Standard BioTools(LAB) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, equity, and cash flows, with detailed notes on accounting policies and performance Condensed Consolidated Balance Sheets The company's balance sheet shows total assets decreased from $390,310 thousand to $355,827 thousand, primarily due to lower short-term investments, while total liabilities slightly decreased and stockholders' deficit increased | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $355,827 | $390,310 | | Total liabilities | $157,961 | $160,524 | | Total stockholders' deficit | $(113,387) | $(81,467) | | Cash and cash equivalents | $142,304 | $81,309 | | Short-term investments | $— | $84,475 | Condensed Consolidated Statements of Operations For the six months ended June 30, 2023, total revenue increased by 17%, and net loss significantly decreased from $139,827 thousand in 2022 to $33,883 thousand in 2023, driven by improved gross profit and reduced operating expenses | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total revenue | $27,666 | $18,777 | $52,785 | $45,281 | | Gross profit | $13,602 | $4,427 | $25,939 | $16,664 | | Loss from operations | $(17,449) | $(38,563) | $(34,042) | $(66,066) | | Net loss | $(17,040) | $(63,539) | $(33,883) | $(139,827) | | Net loss per share, basic and diluted | $(0.22) | $(0.82) | $(0.43) | $(1.81) | Condensed Consolidated Statements of Comprehensive Loss The company reported a comprehensive loss of $33,538 thousand for the six months ended June 30, 2023, a significant improvement from $141,173 thousand in the prior year, primarily reflecting the reduced net loss | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net loss | $(17,040) | $(63,539) | $(33,883) | $(139,827) | | Foreign currency translation adjustment | $(327) | $(485) | $(157) | $(635) | | Net change in unrealized gain (loss) on investments | $104 | $(711) | $502 | $(711) | | Other comprehensive income (loss), net of tax | $(223) | $(1,196) | $345 | $(1,346) | | Comprehensive loss | $(17,263) | $(64,735) | $(33,538) | $(141,173) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) The stockholders' deficit increased from $81,467 thousand at December 31, 2022, to $113,387 thousand at June 30, 2023, primarily due to net loss and common stock repurchases | Metric | December 31, 2022 (in thousands) | June 30, 2023 (in thousands) | | :-------------------------------- | :------------------------------- | :----------------------------- | | Total stockholders' deficit | $(81,467) | $(113,387) | | Additional paid-in capital | $847,008 | $853,466 | | Accumulated deficit | $(926,096) | $(959,979) | | Treasury stock at cost | $(563) | $(5,404) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, investing activities generated $83,280 thousand, offsetting $17,814 thousand used in operations and $4,642 thousand in financing, resulting in a $60,775 thousand net increase in cash | Cash Flow Activity | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash used in operating activities | $(17,814) | $(45,578) | | Net cash provided by (used in) investing activities | $83,280 | $(139,108) | | Net cash provided by (used in) financing activities | $(4,642) | $231,033 | | Net increase in cash, cash equivalents and restricted cash | $60,775 | $45,910 | | Cash, cash equivalents and restricted cash at end of period | $143,099 | $75,377 | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's financial reporting, including its organizational structure, accounting policies, revenue recognition, asset valuations, debt obligations, equity changes, and segment performance, offering context to the condensed financial statements 1. Organization and Basis of Presentation Standard BioTools Inc., formerly Fluidigm Corporation, is a Delaware corporation focused on providing next-generation technologies (mass cytometry and microfluidics) for biomedical research, with global operations and consolidated financial statements prepared under U.S. GAAP - Standard BioTools Inc. (formerly Fluidigm Corporation) is headquartered in South San Francisco, California[21] - The company provides essential, standardized next-generation technologies, including proprietary mass cytometry and microfluidics, to biomedical researchers for insights in health and disease, focusing on translational and clinical research (oncology, immunology, immunotherapy)[22][96] - The company has wholly-owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, Italy, the United Kingdom, China, and Germany, with all intercompany transactions eliminated in consolidation[23] 2. Net Loss Per Share The calculation of basic and diluted net loss per share excludes certain potentially dilutive common shares, such as RSUs, PSUs, stock options, Series B Preferred Stock, and convertible notes, because their inclusion would be anti-dilutive due to the net loss | Potentially Dilutive Common Shares (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | RSUs, PSUs, and stock options | 14,366 | 14,955 | | Series B Preferred Stock | 75,164 | 75,164 | | 2019 Notes | 18,966 | 18,966 | | 2014 Notes | 10 | 10 | | Total | 108,506 | 109,095 | 3. Revenue and Geographic Area Total revenue increased by 47% for three months and 17% for six months ended June 30, 2023, driven by instrument sales, with EMEA showing strong growth and $23,625 thousand expected from unfulfilled service contracts | Revenue Type (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Instruments | $11,587 | $2,661 | $17,510 | $10,184 | | Consumables | $10,078 | $9,558 | $21,593 | $22,039 | | Service revenue | $5,821 | $5,806 | $12,702 | $11,950 | | Other revenue | $180 | $752 | $980 | $1,108 | | Total revenue | $27,666 | $18,777 | $52,785 | $45,281 | | Geographic Region (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Americas | $10,448 | $9,433 | $22,110 | $22,363 | | EMEA | $11,436 | $5,669 | $19,273 | $14,278 | | Asia-Pacific | $5,782 | $3,675 | $11,402 | $8,640 | | Total revenue | $27,666 | $18,777 | $52,785 | $45,281 | | Fiscal Year | Expected Revenue from Unfulfilled Performance Obligations (in thousands) | | :------------------------ | :------------------------------------------------------- | | 2023 remainder of the year | $9,089 | | 2024 | $8,453 | | 2025 | $4,101 | | Thereafter | $1,982 | | Total | $23,625 | 4. Goodwill and Intangible Assets, net Goodwill and intangible assets, primarily from acquisitions, saw developed technology net decrease from $12,600 thousand to $7,000 thousand, and patents/licenses from $578 thousand to $242 thousand, with $5,900 thousand amortization expense for six months ended June 30, 2023 - No indicators of impairment for goodwill, long-lived assets, or intangible assets were identified during the six months ended June 30, 2023[38] | Intangible Asset | June 30, 2023 (Net, in thousands) | December 31, 2022 (Net, in thousands) | Weighted-Average Amortization Period | | :----------------- | :-------------------------------- | :---------------------------------- | :----------------------------------- | | Developed technology | $7,000 | $12,600 | 10.0 years | | Patents and licenses | $242 | $578 | 7.0 years | | Fiscal Year | Expected Amortization Expense (in thousands) | | :------------------------ | :------------------------------------------- | | 2023 remainder of the year | $5,835 | | 2024 | $1,407 | | Total | $7,242 | 5. Balance Sheet Details Cash and cash equivalents significantly increased to $142,304 thousand at June 30, 2023, from $81,309 thousand at December 31, 2022, while inventories remained stable and accrued compensation increased | Account (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------- | :------------ | :---------------- | | Cash and cash equivalents | $142,304 | $81,309 | | Restricted cash | $795 | $1,015 | | Total cash, cash equivalents and restricted cash | $143,099 | $82,324 | | Inventory (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | Raw materials | $16,876 | $16,866 | | Work-in-process | $447 | $945 | | Finished goods | $12,427 | $15,245 | | Total inventory, gross | $29,750 | $33,056 | | Allowance for excess and obsolete inventory | $(7,670) | $(11,583) | | Total inventories, net | $22,080 | $21,473 | | Accrued Compensation (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Accrued incentive compensation | $3,694 | $1,170 | | Accrued vacation | $2,873 | $2,795 | | Accrued payroll taxes and other | $1,276 | $1,174 | | Accrued restructuring | $1,922 | $4,014 | | Total accrued compensation and related benefits | $9,765 | $9,153 | 6. Debt Total debt remained stable at $65,245 thousand at June 30, 2023, primarily from convertible notes ($54,853 thousand) and a term loan ($10,392 thousand), with the Revolving Credit Facility expiring in August 2023 | Debt Type (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | 2014 Notes | $568 | $568 | | 2019 Notes | $54,285 | $54,047 | | Total convertible notes, net | $54,853 | $54,615 | | Term loan, non-current | $5,809 | $8,194 | | Term loan, current | $4,583 | $2,083 | | Total debt | $65,245 | $64,892 | - The 2019 Senior Convertible Notes bear interest at 5.25% per annum, mature on December 1, 2024, and are convertible at an initial rate of 344.8276 shares per $1,000 principal amount[49] - The Term Loan Facility has an outstanding principal balance of $10,000 thousand and a carrying value of $10,400 thousand as of June 30, 2023, with principal repayments starting August 1, 2023, and a stated maturity of July 1, 2025, subject to earlier acceleration[53][54] - The Revolving Credit Facility with Silicon Valley Bank (now First Citizens Bank) expired on August 2, 2023, with no outstanding borrowings and $7,100 thousand available as of June 30, 2023[51][52] 7. Commitments and Contingencies The company has operating leases for its headquarters, with 50% subleased, expecting $13,800 thousand in sublease income, and is subject to legal proceedings with no accrued liabilities for potential losses - The company has subleased 25% of its corporate headquarters (18th floor) expecting $4,700 thousand in sublease income, and an additional 25% (21st floor) expecting $9,100 thousand in sublease income, commencing December 1, 2023[58] - The company enters into indemnification provisions with business partners, customers, and suppliers, typically for intellectual property infringement claims, with no specific maximum payment limits[59] - The company is subject to various legal proceedings but has not recorded any liabilities for estimated losses in the presented periods, as outcomes are difficult to predict[60] 8. Fair Value of Financial Instruments The company's financial instruments measured at fair value primarily include money market funds and U.S. treasury securities, all classified as Level 1 (quoted prices in active markets), while convertible notes and the term loan are valued using Level III inputs | Financial Instrument (in thousands) | June 30, 2023 (Total Fair Value) | December 31, 2022 (Total Fair Value) | Fair Value Hierarchy | | :---------------------------------- | :------------------------------- | :----------------------------------- | :------------------- | | Money market funds | $120,975 | $53,894 | Level 1 | | U.S. treasury securities | $— | $84,475 | Level 1 | - The 2014 Notes, 2019 Notes (Convertible Notes), and Term Loan Facility are valued using Level III inputs, relying on pricing models and discounted cash flow models due to the absence of readily observable market prices[65][66] 9. Mezzanine Equity The Series B Redeemable Preferred Stock, totaling $311,253 thousand at June 30, 2023, is classified as mezzanine equity due to contingent redemption features and ranks senior to common stock | Component of Series B Preferred Stock (in thousands) | Amount (in thousands) | | :------------------------------------------------- | :-------------------- | | Proceeds from Purchase Agreements | $225,000 | | Proceeds from Bridge Loans | $25,000 | | Change in fair value of Forward Purchase Agreements | $60,081 | | Change in the fair value of Bridge Loans | $13,719 | | Less equity issuance costs | $(12,547) | | Total Series B Redeemable Preferred Stock | $311,253 | - The Series B Preferred Stock ranks senior to common stock regarding dividend rights, redemption rights, and rights on asset distribution during liquidation[71] 10. Shareholders' Deficit The board authorized a $20,000 thousand share repurchase program, with $5,400 thousand used to repurchase 2.9 million shares by June 30, 2023, leaving $14,600 thousand authorized - The board authorized a $20,000 thousand share repurchase program through December 31, 2023[72] | Stock Repurchase Program | As of June 30, 2023 | | :----------------------- | :------------------ | | Total cost of repurchases | $5,400 thousand | | Shares repurchased | 2,880,993 | | Remaining authorization | $14,600 thousand | | Equity Compensation Plan | Securities To Be Issued Upon Exercise Of Options (in thousands) | Securities To Be Issued Upon Release Of Restricted Stock (in thousands) | Remaining Securities Available For Future Issuance (in thousands) | | :-------------------------------- | :------------------------------------------------------------ | :-------------------------------------------------------------------- | :---------------------------------------------------------------- | | 2022 Inducement Equity Incentive Plan | 7,595 | 1,350 | 147 | | 2011 Equity Incentive Plan | 1,351 | 4,008 | 8,148 | | 2017 Inducement Award Plan | 60 | 2 | — | | 2017 Employee Stock Purchase Plan | — | — | 1,782 | | Total | 9,006 | 5,360 | 10,077 | 11. Stock-based Compensation The company recognized $6,262 thousand in stock-based compensation expense for the six months ended June 30, 2023, with unrecognized costs for RSUs and stock options totaling $11,300 thousand and $13,900 thousand respectively | RSU Activity (in thousands) | Number of Units (in thousands) | Weighted-Average Grant Date Fair Value per Unit | | :-------------------------- | :----------------------------- | :-------------------------------------------- | | Balance at December 31, 2022 | 7,120 | $2.58 | | RSU granted | 696 | $2.01 | | RSU released | (1,849) | $2.84 | | RSU forfeited | (607) | $2.36 | | Balance at June 30, 2023 | 5,360 | $2.45 | | Stock Option Activity (in thousands) | Number of Options (in thousands) | Weighted-Average Exercise Price per Option | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | | :----------------------------------- | :------------------------------- | :--------------------------------------- | :----------------------------------------------------- | :--------------------------------------- | | Balance at December 31, 2022 | 7,882 | $4.43 | 7.9 | — | | Options granted | 1,959 | $2.61 | — | — | | Options cancelled | (835) | $6.88 | — | — | | Balance at June 30, 2023 | 9,006 | $3.81 | 8.8 | $102 | - Performance-based awards (PSUs) are earned based on the company's Total Shareholder Return (TSR) relative to a defined peer group over a three-year period, with payouts ranging from 0% to 200% of base awards[76] | Stock-based Compensation Expense (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of product revenue | $107 | $163 | $460 | $305 | | Research and development expense | $366 | $705 | $782 | $1,404 | | Selling, general and administrative expense | $2,641 | $3,795 | $5,020 | $6,996 | | Total stock-based compensation expense | $3,114 | $4,663 | $6,262 | $8,705 | 12. Income Taxes The company recorded an income tax expense of $564 thousand for the six months ended June 30, 2023, compared to a benefit of $2,187 thousand in the prior year, primarily due to foreign operations and valuation allowances | Income Tax (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax benefit (expense) | $(301) | $1,613 | $(564) | $2,187 | - The effective tax rates differ from the 21% U.S. Federal statutory tax rate primarily due to valuation allowances against deferred tax assets on domestic losses and tax rate differences in foreign countries[81][124] 13. Segment Reporting The company operates in proteomics and genomics segments; for the six months ended June 30, 2023, proteomics revenue grew 38% to $33,288 thousand, while genomics revenue declined 8% to $19,497 thousand, with both showing improved operating losses - The company evaluates operating performance and allocates resources based on two reportable segments: proteomics (identification of proteins) and genomics (identification of genes)[82] | Segment Revenue (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Proteomics | $18,088 | $10,418 | $33,288 | $24,198 | | Genomics | $9,578 | $8,359 | $19,497 | $21,083 | | Total revenue | $27,666 | $18,777 | $52,785 | $45,281 | | Segment Loss from Operations (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Proteomics | $(3,710) | $(12,350) | $(9,191) | $(17,699) | | Genomics | $(437) | $(10,177) | $(260) | $(15,658) | | Corporate expenses | $(11,035) | $(15,736) | $(21,174) | $(31,019) | | Restructuring and related charges | $(2,267) | $(300) | $(3,417) | $(1,690) | | Total loss from operations | $(17,449) | $(38,563) | $(34,042) | $(66,066) | 14. Restructuring and Related Charges The company implemented a restructuring plan for operational efficiency and cost savings, with charges for the six months ended June 30, 2023, increasing to $3,417 thousand, primarily due to increased facilities expenses - The restructuring plan aims to improve operational efficiency, achieve cost savings, and align the workforce, involving headcount reductions, leased office space reduction, and manufacturing footprint optimization[86][106] | Restructuring Charges (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Severance payments | $1,054 | $300 | $1,346 | $1,690 | | Facilities and other | $1,213 | $— | $2,071 | $— | | Total restructuring and related charges | $2,267 | $300 | $3,417 | $1,690 | | Restructuring Liability Changes (in thousands) | Balance at Dec 31, 2022 | Restructuring and related charges | Cash payments | Balance at Jun 30, 2023 | | :--------------------------------------------- | :---------------------- | :-------------------------------- | :------------ | :---------------------- | | Severance and other employee related benefits | $4,014 | $1,346 | $(3,438) | $1,922 | | Facility Costs | $— | $1,980 | $(1,980) | $— | | Legal and consulting expenses | $19 | $91 | $(110) | $— | | Total | $4,033 | $3,417 | $(5,528) | $1,922 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting strategic priorities, recent developments, detailed analysis of revenue, expenses, and cash flows, and discussions on liquidity, capital resources, and critical accounting policies Overview Standard BioTools Inc. aims to accelerate breakthroughs in human health using its mass cytometry and microfluidics technologies for proteomics and genomics research, serving academic, government, pharmaceutical, and biotechnology laboratories globally - Standard BioTools' purpose is to unleash tools to accelerate breakthroughs in human health, utilizing essential, standardized next-generation high-resolution technologies[96] - The company's proprietary mass cytometry and microfluidics technologies provide reliable and repeatable insights in health and disease, useful in proteomics and genomics[96] - The company distributes systems through direct sales and support in North America, Europe, and Asia-Pacific, and through distributors elsewhere, with manufacturing in Singapore and Canada[97] Recent Developments Following a private placement, new leadership identified three strategic priorities: revenue growth, operating discipline, and capital allocation, with actions including headcount reductions and subleasing 25% of headquarters, expecting $9,100 thousand in income - The company's new leadership team identified three strategic priorities: revenue growth, improving operating discipline, and strategic capital allocation[98] - Actions taken to improve operating discipline include headcount reductions in Europe and subleasing an additional 25% of corporate headquarters, bringing 50% of the space subleased as of March 31, 2023[99] - The company expects to recognize $9,100 thousand of sublease income over the 77-month term of the new sublease agreement, with payments commencing December 1, 2023[99] Financial Operations Overview The company generates revenue from product sales (instruments, consumables) and services, with consumables revenue linked to the installed instrument base; cost of revenue includes manufacturing, amortization, royalties, and warranty costs; operating expenses include R&D focused on technology enhancement and SG&A for personnel and professional services; restructuring charges cover severance and facility costs from efficiency initiatives - Revenue is primarily generated from sales of instruments and consumables, and services, with other revenue from product development and license agreements[100][101] - Cost of product revenue includes manufacturing costs, amortization of developed technology, royalties, warranty costs, and provisions for excess/obsolete inventory[102] - R&D expense focuses on enhancing technologies and supporting new/existing product development, including costs from research grants[104] - SG&A expense covers personnel costs for sales, marketing, business development, finance, legal, HR, IT, and general management, as well as professional services[105] - Restructuring and related charges include severance and facility costs (net of sublease income) incurred to improve operational efficiency, achieve cost savings, and align the workforce[106] Results of Operations Total revenue grew 17% for the six months ended June 30, 2023, driven by 72% instrument revenue increase, with gross profit improving 60%, R&D and SG&A expenses decreasing 41% and 26% respectively, and net loss substantially improving due to absent non-operating losses | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenue | $27,666 | $18,777 | $52,785 | $45,281 | | Gross profit | $13,602 | $4,427 | $25,939 | $16,664 | | Research and development expense | $6,184 | $12,606 | $12,669 | $21,471 | | Selling, general and administrative expense | $22,600 | $30,084 | $43,895 | $59,569 | | Restructuring and related charges | $2,267 | $300 | $3,417 | $1,690 | | Net loss | $(17,040) | $(63,539) | $(33,883) | $(139,827) | - Total revenue grew 47% for the three months and 17% for the six months ended June 30, 2023, primarily due to increased instrument placements in proteomics[108] - Instrument revenue grew 335% for the three months and 72% for the six months ended June 30, 2023. Recurring consumables and service revenue comprised about 65% of total revenue for the six months ended June 30, 2023[109] - Proteomics revenue grew 74% for the three months and 38% for the six months ended June 30, 2023, driven by expanded adoption of CYTOF XT and early traction from Hyperion XTi. Genomics revenue declined 8% for the six months, with a strategy to focus on OEM business and achieve sustainable positive contribution margin[110][111] - Gross profit increased significantly due to one-time reductions in Q2 2022 (revenue reserve for discontinued products, excess/obsolete inventory provision) and cost reductions from relocating operations[112] - R&D expense decreased by 41% for the six months, primarily due to a $3,500 thousand impairment charge in Q2 2022, lower compensation, consulting costs, and reduced spending on laboratory supplies, reflecting focused R&D projects[114] - SG&A expense decreased by 26% for the six months, mainly due to reduced salaries, benefits, stock-based compensation from workforce downsizing, and lower non-recurring legal/professional fees related to the Private Placement in 2022[115] - Non-operating income (expense) improved significantly due to the absence of large losses related to the Private Placement (forward sale of Series B Preferred Stock and Bridge Loans) in 2023, which were present in 2022[118][120] - Other income (expense), net, increased by $2,000 thousand for both three and six months ended June 30, 2023, primarily due to interest earned on money market funds and short-term investments, which were not held before the Private Placement[119][121] Liquidity and Capital Resources The company has an accumulated deficit of $960,000 thousand and funds operations through equity and debt, with $142,304 thousand in cash and equivalents as of June 30, 2023, expected to be sufficient for the next 12 months - The company has an accumulated deficit of $960,000 thousand as of June 30, 2023, and has funded operating losses primarily through equity offerings, term loans, convertible notes, and redeemable preferred stock[125] - Principal sources of liquidity are cash, cash equivalents, and short-term investments, totaling $142,304 thousand at June 30, 2023 (down from $165,800 thousand at December 31, 2022)[128] - The Revolving Credit Facility expired on August 2, 2023, with no outstanding borrowings and $7,100 thousand available as of June 30, 2023[129] - The company expects its existing liquidity and capital sources to be sufficient to support operations for at least the next 12 months[127] Cash Flow Activity Net cash used in operating activities decreased by $27,800 thousand for the six months ended June 30, 2023, while investing activities provided $83,280 thousand, and financing activities used $4,642 thousand, contrasting with prior year's significant financing inflows | Cash Flow Summary (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(17,814) | $(45,578) | | Net cash provided by (used in) investing activities | $83,280 | $(139,108) | | Net cash provided by (used in) financing activities | $(4,642) | $231,033 | | Net increase in cash, cash equivalents and restricted cash | $60,775 | $45,910 | - Net cash used in operating activities declined by $27,800 thousand, reflecting a lower net loss and reduced non-cash adjustments[137] - Net cash provided by investing activities was $83,300 thousand, primarily from $85,100 thousand in proceeds from sales and maturities of short-term investments, a reversal from $137,300 thousand in purchases in 2022[138] - Financing activities used $4,600 thousand, mainly due to $4,800 thousand in common stock repurchases, contrasting with $231,000 thousand provided in 2022 from bridge loans and Series B Preferred Stock issuance[139] Critical Accounting Policies and Estimates The preparation of financial statements requires significant estimates and assumptions, particularly for revenue, trade receivables, inventories, goodwill, intangible assets, and preferred equity, with no significant changes reported from the prior annual report - Key accounts relying heavily on estimates include revenue, trade receivables, inventories, right-of-use assets, goodwill, long-lived intangible assets, lease liabilities, income tax liabilities (assets), and preferred equity[141] - There have been no significant changes to the company's critical accounting policies and estimates as described in the Annual Report on Form 10-K for the year ended December 31, 2022[142] Recent Accounting Pronouncements The company periodically adopts new accounting standards but expects no material impact on its financial position or results of operations from recently issued standards that are not yet effective - The impact of recently issued accounting standards that are not yet effective is not expected to have a material impact on the company's financial position or results of operations upon adoption[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the item is not applicable for the company - This item is not applicable[144] Item 4. Controls and Procedures This section details management's evaluation of the effectiveness of disclosure controls and procedures, reports on changes in internal control over financial reporting, and acknowledges the inherent limitations of control systems Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023 - As of June 30, 2023, the company's disclosure controls and procedures were evaluated and concluded to be effective at the reasonable assurance level[145] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the six months ended June 30, 2023 - There were no changes in internal control over financial reporting during the six months ended June 30, 2023, that materially affected or are reasonably likely to materially affect it[146] Limitations on the Effectiveness of Controls The company acknowledges that control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, meaning misstatements due to error or fraud may occur and not be detected - Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, including resource constraints, meaning misstatements due to error or fraud may occur and not be detected[148] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 7 to the Condensed Consolidated Financial Statements - Information on legal proceedings is included in Note 7 to the Condensed Consolidated Financial Statements[151] Item 1A. Risk Factors The company refers readers to the detailed risk factors discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and notes that additional risks may emerge - Readers should carefully consider the risk factors discussed in Part I Item 1A "Risk Factors" in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[152] - The business is also subject to general risks such as employee relations, economic conditions, global geopolitical events, and international operations, and additional unknown or immaterial risks may adversely affect the business[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase program, including the board's authorization, the amount repurchased during the quarter, and the remaining authorization Issuer Purchases of Equity Securities The board authorized a $20,000 thousand share repurchase program through December 31, 2023; for the three months ended June 30, 2023, 1,208,200 shares were repurchased for $2,400 thousand, leaving $14,600 thousand authorized - The board authorized a $20,000 thousand share repurchase program through December 31, 2023, contingent on market and business conditions[153] | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) | | :--------------- | :----------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | April 1-30, 2023 | 433,852 | $1.82 | $16,200 | | May 1-31, 2023 | 477,853 | $1.95 | $15,300 | | June 1-30, 2023 | 296,495 | $2.20 | $14,600 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[155] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures - None[156] Item 5. Other Information The company reported no other information - None[157] Item 6. Exhibits This section provides a list of exhibits filed with the quarterly report on Form 10-Q, including certificates of incorporation, bylaws, preferred stock designations, sublease agreements, and compensation plans - The exhibit list includes various corporate governance documents (e.g., Certificate of Incorporation, Bylaws, Preferred Stock Designations), material contracts (e.g., Sublease agreements, Offer letters, Change of Control and Severance Plans), and certifications (e.g., CEO/CFO certifications)[160][161] SIGNATURES The report is signed by Michael Egholm, Chief Executive Officer and President, and Jeffrey Black, Chief Financial Officer, on August 8, 2023 - The report was signed by Michael Egholm, Chief Executive Officer and President, and Jeffrey Black, Chief Financial Officer, on August 8, 2023[166]