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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
_____________________________________________
Commission file number:
(Exact name of registrant as specified in its charter)
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State or other jurisdiction of incorporation or organization |
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I.R.S. Employer Identification No. |
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Address of principal executive offices |
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Zip Code |
Registrant’s telephone number, including area code:
(
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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☒ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 3, 2023, there were
STANDARD BIOTOOLS INC.
TABLE OF CONTENTS
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Page |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
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Item 3. |
28 |
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Item 4. |
28 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
30 |
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Item 1A. |
30 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
33 |
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33 |
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35 |
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PART I. FINANCIAL INFORMATION
Item 1. F inancial Statements
STANDARD BIOTOOLS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
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September 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable (net of allowances of $
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset, net |
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Other non-current assets |
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Developed technology, net |
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Goodwill |
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Total assets |
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$ |
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$ |
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LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation and related benefits |
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Operating lease liabilities, current |
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Deferred revenue, current |
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Deferred grant income, current |
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Other accrued liabilities |
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Term loan, current |
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Total current liabilities |
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Convertible notes, net |
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Term loan, non-current |
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Deferred tax liability |
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Operating lease liabilities, non-current |
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Deferred revenue, non-current |
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Deferred grant income, non-current |
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Other non-current liabilities |
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Total liabilities |
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(Note 7) |
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Mezzanine equity: |
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Redeemable preferred stock: $
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Stockholders’ deficit: |
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Preferred stock: $
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Common stock: $
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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(
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(
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Accumulated deficit |
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(
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(
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Treasury stock at cost:
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(
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(
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Total stockholders’ deficit |
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(
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(
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Total liabilities, mezzanine equity and stockholders’ deficit |
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$ |
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$ |
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See accompanying notes
1
STANDARD BIOTOOLS INC.
CONDENSED CONSOLIDA TED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue: |
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Product revenue |
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$ |
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$ |
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$ |
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$ |
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Service and other revenue |
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Total revenue |
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Cost of revenue: |
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Cost of product revenue |
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Cost of service and other revenue |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Restructuring and related charges |
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Transaction-related expenses |
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Total operating expenses |
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Loss from operations |
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(
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) |
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(
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) |
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(
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(
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) |
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Interest expense |
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(
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) |
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(
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) |
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(
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) |
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(
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) |
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Loss on forward sale of Series B Preferred Stock |
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(
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Loss on Bridge Loans |
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(
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) |
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Other income (expense), net |
|
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(
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) |
|
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(
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) |
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Loss before income taxes |
|
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(
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(
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) |
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(
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) |
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(
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) |
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Income tax benefit (expense) |
|
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(
|
) |
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(
|
) |
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Net loss |
|
$ |
(
|
) |
|
$ |
(
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) |
|
$ |
(
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) |
|
$ |
(
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) |
|
Net loss per share, basic and diluted |
|
$ |
(
|
) |
|
$ |
(
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) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Shares used in computing net loss per share, basic and diluted |
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See accompanying notes
2
STANDARD BIOTOOLS INC.
CONDENSED CONSOLID ATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
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|
2023 |
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2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Net loss |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Other comprehensive income (loss), net of tax: |
|
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||||
|
Foreign currency translation adjustment |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net change in unrealized gain (loss) on investments |
|
|
|
|
|
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(
|
) |
|
|
|
|
|
|
(
|
) |
|
Other comprehensive income (loss), net of tax |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Comprehensive loss |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
See accompanying notes
3
STANDARD BIOTOOLS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)
|
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Common Stock |
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Additional
|
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Accum.
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Accum. |
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Treasury Stock |
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Total Stockholders’
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Shares |
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Amount |
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Capital |
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Comp. Loss |
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Deficit |
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Shares |
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Amount |
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|
(Deficit) |
|
||||||||
|
Balance as of December 31, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive income, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance as of March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Issuance of common stock under ESPP |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive loss net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance as of June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Issuance of common stock from option exercises |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive loss net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance as of September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
|
Common Stock |
|
|
Additional
|
|
|
Accum.
|
|
|
Accum. |
|
|
Treasury Stock |
|
|
Total
|
|
||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Comp. Loss |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
(Deficit) |
|
||||||||
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Issuance of common stock from option exercises |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance as of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Issuance of common stock under ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock from option exercises |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance as of June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Issuance of restricted stock, net of shares withheld
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Other comprehensive loss, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance as of September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
See accompanying notes
4
STANDARD BIOTOOLS INC.
CONDENSED CONSOLIDATED ST ATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Operating activities |
|
|
|
|
|
|
||
|
Net loss |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
|
Loss on forward sale of Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
Loss on bridge loans |
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
Amortization of developed technology |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Provision for excess and obsolete inventory |
|
|
|
|
|
|
|
|
|
Impairment of InstruNor developed technology intangible |
|
|
|
|
|
|
|
|
|
Amortization of debt discounts, premiums and issuance costs |
|
|
|
|
|
|
|
|
|
Other non-cash items |
|
|
(
|
) |
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
||
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
Inventories, net |
|
|
(
|
) |
|
|
(
|
) |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
(
|
) |
|
Accounts payable |
|
|
(
|
) |
|
|
(
|
) |
|
Accrued compensation and related benefits |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
(
|
) |
|
Other liabilities |
|
|
|
|
|
|
(
|
) |
|
Net cash used in operating activities |
|
|
(
|
) |
|
|
(
|
) |
|
Investing activities |
|
|
|
|
|
|
||
|
Purchases of short-term investments |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from sales and maturities of investments |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
(
|
) |
|
Financing activities |
|
|
|
|
|
|
||
|
Proceeds from bridge loans |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
Repayment of term loan and advances under revolving credit facility |
|
|
(
|
) |
|
|
(
|
) |
|
Payment of debt and equity issuance costs |
|
|
|
|
|
|
(
|
) |
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(
|
) |
|
|
|
|
|
Proceeds from ESPP stock issuance |
|
|
|
|
|
|
|
|
|
Payments for taxes related to net share settlement of equity awards and other |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash provided by (used in) financing activities |
|
|
(
|
) |
|
|
|
|
|
Effect of foreign exchange rate fluctuations on cash and cash equivalents |
|
|
(
|
) |
|
|
(
|
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
(
|
) |
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
Cash paid for income taxes, net of refunds |
|
$ |
|
|
|
$ |
|
|
|
Non-cash right-of-use assets and lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Asset retirement obligations |
|
$ |
|
|
|
$ |
|
|
See accompanying notes
5
STANDARD BIOTOOLS INC.
NOTES TO CONDENSED C ONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
1. O rganization and Basis of Presentation
Standard BioTools Inc. (Standard BioTools or the Company), formerly known as Fluidigm Corporation, is a Delaware corporation headquartered in South San Francisco, California.
The Company has an established portfolio of essential, standardized next-generation technologies that help biomedical researchers develop medicines faster and better. As a leading solutions provider, the Company endeavors to provide reliable and repeatable insights in health and disease using its proprietary mass cytometry and microfluidics technologies that help transform scientific discoveries into better patient outcomes. Standard BioTools works with leading academic, government, pharmaceutical, biotechnology, plant and animal research and clinical laboratories worldwide, focusing on the most pressing needs in translational and clinical research, including oncology, immunology and immunotherapy.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). As of September 30, 2023 , the Company had wholly owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, Italy, the United Kingdom, China, Germany and Norway. All subsidiaries, except for Singapore, use their local currency as their functional currency. The Singapore subsidiary uses the U.S. dollar as its functional currency. All intercompany transactions and balances have been eliminated in consolidation.
These interim condensed consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented.
The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the full year or for any other year or interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on March 14, 2023.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, the current economic environment and on various other assumptions believed to be reasonable, which together form the basis for making judgments about the carrying values of assets and liabilities. These accounting matters included but were not limited to inventory and related reserves; the carrying value of goodwill and other long-lived assets; and the potential outcome of uncertain tax positions that have been recognized in the Company’s consolidated financial statements or tax returns. The Company also uses significant judgment in determining the fair value of financial instruments, including debt and equity instruments. Actual results could differ materially from these estimates and could have a material adverse effect on the Company’s condensed consolidated financial statements.
Recent Accounting Pronouncements
From time to time, new accounting standards are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
Reclassification
Certain amounts in the condensed consolidated financial statements have been reclassified from their original presentation to conform to current year presentation.
6
Restructuring and Related Charges
Transaction-related Expenses
The Company expensed certain costs incurred related to the merger agreement with SomaLogic, Inc., described further in
Note 15
, including legal, advisory, accounting and other transaction-related costs. The expenses in the prior period relate to the private placement whereby the Company issued and sold an aggregate of $
2. N et Loss Per Share
The Company’s basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Restricted share units (RSUs), performance stock units (PSUs), and options to purchase the Company’s common stock are considered to be potentially dilutive common shares.
The following potentially dilutive common shares (in thousands) were excluded from the computations of diluted net loss per share for the periods presented because including them would have been anti-dilutive:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
RSUs, PSUs, and stock options |
|
|
|
|
|
|
|
|
|
Series B Preferred Stock |
|
|
|
|
|
|
|
|
|
2019 Notes (1) |
|
|
|
|
|
|
|
|
|
2014 Notes |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
3. Rev enue and Geographic Area
Disaggregation of Revenue by Product Type and Geographic Area
The following tables present revenue based upon product type and the geographic regions of the Company’s customers’ facilities (in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Consumables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
7
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Europe, Middle East and Africa (EMEA) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Except for China, which represented $
Unfulfilled Performance Obligations
The condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 included total deferred revenue of
$
The Company expects to recognize revenue from unfulfilled performance obligations associated with service contracts that were partially completed as of September 30, 2023 in the following periods (in thousands):
|
Fiscal Year |
|
Expected Revenue (1) |
|
|
|
remainder of the year |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
The Company also has unsatisfied performance obligations for service contracts with an expected term of one year or less not included in the amounts above.
4. Good will and Intangible Assets, net
In connection with the Company’s acquisition of DVS Sciences, Inc. in February 2014, the Company recorded $
8
Intangible assets with finite lives include developed technology, patents and licenses. In the condensed consolidated balance sheets, developed technology is reported separately while patents and licenses are reported in other non-current assets.
|
|
|
September 30, 2023 |
||||||||||||
|
|
|
Gross Amount |
|
|
Accumulated
|
|
|
Net |
|
|
Weighted-
|
|||
|
Developed technology |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
Patents and licenses |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
December 31, 2022 |
||||||||||||
|
|
|
Gross Amount |
|
|
Accumulated
|
|
|
Net |
|
|
Weighted-
|
|||
|
Developed technology |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
Patents and licenses |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
Total amortization expense of the Company's intangible assets was $
Based on the carrying value of intangible assets as of September 30, 2023, the Company expects estimated future amortization expense to be as follows (in thousands):
|
Fiscal Year |
|
Developed
|
|
|
Patents and
|
|
|
Total |
|
|||
|
2023 remainder of the year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
5. Bala nce Sheet Details
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
Restricted cash is included in other non-current assets in the condensed consolidated balance sheets.
Inventories, net
Inventories, net consisted of the following (in thousands):
9
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work-in-process |
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
Total inventory, gross |
|
|
|
|
|
|
|
|
|
Allowance for excess and obsolete inventory |
|
|
(
|
) |
|
|
(
|
) |
|
Total inventories, net |
|
$ |
|
|
|
$ |
|
|
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Laboratory and manufacturing equipment |
|
$ |
|
|
|
$ |
|
|
|
Leasehold improvements |
|
|
|
|
|
|
|
|
|
Computer equipment and software |
|
|
|
|
|
|
|
|
|
Office furniture and fixtures |
|
|
|
|
|
|
|
|
|
Property and equipment, gross |
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
(
|
) |
|
|
(
|
) |
|
Construction-in-progress |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
Accrued Compensation and Related Benefits
Accrued compensation and related benefits, which are included in current liabilities on the condensed consolidated balance sheets consisted of the following (in thousands):
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Accrued incentive compensation |
|
$ |
|
|
|
$ |
|
|
|
Accrued vacation |
|
|
|
|
|
|
|
|
|
Accrued payroll taxes and other |
|
|
|
|
|
|
|
|
|
Accrued restructuring |
|
|
|
|
|
|
|
|
|
Accrued compensation and related benefits |
|
$ |
|
|
|
$ |
|
|
Refer to Note 14 for additional information on restructuring.
Other Accrued Liabilities
Other accrued liabilities, which are included in current liabilities on the condensed consolidated balance sheets consisted of the following (in thousands):
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Accrued commissions |
|
$ |
|
|
|
$ |
|
|
|
Accrued interest |
|
|
|
|
|
|
|
|
|
Accrued legal expenses |
|
|
|
|
|
|
|
|
|
Accrued taxes |
|
|
|
|
|
|
|
|
|
Uninvoiced receipts |
|
|
|
|
|
|
|
|
|
Accrued warranties |
|
|
|
|
|
|
|
|
|
Customer advances |
|
|
|
|
|
|
|
|
|
Accrued restructuring |
|
|
|
|
|
|
|
|
|
Accrued other |
|
|
|
|
|
|
|
|
|
Other accrued liabilities |
|
$ |
|
|
|
$ |
|
|
10
Deferred Grant Income
In September 2020, the Company executed a contract with the National Institutes of Health (NIH) under NIH’s Rapid Acceleration of Diagnostics program to support the expansion of the Company’s production capacity for its COVID-19 test products. Under the now-completed contract, the Company received $
The current portion of deferred grant income on the Company’s condensed consolidated balance sheets represents amounts expected to be offset against depreciation expense over the next twelve months. The non-current portion of deferred grant income includes amounts expected to be offset against depreciation expense in later periods.
6. Debt
Total carrying value of debt consists of the following (in thousands):
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Convertible notes: |
|
|
|
|
|
|
||
|
2014 Notes |
|
$ |
|
|
|
$ |
|
|
|
2019 Notes |
|
|
|
|
|
|
|
|
|
Total convertible notes, net |
|
|
|
|
|
|
|
|
|
Term loan, non-current |
|
|
|
|
|
|
|
|
|
Term loan, current |
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
Convertible Notes
In February 2014, the Company closed an underwritten public offering of 2014 Senior Convertible Notes (2014 Notes), which will mature on February 1, 2034, unless earlier converted, redeemed or repurchased in accordance with the terms of the 2014 Notes. Holders may require the Company to repurchase all or a portion of their 2014 Notes on each of February 6, 2024 and February 6, 2029, at a repurchase price in cash equal to
In November 2019, the Company issued $
11
Offering-related costs related to both notes were capitalized as debt issuance costs and are recorded as an offset to the carrying value of the 2019 Notes.
Revolving Credit Facility
On August 2, 2018, the Company entered into a revolving credit facility with Silicon Valley Bank (as amended, the Revolving Credit Facility) in an aggregate principal amount of up to the lesser of (i) $
Term Loan Facility, net
On August 2, 2021, the Company amended its Revolving Credit Facility to, amongst other things, provide for a new $
On October 26, 2023, the Company entered into an amendment to the Term Loan Facility agreement which removed certain collateral covenants related to the Revolving Credit Facility due to its expiration on August 2, 2023.
Bridge Loans
On January 23, 2022, the Company entered into separate loan agreements (collectively, the Bridge Loan Agreements) with various investors for a $
Applying the guidance in ASC 825 Financial Instruments, the Company elected to record the Bridge Loans at their fair value using a probability‐weighted expected return method for the valuation analysis of the Bridge Loans. This resulted in a $
7. Com mitments and Contingencies
Leases
The Company has operating leases for buildings and vehicles, which includes a facility lease for its headquarters consisting of four floors. The Company’s facility lease has an expiration date of
As part of the Company’s restructuring plan discussed further in
Note 14
, in August 2022, the Company entered into an agreement to sublease approximately
12
Rent expense, net of sublease income, is reported within restructuring and related charges for the three and nine months ended September 30, 2023 in the condensed consolidated statements of operations. The Company is currently in the process of fully vacating and potentially subleasing an additional floor (20 th floor).
Indemnification
From time to time, the Company has entered into indemnification provisions under certain of its agreements in the ordinary course of business, typically with business partners, customers and suppliers. Pursuant to these agreements, the Company may indemnify, hold harmless and agree to reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any patent or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification provisions is generally perpetual from the time of the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is typically not limited to a specific amount. In addition, the Company has entered into indemnification agreements with its officers, directors and certain other employees. With certain exceptions, these agreements provide for indemnification for related expenses including, among others, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding.
Litigation
From time to time, the Company may be subject to various legal proceedings and claims arising in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contract law, tax, regulatory, distribution arrangements, employee relations and other matters. Periodically, the Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible loss can be estimated, the Company accrues a liability for the estimated loss. The Company has not recorded any such liabilities in any of the periods presented. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, the Company continues to reassess the potential liability related to pending claims and litigation and may revise estimates.
8. Fai r Value of Financial Instruments
Fair Value of Financial Instruments
The following tables summarize the Company’s financial instruments by significant investment category measured at fair value on a recurring basis within the fair value hierarchy (in thousands):
|
|
|
|
|
|
Fair Value Measurements At Reporting Date Using |
|
||||||||||
|
|
|
Total |
|
|
Quoted Prices in Active Markets For Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
|
As of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total short-term investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total assets measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13
|
|
|
|
|
|
Fair Value Measurements At Reporting Date Using |
|
||||||||||
|
|
|
Total |
|
|
Quoted Prices in Active Markets For Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
|
As of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasury securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total short-term investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total assets measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There were no transfers within the hierarchy and no changes in the valuation techniques used during the nine months ended September 30, 2023.
The following table summarizes available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
As of September 30, 2023 |
|
||||||||||
|
|
|
Maturity (in years) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Money market funds |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total cash and cash equivalents |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasury securities |
|
1 or less |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total short-term investments |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total available-for-sale securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
||||||||||
|
|
|
Maturity (in years) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Money market funds |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total cash and cash equivalents |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasury securities |
|
1 or less |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Total short-term investments |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total available-for-sale securities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
As of September 30, 2023
,
Debt
The 2014 Notes and 2019 Notes (collectively, the Convertible Notes) are not regularly traded. The estimated fair values for these securities represent Level III valuations since a fair value for these securities cannot be determined by using readily observable inputs or measures, such as market prices. Fair values were estimated using pricing models and risk-adjusted value ranges.
14
The estimated fair value of the Term Loan Facility also represents a Level III valuation since the value cannot be determined by using readily observable inputs or measures, such as market prices. The fair value of the Company's Term Loan Facility was estimated using a discounted cash flow model and current market interest rate data for similar loans.
The carrying value of the Company's lines of Term Loan Facility approximates fair value as interest rates applied to the underlying debt are adjusted quarterly to market interest rates. The carrying value of the Convertible Notes approximates fair value as the interest rate and terms are reflective of the rate the Company could obtain on debt with similar terms and conditions.
9. M ezzanine Equity
Series B Redeemable Preferred Stock
On January 23, 2022, the Company entered into separate Series B Convertible Preferred Stock Purchase Agreements (collectively, the Purchase Agreements) with Casdin Private Growth Equity Fund II, L.P. and Casdin Partners Master Fund, L.P. (together, Casdin), and Viking Global Opportunities Illiquid Investments Sub Master LP and Viking Global Opportunities Drawdown LP (together, Viking, and together with Casdin, the Lenders), whereby the Company issued and sold an aggregate of $
The Purchase Agreements were accounted for as forward sales contracts at fair value in accordance with the authoritative accounting guidance as the Series B Preferred Stock included certain contingent redemption features that created an obligation for the Company to repurchase its shares. The fair value of the payable portion of the forward sales contracts was determined using a Monte Carlo Simulation, which relies on significant assumptions regarding the estimated yield and term of the Series B Preferred Stock.
The components of the carrying value of the Series B Preferred Stock as of September 30, 2023 and December 31, 2022 were as follows (in thousands):
|
Proceeds from Purchase Agreements |
|
$ |
|
|
|
Proceeds from Bridge Loans |
|
|
|
|
|
Change in fair value of Forward Purchase Agreements |
|
|
|
|
|
Change in the fair value of Bridge Loans |
|
|
|
|
|
Less equity issuance costs |
|
|
(
|
) |
|
Total Series B Redeemable Preferred Stock |
|
$ |
|
|
The Series B Preferred Stock ranks senior to the Company's common stock with respect to dividend rights, redemption rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The holders of Series B Preferred Stock are entitled to participate in all dividends declared on the Company's common stock on an as-converted basis.
10. S hareholders’ Deficit
Stock Repurchase Program
On November 23, 2022, the Company’s board of directors authorized the repurchase of up to $
15
Common Shares Reserved
As of September 30, 2023, the Company had reserved shares of common stock for future issuance under equity compensation plans as follows (in thousands):
|
|
|
Securities To Be Issued Upon Exercise Of Options |
|
|
Securities To Be Issued Upon Release Of Restricted Stock |
|
|
Number Of Remaining Securities Available For Future Issuance |
|
|||
|
2022 Inducement Equity Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Equity Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Inducement Award Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Employee Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common stock reserved for future issuance |
|
|
|
|
|
|
|
|
|
|
|
|
11. Stock-based Compensation
Restricted Stock Units
|
|
|
Number of Units
|
|
|
Weighted-Average
|
|
||
|
Balance at December 31, 2022 |
|
|
|
|
|
$ |
|
|
|
RSU granted |
|
|
|
|
|
$ |
|
|
|
RSU released |
|
|
(
|
) |
|
$ |
|
|
|
RSU forfeited |
|
|
(
|
) |
|
$ |
|
|
|
Balance at September 30, 2023 |
|
|
|
|
|
$ |
|
|
As of September 30, 2023
, the unrecognized compensation costs related to outstanding unvested RSUs under the Company’s equity incentive plans were $
Stock Options
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
Weighted-
|
|
|
Aggregate
|
|
||||
|
Balance at December 31, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Options granted |
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
— |
|
|
|
Options exercised |
|
|
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
||
|
Options cancelled |
|
|
(
|
) |
|
$ |
|
|
|
|
|
|
$ |
— |
|
|
|
Balance at September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Vested at September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Unvested awards at September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
As of September 30, 2023
, the unrecognized compensation costs related to outstanding unvested options under the Company’s equity incentive plans were $
16
Performance-based Awards
The Company previously granted PSUs to certain executive officers and senior-level employees with the number of PSUs ultimately earned under these awards being calculated by comparing the Total Shareholder Return (TSR) of the Company’s common stock over the applicable
In July 2023, the Company granted performance-based restricted stock units to certain executive officers that will vest in the first quarter of 2024 based upon the achievement of specified revenue and EBITDA targets for the twelve months ended December 31, 2023, and the executive’s continued employment with the Company. Stock-based compensation expense is being recognized over the requisite service period, as it is deemed probable the Company will satisfy the performance measures.
Activity under the performance-based awards was as follows:
|
|
|
Number of Units
|
|
|
Weighted-Average
|
|
||
|
Balance at December 31, 2022 |
|
|
|
|
|
$ |
|
|
|
PSU granted |
|
|
|
|
|
$ |
|
|
|
PSU released |
|
|
(
|
) |
|
$ |
|
|
|
Performance adjustment for 2020 awards |
|
|
(
|
) |
|
$ |
|
|
|
Balance at September 30, 2023 |
|
|
|
|
|
$ |
|
|
Stock-based Compensation Expense
Stock-based compensation expense is reported in the Company's condensed consolidated statement of operations as follows (in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Cost of product revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Research and development expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
12. In come Taxes
The Company’s quarterly provision for income taxes is based on an estimated annual effective income tax rate. The quarterly provision for income taxes also includes discrete items, such as changes in valuation allowances or adjustments upon finalization of tax returns as well as infrequently occurring items, if any, such as the effects of changes in tax laws or rates, in the interim period in which they occur.
The Company recorded an income tax expense of $
The Company’s effective tax rates for both periods differ from the
17
13. Se gment Reporting
In the third quarter of 2022, the Company’s Chief Executive Officer (CEO), who is the Chief Operating Decision Maker (CODM), instituted the practice of evaluating operating performance and making resource allocation decisions using
The Company determines each segment’s loss from operations by subtracting direct expenses, including cost of product and service revenues, research and development expense and sales and marketing expense, from revenues. Amortization, depreciation and restructuring expenses are included in each segment’s operating expenses. Corporate costs, including general and administrative expenses for functions shared by both operating segments such as executive management, human resources and finance, along with interest and taxes, are excluded from each segment’s results, which is consistent with how the Company’s CODM evaluates segment performance.
The Company does not prepare or report segmented balance sheet information as its CODM does not use the information to assess segment operating performance. The segments adhere to the same accounting policies that the Company adheres to as a whole. Segment reporting for historical periods has been included in this report to ensure comparability with the current year.
The Company’s business segment information was as follows (in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Proteomics |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Genomics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Proteomics |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Genomics |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Corporate expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Restructuring and related charges |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Transaction-related expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Total loss from operations |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
14. R estructuring and Related Charges
Beginning with the appointment of the Company’s new management team in April 2022 and as further announced in August 2022, the Company has implemented a restructuring plan, including a reduction in force, to improve operational efficiency, achieve cost savings and align the Company’s workforce to the future needs of the business. In addition to the reduction in force, the Company is reducing leased office space, optimizing its manufacturing footprint and streamlining support functions. The Company is developing a more disciplined cost management culture throughout its organization by investing in training and advanced information systems.
The Company records restructuring and related charges as incurred. These items are classified within restructuring and related charges in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023
, and primarily include severance costs as well as facility costs (net of sublease income) for leased space in South San Francisco that the Company has vacated as part of the restructuring plan. The Company recognized restructuring and related charges of $
The Company expects to relieve the majority of the liability for restructuring charges primarily related to employee severance in 2024. Ongoing restructuring charges will continue to be incurred for facility related costs through the termination of the facility leases. These estimates are subject to a number of assumptions, and actual results may differ.
18
The following table summarizes the change in the Company’s restructuring and other related liabilities for the nine months ended September 30, 2023 (in thousands):
|
|
|
Severance
|
|
|
Facility
|
|
|
Other (2) |
|
|
Total |
|
||||
|
Balance at December 31, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Restructuring and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Balance at September 30, 2023 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company’s restructuring and related charges by segment and corporate were as follows (in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Restructuring: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Proteomics |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Genomics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring and related charges |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
15. Su bsequent Events
On October 4, 2023, the Company, SomaLogic, Inc., a Delaware corporation (SomaLogic), and Martis Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (Merger Sub), entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SomaLogic, with SomaLogic continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the Merger). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $
In addition, as of the effective time of the Merger, the Company will assume each SomaLogic stock incentive plan, outstanding option to purchase shares of SomaLogic Stock and outstanding restricted stock units convertible into shares of SomaLogic Stock, whether vested or unvested.
The Merger Agreement contains certain termination rights for both SomaLogic and Standard BioTools. Upon termination of the Merger Agreement by Standard BioTools under specified circumstances, Standard BioTools may be required to pay SomaLogic a termination fee of approximately $
Each of SomaLogic and Standard BioTools has agreed to customary representations, warranties and covenants in the Merger Agreement. Consummation of the Merger is subject to certain customary closing conditions. The transaction is expected to close in the first quarter of 2024, assuming satisfaction of all conditions to the Merger. The Company's certifying officers will remain unchanged.
19
Item 2. Managem ent’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of Standard BioTools Inc. MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section titled “Risk Factors” and this MD&A. Forward-looking statements include information concerning our possible or assumed future cash flow, revenue, sources of revenue and results of operations, cost of product revenue and product margin, operating and other income and expenses, unit sales and the selling prices of our products, business strategies and strategic priorities, changes in commercial and strategic focus, restructuring plan, reduction-in-force and real estate footprint reduction plans, microfluidics research and development and marketing investment reduction plans, other cost reduction initiatives, portfolio rationalization initiatives, operating discipline improvement plans, implementation of Standard BioTools Business Systems, expected costs and cost savings associated with such plans and initiatives, future product offerings, financing plans, capital allocation plans, expansion of our business, merger and acquisition opportunities, competitive position, industry environment, potential growth opportunities and drivers, market growth expectations, the effects of competition and public health crises on our business, the global supply chain, and our customers, suppliers and other business partners, and our expectations with respect to the closing of the proposed Merger with SomaLogic (each as defined below), including with respect to matters of timing, including shareholder approval by our and SomaLogic’s shareholders, regulatory approval and other closing conditions, the anticipated financial impact and potential benefits to us related to the Merger, and integration of the businesses assuming completion of the Merger and other matters related to the Merger;. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in Part II, Item 1A this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 14, 2023. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q.
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of the proposed Merger or any other future acquisitions, mergers, dispositions, joint ventures or investments we may make. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
Standard BioTools, the Standard BioTools logo, Fluidigm®, the Fluidigm logo, 48.Atlas™, Access Array™, Advanta™, Advanta EASE™, Atlas™, Biomark™, “Bringing new insights to life”™, C1™, Callisto™, Cell-ID™, CyTOF®, CyTOF XT™, the CyTOF XT logo, D3™, Delta Gene™, Direct™, Digital Array™, Dynamic Array™, EP1™, EQ™, FC1™, Flex Six™, Flow Conductor™, FluiDesign™, Helios™, High-Precision 96.96 Genotyping™, HTI™, Hyperion™, Hyperion+™, HyperionXTi™, IMC™, Imaging Mass Cytometry™, Immune Profiling Assay™, Juno™, Maxpar®, Maxpar® OnDemand™, MCD™, MSL®, Nanoflex™, Open App™, Pathsetter™, Polaris™, qdPCR 37K™, Script Builder™, Script Hub™, Singular™, SNP Trace™, SNP Type™, “Unleashing tools to accelerate breakthroughs in human health”™, X9™ High-Throughput Genomics System, X9™ Real Time PCR System and Xgrade™ are trademarks or registered trademarks of Standard BioTools Inc. or its affiliates in the United States and/or other countries. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.
Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Standard BioTools” the “Company,” “we,” “us,” and “our” refer to Standard BioTools Inc. and its subsidiaries.
Overview
Standard BioTools Inc. is driven by a bold purpose – unleashing tools to accelerate breakthroughs in human health. We have an established portfolio of essential, standardized next-generation high resolution technologies that assist biomedical researchers develop
20
medicines faster and better. Our tools are designed to provide reliable and repeatable insights in health and disease using our proprietary mass cytometry and microfluidics technologies, which are useful in proteomics and genomics that help transform scientific discoveries into better patient outcomes. We work with leading academic, government, pharmaceutical, biotechnology, plant and animal research, and clinical laboratories worldwide, focusing on the most pressing needs in translational and clinical research, including oncology, immunology, and immunotherapy.
We distribute our systems through our direct sales force and support organizations located in North America, Europe, and Asia-Pacific, and through distributors or sales agents in several European, Latin American, Middle Eastern, and Asia-Pacific countries. Our manufacturing operations are located in Singapore and Canada.
Recent Developments
Our leadership team identified three strategic priorities: revenue growth, improving operating discipline and strategic capital allocation, as more fully discussed in Part I Item 1 “Business” in our Annual Report on Form 10-K filed with the SEC on March 14, 2023.
We took additional actions in the nine months ended September 30, 2023 under our strategic initiative to improve operating discipline, including reductions to our headcount in Europe and additional reductions to our real estate footprint in the U.S. On February 28, 2023, we signed an agreement to sublease an additional 25% of our corporate headquarters for a period of 77 months. As a result, 50% of the space at our headquarters was subleased as of September 30, 2023. We expect to recognize $9.1 million of sublease income over the term of this new agreement, with payments expected to commence on December 1, 2023.
Merger Agreement
On October 4, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with SomaLogic, Inc., a Delaware corporation (SomaLogic), and Martis Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary (Merger Sub), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SomaLogic, with SomaLogic continuing as our wholly owned subsidiary and the surviving corporation of the merger (the Merger). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.0001 per share, of SomaLogic issued and outstanding (SomaLogic Stock) will be converted into the right to receive 1.11 (the Exchange Ratio) shares of our common stock. At the effective time of the Merger, SomaLogic’s common stockholders will own approximately 57%, and our common stockholders will own approximately 43%, of the outstanding shares of common stock of the combined company on a fully diluted basis. The parties have also agreed that Michael Egholm, Ph.D., will serve as Chief Executive Officer, Jeffrey Black will serve as Chief Financial Officer, Adam Taich will serve as Chief Strategy Officer and Shane Bowen will serve as Chief Technology Officer of the combined company.
In addition, as of the effective time of the Merger, we will assume each SomaLogic stock incentive plan, outstanding option to purchase shares of SomaLogic Stock and outstanding restricted stock units convertible into shares of SomaLogic Stock, whether vested or unvested.
The parties have agreed to customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants relating to our obligation to call a meeting of our stockholders, and subject to certain exceptions, to recommend that its stockholders approve the issuance of shares of our common stock to holders of SomaLogic Stock pursuant to the Merger Agreement (the Standard BioTools Stock Issuance) and an amendment to our certificate of incorporation to increase the number of authorized shares of our common stock thereunder (the Standard BioTools Charter Amendment), SomaLogic’s obligations to call a meeting of its stockholders to adopt the Merger Agreement, and subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement and our filing with the SEC and causing to become effective a registration statement on Form S-4 to register the shares of our common stock to be issued pursuant to the Merger Agreement (the Registration Statement).
Consummation of the Merger is subject to certain closing conditions, including, among other things, the (1) approval by our stockholders of the Standard BioTools Stock Issuance and the Standard BioTools Charter Amendment, (2) the adoption by the stockholders of SomaLogic of the Merger Agreement, (3) authorization for listing on The Nasdaq Stock Market of the shares of our common stock (including the shares to be issued in the Merger), subject to official notice of issuance, (4) effectiveness of the Registration Statement, termination or expiration of any waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (5) the absence of any law, judgment, order, injunction, ruling, writ award or decree by any governmental entity of competent jurisdiction restraining, enjoining or otherwise prohibiting consummation of the Merger. Each party’s obligation to consummate the Merger is also subject to other specified customary conditions, including (1) the representations and warranties of the other party being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, generally subject to an overall material adverse effect qualification, (2) the performance in all material respects by
21
the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger and (3) the absence of a material adverse effect with respect to the other party.
The Merger Agreement contains certain termination rights for both SomaLogic and us. Upon termination of the Merger Agreement by Standard BioTools under specified circumstances, we may be required to pay SomaLogic a termination fee of approximately $19.1 million and/or reimburse SomaLogic’s reasonable out of pocket fees and expenses incurred in connection with the Merger Agreement and the transaction contemplated thereby up to a maximum of $2.0 million. Upon termination of the Merger Agreement by SomaLogic under specified circumstances, SomaLogic may be required to pay us a termination fee of approximately $17.2 million and/or reimburse our reasonable out of pocket fees and expenses incurred in connection with the Merger Agreement and the transaction contemplated thereby up to a maximum of $2.0 million.
The transaction is expected to close in the first quarter of 2024, assuming satisfaction of all conditions to the Merger.
Financial Operations Overview
Revenue
We generate revenue primarily from sales of our products and services. Other revenue consists of revenue from product development and license agreements.
Our product revenue consists of sales of instruments and consumables. Consumables revenue is largely driven by the size of our active installed base of instruments and the level of usage per instrument. Service revenue is linked to the sales and active installed base of our instruments as our service revenue primarily consists of post-warranty service contracts, preventive maintenance plans, instrument parts, installation and training for our instruments. We expect the average selling prices of our products and services to fluctuate over time based on market conditions, product mix and currency fluctuations.
Cost of Revenue
Cost of product revenue includes manufacturing costs incurred in the production process, including component materials, labor and overhead, installation, packaging and delivery costs. In addition, cost of product revenue includes amortization of developed technology and intangibles, royalty costs for licensed technologies included in our products, warranty costs, provisions for slow-moving excess and obsolete inventory and stock-based compensation expense. Our cost of product revenue and related product margin may fluctuate depending on the capacity utilization of our manufacturing facilities in response to market conditions and the demand for our products.
Cost of service revenue includes direct labor hours, overhead and instrument parts. Our cost of service revenue and related service margin may fluctuate depending on the variability in material and labor costs of servicing.
Research and Development (R&D)
R&D expense consists primarily of compensation-related costs, product development and material expenses and other allocated facilities and information technology expenses. Our R&D efforts have focused primarily on enhancing our technologies and supporting development and commercialization of new and existing products and services. R&D expense also includes costs incurred in conjunction with research grants and product development arrangements.
Selling, General, and Administrative (SG&A)
SG&A expense consists primarily of personnel costs for our sales and marketing, business development, finance, legal, human resources, information technology and general management teams, as well as professional services, including legal and accounting services.
Restructuring and Related Charges
Restructuring and related charges primarily consist of severance costs and facilities costs for floors we have subleased or have the intent to sublease (net of sublease income) under our facility lease in South San Francisco. These costs, including a reduction in force, are incurred to improve operational efficiency, achieve cost savings and align our workforce to the future needs of the business. In addition to the reduction in force, we are reducing leased office space, optimizing our manufacturing footprint and streamlining support functions.
22
Transaction-related expenses
Transaction-related expenses consist of costs incurred in connection with the Merger Agreement, including legal, advisory, accounting and other transaction-related costs. We expect to continue incurring these costs through the first quarter of 2024. The costs incurred during the year ended December 31, 2022 relate to the private placement whereby the Company issued and sold an aggregate of $225.0 million of convertible preferred stock in connection with the conversion of the bridge loans, which closed on April 4, 2022.
Results of Operations
The following table presents our unaudited condensed consolidated statements of operations and as a percentage of total revenue for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||
|
Revenue |
|
$ |
25,367 |
|
|
|
100 |
% |
|
$ |
25,646 |
|
|
|
100 |
% |
|
$ |
78,152 |
|
|
|
100 |
% |
|
$ |
70,927 |
|
|
|
100 |
% |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cost of product revenue |
|
|
11,403 |
|
|
|
45 |
% |
|
|
14,091 |
|
|
|
55 |
% |
|
|
33,276 |
|
|
|
43 |
% |
|
|
39,168 |
|
|
|
55 |
% |
|
Cost of service and other revenue |
|
|
2,810 |
|
|
|
11 |
% |
|
|
2,335 |
|
|
|
9 |
% |
|
|
7,783 |
|
|
|
10 |
% |
|
|
5,875 |
|
|
|
8 |
% |
|
Total cost of revenue |
|
|
14,213 |
|
|
|
56 |
% |
|
|
16,426 |
|
|
|
64 |
% |
|
|
41,059 |
|
|
|
53 |
% |
|
|
45,043 |
|
|
|
63 |
% |
|
Gross profit |
|
|
11,154 |
|
|
|
44 |
% |
|
|
9,220 |
|
|
|
36 |
% |
|
|
37,093 |
|
|
|
47 |
% |
|
|
25,884 |
|
|
|
36 |
% |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Research and development |
|
|
6,370 |
|
|
|
25 |
% |
|
|
8,486 |
|
|
|
33 |
% |
|
|
19,039 |
|
|
|
24 |
% |
|
|
29,957 |
|
|
|
42 |
% |
|
Selling, general and
|
|
|
22,292 |
|
|
|
88 |
% |
|
|
26,340 |
|
|
|
103 |
% |
|
|
66,187 |
|
|
|
85 |
% |
|
|
82,061 |
|
|
|
116 |
% |
|
Restructuring and related charges |
|
|
1,998 |
|
|
|
8 |
% |
|
|
3,412 |
|
|
|
13 |
% |
|
|
5,415 |
|
|
|
7 |
% |
|
|
5,102 |
|
|
|
7 |
% |
|
Transaction-related expenses |
|
|
1,666 |
|
|
|
7 |
% |
|
|
9 |
|
|
|
0 |
% |
|
|
1,666 |
|
|
|
2 |
% |
|
|
3,857 |
|
|
|
5 |
% |
|
Total operating expenses |
|
|
32,326 |
|
|
|
128 |
% |
|
|
38,247 |
|
|
|
149 |
% |
|
|
92,307 |
|
|
|
118 |
% |
|
|
120,977 |
|
|
|
170 |
% |
|
Loss from operations |
|
|
(21,172 |
) |
|
|
(84 |
)% |
|
|
(29,027 |
) |
|
|
(113 |
)% |
|
|
(55,214 |
) |
|
|
(71 |
)% |
|
|
(95,093 |
) |
|
|
(134 |
)% |
|
Interest expense |
|
|
(1,223 |
) |
|
|
(5 |
)% |
|
|
(1,049 |
) |
|
|
(4 |
)% |
|
|
(3,469 |
) |
|
|
(4 |
)% |
|
|
(3,141 |
) |
|
|
(4 |
)% |
|
Loss on forward sale of Series B
|
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
(60,081 |
) |
|
|
(85 |
)% |
|
Loss on Bridge Loans |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
|
|
(13,719 |
) |
|
|
(19 |
)% |
|
Other income (expense), net |
|
|
1,448 |
|
|
|
6 |
% |
|
|
(63 |
) |
|
|
(0 |
)% |
|
|
4,417 |
|
|
|
6 |
% |
|
|
(119 |
) |
|
|
(0 |
)% |
|
Loss before income taxes |
|
|
(20,947 |
) |
|
|
(83 |
)% |
|
|
(30,139 |
) |
|
|
(117 |
)% |
|
|
(54,266 |
) |
|
|
(69 |
)% |
|
|
(172,153 |
) |
|
|
(242 |
)% |
|
Income tax benefit (expense) |
|
|
(50 |
) |
|
|
(0 |
)% |
|
|
713 |
|
|
|
3 |
% |
|
|
(614 |
) |
|
|
(1 |
)% |
|
|
2,900 |
|
|
|
4 |
% |
|
Net loss |
|
$ |
(20,997 |
) |
|
|
(83 |
)% |
|
$ |
(29,426 |
) |
|
|
(114 |
)% |
|
$ |
(54,880 |
) |
|
|
(70 |
)% |
|
$ |
(169,253 |
) |
|
|
(238 |
)% |
Revenue
Revenue by product type and as a percentage of total revenue were as follows ($ in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Year-over- |
|
|
Nine Months Ended September 30, |
|
|
Year-over- |
|
||||||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
||||||||||||||||||||||
|
Product revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Instruments |
|
$ |
9,002 |
|
|
|
35 |
% |
|
$ |
7,873 |
|
|
|
31 |
% |
|
|
14 |
% |
|
$ |
26,512 |
|
|
|
34 |
% |
|
$ |
18,057 |
|
|
|
25 |
% |
|
|
47 |
% |
|
Consumables |
|
|
9,709 |
|
|
|
38 |
% |
|
|
11,439 |
|
|
|
45 |
% |
|
|
(15 |
)% |
|
|
31,302 |
|
|
|
40 |
% |
|
|
33,478 |
|
|
|
48 |
% |
|
|
(6 |
)% |
|
Total product revenue |
|
|
18,711 |
|
|
|
74 |
% |
|
|
19,312 |
|
|
|
76 |
% |
|
|
(3 |
)% |
|
|
57,814 |
|
|
|
74 |
% |
|
|
51,535 |
|
|
|
73 |
% |
|
|
12 |
% |
|
Service revenue |
|
|
6,566 |
|
|
|
26 |
% |
|
|
5,857 |
|
|
|
23 |
% |
|
|
12 |
% |
|
|
19,268 |
|
|
|
25 |
% |
|
|
17,807 |
|
|
|
25 |
% |
|
|
8 |
% |
|
Other revenue |
|
|
90 |
|
|
|
0 |
% |
|
|
477 |
|
|
|
1 |
% |
|
|
(81 |
)% |
|
|
1,070 |
|
|
|
1 |
% |
|
|
1,585 |
|
|
|
2 |
% |
|
|
(32 |
)% |
|
Total revenue |
|
$ |
25,367 |
|
|
|
100 |
% |
|
$ |
25,646 |
|
|
|
100 |
% |
|
|
(1 |
)% |
|
$ |
78,152 |
|
|
|
100 |
% |
|
$ |
70,927 |
|
|
|
100 |
% |
|
|
10 |
% |
Total revenue decreased slightly by 1% to $25.4 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to timing of instruments orders and a decline in consumables revenue related to our genomics end user markets. Revenue grew 10% to $78.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The growth was primarily attributable to increased instrument placements, primarily in our proteomics end user markets, offset by declines in our genomics end user markets as the result of our decision to reorganize, simplify and reposition our business over the past year. Revenue reported for the nine months ended September 30, 2022 includes a $1.6 million instrument revenue reduction for a one-time reserve recorded for our discontinued LCM product line in the Genomics segment.
23
Instrument revenue grew 14% to $9.0 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, and grew 47% to $26.5 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Combined consumables and services revenue has experienced a flat to moderate decrease in 2023; however, the increase in instrument revenue is expected to drive increased consumables and services pull-through based on an expanded installed base, particularly in our proteomics end user markets.
Revenue by segment and as a percentage of total revenue were as follows ($ in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Year-over- |
|
|
Nine Months Ended September 30, |
|
|
Year-over- |
|
||||||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
||||||||||||||||||||||
|
Proteomics revenue |
|
$ |
14,008 |
|
|
|
55 |
% |
|
$ |
14,566 |
|
|
|
57 |
% |
|
|
(4 |
)% |
|
$ |
47,296 |
|
|
|
63 |
% |
|
$ |
38,764 |
|
|
|
55 |
% |
|
|
22 |
% |
|
Genomics revenue |
|
|
11,359 |
|
|
|
45 |
% |
|
|
11,080 |
|
|
|
43 |
% |
|
|
3 |
% |
|
|
30,856 |
|
|
|
37 |
% |
|
|
32,163 |
|
|
|
45 |
% |
|
|
(4 |
)% |
|
Total revenue |
|
$ |
25,367 |
|
|
|
100 |
% |
|
$ |
25,646 |
|
|
|
100 |
% |
|
|
(1 |
)% |
|
$ |
78,152 |
|
|
|
100 |
% |
|
$ |
70,927 |
|
|
|
100 |
% |
|
|
10 |
% |
Total Proteomics revenue decreased 4% for the three and nine months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to the timing of customer orders, and grew 22% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Our growth in proteomics was driven by expanded adoption of our flow symmetry solution, the CYTOF XT and early traction from the April 2023 release of Hyperion XTi, our next-generation imaging solution.
Total Genomics revenue grew 3% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and decreased 4% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 with instrument growth offsetting declines in consumables, service, and development revenues in the third quarter. The anticipated decline in the genomics segment was a primary driver of our decision to reorganize, simplify and reposition this business over the past year. We have implemented our strategy to focus on growing the OEM business and manage this segment to sustainable positive contribution margin in the near-term.
Cost of Revenue
Product and service cost, product and service gross profit, and product and service margin were as follows ($ in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Year-over- |
|
|
Nine Months Ended September 30, |
|
|
Year-over- |
|
||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
||||||
|
Cost of product revenue |
|
$ |
11,403 |
|
|
$ |
14,091 |
|
|
|
(19 |
)% |
|
$ |
33,276 |
|
|
$ |
39,168 |
|
|
|
(15 |
)% |
|
Cost of service revenue |
|
|
2,754 |
|
|
|
2,335 |
|
|
|
18 |
% |
|
|
7,727 |
|
|
|
5,875 |
|
|
|
32 |
% |
|
Cost of product and service revenue |
|
$ |
14,157 |
|
|
$ |
16,426 |
|
|
|
(14 |
)% |
|
$ |
41,003 |
|
|
$ |
45,043 |
|
|
|
(9 |
)% |
|
Product and service gross profit |
|
$ |
11,120 |
|
|
$ |
8,743 |
|
|
|
27 |
% |
|
$ |
36,079 |
|
|
$ |
24,299 |
|
|
|
48 |
% |
|
Product and service margin |
|
|
43.8 |
% |
|
|
34.1 |
% |
|
|
9.7 |
% |
|
|
46.2 |
% |
|
|
34.3 |
% |
|
|
11.9 |
% |
Product and service gross profit increased by $2.4 million, or 27%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Product and service gross profit decreased by $11.8 million, or 48%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increases in gross profit during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were primarily attributable to certain one-time reductions to gross profit recognized during the second quarter of 2022, including a $1.6 million revenue reserve related to the discontinuation of our laser capture microdissection products, a $3.1 million provision for excess and obsolete inventory, and cost reductions driven by the relocation of operations to lower cost regions completed at the end of 2022.
Operating Expenses
Operating expenses were as follows ($ in thousands):
24
|
|
|
Three Months Ended September 30, |
|
|
Year-over- |
|
|
Nine Months Ended September 30, |
|
|
Year-over- |
|
||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
||||||
|
Research and development |
|
$ |
6,370 |
|
|
$ |
8,486 |
|
|
|
(25 |
)% |
|
$ |
19,039 |
|
|
$ |
29,957 |
|
|
|
(36 |
)% |
|
Selling, general and administrative |
|
|
22,292 |
|
|
|
26,340 |
|
|
|
(15 |
)% |
|
|
66,187 |
|
|
|
82,061 |
|
|
|
(19 |
)% |
|
Restructuring and related charges |
|
|
1,998 |
|
|
|
3,412 |
|
|
|
(41 |
)% |
|
|
5,415 |
|
|
|
5,102 |
|
|
|
6 |
% |
|
Transaction-related expenses |
|
|
1,666 |
|
|
|
9 |
|
|
N/A |
|
|
|
1,666 |
|
|
|
3,857 |
|
|
|
(57 |
)% |
|
|
Total operating expenses |
|
$ |
32,326 |
|
|
$ |
38,247 |
|
|
|
(15 |
)% |
|
$ |
92,307 |
|
|
$ |
120,977 |
|
|
|
(24 |
)% |
Research and Development
R&D expense decreased by $2.1 million, or 25%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. R&D expense decreased by $10.9 million, or 36%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decreases were primarily due to a $3.5 million impairment charge related to our acquisition of InstruNor AS (InstruNor) recognized during the nine months ended September 30, 2022, as well as lower compensation and consulting costs and reduced spending on laboratory supplies. These reductions were related to our strategic initiatives to reduce headcount and improve operating efficiencies by engaging in lower-cost and more focused R&D projects and activities.
Selling, General and Administrative
SG&A expense decreased by $4.0 million, or 15%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. SG&A expense decreased by $15.9 million, or 19%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decreases were primarily attributable to decreased salaries and benefits expense and stock based compensation expense as a result of the restructuring plan that downsized our global workforce.
Restructuring and Related Charges
Restructuring and related charges consisted of the following (in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Year-over- |
|
|
Nine Months Ended September 30, |
|
|
Year-over- |
|
||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
|
2023 |
|
|
2022 |
|
|
Year Change |
|
||||||
|
Severance and other termination benefits |
|
$ |
546 |
|
|
$ |
1,258 |
|
|
|
(57 |
)% |
|
$ |
1,892 |
|
|
$ |
2,948 |
|
|
|
(36 |
)% |
|
Facilities and other |
|
|
1,452 |
|
|
|
2,154 |
|
|
|
(33 |
)% |
|
|
3,523 |
|
|
|
2,154 |
|
|
|
64 |
% |
|
Total restructuring and related charges |
|
$ |
1,998 |
|
|
$ |
3,412 |
|
|
|
(41 |
)% |
|
$ |
5,415 |
|
|
$ |
5,102 |
|
|
|
6 |
% |
Restructuring and related charges decreased by $1.4 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to decreased severance costs and decreased facilities expenses (net of sublease income) as a result of the sublease that commenced in October 2022.
Restructuring and related charges increased by $0.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to increased facilities expenses offset by deceased severance costs, primarily resulting from higher severance costs for our former CEO during the first quarter of 2022.
Transaction-related expenses
Transaction-related expenses increased by $1.7 million for the three months ended September 30, 2023 and decreased by $2.2 million for the nine months ended September 30, 2023 compared to the same periods in 2022. The increase for the three months ended September 30, 2023 was due to legal, advisory, and accounting costs incurred in connection with the Merger Agreement, and the decrease for the nine months ended September 30, 2023 was due to $3.9 million in costs related to our Private Placement which closed in April 2022. The Company expects to incur additional amounts in future periods for the Merger Agreement.
25
Other Non-Operating Income (Expense)
The increase in other income (expense), net of $1.5 million and $4.5 million for the three and nine months ended September 30, 2023 compared to the same periods in 2022 , respectively, was primarily due to the interest earned on money market funds and short-term investments. We previously had no such investments until the second half of 2022.
The improvement in non-operating income (expense) in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily reflects losses related to the Private Placement. The Series B Convertible Preferred Stock Purchase Agreements entered into with various investors were accounted for as forward sales contracts and recorded at fair value. The loan agreements (collectively, the Bridge Loans) that we entered into on January 23, 2022 with various investors for a $25.0 million term loan were also recorded at fair value. In the nine months ended September 30, 2022, the $60.1 million loss on the forward sales of Series B Preferred Stock and the loss on the Bridge Loans of $13.7 million reflected the increase in the price of our common stock from January 23, 2022 (the date of the Purchase Agreements and the Bridge Loan agreements) to the Private Placement Closing Date.
Income Tax Benefit (Expense)
We recorded an income tax expense of $0.1 million in the three months ended September 30, 2023 and an income tax benefit of $0.7 million for the three months ended September 30, 2022. The increase in our tax provision reflects the effect of our foreign operations, which reported pre-tax income in the three months ended September 30, 2023 and pre-tax loss in the three months ended September 30, 2022.
We recorded an income tax expense of $0.6 million in the nine months ended September 30, 2023 and an income tax benefit of $2.9 million for the nine months ended September 30, 2022. The increase in our tax provision reflects the effect of our foreign operations, which reported pre-tax income in the nine months ended September 30, 2023 and pre-tax loss in the nine months ended September 30, 2022.
Our effective tax rates for both periods differ from the 21% U.S. Federal statutory tax rate primarily due to valuation allowances recorded against deferred tax assets on domestic losses and the tax rate differences between the U.S. and foreign countries.
Liquidity and Capital Resources
We have experienced operating losses since inception and have an accumulated deficit of $981.0 million as of September 30, 2023. To date, we have funded our operating losses primarily through equity offerings, term loans, convertible notes and redeemable preferred stock. Our ability to fund future operations and meet debt covenant requirements will depend upon our level of future revenue and operating cash flow and our ability to access additional funding through either equity offerings, issuances of debt instruments or both.
Our liquidity and capital requirements depend upon many factors, including market acceptance of our products and services; effectiveness of our business improvement initiatives and restructuring programs; costs of supporting sales growth, product quality, R&D and capital expenditures, including our ERP upgrade; and costs and timing of acquiring other businesses, assets or technologies.
We continually evaluate our liquidity requirements considering our operating needs, growth initiatives and capital resources. We expect that our existing liquidity and sources of capital will be sufficient to support our operations for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.
Sources of Liquidity
Our principal sources of liquidity are cash, cash equivalents and short-term investments. Our collective balances of cash, cash equivalents and short-term investments were $128.9 million at September 30, 2023 and $165.8 million at December 31, 2022.
Capital Resources and Commitments
We enter into arrangements that serve as sources of capital and the associated contractual agreements may result in firm or contingent obligations of us. In addition to our common stockholders’ equity, our sources of capital primarily include debt, mezzanine equity and operating leases. Our Series B Preferred Stock, which is classified as mezzanine equity, contains rights that may result in their conversion to our common stock or their redemption in cash. Our term loan and operating lease arrangements require cash repayment and our convertible debt that matures on December 1, 2024 contains rights that may result in their conversion to our common stock prior to maturity.
26
We also enter into contractual and legally binding commitments to purchase goods. Most of these contracts are cancellable with little or no notice or penalty. However, once a vendor has incurred costs to fulfill a contract with us, and which costs cannot be otherwise deployed, we are liable for those costs upon cancellation.
In the nine months ended September 30, 2023, there have been no material changes to the cash commitments and contingent obligations associated with the arrangements described above, as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023.
The terms and provisions of our debt, leases and mezzanine equity are more fully discussed in Notes 6 , 7 and 9 , respectively, in the unaudited condensed consolidated financial statements.
Cash Flow Activity
Our cash flow summary was as follows ($ in thousands):
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Cash flow summary: |
|
|
|
|
|
|
||
|
Net cash used in operating activities |
|
$ |
(29,226 |
) |
|
$ |
(70,189 |
) |
|
Net cash provided by (used in) investing activities |
|
|
33,354 |
|
|
|
(128,372 |
) |
|
Net cash provided by (used in) financing activities |
|
|
(5,806 |
) |
|
|
231,028 |
|
|
Effect of foreign exchange rate fluctuations on cash
|
|
|
(196 |
) |
|
|
(719 |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(1,874 |
) |
|
$ |
31,748 |
|
We derive cash flows from operations primarily by collecting amounts due from sales of our products and services, and fees earned under our product development and license agreements. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses and working capital to support the business. We have historically experienced negative cash flows from operating activities as we have expanded our business and built our infrastructure, domestically and internationally.
In the nine months ended September 30, 2023, we used $36.1 million of net proceeds from the sales and maturities of short-term investments to help fund $29.2 million of net cash used in operating activities and $5.2 million of common stock repurchases.
In the nine months ended September 30, 2022, we used $230.7 million of net debt and Series B Preferred Stock proceeds in part to fund $70.2 million used in operating activities, the purchase of short-term investments of $137.3 million and a $31.7 million increase in cash, cash equivalents and restricted cash.
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2023 declined by $41.0 million compared to the same period in 2022. The improvement reflects a lower net loss and adjustments for non-cash items, which collectively used $32.6 million in the nine months ended September 30, 2023 compared to $59.3 million used in the same period of 2022, and changes in net operating assets and liabilities which provided $3.4 million and used $10.9 million in the nine months ended September 30, 2023 and 2022, respectively.
Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2023 was $33.4 million compared to $128.4 million used in the nine months ended September 30, 2022. The nine months ended September 30, 2023 primarily reflects $36.1 million of proceeds from sales and maturities of short-term investments, net of purchases. Net proceeds from the Private Placement issuance and the Bridge Loans were used to purchase short-term investments of $137.3 million during the nine months ended September 30, 2022.
27
Financing Activities
Financing activities used cash of $5.8 million for the nine months ended September 30, 2023 and provided cash of $231.0 million in the same period of 2022. These changes in cash from financing activities primarily reflect $5.2 million of common stock share repurchases in the nine months ended September 30, 2023, and $25.0 million of borrowings under the Bridge Loans and the repayment of $6.8 million borrowed under our Revolving Credit Facility as well as $225.0 million proceeds received from the issuance of Series B Preferred Sock less payments of $12.5 million in equity issuance costs in the nine months ended September 30, 2022.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements and related notes, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the use of estimates and assumptions to determine the value of the assets, liabilities, revenues and expenses reported on the condensed consolidated balance sheets and statements of operations. We develop these estimates after considering historical transactions, the current economic environment and various other assumptions considered reasonable under the circumstances. Actual results may differ materially from these estimates and judgments. Accounts that rely heavily on estimated information to determine their values include revenue, trade receivables, inventories, right-of-use assets, goodwill, long-lived intangible assets, lease liabilities, income tax liabilities (assets) and preferred equity. Refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding our critical accounting policies and estimates.
There have been no significant changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2022.
Recent Accounting Pronouncements
From time to time, new accounting standards are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
Item 3. Quan titative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Cont rols and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEO and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the nine months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
29
PART II. OTHER INFORMATION
Item 1. L egal Proceedings
Information with respect to certain legal proceedings is included in Note 7 to the Condensed Consolidated Financial Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A. Ri sk Factors
We operate in a rapidly changing environment that involves numerous uncertainties and risks. You should carefully consider the risk factors discussed in this Item 1A, as well as the risk factors discussed in Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which could materially affect our business, financial condition or results of operations. The risks below and the risks in our Annual Report on Form 10-K are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employee relations, general economic conditions, global geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price. If any of these risks occur, our business, results of operations or financial condition could suffer, the trading price of our securities could decline and you may lose all or part of your investment.
There can be no assurance that the proposed Merger with SomaLogic will be consummated. The announcement and pendency of the Merger, or the failure of the Merger to be consummated, could have an adverse effect on our stock price, business, financial condition, results of operations or prospects.
On October 4, 2023, we, Merger Sub and SomaLogic entered into the Merger Agreement, pursuant to which Merger Sub shall be merged with and into SomaLogic with SomaLogic surviving as our wholly owned subsidiary. Consummation of the Merger is subject to approval by our shareholders and SomaLogic’s shareholders and other conditions specified in the Merger Agreement. As a result, there can be no assurance that the Merger will be consummated.
Further, the announcement and pendency of the Merger could disrupt our businesses, in any of the following ways, among others:
These disruptions could be exacerbated by a delay in the completion of the Merger or termination of the Merger Agreement. Additionally, if the Merger is not consummated, we will have incurred significant costs and diverted the time and attention of management. A failure to consummate the Merger may also result in negative publicity, litigation against us or our directors and officers, and a negative impression of us in the financial markets. The occurrence of any of these events individually or in combination could have a material adverse effect on our financial statements and stock price.
We may be unable to fully realize the expected benefits from the Merger.
We expect to achieve substantial operating and capital synergies and cost savings as a result of the Merger. If we are unable to successfully integrate the businesses, or integrate them in a timely fashion, we may face material adverse effects including, but not limited to (i) diversion of the attention of management and key personnel and potential disruption of our ongoing business, (ii) the loss of employees, (iii) challenges of managing a larger combined company following the Merger, including challenges of conforming standards, controls, procedures and accounting and other policies and compensation structures, (iv) difficulties in achieving anticipated cost savings, (v) declines in our results of operations, financial condition or cash flows, (vi) a decline in the market price of our common stock, and (vii) potential liabilities, adverse consequences, increased expenses or other problems associated with the Merger and/or the resulting combined company. Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and further diversion of management time and energy, which could materially impact our business, financial statements and prospects.
In addition, following the Merger, we will become responsible for SomaLogic’s liabilities and obligations, including with respect to legal, financial, regulatory and compliance matters. These obligations will result in additional cost and investment by us and, if we have underestimated the amount of these costs and investments or if we fail to satisfy any such obligations, we may not realize the
30
anticipated benefits of the transaction. Further, it is possible that there may be unknown, contingent or other liabilities or problems that may arise in the future, the existence and/or magnitude of which we were previously unaware. Any such liabilities or problems could have an adverse effect on our business, financial condition or results of operations.
Even if we successfully consummate the Merger and integrate the businesses, there can be no assurance that the Merger will result in the realization of the full benefit of the anticipated synergies and cost savings or that these benefits will be realized within the expected time frames or at all. In addition, by engaging in the Merger, we may forego or delay pursuit of other opportunities that may have proven to have greater commercial potential.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities and must generally operate our business in the ordinary course consistent with past practice, subject to certain exceptions. These restrictions could prevent us from pursuing attractive business opportunities that may arise prior to the consummation of the Merger and are generally outside the ordinary course of business, and otherwise have a material adverse effect on us. Although we may be able to pursue such activities with SomaLogic’s consent, SomaLogic may not be willing to provide its consent for us to do so.
A delay in completing the Merger may reduce or eliminate the expected benefits from the Merger.
The Merger is subject to a number of conditions, some of which are beyond our control, which could prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when the conditions will be satisfied. The requirement to obtain certain approvals could delay the completion of the Merger for a significant period of time or prevent it from occurring. A delay in completing the Merger could cause the combined company to not realize some or all of the synergies and other benefits it expects to achieve if the Merger is successfully completed within its expected time frame. Because the Merger Agreement contains certain restrictions on the conduct of our business, if the Merger is delayed, these restrictions could adversely affect our ability to execute business strategies or pursue attractive business opportunities. In addition, a delay could cause management to focus on completion of the Merger instead of on other opportunities that could be beneficial to us or day-to-day business operations.
Failure to consummate the Merger could negatively impact our future stock prices, operations and financial results.
If the Merger is not consummated for any reason, we may be subjected to a number of material risks, including the following:
The issuance of shares of our common stock in connection with the Merger, and any future offerings of securities by us, will dilute our shareholders’ ownership interest in Standard BioTools and sales of shares of our common stock after the completion of the Merger may cause the market price of our common stock to decline.
The Merger will be financed by the issuance of additional shares of our common stock to shareholders of SomaLogic, comprising approximately 57% of our issued and outstanding shares of common stock. These issuances of additional shares of our common stock will dilute our existing shareholders’ ownership interest, and will reduce our existing shareholders’ ownership and voting interest following the consummation of the Merger. In addition, SomaLogic shareholders may decide not to hold the shares of our common stock they receive in the Merger and other SomaLogic shareholders, such as funds with limitations on the amount of stock they are permitted to hold in individual issuers, may be required to sell the shares of our common stock that they receive in the Merger. Such sales of our common stock could result in higher than average trading volume following the closing of the Merger and may cause the market price for our common stock to decline.
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Following completion of the Merger, our current shareholders in the aggregate will not have a majority ownership and voting interest and the structure of our board of directors will be different, which may result in our shareholders having less influence on our management and policies.
Our shareholders currently have the right to vote for the election of directors to our board of directors and on other matters affecting us. Immediately following the Merger, our shareholders and the SomaLogic shareholders are expected to own approximately 43% and 57%, respectively, of the combined company’s outstanding shares on a fully-diluted basis. In addition, following the Merger, the board of directors of the combined company will be comprised of three directors designated by our board of directors, three directors designated by the SomaLogic board of directors and one director designated by the holder of the Series B-1 Preferred Stock. As a result, our shareholders may have less influence on our management and policies than they currently have.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
On November 23, 2022, our board of directors authorized a share repurchase program pursuant to which we were able to repurchase up to $20.0 million of our common stock through open market or privately negotiated transactions. The repurchases were contingent upon favorable market and business conditions and were funded by cash on hand. The program did not obligate us to acquire any specific number of shares. On October 4, 2023, we terminated the share repurchase program.
The following table provides monthly information with respect to the shares of common stock repurchased by us during the nine months ended September 30, 2023:
|
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid Per Share (1) |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program |
|||
|
July 1-31, 2023 |
|
|
145,824 |
|
|
$ |
2.23 |
|
|
|
145,824 |
|
|
$14.3 million |
|
August 1-31, 2023 |
|
|
30,086 |
|
|
$ |
2.44 |
|
|
|
30,086 |
|
|
$14.2 million |
|
September 1-30, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$14.2 million |
1 Average price paid per share includes commission fees.
Item 3. Defa ults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
The documents listed in the Exhibit List, which follows below, are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
EXH IBIT LIST
|
Exhibit Number |
|
Description |
|
Incorporated by Reference From Form |
|
Incorporated by Reference From Exhibit Number |
|
Date Filed |
|
3.1 |
|
Eighth Amended and Restated Certificate of Incorporation filed on February 15, 2011. |
|
10-K |
|
3.1 |
|
3/28/2011 |
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
S-8 |
|
4.8 |
|
4/1/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
Certificate of Amendment to the Eighth Amended and Restated Certificate of Incorporation. |
|
S-8 |
|
4.3 |
|
4/1/2022 |
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
8-K |
|
3.1 |
|
11/22/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
3.5 |
|
Certificate of Elimination of Series A Participating Preferred Stock. |
|
8-K |
|
3.1 |
|
8/2/2017 |
|
|
|
|
|
|
|
|
|
|
|
3.6 |
|
|
8-K |
|
3.6 |
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
8-K |
|
3.7 |
|
4/5/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
10.1# |
|
|
8-K |
|
10.3 |
|
7/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
10.2# |
|
|
8-K |
|
10.1 |
|
7/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3# |
|
2023 Change of Control and Severance Plan Participation Agreement, by and between Standard BioTools Inc. and Michael Egholm, Ph.D., dated July 27, 2023. |
|
8-K |
|
10.2 |
|
7/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 (1) |
|
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2 (1) |
|
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
Exhibit Number |
|
Description |
|
Incorporated by Reference From Form |
|
Incorporated by Reference From Exhibit Number |
|
Date Filed |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Document |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Document |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
|
Filed herewith |
|
|
|
|
# Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
34
SIGN ATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
STANDARD BIOTOOLS INC. |
||
|
|
|
|
|
|
Dated: November 7, 2023 |
By: |
|
/s/ Michael Egholm |
|
|
|
|
Michael Egholm |
|
|
|
|
Chief Executive Officer and President |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
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Dated: November 7, 2023 |
By: |
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/s/ Jeffrey Black |
|
|
|
|
Jeffrey Black |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(Principal Accounting and Financial Officer) |
35