UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ___________ to ___________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
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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 |
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.
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).
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 ☐ |
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
Number of shares of the registrant’s common shares outstanding at July 31, 2023:
AKOYA BIOSCIENCES, INC.
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.
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AKOYA BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| June 30, 2023 |
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Current assets |
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Marketable securities | — | | ||||
Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Property and equipment, net |
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Restricted cash |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
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Current portion of financing lease liabilities | | | ||||
Deferred revenue |
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Deferred revenue, net of current portion |
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Long-term debt, net of debt discount |
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Financing lease liabilities, net of current portion | | | ||||
Contingent consideration liability (Note 4), net of current portion |
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Total liabilities |
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Stockholders’ equity: |
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Common Stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss | — | ( | ||||
Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | | ||
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)
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Cost of goods sold: |
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Operating expenses: |
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Research and development |
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Change in fair value of contingent consideration |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense |
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Interest income | | | | | ||||||||
Other expense, net |
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Loss before provision for income taxes | ( | ( | ( | ( | ||||||||
Provision for income taxes |
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Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss per share attributable to common stockholders, basic and diluted | ( | ( | $ | ( | $ | ( | ||||||
Weighted-average shares outstanding, basic and diluted |
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See accompanying notes to consolidated financial statements.
3
AKOYA BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(in thousands)
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June 30, | June 30, | June 30, | June 30, | |||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive income (loss): | ||||||||||||
Unrealized gain (loss) on marketable securities | — | ( | | ( | ||||||||
Total other comprehensive income (loss) | — | ( | | ( | ||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
See accompanying notes to consolidated financial statements.
4
AKOYA BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (Unaudited)
(in thousands, except share data)
Accumulated | |||||||||||||||||
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Common Stock | Paid in | Accumulated | comprehensive | Stockholders’ | |||||||||||||
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Balance at December 31, 2022 |
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Exercise of stock options |
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Vesting of restricted stock units | | — | ( | — | — | ( | |||||||||||
Other comprehensive income | — | — | — | — | | | |||||||||||
Net loss |
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Stock-based compensation |
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Balance at March 31, 2023 | | $ | | $ | | $ | ( | $ | — | $ | | ||||||
Exercise of stock options |
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Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Sale of common stock in underwritten offering, net of costs | | — | | — | — | | |||||||||||
Net loss |
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Stock-based compensation |
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Balance at June 30, 2023 | | $ | | $ | | $ | ( | $ | — | $ | | ||||||
Accumulated | |||||||||||||||||
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Shares |
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Balance at December 31, 2021 |
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Exercise of stock options |
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Net loss |
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Stock-based compensation |
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Balance at March 31, 2022 | | $ | | $ | | $ | ( | $ | — | $ | | ||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||
Other comprehensive income | — | — | — | — | ( | ( | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Balance at June 30, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
See accompanying notes to consolidated financial statements.
5
AKOYA BIOSCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Six months ended | ||||||
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| 2023 |
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Operating activities |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Deferred taxes |
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Change in fair value of contingent consideration |
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Net accretion of marketable securities | ( | ( | ||||
Operating lease right of use assets | | ( | ||||
Change in inventory reserve | | — | ||||
Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Prepaid expenses and other assets |
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Inventories, net |
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Accounts payable |
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Accrued expenses and other liabilities |
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Operating lease liabilities | ( | | ||||
Deferred revenue |
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Net cash used in operating activities |
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Investing activities |
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Purchases of property and equipment |
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Net cash provided by (used in) investing activities |
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Financing activities |
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Sale of common stock in underwritten offering, net of costs | | — | ||||
Proceeds from stock option exercises |
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Settlement of restricted stock units for tax withholding obligations | ( | — | ||||
Proceeds from debt | — | | ||||
Principal payments on financing leases | ( | ( | ||||
Payments of debt issuance costs | ( | ( | ||||
Payments of deferred at-the-market offering costs |
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Payments of contingent consideration | ( | ( | ||||
Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash at beginning of year |
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Cash, cash equivalents, and restricted cash at end of year | $ | | $ | | ||
Supplemental disclosures of cash flow information |
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Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes | $ | — | $ | — | ||
Supplemental disclosures of non-cash activities |
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Right-of-use asset obtained in exchange for lease liabilities | $ | | $ | — | ||
Unpaid offering costs related to sale of common stock in underwritten offering | $ | | $ | — | ||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | | $ | | ||
See accompanying notes to consolidated financial statements.
6
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 Quantitative Pathology Solutions (“QPS”) 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 QPS 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
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 (“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 June 30, 2023, the consolidated statements of operations, the consolidated statements of comprehensive loss and the consolidated statements of stockholders’ equity for the three and six months ended June 30, 2023 and 2022, and the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 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 June 30, 2023, the results of its operations for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The consolidated balance sheet as of December 31, 2022 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
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financial statements and the notes thereto for the year ended December 31, 2022 included in the Annual Report on Form 10-K filed with the SEC on March 6, 2023.
Liquidity and going concern
At June 30, 2023, the Company had cash and cash equivalents of $
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 $
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, 2022 filed with the SEC and have not materially changed during the six months ended June 30, 2023.
Reclassifications
Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to the current year’s presentation.
Revenue recognition
The Company follows ASC 606, Revenue from Contracts with Customers (“ASC 606”).
The Company generates revenue from the sale and installation of instruments, related warranty services, reagents, software (both company-owned and with third parties), and laboratory services. 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
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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. The Company generally 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 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 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, the Company generally uses the cost-to-cost approach to measure the extent of progress towards completion of the performance obligation because the Company believes 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 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.
In June 2022, the Company entered into a Companion Diagnostic Agreement with Acrivon Therapeutics, Inc. (the “Acrivon Agreement”) to co-develop, validate, and commercialize Acrivon’s OncoSignature® test. The Company will be paid through an upfront payment and at the achievement of certain developmental, commercial, and FDA milestones during the development, that could aggregate to $
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The Acrivon Agreement is in the scope of ASC 606, Revenue from Contracts with Customers and includes one performance obligation since the underlying elements are inputs to a single development service and are not distinct within the context of the contract. Accordingly, the Company will recognize revenue over time for the transaction price in an amount proportional to the expenses incurred and the total estimated expenses to satisfy its performance obligation. Due to the uncertainty in the achievement of certain developmental, commercial, and FDA milestones, the variable consideration associated with certain future milestone payments has been fully constrained from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur.
The costs incurred by the Company under this arrangement are included as research and development expenses in the Company’s Consolidated Statements of Operations as these costs are related to the development of new services and technology to be owned and offered by the Company.
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 | Six months ended | |||||||||||
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Total product revenue | $ | | $ | | $ | | $ | | ||||
Service and other revenue | $ | | $ | | $ | | $ | | ||||
Total revenue | $ | | $ | | $ | | $ | | ||||
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.
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Contract Assets and Liabilities
The Company did not record any contract assets at June 30, 2023 or December 31, 2022.
The Company’s contract liabilities consist of upfront payments for service-based warranties on instrument sales, as well as lab services. The Company classifies contract liabilities associated with service based warranties in deferred revenue, and contract liabilities associated with lab services in accrued expenses. Contract liabilities are classified as current or noncurrent based on the timing of when the Company expects to service the warranty, or complete the lab services contract.
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
Stock-based compensation
The Company records stock-based compensation for awards granted to employees, non-employees, and to members of the Board of Directors of the Company (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
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 Company will continue to apply this process until a sufficient amount of historical information regarding volatility of its own stock price becomes available. 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
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 11 for further details on the Company’s stock-based compensation plans.
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Net loss per share attributable to common stockholders
Basic and diluted net loss per common share outstanding is determined by dividing net loss by the weighted average common shares outstanding during the period. For purposes of the diluted net loss per share calculations, stock options, unvested restricted stock units, and the outstanding warrant, are considered to be potentially dilutive securities, but are excluded from the diluted net loss per share because their effect would be anti-dilutive and therefore basic and diluted net loss per share were the same for all periods presented.
Comprehensive income (loss)
Components of comprehensive income (loss), including net loss, are reported in the financial statements in the period in which they are recognized. Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). Comprehensive income (loss) includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders which for the three and six months ended June 30, 2023 consist of unrealized gain (loss) on marketable securities.
Marketable securities
Marketable securities represent holdings of available-for-sale marketable debt securities in accordance with the Company’s investment policy. Short-term marketable securities mature within one year from the balance sheet date while long-term marketable securities mature after one year. Investments in marketable securities are recorded at fair value, with any unrealized gains and losses reported within accumulated other comprehensive income as a separate component of stockholders’ equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are reflected as a component of other expense. Interest on securities sold is determined based on the specific identification method and reflected as interest income. Any realized gains or losses on the sale of investment are reflected as realized (loss) gain on investments.
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. The Company has elected to avail itself of this extended transition period and, as a result, the Company 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 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. The Company adopted ASU 2016-13 on January 1, 2023 using the modified retrospective approach. The Company’s consolidated financial statements for prior-year periods have not been revised and are reflective of the credit loss requirements which were in effect for that period. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements and related disclosures.
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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 includes a new requirement to disclose the amount of goodwill allocated to reporting units with zero or negative carrying amounts. The Company adopted ASU 2017-04 on January 1, 2023. The adoption of ASU 2017-04 did not have a material impact on the Company’s 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, marketable securities, and receivables. The Company’s cash equivalents are held by large, credit worthy financial institutions. Marketable securities consist of short-term investments. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks generally exceed federally insured limits. 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 credit losses. The allowance for credit loss 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 credit loss of $
For the three and six months ended June 30, 2023,
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(4) Fair value of financial instruments
The Company measures the following financial liabilities at fair value on a recurring basis. There were
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 June 30, 2023 and December 31, 2022:
Quoted Prices | ||||||||||||
in Active | Significant | |||||||||||
Markets for | Other | Significant | ||||||||||
Balance at | Identical | Observable | Unobservable | |||||||||
June 30, | Assets | Inputs | Inputs | |||||||||
| 2023 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | | $ | | $ | | $ | — | ||||
Total Assets | $ | | $ | | $ | | $ | — | ||||
Liabilities: |
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Contingent consideration – Short term portion | $ | | $ | | $ | | $ | | ||||
Contingent consideration – Long term portion | | | | | ||||||||
Total Liabilities | $ | | $ | | $ | | $ | | ||||
Quoted Prices | ||||||||||||
in Active | Significant | |||||||||||
Markets for | Other | Significant | ||||||||||
Balance at | Identical | Observable | Unobservable | |||||||||
| December 31, |
| Assets |
| Inputs |
| Inputs | |||||
| 2022 |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | | $ | | $ | | $ | — | ||||
U.S. Treasury securities | | | | — | ||||||||
Total Assets | $ | | $ | | $ | | $ | — | ||||
Liabilities: |
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Contingent consideration – Short term portion | $ | | $ | | $ | | $ | | ||||
Contingent consideration – Long term portion | | | | | ||||||||
Total Liabilities | $ | | $ | | $ | | $ | | ||||
The following is a summary of cash, cash equivalents, and marketable securities as of June 30, 2023 and December 31, 2022:
June 30, 2023 | ||||||||||||
Gross | Gross | |||||||||||
Unrealized | Unrealized | Estimated | ||||||||||
| Cost |
| Gains |
| Losses |
| Fair Value | |||||
Cash and cash equivalents | $ | | $ | — | $ | — | $ | | ||||
Total cash and cash equivalents | $ |
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