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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-40344

Akoya Biosciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

47-5586242

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

100 Campus Drive, 6th Floor
Marlborough, Massachusetts

01752

(Address of principal executive offices)

(Zip Code)

(855) 896-8401

Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

AKYA

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer  

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes     No 

Number of shares of the registrant’s common shares outstanding at April 29, 2022: 37,589,555

Table of Contents

AKOYA BIOSCIENCES, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021

2

Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2022 and 2021

3

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited) for the Three Months Ended March 31, 2022 and 2021

4

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021

5

Notes to Consolidated Financial Statements (Unaudited)

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

38

Item 4. Controls and Procedures

38

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

38

Item 1A. Risk Factors

38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 3. Defaults Upon Senior Securities

39

Item 4. Mine Safety Disclosures

39

Item 5. Other Information

39

Item 6. Exhibits

40

Signatures

41

Table of Contents

Akoya Biosciences, Inc.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements contained in this report other than statements of historical fact are forward-looking statements, including statements regarding our ability to develop, commercialize and achieve market acceptance of our current and planned products and services, our research and development efforts, and other matters regarding our business strategies, use of capital, results of operations and financial position, and plans and objectives for future operations. In some cases, you can identify forward-looking statements by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks, uncertainties and other factors are described under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report and in other documents we file with the Securities and Exchange Commission (the “SEC”) from time to time. We caution you that forward-looking statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. As a result, the forward-looking statements may not prove to be accurate. The forward-looking statements in this report represent our views as of the date of this report. We undertake no obligation to update any forward-looking statements for any reason, except as required by law.

Unless otherwise stated or the context otherwise indicates, references to “we,” “us,” “our” and similar references refer to Akoya Biosciences, Inc. and its consolidated subsidiary.

1

Table of Contents

AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

    

March 31, 2022

    

December 31, 2021

(unaudited)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

93,938

$

113,079

Accounts receivable, net

 

11,314

 

9,444

Inventories, net

 

11,373

 

9,014

Prepaid expenses and other current assets

 

9,841

 

9,277

Total current assets

 

126,466

 

140,814

Property and equipment, net

 

7,588

 

7,487

Restricted cash – long term

 

302

 

302

Demo inventory, net

 

2,225

 

2,548

Intangible assets, net

 

20,960

 

21,150

Goodwill

 

18,262

 

18,262

Operating lease right of use assets, net

9,937

Financing lease right of use assets, net

1,047

Other assets

 

341

 

344

Total assets

$

187,128

$

190,907

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

11,518

$

9,435

Accrued expenses and other current liabilities

 

12,138

 

13,491

Current portion of operating lease liabilities

2,805

Current portion of financing lease liabilities

383

Current portion of capital lease liabilities

 

 

272

Deferred revenue

 

4,892

 

4,484

Total current liabilities

 

31,736

 

27,682

Deferred revenue, net of current portion

 

1,519

 

1,330

Long-term debt, net of debt discount

 

32,576

 

32,471

Deferred tax liability, net

 

36

 

26

Capital lease liabilities, net of current portion

 

 

197

Operating lease liabilities, net of current portion

7,506

Financing lease liabilities, net of current portion

448

Contingent consideration liability (Note 4), net of current portion

 

6,755

 

7,850

Total liabilities

 

80,576

 

69,556

Stockholders’ equity:

 

  

 

  

Preferred Stock, $0.00001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021

Common Stock, $0.00001 par value; 500,000,000 shares authorized; 37,502,358 shares issued and outstanding at March 31, 2022; 500,000,000 shares authorized; 37,424,101 shares issued and outstanding at December 31, 2021

 

2

 

2

Additional paid in capital

 

219,056

 

217,456

Accumulated deficit

 

(112,506)

 

(96,107)

Total stockholders’ equity

 

106,552

 

121,351

Total liabilities and stockholders’ equity

$

187,128

$

190,907

See accompanying notes to consolidated financial statements.

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AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands except share & per share data)

Three months ended

March 31, 

March 31, 

    

2022

    

2021

Revenue:

 

  

 

  

Product revenue

$

13,343

$

9,963

Service and other revenue

 

3,551

 

2,249

Total revenue

 

16,894

 

12,212

Cost of goods sold:

 

  

 

  

Cost of product revenue

$

4,080

$

3,607

Cost of service and other revenue

 

2,718

 

1,200

Total cost of goods sold

$

6,798

$

4,807

Gross profit

$

10,096

$

7,405

Operating expenses:

 

  

 

  

Selling, general and administrative

 

18,193

 

8,179

Research and development

 

5,714

 

3,192

Change in fair value of contingent consideration

 

200

 

426

Depreciation and amortization

 

1,543

 

1,009

Total operating expenses

 

25,650

 

12,806

Loss from operations

 

(15,554)

 

(5,401)

Other income (expense):

 

  

 

  

Interest expense, net

 

(749)

 

(751)

Change in fair value of warrant liability

 

 

(1,870)

Other expense, net

 

(74)

 

(66)

Loss before benefit (provision) for income taxes

(16,377)

(8,088)

Benefit (provision) for income taxes

 

(22)

 

6

Net loss

$

(16,399)

$

(8,082)

Dividends accrued on redeemable convertible preferred stock

(1,190)

Accretion of redeemable convertible preferred stock

(296)

Adjusted net loss attributable to common stockholders

(16,399)

(9,568)

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

$

(0.44)

$

(3.54)

Weighted-average shares outstanding, basic and diluted

 

37,464,496

 

2,706,133

See accompanying notes to consolidated financial statements.

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AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)

(in thousands, except share data)

Series B

Series C

Series D

Redeemable

Redeemable

Redeemable

Series A

Convertible

Convertible

Convertible

Convertible

Class A

Class B

Additional

Total

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Common Stock

Paid in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

equity (deficit)

Balance at December 31, 2021

 

$

 

$

 

$

 

$

 

37,424,101

$

2

 

$

 

$

217,456

$

(96,107)

$

121,351

Exercise of stock options

 

 

 

 

 

 

 

 

 

78,257

 

 

 

55

55

Net loss

(16,399)

(16,399)

Stock-based compensation

1,545

1,545

Balance at March 31, 2022

$

$

$

$

37,502,358

$

2

$

$

219,056

$

(112,506)

$

106,552

Balance at December 31, 2020

 

13,715,330

$

11,500

 

26,732,361

$

30,107

 

16,390,217

$

27,500

 

5,013,333

$

1,253

 

$

 

2,563,765

$

1

 

$

$

(52,280)

$

(51,026)

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

271,334

 

 

 

44

 

 

44

Accrued dividends

 

 

180

 

 

510

 

 

500

 

 

 

 

 

 

 

 

(298)

 

(892)

 

(1,190)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,082)

 

(8,082)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

254

 

 

254

Balance at March 31, 2021

13,715,330

$

11,680

26,732,361

$

30,617

16,390,217

$

28,000

5,013,333

$

1,253

$

2,835,099

$

1

$

$

(61,254)

$

(60,000)

See accompanying notes to consolidated financial statements.

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AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

Three months ended

March 31, 

March 31, 

    

2022

    

2021

Operating activities

 

  

 

  

Net loss

$

(16,399)

$

(8,082)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization

 

1,619

 

1,041

Non-cash interest expense

 

105

 

106

Stock-based compensation expense

 

1,545

 

254

Deferred taxes

 

10

 

(10)

Change in fair value of contingent consideration

 

200

 

426

Change in fair value of warrant liability

 

 

1,870

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable, net

 

(1,870)

 

(120)

Prepaid expenses and other assets

 

(11,087)

 

(1,256)

Inventories, net

 

(2,286)

 

(430)

Accounts payable

 

2,083

 

702

Accrued expenses and other liabilities

 

7,551

 

772

Deferred revenue

 

597

 

323

Net cash used in operating activities

 

(17,932)

 

(4,404)

Investing activities

 

  

 

  

Purchases of property and equipment

 

(1,138)

 

(907)

Net cash used in investing activities

 

(1,138)

 

(907)

Financing activities

 

  

 

  

Proceeds from stock option exercises

 

55

 

44

Principal payments on capital leases

 

 

(48)

Principal payments on financing leases

(126)

Net cash used in financing activities

 

(71)

 

(4)

Net decrease in cash, cash equivalents, and restricted cash

 

(19,141)

 

(5,315)

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

 

113,381

 

17,508

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

$

94,240

$

12,193

Supplemental disclosures of cash flow information

 

  

 

  

Cash paid for interest

$

638

$

638

Cash paid for income taxes

$

$

Supplemental disclosures of non-cash activities

 

  

 

  

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

$

887

$

884

Accretion of dividends on Series B, C, and D Preferred Stock

$

$

1,190

See accompanying notes to consolidated financial statements.

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AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

(1) The company and basis of presentation

Description of business

Akoya Biosciences, Inc. (“Akoya” or the “Company”) is a life sciences technology company, founded on November 13, 2015 as a Delaware corporation with operations based in Marlborough, Massachusetts and Menlo Park, California, delivering spatial biology solutions focused on transforming discovery and clinical research. Spatial biology refers to an evolving technology that enables academic and biopharma scientists to detect and map the distribution of cell types and biomarkers across whole tissue samples at single cell resolution, enabling advancements in their understanding of disease progression and patient response to therapy. Through Akoya’s PhenoCycler (formerly CODEX®) and PhenoImager™ (formerly Phenoptics™) platforms, reagents, software and services, the Company offers end-to-end solutions to perform tissue analysis and spatial phenotyping across the full continuum, from discovery through translational and clinical research.

On September 28, 2018, the Company acquired the commercial Phenoptics division of PerkinElmer, Inc. (“PKI”) for multiplex immunofluorescence, with the aim of providing consumers with a full suite of end-to-end solutions for high parameter tissue analysis. The Phenoptics technology offers pathology solutions for cancer immunology and immunotherapy research, including advanced multiplex immunochemistry staining kits, multispectral imaging and whole side scanning instruments, and image analysis software. The Company’s combined portfolio of complementary technologies aims to fuel groundbreaking advancements in cancer immunology, immunotherapy, neurology and a wide range of other applications. The Company sells into three main regions across the world: North America, Asia-Pacific (“APAC”), and Europe-Middle East-Africa (“EMEA”).

On April 8, 2021, the Board of Directors of the Company (the “Board”) approved a 1-for-2.33 reverse stock split of its issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock, which was effected on April 9, 2021. The par value of the authorized stock was not adjusted as a result of the reverse stock split. Other than the par value, all issued and outstanding shares of common stock and related per share data shown in the accompanying financial statements and related notes have been retroactively revised to reflect the reverse stock split and adjustment of the Preferred Stock conversion ratios.

In April 2021, the Company completed the initial public offering of its common stock (the “IPO”). In the IPO, the Company issued and sold 7,567,000 shares of its common stock at a price to the public of $20.00 per share, including the exercise by the underwriters of their option to purchase an additional 987,000 shares. The Company received $138.6 million in net proceeds, after deducting underwriting discounts and commissions and other offering expenses.

Immediately prior to completing the IPO, all preferred stock converted into 26,545,579 shares of common stock, and all outstanding shares of the Company’s Class B common stock converted on a 1 for 1 basis into 2,835,099 shares of the Company’s Class A common stock.

On April 20, 2021, in connection with the closing of the IPO, the Company’s amended and restated certificate of incorporation, as filed with the Secretary of State of the State of Delaware, and the Company’s amended and restated bylaws became effective. Refer to Note 9 for further details.

Principles of consolidation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board

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(“FASB”). The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Akoya Biosciences UK Ltd. (“Akoya UK”). All intercompany balances and transactions have been eliminated in consolidation.

Unaudited interim financial information

The accompanying consolidated balance sheet as of March 31, 2022, the consolidated statements of operations, and the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021, and the consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022, the results of its operations for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are also unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Annual Report on Form 10-K filed with the SEC on March 15, 2022.

Liquidity and going concern

At March 31, 2022, the Company had cash and cash equivalents of $93,938 and an accumulated deficit of $112,506. The future success of the Company is dependent on its ability to successfully commercialize its products, successfully launch future products, obtain additional capital and ultimately attain profitable operations. The Company has funded its operations primarily through its preferred stock issuances, debt financing arrangements, and the IPO.

The Company is subject to a number of risks similar to other newly commercial life sciences companies, including, but not limited to, development and market acceptance of the Company’s product candidates, development by its competitors of new technological innovations, protection of proprietary technology, and raising additional capital.

The Company has incurred losses since its inception and has used cash from operations of $17,932 during the three months ended March 31, 2022. However, we believe that our existing cash and cash equivalents will be adequate to satisfy our current operating plans for at least the next twelve months from the issuance of these financial statements.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

(2) Summary of significant accounting policies

Significant accounting policies

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission and have not materially changed during the three months ended March 31, 2022, with the exception of the adoption of the FASB’s ASU 2016-02, Leases (Topic 842) in the first quarter of 2022. Refer below to “Recently adopted accounting standards” for further information.

Revenue recognition

The Company follows ASC 606, Revenue from Contracts with Customers (“ASC 606”).

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The Company generates revenue from the sale and installation of instruments, related warranty services, reagents and software (both company-owned and with third parties). Pursuant to ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for these goods and services.

To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of Topic 606, the Company performs the following five steps: (i) identification of the customer contract; (ii) identification of the performance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

The Company evaluates all promised goods and services within a customer contract and determines which of those are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract.

Most of the Company’s contracts with customers contain multiple performance obligations (i.e., sale of an instrument and warranty services). For these contracts, the Company accounts for individual performance obligations separately if they are distinct (i.e. capable of being distinct and separable from other promises in the contract). The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Excluded from the transaction price are sales tax and other similar taxes which are presented on a net basis.

Product Revenue

Product revenue is generated by the sale of instruments and consumable reagents predominantly through the Company’s direct sales force in the United States and in geographic regions outside the United States such as APAC and EMEA. The Company does not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to its customers. When an instrument is purchased by a customer, the Company recognizes revenue when the related performance obligation is satisfied (i.e. when the control of an instrument has passed to the customer). Revenue from the sale of consumables is recognized upon shipment to the customer. The Company’s perpetual software licenses generally have significant stand-alone functionality to the customer upon delivery and are considered to be functional intellectual property. The Company’s perpetual software licenses are considered distinct performance obligations, and revenue allocated to the software license is typically recognized upon provision of the license/software code to the customer (i.e., when the software is available for access and download by the customer).

Service and Other Revenue

Product sales of instruments include a service-based warranty typically for one year following the installation of the purchased instrument, with an extended warranty for an additional year sold in many cases. These are separate performance obligations as they are service-based warranties and are recognized on a straight-line basis over the service delivery period. After completion of the service period, customers have an option to renew or extend the warranty services, typically for additional one-year periods in exchange for additional consideration. The extended warranties are also service-based warranties that represent separate purchasing decisions. The Company recognizes revenue allocated to the extended warranty performance obligation on a straight-line basis over the service delivery period. Revenue from separately charged installation services is recognized upon completion of the installation process. Additionally, the Company provides laboratory services, in which revenue is recognized as services are performed. For laboratory services, we generally use the cost-to-cost approach to measure the extent of progress towards completion of the performance obligation because we believe it best depicts the transfer of assets to the customer. Under the cost-to-cost measure approach, the extent of progress towards completion is measured based on the ratio of costs incurred to date to

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the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. The Company records shipping and handling billed to customers as service and other revenue and the related costs in cost of service and other revenue in the consolidated statements of operations.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers by type of products, and between service and other revenue, as it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following table disaggregates the Company’s revenue by major source:

Three months ended

    

March 31, 2022

    

March 31, 2021

Revenue

 

  

 

  

Product revenue

 

  

 

  

Instruments

$

8,521

$

6,837

Consumables

 

4,628

 

2,544

Standalone software products

 

194

 

582

Total product revenue

$

13,343

$

9,963

Service and other revenue

$

3,551

$

2,249

Total revenue

$

16,894

$

12,212

Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together requires significant judgment. Once the Company determines the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration, based on the most likely amount, to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company determines standalone selling price based on the price at which the performance obligation in the contract (i.e. instrument, service warranty, installation) would be sold separately. As the first-year warranty for each instrument is embedded in the instrument price, the amount allocated to the first-year warranty has been determined based on the separately identifiable price of the Company’s extended warranty offering when it is sold on a renewal basis.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and the expected costs and margin related to the performance obligations. Contracts in which only one performance obligation is identified (i.e., consumables and standalone software products) do not require allocation of the transaction price.

Contract Assets and Liabilities

The Company did not record any contract assets at March 31, 2022 or December 31, 2021.

The Company’s contract liabilities consist of upfront payments for service-based warranties on instrument sales. The Company classifies these contract liabilities in deferred revenue as current or noncurrent based on the timing of when the Company expects to service the warranty.

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Cost to Obtain and Fulfill a Contract

Under ASC 606, the Company is required to capitalize certain costs to obtain customer contracts and costs to fulfill customer contracts. These costs are required to be amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates, compared to previously being expensed as incurred. As a practical expedient, the Company recognizes any incremental costs to obtain a contract as an expense when incurred if the amortization period of the asset is one year or less. Capitalizable costs to obtain contracts, such as commissions, and costs to fulfill customer contracts were determined to be immaterial for the three months ended March 31, 2022 and 2021.

Stock-based compensation

The Company records stock-based compensation for awards granted to employees, non-employees, and to members of the Board for their services on the Board based on the grant date fair value of awards issued, and the expense is recorded on a straight-line basis over the requisite service period, which is generally four years.

The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. The use of the Black-Scholes-Merton option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. The expected term was determined according to the simplified method, which is the average of the vesting tranche dates and the contractual term. Due to the lack of company-specific historical and implied volatility, the Company bases its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. For these analyses, companies with comparable characteristics are selected, including enterprise value and position within the industry, and with historical price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its stock-based awards. The risk-free interest rate is determined by reference to the U.S. Treasury zero-coupon issues with remaining maturities similar to the expected term of the options. The Company has not paid, and does not anticipate paying, cash dividends on shares of common stock; therefore, the expected dividend yield is assumed to be zero.

For restricted stock units (“RSUs”) issued under the Company’s stock-based compensation plans, the fair value of each grant is calculated based on the Company’s stock price on the date of grant.

The Company has elected to account for forfeitures as they occur; any compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition will be reversed in the period of the forfeiture.

Refer to Note 10 for further details on the Company’s stock-based compensation plans.

Net loss per share attributable to common stockholders

Basic and diluted net loss per common share outstanding is determined by dividing net loss, as adjusted for accretion and accrued dividends on redeemable convertible preferred stock, by the weighted average common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are excluded if their effect is anti-dilutive. In computing diluted net loss per share, the Company utilizes the treasury stock method.

The Company applies the two-class method to compute basic and diluted net loss or income per share when it has issued shares that meet the definition of participating securities. The two-class method determines net (loss) or income per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires net (loss) income available to common stockholders for the period to be allocated between common and participating securities based upon their respective

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rights to share in the earnings as if all net (loss) income for the period had been distributed. The Company’s convertible preferred stock participates in any dividends declared by the Company and are therefore considered to be participating securities. The participating securities are not required to participate in the losses of the Company, and therefore during periods of loss there is no allocation required under the two-class method.

Recent Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company is considered to be an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (Jobs Act). The Jobs Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Recently adopted accounting standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

On January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842)(ASC 842), using the optional transition method allowing entities to recognize a cumulative effect adjustment to the opening balance sheet without restating comparative prior periods presented. ASC 842 requires a lessee to recognize assets and liabilities on the balance sheet for most leases and changes many key definitions, including the definition of a lease. Lessees will continue to differentiate between finance leases and operating, and classification will impact expense recognition.

The Company elected the following practical expedients for all lease asset classes, which must be elected as a package and applied consistently to all of its leases at the transition date: i) the Company did not reassess whether any expired or existing contracts are or contain leases; ii) the Company did not reassess the lease classification for any expired or existing leases; and iii) the Company did not reassess initial direct costs for any existing leases. Refer to Note 17 “Leases” for the adoption impact to our consolidated balance sheet.

Recently issued but not yet adopted accounting standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-03 (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2016-13 may have on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead of determining a hypothetical purchase price allocation to measure goodwill impairment, the Company will compare the fair value of a reporting unit with its carrying amount. The update also

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includes a new requirement to disclose the amount of goodwill allocated to reporting units with zero or negative carrying amounts. ASU 2017-04 is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2017-04 may have on its consolidated financial statements and related disclosures.

(3) Significant risks and uncertainties including business and credit concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and receivables. The Company’s cash equivalents are held by large, credit worthy financial institutions. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the related invoices and represents the Company’s best estimate of probable credit losses in its existing accounts receivable. The Company had an allowance for doubtful accounts of $44 and $45 at March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022 and 2021, no customers accounted for more than 10% of revenue. As of March 31, 2022 and December 31, 2021, no customers accounted for more than 10% of accounts receivable.

(4) Fair value of financial instruments

The Company measures the following financial liabilities at fair value on a recurring basis. There were no transfers between levels of the fair value hierarchy during any of the periods presented.

The following tables set forth the Company’s financial assets and liabilities carried at fair value categorized using the lowest level of input applicable to each financial instrument as of March 31, 2022 and December 31, 2021:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Balance at

Identical

Observable

Unobservable

March 31, 

Assets

Inputs

Inputs

    

2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

Liabilities:

 

  

 

  

 

  

 

  

Contingent consideration – Long term portion

$

6,755

$

$

$

6,755

$

6,755

$

$

$

6,755

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Balance at

Identical

Observable

Unobservable

 

December 31, 

 

Assets

 

Inputs

 

Inputs

    

2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

Liabilities:

Contingent consideration – Long term portion

$

7,850

$

$

$

7,850

$

7,850

$

$

$

7,850

The Company’s recurring fair value measurements using Level 3 inputs relate to the Company’s contingent consideration liability and warrant liability. In those circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company re-measures this liability each reporting period and

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records changes in the fair value through changes in fair value of Contingent consideration on the Company’s consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue.

In September 2019, the Company entered into a Loan and Security Agreement with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), under which Innovatus agreed to make a term loan to the Company in an aggregate principal amount of $25,000 (the “Innovatus Term Loan”). In connection with the Loan and Security Agreement, the Company also issued the lender a warrant to purchase 368,779 additional shares of Series D Preferred Stock, at a purchase price of $1.53 per share. The expiration date of the warrant is September 27, 2029. The holder may at any time and from time to time exercise this warrant, in whole or in part, and on any exercise of the warrant, the holder may elect to receive shares equal to the full value of the warrant or a portion of its full value. Prior to the IPO, since the underlying Series D redeemable convertible preferred stock was classified outside of permanent equity, the preferred stock warrant was classified as other long-term liabilities in the accompanying balance sheet. The preferred stock warrant liability was recorded at fair value utilizing the Black-Scholes model. The Black Scholes option pricing model is based on the estimated market value of the underlying redeemable convertible preferred stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying redeemable convertible preferred stock. The Company adjusted the carrying value of the preferred stock warrant to its estimated fair value at each reporting date, with any related increase or decrease in the fair value recorded as an increase or decrease to other income (expense) in the statements of operations. In connection with the IPO, the preferred stock warrant was converted to a warrant to purchase shares of the Company’s common stock, pursuant to its preexisting terms. As such, the Company assessed the classification of the common stock warrant and determined it met the criteria to be classified within stockholders’ equity. Accordingly, the fair value of the warrant liability was reclassified to stockholders’ equity.

Changes in the fair value of the Company’s long-term portion of the contingent consideration liability during the three months ended March 31, 2022 and 2021 were as follows:

Balance as of December 31, 2021

    

$

7,850

Reclassification of FY 2022 payment to accrued expenses

 

(1,295)

Change in contingent consideration value

 

200

Balance as of March 31, 2022

$

6,755

Balance as of December 31, 2020

    

$

6,984

Reclassification of FY 2021 payment to accrued expenses

 

(1,150)

Change in contingent consideration value

 

426

Balance as of March 31, 2021

$

6,260

The recurring Level 3 fair value measurements of the Company’s contingent consideration liability include the following significant unobservable inputs:

Fair Value

  

  

as of

March 31, 

Valuation

Unobservable

Contingent Consideration Liability

    

2022

    

Technique

    

Inputs

Revenue-based Payments

$

6,755

 

Discounted Cash Flow Analysis under the Income Approach

 

Revenue discount factor, discount rate

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Changes in the fair value of the Company’s warrant liability during the three months ended March 31, 2021 were as follows:

Balance as of December 31, 2020

    

$

490

Change in fair value of warrant liability

 

1,870

Balance as of March 31, 2021

$

2,360

(5) Property and equipment, net

Property and equipment consists of the following:

Estimated Useful

March 31, 

December 31, 

    

Life (Years)

    

2022

    

2021

Furniture and fixtures

 

7

$

360

$

488

Computers, laptop and peripherals

 

5

 

3,863

 

3,590

Laboratory equipment

 

5

 

5,472

 

5,906

Leasehold improvements

 

Shorter of the lease life or 7

 

2,149

 

1,571

Total property and equipment

 

  

 

11,844

 

11,555

Less: Accumulated depreciation

 

  

 

(4,256)

 

(4,068)

Property and equipment, net

 

  

$

7,588

$

7,487

Depreciation expense of $434 and $384 relating to property and equipment was charged to operations for the three months ended March 31, 2022 and 2021, respectively. Depreciation expense of $76 and $0 relating to property and equipment was charged to cost of sales for the three months ended March 31, 2022 and 2021, respectively.

Demo inventory consists of the following:

Estimated

March 31, 

December 31, 

    

Life (Years)

    

2022

    

2021

Demo inventory – gross

 

3

$

3,733

$

3,733

Less: Accumulated depreciation

 

  

 

(1,508)

 

(1,185)

Demo inventory, net

 

  

$

2,225

$

2,548

Depreciation expense of $352 and $103 relating to demo equipment was charged to operations for the three months ended March 31, 2022 and 2021, respectively.

(6) Intangible assets and goodwill

Intangible assets as of March 31, 2022 are summarized as follows:

Accumulated

Useful Life

    

Cost

    

Amortization

    

Net

    

(in years)

Customer relationships

$

11,800

$

(2,758)

$

9,042

 

15

Developed technology

8,300

 

(2,425)

 

5,875

 

12

Licenses

63

 

(26)

 

37

 

15

Trade names and trademarks

6,300

 

(1,929)

 

4,371

 

12

Capitalized software

1,687

 

(89)

 

1,598

 

5

Non-compete agreements

300

 

(263)

 

37

 

4

Total intangible assets

$

28,450

$

(7,490)

$

20,960

 

  

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Intangible assets as of December 31, 2021 are summarized as follows:

Accumulated

Useful Life

    

Cost

    

Amortization

    

Net

    

(in years)

Customer relationships

$

11,800

$

(2,561)

$

9,239

 

15

Developed technology

8,300

 

(2,252)

 

6,048

 

12

Licenses

63

 

(25)

 

38

 

15

Trade names and trademarks

6,300

 

(1,722)

 

4,578

 

12

Capitalized software

1,259

 

(68)

 

1,191

 

5

Non-compete agreements

300

 

(244)

 

56

 

4

Total intangible assets

$

28,022

$

(6,872)

$

21,150

 

  

Total amortization expense charged to operations for the three months ended March 31, 2022 and 2021 was $618 and $521, respectively. Total amortization expense charged to cost of sales for the three months ended March 31, 2022 and 2021 was $0 and $33, respectively.

In November 2015, the Company entered into a license agreement with Stanford University (“Stanford”), pursuant to which Stanford granted the Company an exclusive, worldwide, sublicensable license under certain patent rights to make, use, import and commercialize products for diagnostic, industrial and research and development purposes. In accordance with the agreement, the Company capitalized non-refundable royalties paid to Stanford totaling $63, subject to straight-line amortization over a period of 15 years, or the term of the related agreement.

As of March 31, 2022, the amortization expense related to identifiable intangible assets in future periods is expected to be as follows:

2022 remaining

    

$

1,924

2023

 

2,511

2024

 

2,630

2025

 

2,630

2026

 

2,601