended December 31, 2019 and 2018, respectively, as an operating expense for estimated pre-and post-

judgment interest.

The Companys accrual of $68.7 million as of December 31, 2019 is comprised of the preliminary judgment, along with the Companys estimate of additional royalties and interest for the period from November 2018

through December 31, 2019.

To date the Company has not made any payments related to the judgment or royalties.

In July 2019, the Court denied Bio-Rads other post-trial requests such as

attorneys fees and enhanced damages for willful infringement.

In July 2019, the Court also granted

Bio-Rad a permanent injunction against the Companys GEM microfluidic chips and associated consumables that were found to infringe the Bio-Rad patents, which have

historically constituted a significant amount of the Companys product sales.

Under the injunction, the Company is permitted to continue to sell its GEM microfluidic chips and associated consumables for use with its historical installed base of

instruments provided that the Company pay a royalty of 15% into escrow on the Companys net revenue related to such sales commencing after the injunction effective date.

The amounts will be held in escrow until the conclusion of the

Companys appeal.

These decisions were entered as a final judgment against the Company in August 2019, and the injunction became effective on August 28, 2019.

The Company has appealed the injunction to the Federal Circuit.

Circuit granted an interim order staying the injunction pending resolution of the Companys motion with respect to the Companys Single Cell CNV and Linked-Read solutions subject to the 15% royalty payment described above.

September 24, 2019, the Federal Circuit extended the stay with respect to the Single Cell CNV and Linked-Read solutions for the pendency of the appeal, but otherwise denied the Companys request to stay the injunction.

The Company also

appealed the judgment to the Federal Circuit, which will hold oral arguments in April 2020.

In August 2019, the Court ordered that the

Company may post a bond in the amount of $52 million in lieu of payment of the final judgment.

As of December 31, 2018, the Company recorded a total accrual of $ 38.0 million related to this matter which represented the jury award plus the Company’s estimate of additional damages for the period from June 30, 2018 to the trial date in November 2018 and the royalties accrued in the fourth quarter of 2018.

In July 2019, the Court awarded supplemental damages for the period from June 30, 2018 through the end of the trial in November 2018 and established the interest rates for pre-and post- judgment interest, which when combined with the original award, resulted in a $ 35 million preliminary judgment in favor of Bio-Rad for damages through November 2018 and interest.

During the years ended December 31, 2020 and 2019 the Company recorded royalties of $ 9.5 million and $ 29.2 million, respectively, as a cost of revenue and an additional $ 1.3 million and $ 1.5 million during the years ended December 31, 2020 and 2019, respectively, as an operating expense for estimated pre-and post- judgment interest.

The Company’s accrual of $ 44.2 million as of December 31, 2020 includes estimates of additional royalties and interest for the period from November 2018 through December 31, 2020.

The Company’s accrual of $ 68.7 million as of December 31, 2019 was comprised of the preliminary judgment, along with the Company’s estimate of additional royalties and interest for the period from November 2018 through December 31, 2019.

In July 2019, the Court denied Bio-Rad’s other post-trial requests such as attorneys’ fees and enhanced damages for willful infringement.

In July 2019, the Court also granted Bio-Rad a permanent injunction against the Company’s legacy GEM microfluidic chips and associated consumables that were found to infringe the Bio-Rad patents, which historically constituted a significant amount of the Company’s product sales.

However, under the injunction, the Company is permitted to continue to sell its legacy GEM microfluidic chips and associated consumables for use with its historical installed base of instruments provided that the Company pay into escrow a royalty of 15 % of the Company’s net revenue related to such sales occurring after August 28, 2019.

The amounts will be held in escrow until after the conclusion of the Company’s Federal Circuit appeal and the Delaware Court addresses anticipated motions regarding post-judgment royalties.

In August 2019, the Court ordered that the Company may post a bond in the amount of $ 52 million in lieu of payment of the final judgment.

Bio-Rad subsequently asked the Court to increase the amount of the bond to approximately $ 61 million.

The Company also asked the Court to reconsider its ruling and decrease the potential bond to approximately $ 35 million.

On September 13, 2019, the Company posted a $52 million bond (the Bond) in lieu of payment of the

judgment pending the Companys ongoing appeal.

In connection with the Bond, the Company has deposited $45 million as collateral in a segregated cash account, where it will be held until the conclusion of the appeal.

On September 13, 2019, the Company posted a $ 52 million bond (the “Bond”) in lieu of payment of the judgment pending the Company’s ongoing appeal.

In connection with the Bond, the Company has deposited $ 45 million as collateral in a segregated cash account.

On October 10, 2019, the Court denied the Company’s motion to decrease the bond amount, and, without addressing Bio-Rad’s request to increase the bond amount, stayed any execution or enforcement of the judgment until the completion of appeal, and for thirty days thereafter.

The Company appealed the Court's judgment including the injunction to the Federal Circuit.

In August 2020, the Federal Circuit issued its opinion in the Company's appeal of the 2015 Delaware Action.

The Federal Circuit (1) affirmed the judgment of the lower Court with respect to infringement of the '083 patent by the Company's legacy

GEM products and (2) vacated the judgment with respect to infringement of the '193 and '407 patents, which are remanded to the lower Court for a new trial on infringement.

The Federal Circuit affirmed the damages award including the 15 % royalty with respect to the Company's legacy GEM products.

The Federal Circuit vacated the injunction with respect to the Company's Single Cell CNV and Linked-Read products but affirmed the injunction with respect to the Company's other legacy GEM products.

In October 2020, the Company filed a petition for en banc rehearing with the Federal Circuit.

The Federal Circuit denied the Company's petition for en banc rehearing on November 4, 2020.

The Company paid the $ 34.5 million judgment, plus approximately $ 0.8 million in post-judgment interest, to Bio-Rad on December 17, 2020.

The case was remanded to the Delaware Court for a determination of post-judgment royalties or other amounts, which the Company expects to be made around the second half of 2021.

The Company has accrued $ 44.2 million as of December 31, 2020 related to this matter which is classified within current liabilities in its consolidated balance sheets as of this date.

Restricted cash of $ 16.0 million, classified within current assets in the Company's consolidated balance sheets as of December 31, 2020 serves as collateral for a bond and royalties in connection with the Bio-Rad litigation and would be used to partially satisfy this payment.

The ITC 1068 Action

July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC filed a complaint against the Company in the U.S.

International Trade Commission (ITC) pursuant to Section 337 of the

Tariff Act of 1930, accusing substantially all of the Companys products of infringing certain asserted patents (the ITC 1068 Action).

In September 2018, the judge found that the Companys GEM microfluidic chips infringe

certain of the asserted patents, but also that the Companys gel bead manufacturing microfluidic chip and Next GEM microfluidic chip do not infringe any claim asserted against them.

The judge recommended entry of an exclusion order preventing

the Company from importing its GEM microfluidic chips and a cease and desist order that would prevent the Company from selling such imported chips.

On July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC filed a complaint against the Company in the U.S.

International Trade Commission (“ITC”) pursuant to Section 337 of the Tariff Act of 1930, accusing substantially all of the Company’s Chromium products of infringing certain asserted patents (the “ITC 1068 Action”).

In September 2018, the judge found that the Company’s legacy GEM microfluidic chips infringe certain of the asserted patents, but also that the Company’s gel bead manufacturing microfluidic chip and Next GEM microfluidic chip do not infringe any claim asserted against them (the “Initial Determination”).

The judge recommended entry of an exclusion order preventing the Company from importing its legacy GEM microfluidic chips and a cease and desist order that would prevent the Company from selling such imported chips.

On December 18, 2019, the ITC issued its final determination in the ITC 1068 Action (the “Final Determination”).

Determination affirmed the Initial Determination that the Companys Next GEM

microfluidic chips and gel bead manufacturing microfluidic chips do not infringe any of the claims asserted against them.

The Final Determination also affirmed the ruling that the Companys

GEM microfluidic chips infringe the 664, 682 and 635 patents but not the 160 patent.

The ITC issued (1) a limited exclusion order prohibiting the unlicensed importation of the GEM microfluidic chips into the United

States and (2) a cease and desist order preventing the Company from selling such imported GEM microfluidic chips in the United States.

The ITC expressly allowed the importation and sale of the GEM microfluidic chips for use by researchers

who were using such chips as of December 18, 2019, and who have a documented need to continue receiving such chips for a specific current ongoing research project for which that need cannot be met by any alternative product.

Determination was subject to a 60-day presidential review period.

During the presidential review period, the Company was permitted to continue importation and sales of the GEM microfluidic chips subject to

payment of a bond of three (3) percent of the entered value of the accused microfluidic chips.

The Final Determination affirmed the Initial Determination that the Company’s Next GEM microfluidic chips and gel bead manufacturing microfluidic chips do not infringe any of the claims asserted against them.

The Final Determination also affirmed the ruling that the Company’s legacy GEM microfluidic chips infringe the ‘664, ‘682 and ‘635 patents but not the ‘160 patent.

The ITC issued (1) a limited exclusion order prohibiting the unlicensed importation of the legacy GEM microfluidic chips into the United States and (2) a cease and desist order preventing the Company from selling such imported legacy GEM microfluidic chips in the United States.

The ITC expressly allowed the importation and sale of the legacy GEM microfluidic chips for use by researchers who were using such chips as of December 18, 2019, and who have a documented need to continue receiving such chips for a specific current ongoing research project for which that need cannot be met by any alternative product.

The Final Determination was subject to a 60-day presidential review period.

During the presidential review period, the Company was permitted to continue importation and sales of the legacy GEM microfluidic chips subject to payment of a bond of three (3) percent of the entered value of the accused microfluidic chips.

The Company and Bio-Rad have appealed the Final Determination to the Court of Appeals for the Federal Circuit.

Bio-Rad has appealed the Final Determination with respect to non-infringement of the Company's gel bead manufacturing chips, but not with respect to non-infringement of the Company's Next GEM microfluidic chips.

The Company has appealed the Final Determination with respect to infringement of the Company's legacy GEM microfluidic chips.

Oral argument is scheduled on April 7, 2021.

The Company expects a decision around the fourth quarter of 2021.

The Northern District of California Action

On July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC also filed

suit against the Company in the U.S.

District Court for the Northern District of California, alleging that substantially all of its products infringe certain patents in addition to the patents asserted in the ITC 1068 Action.

The complaint seeks

injunctive relief, unspecified monetary damages, costs and attorneys fees.

This litigation is stayed pending resolution of the ITC 1068 Action.

On July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC also filed suit against the Company in the U.S.

District Court for the Northern District of California, alleging that the Company’s legacy GEM products infringe certain patents in addition to the patents asserted in the ITC 1068 Action.

The complaint seeks injunctive relief, unspecified monetary damages, costs and attorneys’ fees.

This litigation has been stayed pending resolution of the Federal Circuit appeal of the ITC 1068 Action.

In July 2020, Bio-Rad moved to lift the stay with respect to the '059 patent and consolidate the '059 patent with the '115 patent transferred from the District of Massachusetts which is being asserted against the Company's Next GEM products.

In August 2020, the Court denied Bio-Rad's motion to lift the stay with respect to both the '059 and '115 patents.

In October 2020, we filed two petitions for inter partes review (“IPR”) challenging the validity of the ‘115 patent.

We expect the Patent Trials and Appeals Board (“PTAB”) to issue a decision on institution of these IPR petitions in the second quarter of 2021.

The Company believes that this lawsuit is without merit and intends to vigorously defend itself.

The Germany Action

July 31, 2017, Bio-Rad filed suit against the Company in Germany in the Munich Region Court alleging that the Company infringed a European patent.

Bio-Rad dismissed

this action in August 2018.

On February 13, 2018, Bio-Rad filed suit against the Company in

Germany in the Munich Region Court alleging that its Chromium instruments, GEM microfluidic chips and certain accessories infringe a German utility model.

Bio-Rad seeks unspecified damages and an injunction

prohibiting sales of these products in Germany and requiring the Company to recall these products sold in Germany subsequent to February 11, 2018.

An initial hearing was held on November 27, 2018, and a subsequent hearing was held on

May 15, 2019.

On July 31, 2017, Bio-Rad filed suit against the Company in Germany in the Munich Region Court alleging that the Company infringed a European patent.

Bio-Rad dismissed this action in August 2018.

On February 13, 2018, Bio-Rad filed suit against the Company in Germany in the Munich Region Court alleging that its Chromium instruments, legacy GEM microfluidic chips and certain accessories infringe a German utility model.

Bio-Rad seeks unspecified damages and an injunction prohibiting sales of these products in Germany and requiring the Company to recall these products sold in Germany subsequent to February 11, 2018.

An initial hearing was held on November 27, 2018, and a subsequent hearing was held on May 15, 2019.

The Court issued a ruling on November 20, 2019.

The Court ruled that the Companys GEM microfluidic chips, as well as certain Chromium instruments and accessories used with GEM microfluidic chips, infringed the German

Utility Model.

The Court issued an injunction with respect to such GEM microfluidic chips, Chromium instruments and accessories used with such systems, prohibiting among other things the sale of these products in Germany and the importation of such

products into Germany.

The Court ruled that the Company’s legacy GEM microfluidic chips, as well as certain Chromium instruments and accessories used with legacy GEM microfluidic chips, infringed the German Utility Model.

The Court issued an injunction with respect to such legacy GEM microfluidic chips, Chromium instruments and accessories used with such systems, prohibiting among other things the sale of these products in Germany and the importation of such products into Germany.

The Court found that the Company is obligated to compensate Bio-Rad for unspecified damages and required that these products be recalled from distribution channels in Germany.

further found that the Company has to bear the statutory costs of the legal dispute in a minimum amount of at least 61,000 Euros.

The Company has accrued the 61,000 Euros in statutory costs in the consolidated balance sheet as of December 31, 2019.

The Court further found that the Company has to bear the statutory costs of the legal dispute in a minimum amount of at least 61,000 Euros.

The Company has accrued the 61,000 Euros for statutory costs in the consolidated balance sheet as of December 31, 2020.

The Company is unable to estimate any additional potential exposure related to the matter beyond the statutory costs that have been accrued.

The remedies, including the injunction, will take effect once enforced upon the posting of a bond by Bio-Rad.

The Courts ruling did not address the Companys Next GEM products, which were not accused in this action and which constitute substantially all of the Companys sales in Germany.

is currently appealing the Courts ruling.

The Court’s ruling did not address the Company’s Next GEM products, which were not accused in this action and which constitute substantially all of the Company’s Chromium sales in Germany.

The Company appealed the Court’s ruling.

On April 6, 2020, the Munich Higher Regional Court (the “Higher Court”) issued a ruling staying enforcement of the ruling of the lower Court, including the injunction, subject to the payment of a bond by the Company.

The Higher Court found that the lower Court’s claim construction was not justifiable and that the facts did not provide a basis for a finding of infringement.

On April 16, 2020, the Company paid a 2.8 million Euro bond to the Higher Court to completely stay enforcement of the ruling.

The bond is refundable upon a favorable ruling on the merits by the Higher Court.

The Company expects the Higher Court to rule on the merits in 2021.

In August 2020, Bio-Rad filed its appeal response arguing for the first time that the Company's Next GEM microfluidic chips and certain accessories infringe the utility model.

In its appeal response, Bio-Rad also attempted to add infringement allegations with respect to a new patent, European Patent No.

3 132 844, against the Company's Chromium instruments and Next GEM microfluidic chips.

The Company believes it is procedurally improper to attempt to add these new claims at this stage, that the Company's Next GEM products are not covered by the lower court's judgment and are not admissible in the appeal, and that the newly asserted '844 patent is not admissible in the appeal.

The Higher Court is not expected to rule on whether Next GEM products or the '844 patent are admissible in the appeal until 2021.

The 2018 Delaware Action

On October 25, 2018, Bio-Rad filed suit against the Company in the U.S.

District Court for the

District of Delaware alleging that the Company infringed certain patents.

District Court for the District of Delaware alleging that substantially all of the Company’s Chromium products, including our legacy GEM products and Next GEM products, infringe U.S.

9,562,837 and 9,896,722.

Bio-Rad seeks injunctive relief, unspecified monetary damages, costs and attorneys’ fees.

The Company believes that this lawsuit

is without merit and intends to vigorously defend itself.

In October 2019, the Company filed four petitions for IPR challenging the validity of both asserted patents.

On April 27, 2020, the PTAB instituted review on all four of these petitions.

A final written decision is expected from the PTAB in April 2021.

In June 2020, the Court completely stayed the District of Delaware litigation pending resolution of the IPRs before the PTAB.

The Massachusetts Action

On September 11, 2019, Bio-Rad filed suit against the Company in the U.S.

District Court for the

District of Delaware alleging that the Companys Next GEM products infringe certain claims of U.S.

On November 5, 2019, Bio-Rad amended the complaint to additionally allege

that the Companys Next GEM products infringe certain claims of U.S.

District Court for the District of Delaware alleging that the Company’s Next GEM products infringe certain claims of U.S.

On November 5, 2019, Bio-Rad amended the complaint to additionally allege that the Company’s Next GEM products infringe certain claims of U.S.

9,919,277 and 10,190,115.

The 444 and 277 patents are exclusively licensed by Bio-Rad from Harvard University,

which subsequently joined the suit as a party plaintiff.

On December 18, 2019, Bio-Rad

dismissed this action in the District of Delaware and refiled it in the U.S.

The ‘444 and ‘277 patents are exclusively licensed by Bio-Rad from Harvard University, which subsequently joined the suit as a party plaintiff.

Bio-Rad is seeking damages and an injunction against the Company's Next GEM products amongst other remedies.

The ‘444 and ‘277 patents are projected to expire in October 2024.

On December 18, 2019, Bio-Rad dismissed this action in the District of Delaware and refiled it in the U.S.

District Court for the District of Massachusetts.

The case is assigned to Judge William G.

On January 14, 2020, the judge consolidated this case with a separate

action, Bio-Rad Laboratories Inc.

The case was assigned to Judge William G.

On January 14, 2020, the Court consolidated this case with a separate action, Bio-Rad Laboratories Inc.

Stilla Technologies, Inc.

, in which Bio-Rad is asserting the 444 patent (among other patents) against Stilla

Technologies, Inc.s droplet digital PCR product.

On January 23, 2020, the Company filed a motion to dismiss the case and to transfer the 115 patent to the Northern District of California, where the related 059 patent is

A hearing on the Companys motion to dismiss and transfer is scheduled in March 2020.

On January 24, 2020, the Company

filed antitrust counterclaims against Bio-Rad alleging violations of (a) Section 7 of the Clayton Act, (b) Section 2 of the Sherman Act, and (c) California unfair competition laws, for

illegally acquiring Raindance Technologies, Inc.

and illegally monopolizing or attempting to monopolize markets relating to droplet digital PCR products, droplet single cell products and droplet genetic analysis technology.

On February 19, 2020,

Bio-Rad moved to dismiss, or alternatively to stay and sever, the Companys antitrust claims.

A hearing on Bio-Rads motion to dismiss is scheduled in March 2020.

(“Stilla”), in which Bio-Rad is asserting the ‘444 patent (among other patents) against Stilla’s droplet digital PCR product.

On January 23, 2020, the Company filed a motion to dismiss the case and to transfer the ‘115 patent to the Northern District of California, where the related ‘059 patent is stayed.

On January 24, 2020, the Company filed antitrust counterclaims against Bio-Rad alleging violations of (a) Section 7 of the Clayton Act, (b) Section 2 of the Sherman Act and (c) California unfair competition laws, for illegally acquiring Raindance and illegally monopolizing or attempting to monopolize markets relating to droplet digital PCR products, droplet single cell products and droplet genetic analysis technology.

On February 19, 2020, Bio-Rad moved to dismiss, or alternatively to stay and sever, the Company’s antitrust claims.

On February 5, 2020, the Company filed additional counterclaims against Bio-Rad alleging that Bio-Rad’s single cell ATAC-seq products infringe U.S.

9,029,085 and 9,850,526 that are exclusively licensed to the Company from Harvard University.

A Markman hearing has been scheduled in June 2020.

The judge has ordered the parties to be ready for trial with respect to the Companys

antitrust counterclaims by April 2021.

A trial date for Bio-Rads patent claims and the Companys patent counterclaims has not yet been set, but may be set for shortly after the antitrust

On February 26, 2020, Bio-Rad moved to sever and stay the patent counterclaims.

On March 6, 2020, the Court denied the motion to stay and deferred the motion to sever until prior to trial.

On March 25, 2020, the Court held a hearing with respect to (a) the Company’s motion to dismiss Bio-Rad’s patent claims, (b) the Company’s motion to transfer the ‘115 patent and (c) Bio-Rad’s motion to dismiss the Company’s antitrust counterclaims.

On April 30, 2020, the Court denied the Company’s motion to dismiss with respect to Bio-Rad’s patent claims and granted the Company’s motion to transfer the ‘115 patent to the Northern District of California.

In August 2020, the Court granted Bio-Rad’s motion to dismiss (i) the Company's Sherman Act and Clayton Act counterclaims with respect to droplet single cell products and (ii) the Company's Sherman Act counterclaims with respect to droplet genetic analysis technology.

The Court denied Bio-Rad’s motion to dismiss (i) the Company's Clayton Act counterclaims with respect to droplet genetic analysis technology;

(ii) the Company's Sherman Act and Clayton Act counterclaims with respect to droplet digital PCR products;

and (iii) the Company's California unfair competition counterclaims.

Discovery is ongoing.

A Markman hearing was conducted in September 2020.

In December 2020, the Court ordered the parties to be ready for trial for Bio-Rad’s patent claims and our patent counterclaims in July 2021 and for our antitrust counterclaims in September 2021.

In June 2020, the Company filed two petitions for IPR challenging the validity of the '444 patent.

In August 2020, the Company filed two petitions for IPR challenging the validity of the '277 patent.

On January 13, 2021, the PTAB denied institution of IPRs for the '444 patent.

On February 22, 2021, the PTAB denied institution of IPRs for the '277 patent.

The 2019 Becton Dickinson Settlement and Patent Cross License Agreement

On November 15, 2018, Becton, Dickinson and Company (“BD”) and Cellular Research, Inc.

filed suit against the Company in the

filed suit against the Company in the U.S.

District Court for the District of Delaware, alleging that the Company infringed certain patents.

In September 2019, the Company filed counterclaims alleging that BD and Cellular Research, Inc.

(together, the BD Entities) infringed

a number of the Companys patents.

In October 2019, the Company entered into a settlement and patent cross license agreement (the

BD Agreement) with the BD Entities.

(together, the “BD Entities”) infringed a number of the Company’s patents.

In October 2019, the Company entered into a settlement and patent cross license agreement (the “BD Agreement”) with the BD Entities.

The BD Agreement resolved all outstanding patent litigation between the parties (the “BD Litigation”), which was dismissed with prejudice on October 21, 2019.

Under the terms of the BD

Agreement, the BD Entities granted the Company and its affiliates, and the Company granted BD and its affiliates, a worldwide,

royalty-free, non-exclusive, fully paid-up license to certain patents and patent applications relating to molecular barcoding and single cell

analysis, including to all the patents asserted in the BD Litigation.

The Company is required to make an aggregate payment of $25.0 million to BD in annual amounts of $6.25 million over four years beginning in January 2020 in

connection with the BD Agreement.

Upon execution of the BD Agreement, the fair value of these payments was recognized as a liability and is classified as accrued expenses and other current liabilities and accrued license fee, noncurrent on the

Companys consolidated balance sheet as of December 31, 2019.

As part of the BD Agreement, each party, on behalf of itself and its affiliates, has also entered into a covenant not to sue in certain fields related to each

companys products.

Under the terms of the BD Agreement, the BD Entities granted the Company and its affiliates, and the Company granted BD and its affiliates, a worldwide, royalty-free, non-exclusive, fully paid-up license to certain patents and patent applications relating to molecular barcoding and single cell analysis, including to all the patents asserted in the BD Litigation.

The Company is required to make an aggregate payment of $ 25.0 million to BD in annual amounts of $ 6.25 million over four years beginning in January 2020 in connection with the BD Agreement.

As part of the BD Agreement, each party, on behalf of itself and its affiliates, has also entered into a covenant not to sue in certain fields related to each company’s products.

The companies have also agreed on behalf of themselves and their affiliates to refrain from challenging the patents and patent applications licensed under the BD Agreement.

The Company considers this matter closed.

For certain of the Companys litigation matters, the Company is required to make

milestone payments to the Companys legal counsel based on certain litigation outcomes.

Based on the occurrence in the first quarter of 2020 of one such milestone in one of the Companys litigation matters, a milestone payment to the

Companys legal counsel in the amount of $5 million was triggered in the first quarter of 2020.

The Company expects to trigger additional such milestone payments during the pendency of litigation, though the timing and amounts of such payments

is uncertain.

Capital Stock and Stockholders Deficit

The Companys Amended and Restated Certificate of Incorporation authorizes it to issue 1,200,000,000 shares of capital stock consisting of

1,000,000,000 shares of Class A common stock, 100,000,000 shares of Class B common stock, and 100,000,000 shares of preferred stock.

For certain of the Company’s litigation matters, the Company is required to make milestone payments to the Company’s legal counsel based on certain litigation outcomes.

Based on the occurrence in the first quarter of 2020 of one such milestone in one of the Company’s litigation matters, a milestone payment to the Company’s legal counsel in the amount of $ 5 million was triggered in the first quarter of 2020.

The Company expects to trigger additional such milestone payments during the pendency of litigation, though the timing and amounts of such payments is uncertain.

Capital Stock

The Company’s Amended and Restated Certificate of Incorporation authorizes it to issue 1,200,000,000 shares of capital stock consisting of 1,000,000,000 shares of Class A common stock, 100,000,000 shares of Class B common stock, and 100,000,000 shares of preferred stock.

Common stock issued and outstanding was 108,485,909 and 96,241,596 as of December 31, 2020 and 2019, respectively.

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Class B common stock outstanding was 22,681,465 and 75,269,430 as of December 31, 2020 and 2019, respectively.

Companys Class A common stock and Class B common stock have a par value of $0.00001 per share.

Each share of Class B common stock has the right to ten votes and each share of Class A common stock has the right to one vote

The Company’s Class A common stock and Class B common stock have a par value of $ 0.00001 per share.

Each share of Class B common stock has the right to ten votes and each share of Class A common stock has the right to one vote per share.

All other rights and privileges of Class A and Class B common stock are equivalent.

Class B common shares are convertible to Class A common shares at any time upon written notification and all Class B common

shares will convert upon the date specified by vote or written consent of the holders of a majority of the then outstanding Class B common stock, voting together as a single class.

The holders of common stock are also entitled to receive

dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends.

Warrants to Purchase Common Stock

connection with certain debt arrangements, the Company issued lenders the following warrants to purchase shares of Class A common stock which have an exercise term of 10 years:

Exercise Price

September 2015

September 2016

February 2018

In September 2019, the lenders cashless exercised all of the above warrants which resulted in the issuance of

an aggregate of 261,024 shares of common stock.

The Companys common stock warrants were recorded to additional paid-in capital at fair value as of the date of issuance using the Black-Scholes valuation model.

The fair value of the warrants for 125,000 shares of Class A common stock issued in February 2018 was estimated

at $150,000 using the following assumptions:

fair value of shares of Class A common stock on the issuance date of $1.62, risk-free interest rate of 1.54%, contractual term of 10 years, no anticipated dividends, and estimated volatility of 68%.

The initial amount allocated to the warrants are accounted for as a discount to the related debt and amortized to interest expense over the loan term using the effective interest method.

Class B common shares are convertible to Class A common shares at any time upon written notification and all Class B common shares will convert upon the date specified by vote or written consent of the holders of a majority of the then outstanding Class B common stock, voting together as a single class.

The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends.

Equity Incentive Plans

2012 Stock Plan

In October 2012, the

Company adopted the 10x Genomics, Inc.

2012 Stock Plan (the 2012 Stock Plan) which has been amended in subsequent years for increases in authorized shares, among other changes.

The 2012 Stock Plan allowed for the issuance of incentive

stock options (ISOs), non-statutory stock options (NSOs) or restricted shares.

ISOs may be granted only to the Companys employees (including officers and directors who are also

considered employees).

NSOs and restricted shares may be granted to the Companys employees and service providers.

Unvested options that were not exercised as of an employees termination date revert to the 2012 Stock Plan.

December 31, 2019 and December 31, 2018, the number of shares of Class A common stock issuable under the 2012 Stock Plan, including options available and options outstanding, is 15,225,893 and 24,782,088, respectively.

The 2012 Stock

Plan did not allow for the issuance of shares of Class B common stock.

Upon the adoption of the 2019 Omnibus Incentive Plan in

September 2019, any awards outstanding under the 2012 Stock Plan will continue to be governed by their existing terms but no further awards may be granted under the 2012 Stock Plan.

Amended and Restated 2012 Stock Plan

Following the adoption of the 2019 Omnibus Incentive Plan in September 2019, any awards outstanding under the Amended and Restated 2012 Stock Plan continue to be governed by their existing terms but no further awards may be granted under the Amended and Restated 2012 Stock Plan.

As of December 31, 2020, the number of shares of Class A common stock issuable under the Amended and Restated 2012 Stock Plan which includes shares issuable upon the exercise of outstanding awards was 9,601,093 .

2019 Omnibus Incentive Plan

2019, in connection with the IPO, the Companys board of directors adopted the 10x Genomics, Inc.

2019 Omnibus Incentive Plan (the Omnibus Incentive Plan and, together with the 2012 Stock Plan, the Plans), which was

subsequently approved by the Companys stockholders.

The Omnibus Incentive Plan went into effect on September 11, 2019.

The Omnibus Incentive Plan allows for the issuance of ISOs, NSOs or restricted shares.

ISOs may be granted only to the

Companys employees (including officers and directors who are also considered employees).

The Omnibus Incentive Plan allows for the issuance of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”) or restricted shares.

ISOs may be granted only to the Company’s employees (including officers and directors who are also considered employees).

NSOs and restricted shares may be granted to the Company’s employees and service providers.

As of December 31, 2019, the number of shares of

Class A common stock issuable upon the exercise of stock options granted under the Omnibus Incentive Plan is 11,000,000.

The Omnibus Incentive Plan provides that the total number of shares of the Companys Class A common stock

that may be issued under the Omnibus Incentive Plan, including options authorized and options outstanding, is 11,000,000 (such share limit as increased from time to time, the Absolute Share Limit).

However, the Absolute Share Limit

shall be increased on the first day of each calendar year commencing on January 1, 2021 and ending on January 1, 2029 in an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding on the last day of

the immediately preceding fiscal year and (ii) such number of shares of the Companys Class A common stock as determined by the Companys board of directors.

However, if on January 1 of a calendar year, the

Companys board of directors has not either confirmed the 5% increase described in clause (i) or approved a lesser number of shares of the Companys Class A common stock for such calendar year, then the Companys board of

directors will be deemed to have waived the automatic increase, and no such increase will occur for such calendar year.

Of the Absolute Share Limit, no more than 11,000,000 shares of Class A common stock may be issued in the aggregate pursuant

to the exercise of incentive stock options granted under the Omnibus Incentive Plan.

Options under the Omnibus Incentive Plan have a

contractual term of 10 years.

As of December 31, 2020, the number of shares of Class A common stock available for issuance under the 2019 Omnibus Incentive Plan was 3,083,698 shares issuable in connection with outstanding awards and 8,267,389 shares reserved for issuance in connection with grants of future awards.

The number of shares of Class A common stock reserved for issuance under the 2019 Omnibus Incentive Plan at the time the 2019 Omnibus Incentive Plan was adopted in 2019 was 11,000,000 .

The Omnibus Incentive Plan provides that the total number of shares of the Company’s Class A common stock that may be issued under the Omnibus Incentive Plan, including options authorized and options outstanding, is 11,000,000 (such share limit as increased from time to time, the “Absolute Share Limit”).

However, the Absolute Share Limit shall be increased on the first day of each calendar year commencing on January 1, 2021 and ending on January 1, 2029 in an amount equal to the lesser of (i) 5 % of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such number of shares of the Company’s Class A common stock as determined by the Company’s board of directors.

However, if on January 1 of a calendar year, the Company’s board of directors has not either confirmed the 5 % increase described in clause (i) or approved a lesser number of shares of the Company’s Class A common stock for such calendar year, then the Company’s board of directors will be deemed to have waived the automatic increase, and no such increase will occur for such calendar year.

Of the Absolute Share Limit, no more than 11,000,000 shares of Class A common stock may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Omnibus Incentive Plan.

Options under the Omnibus Incentive Plan have a contractual term of 10 years.

The exercise price of an ISO and NSO shall not be less than 100 % of the fair market value of the shares on the date of grant.

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Balance as of December 31, 2019 15,918,243 $ 6.82 7.9 $ 1,105,222,370

Granted 1,774,994 78.63

Exercised ( 5,455,470 ) 3.07

Cancelled ( 376,923 ) 20.25

Balance as of December 31, 2020 11,860,844 $ 18.86 7.6 $ 1,455,758,971

1,105,222,370

Intrinsic Value

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Unvested and exercisable as of December 31, 2020 549,689 $ 7.98 7.7 $ 73,450,934

The weighted-average grant date fair value of options granted during the years ended December 31, 2019,

2018, and 2017 was $13.20, $2.04, and $0.66 per share, respectively.

The total intrinsic value of stock options exercised was $30.5 million, $3.3 million, and $0.8 million during the years ended December 31, 2019, 2018, and 2017,

respectively.

The weighted-average grant date fair value of options granted during the years ended December 31, 2020, 2019, and 2018 was $ 45.02 , $ 13.20 , and $ 2.04 per share, respectively.

The total intrinsic value of stock options exercised was $ 466.1 million, $ 30.5 million and $ 3.3 million during the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020, the total unrecognized stock-based compensation related to stock options was $ 160.3 million, which will be recognized over a weighted-average period of approximately 3 years.

Early Exercise of Options

Stock options

granted under the 2012 Stock Plan provide certain employee and director option holders the right to exercise unvested options in exchange for restricted shares of Class A common stock which are subject to repurchase by the Company at the

original issuance price in the event the optionees employment is terminated either voluntarily or involuntarily prior to the applicable vesting date.

The consideration received for the early exercised options is recorded as a liability on

the consolidated balance sheets and reclassified to stockholders deficit as the shares vest.

As of December 31, 2019 and 2018, the total repurchase liability related to the unvested early exercised options was $494,000 and $652,000,

respectively, which is included in other current and noncurrent liabilities on the consolidated balance sheets.

A summary of these restricted shares issued under the 2012 Stock Plan is as follows:

Stock options granted under the 2012 Stock Plan provide certain employee and director option holders the right to exercise unvested options in exchange for restricted shares of Class A common stock which are subject to repurchase by the Company at the original issuance price in the event the optionee’s employment is terminated either voluntarily or involuntarily prior to the applicable vesting date.

The consideration received for the early exercised options is recorded as a liability on the consolidated balance sheets and reclassified to stockholders’ deficit as the shares vest.

As of December 31, 2020 and 2019, the total repurchase liability related to the unvested early exercised options was $ 247,000 and $ 494,000 , respectively, which is included in other current and noncurrent liabilities on the consolidated balance sheets.

A summary of these restricted shares issued under the Amended and Restated 2012 Stock Plan is as follows:

Exercise Price

Outstanding and unvested as of December 31, 2019 138,250 $ 3.57

Vested ( 69,500 ) 3.55

Outstanding and unvested as of December 31, 2020 68,750 $ 3.59

Stock Option Valuation Assumptions

The fair value of each employee option grant was estimated on the date of grant using the Black-Scholes option pricing model and the following

assumptions for the periods indicated:

The fair value of each employee option grant was estimated on the date of grant using the Black-Scholes option pricing model and the following assumptions for the periods indicated:

Year Ended December 31,

2020 2019 2018

Expected volatility 60 % – 71 %

Risk-free interest rate 0.3 % – 1.7 %

Expected term

5.0 6.9 years

1.5 % – 2.5 %

2.7 % – 3.1 %

Expected term 5.3 – 6.9 years

5.0 – 6.9 years

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Expected dividend — % — % — %

Restricted Stock Units

The Company began granting restricted stock unit awards (“RSUs”) to employees and other service providers during 2020.

RSU activity for the year ended December 31, 2020 is as follows:

Restricted Stock

Units Weighted-Average

Grant Date Fair Value

Balance as of December 31, 2019 — $ —

Granted 963,054 78.94

Vested ( 123,734 ) 66.92

Cancelled ( 15,373 ) 66.71

Outstanding as of December 31, 2020 823,947 $ 80.97

2019 Employee Stock Purchase Plan

In July 2019, the Company’s board of directors adopted the 10x Genomics, Inc.

2019 Employee Stock Purchase Plan (the ESPP),

which was subsequently approved by the Companys stockholders.

2019 Employee Stock Purchase Plan (the “ESPP”), which was subsequently approved by the Company’s stockholders.

The ESPP went into effect on September 11, 2019.

Subject to any limitations contained therein, the ESPP allows eligible employees to contribute, through payroll deductions, up

to 15% of their eligible compensation to purchase the Companys Class A common stock at a discounted price per share.

The ESPP generally provides for consecutive,

overlapping 6-month offering periods.

The initial offering period runs from September 11, 2019 through May 14, 2020.

Unless otherwise determined by the administrator of the ESPP, a

participant may not sell, transfer or otherwise dispose of any shares of the Companys Class A common stock purchased under the ESPP for 12 months following the applicable exercise date.

A total of 2,000,000 shares of Class A common stock were reserved for issuance under the ESPP.

As of December 31, 2019, no shares of

Class A common stock have been purchased under the ESPP.

The ESPP provides that the maximum number of shares of the Companys Class A common stock made available for sale thereunder will be 2,000,000, which number will be

automatically increased on the first day of each calendar year commencing on January 1, 2021 and ending on January 1, 2029 in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on the last day

of the immediately preceding fiscal year and (ii) such number of shares of the Companys Class A common stock as determined by the Companys board of directors.

However, if on January 1 of a calendar year the Companys

board of directors has not either confirmed the 1% described in clause (i) or approved a lesser number of shares of the Companys Class A common stock for such calendar year, the Companys board of directors will be deemed to

have waived the automatic increase and no such increase will occur for such calendar year.

The maximum number of shares available under the ESPP (and any share limitations thereunder, as applicable) will automatically be adjusted upon certain

changes to the Companys capital structure.

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

For the year ended December 31, 2019, the grant date fair value was $12.60.

For the year ended December 31, 2019, the fair

value of the ESPP was estimated using the following assumptions.

Subject to any limitations contained therein, the ESPP allows eligible employees to contribute, through payroll deductions, up to 15 % of their eligible compensation to purchase the Company’s Class A common stock at a discounted price per share.

The ESPP generally provides for consecutive, overlapping 6-month offering periods.

Unless otherwise determined by the administrator of the ESPP, a participant may not sell, transfer or otherwise dispose of any shares of the Company’s Class A common stock purchased under the ESPP for 12 months following the applicable exercise date.

During the year ended December 31, 2020, 163,727 shares of Class A common stock were issued under the ESPP.

No shares of Class A common stock were issued under the ESPP during 2019.

The ESPP provides that the maximum number of shares of the Company’s Class A common stock made available for sale thereunder will be 2,000,000 , which number will be automatically increased on the first day of each calendar year commencing on January 1, 2021 and ending on January 1, 2029 in an amount equal to the lesser of (i) 1 % of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such number of shares of the Company’s Class A common stock as determined by the Company’s board of directors.

However, if on January 1 of a calendar year the Company’s board of directors has not either confirmed the 1 % described in clause (i) or approved a lesser number of shares of the Company’s Class A common stock for such calendar year, the Company’s board of directors will be deemed to have waived the automatic increase and no such increase will occur for such calendar year.

The maximum number of shares available under the ESPP (and any share limitations thereunder, as applicable) will automatically be adjusted upon certain changes to the Company’s capital structure.

For the year ended December 31, 2020, the weighted average grant date fair value of the ESPP shares purchased, using the Black-Scholes option pricing model, was $ 16.61 .

The following assumptions were used in estimating the fair values of shares under the ESPP:

Year Ended December 31,

1 unchanged sentence

Risk-free interest rate 0.12 % - 0.15 %

Expected term

Expected term (in years) 0.5 - 1.0

Expected dividend — % — %

The ESPP commenced in September 2019.

No shares of common stock were purchased pursuant to the ESPP in 2019.

As of December 31, 2020, the total unrecognized stock-based compensation related to the ESPP was $ 0.9 million, which will be recognized over a weighted-average period of approximately 0.5 years.

Stock-based Compensation

The Company recorded stock-based compensation expense in the consolidated statement of operations for the periods presented as follows (in

The Company recorded stock-based compensation expense in the consolidated statement of operations for the periods presented as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Cost of revenue $ 1,551 $ 325 $ 85

4 unchanged sentences

The Company has made available to all full-time United States employees a 401(k) retirement savings plan.

Under this plan, employee and

employer contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code.

Under this plan, employee and employer contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code.

The Company has not contributed to the plan.

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share

and per share data):

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):

Year Ended December 31,

2020 2019 2018

Net loss $ ( 542,731 ) $ ( 31,251 ) $ ( 112,485 )

Weighted average shares used in computing net loss per share, basic and diluted 101,151,675 39,091,366 13,392,273

Net loss per share, basic and diluted $ ( 5.37 ) $ ( 0.80 ) $ ( 8.40 )

The following outstanding shares of common stock equivalents 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:

The following outstanding shares of common stock equivalents 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:

Year Ended December 31,

Convertible preferred stock (on an if-converted

2020 2019 2018

Convertible preferred stock (on an if-converted basis) — — 67,704,278

Stock-options to purchase common stock 11,860,844 15,918,243 14,264,376

Shares subject to repurchase 68,750 138,250 232,750

Restricted Stock Units 823,947 — —

Contingent restricted shares 236,484 — —

Common stock warrants — — 266,099

Shares committed under ESPP 10,939 56,159 —

Selected Quarterly Information

The following tables present certain unaudited consolidated quarterly financial information for each of the eight quarters in the two-year period ended December 31, 2019.

This quarterly information has been prepared on the same basis as the Consolidated Financial Statements and includes all adjustments necessary to state fairly the

information for the periods presented.

Fiscal 2019 Quarter Ended (Unaudited)

(in thousands, except per share data)

Net loss per share, basic and diluted

Fiscal 2018 Quarter Ended (Unaudited)

(in thousands, except per share data)

Net loss per share, basic and diluted

Total 13,000,964 16,112,652 82,467,503

Subsequent Events

On February 20, 2020, the term loan borrowings were prepaid in full.

Changes in and Disagreements With Accountants on Accounting and

Financial Disclosure.

Acquisition of Tetramer Shop ApS

On January 8, 2021, the Company acquired 100 % of the outstanding shares of Tetramer Shop ApS, a privately held company based in Copenhagen, Denmark, for $ 10 million in cash.

Tetramer Shop ApS develops and provides reagents for precise monitoring of antigen-specific T cells in research and development.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data