Bionano Genomics Inc

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Description of Business

Bionano Genomics, Inc. (collectively, with its consolidated subsidiaries, the “Company”) is a provider of genome analysis solutions that can enable researchers and clinicians to reveal answers to challenging questions in biology and medicine. The Company offers optical genome mapping (“OGM”) solutions for applications across basic, translational and clinical research, and for other applications including bioprocessing. The Company offers a platform-agnostic software solution, which integrates next-generation sequencing, microarray and OGM data designed to provide analysis, visualization, interpretation and reporting of copy number variants, single-nucleotide variants and absence of heterozygosity across the genome in one consolidated view. The Company also offers nucleic acid extraction and purification solutions using proprietary isotachophoresis (“ITP”) technology. Through its Bionano Laboratories, (“Bionano Laboratories”) business, the Company also provides OGM-based diagnostic testing services.

Reverse Stock Split

On August 4, 2023, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all issued and outstanding shares of the Company’s common stock at a ratio of 1-for-10. The reverse stock split did not change the par value or the authorized number of shares of the Company’s common stock. The accompanying consolidated financial statements and notes to the consolidated financial statements present the retroactive effect of the reverse stock split on the Company’s common stock and per share amounts for all periods presented.

Basis of Presentation

The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting purposes. The condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, changes in equity, and comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances have been eliminated. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Reclassifications

Certain amounts reported in prior years have been reclassified to conform with the presentation in the current year. These reclassifications had no effect on the reported results of operations.

Liquidity and Going Concern

The Company has experienced recurring net losses from operations, negative cash flows from operating activities, and accumulated deficit since its inception and expects to continue to incur net losses into the foreseeable future. As of September 30, 2024, the Company had approximately $8.8 million in cash and cash equivalents, $3.2 million in short-term investments and $11.4 million in restricted cash and investments. The amount we are required to hold as restricted cash or investments is equal to the lesser of (a) $11.0 million and (b) the then outstanding principal balance of the Debentures (as defined in Note 5 (Debt) below).

As of September 30, 2024 the Company had $17.0 million of principal outstanding under the Debentures (see Note 5 (Debt)) and an accumulated deficit of $673.1 million. During the nine months ended September 30, 2024, the Company used $62.4 million of cash in operations.

Management expects operating losses and negative cash flows to continue for at least the next year as the Company continues to incur costs related to product development and commercialization efforts. Management has prepared cash flows forecasts which indicate that based on the Company’s expected operating losses and negative cash flows, there is substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the unaudited condensed consolidated financial statements for the nine months ended September 30, 2024, are issued. Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management’s plans to raise additional capital to fulfill its operating and capital requirements for at least 12 months include public or private equity or debt financings. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all, and if the Company is unable to raise sufficient additional capital in the very near term, it may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the United States Bankruptcy Code.

Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.

The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the outcome of this uncertainty.

Significant Accounting Policies

During the three and nine months ended September 30, 2024, there were no material changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Restructuring

The Company’s restructuring expense consists primarily of actions taken in May and October 2023 (the “2023 Workforce Reductions”) and March and September 2024 (the “2024 Workforce Reductions”) in order to reduce costs and improve operations and manufacturing efficiency. Severance-related costs were accounted for as a one-time termination benefit communicated by period end without an additional service component, so the charge represents the total amount expected to be incurred. As a result of reducing facility costs and discretionary spending unrelated to headcount and combined with the cost savings from the 2023 Workforce Reductions and 2024 Workforce Reductions, such plans are intended to decrease expenses and maintain a streamlined organization to support its business.

In connection with the Company’s restructuring initiatives, the Company entered into a lease termination agreement on February 28, 2024 with the landlord for the facility in Salt Lake City that resulted in a one-time termination fee of approximately $0.2 million in the third quarter of 2024. The Company continued to lease the property through June 2024. The Company accounted for the lease amendment as a lease modification and recorded a gain of $0.1 million during the three months ended March 31, 2024.

On March 1, 2024, and September 4, 2024, the Company’s board of directors approved restructuring plans, including reductions in force, that it expects to reduce the Company’s annualized operating expenses. The 2024 Workforce Reductions were incremental to the 2023 Workforce Reductions. As part of the 2024 Workforce Reductions, the Company reduced its overall headcount by approximately 120 and 83 employees in March and September, respectively. The Company has substantially completed the reduction in force from the 2024 Workforce Reductions as of October 4, 2024. In addition, as of September 30, 2024, Bionano Laboratories has phased out the offering of certain testing services related to neurodevelopmental disorders, including autism spectrum disorders, and other disorders of childhood development. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in force. See Note 7 (Commitments and Contingencies) for additional information.

Impairment of In-Process Internal-Use Software

In-process internal-use software or cloud computing arrangements are reviewed for impairment if indicators of potential impairment exist. In September 2024, Bionano announced a change in its business strategy to focus on driving utilization and adoption of OGM from the Company’s existing installed base, with less emphasis on new placements of the Company’s OGM systems, which resulted in a change in the manner in which the Company’s in-process internally developed software would be used; therefore, it became probable that the software would not be placed into service. The Company fully impaired the project, and recorded a loss of $1.3 million included in intangible assets and other long-lived assets impairments on the unaudited condensed consolidated statement of operations during the three and nine months ended September 30, 2024. No impairment loss to the Company’s internal-use software was recorded during the same period in 2023. The Company’s in-process internal-use software was recorded in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

Impairment of Long-Lived Assets (including Finite-Lived Intangible Assets)

Long-lived assets are reviewed for impairment if indicators of potential impairment exist. If the Company identifies a change in the circumstances related to its long-lived assets, such as property and equipment and intangible assets (other than goodwill), that indicates the carrying value of any such asset may not be recoverable, the Company will perform an impairment analysis. A long-lived asset (other than goodwill) is not recoverable when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense.

During the three months ended March 31, 2024, the Company experienced a triggering event as a result of the restructuring initiatives announced in March 2024 that required an evaluation of its non-OGM Bionano Laboratories asset group for impairment. The Company performed a recoverability test and concluded that the non-OGM Bionano Laboratories long-lived assets were not recoverable; therefore, the Company measured the impairment loss and fully impaired the intangible assets acquired through the acquisition of Lineagen, consisting of its trade name and customer relationship intangible assets. The Company recognized an impairment loss of $0.4 million during the three months ended March 31, 2024.

During the three months ended September 30, 2024, the Company experienced a triggering event and identified indicators of impairment in all of its asset groups as a result of the restructuring initiatives and change in business strategy announced in September 2024. The Company assessed the recoverability of each asset group and concluded the legacy OGM Bionano and Purigen asset groups were not recoverable. Therefore, the Company was required to perform an impairment analysis to determine the fair value of the legacy OGM Bionano and Purigen asset groups as further described below.

The Company evaluated the fair value of the finite-lived assets of the legacy OGM Bionano asset group. The Company evaluated the fair value of the reagent rental instruments based on expected sales price and recorded an impairment loss of $2.6 million. The estimates and assumptions used in the assessment of the reagent rental instrument impairments represent Level 2 measurements because they are supported by quoted prices for similar assets in markets where trading occurs. The impairment loss associated with these reagent rental instruments was recorded to cost of product revenue in the Company’s unaudited condensed consolidated statement of operations. Underperforming assets that were subject to impairment are included in the install base.

The Company evaluated the fair value of the finite-lived intangible assets of the Purigen asset group, consisting of the Purigen trade name, customer relationships and developed technology, as well as the operating lease right-of-use asset and related office equipment and leasehold improvements. To estimate the fair value of the intangible assets, the Company utilized the discounted cash flow method to estimate the fair value of the asset group. The Company identified that no projected after-tax cash flows would be generated from the Purigen intangible assets and that the cost to maintain and sell the Purigen products exceeded the expected revenue to be generated from the asset group. The carrying value of the Purigen intangible assets therefore exceeded its fair value and the Company recorded an impairment loss of $17.3 million for the intangible assets. The Company estimated the fair value of the right-of-use asset and related office equipment and leasehold improvements for the Pleasanton, California facility and recorded an impairment loss of $0.8 million. The fair value of the right-of-use asset and related office equipment and leasehold improvements was estimated using the discounted future cash flow methods, which includes estimates and assumptions for future sublease rental rates that reflect current sublease market conditions as well as discount rates. The Company also recorded $0.1 million of leasehold improvements and office equipment impairments related to the Pleasanton, California facility. The estimates and assumptions used in the assessment of intangible assets, right-of-use assets and related office equipment and leasehold improvement impairments represent Level 3 measurements because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value. The impairment losses were recognized in intangible assets and other long-lived assets impairment in the unaudited condensed consolidated statement of operations.

No impairment losses were recorded during the three or nine months ended September 30, 2023.

Inventories

The Company reviews its inventories for classification purposes. The value of inventories not expected to be realized in cash, sold or consumed during the next 12 months are classified as non-current within other long-term assets. As of September 30, 2024, $2.0 million of inventories were included in other long-term assets.

During the three months ended September 30, 2024, the Company recorded a $7.2 million write-off of its Saphyr instrument spare parts and other obsolete inventory as a result of the Company’s restructuring initiatives and change in business strategy announced in September 2024.

Loss on disposal of property and equipment

Loss on disposal of property and equipment includes the net book value of assets that have been abandoned or retired and consists primarily of our leasehold improvements, furniture, equipment and fixtures that were abandoned and disposed of in the normal course of business. We recorded a loss on disposal of property and equipment of $1.4 million as of September 30, 2024.

Change in depreciable lives of property and equipment

The Company reviews the estimated useful life of its fixed assets on an ongoing basis. This review indicated that the actual lives of the Company’s Saphyr and Stratys instruments were longer than the estimated useful lives used for depreciation purposes in the Company’s unaudited condensed consolidated financial statements. As a result, effective January 1, 2024, the Company changed its estimates of the useful lives of the Company’s Saphyr and Stratys instruments to better reflect the estimated period during which these assets will remain in service. The estimated useful lives of the Company’s Saphyr and Stratys instruments were increased from 5 to 7 years. The effect of this change in estimate reduced depreciation expense by $0.5 million for the fiscal year 2024.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure about specific expense categories in the notes to financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures.

In November 2023, the FASB issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this ASU to determine its impact on the Company’s consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. Two primary enhancements related to this ASU include disaggregating existing income tax disclosures relating to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures.

2. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. The Pre-Funded Warrants (as defined below) issued in the April 2024 Registered Direct Offering and the July 2024 Registered Direct Offering (each as defined below) were exercised in full and included in the weighted-average number of common shares outstanding (See Note 6 (Stockholder’s Equity and Stock-Based Compensation) for further information). Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common share equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include outstanding common warrants to purchase common stock, restricted stock units (“RSUs”), performance stock units (“PSUs”), and outstanding stock options under the Company’s equity incentive plans have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding because all potentially dilutive securities were anti-dilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

3. Revenue Recognition

Revenue by Source

Revenue by Geographic Location

The table above provides revenue from contracts with customers by source and geographic region (based on the customer’s billing address) on a disaggregated basis. Americas consists of North America and South America. EMEA consists of Europe, the Middle East, and Africa. Asia Pacific includes China, Japan, South Korea, Singapore, India and Australia.

For the three months ended September 30, 2024 and 2023, the United States represented 32.3% and 51.2% of total revenue, respectively. For the nine months ended September 30, 2024 and 2023, the United States represented 38.3% and 44.2% of total revenue, respectively. For the nine months ended September 30, 2023, China represented 10.3% of total revenue. No other countries represented greater than 10% of total revenue during the three and nine months ended September 30, 2024 and 2023.

Remaining Performance Obligations

As of September 30, 2024, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $1.5 million. These remaining performance obligations primarily relate to extended warranty, support and maintenance obligations, as well as obligations related to software under hosting arrangements. The Company expects to recognize approximately 38.3% of this amount as revenue during the remainder of 2024,48.0% in 2025, and 13.7% in 2026 and thereafter. Warranty revenue is included in service and other revenue.

The Company recognized revenue of approximately $0.6 million and $0.2 million during the three months ended September 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period, and revenue of approximately $1.3 million and $1.3 million during the nine months ended September 30, 2024 and 2023, respectively, which was included in the contract liability balance at the end of the year preceding each period.

4. Balance Sheet Account Details

Accounts Receivable and Allowance for Credit Losses

Changes to the allowance for credit losses during the nine months ended September 30, 2024 and 2023 were as follows:

The Company’s analysis included an assessment of our aged trade receivables balances and their underlying credit risk characteristics. Our evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.

Inventory

The components of inventories are as follows:

Intangible Assets

Intangible assets that are subject to amortization consisted of the following for the periods presented:

Intangible assets not subject to amortization totaled $0.1 million at September 30, 2024 and December 31, 2023, and related to the Company’s domain name. See Note 1 (Organization and Basis of Presentation) for further discussion on the impairment charges impacting the Company’s intangible assets in the period.

Accrued Expenses

Accrued expenses consist of the following:

5. Debt

JGB Debentures

On May 24, 2024, the Company entered into a securities purchase agreement with certain accredited investors (the “Holders”) and JGB Collateral LLC, as collateral agent for the Holders, for the sale by the Company in a private placement (the “JGB Debentures Offering”) of:

•2.25 million shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and

•Senior Secured Convertible Debentures in the aggregate principal amount of $20.0 million (the “Debentures”), for an aggregate purchase price of $18.0 million.

The closing of the JGB Debentures Offering occurred on May 24, 2024. In connection with the closing of the JGB Debentures Offering, the Company received net proceeds of approximately $16.6 million, after payment of placement agent fees, and other offering expenses. The Company used the proceeds received to fully redeem the outstanding balance due under the High Trail Note of approximately $17.6 million, as amended (see “High Trail Agreement & Amendment” below).

Debentures

The Debentures have an aggregate face value of $20.0 million and were issued with an original issue discount of $2.0 million. The Debentures mature on May 24, 2026, and have an interest rate of 11% per annum payable monthly on the last business day of each calendar month. As of September 30, 2024, the Company has paid the Holders $0.8 million in interest, which is included in the change in fair value within other income (expense), net.

The Company recorded the Debentures at their fair value at issuance of $19.9 million, per the fair value option under ASC 825 (refer to Note 8 (Investments and Fair Value Measurements)) and they will be measured on a recurring basis and adjusted through other income and expense, net. The Shares were recorded at $0 in common stock and additional paid in capital, which represents the residual amount after allocation of proceeds to the Debentures at fair value. The Company recognized an initial loss on the issuance of the Debentures of $1.9 million for the difference between the fair value of the Debentures and proceeds from the transaction, which is recorded in other income (expense) on the unaudited condensed consolidated statement of operations. The Company incurred debt issuance costs of $1.4 million related to the JGB Debentures Offering, which was charged to interest expense and recorded in other income (expense) on the unaudited condensed consolidated statement of operations.

On July 24, 2024, the Holders of the Debentures requested that the Company redeem up to $1.0 million per calendar month of its Debentures. The table below shows the amount of potential redemptions each year until the maturity of the Debentures. As of September 30, 2024, the Company has paid the Holders $3.0 million in principal redemptions.

The Company may redeem the Debentures, subject to certain Equity Conditions (as defined in the Debentures), at any time by paying an amount equal to the entire outstanding principal amount of the Debenture, plus all accrued and unpaid interest, plus the applicable Company Redemption Premium (as defined in the Debentures, the “Premium”) plus any other amounts due and payable under the Debentures. The Premium is an amount equal to 112% of the principal amount of the Debenture if the redemption is prior to the first anniversary of the original issue date, or 106% of the principal amount of the Debenture if the redemption is on or after the first anniversary of the original issue date. No partial redemptions by the Company are permitted.

At the election of the holder, each Debenture is convertible, in whole or in part, at any time and from time to time at a conversion price of $2.00 per share of common stock. The conversion price is subject to adjustment for stock dividends, stock splits, and certain other corporate events. Notwithstanding the foregoing, the Company will not effect any conversion under the Debentures to the extent that such conversion would cause the holder’s beneficial ownership of the Company’s common stock to exceed 4.99% (or 9.99% at the election of the holder) of the Company’s issued and outstanding common stock.

Under the Debentures, the Company must at all times maintain a cash or restricted investments balance equal to the lesser of (a) $11.0 million and (b) the then outstanding principal balance of the Debentures, in a blocked account. In addition, for as long as any portion of the Debentures remain outstanding, the Company is generally restricted from: incurring indebtedness; granting or suffering liens on any of its property or assets; amending its organizational documents; repurchasing any of its securities; paying dividends; selling, disposing, licensing or leasing its assets other than in the ordinary course; and other customary restrictive covenants. The Debentures also set forth certain customary events of default after which the Debentures may be declared immediately due and payable, including certain types of bankruptcy or insolvency events of default involving the Company and its subsidiaries, and in the event of a change of control or fundamental transaction as defined in the Debentures.

As of September 30, 2024 the Company had $17.0 million of principal outstanding under the Debentures reported at fair value of $15.0 million (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

High Trail Agreement & Amendment

On February 27, 2024, the Company entered into a letter agreement with High Trail and an amendment to the Registered Note (the “High Trail Amendment”) which provided for, among other things, the following:

•Reduction of the minimum available liquidity covenant from $50.0 million to $25.0 million;

•Reduction of the restricted cash covenant from $35.0 million to the amount equal to the sum of (i) the outstanding principal amount of the senior secured convertible notes payable due 2025 (the “High Trail Registered Notes”) plus (ii) approximately $0.7 million, which will be further reduced as the remaining principal on the High Trail Registered Notes are retired;

•Cancellation of the March 2024 partial redemption payment and delay of the April 2024 partial redemption payment;

•Redemption of the outstanding $17.0 million balance of the privately placed senior secured convertible notes payable due 2025 (the “High Trail Private Placement Notes”) at a redemption price of 115% for a total redemption payment of approximately $19.6 million;

•Redemption of approximately $10.7 million of the High Trail Registered Notes at a redemption price of 115% for a total redemption payment of approximately $12.3 million; and

•Increase of $1.0 million to the Retirement Fee (as defined in the Notes) of the High Trail Private Placement Notes to $3.2 million payable concurrently with redemptions of the Initial Private Placement Note.

Immediately following the redemptions above, there was approximately $24.3 million in aggregate principal amount of the High Trail Registered Notes outstanding.

High Trail Redemption Agreement

On May 23, 2024, in connection with the JGB Debentures Offering, the Company entered into a redemption agreement with High Trail (the “HT Agreement”). Pursuant to the HT Agreement, the Company agreed to redeem the entire outstanding principal amount of $15.3 million under the High Trail Note at a redemption price of 115% for a total redemption payment of $17.6 million (the “Redemption Payment”). Upon High Trail’s receipt of the Redemption Payment on May 24, 2024, the High Trail Note and related Option were cancelled. In addition, the Company agreed to pay High Trail a retirement fee of $2.2 million and to reimburse High Trail for all of its reasonable and documented out-of-pocket expenses incurred with the release and termination of security interests relating to the High Trail Note.

The Company recognized a loss on the extinguishment of the High Trail Note of $1.1 million, and a gain on the extinguishment of the Purchase Option (as defined in Note 7 (Commitments and Contingencies) below) of $5.1 million, for a net gain of $4.0 million, which is recorded in other income (expense) on the unaudited condensed consolidated statement of operations.

As of September 30, 2024, the Company hadno principal outstanding under the High Trail Note (refer to Note 8 (Investments and Fair Value Measurements), for fair value measurements and additional discussion) and activity broken out as follows:

In addition to redeeming $15.3 million and $27.7 million of the principal outstanding under the High Trail Note on May 24, 2024, and March 1, 2024, respectively, for an aggregate principal redemption of $43.0 million at the aggregate Redemption Price of $49.5 million, the Holders redeemed $4.5 million each of principal on January 1, 2024, February 1, 2024, April 20, 2024, and May 1, 2024, for an aggregate principal redemption of $18.0 million at an aggregate Repayment Price of $20.7 million. Under the terms of the High Trail Notes, the Holders had the option to redeem a portion of the Notes not to exceed $4.5 million principal on the first day of each month beginning November 1, 2023, at the Repayment Price. The April 2024 payment was delayed to April 20, 2024, under the High Trail Amendment as discussed above.

Other Income (Expense), Net

The following is a summary of the charges included within other income (expense), net on the unaudited condensed consolidated statement of operations:

6. Stockholders’ Equity and Stock-Based Compensation

Reverse Stock Split

On August 4, 2023, the Company completed a reverse stock split of its outstanding shares of common stock pursuant to which every 10 shares of issued and outstanding common stock were exchanged for one share of common stock. No fractional shares were issued in the reverse stock split. Instead, the Company paid cash (without interest) equal to such fraction multiplied by $5.90 per share (a price equal to the average of the closing sales prices of the common stock on The Nasdaq Capital Market during regular trading hours for the five consecutive trading days immediately preceding August 4, with such average closing sales prices being adjusted to give effect to a Reverse Stock Split). All share and per share amounts included within these condensed consolidated financial statements have been retrospectively adjusted to reflect the reverse stock split.

Cowen At-the-Market Facility

On March 23, 2021, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) which provides for the sale, in the Company’s sole discretion, of shares of common stock having an aggregate offering price of up to $350.0 million through or to Cowen, acting as sales agent or principal, which was amended on March 9, 2023 to decrease the maximum aggregate offering price to $200.0 million for sales made on and after the date of the amendment (the “Cowen ATM”). The Company agreed to pay Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights. During the nine months ended September 30, 2024, the Company sold approximately 14.2 million shares of common stock under the Cowen ATM at an average share price of $1.25 per share, and received gross proceeds of approximately $17.7 million before deducting offering costs of $0.4 million.

In October 2024, the Company sold approximately 3.6 million shares of common stock under the Cowen ATM at an average share price of $0.34 per share, and received gross proceeds of approximately $1.2 million before deducting offering costs of approximately $31,000.

Stock Warrants

A summary of the Company’s warrant activity during the nine months ended September 30, 2024 was as follows:

Stock Options

A summary of the Company’s stock option activity during the nine months ended September 30, 2024 was as follows:

For the three months ended September 30, 2024, the weighted-average grant date fair value of stock options granted was $0.44 per share. For the nine months ended September 30, 2024, the weighted-average grant date fair value of stock options granted was $0.67 per share.

Stock-Based Compensation

The Company recognized stock-based compensation expense for the periods presented as follows:

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants during the periods presented were as follows:

Restricted Stock Units and Performance Stock Units

The following table summarizes RSU activity during the nine months ended September 30, 2024:

The total fair value of the RSUs that vested during the nine months ended September 30, 2024 was $0.8 million, determined as of the date of vesting. The weighted average remaining contractual term for the RSUs is 3.3 years as of September 30, 2024.

The following table summarizes PSU activity during the nine months ended September 30, 2024:

During the year ended December 31, 2023, the Company reassessed the implicit service period on its performance-based stock units relative to specified revenue targets and determined that the performance conditions were met from an accounting perspective, but subject to certain certifications and approval from the Compensation Committee; therefore, the remaining expense was accelerated as of December 31, 2023. As a result of the accelerated vesting terms, the weighted average remaining contractual term for the PSUs is 0 years as of September 30, 2024.

Registered Direct Offerings

On April 4, 2024, the Company entered into a securities purchase agreement (the “April 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “April 2024 Registered Direct Offering”): (i) an aggregate of approximately 6.5 million shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to an aggregate of approximately 2.2 million shares of common stock (the “April Pre-Funded Warrants”), and (iii) warrants to purchase up to approximately 8.7 million shares of common stock (the “April Purchase Warrants”). The combined purchase price of each share of common stock and accompanying April Purchase Warrant is $1.15 per share. The combined purchase price of each April Pre-Funded Warrant and accompanying April Purchase Warrant is $1.14 (equal to the combined purchase price per share of common stock and accompanying April Purchase Warrant, minus $0.001). The gross proceeds to the Company from the April 2024 Registered Direct Offering was $10.0 million. The Company received net proceeds of $9.3 million after deducting placement agent fees and other offering expenses of $0.7 million payable by the Company.

Each April Purchase Warrant is exercisable forone share of common stock at an exercise price of $1.02 per share. The Purchase Warrants are immediately exercisable as of the date of issuance of April 8, 2024, and will expire on thefive-year anniversary of the date of issuance. The April Pre-Funded Warrants are offered in lieu of shares of common stock and provide that the holder may not exercise any portion of an April Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99% (or, at the election of the holder,9.99%) of the Company’s outstanding common stock immediately following the consummation of the April 2024 Registered Direct Offering. Each April Pre-Funded Warrant is exercisable forone share of common stock at an exercise price of $0.001 per share. The April Pre-Funded Warrants are immediately exercisable and were exercised in full at the time of closing.

On July 4, 2024, the Company entered into a securities purchase agreement (the “July 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company agreed to issue and sell, (i) in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “July 2024 Registered Direct Offering”): (a) an aggregate of 11.7 million shares of the Company’s common stock, and (b) pre-funded warrants to purchase up to an aggregate of approximately 5.8 million shares of common stock (the “July Pre-Funded Warrants”), and (ii) in a concurrent private placement (the “Private Placement” and together with the July 2024 Registered Direct Offering, the “July 2024 Offering”), Series A warrants to purchase up to an aggregate of approximately 17.5 million shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of approximately 17.5 million shares of common stock (the “Series B Warrants”, and together with the Series A Warrants, the “July Purchase Warrants”). Each share of common stock and each July Pre-Funded Warrant sold pursuant to the July 2024 Purchase Agreement will be accompanied by one Series A Warrant and one Series B Warrant. The combined purchase price of each share of common stock and accompanying July Purchase Warrants is $0.571 per share. The combined purchase price of each July Pre-Funded Warrant and accompanying July Purchase Warrants is $0.571 (equal to the combined purchase price per share of common stock and accompanying July Purchase Warrants, minus $0.001). The gross proceeds to the Company from the July 2024 Offering was approximately $10.0 million (excluding up to $20.0 million of aggregate gross proceeds that may be received in the future upon the cash exercise of the July Purchase Warrants issued in the Private Placement which is contingent upon the July Stockholder Approval described below), before deducting placement agent fees and other offering expenses payable by the Company. The Company received net proceeds of $9.3 million after deducting placement agent fees and other offering expenses of $0.7 million payable by the Company.

Each July Purchase Warrant is exercisable forone share of common stock at an exercise price of $0.571 per share beginning on the effective date of stockholder approval of the issuance of the shares of common stock upon exercise of the July Purchase Warrants (the “July Stockholder Approval”). The Series A Warrants will expire on the earlier of (i) the 24-month anniversary of the July Stockholder Approval and (ii)60 days following the later of (a) the date of the public announcement of the occurrence of a medical administrative contractor (including, without limitation, Molecular Diagnostic Services), issuing a final local coverage determination for optical genome mapping for hematological malignancies and (b) the date of the July Stockholder Approval. The Series B Warrants will expire on the earlier of (i) thefive-year anniversary of the July Stockholder Approval and (ii)six months following the later of (a) the date of the public announcement of the occurrence of the Company receiving clearance from the U.S. Food and Drug Administration for an optical genome mapping system for any indication and (b) the date of the July Stockholder Approval. Each July Pre-Funded Warrant is exercisable forone share of common stock at an exercise price of $0.001 per share. The July Pre-Funded Warrants were immediately exercisable and were exercised in full as of September 30, 2024.

The Company adjourned its reconvened Special Meeting of Stockholders originally held on October 2, 2024 and subsequently adjourned to October 30, 2024 (the “Special Meeting”) because a quorum was not present at the time of the reconvened meeting. The Special Meeting will reconvene on November 27, 2024 to seek stockholder approval for the issuance of the shares of common stock upon exercise of the July Purchase Warrants.

On October 30, 2024, the Company entered into a securities purchase agreement (the “October 2024 Purchase Agreement”) with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market (the “October 2024 Offering”): (i) an aggregate of approximately 9.9 million shares (the “Shares”) of the Company’s common stock, (ii) Series C warrants to purchase up to an aggregate of approximately 9.9 million shares of the Company’s common stock (the “Series C Warrants”) and (iii) Series D warrants to purchase up to an aggregate of approximately 9.9 million shares of the Company’s common stock (the “Series D Warrants”, and together with the Series C Warrants, the (“October Purchase Warrants”). Each share of common stock sold pursuant to the October 2024 Purchase Agreement will be accompanied by one Series C Warrantto purchase one share of common stock and one Series D Warrant to purchase one share of common stock. The Shares and the October Purchase Warrants are immediately separable and will be issued separately. The combined purchase price of each Share and accompanying October Purchase Warrants is$0.304 per share. The gross proceeds to the Company from the October 2024 Offering were approximately$3.0 million (excluding up to approximately$6.0 million of aggregate gross proceeds that may be received in the future upon the cash exercise of the October Purchase Warrants, which is contingent upon the October Stockholder Approval described below), before deducting placement agent fees and other offering expenses payable by the Company.

Each October Purchase Warrant is exercisable forone share of common stock at an exercise price of$0.304 per share beginning on the effective date of stockholder approval of the issuance of the shares of common stock upon exercise of the October Purchase Warrants (the “October Stockholder Approval”). The Series C Warrants will expire on thefive-year anniversary of the October Stockholder Approval. The Series D Warrants will expire on the 18-month anniversary of the October Stockholder Approval.

7. Commitments and Contingencies

The Company has entered into various operating lease agreements and a finance lease agreement, primarily relating to our office, laboratory, and manufacturing space. See Note 11 (Commitments and Contingencies), subsection titled “Leases”, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2023 for information regarding the Company’s lease agreements.

The future minimum payments under non-cancellable operating and finance leases as of September 30, 2024, are as follows:

Restructuring

The 2024 Workforce Reductions described in Note 1 (Organization and Basis of Presentation) resulted in total restructuring charges of approximately $5.6 million, comprised primarily of severance payments and wages for the 60-day notice period in accordance with the California Worked Adjustment and Retraining Notification (WARN) Act.

The following is a summary of restructuring charges associated with the reduction in force for the three andnine months ended September 30, 2024 including severance and other exit related costs:

The following restructuring liability activity was recorded in connection with the reductions in force for thenine months ended September 30, 2024 included within accrued expenses on the unaudited condensed consolidated financial statements:

Litigation

From time to time, the Company may be subject to potential liabilities under various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of the business. The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the unaudited condensed consolidated financial statements. An estimated loss contingency is accrued in the unaudited condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any material loss exposure as it is not a defendant in any claims or legal actions.

See Note 8 (Investments and Fair Value Measurements) for a discussion of the contingent consideration liability.

8. Investments and Fair Value Measurements

The Company holds investment securities that consist of highly liquid, investment grade debt securities. The Company determines the fair value of its investment securities based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

Contingent consideration relates to the acquisitions of BioDiscovery and Purigen. The outcome of the milestone consideration for all contingent consideration liabilities is binary, meaning the milestones are either achieved or not achieved, and the only other variable factor is the timing of when the milestones are achieved. The fair value measurement of the contingent consideration liabilities is based on significant inputs not observed in the market (Level 3 inputs). These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value.

The BioDiscovery milestone consideration was paid in full in 2023.

Contingent consideration liabilities related to the Purigen acquisition are related to the achievement oftwo independent milestones with aggregate possible milestone payments totaling $32.0 million. As of September 30, 2024, the Company concluded that the probability of achievement of the two independent milestones was 0% which resulted in a reduction in the contingent consideration liability to zero. The fair value of the Purigen contingent consideration as of December 31, 2023 was $10.9 million.

The fair value of the Purigen milestones were reassessed on a quarterly basis using a probability weighted model and a Monte Carlo Simulation. Assumptions used to estimate the fair value of the milestones using a probability weighted model include the probability of achieving independent milestones, anticipated payment date and a discount rate of 13.2% as of December 31, 2023. The Company determined the likelihood of each milestone payment which is then applied to the individual payments over thefive-year milestone terms. The probability factors as of December 31, 2023 ranged from 9% to 49%.

For the second milestone, a Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved to determine the milestone consideration payment. Assumptions include the projected units, revenue discount rates of 7% and discount rates of 13.2% as of December 31, 2023.

JGB Convertible debentures payable, High Trail convertible notes payable and purchase option liability

As of September 30, 2024, the fair value of the JGB convertible debentures maturing in 2026, which were issued on May 24, 2024, was estimated using a scenario-based analysis using a 66.7% probability attributed to a going concern scenario and 33.3% attributed to a dissolution scenario. For the going concern scenario, the fair value was estimated using a lattice model, consistent with previous periods. The key input assumptions utilized in the going concern scenario are summarized in the table below:

The September 30, 2024 assumptions in the table above reflect the JGB convertible debentures payable . For December 31, 2023, the table reflects a weighted average of assumptions based on the fair value of the convertible notes payable from the High Trail Agreement (refer to Note 5 (Debt)).

The volatility is based on an analysis of the Company and its peers’ historical stock price, the risk-free rate is based on US treasury yields, the equity discount rate is based on term-specific US treasury yields, and the debt discount rate is based on the Company’s credit rating.

In the dissolution scenario, the fair value of the JGB convertible debentures was estimated based on an expected recovery rate of 75% considering certain restricted cash allocable to principal redemption repayments. The key input assumptions utilized in the dissolution scenario are summarized in the table below:

The risk-free rate is based on US treasury yields; the expected term to repayment is based on management’s best estimate calculated by reducing the outstanding principal balance of the debentures as of September 30, 2024 from the $11.0 million in restricted cash and investments; and the dissolution discount rate is based on an analysis of comparable yields for debt instruments with similar credit ratings.

In connection with the High Trail Notes, the purchaser was granted an option (the “Purchase Option”) which expired on the maturity date of the High Trail Notes to purchase up to an additional $25.0 million aggregate principal amount of private placement notes (the “Subsequently Purchased Notes”) and warrants (refer to Note 5 (Debt)). The estimated fair value of the Purchase Option as of the valuation date was assessed as the difference in the aggregate indicated value of the Subsequently Purchased Notes and the consideration to be paid upon exercising the option which was estimated to be $8.5 million at December 31, 2023. The outstanding amount of the High Trail Notes was redeemed on May 24, 2024, and the Purchase Option rights no longer exist.

The terms used to estimate the fair value of the Subsequently Purchased Notes and warrant underlying the Purchase Option liability (the “Subsequently Purchased Warrants”) as of December 31, 2023 are as follows:

Changes in estimated fair value of contingent consideration liability, convertible debentures payable, convertible notes payable and option liability in the nine months ended September 30, 2024 are as follows:

We evaluated the change in fair value attributable to instrument-specific credit risk as the excess of the total change in fair value over the change in fair value attributable to changes in the valuation model described above and determined that the total change in fair value of $1.5 million for the three months ended September 30, 2024 was attributable to instrument-specific credit risk which is recorded in other comprehensive income (loss).

Changes in estimated fair value of contingent consideration liability in the nine months ended September 30, 2023 is as follows:

Available for Sale Investments

The Company invests its excess cash in U.S. Treasury and agency securities, corporate debt securities, and commercial paper, which are classified as available-for-sale investments. These investments are carried at fair value and are included in the tables below. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. At each reporting date, the Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. The Company evaluates, among others, whether the Company has the intention to sell any of these investments and whether it is not more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met in any period presented. The credit ratings of the securities held remain of the highest quality. Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. Based on this evaluation, as of September 30, 2024 and December 31, 2023, the Company determined that unrealized losses of the below securities were primarily attributable to changes in interest rates and non-credit related factors. As such, no allowances for credit losses were recorded during these periods.

As of September 30, 2024 and December 31, 2023, the Company held 2 and 15 securities, respectively, which have been in an unrealized loss position for a period of less than 12 months. As of September 30, 2024 and December 31, 2023, the Company held 0 and 2 securities, respectively, which have been in an unrealized loss position for a period of greater than 12 months.

Realized gains and losses are calculated using the specific identification method and recorded in other income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss. The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

During the nine months ended September 30, 2024, the Company sold 18 of its available for sale securities and received proceeds of $33.3 million. During the nine months ended September 30, 2024, the Company recognized an immaterial loss in other income relating to the maturity of its securities. Amounts are reclassified out of accumulated other comprehensive income into earnings using the specific identification method.

Interest receivable as of September 30, 2024 wasimmaterial and as of December 31, 2023 was $0.3 million. Interest receivable is recorded as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets.

As of September 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within investments:

As of September 30, 2024, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within restricted investments:

As of December 31, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within investments:

As of December 31, 2023, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities presented within restricted investments:

As of September 30, 2024, the following table summarizes available-for-sale securities in an unrealized loss position:

As of September 30, 2024, the available-for-sale securities listed as restricted investments in an unrealized loss position waszero.

As of December 31, 2023, the following table summarizes available-for-sale securities in an unrealized loss position:

As of December 31, 2023, the following table summarizes available-for-sale securities listed as restricted investments in an unrealized loss position: