What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-26 · 216 added, 456 removed, 661 unchanged (50% of the section changed)

2 unchanged sentences

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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(the “Company”) as of December 31, 2021 and 2020, 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, 2021, 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.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 18, 2022 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

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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.

Auditing the Company’s revenue recognition can be complex due to the volume of sales transactions including multiple performance obligations.

Judgment is involved to determine the allocation of consideration using stand-alone selling price.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the allocation of the transaction price to performance obligations in revenue transactions.

For example, we tested controls over management’s review of revenue system configurations, management’s analyses of stand-alone selling price, and the automated system controls for the application of the stand-alone selling price to the revenue transactions.

Our audit procedures over the allocation of consideration using stand-alone selling price included, among others, for a sample of individual sales transactions, we inspected the customer contract, identified the distinct performance obligation(s) in the contract, and recalculated the allocation of the transaction price.

We further assessed the timing of revenue recognition based on evidence of transfer of control of the goods to the customer or the recognition of revenue over time for extended warranty service performance obligations.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

Redwood City, California

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

San Jose, California

February 18, 2022

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Operating lease right-of-use assets 60,918 46,983

Other assets 26,678 23,935

Goodwill 4,511 —

Intangible assets, net 25,397 22,354

Other noncurrent assets 3,319 4,324

Total assets $ 1,018,826 $ 929,341

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Current liabilities:

Accrued contingent liabilities $ 44,173 $ —

Accounts payable $ 17,351 $ 4,709

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Accrued expenses and other current liabilities 50,909 43,453

Term loans, current portion — 9,882

Deferred revenue, current 4,472 3,297

Deferred revenue 5,340 4,472

Operating lease liabilities 5,131 5,936

Total current liabilities 118,126 63,049

Term loans, noncurrent portion — 19,837

Accrued contingent liabilities — 44,173

Total current liabilities 110,357 118,126

Accrued license fee, noncurrent 5,814 11,171

Deferred rent, noncurrent — 16,120

Operating lease liabilities, noncurrent 76,847 57,042

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Preferred stock, $ 0.00001 par value;

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

100,000,000 shares authorized, no shares issued or outstanding as of December 31, 2021 and December 31, 2020

Common stock, $ 0.00001 par value;

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

1,100,000,000 shares authorized (Class A 1,000,000,000 , Class B 100,000,000 );

112,514,977 (Class A 92,868,512 , Class B 19,646,465 ) and 108,485,909 (Class A 85,804,444 , Class B 22,681,465 ) shares issued and outstanding as of December 31, 2021 and 2020

Additional paid-in capital 1,680,865 1,544,218

Accumulated deficit ( 863,321 ) ( 805,098 )

Accumulated other comprehensive loss ( 50 ) ( 46 )

Accumulated other comprehensive gain (loss) 22 ( 50 )

Total stockholders’ equity 817,568 739,072

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Interest expense ( 866 ) ( 1,682 ) ( 3,079 )

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

Other (expense) income, net ( 802 ) 1,337 ( 186 )

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

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Net loss $ ( 58,223 ) $ ( 542,731 ) $ ( 31,251 )

Other comprehensive loss:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 72 ( 4 ) ( 9 )

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Balance as of December 31, 2018 67,704,278 $ 243,244 14,549,801 $ 1 $ 11,165 $ ( 231,116 ) $ ( 37 ) $ ( 219,987 )

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 2,749,407 34,952 — — — — — —

Issuance of Class A common stock upon exercise of options — — 2,226,493 — 3,435 — — 3,435

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

Issuance of warrants to purchase Class A common stock — — — — 150 — — 150

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

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

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

Balance as of December 31, 2018 67,704,278 243,244 14,549,801 1 11,165 ( 231,116 ) ( 37 ) ( 219,987 )

Issuance of Class A common stock upon exercise of options — — 2,226,493 — 3,435 — — 3,435

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

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

Issuance of Class A common stock related to equity awards — — 4,029,068 — 40,325 — — 40,325

Vesting of shares subject to repurchase, including early exercised options — — — — 154 — — 154

Stock-based compensation — — — — 96,168 — — 96,168

Net loss — — — — — ( 58,223 ) — ( 58,223 )

Other comprehensive income — — — — — — 72 72

Balance as of December 31, 2021 — $ — 112,514,977 $ 2 $ 1,680,865 $ ( 863,321 ) $ 22 $ 817,568

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

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Depreciation and amortization 21,118 14,012 7,066

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

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

Stock-based compensation expense 95,962 48,626 13,333

Loss on disposal of property and equipment 79 29 614

Loss on extinguishment of debt — 1,521 —

Amortization of right-of-use assets 7,136 5,009 —

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

Loss on disposal of property and equipment 29 614 251

Accretion of discount on term loan — 17 101

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Prepaid expenses and other current assets ( 1,053 ) ( 5,265 ) ( 3,535 )

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

Other noncurrent assets 1,045 ( 2,686 ) ( 251 )

Accounts payable 11,084 ( 7,770 ) 4,901

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Purchases of property and equipment ( 101,278 ) ( 36,666 ) ( 42,742 )

Acquisition of business, net of cash acquired ( 5,451 ) — —

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

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Financing activities:

Proceeds from term loans — — 19,512

Payments on term loans — ( 31,256 ) —

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

Payments on financing arrangement ( 5,848 ) — —

Payments on capital lease obligations — — ( 69 )

Payments on technology license financing arrangement ( 5,028 ) ( 5,848 ) —

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

Issuance of common stock from exercise of stock options and employee stock purchase plan purchases 40,325 23,743 3,766

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Effect of exchange rates on changes in cash, cash equivalents, and restricted cash 234 ( 463 ) ( 45 )

( 463 ) ( 45 ) ( 18 )

Net increase in cash, cash equivalents, and restricted cash

212,151 406,405 22,231

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 92,571 ) 212,151 406,405

Cash, cash equivalents, and restricted cash at beginning of year 688,644 476,493 70,088

476,493 70,088 47,857

Cash, cash equivalents, and restricted cash at end of year $ 596,073 $ 688,644 $ 476,493

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

Supplemental disclosures of cash flow information:

Cash paid for interest $ 1,222 $ 1,670 $ 2,250

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

Cash paid for taxes $ 8,660 $ 280 $ 22

$ 280 $ 22 $ 6

10x Genomics, Inc.

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Noncash investing and financing activities

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

Purchases of property and equipment included in accounts payable, accrued expenses and other current liabilities $ 16,972 $ 2,983 $ 4,492

Right-of-use assets obtained in exchange for new operating lease liabilities $ 21,284 $ 13,562 $ —

Contingent consideration payable related to business acquisition $ 1,500 $ — $ —

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

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(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’s integrated solutions include the Company’s Chromium Controller, Chromium Connect and Chromium X Series instruments, which the Company refers to as “instruments,” and the Company’s proprietary microfluidic chips, slides, reagents and other consumables for our Visium solution, which does not require a 10x Genomics instrument, and our Chromium solution, 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 China, Germany, Netherlands, Singapore, Sweden and the United Kingdom.

Initial Public Offering

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.

The Company is headquartered in Pleasanton, California and has wholly-owned subsidiaries in Asia, Europe and North America.

Basis of Presentation

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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.

These judgments, estimates and assumptions are used for, but not limited to, revenue recognition, inventory valuation and write-downs, accounting for asset and business 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.

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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.

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).

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

Short-term restricted cash of $ 1.0 million and long-term restricted cash of $ 7.6 million primarily represents cash on deposit with financial institutions as security for letters of credit outstanding for the benefit of the landlord related to the Company’s non-cancelable operating leases 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):

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

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.

The Company’s cash and cash equivalents held with large financial institutions 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 these financial institutions.

The Company performs ongoing credit evaluations of its customers’ financial condition.

The Company does not require collateral from its customers but may require upfront payments from certain customers.

The Company has not experienced significant credit losses to date.

The Company has not experienced material credit losses to date.

For the years ended December 31, 2021, 2020, and 2019, 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.

As of December 31, 2021, one of the Company's distributors accounted for 11 % of the Company’s outstanding accounts receivable.

No other customer or distributor represented more than 10% of the Company’s outstanding accounts receivable as of December 31, 2021 and December 31, 2020.

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

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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.

The Company capitalizes costs incurred to develop internal-use software within fixed assets and commencing from 2020, began capitalizing costs to develop hosting arrangements within other noncurrent 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.

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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.

when available and appropriate, to comparable market values.

There were no impairment losses recorded for the years ended December 31, 2021, 2020 and 2019.

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

Revenue Recognition

The Company generates revenue from sales of products and services.

The Company’s products consist of instruments and consumables.

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.

The Company generates revenue from sales of products and services, and its products consist of instruments and consumables.

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.

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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 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.

Cost of revenue primarily consists 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, cost 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.

Shipping and Handling Costs

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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.

Stock-based compensation expense for its stock-based awards is 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 Company estimates the fair value of stock option awards and stock purchase rights under an ESPP on the grant date using the Black-Scholes option-pricing model.

The fair values of stock-based awards are 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.

The Company calculated the expected term using the simplified method, which is the mid-point between the vesting and contractual term.

Due to the short trading period of the Company's stock, the Company has estimated volatility by reference to the historical volatilities 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.

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.

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

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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.

The adjustments resulting from these foreign currency translations are recorded in Accumulated other comprehensive gain (loss).

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

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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 recognized foreign currency transaction losses of $ 0.9 million for the year ended December 31, 2021, and foreign currency transaction gains of $ 1.3 million and $ 0.1 million for the years ended December 31, 2020 and 2019, respectively.

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.

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The amount of income tax paid is subject to examination by U.S.

federal and state tax authorities.

federal state and foreign tax authorities.

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.

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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.

For the calculation of diluted net loss per share, basic net loss per share is adjusted by the effect of dilutive securities including awards under the Company’s equity compensation plans.

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

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

Goodwill is not amortized, rather assessed, at least annually, for impairment at a reporting unit level.

During the goodwill impairment review, the Company assesses qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than the carrying amount, including goodwill.

The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance.

If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting unit is less than the carrying amount, then no additional assessment is deemed necessary.

Otherwise, we proceed to compare the estimated fair values of the reporting unit with the carrying value, including goodwill.

If the carrying amounts of the reporting unit exceed the fair value, we record an impairment loss based on the difference.

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.

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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 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 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, 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

2021 Acquisition

Tetramer Shop Acquisition

On January 8, 2021 (the "acquisition date"), the Company purchased 100 % of the outstanding shares of Tetramer Shop ApS (“Tetramer Shop”), a privately held company based in Copenhagen, Denmark, for a total cash consideration of $ 8.5 million, net of cash acquired of $ 0.2 million and including $ 1.5 million of fair value of contingent consideration.

The contingent consideration is recorded as a liability and is payable upon the successful transfer of Tetramer Shop's technology to the Company within two years of the acquisition date.

Tetramer Shop is a life sciences technology company which develops and provides reagents for precise monitoring of antigen-specific T-cells in research and development.

The Company acquired Tetramer Shop for its expertise in building empty, loadable major histocompatibility complex (MHC) molecules.

The acquisition was accounted for using the acquisition method of accounting, with Tetramer Shop treated as the acquiree.

The acquired assets, including identified intangible assets, and liabilities were recorded at their respective fair values with an amount recorded to goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.

The fair values assigned to the assets acquired and liabilities assumed were based on management’s assumptions as of the reporting date.

Our consolidated statements of income include the financial results of Tetramer Shop subsequent to the acquisition date.

Revenue related to Tetramer Shop since the acquisition date was included in our consolidated statements of income and was not material.

The final fair value of assets acquired, including goodwill and intangibles, and liabilities assumed as of the acquisition date were as follows (in thousands):

Cash and cash equivalents $ 224

Other assets acquired 83

Tangible assets acquired 307

Other liabilities assumed ( 652 )

Deferred tax liability - non-current ( 1,131 )

Total net tangible assets acquired and liabilities assumed ( 1,476 )

Intangible assets 5,640

Goodwill 4,511

Net assets acquired $ 8,675

The intangible assets as of the acquisition date included (in thousands):

Amount Weighted Average Useful Life (in years)

Developed technology $ 5,500 10

Customer relationships 140 3

The fair value of the intangible assets acquired in connection with the acquisition was determined using either the income or replacement cost methodologies.

The developed technology and customer relationships will be amortized over ten years and three years , respectively.

Identifiable Intangible Assets

Developed technology acquired primarily consists of existing technology related to developing reagents for precise monitoring of antigen-specific T-cells in research and development, enabling the Company to strengthen its efforts in immunology.

The Company valued the developed technology using the multi-period excess earnings method under the income approach.

Using this approach, the final fair values were calculated using expected future cash flows discounted to their net present values at an appropriate risk-adjusted rate of return.

The excess of purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition.

We do not expect any portion of this goodwill to be deductible for tax purposes.

The goodwill attributable to the acquisition was recorded as a noncurrent asset and is not amortized but is subject to an annual review for impairment.

2020 Acquisitions

ReadCoor Acquisition

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

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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.

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.

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

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

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Total net assets acquired $ 407,432

CartaNA Acquisition

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.

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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.

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 noncurrent assets in the consolidated balance sheets.

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

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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.

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):

Assets Acquired and Liabilities Assumed

In-process research and development

Intangible assets

Other assets and liabilities

Total net assets acquired

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 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

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Year Ended December 31,

Land $ 36,099 $ —

Laboratory equipment and machinery 44,189 30,010

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Intangible Assets, Net

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

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

December 31, 2021 December 31, 2020

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Amortization Intangibles,

Net Remaining Useful Life in Years Gross

Amount Accumulated

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Technology licenses 12.7 $ 22,504 $ ( 3,506 ) $ 18,998 $ 22,504 $ ( 1,973 ) $ 20,531

Developed technology 9.0 5,500 ( 550 ) 4,950 — — —

Customer relationships 2.8 945 ( 337 ) 608 805 ( 111 ) 694

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Assembled workforce 3.8 1,128 ( 287 ) 841 1,128 ( 61 ) 1,067

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

Intangible assets, net $ 30,281 $ ( 4,884 ) $ 25,397 $ 24,641 $ ( 2,287 ) $ 22,354

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

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Revenue and Deferred Revenue

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.

As of December 31, 2021, 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 instruments, was $ 7.7 million, of which approximately $ 5.3 million is expected to be recognized to revenue in the next 12 months, with the remainder thereafter.

The contract liabilities of $ 7.7 million and $ 6.2 million as of December 31, 2021 and December 31, 2020, respectively, consisted of deferred revenue related to extended warranty service agreements.

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

Year Ended December 31,

January 1 $ 4,131 $ 3,497

Beginning of period $ 6,154 $ 4,131

Revenue recognized that was included in the contract liability at the beginning of the year ( 4,101 ) ( 3,295 )

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2021 2020 2019

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

United States $ 258,274 $ 154,768 $ 133,266

Europe, Middle East and Africa 108,491 73,265 58,004

China 74,924 41,741 29,920

Asia-Pacific (1)

24,507 18,211 10,294

Asia-Pacific (excluding China) 42,087 24,507 18,211

North America (excluding United States) 6,714 4,564 6,492

Total revenue $ 490,490 $ 298,845 $ 245,893

(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.

On February 20, 2020, the Company repaid 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.

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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.

The revolving line of credit and the Loan and Security Agreement was terminated at the election of the Company on June 18, 2020.

Upon termination, the Company incurred termination fees of $ 0.3 million.

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

Year Ended December 31,

2021 2020 2019

United States $ ( 73,070 ) $ ( 376,835 ) $ ( 35,675 )

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Total $ ( 53,715 ) $ ( 534,476 ) $ ( 31,033 )

The provision for income taxes consisted of the following (in thousands):

Year Ended December 31,

2021 2020 2019

Current provision:

Federal $ — $ — $ —

State 50 — 98

Foreign 5,148 8,173 126

Total current provision for income taxes 5,198 8,173 224

Deferred provision:

Federal — — —

Foreign ( 690 ) 82 ( 6 )

Total deferred provision for income taxes ( 690 ) 82 ( 6 )

Provision for income taxes $ 4,508 $ 8,255 $ 218

The provision for income taxes was $ 4.5 million for the year ended December 31, 2021, which related to foreign and state income taxes.

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

For the years ended December 31, 2020 and 2019, the provision for income taxes were $ 8.3 million and $ 0.2 million, respectively.

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,

2021 2020 2019

Income tax provision at statutory rate $ ( 11,280 ) $ ( 112,240 ) $ ( 6,517 )

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Total deferred tax liabilities ( 17,934 ) ( 14,138 )

Net deferred taxes $ ( 75 ) $ 7

Net deferred tax liabilities $ ( 516 ) $ ( 75 )

As of December 31, 2021 and 2020, the Company maintained a full valuation allowance on its domestic net deferred tax assets.

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The valuation allowance increased by $ 126.3 million and by $ 120.4 million for the years ended December 31, 2021 and 2020, respectively.

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 $ 20.9 million, which do not expire.

As of December 31, 2021, the Company had federal net operating loss (NOL) carryforwards of $ 818.0 million and federal tax credit carryforwards of $ 45.8 million.

The federal NOL carryforwards generated during and after fiscal 2018 totaling $ 703.1 million are carried forward indefinitely, while all others, along with the federal tax credit carryforwards, expire in years beginning in 2033.

As of December 31, 2021, the Company had state NOL carryforwards of $ 372.5 million, which begin to expire in 2033.

In addition, the Company had state tax credit carryforwards of $ 35.3 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.

The Company completed a study through October 31, 2021 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.

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Unrecognized tax benefits at end of year $ 23,759 $ 14,657

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

The total amount of unrecognized gross tax benefits was $ 23.8 million and $ 14.7 million as of December 31, 2021 and 2020, respectively, of which $ 1.5 million and $ 0.6 million, if recognized, would affect our effective tax rate, respectively.

The Company is subject to the examination of its income tax returns by the U.S.

Internal Revenue Service and other domestic and foreign tax authorities.

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 Company’s consolidated financial statements.

Tax examinations are expected to focus on research and development tax credits, intercompany transfer pricing practices and other matters.

Due to NOLs and credit carryforwards, as of December 31, 2021, federal and California income tax returns for the years ended 2012 through the current period are open to examination.

Significant foreign income tax returns for the years 2018 through the current period are open to examination.

Due to the number of years remaining that are subject to examination, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

It is reasonably possible that the Company's unrecognized tax benefits will change significantly over the next 12 months, likely due to increases related to research and development tax credits.

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

As a result, if recognized, the unrecognized tax benefits would not materially impact income tax expense.

The Company includes interest and penalties related to income tax matters within the provision for income taxes.

As of December 31, 2021, the total amount of gross interest and penalties accrued was $ 0.2 million.

The Company recognized interest and penalty expenses of $ 0.2 million in 2021.

The Company maintained undistributed earnings overseas as of December 31, 2021.

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.

As of December 31, 2021, the Company believed the funds held by all non-US subsidiaries will be permanently reinvested outside of the U.S.

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

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when distributed.

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 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.

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 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.

Commitments and Contingencies

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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.

December 31, 2021, the Company has commitments to make a total of $ 0.5 million in purchases over the next three 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.

As of December 31, 2021, the Company has entered into non-cancelable arrangements for subscription software services and construction contracts associated with the development of buildings at our Springdale, Pleasanton site under which the Company has an obligation to make payments aggregating to $ 15.9 million and $ 16.3 million over the next five years.

Intellectual Property Licensing

In July 2021, the Company entered into a global settlement and patent cross license agreement with Bio-Rad laboratories, Inc.

(see the 2021 Bio-Rad Settlement And Patent Cross License Agreement in this footnote for further details) pursuant to which both parties granted each other a non-exclusive, worldwide, royalty-bearing license to develop products and services related to single cell analysis.

Each company shall pay to the other royalties from licensed products and licensed services through 2030.

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.

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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 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 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.

This license is classified within other noncurrent assets on the Company’s consolidated balance sheet as of December 31, 2021.

The minimum commitments related to the Company's license arrangements aggregate to $ 19.9 million as of December 31, 2021 to be paid over the next 17 years.

Lease Agreements

The Company leases office, laboratory, manufacturing, distribution and server space with lease terms ranging from 1 to 10 years.

The Company leases office, laboratory, manufacturing, distribution and server space with lease terms up to 12 years.

These leases require monthly lease payments that may be subject to annual increases throughout the lease term.

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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.

For the years ended December 31, 2021 and December 31, 2020, the Company incurred $ 10.5 million and $ 8.4 million, respectively, of operating lease costs and $ 0.6 million and $ 0.4 million, respectively, 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.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2021 and December 31, 2020 were $ 6.2 million and $ 7.1 million and were included in net cash used in operating activities in the Company’s consolidated statements of cash flows.

The Company maintains letters of credit for the benefit of the landlord related to two of the Company’s non-cancelable operating leases, in the amount of $ 7.5 million in aggregate.

The maturity of the Company’s operating lease liabilities as of December 31, 2021 is as follows (in thousands):

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The following table summarizes additional information related to operating leases as of December 31, 2021:

December 31, 2021 December 31, 2020

Weighted-average remaining lease term:

Operating leases 8.4 years

Operating leases 8.7 years 8.4 years

Weighted-average discount rate:

Operating leases 5.4 % 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.

On November 6, 2020, the Company entered into a Master Lease Agreement ("MLA") 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 MLA consists of various lease components, certain of which commenced during the year ended December 31, 2021.

The remaining components are expected to commence on various dates within 2022 and 2023 and is expected to terminate on June 30, 2033 Total undiscounted payments for lease components commencing in fiscal years 2022 and 2023 will be $ 21.0 million and $ 14.0 million, respectively, with weighted-average expected lease terms of 12 years for 2022 and 11 years for 2023.

On April 30, 2021, the Company entered into a lease agreement to lease office building space of approximately 22,000 square feet in Stockholm, Sweden to accommodate its future growth requirements.

The Company expects the lease term to commence in January 2022 for a five-year term and expects total lease payments over the lease term to amount to approximately $ 5.6 million.

The tables above do not include payments, lease term, or discount rates relating to any leases or lease components that have not yet commenced as of December 31, 2021.

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):

All leases and lease components that have not yet commenced are expected to be classified as operating leases.

Lease payments for leases not yet commenced as of December 31, 2021 is as follows (in thousands):

Lease payments for leases not yet commenced

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Total undiscounted lease payments $ 40,553

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

In February 2015, Raindance Technologies, Inc.

(“Raindance”) and the University of Chicago filed suit against the Company in the U.S.

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.

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 $ 38.0 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 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

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”).

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 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

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 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.

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 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 substantially all of the Company’s Chromium products, including our legacy GEM products and Next GEM products, infringe U.S.

The 2021 Bio-Rad Settlement And Patent Cross License Agreement

Bio-Rad Laboratories, Inc.

(“Bio-Rad”) and the Company were previously engaged in litigation and other proceedings relating to substantially all of the Company’s Chromium products, including the Company’s legacy GEM products and Next GEM products and multiple Bio-Rad products, around the world.

On July 26, 2021, the Company entered into a Settlement and Patent Cross License Agreement (the “Bio-Rad Agreement”) with Bio-Rad resolving all outstanding litigation and other proceedings between the two companies across all jurisdictions around the world and dismissing all infringement claims with prejudice.

Pursuant to the terms of the Bio-Rad Agreement, Bio-Rad and the Company granted each other a non-exclusive, worldwide, royalty-bearing license to develop products and services related to single cell analysis.

The cross license excludes spatial and In Situ products.

It also excludes digital PCR products in the case of 10x.

The term of the Bio-Rad Agreement is for the life of the licensed patents.

The Company and Bio-Rad have agreed not to sue each other on licensed products and licensed services on other patents owned or exclusively licensed by each company.

The companies have agreed that each company’s patents are owned by each respective company.

Each company shall pay to the other royalties from licensed products and licensed services through 2030.

The Company previously accrued $ 44.8 million in royalties and interest between November 14, 2018 and March 31, 2021 related to sales of the Company’s GEM products as a result of the litigation with Bio-Rad.

Pursuant to the Agreement, the Company paid Bio-Rad $ 29.4 million in royalties and interest related to the sales of such GEM products between November 14, 2018 and March 31, 2021.

As a result, in connection with the Agreement the Company reversed $ 15.4 million in accrued royalties and interest as a reduction in cost of goods sold and operating expenses in the second quarter of 2021.

The Nanostring Action

On May 6, 2021, the Company filed suit against Nanostring Technologies, Inc.

("Nanostring") in the U.S.

District Court for the District of Delaware alleging that Nanostring's GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S.

10,472,669, 10,662,467, 10,961,566, 10,983,113, and 10,996,219.

Bio-Rad seeks injunctive relief, unspecified monetary damages, costs and attorneys’ fees.

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 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.

On May 19, 2021, the Company filed an amended complaint additionally alleging that the GeoMx products infringe U.S.

11,001,878 and 11,008,607.

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 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.

(“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.

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 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 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 Company’s consolidated balance sheet as of December 31, 2020.

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 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.

On July 1, 2021, Nanostring filed a motion to dismiss.

On November 17, 2021, the Court held a hearing and dismissed without prejudice the Company's claims for pre-suit indirect infringement and willful infringement.

Discovery is in progress.

A Markman hearing is scheduled for October 2022 and trial is scheduled for June 2023.

For further discussion of the risks relating to intellectual property and our pending litigation, see the section titled “ Risk Factors-Risks related to litigation and our intellectual property ” under Item 1A above.

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.

Class A common stock outstanding was 85,804,444 and 20,972,166 as of December 31, 2020 and 2019, respectively.

Class B common stock outstanding was 22,681,465 and 75,269,430 as of December 31, 2020 and 2019, respectively.

The Company has the following shares of common stock issued and outstanding:

As of December 31,

Class A common stock 92,868,512 85,804,444

Class B common stock 19,646,465 22,681,465

Total common stock issued and outstanding 112,514,977 108,485,909

During the twelve months ended December 31, 2021 and December 31, 2020, 3,035,000 shares and 52,587,965 shares of Class B common stock, respectively, were converted to shares of Class A common stock upon the election of the holders of such shares.

The Company’s Class A common stock and Class B common stock have a par value of $ 0.00001 per share.

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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.

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.

1 unchanged sentence

A summary of the Company’s stock option activity under the Plans is as follows:

(Years) Aggregate

Intrinsic Value

4 unchanged sentences

Balance as of December 31, 2021 8,212,754 $ 29.28 6.8 $ 993,520,419

Intrinsic Value

Vested and exercisable as of December 31, 2021 5,251,327 $ 17.14 6.3 $ 693,906,970

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, 2021, 2020, and 2019 was $ 108.05 , $ 45.02 , and $ 13.20 per share, respectively.

The total intrinsic value of stock options exercised was $ 572.2 million, $ 466.1 million and $ 30.5 million during the years ended December 31, 2021, 2020, and 2019, 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 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

As of December 31, 2021, the total unrecognized stock-based compensation related to stock options was $ 86.5 million, which will be recognized over a weighted-average period of approximately two years .

Stock Option Valuation Assumptions

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Outstanding as of December 31, 2021 1,298,244 $ 141.48

As of December 31, 2021, the total unrecognized stock-based compensation related to RSUs was $ 171.6 million, which will be recognized over a weighted-average period of approximately three years .

2019 Employee Stock Purchase Plan

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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.

During the years ended December 31, 2021 and 2020, 61,764 and 163,727 shares of Class A common stock, respectively, were issued under the ESPP.

The ESPP provides that the maximum number of shares of the Company’s Class A common stock made available for sale thereunder will be 3,084,859 , 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.

1 unchanged sentence

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 .

As of December 31, 2021, there were 2,857,556 shares available for issuance under the ESPP.

For the years ended December 31, 2021 and 2020, the weighted average grant date fair values of the ESPP shares purchased, using the Black-Scholes option pricing model, were $ 43.39 and $ 16.61 , respectively.

The following assumptions were used in estimating the fair values of shares under the ESPP:

Year Ended December 31,

2021 2020 2019

Expected volatility 47 % – 69 %

Risk-free interest rate 0.04 % – 0.06 %

0.12 % – 0.15 %

Expected term (in years) 0.5 – 1.0

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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):

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:

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2021 2020 2019

Convertible preferred stock (on an if-converted basis) — — 67,704,278

Stock options to purchase common stock 8,212,754 11,860,844 15,918,243

2 unchanged sentences

Contingent restricted shares — 236,484 —

Common stock warrants — — 266,099

Shares committed under ESPP 13,368 10,939 56,159

Total 9,543,116 13,000,964 16,112,652

Subsequent Events

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