The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated condensed financial
statements and the related notes appearing elsewhere in this Quarterly Report on
Form 10-Q and our audited Consolidated Financial Statements and related notes
thereto for the year ended December 31, 2020, included in our prospectus, dated
July 14, 2021, filed with the Securities and Exchange Commission, or the SEC, in
accordance with Rule 424(b) of the Securities Act on July 16, 2021, or the
Prospectus. Some of the information contained in this discussion and analysis or
set forth elsewhere in this Quarterly Report on Form 10-Q, including information
with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. As a result of
many factors, including those factors set forth in the "Risk Factors" section of
this Quarterly Report on Form 10-Q, our actual results could differ materially
from the results described in or implied by the forward-looking statements
contained in the following discussion and analysis.

Overview


We are an innovative life sciences technology company that enables the safe and
efficient manufacture of pharmaceutical products through our rapid automated
microbial quality control, or MQC, detection platform. We develop, manufacture,
market and sell the Growth Direct system and related proprietary consumables,
and value-added services to enable rapid MQC testing in the manufacture of
biologics, cell and gene therapies, vaccines, sterile injectables, and other
healthcare products. Our system delivers the power of industrial automation to
bioprocessing and pharmaceutical manufacturing firms by modernizing and
digitizing their MQC operations. Our Growth Direct platform, developed with over
15 years of active feedback from our customers, was purpose-built to meet the
growing demands posed by the increasing scale, complexity, and regulatory
scrutiny confronting global pharmaceutical manufacturing. Our Growth Direct
platform comprises the Growth Direct system, optional laboratory information
management system, or LIMS, connection software (which the majority of our
customers purchase), proprietary consumables, and comprehensive field service,
validation services and post-warranty service contracts. Once embedded and
validated in our customers' facilities, our Growth Direct platform provides for
recurring revenues through ongoing sales of consumables and service contracts.

Our technology fully automates and digitizes the process of pharmaceutical MQC
and is designed to enable our customers to perform this critical testing process
more efficiently, accurately, and securely. Our Growth Direct platform
accelerates time to results by several days, a 50% improvement over the
traditional method, and reduces MQC testing to a simple two-step workflow,
eliminating 85% of the manual steps of traditional MQC, generating significant
time, operational, and cost savings for our customers. We seek to establish the
Growth Direct as the trusted global standard in automated MQC by delivering the
speed, accuracy, security, and data integrity compliance that our customers
depend on to ensure patient safety and consistent drug supply.

Since inception, we have devoted a majority of our resources to designing,
developing, and building our proprietary Growth Direct platform and associated
products, launching our Growth Direct platform commercially, expanding our sales
and marketing infrastructure to grow our sales, building a global customer
support team to deliver our value-added services, investing in robust
manufacturing and supply chain operations to serve our customers globally, and
providing general and administrative support for these operations. To date, we
have funded our operations primarily with proceeds from sales of preferred
stock, proceeds from our IPO, borrowings under loan agreements and product and
service sales as well as our cost-reimbursement contract with the U.S.
Department of Health and Human Services Biomedical Advanced Research &
Development Authority, or BARDA.

On July 19, 2021, we closed an initial public offering of our Class A common
stock, or the IPO, which resulted in the sale of 7,920,000 shares of our Class A
common stock at a public offering price of $20.00 per share, before underwriting
discounts. The IPO resulted in gross proceeds of $158.4 million and net proceeds
of approximately $143.8 million after deducting underwriting discounts,
commissions and estimated offering expenses payable by us. Additionally, on
August 4, 2021, the underwriters exercised their overallotment option in part
and purchased 1,086,604 shares of Class A common stock at the initial public
offering price of $20.00 per share less discounts and commissions. The
overallotment option exercise resulted in net proceeds of approximately $20.2
million.

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Since our inception, we have incurred net losses in each year. We generated revenue of $6.9 million and $5.2 million for the three months ended September 30, 2021 and 2020, respectively, and incurred net losses of $25.0 million and $8.5 million for those same periods, respectively. We generated revenue of $18.0 million and $10.8 million for the nine months ended September 30, 2021 and 2020, respectively, and incurred net losses of $58.9 million and $25.7 million for those same periods, respectively. As of September 30, 2021, we had an accumulated deficit of $300.5 million. We expect to continue to incur net losses in connection with our ongoing activities, including:

? growing sales of our products in both the United States and international

markets by further expanding our sales and marketing capabilities;

? scaling our manufacturing and supply chain processes and infrastructure to meet

growing demand for our products;

? investing in research and development to develop new products and further

enhance our existing products;

? protecting and building on our intellectual property portfolio; and

? attracting, hiring and retaining qualified personnel.




Until such time as we can generate revenue sufficient to achieve profitability,
we expect to finance our operations through a combination of equity offerings
and debt financings. If we are unable to raise capital or enter into such
agreements as, and when, needed, we may have to significantly delay, scale back
or discontinue our expansion plans including the further development and
commercialization efforts of one or more of our products, or may be forced to
reduce or terminate our operations.

We believe that the net proceeds from the IPO, together with our cash and cash
equivalents as of September 30, 2021, will enable us to fund our operating
expenses and capital expenditure requirements for at least the next twelve
months. We have based this estimate on assumptions that may prove to be wrong,
and we could exhaust our available capital resources sooner than we expect. See
"Liquidity and Capital Resources."

COVID-19 update



In response to the COVID-19 pandemic and various resulting government
directives, we took proactive measures to protect the health and safety of our
employees, customers, and partners, while maintaining our ability to supply and
service our customers. We continue to monitor the implications of the ongoing
COVID-19 pandemic on our business, as well as our customers' and suppliers'
businesses. Some of the measures we have taken follow:

During this pandemic, we moved quickly to implement several business continuity

initiatives aimed at maintaining uninterrupted manufacturing and supply

? capabilities while keeping our workforce safe, including instituting a COVID-19

task force, forming multiple manufacturing teams with staggered shifts,

increasing inventory safety stock levels, and establishing appropriate

protective equipment and distancing policies for essential on-site personnel.

We have been designated an essential business that can continue operations

during the COVID-19 pandemic. In early March 2020, we promptly instituted

protocols to have many personnel work remotely. At the same time, because of

our continued designation as an essential business, many employees continue to

work on-site at our facility in Lowell, MA to undertake manufacturing

activities that support essential operations to provide mission-critical MQC

? testing products to global pharmaceutical customers manufacturing life-saving

drugs. We have also restricted business travel and have limited access to our

facilities to outside visitors other than customers, vendors, suppliers and

partners who are integral to supporting our business. To date, these

arrangements have not materially affected our ability to maintain our business

operations, including the operation of financial reporting systems, internal


   control over financial reporting and disclosure controls and procedures.


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Our production, shipping and customer service functions remain operational to

maintain a continuous supply of products to our customers. We are communicating

? regularly with our suppliers and logistics partners so that our supply chain

remains intact and we have not experienced any material supply issues to date.

Our customer service teams around the world are operating remotely and remain

available to assist our customers and partners as needed.

As a result of travel restrictions and shelter-in-place orders, we experienced

an impact on our ability to ship, install and validate systems, as well as

? train customers in certain geographies, which negatively impacted our product

and service revenues during 2021 and 2020. Despite these restrictions, we were

able to implement several measures including remote and customer-assisted

support activities to support the continued growth of our business.

We are actively reviewing and managing costs to navigate the current

? environment. However, to date, the COVID-19 pandemic has not had a material

adverse effect on results of operations.




While the disruption due to COVID-19, and its variants, is currently expected to
be temporary, there is considerable uncertainty around its duration. We expect
these disruptions to continue to impact our operating results. However, the
related financial impact and duration of these disruptions cannot be reasonably
estimated at this time.

Factors affecting our performance


We believe that our financial performance has been, and in the foreseeable
future will continue to be, primarily driven by multiple factors as described
below, each of which presents growth opportunities for our business. These
factors also pose important challenges that we must successfully address in
order to sustain our growth and improve our results of operations. Our ability
to successfully address these challenges is subject to various risks and
uncertainties, including those described under the heading "Risk Factors."

New customer adoption of the Growth Direct platform



Our financial performance has largely been driven by, and a key factor to our
future success will be, our ability to increase the global adoption of our
Growth Direct platform in our key markets. We plan to drive global customer
adoption through both direct and indirect sales and marketing organizations in
North America, Europe, and Asia.

We are investing substantially in these organizations and expect to continue to
do so in the future. As part of this effort, we increased our direct sales and
marketing team by 69% for the nine months ended September 30, 2021 compared to
the prior year-end.

Expansion within our existing customer base


There is an opportunity to increase broader adoption and utilization of our
Growth Direct platform throughout our existing customers' organizations by their
purchasing of more systems to convert more of their test volume at existing
locations, to support multiple locations, to meet redundancy requirements, or
driven by a need to increase capacity. As of September 30, 2021, approximately
50% of our customers have purchased Growth Direct systems for multiple sites,
and approximately 60% of our customers have purchased multiple Growth Direct
systems. Increased utilization amongst existing customers can also occur as
customers advance through the Growth Direct platform adoption cycle from early
validation of initial applications to validation and conversion of multiple
applications on the Growth Direct platform.

Innovating and launching new products on the Growth Direct platform



We believe the depth, scalability and robust capabilities of our Growth Direct
platform allow us to address key opportunities and challenges facing MQC testing
in the pharmaceutical industry. As an innovative leader in automated MQC
testing, we intend to invest in further enhancements in our existing Growth
Direct platform as well as end-to-end workflow solutions in our core market. We
plan to further invest in research and development to support the expansion

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of our Growth Direct platform through development and launch of new applications
to capture greater share of customer testing volume, new product formats to
broaden our ability to serve different market segments and launch of new
products and technologies to address adjacent segments of the overall MQC
workflow. We plan to continue to hire employees with the necessary scientific
and technical backgrounds to enhance our existing products and help us introduce
new products to market. We expect to incur additional research and development
expenses as a result. By expanding and continuously enhancing the Growth Direct
platform, we believe we can drive incremental revenue from existing clients as
well as broaden the appeal of our solutions to potential new customers.

Expanding Growth Direct into adjacent end markets



We have identified adjacent end markets that conduct high volumes of MQC testing
under regulatory control and derive value from improving operational efficiency
via MQC automation and we may opportunistically enter these markets. We could
expand into these markets through our existing technologies, through adapting
our existing technologies, or through developing new products to specifically
address the unmet needs of these adjacent markets. We may drive our expansion
into these markets by building commercial infrastructure to specifically target
customers in those markets, or by partnering with other participants in those
markets.

Revenue mix

Our revenue is derived from sales of our Growth Direct systems, our LIMS
connection software, proprietary consumables, services and our
cost-reimbursement contract with BARDA. During the three and nine months ended
September 30, 2021 and 2020, Growth Direct system revenue was the single largest
component of our revenue. Because Growth Direct system revenue involves a
capital selling process and tends to be somewhat concentrated within a small
(but different) group of customers each year, it is subject to variability from
quarter to quarter. While we expect Growth Direct systems revenue to continue to
be the largest contributor to our revenue over the near- to mid-term, as our
base of validated Growth Direct systems continues to grow, we expect our
recurring revenue (consumables and service contracts) to grow at a faster rate
than our non-recurring revenues (Growth Direct systems, validation and other
services), which we expect to drive variability and longer-term trends in our
revenue mix.

Our non-commercial revenue is generated from long-term contracts with
governmental agencies and third parties that are typically fixed in terms of
scope and value. As a result, the amount of non-commercial revenue recognized in
each period is subject to variability depending on factors such as the number of
active contracts as well as the work performed and value remaining under each
contract.

Key business metrics

We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are representative of our current business; however, we anticipate these may change or be substituted for additional or different metrics as our business grows and evolves.




                                             Three Months Ended
                                               September 30,              Change
                                              2021         2020      Amount       %

                                                  (dollars in thousands)
Systems placed:
Systems placed in period                           10          11        (1)    (9.1) %
Cumulative systems placed                         113          77         36     46.8 %
Systems validated:

Systems validated in period                         5           4          1     25.0 %
Cumulative systems validated                       68          37         31     83.8 %
Product and service revenue - total        $    6,303     $ 4,964    $ 1,339     27.0 %
Product and service revenue - recurring    $    2,171     $   855    $ 1,316    153.9 %




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                                             Nine Months Ended
                                              September 30,              Change
                                              2021        2020      Amount       %

                                                 (dollars in thousands)
Systems placed:
Systems placed in period                           26         16         10     62.5 %
Cumulative systems placed                         113         77         36     46.8 %
Systems validated:

Systems validated in period                        17         10          7     70.0 %
Cumulative systems validated                       68         37         31     83.8 %
Product and service revenue - total        $   16,782    $ 8,981    $ 7,801     86.9 %
Product and service revenue - recurring    $    5,539    $ 2,712    $ 2,827

104.2 %

Growth Direct system placements


We consider a Growth Direct system to be "placed" upon transfer of control of
the system to the customer, at which point the revenue for that system is
recognized. We regularly review the number of Growth Direct systems placed and
cumulative Growth Direct system placements in each period as a leading indicator
of our business performance. Our revenue has historically been driven by, and in
the future will continue to be impacted by, the rate of Growth Direct system
placements as a reflection of our success selling and delivering our products.
We expect our Growth Direct system placements to continue to grow over time as
we increase penetration in our existing markets and expand into new markets.

The number of Growth Direct system placements and rate of growth varies from
period-to-period due to factors including, but not limited to, Growth Direct
system order volume and timing, and access to customer sites (including COVID-19
related restrictions). As a result, we expect to experience continued
variability in our period-to-period number of Growth Direct system placements
due to the aforementioned factors.

Validated systems



We regularly review the number of Growth Direct systems validated and cumulative
Growth Direct systems validated in each period as indicators of our business
performance. Management focuses on validated Growth Direct systems as a leading
indicator of likely future recurring revenue as well as a reflection of our
success validating placed systems. We expect our validated Growth Direct systems
to continue to grow over time as we increase our base of cumulative systems
placed and then validate those systems. After a Growth Direct system is placed
with a customer and installed, we work with the customer to validate the system,
which typically takes anywhere from three to nine months. Once a validation has
been completed, we generally expect our customers to transition from their
legacy manual method to our automated method and begin regular utilization of
consumables over a period of up to three months.

The number of validated Growth Direct systems and rate of growth varies from
period-to-period due to factors including, but not limited to, Growth Direct
system order volume and timing, whether customers have previously validated
Growth Direct systems within their site or network, access to customer sites
(including as a result of COVID-19 related restrictions and delays in 2021 and
2020), customer site readiness and the time to install and validate each
individual system. As a result, we expect to experience continued fluctuations
in our period-to-period number of Growth Direct systems validated due to the
aforementioned factors.

Product and service revenue

We regularly assess trends relating to our combined product and service revenue
as an indicator of our business performance. Product and service revenue
represents all of our commercial revenue for the business. It excludes
non-commercial revenue, which typically supports other business functions such
as research and development and is by its nature subject to significant
variability.

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During the three and nine months ended September 30, 2021 and 2020, travel
restrictions related to COVID-19, and its variants, negatively impacted our
ability to ship, install and validate Systems, as well as train customers in
certain geographies. This negatively impacted our product and service revenue in
those periods. While we expect these disruptions to continue to impact our
operating results, the related financial impact and duration of these
disruptions cannot be reasonably estimated at this time.

Recurring revenue



We regularly assess trends relating to recurring revenue, which is the revenue
from consumables and service contracts, based on our product offerings, our
customer base and our understanding of how our customers use our products.
Recurring revenue was 31.5% and 16.3% of our total revenue for the three months
ended September 30, 2021 and 2020, respectively. Recurring revenue was 30.7% and
25.0% of our total revenue for the nine months ended September 30, 2021 and
2020, respectively. Our recurring revenue as a percentage of the total product
and service revenue will generally vary based upon the cumulative number of
validated Growth Direct systems in the period, as well as other variables such
as the volume of tests being conducted, and the test application(s) being used
on those Growth Direct systems. As our base of validated systems continues to
grow, we expect our recurring revenue streams to grow at a faster rate that will
ultimately result in them constituting the majority of our revenue over the
longer term.

Components of results of operations

Revenue



We generate revenue from sales of our Growth Direct system including our LIMS
connection software, consumables, validation services, service contracts and
field service as well as our contractual arrangement with BARDA. We primarily
sell our products and services through direct sales representatives. The
arrangements are generally noncancelable and nonrefundable after ownership
passes to the customer.


                                     Three Months Ended     Percentage    Three Months Ended     Percentage
                                       September 30,         of total       September 30,         of total
                                            2021             revenue             2020             revenue
                                       (in thousands)                       (in thousands)
Product revenue                      $             4,824          69.9 %  $             4,069          77.5 %
Service revenue                                    1,479          21.4 %                  895          17.1 %
Non-commercial revenue                               596           8.6 %                  283           5.4 %
Total revenue                        $             6,899         100.0 %  $             5,247         100.0 %





                                       Nine Months Ended     Percentage     Nine Months Ended     Percentage
                                        September 30,         of total       September 30,         of total
                                             2021             revenue             2020             revenue
                                        (in thousands)                       (in thousands)
Product revenue                       $            12,630          70.1 %  $             6,921          63.9 %
Service revenue                                     4,152          23.0 %                2,060          19.0 %
Non-commercial revenue                              1,242           6.9 %                1,858          17.1 %
Total revenue                         $            18,024         100.0 %  $            10,839         100.0 %


Product revenue

We derive product revenue primarily from the sale of our Growth Direct systems
and related consumables as well as our LIMS connection software, which the
majority of our customers purchase. As of September 30, 2021, we had sold over
100 Growth Direct systems to over thirty customers globally, including over half
of the top twenty pharmaceutical companies as measured by revenue and 30% of
globally approved cell and gene therapies.

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Growth Direct systems

Growth Direct system revenue is a non-recurring product revenue stream that we
recognize as revenue upon transfer of control of the system to the customer. The
Growth Direct system is fully functional for use by the customer upon delivery,
as such transfer of control occurs at shipment or delivery, depending on
contractual terms.

We expect our Growth Direct system revenue to continue to grow over time as we
increase system placements in our existing customers and markets and expand into
new customers and markets.

Consumables



Our consumable revenue is a recurring product revenue stream composed of two
proprietary consumables to capture test samples for analysis on the Growth
Direct system, an Environmental Monitoring or EM, consumable, and a
Water/Bioburden consumable, or W/BB consumable. Both proprietary consumables
support the growth-based compendial method for MQC testing mandated by global
regulators and provide results that are comparable to traditional consumables.
Our consumables are designed with features that enable automation on the Growth
Direct system, with bar coding for tracking and data integrity, and physical
characteristics for robotic handling, to support vision detection, and to
prevent counterfeiting.

We expect consumable revenue to increase in future periods as our base of cumulative validated Growth Direct systems grows and those systems utilize our consumables on a recurring, ongoing basis.

LIMS Connection Software



Our LIMS connection software is a non-recurring product revenue stream. Although
optional, the majority of our customers elect to purchase this software, which
allows Growth Direct systems to export result reports and securely link to a
customer's two-way LIMS connection software to completely eliminate manual data
entry and drive productivity.

Service revenue

We derive service revenue from validation services, field service including installations, and service contracts sold to our customers. Revenue from validation services and field service are non-recurring service revenue streams, while revenue from service contracts is a recurring service revenue stream.



We offer our customers validation services (including related documentation)
that enable them to replace their existing manual testing method and utilize
their Growth Direct systems in compliance with relevant MQC regulations.
Validation services are recognized as revenue over time as these services are
provided to the customer.

We offer our customers service contracts that can be purchased after the
expiration of the one-year assurance warranty that all of our customers receive
with the purchase of a Growth Direct system. Under these contracts, they are
entitled to receive phone support, emergency on-site maintenance support and two
preventative maintenance visits per year. These service contracts generally have
fixed fees and a term of one year. We recognize revenue from the sale of service
contracts over time as these services are provided over the respective contract
term.

We also offer our customers field service which consists of services provided by
our field service engineers to install Growth Direct systems at customer sites.
We recognize revenue from field service over time as these services are provided
to the customer.

We expect service revenue to increase in future periods as the number of placed
and validated Growth Direct systems grows and we are able to generate increasing
non-recurring revenue from validation services and field service for newly
placed systems and increasing recurring revenue from service contracts for

validated systems.

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Non-commercial revenue

We generate non-commercial revenue from long-term contracts with governmental
agencies and third parties. To date, our non-commercial revenue has been derived
from contracts with BARDA. Our current contract with BARDA is a
cost-reimbursable, cost-sharing arrangement, whereby BARDA reimburses us for
a percentage of the total cost incurred which includes allowable indirect costs.
We recognize revenue from non-commercial revenue over time using an input method
based on cost incurred to date in relation to total estimated cost.

Since the underlying contracts are typically fixed in terms of scope and value,
the amount of non-commercial revenue recognized in each period is subject to
variability depending on factors such as the number of active contracts as well
as the work performed and value remaining under each contract. We received
additional funding in April 2021 from BARDA. The Company expects our current
funding to be fully earned by the end of 2021.

Costs and operating expenses

Costs of revenue


Cost of product revenue primarily consists of costs for raw material parts and
associated freight, shipping and handling costs, salaries and other personnel
costs including stock-based compensation expense, contract manufacturer costs,
scrap, warranty cost, inventory reserves, royalties, depreciation and
amortization expense, allocated information technology and facility-related
costs, overhead and other costs related to those sales recognized as product
revenue in the period.

Cost of service revenue primarily consists of salaries and other personnel costs
including stock-based compensation expense, travel costs, materials consumed
when performing installations, validations and other services, allocated
information technology and facility-related costs associated with training, and
other expenses related to service revenue recognized in the period.

Cost of non-commercial revenue primarily consists of salaries and other
personnel costs including stock-based compensation expense, consulting expense,
materials, travel and other costs related to the revenue recognized as
non-commercial revenue during the period. Our contract with BARDA is subject to
the Federal Acquisition Regulation, or FAR and is priced based on estimated or
actual costs of producing goods or providing services. The FAR provides guidance
on the types of costs that are allowable in establishing prices for goods or
services provided under U.S. government contracts.

We expect that our cost of revenue will generally increase or decrease to the extent that our revenue increases or decreases, but that such costs will increase more slowly than the related revenue streams over time.

Research and development



Research and development expenses consist primarily of costs incurred for our
research activities, product development, hardware and software engineering and
consultant services and other costs associated with our technology Growth Direct
platform and products, which include:

employee-related expenses, including costs for salaries, bonuses and other

? personnel costs including stock-based compensation expense, for employees

engaged in research and development functions;

? the cost of developing, maintaining and improving new and existing product

designs;

? the cost of hardware and software engineering;

? research materials and supplies;




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? external costs of outside consultants engaged to conduct research and

development associated with our technology and products; and

information technology and facilities expenses, which include direct and

? allocated expenses for rent, maintenance of facilities and insurance as well as

related depreciation and amortization.




Our research and development costs are expensed as incurred. We believe that our
continued investment in research and development is essential to our long-term
competitive position, and we expect these expenses to increase in future
periods.

Sales and marketing



Sales and marketing expenses consist primarily of salaries, commissions,
benefits and other personnel costs including stock-based compensation expense as
well as costs relating to travel, consulting, public relations and allocated
information technology and facility-related costs for our employees engaged in
sales and marketing activities. We expect sales and marketing expenses to
increase in future periods as the number of sales and marketing personnel grows
and we continue to expand our geographic reach and capabilities, broaden our
customer base and introduce new products.

General and administrative


General and administrative expenses consist primarily of salaries, bonuses and
other personnel costs including stock-based compensation expense for our
finance, legal, human resources and general management employees, as well as
professional fees for legal, patent, accounting, audit, investor relations,
recruiting, consulting and other services. General and administrative expenses
also include direct and allocated information technology and facility-related
costs. General and administrative expenses are expected to increase in future
periods as the number of administrative personnel grows to support increasing
business size and complexity. We have also started to incur incremental
accounting, audit, legal, regulatory, compliance and director and officer
insurance costs as well as investor relations expenses associated with operating
as a public company.

Other income (expense)

Interest expense

Interest expense is comprised of interest cost associated with outstanding borrowings under our loan and security agreements, amortization of deferred financing costs and debt discounts associated with such arrangements.

Change in fair value of preferred stock warrant liability



In connection with the May 2020 term loan facility we entered into with a
lender, or the 2020 Term Loan, we issued 1,195,652 warrants to purchase shares
of Series C1 Preferred Stock at an exercise price of $1.15 per share. These
warrants were immediately exercisable and expire 10 years after the issuance
date. We also have other outstanding warrants to purchase preferred stock issued
in connection with previous financing arrangements.

We classified all of our warrants to purchase preferred stock as a liability on
our consolidated balance sheets until our IPO because the warrants were
freestanding financial instruments that may require us to transfer assets upon
exercise. The liability associated with each of these warrants was initially
recorded at fair value upon the issuance date and was subsequently remeasured to
fair value at each reporting date. The resulting change in the fair value of the
preferred stock warrant liability was recorded as a component of other income
(expense) in our consolidated statements of operations. We continued to
recognize changes in the fair value of this preferred stock warrant liability at
each reporting period until the IPO when they qualified for equity
classification.

In connection with the IPO, the preferred stock warrants were automatically
converted to Class A common stock warrants. We determined the event resulted in
equity classification of the Class A common stock warrants and derecognized the
fair value of the preferred stock warrant liability as of the IPO date and

reclassified to equity.

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Loss on extinguishment of debt



Loss on extinguishment of debt recognized in the nine months ended September 30,
2020, includes a loss from the conversion of the 2020 Convertible Notes into
Series C1 Preferred Stock in April 2020. In addition, the loss on extinguishment
of debt includes unamortized issuance costs, back-end fees and early payment
fees related to the refinancing of our $18.0 million term loan with a new $25.0
million term loan in May 2020. We determined the loss on extinguishment of debt
to be the difference between the reacquisition price of the debt and net
carrying value of the extinguished debt.

Loss on extinguishment of debt recognized in the three and nine months ended
September 30, 2021, includes a loss from the extinguishment of the 2020 Term
Loan. In addition, the loss on extinguishment of debt includes unamortized
issuance costs, unamortized prepaid commitment fees, and early payment fees
associated with the 2020 Term Loan repayment.

Other income

Other income primarily consists of interest income as well as other miscellaneous income unrelated to our core operations.

Income tax expense



We generated significant taxable losses during the three and nine months ended
September 30, 2021 and 2020, and, therefore, have not recorded any U.S. federal
or state income tax expense during those periods. However, we did record an
immaterial amount of foreign income tax expense during each of those periods.

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Results of operations

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:




                                                                     Three Months Ended
                                                September 30,       September 30,              Change
                                                     2021                2020            Amount          %

                                                                         (in thousands)
Revenue:
Product revenue                                $          4,824    $          4,069    $      755         18.6 %
Service revenue                                           1,479                 895           584         65.3 %
Non-commercial revenue                                      596                 283           313        110.6 %
Total revenue                                             6,899               5,247         1,652         31.5 %
Costs and operating expenses:
Cost of product revenue                                   6,298               5,441           857         15.8 %
Cost of service revenue                                   1,516                 772           744         96.4 %
Cost of non-commercial revenue                              396            

    399           (3)        (0.8) %
Research and development                                  2,441               2,224           217          9.8 %
Sales and marketing                                       3,063               1,447         1,616        111.7 %
General and administrative                                5,308               2,541         2,767        108.9 %

Total costs and operating expenses                       19,022            

 12,824         6,198         48.3 %
Loss from operations                                   (12,123)             (7,577)       (4,546)         60.0 %
Other income (expense):
Interest expense                                          (775)               (886)           111       (12.5) %
Change in fair value of preferred stock
warrant liability                                       (8,160)                   -       (8,160)            *
Loss on extinguishment of debt                          (3,100)                   -       (3,100)            *
Other income (expense)                                    (809)                  18         (827)    (4,594.4) %
Total other income (expense), net                      (12,844)               (868)      (11,976)      1,379.7 %
Loss before income taxes                               (24,967)            

(8,445)      (16,522)        195.6 %
Income tax expense                                           20                  20             -            - %
Net loss                                       $       (24,987)    $        (8,465)    $ (16,522)        195.2 %

* Not Meaningful


Revenue

Product revenue increased by $0.8 million, or 18.6%, with a net increase of $1.2
million primarily attributable to increased utilization of consumables
attributable to both recently validated systems as well as those at existing
customer sites. Partially offsetting the increase in product revenue volume was
a negative impact of consumable product mix of $0.4 million.

Service revenue increased by $0.6 million, or 65.3%. The increase in service
revenue was primarily due to a $0.3 million increase in validation revenue due
to the increase in Growth Direct systems placed during 2021, as well as a $0.2
million increase in service contract revenue, driven by an increase in
cumulative Growth Direct systems validated.

During the quarters ended September 30, 2021 and 2020, travel restrictions and
shelter-in-place orders related to COVID-19, and its variants, negatively
impacted our ability to ship, install and validate systems, as well as train
customers in certain geographies. This negatively impacted our product and
service revenue in the periods. While we expect these disruptions to continue to
impact our operating results, the related financial impact and duration of these
disruptions cannot be reasonably estimated at this time.

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Non-commercial revenue increased by $0.3 million, or 110.6%. The increase in non-commercial revenue was primarily due to a final adjustment, approved by BARDA in September 2021, which closed out our previous contract with them.

Costs and operating expenses

Costs of revenue



Cost of product revenue increased by $0.9 million, or 15.8%. The increase was
primarily driven by increased product volume of $1.0 million partially offset by
a reduction in product cost of $0.9 million and mix of $0.2 million. Also
contributing to the increase was an increase of $0.5 million in
personnel-related costs resulting from higher headcount to support increased
production volume and manufacturing support activities as well as to provide
redundancy in the event of potential disruptions from COVID-19 and its variants,
a $0.2 million increase in facilities and information technology, or IT, costs,
and a net increase of $0.3 million in other costs.

Cost of service revenue increased by $0.7 million, or 96.4%. This increase was
driven by an increase of $0.5 million due to higher headcount-related costs
associated with additional validation and field service employees hired in 2021
and 2020 to support increased service activity. Also contributing to the
increase was higher material, supplies and IT related costs of $0.2 million
driven by higher service activity.

Cost of non-commercial revenue remained relatively flat, decreasing 0.8%. There was no significant change in costs incurred under our BARDA contract.



Research and development


                                         Three Months Ended
                                  September 30,            Change
                                 2021       2020        Amount     %

                                   (dollars in thousands)
Research and development       $  2,441    $ 2,224    $    217    9.8 %
Percentage of total revenue        35.4 %     42.4 %


Research and development expenses increased by $0.2 million, or 9.8%. This
increase was primarily due to an increase of $0.4 million in employee-related
costs due primarily to higher headcount partially offset by a reduction in
consulting expenses of $0.3 million, and an increase in other general research
and development costs of $0.1 million.

Sales and marketing


                                         Three Months Ended
                                 September 30,            Change
                                2021       2020      Amount       %

                                  (dollars in thousands)
Sales and marketing            $ 3,063    $ 1,447    $ 1,616    111.7 %

Percentage of total revenue 44.4 % 27.6 %




Sales and marketing expenses increased by $1.6 million, or 111.7%. This increase
was due to an increase in marketing consulting of $0.7 million, an increase in
employee-related costs (including commissions earned) of $0.8 million primarily
due to the expansion of our sales organization, and a $0.1 million increase in
other expenses to support our sales and marketing organizations.

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General and administrative


                                         Three Months Ended
                                 September 30,            Change
                                2021       2020      Amount       %

                                  (dollars in thousands)
General and administrative     $ 5,308    $ 2,541    $ 2,767    108.9 %
Percentage of total revenue       76.9 %     48.4 %


General and administrative expenses increased by $2.8 million, or 108.9%. This
increase was driven by a $1.5 million increase in employee-related costs due to
business growth, including the transition to a public company beginning in July
2021, and higher benefit costs, a $0.6 million increase in business insurance,
and increase of $0.7 million in professional fees related to legal, audit,
accounting, and consulting activities due to an increase in underlying business
activity, including public company operating costs.

Other income (expense)

Interest expense


Interest expense for the three months ended September 30, 2021 and 2020 was $0.8
million and $0.9 million, respectively. The decrease of $0.1 million, or 12.5%,
was primarily due to $0.1 million in term loan interest expense, which decreased
primarily due to the repayment of our 2020 Term loan in September 2021.

Change in fair value of preferred stock warrant liability


The change in fair value of preferred stock warrant liability was a loss of $8.2
million for the three months ended September 30, 2021, compared no change in the
fair value of preferred stock warrant liability for the three months ended
September 30, 2020. The change was due to an increase in the fair value of the
underlying preferred stock, which is used to determine the value of preferred
stock warrants, to reflect the IPO price. The increase in fair value was
recorded upon the IPO prior to the conversion to Class A common stock warrants
and the reclassification to equity.

Loss on extinguishment of debt



The loss on extinguishment of debt was $3.1 million for the three months ended
September 30, 2021, compared to no loss for the three months ended
September 30, 2020. The $3.1 million loss is comprised of a $1.8 million
prepayment penalty, $1.1 million in expense related to unamortized discounts,
and $0.2 million in unamortized prepaid facility fee and other charges. We
determined the loss on extinguishment of debt to be the difference between the
reacquisition price of the debt and net carrying value of the extinguished debt.

Other income (expense)



Other expense was $0.8 million for the three months ended September 30, 2021
compared to less than $0.1 million for the three months ended September 30,
2020. The increase was due to the expense related to the Exit Fee described in
Note 16 to our condensed consolidated financial statements.

Income tax expense

Income tax expense was $20 thousand for the three months ended September 30, 2021 and September 30, 2020. The expense relates to tax expense recorded for our German entity.



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Comparison of the nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:




                                                        Nine Months Ended
                                                September 30,       September 30,              Change
                                                     2021                2020            Amount          %

                                                                       (in thousands)
Revenue:
Product revenue                                $         12,630     $         6,921    $    5,709         82.5 %
Service revenue                                           4,152               2,060         2,092        101.6 %
Non-commercial revenue                                    1,242               1,858         (616)       (33.2) %
Total revenue                                            18,024              10,839         7,185         66.3 %
Costs and operating expenses:
Cost of product revenue                                  17,900              11,544         6,356         55.1 %
Cost of service revenue                                   3,997               2,478         1,519         61.3 %
Cost of non-commercial revenue                            1,282            

  1,732         (450)       (26.0) %
Research and development                                  6,926               4,906         2,020         41.2 %
Sales and marketing                                       8,460               4,149         4,311        103.9 %
General and administrative                               12,135               6,855         5,280         77.0 %

Total costs and operating expenses                       50,700            

 31,664        19,036         60.1 %
Loss from operations                                   (32,676)            (20,825)      (11,851)         56.9 %
Other income (expense):
Interest expense                                        (2,631)             (2,463)         (168)          6.8 %
Change in fair value of preferred stock
warrant liability                                      (19,643)                 549      (20,192)    (3,678.0) %
Loss on extinguishment of debt                          (3,100)             (2,910)         (190)          6.5 %
Other income                                              (812)                  24         (836)    (3,483.3) %
Total other income (expense), net                      (26,186)            

(4,800)      (21,386)        445.5 %
Loss before income taxes                               (58,862)            (25,625)      (33,237)        129.7 %
Income tax expense                                           57                 114          (57)       (50.0) %
Net loss                                       $       (58,919)    $       (25,739)    $ (33,180)        128.9 %


Revenue

Product revenue increased by $5.7 million, or 82.5%. The increase is
attributable to a higher number of Growth Direct system placements during the
nine months ended September 30, 2021, as well as higher volume of consumable
shipments due to increased utilization of consumables attributable to both
recently validated systems as well as those at existing customer sites,
partially offset by an unfavorable impact of consumable product mix of $0.6
million.

Service revenue increased by $2.1 million, or 101.6%. The increase in service
revenue was primarily due to a $1.3 million increase in validation revenue, a
$0.7 million increase in service contract revenue, driven by an increase in
cumulative Growth Direct systems validated, as well as a $0.1 million increase
in field service revenue due to the increase in Growth Direct systems placed.

Non-commercial revenue decreased by $0.6 million, or 33.2%. The decrease in non-commercial revenue was primarily due to a reduction in billable costs due to a lower level of reimbursable activity under our contract with BARDA.



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Costs and operating expenses

Costs of revenue



Cost of product revenue increased by $6.4 million, or 55.1%. The increase was
driven by a $4.6 million increase in volume of Growth Direct systems and
consumables sold, an increase of $2.0 million in personnel-related costs
resulting from higher headcount to support increased production volume and
manufacturing support activities, as well as to provide redundancy in the event
of potential COVID-19 related disruptions, an increase in IT and facilities
related costs of $0.9 million, an increase in freight costs of $0.3 million, and
a $0.1 million increase in other non-direct costs. Partially offsetting the cost
increase was a decrease in cost and mix of product sold of $1.5 million.

Cost of service revenue increased by $1.5 million, or 61.3%. This increase was
primarily due to higher headcount-related costs of $1.2 million associated with
additional validation and field service employees hired in the later part of
2020 and in 2021 to support increased service activity. Additionally, an
increase in IT and facility related costs of $0.2 million, and materials used
for increased validations and customers under service contracts, were partially
offset by a net reduction in other cost of service revenue expenses of $0.1
million.

Cost of non-commercial revenue decreased by $0.5 million, or 26.0%. This
decrease was primarily due to a reduction in spend due to the timing and extent
of development activities under our contract with BARDA, with consulting
activities down $0.5 million.

Research and development


                                 Nine Months Ended
                                  September 30,             Change
                                  2021        2020      Amount      %

                                    (dollars in thousands)
Research and development       $    6,926    $ 4,906    $ 2,020    41.2 %
Percentage of total revenue          38.4 %     45.3 %


Research and development expenses increased by $2.0 million, or 41.2%. This
increase was primarily due to an increase of $1.9 million in employee-related
costs due primarily to higher headcount to support increased activity, an
increase of $0.3 million in IT and facility costs, and a net increase of $0.2
million in other general research and development expenses, partially offset by
a reduction in consulting expenses of $0.4 million.

Sales and marketing


                                 Nine Months Ended
                                  September 30,              Change
                                  2021        2020      Amount       %

                                    (dollars in thousands)
Sales and marketing            $    8,460    $ 4,149    $ 4,311    103.9 %
Percentage of total revenue          46.9 %     38.3 %


Sales and marketing expenses increased by $4.3 million, or 103.9%. This increase
was primarily due to a $2.0 million increase in employee-related costs
(including commissions earned) due to higher headcount, and increase in
marketing consulting expenses of $1.8 million, an increase of $0.3 million in
other marketing activities and a net increase of $0.2 million in other sales and
marketing expenses.

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General and administrative


                                 Nine Months Ended
                                  September 30,             Change
                                  2021        2020      Amount      %

                                    (dollars in thousands)
General and administrative     $   12,135    $ 6,855    $ 5,280    77.0 %
Percentage of total revenue          67.3 %     63.2 %


General and administrative expenses increased by $5.3 million, or 77.0%. This
increase was primarily due to a $3.1 million increase in employee-related costs
driven by higher headcount and a $1.7 million increase in professional fees
related to legal, audit, accounting, recruiting and consulting activities due to
an increase in underlying business activity, including IPO preparation costs and
public company operating costs, and an increase of $0.6 million in business
insurance. The increase was partially offset by a net decrease of $0.1 million
in other general and administrative expenses.

Other income (expense)

Interest expense


Interest expense for the nine months ended September 30, 2021 and 2020 was $2.6
million and $2.5 million, respectively. The increase of $0.1 million, or 6.8%,
was primarily due to a larger long-term debt principal balance incurring
interest expense during 2021.

Change in fair value of preferred stock warrant liability


The change in fair value of preferred stock warrant liability was a loss of
$19.6 million for the nine months ended September 30, 2021, compared to a gain
of $0.5 million for the nine months ended September 30, 2020. The change was due
primarily to an increase in the fair value of the underlying preferred stock,
which is used to determine the value of preferred stock warrants, to reflect the
IPO price. The increase in fair value was recorded upon the IPO prior to the
conversion to Class A common stock warrants and reclassification to equity.

Loss on extinguishment of debt



The loss on extinguishment of debt was $3.1 million for the nine months ended
September 30, 2021, compared to $2.9 million for the nine months ended
September 30, 2020. The $3.1 million loss is comprised of a $1.8 million
prepayment penalty, $1.1 million in expense related to unamortized discounts,
and $0.2 million in unamortized prepaid facility fee and other charges, and was
incurred as a result of the repayment of the 2020 Term Loan. We determined the
loss on extinguishment of debt to be the difference between the reacquisition
price of the debt and net carrying value of the extinguished debt. The loss for
the nine months ended September 30, 2020 is comprised of unamortized issuance
costs, unamortized prepaid commitments fees, and early payment fees, and was
incurred as result of the conversion of the 2020 Convertible Notes into Series
C1 Preferred Stock in April 2020.

Other income (expense)


Other expense was $0.8 million for the nine months ended September 30, 2021
compared to less than $0.1 million income for the nine months ended September
30, 2020. The increase was due to the expense related to the Exit Fee described
in Note 16 to our condensed consolidated financial statements.

Liquidity and capital resources



Since our inception, we have incurred significant operating losses. To date, we
have funded our operations primarily through proceeds from sales of redeemable
convertible preferred stock, proceeds from our IPO, borrowings under loan
agreements and revenue from sales of our products, services and contracts.

As of
September 30, 2021, we had

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cash and cash equivalents of $219.6 million. In July 2021, we completed our IPO
and received net proceeds of approximately $143.8 million. Additionally, in
August 2021, the underwriters exercised their overallotment option in part which
resulted in net proceeds of approximately $20.2 million. We believe that our
cash and cash equivalents will enable us to fund our operating expenses and
capital expenditure requirements for at least twelve months following the date
these condensed consolidated financial statements were issued.

Cash flows



The following table summarizes our sources and uses of cash for each of the
periods presented:


                                                                    Nine Months Ended September 30,
                                                                       2021                  2020

Net cash used in operating activities                            $       (42,077)      $       (25,825)
Net cash provided by (used in) investing activities                        13,769              (25,546)
Net cash provided by financing activities                                 218,001                64,185

Net increase in cash and cash equivalents and restricted cash $ 189,693 $ 12,814

Operating activities


During the nine months ended September 30, 2021, operating activities used $42.1
million in cash, primarily resulting from our net loss of $58.9 million, net
cash used by changes in our operating assets and liabilities of $8.6 million,
which were partially offset by non-cash charges of $25.4 million, which included
a non-cash change in fair value of preferred stock warrant liability of $19.6
million and debt extinguishment loss of $3.1 million. Net cash used by changes
in our operating assets and liabilities for the nine months ended
September 30, 2021 consisted primarily of increases in inventory of $5.2 million
driven by an increase in finished good and raw material inventory to support
increased production volume and to build safety stock, an increase in prepaid
and other assets of $2.6 million driven by an increase in prepaid business
insurance, as well as a decrease in accounts payable of $2.2 million and
deferred revenue of $0.5 million. The cash used by operating assets and
liabilities was partially offset by an increase in accrued expenses and other
liabilities of $2.6 million, and an increase long term deferred rent of less
than $0.1 million.

During the nine months ended September 30, 2020, operating activities used $25.8
million in cash, primarily resulting from our net loss of $25.7 million, and net
cash used by changes in our operating assets and liabilities of $5.4 million,
which were partially offset by non-cash charges of $5.3 million, which included
a non-cash loss on extinguishment of debt of $2.9 million. Net cash used by
changes in our operating assets and liabilities for the nine months ended
September 30, 2020 consisted primarily of increases in accounts receivable of
$2.0 million, increase in inventory of $2.5 million to support increased
production volume and to build safety stock, an increase in prepaid expenses and
other current and long-term assets of $1.2 million, decreases of $1.6 million in
accounts payable, and a decrease in prepaid and other current assets of $0.3
million. The cash used by operating assets and liabilities was partially offset
by an increase in deferred revenue of $1.3 million and accrued expense and

other
liabilities of $0.6 million.

Investing activities

During the nine months ended September 30, 2021, net cash provided by investing
activities was $13.8 million, maturities of investments of $15.0 million, net of
purchases of property and equipment of $1.3 million.

During the nine months ended September 30, 2020, net cash used in investing activities was $25.5 million, consisting of purchases of investments of $25.0 million and purchases of property and equipment of $0.6 million.

Financing activities



During the nine months ended September 30, 2021, net cash provided by financing
activities was $218.0 million, consisting of net proceeds from the IPO of $165.5
million, net proceeds of $79.7 million from the issuance of

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redeemable convertible preferred stock in March 2021 and $0.8 million proceeds
from issuance of restricted common stock purchased by an employee and stock
option exercises. The proceeds were partially offset by the repayment of the
2020 Term loan of $26.2 million and payment of debt extinguishment fees of $1.9
million in September 2021.

During the nine months ended September 30, 2020, net cash provided by financing
activities was $64.2 million, consisting primarily of net proceeds of $49.9
million from the issuance of redeemable convertible preferred stock in April
2020, $9.5 million proceeds from issuance of convertible notes in February 2020,
and $25.0 million in proceeds from the issuance of long-term debt in May 2020.
Partially offsetting the proceeds from financing activities were $18.0 million
for the repayment of term loans, $1.4 million payments to extinguish debt, and
$0.9 million in payment of debt issuance costs.

Long-term debt



In May 2020, we entered into the 2020 Term Loan which provides for borrowings of
an initial $25.0 million tranche upon closing and options to borrow up to an
aggregate of $35.0 million in two additional tranches of $20.0 million under the
second tranche, or the Term B Loan, and $15.0 million under the third tranche,
or the Term C Loan, subject to certain Growth Direct system sales milestones.

At closing, we issued warrants to purchase 1,195,652 shares of Series C1 Preferred Stock to the lender with an exercise price of $1.15 per share. We paid a $0.8 million facility fee in connection with the 2020 Term Loan.

The 2020 Term Loan's interest rate could be elected each quarter by us, as either (a) 12%, up to 7% of which may be Payment in Kind, or PIK, interest or (b) 13% PIK interest.



In September 2021, we repaid the 2020 Term Loan and incurred a debt
extinguishment loss of $3.1 million, which was comprised of a $1.8 million
prepayment penalty, $1.1 million in expense related to unamortized discounts,
and $0.2 million in unamortized prepaid facility fee and other charges. For
additional information on the 2020 Term Loan, see Note 9 -Long-term Debt to our
condensed consolidated financial statements.

Contractual obligations and commitments



In October 2013, we entered into an operating lease for office and manufacturing
space in Lowell, Massachusetts, which expires in July 2026. The terms of the
lease include options for a one-time, five-year extension of the lease and early
termination of the lease in July 2024 as well as a $0.7 million tenant
improvement allowance which has been drawn down in full. Future minimum
commitments under this lease through July 2026 are $2.3 million and $2.6 million
as of September 30, 2021 and December 31, 2020, respectively.

In December 2016, in connection with the amendment of a then-outstanding loan
agreement with the lender, we entered into an agreement under which we are
obligated to pay the lender an exit fee in the amount of $0.8 million in the
event of a "qualifying exit event" prior to December 31, 2026. As defined in the
agreement, a "qualifying exit event" includes but is not limited to a
liquidation, merger, sale or change of control of the company or a public
offering of its common stock. No amounts were accrued at December 31, 2020 as a
"qualifying exit event" was not deemed probable. The IPO was a qualifying event
and we expensed and paid the exit fee in July 2021.

In March 2020, we entered into an agreement with a supplier to secure future
supply of certain materials used in the manufacturing of our Growth Direct
systems. As of September 30, 2020, we had committed to minimum payments under
these arrangements totaling $0.9 million through December 31, 2022. We had $0.3
million and $0.1 million accrued for the supply agreement as of
September 30, 2021 and December 31, 2020, respectively.

In December 2020, we entered into a non-cancelable agreement with a service provider for software as a service and cloud hosting services. As of September 30, 2021, we had committed to minimum payments under these arrangements totaling $1.1 million through January 31, 2026. There were no amounts accrued for this agreement as of September 30, 2021 and December 31, 2020.



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In June 2021, we entered into a Sublease agreement for office and manufacturing
space in Lexington, Massachusetts, which expires in June 2029. The Sublease
agreement includes an option to terminate the sublease in July 2026, subject to
an early termination fee. Monthly rent payments are fixed and future minimum
lease payments over the term of the sublease is $5.6 million. We also have the
right to use furniture and equipment specified in the Sublease agreement for an
additional $0.6 million in future payments over the term of the sublease with
the option to purchase the furniture and equipment at the end of the sublease
term. Concurrent with entering into the Sublease agreement, we executed an
Option Agreement with the property owner which provides us the option to enter
into a new direct lease for the Lexington facility for an additional five-years
following expiration of the Sublease.

For additional information on our contractual obligation and commitments please see Note 16 - Commitments and Contingencies to our condensed consolidated financial statements.

Seasonality



Our revenues vary from quarter to quarter as a result of factors such as our
customers' budgetary cycles and extended summer vacation periods that could
impact our ability to deliver products and provide onsite services to our
customers during those periods that could impact our ability to deliver product
and provide onsite services to our customer during those periods. We expect this
volatility to continue for the foreseeable future, which may cause fluctuations
in our operating results and financial metrics. However, trends may vary in the
future as our revenue mix shifts from non-recurring to recurring revenues.

Critical accounting policies and significant judgments and estimates



Our condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of our consolidated financial statements and related disclosures
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, costs and expenses, and the disclosure of contingent assets
and liabilities in our consolidated financial statements. Our estimates are
based on our historical experience, known trends and events and various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. We evaluate
our estimates and assumptions on an ongoing basis. Our actual results may differ
from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in Note 2 -
Summary of Significant Accounting Policies to our condensed consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q.
There have been no significant changes in our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
disclosed in the section titled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Prospectus.

Recently issued accounting pronouncements



A description of recently issued accounting pronouncements that may potentially
impact our financial position, results of operations or cash flows is disclosed
in Note 2 - Summary of Significant Accounting Policies to our condensed
consolidated financial statements appearing elsewhere in this Quarterly Report
on Form 10-Q.

Emerging growth company status



The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an
"emerging growth company" such as us to take advantage of an extended transition
period to comply with new or revised accounting standards applicable to public
companies until those standards would otherwise apply to private companies. We
have elected to use this extended transition period for complying with new or
revised accounting standards that have different effective dates for public and
private companies until the earlier of the date we (i) are no longer an emerging
growth company or (ii) affirmatively and irrevocably opt out of the extended
transition period provided in the JOBS Act. As a result, we will not be subject
to the same new or revised accounting standards as other public companies that
are not emerging growth companies, and our financial statements may not be
comparable to other public companies that comply with new or

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revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.



We will cease to be an emerging growth company on the date that is the earliest
of (i) the last day of the fiscal year in which we have total annual gross
revenues of $1.07 billion or more, (ii) the last day of our fiscal year
following the fifth anniversary of the date of the closing of the IPO, (iii) the
date on which we have issued more than $1.0 billion in nonconvertible debt
during the previous three years or (iv) the date on which we are deemed to be a
large accelerated filer under the rules of the Securities and Exchange
Commission.

Further, even after we no longer qualify as an emerging growth company, we may
still qualify as a "smaller reporting company," which would allow us to take
advantage of many of the same exemptions from disclosure requirements, including
reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements. We cannot predict if investors will find our
common shares less attractive because we may rely on these exemptions. If some
investors find our common shares less attractive as a result, there may be a
less active trading market for our common shares and our share price may be more
volatile.

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