BIONANO GENOMICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K, or our Annual Report, filed with theSecurities and Exchange Commission , or theSEC , onMarch 1, 2022 . Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "we," "us," and "our" refer toBionano Genomics, Inc. and its subsidiaries or, as the context may require,Bionano Genomics, Inc. only.
Forward-Looking Statements
The information in this Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to any statements concerning the potential effects of the COVID-19 pandemic on our business, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with theSEC . The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
We are a provider of genome analysis solutions that can enable researchers and clinicians to reveal answers to challenging questions in biology and medicine. Our mission is to transform the way the world sees the genome through optical genome mapping, or OGM, solutions, diagnostic services and software. We offer OGM solutions for applications across basic, translational and clinical research. Through ourLineagen, Inc. , orLineagen , business, we also provide diagnostic testing for patients with clinical presentations consistent with autism spectrum disorder and other neurodevelopmental disabilities. Through ourBioDiscovery, LLC , or BioDiscovery, business, we also offer an industry-leading, platform-agnostic software solution, which integrates next-generation sequencing and microarray data designed to provide analysis, visualization, interpretation and reporting of copy number variants, single-nucleotide variants and absence of heterozygosity across the genome in one consolidated view.
We have incurred losses in each year since our inception. Our net loss was
We expect to continue to incur significant expenses and operating losses as we:
•expand our sales and marketing efforts to further commercialize our products;
•continue research and development efforts to improve our existing products;
•hire additional personnel;
•enter into collaboration arrangements, if any;
•add operational, financial and management information systems; and
•incur increased costs as a result of operating as a public company.
Recent Highlights
Commercial Adoption of Offerings for Saphyr
In executing on our commercialization strategy, we expanded the utilization of our Saphyr® system and:
•Grew our installed base to 196 as of
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•Sold 3,394 flowcells in the three-month period endedJune 30, 2022 , an increase of approximately 24% over the 2,742 flowcells sold during the same quarter of 2021. The Saphyr cartridge is the consumable that packages nanochannel arrays for DNA linearization. In its current form, the Saphyr cartridge has two configurations - one with two flowcells per cartridge and the other with three flowcells per cartridge. Flowcells sold refers to the units of genome mapping consumables used for analyzing one genome, purchased by customers to process optical genome mapping.
•We analyzed 373 samples in our Saphyr service lab during the quarter ended
COVID-19 and Other Geopolitical Events
We are subject to additional risks and uncertainties as a result of the continued spread of COVID-19, adverse geopolitical and macroeconomic events, such as the ongoing conflict betweenUkraine andRussia and related sanctions, and uncertain market conditions, including higher inflation and supply chain disruptions, which could continue to have a material impact on our business and financial results. We closely monitor and comply with various applicable guidelines and legal requirements in the jurisdictions in which we operate, which may continue to result in reduced business operations in response to new or existing stay-at-home orders, travel restrictions and other social distancing measures. If restrictions related to COVID-19 persist, we could see additional supply chain disruptions that impact our ability to produce our products and may cause us to make strategic determinations regarding, among other things, the cost and quality of the components and supplies we acquire. We may also see negative effects on enrollment in our ongoing or future clinical studies. At various times throughout the pandemic, we have been unable to visit certain customer sites to support installation or service our OGM systems. Our manufacturing partners, suppliers, and customers, have implemented similar operational reductions. This overall reduction in activity has contributed to a decrease in sales which negatively impacted the Company's financial results in the first and second quarters of 2021 and 2022. Given the continued evolution of the COVID-19 pandemic and the related complexities and uncertainties associated with the additional variants, the future effects of COVID-19 are unknown and our financial results may continue to be negatively affected in the future. The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may present strategy, operational, talent recruiting and retention and workplace culture challenges that may adversely affect our business. Following the recent invasion ofUkraine byRussia , theU.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity globally. In response to the invasion,the United States ,United Kingdom andEuropean Union , along with others, imposed significant new sanctions and export controls againstRussia , Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed onRussia and possible future punitive measures that may be implemented, as well as the counter measures imposed byRussia , in addition to the ongoing military conflict betweenUkraine andRussia , which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity on acceptable terms, in bothEurope and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing conflict betweenUkraine andRussia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. During the three and six months endedJune 30, 2022 , we experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic and the general disruptions resulting from the ongoing conflict betweenUkraine andRussia and related sanctions. While neither the COVID-19 pandemic nor theUkraine -Russia conflict prevented us from operating our business during the three and six months endedJune 30, 2022 , we experienced increased cost to secure certain component parts in our products and to produce our products at our contract manufacturers. We expect these increased costs to remain high as the COVID-19 pandemic, theUkraine -Russia conflict and their respective effects persist. As global economic conditions recover from the COVID-19 pandemic, theUkraine -Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that these and related events could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic events, or any similar negative economic condition. Further, the travel restrictions on our business have limited our ability to support our global and domestic operations, including providing installation and training and customer service, which has and may continue to slow the pace of our commercial strategy, sales and marketing efforts. These negative effects could have a material impact on our operations, business, earnings, and liquidity. 21
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Table of Contents Financial Overview Revenue We generate product revenue from sales of our instruments and consumables. We currently sell our products for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, academic and commercial clinical laboratories, as well as pharmaceutical, biotechnology and contract research companies. In addition, we provide instruments to certain customers under our reagent rental program, under which we provide an instrument to customers at no cost and the customers agree to purchase minimum quantities of consumables. Consumable revenue consists of sales of reagents and chips necessary to process a sample. We generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through our wholly owned subsidiaryLineagen . We also generate service and product revenue through BioDiscovery's NxClinical™ software, which provides customers with solutions for analysis, interpretation and reporting of genomics data. Other revenue consists of warranty and other service-based revenue, including services performed related to customer sample evaluations using the Saphyr system, license maintenance agreements, and support, repair and maintenance services.
The following table presents our revenue for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Product revenue $ 3,913,000
2,757,000 1,360,000 5,337,000 2,479,000
Total $ 6,670,000 $ 3,856,000 $ 12,366,000 $ 7,024,000 1 Includes
The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers.Americas consists ofNorth America andSouth America . EMEIA consists ofEurope ,Middle East ,India andAfrica .Asia Pacific includesChina ,Japan ,South Korea ,Singapore andAustralia . Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 $ % $ % $ % $ % Americas$ 2,611,000 39 %$ 2,365,000 61 %$ 5,940,000 48 %$ 3,872,000 55 % EMEIA 2,609,000 39 % 940,000 25 % 4,348,000 35 % 2,518,000 36 % Asia Pacific 1,450,000 22 % 551,000 14 % 2,078,000 17 % 634,000 9 % Total$ 6,670,000 100 %$ 3,856,000 100 %$ 12,366,000 100 %$ 7,024,000 100 % Cost of Revenue Cost of product revenue for our instruments and consumables includes costs from the manufacturer, raw material parts costs and associated freight, shipping and handling costs, contract manufacturer costs, salaries and other personnel costs, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of service and other revenue consists of third-party laboratory costs to process the diagnostic samples, salaries of our clinical technicians who interpret and deliver the results to patients, warranty services, and other costs of servicing equipment at customer sites.
Research and Development Expenses
Research and development expenses consist of salaries and other personnel costs, stock-based compensation, research supplies, third-party development costs for new products, materials for prototypes, and allocated overhead costs that include facility and other overhead costs. We have made substantial investments in research and development since our inception, and plan to continue to make investments in the future. Our research and development efforts have focused primarily on the tasks required to support development and commercialization of new and existing products. We believe that our continued investment in research and development is essential to our long-term competitive position.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and
other personnel costs, stock-based compensation for our sales and marketing,
amortization expense related to acquired intangible assets, finance, legal,
human resources and general management, as well as professional services, such
as legal and accounting services.
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Results of Operations
Comparison of the Three Months Ended
The following table sets forth our results of operations for the three months
ended
Three Months Ended June 30, Period-to-Period Change
2022 2021 $ %
Revenues:
Product revenue $ 3,913,000 $ 2,496,000 $ 1,417,000 57 %
Service and other revenue 2,757,000 1,360,000 1,397,000 103 %
Total revenue 6,670,000 3,856,000 2,814,000 73 %
Cost of revenue:
Cost of product revenue 3,973,000 1,869,000 2,104,000 113 %
Cost of other revenue 1,226,000 548,000 678,000 124 %
Total cost of revenue 5,199,000 2,417,000 2,782,000 115 %
Operating expenses:
Research and development 11,767,000 4,086,000 7,681,000 188 %
Selling, general and administrative 21,783,000 13,829,000 7,954,000 58 %
Total operating expenses 33,550,000 17,915,000 15,635,000 87 %
Loss from operations (32,079,000) (16,476,000) (15,603,000) 95 %
Other income (expenses):
Interest income 192,000 58,000 134,000 231 %
Interest expense (74,000) (268,000) 194,000 (72) %
Loss on debt extinguishment - (2,076,000) 2,076,000 (100) %
Other income (expenses) (156,000) (15,000) (141,000) 940 %
Total other income (expenses) (38,000) (2,301,000) 2,263,000 (98) %
Loss before income taxes (32,117,000) (18,777,000) (13,340,000) 71 %
Provision for income taxes (41,000) (9,000) (32,000) 356 %
Net loss $ (32,158,000) $ (18,786,000) $ (13,372,000) 71 %
Revenue
Total revenue increased by $2.8 million , or 73%, to $6.7 million for the three
months ended June 30, 2022 compared to $3.9 million for the same period in 2021.
The increase in product sales was driven by increased demand for our Saphyr OGM
solutions, including an increase in instrument installed base (62%) and flowcell
units sold (24%), when compared to the same period last year. The increased
demand for our reagent rental program continues to drive a significant portion
of the increase in consumable sales. We believe increased demand for our OGM
systems was primarily driven by increased market awareness and additional
published data demonstrating the utility of OGM. While not immune to the
negative effects caused by COVID-19 and other geopolitical events, we expect
revenue to increase as market awareness and published data of OGM utility
increases. The increase in service and other revenue was primarily driven by
$1.0 million in revenues generated by our BioDiscovery subsidiary, which was
acquired in October 2021 .
Cost of Revenue
Cost of revenue increased by $2.8 million , or 115%, to $5.2 million for the
three months ended June 30, 2022 compared to $2.4 million for the same period in
2021. During the three months ended June 30, 2022 , gross margin was 22%,
compared to 37% during the same period in 2021. Gross margin for the three
months ended June 30, 2022 improved compared to gross margin for the first
quarter of 2022, which was 15%. The improvement in gross margin was primarily
due to improvements in chip yield during the second quarter of 2022. Cost of
product revenue increased primarily due to increased instrument and flowcell
sales volume, but was also negatively impacted by unfavorable flowcell yields in
the production cycle, which is in part attributable to COVID-19. Our gross
margins for the three months ended June 30, 2022 were affected by the
unfavorable flowcell yields in the production cycle which led to increased scrap
and quality control costs during the second quarter of 2022. If we are unable to
solve the unfavorable flowcell yield issue, it could lead to lower gross margins
in future periods. Cost of service and other revenue increased primarily due to
increased maintenance and service costs on our increased installed base, as
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well as increased service expenses related to our laboratory services. We expect cost of product and service and other revenue to continue to increase as we continue to increase our installed base and the number of customers purchasing laboratory services
Research and Development Expenses
Research and development, or R&D, expenses increased by$7.7 million , or 188%, to$11.8 million for the three months endedJune 30, 2022 compared to$4.1 million for the same period in 2021. The increase is primarily due to a$5.5 million increase in compensation expenses, of which$3.1 million relates to stock-based compensation expense, and an increase of$1.8 million in product development costs. The increase in compensation expense is primarily driven by increased headcount. We anticipate future additions to our development teams as well as continued increases to our product development costs and, thus, future increases to R&D expenses. We expect R&D expenses to increase in the remainder of 2022 relative to 2021 as we have added headcount in order to support our efforts to develop more scalable and efficient manufacturing workflows, expand the utility of Saphyr, and develop the next versions of OGM products - including integration of OGM data into our NxClinical software. We expect that stock based compensation will continue to drive a significant portion of the increase in expense in the remainder of 2022 as a result of the stock issued as consideration in the BioDiscovery acquisition, which primarily rolls up into R&D expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by$8.0 million , or 58%, to$21.8 million for the three months endedJune 30, 2022 compared to$13.8 million for the same period in 2021. The increase is primarily due to a$4.1 million increase in compensation expenses, of which$0.9 million relates to stock-based compensation, a$1.3 million increase in amortization of intangibles related to the acquisition of BioDiscovery, a$0.6 million increase in marketing expenses, and a$0.4 million increase in other headcount-related expenses. The increase in compensation expense is driven primarily by increased headcount. This is due to growth in our global sales, service, and back-office teams to facilitate the expanding customer base, as well as headcount additions attributed to the acquisition of BioDiscovery. We anticipate headcount additions to our global sales and back-office teams in the coming 12 months. Other headcount-related expenses included the cost of recruiting, temporary employment, and facilities expenses incurred in order to support increased product demand. We expect selling, general, and administrative expenses to increase in the remainder of 2022 due to our continuing investment in growing and supporting our customer base. We expect stock based compensation to continue to drive a significant portion of the increase in expense in the remainder of 2022 due to stock option awards issued to senior-level fourth quarter 2021 hires as well as annual refresher grants issued to executives and non-executives inFebruary 2022 .
Interest Expense
Interest expense decreased by$0.2 million , or 72%, to$0.07 million for the three months endedJune 30, 2022 compared to$0.3 million for the same period in 2021, driven by us paying off the outstanding principal balance of our outstanding term loan withInnovatus , or the Innovatus LSA, during the three months endedJune 30, 2021 . Interest Income Interest income was$0.2 million for the three months endedJune 30, 2022 , as compared to$58,000 for the same period in 2021 resulting from positive returns on investments. Our total available for sale securities balance was$160.2 million as ofJune 30, 2022 .
Loss on debt extinguishment
A loss on debt extinguishment of$2.1 million was recognized during the three months endedJune 30, 2021 in connection with our payment in full of the term loan under the Innovatus LSA, including all accrued interest, an end of term fee, a prepayment fee, and write-off of unamortized debt issuance costs. 24
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Comparison of the Six Months Ended
The following table sets forth our results of operations for the six months
ended
Six Months Ended June 30, Period-to-Period Change
2022 2021 $ %
Revenues:
Product revenue $ 7,029,000 $ 4,545,000 $ 2,484,000 55 %
Service and other revenue 5,337,000 2,479,000 2,858,000 115 %
Total revenue 12,366,000 7,024,000 5,342,000 76 %
Cost of revenue:
Cost of product revenue 7,549,000 3,383,000 4,166,000 123 %
Cost of other revenue 2,485,000 1,159,000 1,326,000 114 %
Total cost of revenue 10,034,000 4,542,000 5,492,000 121 %
Operating expenses:
Research and development 22,296,000 6,765,000 15,531,000 230 %
Selling, general and administrative 42,060,000 23,357,000 18,703,000 80 %
Total operating expenses 64,356,000 30,122,000 34,234,000 114 %
Loss from operations (62,024,000) (27,640,000) (34,384,000) 124 %
Other income (expenses):
Interest income 301,000 123,000 178,000 145 %
Interest expense (151,000) (871,000) 720,000 (83) %
Loss on debt extinguishment - (2,076,000) 2,076,000 - %
Gain on forgiveness of Paycheck Protection
Program Loan - 1,775,000 (1,775,000) (100) %
Other income (expenses) (188,000) (29,000) (159,000) 548 %
Total other income (expenses) (38,000) (1,078,000) 1,040,000 (96) %
Loss before income taxes (62,062,000) (28,718,000) (33,344,000) 116 %
Provision for income taxes (50,000) (15,000) (35,000) 233 %
Net loss $ (62,112,000) $ (28,733,000) $ (33,379,000) 116 %
Revenue
Total revenue increased by $5.3 million , or 76%, to $12.4 million for the six
months ended June 30, 2022 compared to $7.0 million for the same period in 2021.
The increase in product sales was driven by increased demand for our Saphyr OGM
solutions, including an increase in instrument installed base (62%) and flowcell
units sold (24%), when compared to the same period last year. The increased
demand for our reagent rental program continues to drive a significant portion
of the increase in consumable sales. We believe increased demand for our OGM
systems was primarily driven by increased market awareness and additional
published data demonstrating the utility of OGM. While not immune to the
negative effects caused by COVID-19 and other geopolitical events, we expect
revenue to increase as market awareness and published data of OGM utility
increases. The increase in service and other revenue was primarily driven by
$2.2 million in revenues generated by our BioDiscovery subsidiary, which was
acquired in October 2021 .
Cost of Revenue
Cost of revenue increased by $5.5 million , or 121%, to $10.0 million for the six
months ended June 30, 2022 compared to $4.5 million for the same period in 2021.
Cost of product revenue increased primarily due to increased instrument and
flowcell sales volume, but was also negatively impacted by unfavorable flowcell
yields in the production cycle, which is in part attributable to COVID-19. Our
gross margins for the six months ended June 30, 2022 were affected by the
unfavorable flowcell yields in the production cycle which led to increased scrap
and quality control costs during the first half of 2022. If we are unable to
solve the unfavorable flowcell yield issue, it could lead to lower gross margins
in future periods. Cost of service and other revenue increased primarily due to
increased maintenance and service costs on our increased installed base, as well
as increased service expenses related to our laboratory services. We expect cost
of product and service and other revenue to continue to increase as we continue
to increase our installed base and the number of customers purchasing laboratory
services.
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Research and Development Expenses
R&D expenses increased by$15.5 million , or 230%, to$22.3 million for the six months endedJune 30, 2022 compared to$6.8 million for the same period in 2021. The increase is primarily due to a$11.6 million increase in compensation expenses, of which$6.3 million relates to stock-based compensation expense, and an increase of$3.1 million in product development costs. The increase in compensation expense is primarily driven by increased headcount. We anticipate future additions to our development teams as well as continued increases to our product development costs and, thus, future increases to R&D expenses. We expect R&D expenses to increase in the remainder of 2022 relative to 2021 as we have added headcount in order to support our efforts to develop more scalable and efficient manufacturing workflows, expand the utility of Saphyr, and develop the next versions of OGM products - including integration of OGM data into our NxClinical software. We expect that stock based compensation will continue to drive a significant portion of the increase in expense in the remainder of 2022 as a result of the stock issued as consideration in the BioDiscovery acquisition, which primarily rolls up into R&D expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by$18.7 million , or 80%, to$42.1 million for the six months endedJune 30, 2022 compared to$23.4 million for the same period in 2021. The increase is primarily due to a$9.9 million increase in compensation expenses, of which$2.4 million relates to stock-based compensation, a$2.7 million increase in amortization of intangibles related to the acquisition of BioDiscovery, a$1.8 million increase in marketing expenses, and a$1.0 million increase in other headcount-related expenses. The increase in compensation expense is driven primarily by increased headcount. This is due to growth in our global sales, service, and back-office teams to facilitate the expanding customer base, as well as headcount additions attributed to the acquisition of BioDiscovery. We anticipate headcount additions to our global sales and back-office teams in the coming 12 months. Other headcount-related expenses included the cost of recruiting, temporary employment, and facilities expenses incurred in order to support increased product demand. We expect selling, general, and administrative expenses to increase in the remainder of 2022 due to our continuing investment in growing and supporting our customer base. We expect stock based compensation to continue to drive a significant portion of the increase in expense in the remainder of 2022 due to stock option awards issued to senior-level fourth quarter 2021 hires as well as annual refresher grants issued to executives and non-executives inFebruary 2022 .
Interest Expense
Interest expense decreased by$0.7 million , or 83%, to$0.2 million for the six months endedJune 30, 2022 compared to$0.9 million for the same period in 2021, driven by us paying off the outstanding principal balance of our outstanding term loan under the Innovatus LSA during the six months endedJune 30, 2021 .
Interest Income
Interest income was
Loss on debt extinguishment
A loss on debt extinguishment of$2.1 million was recognized during the six months endedJune 30, 2021 in connection with our payment in full of the term loan under the Innovatus LSA, including all accrued interest, an end of term fee, a prepayment fee, and write-off of unamortized debt issuance costs.
Gain on forgiveness of Paycheck Protection Program loan
A gain on forgiveness of our Paycheck Protection Program loan, or PPP Loan, of$1.8 million was recognized during the six months endedJune 30, 2021 in connection with the forgiveness of the PPP Loan in full, including all accrued interest.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred net losses and negative cash flows from operations. We have primarily generated cash flows from sales of equity securities and debt financings. We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations. Revenue from our commercial operations has increased due to increased demand for our product offerings and our acquisition of revenue-positive BioDiscovery. See Note 6 to our condensed consolidated financial statements for a discussion of our recent equity activity included elsewhere in this Quarterly Report on Form 10-Q for more information. We incurred net losses of$62.1 million and$28.7 million for the six months endedJune 30, 2022 and 2021, respectively. As ofJune 30, 2022 , we had an accumulated deficit of$278.2 million , cash and cash equivalents of$27.2 million , and available for sale investment 26
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securities of
Future Capital Requirements
We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, additional research and development expenses associated with expanding our offerings, expenses associated with continuing to build out our corporate infrastructure and expenses associated with being a public company. Our short-term capital expenditure needs relate primarily to the ongoing build out of our facilities, service lab and service-related capabilities, research and development expenses related to current and future product offerings, and enhancements to information technology. We expect such expenditures to continue throughout 2022. Cash Flows
The following table sets forth the cash flow from operating, investing and financing activities for the periods presented:
Six Months Ended June 30,
2022 2021
Net cash provided by (used in):
Operating activities $ (60,826,000) $ (26,323,000)
Investing activities 63,204,000 50,000
Financing activities 210,000 320,378,000
Operating Activities
We derive cash flows from operations primarily from the sale of our products and
services. Our cash flows from operating activities are also significantly
influenced by our use of cash for operating expenses to support the growth of
our business. We have historically experienced negative cash flows from
operating activities as we have developed our technology, expanded our business
and built our infrastructure and this may continue in the future. We anticipate
our use of cash in operating activities to increase in the next 12 to 24 months
due to anticipated increases in headcount and ongoing support of our growing
operations, including, R&D operations. As discussed below, we anticipate our
available cash balance will be sufficient to fund those increases in cash used
in operating activities for at least the next 12 months, but we may consider
funding those increases or increases beyond the next 12 months with the methods
discussed in the section below entitled "Capital Resources."
Net cash used in operating activities was $60.8 million during the six months
ended June 30, 2022 as compared to $26.3 million during the same period in 2021.
The increase in cash used in operating activities of $34.5 million was primarily
attributed to an incremental headcount growth compared to our headcount as of
June 30, 2021 .
Investing Activities
Historically, our primary investing activities have consisted of capital
expenditures for the purchase of capital equipment to support our expanding
infrastructure, the acquisitions of Lineagen and BioDiscovery to grow our
business, and purchases of available for sale investment securities. We expect
to continue to incur additional costs for capital expenditures related to these
efforts in future periods. During the six months ended June 30, 2022 , cash
provided by investing activities was $63.2 million , as compared to $0.05 million
during the same period in 2021. The increase in cash provided by investing
activities of $63.2 million was primarily attributed to the sale of $93.5
million in available for sale securities, offset by a purchase of $29.5 million
in available for sale securities.
Financing Activities
Net cash provided by financing activities was$0.2 million during the six months endedJune 30, 2022 as compared to the same period in 2021 where we had net cash provided by financing activities of$320.4 million , a decrease of$320.2 million . During the six months endedJune 30, 2021 , we raised approximately$328.6 million in gross proceeds from executing two follow-on offerings and sales under our at-the-market facilities withLadenburg Thalmann & Co. Inc. , or Ladenburg, andCowen and Company, LLC , or Cowen. We did not have similar fundraising activity in the six months endedJune 30, 2022 .
Paycheck Protection Program
InApril 2020 , we received loan proceeds of approximately$1.8 million , or the PPP Loan, pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, administered by theU.S. Small Business Administration , or the SBA. 27
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The PPP Loan accrued interest at a rate of 1.00% per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act. InFebruary 2021 , we applied for forgiveness of the PPP Loan and, inMarch 2021 , the PPP Loan, including all accrued interest, was forgiven in full.
The PPP Loan is also described in Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Capital Resources
As of
InAugust 2020 , we filed a shelf registration statement on Form S-3 with theSEC covering the offering, issuance and sale of up to$125.0 million of our securities, including up to$40.0 million of common stock pursuant to an At Market Issuance Sales Agreement, with Ladenburg acting as sales agent, or the Ladenburg ATM. DuringOctober 2020 throughJanuary 2021 , we sold 27.0 million shares of common stock under the Ladenburg ATM and received net proceeds of$38.0 million after deducting aggregate offering costs. We terminated the Ladenburg ATM inMarch 2021 . OnJanuary 12, 2021 , we completed an underwritten public offering of 33.4 million shares of our common stock, including 4.4 million shares of our common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. The price to the public in the offering was$3.05 per share and the underwriters purchased the shares from us pursuant to the underwriting agreement at a price of$2.87 per share. The gross proceeds to us were approximately$101.8 million before deducting underwriting discounts and commissions and other offering expenses. OnJanuary 19, 2021 , we filed an automatically effective shelf registration statement on Form S-3 (File No. 333-252216) with theU.S. Securities and Exchange Commission , orSEC , as a "well-known seasoned issuer." The registration statement allows us to issue an indeterminate number or amount of common stock, preferred stock, debt securities and warrants from time to time in one or more offerings. However, there can be no assurance that we will complete any future offerings of securities. Any future offerings under this registration statement will be dependent upon, among other factors, market conditions, available pricing, our financial condition, investor perception of our prospects, our capital needs and our ability to maintain status as a well-known seasoned issuer. Further, as ofJune 30, 2022 , as a consequence of our re-qualification as a "smaller reporting company," we may lose "well-known seasoned issuer" status at the time we file our Annual Report on Form 10-K for the fiscal year endingDecember 31, 2022 if the worldwide market value of our voting and non-voting common equity held by our non-affiliates does not equal$700.0 million or more, calculated as of a date within 60 days prior to filing such report. If that were to occur and we were no longer considered a well-known seasoned issuer, we anticipate needing to amend our automatically effective shelf registration statement on Form S-3 prior to our filing of such annual report (or earlier if required by the Securities Act or the rules and regulations of theSEC ) in order to sell securities under that Form S-3 on an ongoing basis. OnJanuary 25, 2021 , we completed an underwritten public offering pursuant to our shelf registration statement of 38.3 million shares of our common stock, including 5.0 million shares of our common stock sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. The price to the public in the offering was$6.00 per share, and the underwriters purchased the shares from us pursuant to the underwriting agreement at a price of$5.64 per share. The gross proceeds to us were approximately$230.0 million before deducting underwriting discounts and commissions and other offering expenses. OnMarch 23, 2021 , we entered into a Sales Agreement with Cowen pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to$350.0 million , through or to Cowen, acting as sales agent or principal, or the Cowen ATM. In August andSeptember 2021 , the Company sold 2.3 million shares of common stock under the Cowen ATM at an average share price of$6.15 per share, and received gross proceeds of approximately$13.9 million before deducting offering costs of$0.6 million . There were no sales of common stock under the Cowen ATM fromJanuary 1, 2022 toJune 30, 2022 . We believe that our cash, cash equivalents, and available for sale securities will be sufficient to fund our planned operations, obligations as they become due and capital investments for at least the next twelve months. This estimate is based on our current business plan. This estimate does not reflect any additional expenditures resulting from potential acquisitions or strategic transactions. We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information. 28
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Contingent Consideration
As part of the merger agreement related to the acquisition of BioDiscovery, the Company agreed to pay a milestone payment of$10.0 million in cash contingent on the achievement of a commercial milestone within eighteen months of the acquisition date. The Company determined the fair value of the milestone consideration using a scenario-based technique, as the trigger for payment is event driven. The outcome of the milestone consideration is binary, meaning the milestone is either achieved or not achieved, and the only other variable factor is the timing of when the milestone is achieved. The Company determined it is highly likely that the milestone will be achieved and therefore used a 95% probability factor which is applied to the$10.0 million milestone consideration. Based on these valuation assumptions, the fair value of the milestone consideration was determined to be$9.2 million as ofJune 30, 2022 . During the three months endedJune 30, 2022 , the milestone consideration liability was reclassified from non-current liabilities to current liabilities.
Contractual Obligations
There were no material changes to our contractual obligations from those
disclosed in the Company's Annual Report on Form 10-K for the year ended
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. We have discussed the development, selection and disclosure of the accounting estimates with our audit committee. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. Historically, revisions to our estimates have not resulted in a material change to our financial statements. During the three and six months endedJune 30, 2022 , there have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 .
Recent Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information concerning recent accounting pronouncements.
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