Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Basis of Presentation and Summary of Significant Accounting Policies

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for fair presentation, have been included. Interim financial results are not necessarily indicative of results anticipated for the full year.

The preparation of the Company’s unaudited financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited financial statements and accompanying notes. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may significantly differ from these estimates and assumptions. For the year ended December 31, 2023, significant estimates and assumptions include the value of lease liabilities and right-of-use lease assets. There were no changes to the Company's significant estimates and assumptions subsequent to December 31, 2023.

On June 25, 2024, the Company filed a certificate of amendment (the “Reverse Stock Split Amendment”) to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-30 reverse stock split of its common stock (the “Reverse Stock Split”), which became effective at 12:01 a.m. Eastern Time on June 26, 2024. The Reverse Stock Split Amendment does not reduce the number of authorized shares of common stock, which remains at 400,000,000, and does not change the par value of the common stock, which remains at $0.0001 per share. The Reverse Stock Split does not reduce the number of shares of the Company’s Series A Preferred Stock outstanding, which remains at 2,500 shares but is subject to a proportional conversion ratio adjustment. Additionally, the Company’s outstanding equity-based awards and other outstanding equity rights were proportionately adjusted. The Reverse Stock Split was effective for purposes of trading on the Nasdaq Capital Market as of the opening of business on June 26, 2024. Accordingly, all share and per share amounts of common stock for all periods presented in these unaudited financial statements and related notes have been retroactively adjusted to give effect to the Reverse Stock Split.

Summary of Significant Accounting Policies

During the six months ended June 30, 2024, other than the policies described below, there were no changes to the Company’s significant accounting policies as described in Note 2 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets (in thousands):


	June 30,		December 31,
	2024		2023
Cash and cash equivalents	$	30,115	$	16,233
Restricted cash		600		600
Total	$	30,715	$	16,833

Short-term Investments

Short-term investments consisted of U.S. treasury securities at June 30, 2024 and U.S. treasury securities, corporate debt securities and asset-backed securities at December 31, 2023. The Company’s investments in securities are classified as current as they are available for use in current operations. The following tables summarize the short-term investments held by the Company at June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024
	Amortized Cost		Gross Unrealized Losses			Estimated Fair Value
U.S. treasury securities	$	103,163	$	(74	)	$	103,089
Total	$	103,163	$	(74	)	$	103,089


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains (Losses)			Estimated Fair Value
U.S. treasury securities	$	149,129	$	158		$	149,287
Corporate debt securities		8,255		(3	)		8,252
Asset-backed securities		169		-			169
Total	$	157,553	$	155		$	157,708

The following table summarizes the estimated fair value of contractual maturities of available-for-sale debt securities held by the Company at June 30, 2024 and December 31, 2023 (in thousands):


	June 30,		December 31,
	2024		2023
Due within one year	$	103,089	$	157,540
Due after one but within five years		-		168
Total	$	103,089	$	157,708

As of June 30, 2024, the Company considered the nature and number of available-for-sale debt securities in an unrealized loss position. The Company reviews its portfolio of available-for-sale debt securities at least quarterly to determine if any investment is impaired, whether due to changes in credit risk or other potential valuation concerns. Unrealized losses on available-for-sale debt securities at June 30, 2024 were primarily due to changes in market interest rates. The Company does not intend to sell the available-for-sale debt securities that are in an unrealized loss position, and it is not more-likely-than-not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity. Based on the credit quality of the available-for-sale debt securities in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, the Company did not record an allowance for credit losses related to its available-for-sale debt securities at June 30, 2024.

Revenue Recognition

The Company generates revenue from sales of its products, which currently consist of the G4 instrument, related consumable flow cell kits and services. Revenue from instrument sales is recognized generally upon customer acceptance. Revenue from consumables sales is recognized generally upon shipment to the customer. Revenue from services, which are primarily comprised of assurance-type services, is recognized over the applicable service period.

Revenue is recorded net of discounts and sales taxes. The Company invoices its customers for instruments generally upon acceptance, for consumables generally on delivery, and for services generally in advance of the service period. Invoice terms are generally net 30 days. Cash received from customers in advance of revenue recognition is recorded as a contract liability. The Company’s contracts with its customers generally do not include rights of return or a significant financing component.

The Company periodically enters into contracts that include a combination of products and services, which are distinct within the context of the contract and are accounted for as separate performance obligations. The transaction price is allocated to each performance obligation in proportion to its standalone selling price. Until the Company has sufficient volume of historical sales data for each performance obligation, the Company determines the standalone selling price using observable prices when available and with consideration of current market conditions, which is primarily based on prices set by management, adjusted for applicable discounts. The Company then recognizes revenue for each performance obligation as that performance obligations is satisfied, as discussed above.

The Company has entered into instrument arrangements with certain customers, under which the Company provides the G4 instrument at no cost to the customer, other than shipping, and the customer pays for consumables at list price, or at list price plus a mark-up, as consumables are ordered, shipped and invoiced. Revenue is recognized as consumables are shipped to the customer and disclosed within consumables revenue below. The G4 instrument provided to the customer is recorded on the balance sheet as property and equipment and disclosed as instruments at customer sites under Note 6 to these financial statements. Depreciation expense for these instruments is included in cost of revenue. Revenue associated with any lease elements of these arrangements was not material during the three and six months ended June 30, 2024 and 2023.

During the six months ended June 30, 2024, the Company recognized $0.5 million of revenue for G4 instruments and $0.7 million of revenue for G4 consumables and services. Contract liabilities, which consists of deferred revenue, as of June 30, 2024 and December 31, 2023 were $0.2 million and $0.3 million, respectively. As of June 30, 2024, $0.1 million of this balance was classified as current, and the remainder of this balance was classified as noncurrent. Deferred revenue represents the value of performance obligations that have been invoiced but for which revenue has not yet been earned.

For the six months ended June 30, 2024, all of the Company’s revenue was generated within the United States, and the Company generated approximately 57% of revenue from its top three customers.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, restricted cash, cash equivalents and short-term investments. The Company invests its cash equivalents in highly rated money market funds. The Company’s short-term investments consisted of U.S. treasury securities as of June 30, 2024. Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits with financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (“FDIC”). During the periods presented, the Company has not experienced any losses on its cash, restricted cash, cash equivalents or short-term investments.

Long-lived Asset Impairment

Long-lived assets consist primarily of right-of-use lease assets and property and equipment. During the year ended December 31, 2023, the Company identified an indicator of impairment of its long-lived assets due to a sustained decline in the trading price of the Company’s common stock over the preceding year, resulting in the Company’s market capitalization being below its net asset value. Although the Company is confident in the utility of its long-lived assets, and there have been no changes in their intended use, the implied cash flows based on the market capitalization of the Company indicated its long-lived assets may not be recoverable. In determining the fair value of its long-lived assets, the Company used a combination of discounted cash flows and observable market data. As a result of its fair value analysis, the Company recorded a $1.9 million impairment charge on its property and equipment as selling, general and administrative expense in the statement of operations during the year ended December 31, 2023. The above indicator of impairment continued to exist as of June 30, 2024. The Company updated its fair value analysis as of June 30, 2024 and recorded no additional impairment. The Company did not record any impairment loss during the six months ended June 30, 2024 and recorded $1.9 million of impairment losses during the six months ended June 30, 2023.

Recent Accounting Pronouncements

There were no additions to the new accounting pronouncements not yet adopted as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Other amendments to GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.