10-Q 1 akya-20240331x10q.htm 10-Q
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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, 2024

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

The Nasdaq Stock Market LLC

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 30, 2024: 49,386,247

AKOYA BIOSCIENCES, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at March 31, 2024 (Unaudited) and December 31, 2023

2

Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2024 and 2023

3

Consolidated Statements of Comprehensive Loss (Unaudited) for the Three Months Ended March 31, 2024 and 2023

4

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2024 and 2023

5

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023

6

Notes to Consolidated Financial Statements (Unaudited)

7

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

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

Item 4. Controls and Procedures

37

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

38

Item 3. Defaults Upon Senior Securities

38

Item 4. Mine Safety Disclosures

38

Item 5. Other Information

38

Item 6. Exhibits

39

Signatures

40

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 “Akoya,” “we,” “us,” “our” and similar references refer to Akoya Biosciences, Inc. and its consolidated subsidiary.

This report contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

1

AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

    

March 31, 2024

    

December 31, 2023

(unaudited)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

13,039

$

83,125

Marketable securities

48,536

Accounts receivable, net

 

13,473

 

16,994

Inventories, net

 

22,988

 

17,877

Prepaid expenses and other current assets

 

3,793

 

3,794

Total current assets

 

101,829

 

121,790

Property and equipment, net

 

8,964

 

10,729

Restricted cash

 

700

 

699

Demo inventory, net

 

726

 

893

Intangible assets, net

 

16,699

 

17,412

Goodwill

 

18,262

 

18,262

Operating lease right of use assets, net

5,568

8,365

Financing lease right of use assets, net

1,348

1,562

Other assets

 

654

 

657

Total assets

$

154,750

$

180,369

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

10,747

$

11,776

Accrued expenses and other current liabilities

 

12,462

 

13,433

Current portion of operating lease liabilities

2,654

2,681

Current portion of financing lease liabilities

718

767

Deferred revenue

 

6,612

 

6,688

Total current liabilities

 

33,193

 

35,345

Deferred revenue, net of current portion

 

2,928

 

3,193

Long-term debt, net of debt discount

 

75,469

 

75,254

Deferred tax liability, net

 

75

 

38

Operating lease liabilities, net of current portion

5,713

6,238

Financing lease liabilities, net of current portion

634

766

Contingent consideration liability, net of current portion

 

4,015

 

5,765

Total liabilities

 

122,027

 

126,599

Stockholders’ equity:

 

  

 

  

Preferred Stock, $0.00001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Common Stock, $0.00001 par value; 500,000,000 shares authorized at March 31, 2024 and December 31, 2023; 49,340,417 and 49,117,738 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

2

 

2

Additional paid in capital

 

286,292

 

283,839

Accumulated deficit

 

(253,555)

 

(230,071)

Accumulated other comprehensive loss

(16)

Total stockholders’ equity

 

32,723

 

53,770

Total liabilities and stockholders’ equity

$

154,750

$

180,369

See accompanying notes to consolidated financial statements.

2

AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands except share & per share data)

Three months ended

March 31, 

March 31, 

    

2024

    

2023

Revenue:

 

  

 

  

Product revenue

$

12,140

$

15,524

Service and other revenue

 

6,210

 

5,886

Total revenue

 

18,350

 

21,410

Cost of goods sold:

 

  

 

  

Cost of product revenue

6,723

5,751

Cost of service and other revenue

3,248

3,366

Total cost of goods sold

9,971

9,117

Gross profit

8,379

12,293

Operating expenses:

 

  

 

  

Selling, general and administrative

 

19,863

 

23,124

Research and development

 

5,554

 

6,378

Change in fair value of contingent consideration

 

179

 

227

Impairment

 

2,971

 

Restructuring

1,397

Total operating expenses

 

29,964

 

29,729

Loss from operations

 

(21,585)

 

(17,436)

Other income (expense):

 

  

 

  

Interest expense

 

(2,612)

 

(2,054)

Interest income

937

765

Other expense, net

 

(161)

 

(48)

Loss before provision for income taxes

(23,421)

(18,773)

Provision for income taxes

 

(63)

 

(29)

Net loss

$

(23,484)

$

(18,802)

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

$

(0.48)

$

(0.49)

Weighted-average shares outstanding, basic and diluted

 

49,188,170

 

38,326,024

See accompanying notes to consolidated financial statements.

3

AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in thousands)

Three months ended

March 31, 

March 31, 

    

2024

    

2023

Net loss

$

(23,484)

$

(18,802)

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities

(16)

6

Total other comprehensive (loss) income

(16)

6

Comprehensive loss

$

(23,500)

$

(18,796)

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

Additional

other

Total

Common Stock

Paid in

Accumulated

comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

loss

    

Equity

Balance at December 31, 2023

 

49,117,738

$

2

 

$

283,839

$

(230,071)

$

$

53,770

Exercise of stock options

 

65,482

 

 

36

 

 

 

36

Vesting of restricted stock units

157,197

(149)

(149)

Net loss

(23,484)

(23,484)

Other comprehensive loss

 

 

 

 

 

(16)

 

(16)

Stock-based compensation

 

 

 

2,566

 

 

 

2,566

Balance at March 31, 2024

49,340,417

$

2

$

286,292

$

(253,555)

$

(16)

$

32,723

Accumulated

Additional

other

Total

Common Stock

Paid in

Accumulated

comprehensive

Stockholders’

Shares

    

Amount

    

Capital

    

Deficit

    

income (loss)

    

Equity

Balance at December 31, 2022

 

38,288,188

$

2

 

$

225,333

$

(166,748)

$

(6)

$

58,581

Exercise of stock options

 

88,756

 

 

58

 

 

 

58

Vesting of restricted stock units

22,127

(94)

(94)

Net loss

 

 

 

 

(18,802)

 

 

(18,802)

Other comprehensive income

6

6

Stock-based compensation

 

 

 

2,375

 

 

 

2,375

Balance at March 31, 2023

38,399,071

$

2

$

227,672

$

(185,550)

$

$

42,124

See accompanying notes to consolidated financial statements.

5

AKOYA BIOSCIENCES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

Three months ended

March 31, 

March 31, 

    

2024

    

2023

Operating activities

 

  

 

  

Net loss

$

(23,484)

$

(18,802)

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

 

  

 

  

Depreciation and amortization

 

2,051

 

2,121

Non-cash interest expense

 

215

 

178

Stock-based compensation expense

 

2,566

 

2,375

Deferred taxes

 

37

 

Change in fair value of contingent consideration

 

179

 

227

Credit losses on accounts receivable

375

Net accretion of marketable securities

(545)

(5)

Operating lease right of use assets

728

598

Provision for excess and obsolete inventories

2,298

Impairment

2,971

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

3,146

 

(3,214)

Prepaid expenses and other assets

 

4

 

2,517

Inventories, net

 

(7,310)

 

(137)

Accounts payable

 

(1,029)

 

(1,945)

Accrued expenses and other liabilities

 

(2,133)

 

(3,941)

Operating lease liabilities

(552)

(539)

Deferred revenue

 

(341)

 

809

Net cash used in operating activities

 

(20,824)

 

(19,758)

Investing activities

 

  

 

  

Purchases of property and equipment

 

(810)

 

(804)

Purchases of marketable securities

(48,007)

Maturities of marketable securities

7,000

Net cash (used in) provided by investing activities

 

(48,817)

 

6,196

Financing activities

 

  

 

  

Proceeds from stock option exercises

 

36

 

58

Settlement of restricted stock units for tax withholding obligations

(149)

(94)

Principal payments on financing leases

(181)

(148)

Payments of debt issuance costs

(33)

Payments of deferred offering costs

 

(150)

 

(202)

Net cash used in financing activities

 

(444)

 

(419)

Net decrease in cash, cash equivalents, and restricted cash

 

(70,085)

 

(13,981)

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

 

83,824

 

74,532

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

$

13,739

$

60,551

Supplemental disclosures of cash flow information

 

  

 

  

Cash paid for interest

$

2,243

$

1,793

Cash paid for income taxes

$

$

Supplemental disclosures of non-cash activities

 

  

 

  

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

$

84

$

529

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, delivering spatial biology solutions focused on transforming discovery, clinical research and diagnostics. Spatial biology refers to a rapidly 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 and diagnostics.

On September 28, 2018, the Company acquired the commercial Quantitative Pathology Solutions (“QPS”) division of Perkin Elmer, Inc. (“PKI”), subsequently known as Revvity, Inc. (“Revvity”), 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 three main regions across the world: North America, Asia-Pacific (“APAC”), and Europe-Middle East-Africa (“EMEA”).

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 March 31, 2024, the consolidated statements of operations, the consolidated statements of comprehensive loss and the consolidated statements of stockholders’ equity, and the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 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, 2024, the results of its operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The consolidated balance sheet as of December 31, 2023 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

7

ended December 31, 2023 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2024.

Liquidity and going concern

At March 31, 2024, the Company had cash, cash equivalents, and marketable securities of $61,575 and an accumulated deficit of $253,555. The future success of the Company is dependent on its ability to successfully commercialize its products, successfully launch future products, obtain additional capital, if necessary, and ultimately attain profitable operations. The Company has funded its operations primarily through its preferred stock issuances, debt financing arrangements, and through the sale of shares of the Company’s common stock. The Company completed its initial public offering of the Company’s common stock in April of 2021 (the “IPO”) and completed a follow-on public offering of the Company’s common stock in June of 2023, as further described in Note 10.

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 products and potential products, 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 $20,824 during the three months ended March 31, 2024. However, the Company believes that its existing cash, cash equivalents, and marketable securities will be adequate to satisfy its 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, 2023 filed with the SEC and have not materially changed during the three months ended March 31, 2024.

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period 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

8

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.

In order to determine the stand-alone selling price, the Company conducts a periodic analysis to determine whether various goods or services have an observable stand-alone selling price as well as to identify significant changes to current stand-alone selling prices. If the Company does not have an observable stand-alone selling price for a particular good or service, then the stand-alone selling price for that particular good or service is estimated using an approach that maximizes the use of observable inputs. The Company’s process for determining stand-alone selling price requires judgment and considers multiple factors that are reasonably available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance obligation. The Company believes that this method results in an estimate that represents the price the Company would charge for the product offerings if they were sold separately.

Taxes, such as sales, value-added and other taxes, collected from customers concurrent with revenue generating activities and remitted to governmental authorities are not included in revenue. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales.

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 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

9

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 output method to measure the extent of progress towards completion of the performance obligation. For companion diagnostic development, 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 output method, the extent of progress towards completion is measured based on the value of the services transferred to date relative to the remaining services promised under the contract. 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. On December 4, 2023, the Company amended the Acrivon Agreement, which expanded the scope of work and increased total development milestone payments to an aggregate of $17,250. Such amendment was accounted for as a modification to the existing contract. The Company is entitled to be paid through an upfront payment and at the achievement of certain developmental, commercial, and FDA milestones during the development, that could aggregate to $17,850. A portion of these payments have been received from June 2022 through March 31, 2024.

The Acrivon Agreement is in the scope of ASC 606, Revenue from Contracts with Customers. The Company concluded that the Acrivon Agreement contains one performance obligation for certain development services, since the underlying elements are inputs to a single development service and are not distinct within the context of the contract. Additional development services in the Acrivon Agreement were deemed to be an option, due to certain contingencies with significant uncertainty. 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.

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 instrument warranty and 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, 2024

    

March 31, 2023

Revenue

 

  

 

  

Product revenue

 

  

 

  

Instruments

$

4,869

$

9,607

Consumables

 

7,001

 

5,712

Standalone software products

 

270

 

205

Total product revenue

$

12,140

$

15,524

Service and other revenue

Service and other revenue

$

3,383

$

3,552

Instrument warranty

2,827

2,334

Total service and other revenue

$

6,210

$

5,886

Total revenue

$

18,350

$

21,410

10

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’s contract assets consist of revenues recognized, but not yet invoiced to customers for lab services, companion diagnostic development, and instruments. The Company classifies contract assets in accounts receivable. Contract assets are classified as current or noncurrent based on timing of when the Company expects to invoice the customer. The Company recorded $2,196 and $1,276 in contract assets at March 31, 2024 and December 31, 2023, respectively.

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 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, 2024 and 2023.

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 four years.

11

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, in combination with the Company’s historical volatility. 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 Company’s and 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 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 11 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 by the weighted average common shares outstanding during the period. For purposes of the diluted net loss per share calculations, stock options, and unvested restricted stock units, 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 months ended March 31, 2024 and 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 interest income. Interest on

12

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 issued but not yet adopted accounting standards

In November 2023, the FASB issued ASC Update No. 2023-07, Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures. This update enhances reportable segment disclosure requirements by requiring public entities to provide disclosures of significant segment expenses and other segment items, as well as disclosures about a reportable segment’s profit or loss and assets that are currently required annually in interim periods. The new standard will be effective for the Company’s annual financial statements for the period beginning on January 1, 2024. The adoption of this standard is not expected to have a material impact on the Company’s disclosures.

In December 2023, the FASB issued ASC Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances income tax disclosure requirements by requiring public entities to provide additional information in its tax rate reconciliation and additional disclosures about income taxes paid. The update is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance and the amendments in this update should be applied prospectively, but entities have the option to apply it retrospectively. The Company is currently evaluating the impact that the standard will have on its Consolidated Financial Statements.

(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 losses is developed using historical collection experience, current and future economic and market conditions, and a review of the status of customers’ accounts receivable. The Company had an allowance for credit losses of $420 and $45 at March 31, 2024 and December 31, 2023, respectively.

For the three months ended March 31, 2024 and 2023, no single customer accounted for more than 10% of revenue. As of March 31, 2024, one customer accounted for 16% of accounts receivable. As of December 31, 2023, no single customer accounted for more than 10% of accounts receivable.

13

(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, 2024 and December 31, 2023:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Balance at

Identical

Observable

Unobservable

March 31, 

Assets

Inputs

Inputs

    

2024

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

Cash equivalents

$

11,528

$

10,141

$

1,387

$

U.S Treasury securities

29,776

29,776

Corporate bonds

6,908

6,908

U.S. Government agency bonds

4,996

4,996

Commercial paper

3,410

3,410

Yankee bonds

3,446

3,446

Total Assets

$

60,064

$

10,141

$

49,923

$

Liabilities:

 

  

 

  

 

  

 

  

Contingent consideration – Short term portion

$

3,839

$

$

$

3,839

Contingent consideration – Long term portion

4,015

4,015

Total Liabilities

$

7,854

$

$

$

7,854

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Balance at

Identical

Observable

Unobservable

 

December 31, 

 

Assets

 

Inputs

 

Inputs

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Assets:

Cash equivalents

$

76,844

$

76,844

$

$

Total Assets

$

76,844

$

76,844

$

$

Liabilities:

 

  

 

  

 

  

 

  

Contingent consideration – Short term portion

$

1,911

$

$

$

1,911

Contingent consideration – Long term portion

5,765

5,765

Total Liabilities

$

7,676

$

$

$

7,676

14

The following is a summary of cash equivalents and marketable securities as of March 31, 2024 and December 31, 2023:

March 31, 2024

Gross

Gross

Unrealized

Unrealized

Estimated

    

Cost

    

Gains

    

Losses

    

Fair Value

Cash equivalents

$

11,528

$

$

$

11,528

Marketable securities (due in one year or less):

U.S Treasury securities

29,780

(4)

29,776

Corporate bonds

6,911

(3)

6,908

U.S. Government agency bonds

5,000

(4)

4,996

Commercial paper

3,413

(3)

3,410

Yankee bonds

3,448

(2)

3,446

Total marketable securities

48,552

(16)

48,536

Total cash equivalents and marketable securities

$

60,080

$

$

(16)

$

60,064

December 31, 2023

Gross

Gross

Unrealized

Unrealized

Estimated

    

Cost

    

Gains

    

Losses

    

Fair Value

Cash equivalents

$

76,844

$

$

$

76,844

Total cash equivalents

$

76,844

$

$

$

76,844

The Company held ten debt securities at March 31, 2024 classified as marketable securities with original maturity dates greater than three months that were in an unrealized loss position for less than twelve months. The fair market value of these securities was $48,536. The Company evaluated its securities for other-than-temporary impairments based on quantitative and qualitative factors. The Company considered the decline in market value for these securities to be primarily attributable to current economic and market conditions. It is not more likely than not that the Company will be required to sell these securities, and the Company does not intend to sell these securities before the recovery of their amortized cost basis. Based on its analysis, the Company does not consider these investments to be other-than-temporarily impaired as of March 31, 2024.

The Company had no material realized gains or losses on its available-for-sale securities for the three months ended March 31, 2024 and 2023.

The Company’s recurring fair value measurements using Level 3 inputs relate to the Company’s contingent consideration 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 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.

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

    

2024

    

Technique

    

Inputs

Revenue-based Payments

$

7,854

 

Discounted Cash Flow Analysis under the Income Approach

 

Revenue discount factor, discount rate

15

(5) Property and equipment, net

Property and equipment consists of the following:

Estimated Useful

March 31, 

December 31, 

    

Life (Years)

    

2024

    

2023

Furniture and fixtures

 

7

$

317

$

474

Computers, laptop and peripherals

 

5

 

5,173

 

5,173

Laboratory equipment

 

5

 

7,470

 

8,869

Leasehold improvements

 

Shorter of the lease life or 7

 

5,139

 

5,876

Total property and equipment

 

  

 

18,099

 

20,392

Less: Accumulated depreciation

 

  

 

(9,135)

 

(9,663)

Property and equipment, net

 

  

$

8,964

$

10,729

For the three months ended March 31, 2024, the Company recorded $902 in impairment related to leasehold improvements, furniture and fixtures, and laboratory equipment associated with its exit of office and laboratory space in Menlo Park, California. Please refer to Note 18 – Leases for further discussion. There was no impairment related to property and equipment for the three months ended March 31, 2023.

Depreciation expense relating to property and equipment charged to operations was $716 and $698 for the three months ended March 31, 2024 and 2023, respectively. Depreciation expense relating to property and equipment charged to cost of sales was $156 and $79 for the three months ended March 31, 2024 and 2023, respectively.

Demo inventory consists of the following:

Estimated

March 31, 

December 31, 

    

Life (Years)

    

2024

    

2023

Demo inventory – gross

 

3

$

4,164

$

4,284

Less: Accumulated depreciation

 

  

 

(3,438)

 

(3,391)

Demo inventory, net

 

  

$

726

$

893

Depreciation expense relating to demo equipment charged to operations was $252 and $326 for the three months ended March 31, 2024 and 2023, respectively.

(6) Allowance for credit losses

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers’ trade accounts receivable. Due to the short-term nature of such receivables, the estimated accounts receivable that may not be collected is based on aging of the accounts receivable balances.

The Company evaluates contract terms and conditions, country, and political risk, and may require prepayment to mitigate risk of loss. Specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company monitors changes to the receivables balance on a timely basis, and balances are written off as they are determined to be uncollectable after all collection efforts have been exhausted.

As of March 31, 2024, the Company’s accounts receivable balance was $13,473, net of $420 of allowance for credit losses. The following table provides a roll-forward of the allowance for credit losses for the three months ended March

16

31, 2024 that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.

Balance at January 1, 2024

$

45

Change in provision

375

Balance at March 31, 2024

$

420

(7) Intangible assets

Intangible assets as of March 31, 2024 are summarized as follows:

Accumulated

Useful Life

    

Cost

    

Amortization

    

Net

    

(in years)

Customer relationships

$