10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from         to

Commission file number 001-40735

Rockley Photonics Holdings Limited

(Exact name of Registrant as specified in its charter)

Cayman Islands	98-1644526
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3rd Floor, 1 Ashley Road

Altrincham, Cheshire

WA14 2DT, United Kingdom

+44 (0) 1865 292017

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary shares, $0.000004026575398 par value per share	RKLY	New York Stock Exchange
Warrants, each whole warrant exercisable for one ordinary share at an exercise price of $11.50 per share	RKLY.WS	New York Stock Exchange

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The aggregate market value of voting stock held by non-affiliates of the Registrant on August 12, 2021, based on the closing price of $15.33 for shares of the Registrant’s ordinary shares as reported by the New York Stock Exchange, was approximately $1.2 billion. The Registrant has elected to use August 12, 2021, which was the date of its initial listing of ordinary shares, as the calculation date because on June 30, 2021 (the last business day of the Registrant’s most recently completed second fiscal quarter), the Registrant was a privately held company.

As of March 3, 2022, there were 128,470,241 shares of the Registrant's ordinary shares, par value $0.000004026575398, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders are incorporated herein by references in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended December 31, 2021.

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TABLE OF CONTENTS

	Page
Cautionary Note Regarding Forward-Looking Statements
Risk Factor Summary
Part I
Item 1. Business	1
Item 1A. Risk Factors	21
Item 2. Properties	50
Item 3. Legal Proceedings	50
Item 4. Mine Safety Disclosures	50
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	51
Item 6. Selected Financial Data	51
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	65
Item 8. Financial Statements and Supplementary Data	66
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	102
Item 9A. Controls and Procedures	102
Item 9B. Other Information	103
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	103
Part III
Item 10. Directors, Executive Officers and Corporate Governance	104
Item 11. Executive Compensation	104
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	104
Item 13. Certain Relationships and Related Transactions, and Director Independence	104
Item 14. Principal Accounting Fees and Services	104
Part IV
Item 15. Exhibits, Financial Statement Schedules	105
Item 16. Form 10–K Summary	106
Signatures	107

    

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Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding Rockley Photonics Holdings Limited’s (the “Company”) future expectations, beliefs, plans, prospects, objectives, and assumptions regarding future events or performance, as well as the Company’s strategies, future operations, financial position, and estimated future financial results and anticipated costs. The words “anticipate,” “believe,” “continue,” “could,” “enable,” “estimate,” “eventual,” “expect,” “future,” “intend,” “may,” “might,” “opportunity,” “outlook,” “plan,” “possible,” “position,” “potential,” “predict,” “project,” “revolutionize,” “seem,” “should,” “trend,” “will,” “would,” and other terms that predict or indicate future events, trends, or expectations, and similar expressions or the negative of such expressions may identify forward-looking statements, but the absence of these words or terms does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Annual Report on Form 10-K are based on information available as of the date of this Annual Report on Form 10-K, and current expectations, forecasts, and assumptions, (whether or not identified herein), and involve a number of risks and uncertainties. Accordingly, forward-looking statements in this Annual Report on Form 10-K should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Forward-looking statements in this report include, but are not limited to, statements regarding the following:

• Rockley’s ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

• Rockley’s financial and business performance following the Business Combination, including anticipated financial outlook or information and business metrics;

• Rockley’s strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects and plans;

• the implementation, market acceptance, and success of Rockley’s business model;

• developments and expectations relating to Rockley’s competitors, target markets, and industry;

• Rockley’s future capital requirements and sources and uses of cash;

• Rockley’s ability to obtain funding for its product development plans, execution of its business strategy, and its operations;

• Rockley’s business, product development plans, and opportunities;

• the outcome of any known and unknown litigation and regulatory proceedings;

• Rockley’s anticipated financial outlook or information, anticipated growth rate, and market opportunities;

• Rockley’s plans to commercialize its products and services, and anticipated timing thereof;

• Rockley’s expectations as to when it may generate sufficient revenue from the sale of its products and services to cover expansion plans, operating expenses, working capital, and capital expenditures;

• the development status and anticipated timeline for commercial production of Rockley’s products;

• Rockley’s plans for products under development and future products and anticipated features and benefits thereof;

•the status and expectations regarding Rockley’s customer and strategic partner relationships, and potential customer and strategic partner relationships;

• the total addressable markets for Rockley’s products and technology;

• the ability of Rockley to increase market share in its existing markets or any new markets it may enter;

• Rockley’s ability to obtain any required regulatory approvals, including any required Food and Drug Administration (“FDA”) approvals, in connection with its anticipated products and technology;

• Rockley’s ability to maintain an effective system of internal control over financial reporting;

• Rockley’s ability to maintain and protect its intellectual property;

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• Rockley’s success in retaining or recruiting, or changes required in, officers, key employees, or directors; the ability of Rockley to manage its growth effectively;

• the ability of Rockley to achieve and maintain profitability in the future;

• Rockley’s sale of ordinary shares to Lincoln Park pursuant to the terms of the Purchase Agreement and its ability to register and maintain the registration of the shares issued and issuable thereunder;

• Rockley’s anticipated use of the net proceeds from the potential sale of ordinary shares to Lincoln Park; and

• the impact of the COVID-19 pandemic.

Forward-looking statements are subject to several risks and uncertainties (many of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

•the Company’s ability to achieve commercial production of its products and technology, including in a timely and cost-effective manner;

•the Company’s ability to achieve customer design wins, convert memoranda of understanding and development contracts into production contracts, and achieve customer acceptance of its products and technology;

•risks related to purchase orders, including the lack of long-term purchase commitments, the cancellation, reduction, delay, or other changes in customer purchase orders, and if and to the extent customers seek to enter into licensing arrangements in lieu of purchases;

•the Company’s history of losses and need for additional capital and its ability to access additional financing to support its operations and execute on its business plan, as well as the risks associated with any future financings;

•legal and regulatory risks, including those related to its products and technology and any threatened or actual litigation;

•risks associated with its fabless manufacturing model and dependency on third-party suppliers;

•the Company’s reliance on a few significant customers for a majority of its revenue and its ability to expand and diversify its customer base;

•the Company’s financial performance;

•the impacts of COVID-19 on the Company, its customers and suppliers, its target markets, and the economy;

•the Company’s ability to successfully manage growth and its operations as a public company;

•fluctuations in the Company’s share price and the Company’s ability to maintain the listing of its ordinary shares on the New York Stock Exchange ("NYSE");

•the Company’s ability to anticipate and respond to industry trends and customer requirements;

•changes in the Company’s current and future target markets;

•intellectual property risks;

•the Company’s ability to compete successfully;

•market opportunity and market demand for, and acceptance of, the Company’s products and technology, as well as the customer products into which the Company’s products and technology are incorporated;

•risks related to international operations;

•risks related to cybersecurity, privacy, and infrastructure;

•risks related to financial and accounting matters;

•general economic, financial, legal, political, and business conditions and changes in domestic and foreign markets;

•the Company’s ability to realize the anticipated benefits of the Business Combination (as defined herein) and costs associated with the Business Combination;

•statements of belief and any statement of assumptions underlying any of the foregoing;

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•the Company’s ability to sell ordinary to Lincoln Park pursuant to the terms of the Purchase Agreement and its ability to register and maintain the registration of the shares issued and issuable thereunder;

•the Company’s anticipated use of the net proceeds from the potential sale of shares of ordinary shares to Lincoln Park; and

•changes adversely affecting the businesses or markets in which the Company is engaged, and other factors described under the heading “Risk Factors” herein and in other documents the Company files with the Securities and Exchange Commission (the “SEC”) in the future.

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RISK FACTOR SUMMARY

The following risk factor summary should be read together with the more detailed discussion of risks and uncertainties set forth in the “Risk Factors” section of this report.

Risks Related to the Company’s Business and Industry; Customer-Related Risks

•If the Company does not fully develop or commercialize its products and services, or if such products and services experience significant delays, the Company’s business, financial condition, and results of operation will be materially and adversely affected;

•The Company has a history of recurring losses and a significant accumulated deficit, which raises substantial doubt about its ability to continue as a “going concern.” The Company expects to incur significant research and development expenses and devote substantial resources to commercializing new products, which could increase its losses and negatively impact its ability to achieve or maintain profitability;

•If the end products into which the Company’s products are incorporated are not fully developed and commercialized or do not achieve widespread market acceptance, or if such products experience delays, cancellations, or reductions, or if the Company’s products are not selected for inclusion in its customers’ end products, are not adopted in other industry verticals or use cases, or are not adopted by leading consumer and medical device companies, the Company’s business will be materially and adversely affected;

•Changes to our product offerings (cancellation of a product line or significant changes in requirements)

•The Company’s forecasts and projections are based upon assumptions, analyses, and internal estimates developed by the Company’s management. If these assumptions, analyses, or estimates prove to be incorrect or inaccurate, the Company’s actual operating results may differ materially from those forecasted or projected;

•The Company expects its results of operations to fluctuate on a quarterly and annual basis, which could cause its share price to fluctuate or decline;

•If the Company is unable to manage its growth or scale its operations, its business and operating results could be materially and adversely affected;

•Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates (for example on cost, volume, and ASP) that may not prove to be accurate;

•The Company’s international operations expose it to operational, financial, and regulatory risks, which could harm the Company’s business;

•The Company is susceptible to supply shortages, long lead times for components, and supply changes, any of which could disrupt its supply chain and could delay deliveries of its products to customers, which in turn could adversely affect the Company’s business, results of operations, and financial condition;

•If the Company is unable to sell its products to its target customers, including large corporations with substantial negotiating power, or is unable to enter into agreements with customers and suppliers on satisfactory terms, its prospects and results of operations will be adversely affected;

•The Company currently depends on a few large customers for a substantial portion of its revenue. The loss of, or a significant reduction in, orders from the Company’s customers, or the Company’s failure to diversify its customer base, could significantly reduce its revenue and adversely impact the Company’s operating results;

•Because the Company does not anticipate long-term purchase commitments with its customers, orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes the Company to inventory risk, and may cause its business and results of operations to suffer; and

•The Company’s business depends substantially on the efforts of its executive officers, including its Chief Executive Officer and founder, Dr. Andrew Rickman.

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Regulatory, Intellectual Property, Infrastructure, Cybersecurity and Privacy Risks

•The Company’s failure to comply with applicable governmental export and import control laws and regulations, including those related to the use, distribution, and sale of its products, U.S. Food and Drug Administration clearance or approval requirements, or privacy, data protection, and information security requirements in the jurisdictions in which the Company operates could materially harm its business and operating results;

•The Company may not be able to adequately protect or enforce its intellectual property rights or prevent unauthorized parties from copying or reverse engineering its products or technology. Further, the Company’s intellectual property applications, including patent applications, may not be approved or granted; and

•A network or data security incident or disruption or performance issues with the Company’s network infrastructure could harm its brand, reputation, and business, as well as its operating results.

Risks Related to Financial and Accounting Matters

•The Company’s failure to raise additional capital or generate the significant capital necessary to expand its operations could reduce its ability to compete and could harm its business; and

•In preparing the Company’s consolidated financial statements, the Company makes good faith estimates and judgments that may change or turn out to be erroneous, which could adversely affect the Company’s operating results.

Risks Related to Being a Public Company, our Ordinary Shares, and General Risks

•The requirements of being a public company may strain the Company’s resources, divert management’s attention, and affect its ability to attract and retain qualified board members;

•Our share price may be volatile and sales of substantial volumes of our ordinary shares into the public market or the perception that such sales may occur could cause our share price to decline, including substantially; and

•The global COVID-19 pandemic could harm the Company’s business and results of operations.

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PART I

Item 1.Business

INFORMATION ABOUT ROCKLEY

The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this section, the terms “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan,” “anticipate,” “seek,” “future,” “strategy,” “likely,” or the negative of these terms, and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these or any other forward-looking statements. These risks and uncertainties include, but are not limited to, those risks set forth under “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on current expectations and reflect management’s opinions only as of the date hereof. These forward-looking statements speak only as of the date of hereof. Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Rockley®, RayDriver™, RPFabric™, RPStack™, Topanga™, LightDriver™, SpectraCloud™, SpectraSense™, VitalSpex™, Bioptx™, and clinic-on-the-wrist™ are among the trademarks, registered trademarks, or service marks owned by Rockley.

Company Overview

We have developed a comprehensive range of silicon photonics technologies that have both the power and the flexibility to support a wide range of potential applications. Our silicon-phonics platform will incorporate several key components to support these solutions, including photonic integrated circuits and associated modules, sensors, and end-to-end solutions. We expect that our immediate focus over the next two years will be on developing and commercializing our products for incorporation in consumer wearables, medical devices, and dedicated solutions for the healthcare market. As testament to the relevance of our product development, we have captured the attention of several consumer electronics companies and, as of the date of this Annual Report on Form 10-K, we have non-binding memoranda of understanding (“MOUs”) or development and supply agreements with entities that collectively account for over 60% market share of wearable devices, including six of the top 10 consumer wearables companies. These agreements will help shape our development of our consumer and medical device capabilities.

The summation of our technologies and manufacturing expertise is Rockley’s “cohesive end-to-end platform.” Our end-to-end platform encompasses photonic integrated circuits (“PICs”) in silicon with integrated III-V devices (devices incorporating certain conductor elements that offer superior electronic properties, such as lasers), application-specific electronic integrated circuits (“ASICs”), and photonic and electronic co-packaging, which are all supported by and coupled with biosensing algorithms, AI, cloud analytics, firmware/software, system architecture, and hardware design.

With this unique sensing platform, we believe we can reshape several important markets of the healthcare sector such as consumer wellness, long term health trend monitoring, patient monitoring, early disease detection, nutrition management and the treatment of certain chronic diseases. Our biosensing platform will enable multiple applications using our non-invasive, continuous, multi-modal biomarker monitoring capabilities.

Our end-to-end solutions include hardware with the potential to detect multiple biomarkers, related algorithms, and cloud-based analytics and artificial intelligence (“AI”). We have shipped early engineering samples to some of our customers to support research and development efforts.

Our platform has been built upon our silicon photonics technology, which enables highly advanced sensor performance, power, resolution, and formfactor. This technology has the potential to allow monitoring devices, currently the size of clinical laboratory machines, to be miniaturized to the size of a wearable device. We believe that this miniaturization capability has the potential to unlock additional applications in consumer electronics and medical devices. Our technology is built on over 190 patents, over eight years of product development, and over approximately $450 million in total funding as of the date of this Annual Report on Form 10-K, through the issuance of convertible loan notes and ordinary shares.

Our target biomarkers for consumer healthcare include lactate, alcohol, glucose (indicator), hydration, blood pressure, blood oxygen, and core body temperature, among others. Our lasers will deliver an extremely high level of performance,

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supporting up to 1,000,000 times higher resolution, 1,000 times higher accuracy, and 100 times broader range in wavelengths than existing LED offerings in wearable solutions (based on product analysis undertaken by Rockley comparing the Rockley silicon photonics-based spectrometer chip to existing solutions). With this performance, we believe that Rockley’s platform will be able to address existing applications in consumer wearable and medical devices with significantly higher resolution, accuracy, and range.

We have established a manufacturing ecosystem based upon our wholly-owned, proprietary processes in several areas. We believe that this manufacturing ecosystem will support rapid scalability, providing us with a significant competitive advantage.

As we do not currently have any products in commercial production, our current customer relationships are in the following stages: (a) customers with whom we are “engaged,” or in discussions with, regarding potential product features for incorporation into such customer’s end products, or (b) customers with whom we are “contracted,” where we have non-binding MOUs or development and supply agreements. These MOUs and development and supply agreements provide a general framework for our transactions with the customer and typically provide that we will develop and deliver new products meeting the customer’s specifications. There are no binding purchase commitments under our MOUs and supply agreements. We currently anticipate that sales of our products will be primarily made pursuant to standard purchase orders, which orders may be cancelled, reduced, changed, or rescheduled with little or no notice or penalty. Our ability to grow our business will depend on our ability to attract and retain customers with whom we are engaged in discussions only and successfully transition such customers to contracted customers with whom we have MOUs or development and supply agreements, and to otherwise attract new customers.

Our vision is to address many pressing healthcare concerns using our technology, and we believe that there exists a large market opportunity for our platform. We estimate that the total addressable market (“TAM”) for the consumer wearables, mobile device, and medical device markets is projected to be over $48 billion by 2025, based on data sourced from IDC, as the universe of healthcare and consumer wearable devices incorporating additional sensing capabilities emerges. Our products are being designed for utilization in: (a) medical devices, including blood pressure, body temperature, blood glucose, and alcohol monitoring devices, pulse oximetry, and near infra-red (“NIR”) spectrometers, with an aggregate forecasted TAM of $15.1 billion by 2025, according to the Yole Report, and mobile cardiac telemetry/general patient monitoring patch devices, with an aggregate forecasted TAM of $2.7 billion by 2025, according to the IDtechEx Report; and (b) consumer wearables and mobile devices, including smartwatches, smart earbuds, fitness bands, and mobile phones, which, based on our internal estimates, are expected to have a TAM of $2.7 billion, $3.0 billion, $1.5 billion, and $23.5 billion, respectively, or an aggregate TAM of $30.7 billion, by 2025. We estimated our TAM in the consumer wearables and mobile device sectors by multiplying third-party forecasted total volumes in 2025 for the devices for which our products are being designed, by our currently anticipated and estimated average selling prices for these products. The volume estimate for smartwatches was based on the benchmarked figure forecasted by annual volume for smartwatches for 2022 according to the TrendForce Report. The volume estimate for smart earbuds was based a 20% volume CAGR between 2020-2025, with 2020 annual shipments estimated at 230 million units, according to the TrendForce Report. According to the Yole Report, fitness bands were forecasted to reach 89 million units by 2025. The volume estimates for smartphones were based on multiple third-party forecasted volumes for mobile phones, multiplied by the average selling price.

Product Applications and Development Status

We believe that our innovative and differentiated silicon photonics platform positions us to make photonics-based solutions increasingly pervasive, while unlocking previously unaddressed applications. Consequently, we believe that the potential applications for our technology will be wide-ranging. Leveraging the flexibility and power of our innovative silicon photonics platform, we believe that we are positioned to become a leading supplier of end-to-end solutions (including integrated optical components, algorithms, data analytics, and AI) for dynamic, high-growth market sectors, including consumer sensors, medtech and healthcare.

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Figure 1: Rockley end-to-end sensing platform

To date, we have been engaged in developing customer-specific designs of our silicon photonics chipsets and modules for incorporation into our consumer electronics customers’ end products. We are working with leading customers in the medtech market to deliver a standalone wrist-wearable product for targeted use cases. In parallel, we are shaping and developing our own standard offerings that could have different shapes and form factors. Currently, we do not have any of our own end products in commercial production. We have started delivering samples to strategic customers, and we intend to deliver final samples and begin production of these products in the second half of 2022. During 2022, our aim is to build a collaboration model for our AI/analytics cloud platform before proceeding to a commercial launch of a subscription platform, planned for the first half of 2023.

Figure 2: Product development and commercial roadmap

Healthcare: Consumer Wearables

We believe the high-density optical integration capabilities of our platform can personalize healthcare monitoring of multiple biomarkers and can significantly improve how individuals track and monitor their health and well-being. Our VitalSpex™ biomarker sensing platform will address the consumer wearable market. Further, as part of our product offering, we believe that our cloud-based analytics and AI platform will offer further insight by leveraging data collected through our unique and broad sensing platform and will provide meaningful and actionable insights to end users. Our plans for the VitalSpex™ biomarker sensing platform include a Baseline module and a Pro module, each of which will have a wide array of current and potential applications, as shown in the figure below. Depending on the needs of each customer and market trends, multiple generations of products could be built on each of these platforms addressing different set of biomarkers, form factors, performance specifications, and potential use cases.

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Figure 3: Targeted biomarker sensing capabilities

 These products are intended to address the needs of the consumer market and will provide information about general health and wellness. (i.e., they do not require regulatory approval for offered applications and end uses.) As we move forward, we intend to monitor and comply with regulations to the extent they become applicable to us, including any requirements for clearance by the U.S. Food and Drug Administration (FDA) and/or other regulatory bodies.

Healthcare: Medical Devices

Our Bioptx™ healthcare sensing platform will address the medical and professional healthcare market. We plan to incorporate our biomarker sensing technology into existing devices (such as medical patches, wearable bands, and other monitoring devices) to provide additional biomarker sensing capabilities not currently available to consumers. Also, as part of the Bioptx product offering, we intend to deliver a complete standalone finished product with targeted use cases for healthcare and health monitoring.

We believe that these product offerings will enhance point-of-care and remote monitoring and will have the potential to ultimately transform and disrupt the delivery of patient monitoring and healthcare. In the medical device space, we currently anticipate that we will develop two types of devices: an advisory device that will not need regulatory clearance and a clinical device that will need regulatory clearance from the FDA or other regulatory bodies.

These products are still under development. Even though there can be no assurance that these product development efforts will succeed or that, even if developed, these products will be approved by regulators or achieve widespread market acceptance, we believe that there are significant market opportunities in addition to our consumer wearables applications.

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Data Communications: Transceiver Chipsets and Co-Packaged Optics

Data centers, which are the nerve centers of the digital economy, require interconnected communications for which we believe our datacom chipset technology offers several advantages. Business, entertainment, vital medical research, and other aspects of daily life are in many ways connected to hyperscale data centers, which in turn rely on cost-effective, power-efficient optical communication links. Whether incorporated in pluggable optical transceiver modules or in co-packaged optics, we believe hyperscale data centers will benefit from the unique advantages that our silicon photonics platform has to offer. Furthermore, we believe our go-to-market approach of partnering with Transceiver manufacturers and Switch/Networking equipment OEM companies has economic benefits over participating directly in this margin-sensitive market. By selling/licensing our assets/technology, we offer the third party the opportunity to create an economically compelling solution without any margin stacking while Rockley can keep expenses low/minimal and benefit from upfront/ongoing fees. Note that given Jiangsu Hengtong Optic-Electric Co., Ltd. (a shareholder in our joint venture partner) was placed on the “Entity List” by the U.S. Bureau of Industry and Security (BIS) of the U.S. Department of Commerce in December 2021, we have widened our potential partner network significantly and are evaluating various options for this business.

Other Applications

We believe that our silicon photonic platform is suited for delivering the sensing capabilities needed for machine perception and interrogation at depth, which has become increasingly necessary in industrial automation, robotic vision (including surgical applications), safety, and other autonomous applications. Finely tuned light, delivered through a PIC via a free-space aperture or fiber optic interconnect with accompanying detection receiver capabilities, enables substantially better capabilities than previously available technology, such as frequency modulated continuous wave (“FMCW”) LiDAR for automotive safety solutions, as well as future autonomous vehicle offerings. Our team has extensive experience in the design of PICs for use in the LiDAR domain, and we have prototyped the key components of the system and demonstrated their superior performance. Although we believe the inflection point for LiDAR and the automotive market may be approaching, we plan to leverage our core technology readiness and economies of scale from our consumer business to position ourselves for this potential market opportunity.

Market Opportunity

Health and Wellness

There is growing demand for miniaturized, wearable solutions that offer an affordable way to provide key insights into a person’s health and well-being, outside the clinical environment. Delivering relevant insights will require non-invasive, continuous, real-time sensing and measurement of multiple biomarkers, coupled with advanced analytics to interpret the data. We believe that this demand is driven and will continue to be driven by two major market and secular trends:

•Consumer health and well-being awareness. While there is an existing market for athletes in training and for highly active and health-conscious users, there has been an increasing global consumer focus on preventative healthcare, with users desiring greater control and visibility over their own health and well-being. In parallel, amid the proliferation of wearable technologies with emerging health monitoring capabilities, there is greater demand for more sophisticated and comprehensive sensing technology that can measure and track a broad range of conditions and biomarkers. Generating a holistic view of the human body through access to multiple biomarkers will enable a more sophisticated ability to monitor and track general trends of changing health conditions. This has the potential to help physicians identify health conditions and possible disease states earlier and allow for more affordable prevention measures and effective patient treatment, perhaps long before requiring aggressive disease management. More recently, COVID-19 has had a profound impact on the way consumers perceive their need for “at-home” monitoring solutions.

•Treatment of chronic conditions and disease care. With increased life expectancies, a growing number of chronic conditions and diseases has placed a strain on healthcare systems. Furthermore, non-invasive monitoring solutions for chronic conditions have historically been costly and available only in a medical facility. With our potential for delivering individual non-invasive wearable monitoring solutions, we believe that we have a great opportunity to impact patients’ compliance with healthcare guidance and subsequent efficient treatment of patients, which will lead to better quality of life and drastic reductions in the overall cost of healthcare. Non-invasive, continuous monitoring also has the potential to detect and possibly prevent chronic conditions and diseases at a much earlier stage, resulting in reduced overall healthcare cost.

We believe that existing monitoring and sensing technologies are not capable of delivering on the needs of consumers and healthcare professionals. Meeting these needs require solutions that provide access to a broad range of biomarkers non-invasively; that can be miniaturized and operate with power low enough to be integrated into consumer wearables, medical

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patches, and other compact form factors; and that can scale cost effectively to high volumes. We believe that our silicon photonics-based platform is poised to serve at the confluence of the above two market and secular trends.

Beyond these opportunities, we believe there may be significant potential for us in the field of genomics. As the field of genomics grows, as shown in the development of personalized medicines and treatment, the value and effectiveness are enhanced when genomic information is combined and processed along with continuous biomarker monitoring for the users. We believe this emerging field could play to the strengths of our platform and potentially represents a high-value growth opportunity for the future.

Data Communications

Datacenter operators continue to build and upgrade their datacenter infrastructure to meet the continuing growth in public, private, and hybrid cloud capacity. As these datacenters rely heavily on fiber optics to interconnect compute, storage, accelerators and other resources, this trend is reflected with substantial growth in demand in the high-speed Ethernet optics. LightCounting forecasts that the market for Ethernet optics will grow from approximately $3.0 billion in 2018 to approximately over $8.0 billion in 2026. The market segment that we are primarily targeting comprises 400Gb/s and 800Gb/s modules and their addressable market are expected at a CAGR of approximately 35%, according to LightCounting’s forecasts. We believe our silicon photonics platform is well positioned to address this market with highly integrated Si PICs and class leading III-V technology to implement the optical functionality required for such transceiver modules. We believe that our platform will provide a substantial cost advantage over conventional discrete-optics-based solutions, as well as over competing integrated photonics solutions due to our platform’s inherent benefits.

Competitive Advantages

We believe our silicon photonics solutions and technology offer the following key healthcare monitoring benefits: We believe that we have 7 sources of advantage over our competitors in meeting these healthcare needs:

•Superior sensing performance. Our silicon photonics-based spectrometer chip provides up to one million times higher resolution, approximately one thousand times higher accuracy, and approximately one hundred times broader spectral range than existing LED-based solutions, based on product analysis undertaken by Rockley comparing the Rockley silicon photonics-based spectrometer chip to existing LED-based solutions. We believe that our unique silicon photonics technology and the entire product ecosystem we are developing will make our end-to-end offerings in the health and wellness domain difficult to replicate. Current optical-based sensing solutions rely on LED-based sensing (PPG signals for SpO2, heart rate, heart rate variability, breath rate, and blood pressure). However, there are many biomarkers present in the body (such as in blood or interstitial fluid) that are not detectable in the visible LED range. We believe that our silicon photonics technology delivers several ingredients that will be required to bring a powerful and meaningful product into the healthcare market: the accuracy and width of our wavelength span in the infrared spectrum, the capability of our silicon photonics solutions to integrate many wavelengths, and the high signal-to-noise ratio (“SNR”) generated by our chips.

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Figure 4: Enabling a new class of sensor by combining visible light and infrared

•Flexible platform architecture. We have designed our platform from the ground up and, leveraging our team’s extensive experience, have developed a highly flexible platform architecture. As a result, we believe our innovative platform architecture will allow us to easily configure core building blocks to produce a wide range of functional components and modules for high-volume applications across a broad range of market sectors.

•Differentiated biomarker sensing algorithms and analytics. Our biomarker detection algorithms are optimized for our unique and optimized hardware technology platform. We believe that the data analytics and biomarker processing capabilities of our AI / cloud offering will further expand our ability to offer additional insights into a person’s health.

•Deep understanding of market opportunity and customer priorities. We are developing many applications and systems with our silicon photonics solutions that are driven by industry leaders in the consumer sensors, healthcare, and data communications markets. Through our established relationships with industry leaders, we have consistently demonstrated our ability to address their technological challenges. As a result, we have signed memoranda of understanding and have contracted with several industry leaders in wearable consumer technology to establish product specifications and desirable features. We believe we are well-positioned to develop high-volume optical sensing modules and algorithms for their emerging architectures. We have ongoing, collaborative discussions with consumer wearables, healthcare, and communication companies and original equipment manufacturers (“OEM”) and module and component vendors to address their next-generation product offering to end users.

•Fabless, scalable business model with manufacturing process expertise and ownership. We plan to operate in a fabless business model by using third-party foundries to manufacture and test our products. We believe that outsourcing our product manufacturing and test processes and procedures simplifies our operations, significantly reduces capital commitments, and provides greater flexibility to respond to new market opportunities and scale with our customer demand. We also believe this approach will allow us to invest and focus our resources on proprietary process development and sales and marketing efforts.

•Highly differentiated manufacturing process. Our manufacturing processes in several key areas (PICs, III-V actives, Integration) are unique and well-suited to meeting our customers’ economic and performance needs for their applications. In particular, we believe our silicon PIC process on multi-micron thick Silicon-On-Insulator (“SOI”) is a key differentiator. Our manufacturing processes utilize standard semiconductor manufacturing equipment but are optimized for photonics performance through incorporating innovative features to facilitate easier integration and packaging.

•Extensive intellectual property portfolio. We believe our extensive intellectual property provides us with a significant competitive advantage. Our know-how is based on over 30 years of leadership in the development and commercialization of silicon photonics, and we have established strong and deep technical foundations and expertise for high-volume product delivery that would be difficult for a competitor to replicate.

•Established and committed foundry partner network. We have built a high-volume foundry network comprised of strategic partners who share our growth vision, and our engineering team continues to work to push new boundaries in photonic component manufacturing processes.

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Our high-performance optical sensing products and technology with broad biomarker detection capabilities, combined with the power of our algorithms and AI platform, enable us to target unmet needs and challenges in the health and wellness markets. We have ongoing formal and informal collaborative discussions with industry and technology leaders in consumer sensor, healthcare, and data communications companies, with original equipment manufacturer (“OEMs”), and with module and component vendors concerning the design of architectures and products to address existing and next-generation applications. Based on these interactions, we believe that we are one of a limited number of suppliers to these companies for the type of products we plan to sell, and in some cases, we may be the sole supplier for certain applications.

Our Strategy

Our strategy is to become the leading global provider of sensing products that incorporate integrated optical modules with supporting electronics, software, application algorithms, and cloud-based AI platforms for high-volume and high-margin applications in dynamic high-growth market sectors and for use-case specific opportunities with a focus on medtech and healthcare. Key elements of our strategy include:

•Extend our silicon photonics leadership. We intend, through continuous platform engineering and advanced research and development, to continue driving innovation in the silicon photonics market and to improve the performance of our current solutions across a variety of key metrics, including size, power, and signal quality. Such innovation will be a key to opening new market opportunities.

•Identify and promote new and emerging applications for our technologies. We are actively engaged with our science and technology partners to explore new potential markets and applications for our technology. We intend to continue to collaborate with our partners to understand the challenges in their end-product roadmaps and to demonstrate how our technologies can help them design and enable innovative solutions.

•Develop our product portfolio. Beginning with our first target products in the consumer and medtech domains and for on-the-wrist applications, we intend to develop and broaden our product portfolio by continuing to invest in research and development so we can expand our platform capabilities as well as enhance our existing product roadmap. We are actively conducting research and development on other form factors and domains. We believe our differentiated technology will play an important role in delivering products for remote patient monitoring needs and for other niche markets such as diet and weight management, women’s health, and early detection and monitoring of chronic diseases such as diabetes.

•Continue forming strategic partnerships in products and applications: Working with our partners, we have developed many potential product application opportunities with our unique technology that can be researched and unlocked in the future. Our partners operate in various domains such as hardware development, algorithm development, AI, and clinical research.

•Continue to attract and acquire new customers. We intend to expand our customer base beyond our 17 existing customers in consumer electronics and medtech by focusing on direct dialogue with large strategic accounts, as well as by partnering with large distributors and resellers, when necessary. We believe this multi-track strategy will allow us to provide differentiated solutions to a broad array of customers.

•Sustain margin through expansion of our products into higher-end markets. We intend to use our technological expertise to deliver higher value and high product margins. In addition, we intend to continue to reduce our costs through operational improvements and supply-chain management initiatives.

Our Technology Platform and Product Offerings

Our solutions leverage our developed knowledge of silicon photonics, application science, and our innovative platform architecture to address high-volume applications in the consumer sensors, medtech and healthcare. We believe our leadership position in developing silicon photonics-based sensing solutions is a result of the following core strengths:

•We have developed a unique and proprietary silicon photonics platform technology that addresses a broad set of requirements in the healthcare and wellness industries.

•Our custom multi-micron-waveguide photonics-optimized process with integrated III-V semiconductor actives brings multiple competitive advantages in terms of performance and manufacturability, offering lower waveguide losses, higher waveguide power handling, polarization independence, ubiquitous integration of III-V actives in their native known-good-die form, ultra-broad-band performance, and lower sensitivity to manufacturing variations while enabling compact circuitry with high integration densities.

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Figure 5: Rockley spectrophotometer chip solution, as compared to

conventional LED- and spectrometer-based solutions

Additional key points concerning the photonics technology include the following:

•The optical-loss-per-unit distance is much lower than for other technologies, enabling lower-power solutions and/or larger-scale PICs, which enables a high signal-to-noise ratio and hence high-fidelity signal detection and helps reduce overall power consumption;

•The platform provides broadband performance and is suitable for the visible, short-wave, and mid-infrared bands. This is a key enabler for sensing applications that other platforms cannot serve. Broadband optical performance also enables sensing a large optical spectrum to cover a wide range of measurands;

•The platform is well suited to power-efficient integration of III-V waveguide devices such as lasers and modulators that also have a multi-micron mode size. Low-loss coupling from III-V to Si waveguide drives down power consumption for long battery life;

•A larger waveguide is much less sensitive to manufacturing variations that can affect its shape and hence its refractive index, thereby achieving much better center wavelength registration than small waveguides enabling accurate wavelength filters. The large waveguides also offer a much higher optical power handling capability than small waveguides;

•Rockley's waveguides exhibit low dispersion (low signal distortion) and low polarization dependent loss (simplifying receiver architectures in particular);

•Strong optical confinement enables tight packing of waveguides and sharp waveguide bends, thereby yielding dense layout capability and compact PICs. Compact PIC layouts result in small chip sizes to fit within consumer device form factors and reduce product cost;

•Accurate wavelength targeting enables using many finely-spaced wavelengths for accurate detection;

•Known-good-die integration of active elements improved yields, which leads to cost-effective solutions.

The following are the key components of our end-to-end (full-stack) platform model:

•Photonic integrated circuits in silicon with integrated III-V: The design and large-scale manufacturing of silicon photonic PICs and integration of active “III-V” elements onto these PICs are the foundational competencies of Rockley. These PICs are manufactured using our proprietary and highly differentiated process flow deployed at our foundry partners;

•Application-specific integrated circuits (“ASICs”): The design of electronic ICs to complement our PICs and facilitate their integration into a specific end-product is the second key component of our platform offering. The ICs are designed in

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volume complementary metal-oxide-semiconductor (“CMOS”) or bipolar CMOS (“BiCMOS”) technology nodes using standard design flows and are manufactured at volume-scale foundries;

•Photonic & electronic co-packaging: The next layer of the stack conjoins photonic and electronic ICs into opto-electronic engines through advanced co-packaging technologies, including 2.5D and 3D integration. Such dense integration is key and enables us to achieve the energy efficiency and physical size requirements for our core use cases. We partner with specialized packaging houses to provide the capacity required for serving consumer markets;

•System architecture & hardware design: We have built deep expertise in architecting photonic systems for sensing solutions in healthcare and wellness, machine vision, and data communications. This enables us to go beyond making chips and allows us to deliver higher value-add photonic subsystems, modules, and chipsets that fit seamlessly into our end-product partners’ designs;

•Firmware/software: Any system requires some degree of firmware and software to operate and inter-operate, and our photonic systems are no exception. We have in-house expertise to develop the necessary firmware and software to complement our hardware offerings and facilitate system integration, testing, and monitoring by our customers; and

•Sensing algorithms, AI, and cloud analytics: At the highest level of the stack, we develop algorithms, AI models, and cloud-based infrastructure to gain deeper insights into health and wellness trends from the volume of sensor data collected by our wearable modules.

Figure 6: Rockley cloud analytics and AI

We believe the key benefits that our solutions can provide to our customers are as follows:  

•Broad set of biomarkers with data analytics. Leveraging our unique integrated solution, we enable the detection and monitoring of multiple biomarkers. Analyzing the underlying spectral data with our growing base of machine learning and AI models has the potential to provide further insights into a person’s health;

•Low power and small footprint. In each of the markets that we expect to serve, the power budget of the overall system is a key consideration. Power consumption greatly impacts system operation cost, footprint, and cooling requirements and is increasingly becoming a point of focus for our current customers and for other market participants that we are targeting as future customers. We believe that our silicon photonics solutions enable our customers to implement system architectures that reduce overall system power consumption. Moreover, in many of our applications, we are able to design and deliver semiconductors that have a smaller footprint and therefore reduce the overall system size; and

•Faster time to market. To meet our customers’ time-to-market requirements, we work closely with them early in their design cycles and are actively involved in their development processes. Our hardware, algorithm, data analytics, and AI roadmaps provide flexibility in meeting our customers’ schedules.

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Rockley’s Silicon Photonics Toolbox Elements

Rockley’s proprietary silicon photonics platform covers a unique end-to-end solution, including generation of the light, manipulation of the light (modulation, multiplexing), radiation out of the module, and collection and processing of the returned light. The following provides an overview of the key components of our platform:

•Lasers: Our lasers offer precise wavelength control and robust power efficiency. The waveguide platform allows efficient wafer-scale integration of laser-devices through a flip-chip process;

•Modulators and detectors: We have developed optical modulators and detectors that are ultra-compact, power-efficient and high-speed, capable of handling high data rates and a broad range of wavelengths;

•Combiners and splitters: Our platform is capable of wavelength division multiplexing (“WDM”) and demultiplexing, enabling in excess of 100 wavelengths on a single optical path;

•Fiber optic coupling: Our PIC contains on-chip embedded interfaces to the optical fibers. These interfaces allow the fiber to be passively attached directly to the PIC without external light coupling elements;

•Free-space optics: Our platform allows for efficient light coupling from free space into and out of the photonics circuits, with either edge or perpendicular coupling. This feature enables a broad range of sensing applications;

•Photonic integrated circuits: Our development platform enables integration of light sources, active devices, passive devices, and optical coupling elements into a single compact silicon chip;

•Wafer-scale processing: Our silicon photonics platform enables high throughput wafer-scale processing of monolithic and multi-die structures for chip-on-wafer integration;

•Interface electronics: We have in-house design expertise for custom analog circuitry to translate high-speed data streams into signals that actuate the PICs (drivers) and receive signals from them (amplifiers). This is complemented by our digital design capability for device control, signal processing, and interfaces to our customers systems; and

•Packaged assembly: The assembly of electrical ASICs, PICs, and fiber optics (if needed) into a single, highly integrated product requires a test and manufacturing flow that enables high-volume scale.

Further application-based expertise is focused on the following:

•Tissue optics design: Our sensing module products will include probe and hardware design to optimize sensing through the skin;

•Biomarker application: Our sensing algorithms are being developed through various levels of validation to provide state-of-the-art sensing capabilities, from proof of concept in the lab to clinical validation in human studies; and

•Applied data science: Our AI and cloud analytics will aggregate, analyze, and assess spectral data from our sensing products to extract additional insights and algorithm improvements.

Current Product Offerings

We have developed two separate product offerings to address our target markets: (i) VitalSpex (consume domain); and (ii) Bioptx (healthcare and medtech).

In respect of the VitalSpex biomarker sensing platform:

•We will target applications in the consumer health and wellness industry and expect strong customer engagement in the consumer electronics and wearables market. The VitalSpex platform represents a breakthrough that will empower consumer electronic devices, primarily personal wearables, smartphones and homecare devices, with the capacity for new powerful healthcare and wellness monitoring;

•The VitalSpex line will include a range of hardware and software solutions that enable non-invasive, continuous, and real-time monitoring of multiple biomarkers, from modules and chipsets that can be integrated into a wearable form factor to cloud analytics and artificial intelligence (AI);

•The VitalSpex line will include a Baseline module, which will target the measurement of core body temperature, body, hydration, blood pressure, and more, and a Pro module, which will add the measurement of alcohol, lactate, and glucose trends. Our first health monitoring product offering is expected to launch in the second half of 2022; and

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•The VitalSpex Baseline and Pro modules will each combine existing LED-based optical sensing with Rockley’s proprietary infrared optical sensing to expand the range of biomarkers that wearable devices can measure. Our VitalSpex modules will include the hardware and software capabilities to collect information available and relevant to the target biomarkers.

•We also plan to offer additional cloud-based subscription services that enhance the capabilities of the VitalSpex platform.

In respect of the Bioptx healthcare sensing platform:

•The Bioptx platform will target medical institutions, such as hospitals, research clinics, pharmaceutical companies, medical device manufacturers, and other healthcare providers, offering them the ability to monitor the general health and wellness of individuals. The measurement capabilities of the Bioptx platform the potential to transform healthcare by providing real-time insights into a variety of health conditions and by enabling early detection of multiple disease states;

•The Bioptx platform will include a range of hardware and software solutions that enable non-invasive, continuous, and real-time monitoring of multiple biomarkers, from a stand-alone wearable wristband to cloud analytics and artificial intelligence (AI);

•The Bioptx platform will include Baseline products (for core body temperature, body, hydration, blood pressure, and more) and Pro products (which will add the measurement of alcohol, lactate, and glucose trends). Our first health monitoring product offering is expected to ship in the second half of 2022;

•We also plan to offer additional cloud-based subscription services that enhance the capabilities of the Bioptx platform;

•The intended markets for Bioptx products, including our wristband, are markets in the medical professional healthcare domain (i.e., not consumer) that require an optimized and dedicated solution for health monitoring. tracking, and detection; and

•We expect that our customers will initially use the Bioptx platform to monitor the general wellness of individuals under care or in studies. After products in the Bioptx line receive approval from the FDA or other regulatory bodies, we anticipate that customers will expand product use into preventive and diagnostic care, such as remote patient monitoring and diagnosis.

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Future Product Capabilities

We plan to incorporate our biomarker sensing technology into a range of existing devices, such as patches, wearable bands, and other monitoring devices, to provide additional biomarker measurement capabilities not currently available. We continuously research, evaluate, and prioritize the addition of new biomarkers into our product offerings, with the objective of providing more valuable information and improving health insights. Our broad range of addressable biomarkers are at various stage of validation and demonstration, from proven science to miniaturization. The chart below illustrates a few examples of biomarkers for which we have validated their addressability using its IR wavelengths. 

Figure 7: Lab validation of Rockley’s sensing technology

These biomarkers along a few others we are investigating are key in early detection, prevention, and monitoring of major chronic illnesses, as illustrated in the table below:

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Figure 8: Disease detection and management potential of Rockley’s biomarker sensing platform

These products are still under development, and there can be no assurance that these product development efforts will succeed or that, even if developed, that these products will achieve widespread market acceptance.

Customers

Our customers’ design cycle from initial engagement to volume shipment typically ranges from three to five years, with product life cycles of two years or more. For many of our products, which are technically complex, we must engage early with our customers’ technical staff. To ensure an adequate level of early engagement, our sales, marketing, and development engineers must work closely with our customers and channel partners to understand, identify, and propose solutions to meet their systems’ challenges. We work closely with our customers to anticipate end customer market needs. In some cases, we work with ecosystem partners to better understand market trends and new requirements that are being placed on our end customers.

We believe that our existing commercial relationships with leading consumer and medtech customers validate our unique technology and the business opportunity at hand. Our near-term commercial focus is on a robust pipeline in consumer devices, medical devices, and life sciences companies. We have a sales funnel of over 100 potential customer targets, of which we have started discussions with 54 and entered into contracts with 17. The customers with which we are contracted represent more than 60% of wearable global volumes, six of the top ten wearables companies, and two of the top ten medtech companies. Although our near-term focus through 2024 is on our consumer wearables and medtech strategy, we believe that other markets also represent upside potential.

To date, we have generated revenue primarily from non-recurring engineering (“NRE”) and development services for customer-specific designs of silicon photonics chipsets for incorporation into customers’ end products. Our two largest customers collectively accounted for 82% and 100% of our revenue in 2021 and 2020, respectively. We anticipate that revenue attributable to these customers will fluctuate from period to period, although we expect to remain dependent on these customers for a significant portion of our revenue for the foreseeable future. See “Risk Factors – Customer-Related Risks.” Our current projections anticipate that we will achieve increased revenue beginning in 2023, assuming commercial adoption of our products by consumer device manufacturers in the wearable space.

We work closely with our end customers throughout their design cycles and will develop long-term relationships as our differentiated technology becomes embedded into their products. For example, we currently hold a development and supply agreement with one customer since 2017 and have successfully designed and delivered critical sample chips to them. As a result, we believe we are well-positioned to be designed into their product roadmaps and develop next-generation solutions for their future products. Because many of our target customers or their OEMs are located in North America and Asia Pacific, we anticipate that a majority of our future revenue will come from sales in these regions. Although a large percentage of our sales are made to customers in North America, we believe that a significant number of the systems and devices designed by these

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customers will incorporate our semiconductor products which are then sold to end-users globally. We expect that once our modules are commercially available, we will enter into standard supply agreements with each of these parties.

Manufacturing

Our Proprietary Production and Manufacturing Ecosystem

We have built, and plan to continue to develop, a global manufacturing ecosystem designed with the ability to scale in a rapid and efficient manner. Several key areas within this manufacturing ecosystem run on our proprietary process and manufacturing technologies and are protected by our intellectual property portfolio. We possess end-to-end control over design, manufacturing and packaging processes, algorithms, and software. Our disciplined and systematic documentation and protection of critical know-how, trade secrets, and proprietary information further underpins our manufacturing ecosystem. To the best of our knowledge, there are no other turnkey options with the components and technologies needed to put together our sensing product. In addition to the intellectual property arrangements, we also have commercial exclusivity agreements with some of the key manufacturing ecosystem partners to prevent replication of this capability.

In addition to providing what we believe to be unmatched capabilities at the product level, our platform and the associated technology have been designed from bottom up to consider the relative ease and cost of manufacturing and scaling. Elements like waveguide dimensions for ease of wafer fabrication and high yields, robust and position tolerant coupling strategies for III-V integration, wafer scale back-end activities for III-V manufacturing, and all known good die integration at the module are integral to the product and the process technology. These elements are covered by the intellectual property which we have licensed to partners in our manufacturing ecosystem.

Manufacturing Model Overview

We plan to operate a fabless business model and use third-party foundries and Outsource Assembly & Test (OSAT) contractors to produce our products. In several key areas, our third-party partners operate a proprietary process wholly owned by us and protected by our intellectual property portfolio. This outsourced manufacturing approach allows us to focus our resources on the design, sale, and marketing of our products. In addition, we believe that outsourcing many of our manufacturing and assembly activities provides us with the flexibility needed to respond to new market opportunities and scale for customer demand, simplifies our operations, and significantly reduces our capital commitments.

We believe our fabless model will allow us to scale in a capex efficient manner. We have contracted with global tier-1 foundries, including Skywater (“SW”) for silicon PICs and wafer-scale III-V device integration and testing. This US based foundry is qualified for health, consumer and defense applications and has the capacity to meet our production needs. Our high-volume III-V semiconductor foundry is consumer and telecom qualified, supports very high volumes, and runs fully automated processes at one of the largest wafer scale in III-V manufacturing globally. Finally, our global IC foundry supplier handles the manufacturing of the electronic integrated circuits for our sensing modules. The foundry is used by most major consumer OEMs and is qualified for the ultra-high volume process node that we have chosen.

•Raw Materials and Wafer Supply: The starting raw materials (SOI wafers) for our silicon photonics have been customized by world leading silicon providers for the Rockley proprietary specification. For the active III-V components, we have arrangements in place with the world’s leading epitaxial wafer supplier. We also have volume ready suppliers for commercial off-the shelf-components (“COTS”) that go into the visible sensing and the overall module.

•Wafer Fabrication: Our SOI wafers are converted into fully processed silicon photonics PIC wafers at Skywater. The process used by SW is wholly owned by Rockley and licensed for use by SW only in Rockley products. The process design kit (“PDK”) for this process is developed and maintained by us and constitutes our intellectual property.

For the III-V active components, epitaxial materials are processed into finished wafers at a world leading dedicated III-V foundry making detectors, lasers and LEDs using state-of-the-art wafer-scale levels of automation. We have adapted the base process technology from this foundry to incorporate the previously discussed elements that allow for ease of integration into our platform and ease of manufacturing. These elements are exclusively for use in Rockley products.

Finally, for ASIC manufacturing, we use a standard process node and PDK provided to us by Taiwan Semiconductor Manufacturing Company, Limited. While the manufacturing process is widely used in high volume (good for product economics), the design know-how belongs to Rockley. The custom ASIC matches our silicon photonics platform optimally for low noise, low power and high level of integration.

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•Chipset and module integration: The chipset integration of the III-V active components into the silicon PICs is done at wafer scale and using passive alignment techniques that are uniquely enabled in our platform. Furthermore, we have ensured that the III-V components are in arrays of devices (reduces amount of alignment and integration activities) and on pretested known good die (“KGD”) which ensures very high compounded yields. The process intellectual property (“IP”) is developed and owned by Rockley and the integration is currently done in the UK at pilot production volumes, with plans to outsource higher volume in the future.

The integration of the overall module is in-line with assemblies used for wearables and mobile devices and there are many global suppliers with this capability. We have engaged with leading suppliers that serve Tier-1 consumers in this space and expect to finalize these arrangements for assembly within 2022.

We have development and supply agreements in place with our key suppliers. These agreements cover the development program, economic framework, IP licenses, exclusivity terms and other matters. Although we have commenced long-term supply agreement discussions in parallel with the detailed manufacturing ramp discussions, we do not currently have any long-term supply agreements in place and transact business with our third-party suppliers on a purchase-order basis with no minimum supply obligations on their part. We have designed our manufacturing partner network to be resilient by having multiple sources of supply for several key processes/components and we have plans for the appropriate inventory and stocking strategies to mitigate risks to our ramp plans.

Commitment to Quality

We are committed to excellence by creating class-leading silicon photonics-based products and services. We intend to meet or exceed our global customer expectations by executing the following:

•Creating long-lasting, trusting, and mutually beneficial relationships with customers and partners;

•Establishing a full understanding of our customers’ requirements and ensuring our products and services meet their expectations;

•Building a team of highly trained, empowered, and accountable employees;

•Innovating in the creation of technology that drives our products and services;

•Improving the effectiveness and efficiency of our quality management system through review of results, learning, and enhancement on a continual basis

We achieved ISO 9001:2015 certification in January 2022. We subject our third-party manufacturing contractors to rigorous qualification requirements to meet the high quality and reliability standards required of our products. We carefully qualify each of our partners and their processes. Our engineers work closely with our foundries (we even have teams embedded at partners sites in some critical areas) and other contractors to perfect the in-house processes, increase yield, lower manufacturing costs, and improve product quality. See “Risk Factors – Risks Related to Rockley’s Business and Industry” for a discussion of risks related to the semiconductor industry and Rockley’s manufacturing processes and foundry relationships.

Research and Development

We believe that our future success depends on our ability to develop new products for both existing and new markets, development enhancements to our products once developed or if and when commercially launched, to stay ahead of our competition by being leaders in extending the boundaries of our technologies. As a result, a significant amount of our operating expenses has been allocated towards next-generation platform development. Our research and development efforts are focused primarily on extending the functionality and addressable markets of our integrated photonics platform, as well as continually increasing its performance, efficiency, and volume manufacturing competitiveness. We have assembled a core team of experienced engineers and systems designers with an extremely broad range of skill sets across different disciplines who conduct research and development activities in the United States and various European locations, and we are supported by partnerships with leading research institutions and consumer electronics and medical devices companies. As of December 31, 2021, we had 302 employees globally with over 75% of our workforce focused on research, product development, and engineering.

Competition

The global optical components and full-stack solution market in general, and the consumer sensor, healthcare, and data communications markets in particular are highly competitive. We expect competition to increase and intensify as additional

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companies enter our target markets. Our competitors range from large, international companies offering a wide range of services and optical components, such as LEDs, lasers, detectors, or PICs, to smaller companies specializing in narrow vertical markets. We expect competition in our target markets to increase in the future as existing competitors improve or expand their product offerings and as new competitors enter these markets. However, we believe that we are currently the only provider with the capability to integrate the technologies, features, and performance required by customers in our target markets. We believe that our unique silicon-photonic-based platform and the entire product ecosystem that we have developed around it will make our end-to-end offerings in the health and wellness domain difficult to replicate and provide us with a significant competitive moat. We believe this will be particularly true as we incorporate our AI and cloud-based offerings, currently under development.

Intellectual Property

We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology and intellectual property. As of December 31, 2021, we had 182 issued patents and 298 other patent applications pending worldwide. The 101 issued and allowed patents in the United States expire in the years beginning in 2022 through 2040. Many of our issued patents and pending patent applications relate to sensors and sensor chips, and we have extensive geographic coverage over numerous relevant technology domains.

In addition to our own intellectual property, we also use third-party licensors for certain technologies embedded in our silicon photonics solutions. These are typically non-exclusive contracts provided under paid-up licenses. These licenses are generally perpetual or automatically renewed for as long as we continue to pay any maintenance fees that may be due. To date, maintenance fees have not constituted a significant portion of our annual capital expenditures. We have entered into a number of licensing arrangements pursuant to which we license third-party technologies. We do not believe our business is dependent to any significant degree on any individual third-party license.

We generally control access to and use of our confidential information and trade secrets through the use of internal and external controls, including contractual protections with employees, contractors, and customers. We rely in part on the laws of the United States and international laws to protect our work. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. However, we cannot guarantee that we have entered into such agreements with every such party, and we may not have adequate remedies in case of a breach of any such agreements. Our trade secrets could be disclosed to our competitors or others may independently develop substantially equivalent technologies or otherwise gain access to our trade secrets. Trade secrets can be difficult to protect and some courts inside and outside of the United States are less willing or unwilling to protect trade secrets.

Government Regulation

Healthcare-Related Regulation

Our solutions may be incorporated into multi-application, health-related sensing, and monitoring applications, including healthcare consumer wearables. Accordingly, the end products into which our solutions are incorporated may be subject to FDA and similar or related regulations, and demand for these end products or future regulated products could be adversely affected if such end products do not comply with applicable requirements. Although our target market is consumer wellness rather than medical, we intend to monitor and comply with regulations to the extent they become applicable to us, including any requirements for FDA clearance. Certain healthcare-related products may be regulated by the FDA and corresponding state regulatory agencies in the United States and separate governmental authorities outside of the United States. In the United States, the medical device industry is regulated by governmental authorities, principally the FDA and corresponding state regulatory agencies. Before a new regulated product or a significant modification to an existing medical device may be marketed or sold in the United States, it must comply with FDA Quality Management System regulations, and must obtain regulatory clearance or approval from the FDA, unless an exemption from pre-market review applies. In addition, certain future software functionality, whether standalone or embedded in existing or future devices, may be regulated as a medical device and require pre-market review and clearance or approval by the FDA. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and our end customers may not be able to obtain these clearances or approvals on a timely basis, or at all, for future products. Any delay in, or failure to receive or maintain, clearance or approval for any medical device products under development could prevent us from generating revenue from our solutions incorporated into these products.

Medical devices are also subject to numerous ongoing compliance requirements under the regulations of the FDA and corresponding state regulatory agencies, which can be costly and time consuming. For example, under FDA regulations medical

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device manufacturers are required to, among other things: (i) establish a quality management system to help ensure that their products consistently meet applicable requirements and specifications; (ii) establish and maintain procedures for receiving, reviewing, and evaluating complaints; (iii) establish and maintain a corrective and preventive action procedure; (iv) report certain device-related adverse events and product problems to the FDA; and (v) report to the FDA the removal or correction of a distributed product. If our solutions are incorporated into any medical device products of our end customers and these customers experience any product problems requiring reporting to the FDA or otherwise fail to comply with applicable FDA regulations or the regulations of corresponding state regulatory agencies, it could harm our ability to sell our solutions. In addition, if our end customers in the healthcare market are subject to enforcement actions such as fines, civil penalties, injunctions, recalls of products, delays in the introduction of products into the market, and refusal of the FDA or other regulators to grant future clearances or approvals, it could harm our reputation, business, operating results, and financial condition. In addition, in the United States, the FDA has taken the position that device manufacturers are prohibited from promoting their products other than for the uses and indications set forth in the approved product labeling, and any failure to comply could subject our end customers to significant civil or criminal exposure, administrative obligations and costs, and/or other potential penalties from, and/or agreements with, the federal government.

Government regulations outside the United States have, and may continue to, become increasingly stringent and common. In the European Union, for example, the European Union Medical Device Regulation was published in 2017 and, when it entered into full force in 2020, included significant additional pre-market and post-market requirements. Penalties for regulatory non-compliance could be severe, including fines and revocation or suspension of a company’s business license, mandatory price reductions, and criminal sanctions. Future laws and regulations may have a material adverse effect on our end customers in the healthcare market, which in turn may negatively impact our ability to sell our solutions and otherwise harm our business and financial results.

Export Regulation

Our business activities are also subject to various restrictions under U.S. export and similar laws and regulations, as well as various economic and trade sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Further, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide customers with our products in those countries.

We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies, their employees, and their intermediaries from authorizing, offering, providing, and/or accepting improper payments or other benefits for improper purposes. Although we take precautions to prevent violations of these laws, our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.

New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to technology in the wearables industry generally could result in significant additional compliance costs and responsibilities for our business.

Privacy

We are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data protection, and data security. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws.

In particular, there are numerous U.S. federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data. Such laws and regulations often have changes in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. For example, the General Data Protection Regulation (the “GDPR”), which became effective in May 2018, includes operational requirements for companies that receive or process personal data of residents of the European Union that are broader and more stringent than those previously in place in the European Union. The GDPR includes significant penalties for non-compliance, including fines of up to €20 million or 4% of total worldwide revenue. Additionally, in June 2018, California enacted the California Consumer Privacy Act (the “CCPA”), which became effective in January 2020. The CCPA requires covered companies to provide California consumers with new disclosures and expands the rights afforded consumers regarding their data. Fines for noncompliance may be up to $7,500 per violation. We cannot currently estimate the potential impact of the CCPA on our business or operations.

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Additionally, we rely on various legal mechanisms for transferring certain personal data outside of the European Economic Area, or EEA, including the EU-U.S. Privacy Shield Framework, or Privacy Shield, and EU Standard Contractual Clauses, or SCCs. If we fail or are perceived to fail to meet the Privacy Shield principles or our obligations under the SCCs, or if any of these legal mechanisms for transferring data from the EEA are invalidated by European courts or otherwise become defunct, European Union data protection authorities or the U.S. Federal Trade Commission, or FTC, could bring enforcement actions seeking to prohibit or suspend our data transfers or alleging unfair or deceptive practices. In such cases, we could be required to make potentially expensive changes to our information technology infrastructure and business operations, and we could face legal liability, fines, negative publicity, and resulting loss of business.

Certain health-related laws and regulations such as the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH, may also have an impact on our business. If we are unable to comply with the applicable privacy and security requirements under HIPAA, HITECH, or PCI DSS, or we fail to comply with BAAs that we enter into with covered entities, we could be subject to claims, legal liabilities, penalties, fines, and negative publicity, which could harm our operating results.

Governments are continuing to focus on privacy and data security, and it is possible that new privacy or data security laws will be passed, or existing laws will be amended in a way that is material to our business. Any significant change to applicable laws, regulations, or industry practices regarding our users’ data could require us to modify our services and features, possibly in a material manner, and may limit our ability to develop new products, services, and features. Although we have made efforts to design our policies, procedures, and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes to applicable laws and regulations in this area could subject us to additional regulation and oversight, any of which could significantly increase our operating costs.

We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, and data protection. The costs of compliance with, and other burdens imposed by, the GDPR, CCPA, HIPAA, and similar laws may limit the use and adoption of our products and services, and/or require us to incur substantial compliance costs, which could have an adverse impact on our business. In addition, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us, our end customers, or third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, the failure or perceived failure by our end customers to comply with their privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, damages, penalties, and negative publicity, and could also have an adverse effect on our brand and operating results.

Cybersecurity

We have designed and implemented and continue to maintain a security program consisting of policies, procedures, and technology intended to maintain the privacy, security and integrity of our information, systems, and networks. Among other things, the program includes controls designed to limit and monitor access to authorized systems, networks, and data, prevent inappropriate access or modification, and monitor for threats or vulnerability.

Employees and Human Capital Resources

Our workforce represents a highly regarded team of silicon photonics and measurement science experts under the same organization. A significant number of our employees have advanced degrees, including a large percentage holding PhDs. As of December 31, 2021, we had 302 employees, a large percentage of whom are in technical roles, including engineering.

•The quality of our employees is well recognized in the industry and has a strong and positive impact on our ability to develop and capitalize on our strategic operating model and business plan;

•Our leadership team is recognized for world-leading expertise in silicon photonics design and process, microelectronics design, packaging and test, software and algorithms including cloud and AI, and applications in data communications and medical sensing; and

•We have strong relationship with our employees and have never experienced a work stoppage.

Despite the significant challenges facing the world economy in light of the COVID-19 pandemic, we have remained focused on our business plan and priorities. We intend to continue to focus on:

•Protecting the well-being of our employees and keeping them healthy and engaged;

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•Making our physical workplaces safe and compliant;

•Building out efficient global human resource information systems and processes;

•Recruiting and staff retention for critical skills and competencies;

•Investing in the development of current and future leadership; and

•Creating sustainable operations, while building resilience, efficiency and flexibility into everything, from strategy to work design.

Facilities

Our headquarters are currently located in the United Kingdom. We have premises in Pasadena, California under multiple leases for approximately 18,000 square feet, with most leases for these premises expiring around June 2023. The premises in Pasadena are predominantly used for engineering, finance, and general administration services. We lease a property in San Jose, California of approximately 4,600 square feet under a lease expiring in 2024, which is predominantly used for sales and marketing, finance, and general administration services. To support headcount growth over the past year, we continue to explore options and timing for improving and expanding our facilities. In the United States, we recently expanded our premises in Irvine, California to accommodate our sensor application facility and additional office space and have under multiple leases for approximately 12,000 square feet, all expiring in July 2027. In the United Kingdom, we have a lease on our lab facilities in Wales for approximately 1,733 square feet due to expire in 2024. We also recently entered into a facilities access agreement for new premises at the Tyndall Institute in Cork, Ireland for a new laboratory and office space of approximately 600 square feet. We believe that our current facilities are sufficient to support our operations and growth plans and that additional space, if needed, will be available on commercially reasonably terms.

Website Access to Company’s Reports

Our website address is www.rockleyphotonics.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Disclosure Information

In compliance with disclosure obligations under Regulation FD, we announce material information to the public through a variety of means, including filings with the Securities and Exchange Commission, press releases, company blog posts, public conference calls and webcasts, as well as our investor relations website.

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Item 1A.Risk Factors

Shareholders should carefully consider the following risk factors, together with all of the other information included in this Annual Report on Form 10-K, including the financial statements and notes to the financial statements included herein, before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this Annual Report on Form 10-K. If any of the following risks occur, or if Rockley fail to manage these risks and uncertainties successfully, it may have a material adverse effect on the business, results of operations, or financial condition of Rockley. Further, if any of the following risks or events occur, it could have a material adverse effect on the trading price of the ordinary shares of Rockley. If any of the risks or events described below occur, shareholders may lose all or part of their investment. The risks and uncertainties described in this “Risk Factors” section or elsewhere in this Annual Report on Form 10-K may also be incorrect or may change and should be read together with the financial statements and notes to the financial statements included herein. Additional risks and uncertainties presently unknown to Rockley may also have a material and adverse impact on the company.

As used in the risks described in this subsection, references to “the Company,” “Rockley,” “we,” “us,” and “our,” are intended to refer to the business and operations of Rockley, unless the context clearly indicates otherwise.

Risks Related to Rockley’s Business and Industry; Customer-Related Risks

Rockley has incurred net losses since inception and expects to continue to incur losses for the foreseeable future. If Rockley does not fully develop or commercialize its products and services, including its silicon photonics chipsets, or if such products and services experience significant delays, Rockley’s business, financial condition, and results of operation will be materially and adversely affected and Rockley may never achieve or sustain profitability.

Rockley has to date generated revenue primarily from non-recurring engineering (“NRE”) and development services for customer-specific designs of silicon photonics chipsets for incorporation into its customers’ end products. Rockley incurred a net loss of $168.0 million and $80.3 million for the years ended December 31, 2021and 2020, respectively. For the years ended December 31, 2021 and 2020, Rockley had an accumulated deficit of $400.9 million and $232.9 million, respectively. Rockley believes that it will continue to incur operating and net losses for the foreseeable future, including for a period of time after commercialization of its silicon photonics chipsets, which is not currently expected to begin until the second half of 2022; provided that any such commercialization may occur later than the second half of 2022 or not at all. Even if Rockley is able to successfully develop and sell its products, there can be no guarantee that it will do so within its anticipated timeframe or that its products will be commercially successful. Rockley’s potential future profitability is dependent upon the successful development, commercial introduction, and acceptance of its products and services, including its silicon photonics chipsets for the consumer wearables market and its module applications with biomarker detection capabilities for advanced health metrics. Because Rockley will incur costs to develop and commercialize its products and services, including its chipsets and module applications, before it receives any significant revenue from any sales of such products or services, Rockley’s losses in future periods may continue. Rockley may never achieve or sustain profitability.

Rockley expects to continue to incur operating losses for the foreseeable future as it:

•continues to invest in its technology and its silicon photonics chipsets and modules, as well as its cloud-based analytics subscription service;

•continues to develop innovative solutions and applications for its technology;

•commercializes its silicon photonics solutions;

•continues to invest in its sales and marketing activities and distribution channels;

•invests and improves its operational, financial, and management information systems;

•increases its headcount;

•expands its intellectual property portfolio; and

•enhances internal functions, systems, and infrastructure to support its anticipated transition to a public company.

Rockley has a history of recurring losses and negative cash flows from operations, and a significant accumulated deficit, which raises substantial doubt about its ability to continue as a “going concern.”

Since inception, Rockley has financed its operations primarily through the issuance and sale of convertible loan notes, ordinary shares and revenue received from agreed-upon projects. As of December 31, 2021, Rockley’s cash and cash

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equivalents balance was $36.8 million and it had an accumulated deficit of $400.9 million. Due to Rockley’s history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, its management concluded that there is substantial doubt about Rockley’s ability to continue as a going concern. There have been no adjustments to the accompanying financial statements of Rockley to reflect this uncertainty. Rockley’s ability to continue as a going concern is dependent upon it becoming profitable in the future or obtaining the necessary capital to meet its obligations. Rockley’s determination of substantial doubt about its ability to continue as a going concern could materially limit its ability to raise additional funds through the issuance of equity securities, debt financing or otherwise. There can be no assurance that any such issuance of equity securities, debt financing or other means of financing will be available in the future, or the terms of any such financing will be acceptable to Rockley. Further, there can be no assurance that Rockley will ever become profitable or continue as a going concern.

Rockley is subject to restrictive debt covenants that may limit its ability to finance its future operations and capital needs and to pursue business opportunities and activities.

Rockley’s existing financing agreements contain restrictive covenants, including a requirement to maintain at least $35 million cash on hand, that limit its ability to take certain actions. These restrictions may limit Rockley’s ability to operate its businesses and may prohibit or limit its activity to enhance its operations or take advantage of potential business opportunities as they arise. All of these limitations are subject to significant exceptions and qualifications. These covenants could limit Rockley’s ability to finance its future operations and capital needs and its ability to pursue business opportunities and activities that may be in its interest. If Rockley breaches any of these covenants it may be in default under its indebtedness, which may then become immediately due and payable. Rockley may not have, or be able to obtain, sufficient funds to make these accelerated payments. Rockley’s ability to comply with the provisions of its financing arrangements may be affected by changes in economic or business conditions or other events beyond its control.

If the end products into which Rockley’s products are incorporated are not fully developed and commercialized or do not achieve widespread market acceptance, or if such products experience delays, cancellations, or reductions, Rockley’s business, financial condition, and results of operations will be materially and adversely affected.

Rockley’s success in developing and commercializing its products depends in large part on its customers’ success in developing, commercializing, and achieving widespread market acceptance of their end products that incorporate Rockley’s products. Rockley’s customers may be unable to fully develop and commercialize, or achieve widespread market acceptance of, their end products that incorporate Rockley’s products. Further, these customers may not continue to incorporate Rockley’s products into their end products either in the short or long term. If such customers’ end products are not fully developed and commercialized, fail to achieve or maintain widespread market acceptance, experience delays, or if Rockley’s customers otherwise choose not incorporate Rockley’s products into their end products, Rockley’s business, financial condition, and results of operations will be materially and adversely affected.

If Rockley’s products are not selected for inclusion in its customers’ end products, including products for the consumer health and wellness market, or adopted in other industry verticals or use cases or are not adopted by leading consumer and medical device companies, life sciences companies, or their respective suppliers, Rockley’s business will be materially and adversely affected.

Rockley is currently developing products for use in its customers’ end products, which are in varying stages of development. Many of these products, including products for consumer device, medical device, and life sciences companies, require extensive testing or qualification processes, which involve testing of Rockley’s products in the customers’ end products and systems, as well as testing for reliability. These qualification processes may continue for several months or longer. However, qualification of any of Rockley’s products by a customer does not assure any sales of such product by Rockley to that customer. Even after successful qualification and sales by Rockley of a product to a customer, a subsequent revision in Rockley’s third-party contractors’ manufacturing process or Rockley’s selection of a new supplier may require a new qualification process with Rockley’s customers, which may result in delays in the sale of such product and could also result in Rockley holding excess or obsolete inventory. After Rockley’s products are qualified, it can take several months before the customer commences production of end products that incorporate Rockley’s products. Rockley spends significant time and resources to have its products selected for incorporation into these end products, which is known as a “design win.” If Rockley fails to win a significant number of design wins in its target markets, its business, results of operations, and financial condition will be materially and adversely affected.

Rockley is targeting the deployment of its products in the consumer health and wellness and medical device sectors and any estimates of Rockley’s future results contained in this Annual Report on Form 10-K assume that Rockley will successfully

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commercialize its products and achieve significant market penetration in these sectors. As a result, if Rockley’s products are not selected for inclusion by consumer device and medical device companies or life sciences companies, or their suppliers, Rockley’s actual results may differ materially from its estimates included in this Annual Report on Form 10-K and Rockley’s business would be materially and adversely affected.

Rockley’s limited operating history makes it difficult to evaluate its future prospects and the risks and challenges which may impact its business.

Rockley was founded in 2013, completed development of its advanced sensing platform in 2019, launched its healthcare module offering in 2020, and has not yet fully developed and commercialized any of its products. This relatively limited operating history makes it difficult to evaluate Rockley’s future prospects and the risks and challenges it may encounter. The risks and challenges which may impact Rockley’s future prospects and business include, but are not limited to, its ability to:

•successfully commercialize its products and services, including its silicon photonics chipsets, module applications, and analytics subscription service;

•develop innovative applications for its silicon photonics and sensing technology;

•expand its sales and marketing activities and distribution channels;

•improve its operational, financial, and management information systems;

•attract, hire, integrate, and retain qualified talent to support the growth of its business. This includes increasing headcount to appropriately staff to projected growth;

•protect its intellectual property portfolio;

•enhance internal, systems, functions, and infrastructure to support its anticipated transition to a public company;

•comply with existing and new or modified laws and regulations applicable to its business;

•manage capital expenditures for its current and future products, as well as its supply chain and supplier relationships;

•anticipate and respond to macroeconomic changes and changes in the markets in which it operates;

•effectively manage its growth and business operations, including the impacts of the COVID-19 pandemic on its business; and

•hire, integrate, and retain qualified talent to support the growth of its business.

If Rockley fails to successfully manage the risks and difficulties that it faces, including those associated with the challenges listed above and those described elsewhere in this “Risk Factors Related to Rockley” section, its business, financial condition, and results of operations could be materially and adversely affected. Further, because Rockley has a limited operating history and has not yet commercialized its products, it is difficult to accurately assess its future prospects or financial performance. Rockley has encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If Rockley’s assumptions regarding these risks and uncertainties, which it uses to plan and operate its business, are incorrect or change, or if it does not address these risks successfully, its results of operations could differ materially from its expectations and its business, financial condition, and results of operations could be materially and adversely affected.

Rockley’s estimates and expectations as to its financial performance are based upon assumptions, analyses, and internal estimates developed by Rockley’s management. If these assumptions, analyses, or estimates prove to be incorrect or inaccurate, Rockley’s actual operating results may differ materially from any such estimates and expectations.

Rockley’s estimates and expectations as to its future financial performance included in this Annual Report on Form 10-K are subject to uncertainty and are based on assumptions, analyses, and internal estimates developed by Rockley’s management, all or some of which may not prove to be correct or accurate. If these assumptions, analyses, or estimates prove to be incorrect or inaccurate, Rockley’s actual operating results may differ materially from any such estimates or expectations. We have in the past experienced actual results which varied from our estimates. These assumptions, analyses, or estimates are subject to risks and uncertainties, some of which are outside of Rockley’s control. These risks and uncertainties include, but are not limited to, risks discussed elsewhere in this “Risk Factors Related to Rockley” section and in this Annual Report on Form 10-K, as well as those discussed below:

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•Revenue-related assumptions:

◦Customer contracts and design wins: Rockley’s existing memoranda of understanding (“MOUs”) and development contracts may not ultimately convert into production contracts. In addition, Rockley may be unable to secure design wins from additional customers in a timely manner;

◦Form of customer arrangement: It is possible that instead of entering into agreements with customers for the purchase of a significant amount of Rockley’s products, Rockley may be required to enter into license arrangements with certain customers, any of which would have a significant impact on the revenue Rockley expects to achieve;

◦Timing of launch and delivery: Rockley or Rockley’s customers may encounter delays in the launch or delivery of Rockley’s product or the customer’s end product incorporating Rockley’s product, including due to a customer’s decision to delay the launch of a product, Rockley’s ability to deliver its product in a timely manner to a customer, which in turn may result in the customer canceling a contract, technical challenges, or customer-related delays in its development program;

◦Pricing and volume fluctuation: Rockley may experience pricing and volume fluctuations due to price negotiations, lower than anticipated unit volumes, delays in volume ramp, decreases in average selling prices due to competition or market dynamics, or other factors;

◦Timing and execution of customer agreements: Rockley may face difficulties in meeting customer milestones in a timely manner or achieving required technical specifications. In addition, Rockley may experience execution delays under its NRE programs, including with its largest customer, due to resource constraints or customer delay. Further, to the extent Rockley were to enter into licensing arrangements in lieu of a product sale with a customer, including its largest customer, it could have a significant negative impact on Rockley’s anticipated revenue; and

◦Commercialization of products and services: Rockley must successfully commercialize its products and services, including its silicon photonics chipsets, module applications, and analytics subscription service.

•Production cost-related assumptions:

◦Production volume and ramp: Rockley has in the past, and may in the future experience delays in contract execution, lower than expected manufacturing yields, manufacturing delays, and technical challenges, including if and when Rockley commences commercial production of its products, any of which could negatively impact forecasted production volume and ramp;

◦Production cost: Rockley may be unable to secure the volume pricing or yield cost levels underlying its assumptions and indirect materials and production overhead costs may exceed forecasted amounts; and

◦Inventory and obsolescence: Rockley’s quality, warranty, return merchandise authorization, and inventory obsolescence may exceed forecasted amounts. Rockley may also experience product recalls which are not included in Rockley’s assumptions. Further, Rockley may incur greater than expected costs in connection with its NRE programs.

•Operating expenses and cash utilization-related assumptions: Rockley’s cash utilization may exceed currently anticipated rates due to a variety of factors, including lower than expected revenue, revenue delays, higher than anticipated production and manufacturing costs, operating expenses, and capital expenditures, lower than anticipated average selling prices, greater than anticipated cash needs for internal resources and organic growth, and potential strategic investments and acquisitions not currently anticipated.

Rockley's estimates and expectations may also be based in part on in this Annual Report on Form 10-K the expected size and growth of the markets in which Rockley operates or intends to enter, including the consumer wearables, mobile device, and medical device markets. Such markets may not develop or grow, or may develop and grow at a lower rate than expected, and even if these markets experience the forecasted growth described in this Annual Report on Form 10-K, Rockley may not grow its business at similar rates, or at all. Accordingly, the forecasts and estimates of market size and growth described in this Annual Report on Form 10-K should not be taken as a guarantee or other indication of Rockley’s future growth or results of operations. In addition, these forecasts may be materially and adversely affected by a number of factors outside of Rockley’s control, including, but limited to, factors associated with the ongoing COVID-19 pandemic.

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The strategic initiatives Rockley has undertaken or may undertake in the future may be more costly than currently anticipated and Rockley may not generate sufficient revenue to offset the costs of these initiatives, which in turn would negatively impact Rockley’s ability to achieve and maintain profitability.

Rockley continues to invest in initiatives designed to grow its business, including:

•partnering with customers and potential customers to develop and commercialize Rockley’s products;

•investing in research and development;

•investing in its workforce, including its engineering talent;

•expanding its sales, marketing, and distribution efforts;

•investing in new applications and markets for its products;

•partnering with third-parties to develop manufacturing processes; and

•investing in legal, accounting, and other administrative and internal functions necessary to support its operations as a public company.

These initiatives may be more costly than anticipated and Rockley may not generate sufficient revenue to offset the costs of these initiatives. Certain of Rockley’s market opportunities, such as healthcare monitoring devices incorporating sensing capabilities for disease detection and management, are at an early stage of development, and it may be years before these end markets generate demand for Rockley’s products at scale, if at all. Rockley’s revenue may be adversely affected for a number of reasons, including the rate and degree of development or market acceptance of new technology that competes with its products, failure of Rockley’s customers to develop and commercialize their end products that incorporate Rockley’s products, Rockley’s inability to effectively manage production of its products to scale, Rockley’s inability to enter new markets or help its customers adopt Rockley’s products for new applications, and Rockley’s failure to attract new customers or expand orders from existing customers. Further, it is difficult to predict the size and growth rate of Rockley’s target markets, customer demand for its products, commercialization timelines, developments in silicon photonics technology, the entry of competitive products, or the success of existing competitive products and services. As a result, Rockley does not expect to achieve profitability until 2023 at the earliest. If Rockley’s revenue does not grow over the short or long term, its ability to achieve and maintain profitability will be adversely affected, and the value of its business may significantly decrease.

Rockley expects its results of operations to fluctuate on a quarterly and annual basis, which could cause the stock price of Rockley to fluctuate or decline.

Rockley’s revenue and operating results have fluctuated in the past and may vary significantly in the future. Historical comparisons of its operating results may not be relevant, or indicative of future results. In particular, because Rockley’s revenue to date has been generated from NRE and development services for customer-specific designs of silicon photonics chipsets for testing in the customers’ end products, revenue in any given quarter or period can fluctuate based on the timing and success of its customers’ development projects. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Rockley’s quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside of its control and may not fully reflect the underlying performance of Rockley’s business. These fluctuations could adversely affect Rockley’s ability to meet its expectations or those of securities analysts, ratings agencies, or investors. If Rockley does not meet these expectations for any reporting period, the value of its business and its securities, could decline significantly. Factors that may cause these quarterly and annual fluctuations include, but are not limited to, those listed below:

•the timing and magnitude of NRE services revenue in any quarter;

•the timing and magnitude of operating expenses incurred, including research and development expenses;

•Rockley’s ability to meet product development roadmaps and timelines, which in turn may be impacted by resource constraints and must meet certain technical standards;

•the timing and degree of success of commercialization of Rockley’s products;

•Rockley’s ability to attract and retain customers and successfully transition customers with which it is engaged in discussions to contracted customers and to attract new customers;

•changes in terms of customer agreements;

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•the ability of Rockley’s customers to commercialize and achieve widespread market adoption of products incorporating Rockley’s products;

•the timing and magnitude of orders and shipments of Rockley’s products in any quarter;

•the mix of product sales and licensing arrangements in lieu of product sales;

•the actual timing and magnitude of sales returns and warranty claims of Rockley’s products in any quarter may differ from estimate;

•Rockley’s ability to develop, introduce, commercialize, manufacture, and ship in a timely manner products that meet customer requirements;

•disruptions in Rockley’s sales channels or termination of its relationships with key channel partners;

•customer demand and product life cycles;

•the receipt, reduction, or cancellation of, or changes in the forecasts or timing of, orders by customers;

•fluctuations in the levels of inventories held by distributors or end customers;

•the gain or loss of significant customers, including Rockley’s largest customer;

•fluctuations in sales by customers who incorporate Rockley’s products into their end products;

•cyclicality, seasonality, and the competitive landscape in Rockley’s target markets;

•fluctuations in manufacturing yields;

•changes in pricing, product cost, product volume, and product mix;

•sales of subscriptions to Rockley’s cloud-based analytics subscription service, if and when commercially launched, and in the future, the rate of renewal of subscriptions by existing customers, the extent the use of subscription offerings and related services is expanded under such subscriptions, and timing and magnitude of any such subscriptions which are not renewed;

•the mix of customers licensing the service on a subscription basis as compared to a perpetual license;

•the size, timing, and terms of its subscription agreements with new customers;

•supply chain disruptions, delays, shortages, and capacity limitations as a result of the COVID-19 pandemic or other reasons;

•the impact and duration of the global COVID-19 pandemic;

•the timing and rate of broader market adoption of consumer and medical devices utilizing Rockley’s products or technology across the consumer wearables, mobile device, and medical device sectors;

•changes in the competitive landscape in Rockley’s target markets, including industry consolidation, regulatory developments, and new market entrants;

•Rockley’s ability to effectively manage its third-party suppliers and manufacturing partners;

•changes in the source, cost, and availability of materials and components incorporated in Rockley’s products;

•adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs;

•general economic, industry, and market conditions, including trade disputes; and

•Rockley’s estimates of potential or future market growth in this Annual Report on From 10-K may not be accurate.

Rockley expects to incur significant research and development expenses and devote substantial resources to commercializing new products, which could increase its losses and negatively impact its ability to achieve or maintain profitability.

Rockley’s future growth depends on developing and commercializing its products, achieving widespread market adoption of its products, adapting existing products to new applications and customer requirements, and introducing new products to address changing customer and market demands. Rockley plans to incur substantial research and development expenses as part

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of its efforts to design, develop, manufacture, and commercialize new products and enhance existing products. Rockley’s research and development expenditures could increase its losses and adversely affect its results of operations in the future. Further, Rockley’s research and development efforts may not be successful or result in additional revenue. This in turn would negatively impact Rockley’s ability to achieve or maintain profitability.

If Rockley is unable to manage its growth or expansion of operations, including in a cost-efficient manner, its business, operations, and financial condition, as well as its ability to scale its operations, could be materially and adversely affected.

Rockley’s ability to effectively manage its anticipated growth and expansion of operations and manage its transition to operating as a public company will also require it to enhance its operational, financial, and management controls and infrastructure, human resources policies, and reporting systems. These enhancements and improvements will require significant capital expenditures, investments in additional headcount and other operating expenditures, and allocation of valuable management and employee resources. Rockley’s future financial performance and ability to execute on its business plan will depend, in part, on its ability to effectively manage any future growth and expansion. Rockley may be unable to effectively manage any future growth or expansion in an efficient or timely manner. Further, Rockley may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing controls, programs, systems, and procedures, which could have an adverse effect on its business, reputation, and financial results.

Market opportunity estimates and growth forecasts included in this Annual Report on Form 10-K are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

The forecasts and estimates in this Annual Report on Form 10-K relating to the expected size and growth of the markets for consumer wearables, mobile devices, and medical devices may prove to be inaccurate. Even if these markets experience the forecasted growth described in this Annual Report on Form 10-K, Rockley may not grow its business at similar rates, or at all. Rockley’s future growth is subject to many factors, including market adoption of its products, which is subject to many risks and uncertainties. Accordingly, the forecasts and estimates of market size and growth described in this Annual Report on Form 10-K, including Rockley’s estimates that the consumer wearables, mobile device, and medical devices markets will represent, in the aggregate, an approximately over $48 billion of total addressable market for healthcare monitoring devices incorporating additional sensing capabilities by 2025, should not be taken as indicative of Rockley’s future growth. In addition, these forecasts may be materially and adversely affected as a result of the COVID-19 pandemic.

If Rockley is unable to accurately forecast long-term end-customer adoption rates and demand for Rockley’s products, it could materially and adversely affect its current and future financial results of operations.

Rockley is pursuing opportunities in markets that are undergoing rapid changes, including technological and regulatory changes, and it is difficult to predict the timing and size of the opportunities. For example, consumer health and wellness applications and healthcare monitoring devices require complex technology. Because these products may incorporate technology from other companies, commercialization of these products could be delayed or impaired on account of certain technological components of Rockley or others not being ready to be deployed. Although Rockley currently has MOUs or development and supply agreements with various consumer and medical device companies, these companies may not be able to commercialize products incorporating Rockley’s products immediately, or at all. Regulatory developments, many of which are outside of Rockley’s control, could also cause delays or otherwise impair commercial adoption of these products. Rockley’s future financial performance will depend on its ability to make timely investments in the correct market opportunities. Given the evolving nature of the markets in which Rockley operates in, it is difficult to predict customer demand or adoption rates for its products or the future growth of the markets in which it operates. As a result, Rockley's estimates included in this Annual Report on Form 10-K may not necessarily reflect various estimates and assumptions that may not prove accurate and any such estimates could differ materially from actual results due to the risks included in this “Risk Factors Related to Rockley” section, among others. If demand does not develop or if Rockley cannot accurately forecast customer demand, the size of its markets, inventory requirements, or its future financial results, its business, results of operations, and financial condition will be adversely affected.

Rockley’s target customer and product markets may not grow or develop as Rockley currently expects, and if Rockley fails to penetrate new markets and scale successfully within those markets, Rockley’s revenue and financial condition would be harmed.

Rockley’s target markets include the consumer wearables, mobile device, and medical device markets. Any deterioration in Rockley’s target customer or product markets or reduction in capital spending to support these markets could lead to a reduction in demand for Rockley’s products, which would adversely affect its revenue and results of operations. Further, if

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Rockley’s target customer markets do not grow or develop in ways that Rockley currently expects, demand for Rockley’s products may not materialize as expected, which would also negatively impact its business, financial condition, and results of operations. Rockley may be unable to predict the timing or development of trends in its target markets with any accuracy. If Rockley fails to accurately predict market requirements or market demand for these solutions, Rockley’s business may suffer.

Rockley’s future revenue growth, if any, will depend in part on Rockley’s ability to penetrate Rockley’s current target markets, and to enter emerging markets, such as the market for consumer healthcare monitoring devices and predictive analytics. Meeting the technical requirements and securing design wins in any of these new markets will require a substantial investment of Rockley’s time and resources. Rockley may not secure design wins from these or other new markets, or achieve meaningful revenue from sales in these markets. If any of these markets do not develop as Rockley currently anticipates or if Rockley is unable to penetrate and scale them successfully, it may adversely affect Rockley’s ability to grow its business.

Rockley’s target markets are characterized by rapid technological change, which requires Rockley to continue to develop new products and technology innovations and could adversely affect market adoption of its products.

Rapid technological changes in the markets for sensing technology, including the consumer wearables, mobile device, and medical device markets, could adversely affect adoption of Rockley’s products, either generally or for particular applications. Rockley’s future success will depend upon its ability to develop and introduce a variety of new capabilities and innovations to its products, as well as introduce new products, to address the changing needs of its target markets. Delays in delivering new products that meet customers’ requirements could damage Rockley’s relationships with its customers and lead them to seek alternative sources of supply. Further, the introduction of new products by Rockley’s competitors, the delay or cancellation of any of Rockley’s customers’ end products into which Rockley’s products are designed, the market acceptance of products based on new or alternative technologies, or the emergence of new industry standards could render Rockley’s existing or future products uncompetitive, obsolete, and/or otherwise unmarketable.

In addition, Rockley’s success to date has been based on the delivery of prototypes and services to research and development programs in which customers are investing substantial capital to develop new products. Delays in introducing products and innovations, the failure to choose correctly among technical alternatives, or the failure to offer innovative products at competitive prices may cause existing and potential customers to purchase Rockley’s competitors’ products or turn to alternative sensing technology. If Rockley is unable to successfully develop products that meet changing customer or market requirements on a timely basis or that remain competitive with technological alternatives, its products may fail to achieve commercial adoption, its revenue will decline, it may experience operating losses, and its business and prospects will be adversely affected.

Rockley may be unable to make the substantial investments that are required to remain competitive.

The silicon photonics industry requires substantial and continuous investment in research and development in order to bring to market new and enhanced solutions. Rockley expects its research and development expenditures to increase in the future as part of its strategy to increase demand for Rockley’s solutions in Rockley’s current target markets and to expand into additional markets. Rockley may not have sufficient resources to maintain the level of investment in research and development required to remain competitive. In addition, Rockley cannot assure you that the technologies that are the focus of its research and development expenditures will become commercially successful or generate any revenue.

If Rockley fails to compete effectively, it may lose or fail to gain market share, which could negatively impact Rockley’s operating results and Rockley’s business.

The global optical components market in general, and the consumer sensor, healthcare, and data communications markets in particular, are highly competitive. Rockley expects competition to increase and intensify as additional companies enter Rockley’s target markets. Increased competition could result in price pressure, reduced gross margins, and difficulty achieving market penetration, any of which could harm Rockley’s business, financial condition, and results of operations. Rockley’s competitors range from large, international companies offering a wide range of services and optical components, such as LEDs, lasers, detectors, or photonic integrated circuit (“PICs”), to smaller companies specializing in narrow market verticals. Some of Rockley’s key competitors across various verticals include: ams AG, Analog Devices, Inc., Broadcom Inc., DexCom, Inc. GlobalFoundries Inc., Intel Corporation, Lightwave Logic, Inc. Lumentum Holdings Inc. (“Lumentum”), Masimo Corporation, Osram Licht AG, and Tower Semiconductor Ltd. Rockley expects competition in its target markets to increase in the future as existing competitors improve or expand their product offerings and as new competitors enter these markets.

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Rockley’s ability to compete successfully depends, in part, on factors that are outside of its control, including industry and general economic trends. Rockley’s ability to compete successfully will depend on a number of factors, including its ability to:

•define, design, and regularly introduce new products that anticipate the functionality and integration needs of Rockley’s customers’ next-generation products and applications;

•build strong and long-lasting relationships with Rockley’s customers and other industry participants;

•cost-effectively develop and commercialize products which compete favorably with competitors’ products;

•achieve design wins;

•accurately estimate the effectiveness and success of Rockley’s customers’ end products incorporating Rockley’s products in their competitive end markets;

•expand its research and development capabilities to provide innovative solutions and maintain Rockley’s product roadmap;

•strengthen its sales and marketing efforts, brand awareness and reputation;

•deliver products in volume on a timely basis at competitive prices;

•withstand or respond to significant price competition;

•build and expand international operations in a cost-effective manner;

•obtain, maintain, protect, and enforce Rockley’s intellectual property rights;

•defend potential patent infringement claims arising from third parties;

•promote and support Rockley’s customers’ incorporation of Rockley’s products into their end products; and

•attract, hire, and retain high-level talent, including Rockley’s management team and engineers.

Rockley’s competitors may also establish cooperative relationships among themselves or with third parties or may acquire companies that provide similar products to Rockley’s. As a result, new competitors or alliances may emerge that could capture significant market share. Any of these factors, alone or in combination with others, could harm Rockley’s business, financial condition, and results of operations and result in a loss of market share and an increase in pricing pressure.

Rockley may pursue strategic investments or acquisitions in the future. If Rockley fails to successfully select, execute, or integrate its acquisitions, then its business, results of operations, and financial condition could be materially and adversely affected, and the stock price could decline.

From time to time, Rockley may pursue investments or acquisitions to add new products and technologies, acquire talent, gain new sales channels, or enter into new markets or sales territories. In addition to possible shareholder approval, Rockley may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs. Furthermore, acquisitions and the subsequent integration of new assets, businesses, key talent, customers, vendors, and suppliers require significant attention from Rockley’s management and could result in a diversion of resources from Rockley’s existing business, which in turn could have an adverse effect on Rockley’s operations. Acquired assets or businesses may not generate the financial results Rockley expects. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets, and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

Failure to successfully identify, complete, manage, and integrate acquisitions could materially and adversely affect its business, financial condition, and results of operations and could cause Rockley's stock price to decline.

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Rockley’s international operations expose it to operational, financial, and regulatory risks, including possible unfavorable regulatory, political, tax, and labor conditions, which could harm Rockley’s business.

Rockley is committed to growing its international sales, and while it has committed resources to expanding its international operations and sales channels, these efforts may not be successful. International operations are subject to a number of other risks, including:

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue;

•political and economic instability, international terrorism, and anti-American or British sentiment, particularly in emerging markets;

•disadvantages of competing against companies from countries that are not subject to U.S. and U.K. laws and regulations, including the Foreign Corrupt Practices Act, Office of Foreign Assets Control regulations, and U.S. anti-money laundering regulations, as well as exposure of Rockley’s foreign operations to liability under these regulatory regimes;

•preference for locally branded products, and laws and business practices favoring local competition;

•potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there;

•less effective protection of intellectual property;

•stringent regulation of the end products incorporating Rockley’s products and stringent consumer protection and product compliance regulations, including but not limited to General Data Protection Regulation in the European Union, European competition law, the Restriction of Hazardous Substances Directive, the Waste Electrical and Electronic Equipment Directive, and the European Ecodesign Directive that are costly to comply with and may vary from country to country;

•difficulties and costs of staffing and managing foreign operations;

•foreign taxes, including withholding of payroll taxes; and

•the U.S. government’s and U.K. government’s restrictions on certain technology transfer to certain countries of concern.

For example, we have significant international operations that are denominated in foreign currencies, primarily the British Pound and Euro, subjecting us to foreign currency exchange risk that may adversely impact our financial results. The occurrence of any of these risks could negatively affect Rockley’s international business and consequently its business, operating results, and financial condition.

The average selling prices of Rockley’s products could decrease rapidly over the life of the product, which may negatively affect Rockley’s revenue and margins. In addition, the selling prices Rockley is able to ultimately charge in the future for the products it is currently developing or commercializing may be less than what Rockley currently anticipates, which may cause Rockley’s actual operating results to differ materially from its expectations.

The prices that Rockley is able to ultimately charge in the future for the products it is currently developing or commercializing may experience declines for a variety of reasons, many of which are outside of Rockley’s control. In order to sell products that have a falling average unit selling price and maintain margins at the same time, Rockley will need to continually reduce product and manufacturing costs. To manage manufacturing costs, Rockley must engineer the most cost-effective design for its products and collaborate with its manufacturing counterparties to reduce manufacturing costs. Rockley also needs to continually introduce new products with higher sales prices and gross margin in order to maintain its overall gross margin. If Rockley is unable to manage the cost of older products or successfully introduce new products with higher gross margin, its revenue and overall gross margin would likely decline. In addition, the selling prices Rockley is able to ultimately charge in the future for the products it is currently developing or commercializing may be less than what Rockley currently projects, which may cause Rockley’s actual operating results to differ materially from its estimates.

Rockley’s gross margins may fluctuate due to a variety of factors, which could negatively impact Rockley’s results of operations and Rockley’s financial condition.

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Rockley’s gross margins may fluctuate due to a number of factors, including customer and product mix, market acceptance of Rockley’s new products, yield, wafer pricing, packaging and testing costs, competitive pricing dynamics, the impact of the COVID-19 pandemic, and geographic and market pricing strategies. To the extent Rockley may offer certain customers favorable prices, it would decrease Rockley’s average selling prices and likely impact gross margins. Further, Rockley may in the future offer pricing incentives to Rockley’s customers on earlier generations of products that inherently have a higher cost structure, which would negatively affect Rockley’s gross margins. In addition, in the event Rockley’s customers, including Rockley’s larger customers, exert more pressure with respect to pricing and other terms, it could put downward pressure on Rockley’s margins.

Because Rockley does not operate its own manufacturing, assembly, or testing facilities, it may not be able to reduce its costs as rapidly as companies that operate their own facilities, and Rockley’s costs may even increase, which could further reduce Rockley’s gross margins. Rockley relies primarily on obtaining yield improvements and volume-based cost reductions to drive cost reductions. To the extent that such cost reductions do not occur at a sufficient level and in a timely manner, Rockley’s business, financial condition, and results of operations could be adversely affected and may vary from Rockley’s estimates.

In addition, Rockley may in the future maintain an inventory of Rockley’s products at various stages of production and in finished goods inventory. Rockley will hold these inventories in anticipation of customer orders. If those customer orders do not materialize in a timely manner, Rockley may have excess or obsolete inventory which Rockley would have to reserve or write-down, and Rockley’s gross margins would be adversely affected.

Because some of the raw materials and key components in its products come from limited or single source suppliers, Rockley is susceptible to supply shortages, long lead times for components, and supply changes, including as a result of industry consolidation, any of which could disrupt its supply chain and could delay deliveries of its products to customers, which could adversely affect Rockley’s business, results of operations, and financial condition.

Some of the components used in the manufacturing of Rockley’s products are sourced from third-party suppliers. To date, Rockley has produced its products in relatively limited quantities for use in products. Rockley does not have extensive experience in managing its supply chain to manufacture and deliver its products at scale. Some of the key components used to manufacture Rockley’s products come from limited or single source suppliers. Rockley is therefore subject to the risk of shortages and long lead times in the supply of these components and the risk that its suppliers discontinue or modify components used in its products. Rockley has a global supply chain and the COVID-19 pandemic and other health epidemics and outbreaks may adversely affect its ability to source components in a timely or cost effective manner from its third-party suppliers due to, among other things, work stoppages or interruptions. For example, Rockley relies on third-party foundries to manufacture its silicon photonic integrated circuits and for wafer scale integration. Any disruptions to those foundries could materially and adversely affect Rockley’s ability to manufacture its products. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. Rockley has in the past experienced and may in the future experience component shortages and price fluctuations of certain key components and materials, and the predictability of the availability and pricing of these components may be limited. In the event of a component shortage, supply interruption or material pricing change from suppliers of these components, Rockley may not be able to develop alternate sources in a timely manner or at all in the case of sole or limited sources. These risks may be exacerbated if any of Rockley’s suppliers were to cease operations or be acquired by a third party. If this were to occur, Rockley may need to re-qualify the supplier and/or otherwise confirm that such an event would not cause concerns with Rockley’s end customers or otherwise negatively impact Rockley’s relationships with its end customers. Developing alternate sources of supply for these components may be time-consuming, difficult, and costly and Rockley may not be able to source these components on terms that are acceptable to it, or at all, which may undermine Rockley’s ability to meet its requirements or to fill customer orders in a timely manner. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would adversely affect Rockley’s ability to meet its scheduled product deliveries to its customers. This could adversely affect Rockley’s relationships with its customers and channel partners and could cause delays in shipment of its products and adversely affect its operating results. In addition, increased component costs could result in lower gross margins. Even where Rockley is able to pass increased component costs along to its customers, there may be a lapse of time before it is able to do so such that Rockley must absorb the increased cost. If Rockley is unable to buy these components in quantities sufficient to meet its requirements on a timely basis, it will not be able to deliver products to its customers. This in turn could materially and adversely affect Rockley’s business, financial condition, and results of operations.

If the foundries with which Rockley contracts do not achieve satisfactory yields or quality, Rockley’s reputation and customer relationships could be harmed.

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Rockley depends on satisfactory wafer foundry manufacturing capacity, wafer prices, and production yields, as well as timely wafer delivery, to meet customer demand and enable it to maintain gross margins. The fabrication of Rockley’s products is a complex and technically demanding process. Minor deviations in the manufacturing process can cause substantial decreases in yields and, in some cases, cause production to be suspended. Rockley’s foundry vendors may experience manufacturing defects and reduced manufacturing yields from time to time. Further, any new foundry vendors Rockley employs, whether due to industry consolidation, customer requirements, or otherwise, may present additional and unexpected manufacturing challenges that could require significant management time and focus. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by the foundries that Rockley employs could result in lower than anticipated

production yields or unacceptable performance of Rockley’s products. Many of these problems are difficult to detect at an early stage of the manufacturing process and may be time-consuming and expensive to correct. Poor production yields from the foundries that Rockley employs, or defects, integration issues, or other performance problems in Rockley’s products could significantly harm Rockley’s customer relationships and financial results, and give rise to financial or other damages to Rockley’s customers. Any product liability claim brought against Rockley, even if unsuccessful, would likely be time-consuming and costly to defend.

Manufacturing yields for new products initially tend to be lower as Rockley completes product development and commence volume manufacturing, and typically increase as Rockley brings the product to full production. While Rockley’s business model includes this assumption of improving manufacturing yields its assumptions may be incorrect and, as a result, material variances between projected and actual manufacturing yields will have a direct effect on Rockley’s gross margin and profitability. The difficulty of accurately forecasting manufacturing yields and maintaining cost competitiveness through improving manufacturing yields will continue to be magnified by the increasing process complexity of manufacturing silicon photonics products.

Raw material price fluctuations can increase the cost of Rockley’s products, impact Rockley’s ability to meet customer commitments, and may adversely affect its results of operations.

The cost of raw materials is a key element in the cost of Rockley’s products. Rockley’s inability to offset material price inflation through increased prices to customers, suppliers, productivity actions, or through commodity hedges could adversely affect Rockley’s results of operations. Many major components, product equipment items, and raw materials are procured or subcontracted on a single or sole-source basis. Although Rockley maintains a qualification and performance surveillance process and Rockley believes that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Rockley’s inability to fill its supply needs would jeopardize its ability to fulfill its contractual obligations, which could, in turn, result in reduced revenue, contract penalties or terminations, and damage to Rockley’s customer relationships.

Furthermore, increases in the price of wafers, testing costs, and commodities, which may result in increased production costs, mainly assembly and packaging costs, may result in a decrease in Rockley’s gross margins. Moreover, Rockley’s suppliers may pass the increase in raw materials and commodity costs onto it which would further reduce the gross margin of Rockley’s products. In addition, as Rockley is a fabless company, global market trends such as a shortage of capacity to fulfill Rockley’s fabrication needs also may increase Rockley’s raw material costs and thus decrease its gross margin.

Rockley is subject to the cyclical nature of the semiconductor industry.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, industry consolidation, and wide fluctuations in product supply and demand. The industry experienced significant downturns during past global recessions. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices. While these downturns have not directly impacted Rockley’s business to date, any prolonged or significant downturn in the semiconductor industry could adversely affect Rockley’s business and reduce demand for Rockley’s products. Any future downturns in the semiconductor industry could also harm Rockley’s business, financial condition, and results of operations. Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. Rockley is dependent on the availability of this capacity to manufacture and assemble Rockley’s products and Rockley can provide no assurance that adequate capacity will be available to it in the future.

If Rockley or its suppliers do not maintain sufficient inventory or if they do not adequately manage their respective inventory, Rockley could lose sales or incur higher inventory-related expenses, which could negatively affect Rockley’s operating results.

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To ensure adequate inventory supply, Rockley and its suppliers must forecast inventory needs and expenses, place orders sufficiently in advance with their respective suppliers and manufacturing counterparties, and manufacture products based on its estimates of future demand for particular products. Changes in customer purchasing patterns may affect Rockley’s ability to forecast its future operating results, including revenue, gross margins, cash flows, and profitability. Rockley’s ability to accurately forecast demand for its products could be affected by many factors, including the growth rate, if any, in Rockley’s target markets or the market adoption of the end products into which Rockley’s products are incorporated, the emergence of new markets, an increase or decrease in customer demand for Rockley’s products or for products and services of its competitors, product introductions by competitors, the COVID-19 pandemic, other health epidemics and outbreaks, and any associated work stoppages or interruptions, unanticipated changes in general market conditions, and the weakening of economic conditions or consumer confidence in future economic conditions. If Rockley’s products are commercialized in markets that are quickly growing, including the consumer wearables, mobile device, and medical device markets, Rockley may face challenges acquiring adequate supplies to manufacture its products and/or Rockley and its manufacturing counterparties may not be able to manufacture its products at a rate necessary to satisfy the levels of demand, which would negatively affect Rockley’s revenue. This risk may be exacerbated by the fact that Rockley may not carry or be able to obtain for its manufacturers a significant amount of inventory to satisfy short-term demand increases. If it fails to accurately forecast customer demand, Rockley may experience excess inventory levels or a shortage of products available for sale.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would adversely affect Rockley’s financial results, including its gross margin, and have a negative effect on its brand. Conversely, if Rockley underestimates customer demand for its products, Rockley, or its manufacturing counterparties, may not be able to deliver products to meet its requirements, and this could result in damage to Rockley’s brand and customer relationships and adversely affect its revenue and operating results.

If Rockley’s products do not conform to, or are not compatible with, existing or emerging industry standards, demand for Rockley’s products may decrease, which in turn would harm Rockley’s business and operating results.

Rockley’s ability to compete in the future will depend on its ability to identify and ensure compliance with evolving industry standards in its target markets, as well as in the silicon photonics and sensing technology industry generally. The emergence of new industry standards could render Rockley’s products incompatible with products developed by third-party suppliers or make it difficult for Rockley’s products to meet the requirements of certain device manufacturers and their suppliers. If Rockley’s customers or Rockley’s third-party suppliers adopt new or competing industry standards with which Rockley’s solutions are not compatible, or if industry groups fail to adopt standards with which Rockley’s products are compatible, Rockley’s products would become less desirable to its current or prospective customers. As a result, Rockley’s sales would suffer and it could be required to make significant expenditures to develop new products. Although Rockley designs its products to be compliant with applicable industry standards, proprietary enhancements may not in the future result in conformance with existing industry standards under all circumstances. If Rockley’s products do not conform to, or are not compatible with, existing or emerging standards, it would harm its business, financial condition, and results of operations.

Rockley may be subject to warranty or product liability claims, which could result in unexpected expenses and loss of market share.

Rockley may be subject to warranty or product liability claims. These claims may require Rockley to make significant expenditures to defend those claims, replace Rockley’s solutions, refund payments, or pay damage awards. Rockley has not yet commercialized its products. Accordingly, the operation of Rockley’s products and technology has not been validated over longer periods. If a customer’s end product fails in use, the customer may incur significant monetary damages, including a product recall or associated replacement expenses as well as lost revenue. The customer may claim that a defect in Rockley’s product caused the product failure and assert a claim against Rockley to recover monetary damages. The cost of defending these claims and satisfying any arbitration award or judgment with respect to these claims would result in unexpected expenses, which could be substantial, and could harm Rockley’s business, financial condition, and results of operations. Although Rockley carries product liability insurance, this insurance is subject to significant deductibles and may not adequately cover Rockley’s costs arising from defects in its products or otherwise.

The complexity of Rockley’s products and its anticipated future product and service offerings could result in unforeseen delays or expenses from undetected defects, errors, or reliability issues in hardware or software that could reduce the market adoption of its new products, damage its reputation with current or prospective customers, and adversely affect its operating costs.

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Rockley’s current and future products and service offerings are or are expected to be highly technical and very complex and require high standards to manufacture or distribute and have in the past and will likely in the future experience defects, errors, or reliability issues at various stages of development. Rockley may be unable to timely release new products, product updates, manufacture existing products, correct problems that have arisen, or correct such problems to its customers’ satisfaction. Additionally, undetected errors, defects, or security vulnerabilities, especially as new products or updates are introduced or as new versions are released, could result in inaccurate data to the end users of products incorporating Rockley’s products. Any of the foregoing could negatively impact Rockley’s ability to commercialize a product or service offering, result in litigation against Rockley, and damage Rockley’s credibility. These risks may be heightened in the medical device industry, one of Rockley’s target markets, where the end user may act in reliance upon inaccurate data as a result of errors or defects, or where there may be a privacy or data breach of an end user’s personal health information. Some errors or defects in Rockley’s products and service offerings may only be discovered after they have been tested, commercialized, and deployed by customers. In these cases, Rockley may incur significant additional development costs and product recall, repair, or replacement costs. These problems may also result in claims, including class actions, against Rockley by its customers or others. Rockley’s reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy its products, which could adversely affect its ability to retain existing customers and attract new customers and could adversely affect its financial results.

In addition to product liability claims, Rockley could face material legal claims for breach of contract, fraud, tort, or breach of warranty as a result of these problems. Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of Rockley and its products. In addition, Rockley’s business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all. These product-related issues could result in claims against Rockley and its business could be adversely affected.

Rockley currently expects to recognize subscription revenue from its future cloud-based analytics subscription offering ratably over the term of these subscriptions and, to a lesser extent, perpetual licenses ratably over an expected period of benefit and, as a result, downturns in sales may not be immediately reflected in its operating results.

If Rockley is able to commercially launch its cloud-based analytics subscription service, which is currently expected to occur as early as 2023, it expects to recognize revenue ratably over the terms of its subscriptions with customers. As a result, a substantial portion of the revenue that it will report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, a decline in new sales or renewals in any one period may not be immediately reflected in its revenue results for that period. This decline, however, will negatively affect its revenue in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of its subscription service and potential changes in the rate of renewals may not be fully reflected in its results of operations until future periods. This will also make it difficult for Rockley to rapidly increase revenue growth through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement. Rockley may be unable to commercially launch its subscription service offering in a timely manner or at all and such subscription offering may not achieve widespread customer adoption.

Any decline in customer renewals, terminations, or failure to convince customers to use Rockley’s cloud-based analytics subscription service would harm its business, results of operations, and financial condition.

The rate at which Rockley’s customers purchase subscriptions to its cloud-based analytics service will depend on a number of factors, including the perceived value of the service. Rockley anticipates that its subscription offerings for enterprise customers will range from one to two years subject to renewal terms. Rockley’s ability to grow revenue from its cloud-based analytics subscription offering, if and when commercially launched, will depend on a significant percentage of customer renewals when the then-existing subscription terms expire, as well as renewals on the same or more favorable terms. Customers will have no obligation to renew their subscriptions, and Rockley may not be able to accurately predict customer renewal rates. The growth of Rockley’s business will depend in part on its customers adopting and expanding their use of Rockley’s cloud-based analytics subscription offering and related services. If Rockley’s customers do not maintain or renew their subscriptions or renew on less favorable terms, Rockley’s future business prospects and growth opportunities may suffer.

If Rockley’s future platform offerings do not interoperate with its customers’ network and security infrastructure or with third-party products, websites, or services, it would negatively impact its business and results of operations.

Rockley’s cloud-based analytics subscription offering, which is under development and is currently expected to be commercially launched as early as 2023, is expected to allow for the deployment of Rockley’s technology through a cloud-

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based software-as-a-service model. As a result, it must interoperate with Rockley’s customers’ existing network and security infrastructure. The components of Rockley’s customers’ infrastructure have different specifications, rapidly evolve, utilize multiple protocol standards, include multiple versions and generations of products, and may be highly customized. Rockley must be able to interoperate and provide its software service to customers with highly complex and customized networks, which requires careful planning and execution between its customers, its customer support teams, and its channel partners. Further, whenever there are new or updated elements of the customers’ infrastructure or new industry standards or protocols, Rockley may have to update or enhance its cloud platform to continue to provide service to customers. Rockley’s competitors or other vendors may refuse to work with Rockley to allow their products to interoperate with Rockley’s, which could make it difficult for Rockley’s cloud-based analytics subscription service to function properly in customer networks that include these third-party products.

Rockley may not deliver or maintain interoperability quickly or cost-effectively, or at all. If Rockley fails to maintain compatibility of its cloud-based analytics subscription service with its customers’ network and security infrastructures, its customers may not be able to fully utilize the service, and Rockley may, among other consequences, fail to achieve widespread customer adoption of this subscription service and experience reduced demand for its products and services, which would materially harm its business, operating results, and financial condition.

Rockley licenses technology from third parties, and its inability to maintain those licenses could harm its business.

Rockley incorporates technology that it licenses from third parties, including software, into its software subscriptions. Rockley cannot be certain that its licensors are not infringing the intellectual property rights of

third parties or that its licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which Rockley may sell its software subscriptions. In addition, some licenses may be non-exclusive, and therefore its competitors may have access to the same technology licensed to Rockley. Some of Rockley’s license agreements may be terminated for convenience by the licensors. Rockley may also be subject to additional fees or be required to obtain new licenses if any of its licensors allege that Rockley has not properly paid for such licenses or that it has improperly used the technologies under such licenses, and such licenses may not be available on terms acceptable to Rockley or at all. If Rockley is unable to continue to license any of this technology because of intellectual property infringement claims brought by third parties against its licensors or against it, or claims against Rockley by its licensors, or if Rockley is unable to continue its license agreements or enter into new licenses on commercially reasonable terms, its ability to develop and sell software subscriptions containing such technology would be severely limited, and its business could be harmed. Additionally, if Rockley is unable to license necessary technology from third parties, it may be forced to acquire or develop alternative technology, which it may be unable to do in a commercially feasible manner or at all, and Rockley may be required to use alternative technology of lower quality or performance standards. This would limit and delay its ability to offer new or competitive software subscriptions and increase its costs of production. As a result, Rockley’s margins, market share, and operating results could be significantly harmed.

Portions of Rockley’s cloud-based analytics subscription offering utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect its business.

Rockley’s cloud-based analytics subscription offering contains software made available by third parties under so-called “open source” licenses. From time to time, there have been claims against companies that distribute or use open source software in their products and services, asserting that such open source software infringes the claimants’ intellectual property rights. Rockley could be subject to suits by parties claiming that what Rockley believes to be licensed open source software infringes their intellectual property rights. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open source licenses require that source code for software programs that are subject to the license be made available to the public and that any modifications or derivative works to such open source software continue to be licensed under the same terms. Further, certain open source licenses also include a provision that if Rockley enforces any patents against the software programs that are subject to the license, it will lose the license to such software. If Rockley were to fail to comply with the terms of such open source software licenses, such failures could result in costly litigation, lead to negative public relations, or require that it quickly find replacement software which may be difficult to accomplish in a timely manner.

Although Rockley monitors its use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting its software to conditions it does not intend, the terms of many open source licenses have not been interpreted by U.S. or international courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on its ability to commercialize its product or operate its business. By the terms of certain open source licenses, Rockley could be required to release the source code of its software and to make its proprietary software available under open source licenses, if Rockley combines or distributes its software with open source

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software in a certain manner. In the event that portions of its software are determined to be subject to an open source license, Rockley could be required to publicly release the affected portions of its source code, re-engineer all, or a portion of, that software or otherwise be limited in the licensing of its software, each of which could reduce or eliminate the value of its product. Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect its business, results of operations, and financial condition.

Customer-Related Risks

Rockley currently has, and intends to target, customers and suppliers that are large corporations with substantial negotiating power, exacting product, quality, and warranty standards, and potentially competitive internal solutions. If Rockley is unable to sell its products to these customers or is unable to enter into agreements with customers and suppliers on satisfactory terms, its prospects and results of operations will be adversely affected.

Many of Rockley’s customers and suppliers, and potential customers, are large corporations with substantial negotiating power relative to it and, in some instances, may have internal solutions that are competitive to Rockley’s products. Many of these large corporations that are customers or potential customers also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements and securing design wins with any of these companies will require a substantial investment of Rockley’s time and resources. Rockley cannot assure you that its products or technology will secure design wins from these or other companies or that it will generate meaningful revenue from the sales of its products to these key customers and potential customers. If Rockley’s products are not selected by these large corporations or if these corporations develop or acquire competitive technology, it will have an adverse effect on Rockley’s business.

Rockley currently depends on a few large customers for a substantial portion of its revenue. The loss of, or a significant reduction in, orders from Rockley’s customers, including its largest customer, could significantly reduce its revenue and adversely impact Rockley’s operating results.

Rockley believes that its operating results for the foreseeable future will continue to depend to a significant extent on revenue attributable to a few large customers, including Apple Inc., Rockley’s largest customer, and Hengtong Rockley Technology Co., Ltd. (“HRT”), its second largest customer. Rockley’s two largest customers collectively accounted for 82% and 100% of Rockley’s revenue in 2021 and 2020, respectively. Revenue attributable to Rockley’s largest customer accounted for the majority of its revenue in 2021 and 2020, respectively. Rockley anticipates revenue attributable to this customer will fluctuate from period to period, although it expects to remain dependent on this customer for a significant portion of its revenue for the foreseeable future. Rockley has a master supply and development agreement with this customer, which provides a general framework for Rockley’s transactions with it. This agreement continues until either party terminates for material breach. Under this agreement, Rockley has agreed to develop and deliver new products to this customer at its request, provided it also meets Rockley’s business purposes, and has agreed to indemnify it for intellectual property infringement or any injury or damages caused by Rockley’s products. This customer does not have any minimum or binding purchase obligations to Rockley under this agreement and could elect to discontinue or reduce making purchases from Rockley with little or no notice.

HRT is a joint venture (the "JV") formed by Rockley with Jiangsu Hengtong Optic-Electric Co., Ltd. (“Hengtong”), a subsidiary of Hengtong Group, Co., Ltd., in 2017. Under the Sino-Foreign Equity Joint Venture Contract dated December 19, 2017 by and between Hengtong and Rockley Photonics Ltd, a wholly-owned subsidiary of Rockley (the “JV Agreement”) and the related technology development agreement and license agreement, HRT must procure chipsets from Rockley for use in finished products and HRT owns the copyright in the final designs. HRT has a license to the underlying intellectual property in the reference designs and Rockley has certain non-compete obligations under the JV Agreement. During the years ended December 31, 2021 and 2020, Rockley made sales to HRT of $0.3 million and $5.3 million, respectively. See “Certain Relationships and Related Party Transactions – Rockley – Hengtong JV” and Notes 4 and 13 to the notes to Rockley’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

In addition, customers may seek to enter into licensing arrangements in lieu of product purchases, which could negatively impact Rockley’s revenue, and, to a lesser extent, Rockley’s gross margins. If Rockley’s customers were to choose to work with other manufacturers or its relationships with its customers is disrupted for any reason, it could have a significant negative impact on Rockley’s business. Any reduction in sales attributable to Rockley’s larger customers would have a significant and disproportionate impact on Rockley’s business, financial condition, and results of operations.

Rockley’s customers, or the distributors through which it sells to these customers, may choose to use products in addition to Rockley’s, use a different product altogether, or develop an in-house solution. Any of these events could significantly harm its business, financial condition, and results of operations. In addition, if Rockley’s distributors’ relationships with Rockley’s

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end customers, including its larger end customers, are disrupted for inability to deliver sufficient products or for any other reason, it could have a significant negative impact on Rockley’s business, financial condition, and results of operations.

Rockley is dependent in part upon its relationships and alliances with industry participants to generate revenue, which involves risks and uncertainties.

Rockley has, and in the future may, acquire interests in joint ventures, which may subject Rockley to risk because, among other things, Rockley cannot exercise sole decision-making power and its partners may have different economic interests than Rockley has. For example, Rockley currently holds a 24.9% share in a strategic joint venture with another industry participant and is currently in discussions regarding potential licensing of technology to the joint venture in return for future payments. Rockley is therefore dependent on the successful execution of a licensing agreement with this joint venture partner to generate additional revenue. Rockley may also acquire interests in other joint ventures with third parties. There are additional risks involved in joint venture transactions. For example, as a co-investor in a joint venture, Rockley may not be in a position to exercise sole decision-making authority relating to the joint venture or other entity. As a result, the operations of any joint venture are subject to the risk that third parties may make business, financial, or management decisions with which Rockley does not agree, or the management of the joint venture may take risks or otherwise act in a manner that does not serve Rockley’s interests. Further, there may be a potential risk of impasse in some business decisions because Rockley may not be in a position to exercise sole decision-making authority. In such situations, it is possible that Rockley may not be able to exit the relationship because it may not have the funds necessary to complete a buy-out of the other partner or it may be difficult to locate a third-party purchaser for its interest. Because Rockley may not have the ability to exercise control over such operations, it may not be able to realize some or all of the benefits that it believes will be created from its involvement. In addition, there is the potential that a joint venture partner may become bankrupt or have divergent, conflicting, or inconsistent economic or business interests from Rockley. This could result in, among other things, exposing Rockley to liabilities of the joint venture in excess of its proportionate share of these liabilities. If any of the foregoing were to occur, Rockley’s business, financial condition, and results of operations could suffer.

If Rockley is unable to expand or further diversify its customer base, its business, financial condition, and results of operations could suffer.

Rockley currently expects the composition of its largest customers to vary over time, and that revenue attributable to its largest customers in any given period may decline over time. Rockley’s relationships with existing customers may deter potential customers who compete with these customers from buying Rockley’s products. If Rockley is unable to expand or further diversify its customer base, it could harm its business, financial condition, and results of operations.

Rockley does not currently have any products in commercial production. Accordingly, Rockley views its current customer relationships in the following stages: (a) customers with whom it is “engaged”, or in discussions with, regarding potential product features for incorporation into such customer’s end products or (b) customers with whom it is “contracted” where Rockley has non-binding MOUs or development and supply agreements. These non-binding MOUs and development and supply agreements provide a general framework for Rockley’s transactions with the customer and typically provide that Rockley will develop and deliver new products meeting the customer’s specifications. These agreements do not contain any minimum or binding purchase obligations. If Rockley is unable to transition customers with whom it is engaged in discussions to contracted customers or if Rockley fails to otherwise attract new customers, it would negatively impact Rockley’s ability to grow its business and gain market share, which in turn would harm Rockley’s financial condition and results of operations.

Because Rockley does not anticipate long-term purchase commitments with its customers, orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes Rockley to inventory risk, and may cause its business and results of operations to suffer.

Rockley anticipates that its products will be sold directly to customers as well as through distributors and resellers, with, in certain cases, no long-term or minimum purchase commitments from them or their end customers. Rockley expects that sales of its products will be primarily made pursuant to standard purchase orders, which orders may be cancelled, reduced, changed, or rescheduled with little or no notice or penalty. Cancellations of orders could result in the loss of anticipated sales without allowing Rockley sufficient time to reduce its inventory and operating expenses. In addition, changes in forecasts or the timing of orders from its customers expose Rockley to the risks of inventory shortages or excess inventory. As a result, Rockley’s revenue and operating results could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of Rockley’s customers, including Rockley’s larger customers. In the future, Rockley’s customers or its distributors or their end customers may decide to purchase fewer units than expected, may alter their purchasing patterns at any time with

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limited or no notice, or may decide not to continue to purchase Rockley’s products at all, any of which could cause Rockley’s revenue to decline materially and materially harm Rockley’s business, financial condition, and results of operations.

Cancellations of, reductions in, or rescheduling of customer orders could also result in the loss of anticipated sales without allowing Rockley sufficient time to reduce its inventory and operating expenses, as a substantial portion of Rockley’s expenses are fixed at least in the short term. In addition, changes in forecasts or the timing of orders expose Rockley to the risks of inventory shortages or excess inventory. Any of the foregoing events could materially and adversely affect Rockley’s business, financial condition, and results of operations.

If Rockley is unable to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity, then Rockley’s financial condition, operating results, business prospects, and access to capital may suffer materially.

Rockley has not yet fully developed or commercialized its products or services and the successful commercialization of Rockley’s products depends in part on Rockley’s customers and potential customers committing to use Rockley’s products in their own products. Customers may be less likely to purchase Rockley’s products if they are not convinced that Rockley’s business will succeed or that its service and support and other operations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with Rockley if they are not convinced that Rockley’s business will succeed. If Rockley is unable to establish and maintain confidence in its long-term business prospects among customers, suppliers, analysts, ratings agencies, and within its industry or is subject to negative publicity, then Rockley’s financial condition, operating results, business prospects, and access to capital may suffer materially.

Rockley’s investments in educating its customers and potential customers about the advantages of Rockley’s silicon photonics and sensing technology and its applications will require significant financial and talent resources and may not result in sales of Rockley’s products.

Educating Rockley’s prospective customers, and to a lesser extent, its existing customers, about Rockley’s silicon photonics and sensing technology and its applications in health monitoring devices, its advantages over competitive technologies, and the potential application of Rockley’s products in different industries and use cases is an integral part of Rockley’s strategy to expand into additional markets. Rockley’s efforts to educate potential customers and the market generally will require significant financial and talent resources. These educational efforts may not be successful and Rockley may not offset the costs of such efforts with revenue from the new customers. If Rockley is unable to acquire new customers to offset these expenses, its financial condition will be adversely affected.

Rockley’s business depends substantially on the efforts of its executive officers, including its Chief Executive Officer and founder, Dr. Andrew Rickman, OBE, and highly skilled talent, and its operations may be severely disrupted if it lost their services.

Rockley is highly dependent on its founder, Dr. Andrew Rickman, OBE as well its other executive officers, and the loss of his services would adversely affect Rockley’s business because his loss could make it more difficult to, among other things, compete with other market participants, manage Rockley’s research and development activities, and retain existing customers or cultivate new ones. Competition for highly-skilled talent is often intense and Rockley may incur significant costs to attract highly-skilled talent. Rockley may not be successful in attracting, integrating, or retaining qualified talent to fulfill its current or future needs. Rockley has, from time to time, experienced, and it expects to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of Rockley’s equity or equity awards declines, it may adversely affect Rockley’s ability to retain highly skilled employees. If Rockley fails to attract new talent or fails to retain and motivate its current talent, its business and future growth prospects could be adversely affected.

Legal and Regulatory Risks Related to Rockley’s Business

Rockley is subject to governmental export and import control laws and regulations. Rockley’s failure to comply with these laws and regulations could have an adverse effect on its business, prospects, financial condition, and results of operations.

Certain of Rockley’s products and services are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. U.S. export control laws and regulations

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and economic sanctions prohibit the shipment of certain products and services to U.S. embargoed or sanctioned countries, governments and persons. In addition, complying with export control and sanctions regulations for a particular sale may be time-consuming and result in the delay or loss of sales opportunities. Exports of Rockley’s products and technology must be made in compliance with these laws and regulations. If Rockley fails to comply with these laws and regulations, Rockley and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on Rockley and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers.

Changes to trade policy, tariffs, and import/export regulations may have a material adverse effect on Rockley’s business, financial condition, and results of operations.

Changes in global political, regulatory, and economic conditions, or in laws and policies governing foreign trade, manufacturing, development, and investment in the territories or countries where Rockley may purchase its components, sell its products, or conduct its business, could adversely affect Rockley’s business. The United States has in the past instituted or proposed changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, economic sanctions on individuals, corporations, or countries, and other government regulations affecting trade between the United States and other countries where Rockley conducts its business. For instance, effective December 17, 2021, the U.S. Bureau of Industry and Security ("BIS”) of the U.S. Department of Commerce placed Hengtong and certain of its affiliates on the BIS “Entity List,” meaning that the U.S. Export Administration Regulations prohibit companies from providing products and technologies to organizations on the “Entity List” without prior authorization. In response to this decision, the Company terminated a planned technical sale to the JV. A number of other nations have proposed or instituted similar measures directed at trade with the United States in response. As a result of these developments or any future similar developments, there may be greater restrictions and economic disincentives on international trade and economic cooperation that could adversely affect Rockley’s business. It may be time-consuming and expensive for Rockley to alter its business operations to adapt to or comply with any such changes, and any failure to do so could have a material adverse effect on its business, financial condition, and results of operations.

Rockley may become involved in legal and regulatory proceedings and commercial or contractual disputes, which could have an adverse effect on its profitability and financial position.

Rockley may be, from time to time, involved in litigation, regulatory proceedings, and commercial or contractual disputes that may be significant. These matters may include, without limitation, disputes with Rockley’s suppliers and customers, intellectual property claims, shareholder litigation, government investigations, class action lawsuits, personal injury claims, environmental issues, customs and value-added tax disputes, and employment and tax issues. In addition, Rockley could face in the future a variety of labor and employment claims against it, which could include but is not limited to general discrimination, wage and hour, privacy, ERISA, or disability claims. In such matters, government agencies or private parties may seek to recover from Rockley indeterminate amounts in penalties or monetary damages (including, in some cases, treble or punitive damages) or seek to limit Rockley’s operations in some way. These types of lawsuits could require significant management time and attention or could involve substantial legal liability, adverse regulatory outcomes, and/or substantial expenses to defend. Often these cases raise complex factual and legal issues and create risks and uncertainties. No assurances can be given that any proceedings and claims will not have a material adverse impact on Rockley’s operating results and financial position or that its established reserves or its available insurance will mitigate this impact.

Rockley is subject to, and must remain in compliance with, numerous laws and governmental regulations across various jurisdictions concerning the use, distribution, and sale of its products. Some of Rockley’s customers also require that it comply with their own unique requirements relating to these matters.

Rockley sells products that contain electronic components, and such components may contain materials that are subject to government regulation in locations where Rockley sells its products. For example, certain regulations limit the use of lead in electronic components. Since Rockley operates on a global basis, compliance with regulations is a complex process which requires continual monitoring of regulations and an ongoing compliance process to ensure that Rockley and its suppliers are in compliance with existing regulations in each market where it operates. If there is an unanticipated new regulation that significantly impacts Rockley’s use and sourcing of various components or requires more expensive components, that regulation could materially and adversely affect its business, results of operations, and financial condition. Rockley’s products may also be used in healthcare monitoring and other medical devices, which are subject to additional regulation. If Rockley fails to adhere to these new regulations or fails to continually monitor the updates, it may be subject to litigation, loss of customers, or negative publicity and its business, results of operations, and financial condition will be adversely affected.

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Rockley may in the future become subject to additional regulations, including Food and Drug Administration (the “FDA”) clearance or approval, for health monitoring products in which Rockley’s products are incorporated. Achieving and maintaining compliance and approval under applicable regulations may be difficult to achieve.

Rockley’s products may be incorporated into end products in the health monitoring sector, including products which collect clinical data. Accordingly, it is possible that certain of Rockley’s products, or the end products which incorporate Rockley’s products will be subject to current and future regulation by the FDA, as well as by other federal, state, and local agencies. As Rockley’s target market is consumer wellness rather than medical, Rockley currently anticipates that FDA clearance will be unnecessary for its products targeting the consumer wearables market; however, Rockley intends to monitor and comply with regulations to the extent they become applicable to Rockley.

Manufacturers of medical devices are required to comply with applicable laws and regulations governing development, testing, manufacturing, labeling, marketing, and distribution of medical devices. Devices are generally subject to varying levels of regulatory control, based on the risk level of the device. Governmental regulations specific to medical devices are wide-ranging and govern, among other things:

•product design, development, and manufacture;

•laboratory, pre-clinical and clinical testing, labeling, packaging, storage, and distribution;

•premarketing clearance or approval;

•record-keeping;

•product marketing, promotion and advertising, sales, and distribution; and

•post-marketing surveillance, including reporting of deaths or serious injuries and recalls and correction and removals.

Rockley or its customers may not be able to obtain the necessary clearances or approvals for their products or may be unduly delayed in doing so, which could harm Rockley’s business. Furthermore, even if Rockley is granted regulatory clearances or approvals, they may include significant limitations on the permitted uses for the product, which may limit the market potential for the product. Delays in obtaining clearance or approval could increase Rockley’s costs and harm Rockley’s revenue and growth.

Additionally, Rockley’s products may be subject to regulation by similar agencies in other states and foreign countries. While Rockley believes that it has complied with all applicable laws and regulations, continued compliance with such laws or regulations, including any new laws or regulations, might impose additional costs on Rockley which could adversely affect its financial performance and results of operations.

Rockley is subject to various environmental laws and regulations that could impose substantial costs upon Rockley.

Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and Rockley believes this will continue both in scope and in the number of countries participating. In addition, as climate change issues become more prevalent, foreign, federal, state, and local governments and Rockley’s customers have been responding to these issues. The increased focus on environmental sustainability may result in new regulations and customer requirements, or changes in current regulations and customer requirements, which could materially and adversely impact Rockley’s business, results of operations, and financial condition. If Rockley is unable to effectively manage real or perceived issues, including concerns about environmental impacts or similar matters, sentiments toward Rockley or its products could be negatively impacted, and its business, results of operations, or financial condition could suffer.

Rockley’s operations are and will be subject to foreign, federal, state, and local environmental laws and regulations, and such laws and regulations could directly increase the cost of energy, which may have an effect on the way Rockley manufactures products or utilizes energy to produce its products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components Rockley uses in its products. Environmental regulations require Rockley to reduce product energy usage, monitor and exclude an expanding list of restricted substances, and to participate in required recovery and recycling of its products. Environmental and health and safety laws and regulations can be complex, and Rockley has limited experience complying with them. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production, or a cessation of Rockley’s operations.

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The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on Rockley’s financial condition or operating results. Rockley may face unexpected delays in obtaining the required permits and approvals in connection with its planned production facilities that could require significant time and financial resources and delay its ability to operate these facilities, which would adversely impact Rockley’s business, prospects, financial condition, and operating results.

Rockley is subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. Rockley can face criminal liability and other serious consequences for violations, which can harm its business.

Rockley is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act of 2010, and possibly other anti-bribery and anti-money laundering laws in countries in which Rockley conducts activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. Rockley can be held liable for the corrupt or other illegal activities of its employees, agents, contractors, and other collaborators, even if Rockley does not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

Failures, or perceived failures, to comply with privacy, data protection, and information security requirements in the variety of jurisdictions in which Rockley operates may adversely impact its business, and such legal requirements are evolving, uncertain, and may require improvements in, or changes to, Rockley’s policies and operations.

Rockley’s current and potential future operations and sales are subject to laws and regulations addressing privacy and the collection, use, storage, disclosure, transfer, and protection of a variety of types of data. For example, the European Commission has adopted the General Data Protection Regulation and California recently enacted the California Consumer Privacy Act of 2018, both of which provide for potentially material penalties for non-compliance. These regimes may, among other things, impose data security requirements, disclosure requirements, and restrictions on data collection, uses, and sharing that may impact Rockley’s operations and the development of its business. Rockley has limited access to collect, store, process, or share certain information collected by its products, and Rockley’s products may evolve to collect additional information. Therefore, the full impact of these privacy regimes on Rockley’s business is rapidly evolving across jurisdictions and remains uncertain at this time.

Rockley may also be affected by cyber-attacks and other means of gaining unauthorized access to its products, systems, and data. For instance, cyber criminals or insiders may target Rockley or third parties with which it has business relationships to obtain data, or in a manner that disrupts Rockley’s operations or compromises its products or the systems into which its products are integrated. Due to the political uncertainty involving Russia and Ukraine, there is an increased likelihood that escalation of tensions could result in cyber attacks that could either directly or indirectly impact our operations.

Rockley is assessing the continually evolving privacy and data security regimes and measures it believes are appropriate in response. Since these data security regimes are evolving, uncertain, and complex, especially for a global business like Rockley, Rockley may need to update or enhance its compliance measures and these updates or enhancements may require implementation costs. In addition, Rockley may not be able to monitor and react to all developments in a timely manner. The compliance measures Rockley does adopt may prove ineffective. Any failure, or perceived failure, by Rockley to comply with current and future regulatory or customer-driven privacy, data protection, and information security requirements, or to prevent or mitigate security breaches, cyber-attacks, or improper access to, use of, or disclosure of data, or any security issues or cyber-attacks affecting Rockley, could result in significant liability, costs (including the costs of mitigation and recovery), and a material loss of revenue resulting from the adverse impact on its reputation and brand, loss of proprietary information and data, disruption to its business and relationships, and diminished ability to retain or attract customers and business partners. Such events may result in governmental enforcement actions and prosecutions, private litigation, fines, and penalties or adverse publicity, and could cause customers and business partners to lose trust in Rockley, which could have an adverse effect on its reputation and business.

Further, in the event Rockley’s products, or the end products into which Rockley’s products are incorporated, involve the collection of personal medical or clinical data, Rockley would be subject to additional privacy regulations. For example, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations apply U.S. national standards for some types of electronic health information transactions and the data elements used in those transactions to ensure the integrity, security, and confidentiality of health information and standards to protect the privacy of individually identifiable health

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information businesses receive, maintain or transmit. The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH Act”) expanded the scope of the privacy and security requirements under HIPAA and increased penalties for violations. In addition, the HITECH Act enacted federal breach notification rules requiring notification to affected individuals and the Department of Health and Human Services (and in some cases, relevant media outlets) whenever a breach of protected health information occurs. Rockley’s failure to maintain confidentiality of sensitive protected health information or other personal information in accordance with the applicable regulatory requirements could damage its reputation and expose Rockley to claims, fines, and penalties. Rockley’s business, operating results, and financial condition could also be negatively impacted by a violation of the HIPAA privacy or security rules or any other applicable privacy or data security law.

Many U.S. states and international jurisdictions in which Rockley operates also have laws and regulations that protect the privacy and security of confidential, protected health information, or other personal information and have similar or even more protection than U.S. federal regulations. Furthermore, state data breach notification laws continue to expand the type of protected health information and other personal information they encompass, and in many cases are more burdensome than the HIPAA/HITECH breach reporting requirements.

Regulations related to conflict minerals may cause Rockley to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of its products.

As a public company, Rockley is subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, that will require it to determine, disclose, and report whether its products contain conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in Rockley’s products. In addition, Rockley will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of its products and, if applicable, potential changes to products, processes, or sources of supply as a consequence of such verification activities. It is also possible that its reputation may be adversely affected if Rockley determines that certain of its products contain minerals not determined to be conflict-free or if Rockley is unable to alter its products, processes, or sources of supply to avoid use of such materials.

Risks Related to Rockley’s Intellectual Property

Despite the actions Rockley is taking to defend and protect its intellectual property, Rockley may not be able to adequately protect or enforce its intellectual property rights or prevent unauthorized parties from copying or reverse engineering its products or technology. Rockley’s efforts to protect and enforce its intellectual property rights and prevent third parties from violating its rights may be costly.

The success of Rockley’s products and its business depend in part on Rockley’s ability to obtain patents and other intellectual property rights and maintain adequate legal protection for its products in the United States and other international jurisdictions. Rockley relies on a combination of patent, trademark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect its proprietary rights, all of which provide only limited protection.

As of December 31, 2021, Rockley had 192 issued and allowed patents and 90 other patent applications pending in the United States and 81 patents in foreign jurisdictions. The 192 issued and allowed patents in the United States expire in the years beginning in 2022 through 2040. The 81 patents in foreign jurisdictions include 51 in the United Kingdom, 26 in China, 1 in Europe, and 3 in Japan, and they expire in the years beginning 2027 through 2039. Many of Rockley’s issued patents and pending patent applications relate to sensors and sensor chips.

Rockley cannot assure you that any patents will be issued with respect to its currently pending patent applications or that any trademarks will be registered with respect to its currently pending applications in a manner that gives Rockley adequate defensive protection or competitive advantages, if at all, or that any patents issued to Rockley or any trademarks registered by it will not be challenged, invalidated, or circumvented. Rockley may file for patents and trademarks in the United States and in certain international jurisdictions, but such protections may not be available in all countries in which it operates or in which Rockley seeks to enforce its intellectual property rights, or may be difficult to enforce in practice. For example, the legal environment relating to intellectual property protection in certain emerging market countries where Rockley may operate in the future is relatively weaker, often making it difficult to create and enforce such rights. Rockley’s currently registered trademarks and any patents and trademarks that may be issued or registered, as applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. Rockley cannot be certain that the steps it has taken will prevent unauthorized use of its technology or the reverse engineering of its technology. Moreover, others may independently develop technologies that are competitive to Rockley or infringe Rockley’s intellectual property.

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Protecting against the unauthorized use of Rockley’s intellectual property, products, and other proprietary rights is expensive and difficult, particularly internationally. Unauthorized parties may attempt to copy or reverse engineer Rockley’s sensing technology or certain aspects of Rockley’s products or manufacturing processes that it considers proprietary. Litigation may be necessary in the future to enforce or defend Rockley’s intellectual property rights, to prevent unauthorized parties from copying or reverse engineering its products, or technology to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products into the United States.

Any such litigation, whether initiated by Rockley or a third party, could result in substantial costs and diversion of management resources, either of which could adversely affect Rockley’s business, operating results, and financial condition. Even if it obtains favorable outcomes in litigation, Rockley may not be able to obtain adequate remedies, especially in the context of unauthorized parties copying or reverse engineering its products or technology.

Further, many of Rockley’s current and potential competitors have the ability to dedicate substantially greater resources to defending intellectual property infringement claims and to enforcing their intellectual property rights than Rockley has. Attempts to enforce its rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against Rockley or result in a holding that invalidates or narrows the scope of Rockley’s rights, in whole or in part. Effective patent, trademark, service mark, copyright, and trade secret protection may not be available in every country in which Rockley’s products are available and competitors based in other countries may sell infringing products in one or more markets. Failure to adequately protect Rockley’s intellectual property rights could result in Rockley’s competitors offering similar products, potentially resulting in the loss of some of Rockley’s competitive advantage and a decrease in its revenue, which would adversely affect Rockley’s business, operating results, financial condition, and prospects.

Third-party claims that Rockley is infringing intellectual property, whether successful or not, could subject Rockley to costly and time-consuming litigation or expensive licenses, and its business could be adversely affected.

Although Rockley has applied for patents related to its products and technology, a number of companies hold patents covering aspects of sensing and photonic chip technologies. In addition to these patents, participants in this industry typically also protect their technology, especially embedded software, through copyrights and trade secrets. As a result, there is frequent litigation based on allegations of infringement, misappropriation, or other violations of intellectual property rights. Rockley may in the future receive inquiries from other intellectual property holders and may become subject to claims that it infringes their intellectual property rights, particularly as Rockley expands its presence in the market, expands to new use cases, and faces increasing competition. In addition, parties may claim that the names and branding of Rockley’s products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, Rockley may have to change the names and branding of its products in the affected territories and it could incur other costs.

Rockley currently has a number of agreements in effect pursuant to which it has agreed to defend, indemnify, and hold harmless its customers, suppliers, and channel partners and other counterparties from damages and costs which may arise from the infringement by Rockley’s products of third-party patents or other intellectual property rights. The scope of these indemnity obligations varies, and, in some instances, include indemnification for damages and expenses, including attorneys’ fees. Rockley’s insurance may not cover all intellectual property infringement claims. A claim that its products infringe a third party’s intellectual property rights, even if untrue, could adversely affect Rockley’s relationships with its customers, may deter future customers from purchasing its products, and could expose Rockley to costly litigation and settlement expenses. Even if Rockley is not a party to any litigation between a customer and a third party relating to infringement by its products, an adverse outcome in any such litigation could make it more difficult for Rockley to defend its products against intellectual property infringement claims in any subsequent litigation in which it is a named party. Any of these results could adversely affect Rockley’s brand and operating results.

Rockley may in the future need to initiate infringement claims or litigation to try to protect its intellectual property rights. In addition to litigation where Rockley is a plaintiff, Rockley’s defense of intellectual property rights claims brought against it or its customers, suppliers, and channel partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention, and force Rockley to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that requires Rockley to pay substantial damages or obtain an injunction and also Rockley may lose the opportunity to license its technology to others or to collect royalty payments. An adverse determination also could invalidate or narrow Rockley’s intellectual property rights and adversely affect its ability to offer its products to its customers and may require that Rockley procure or develop substitute products that do not infringe, which could require significant effort and expense. Any of these events could adversely affect Rockley’s business, reputation, operating results, financial condition, and prospects.

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Rockley’s intellectual property applications, including patent applications, may not be approved or granted or may take longer than expected to result in approval or grant, which may have a material adverse effect on Rockley’s ability to prevent others from commercially exploiting products similar to Rockley’s.

Rockley cannot be certain that it is the first inventor of the subject matter to which it has filed a particular patent application, or if it is the first party to file such a patent application. If another party has filed a patent application to the same subject matter as Rockley has, Rockley may not be entitled to the protection sought by the patent application. Rockley also cannot be certain whether the claims included in a patent application will ultimately be allowed in the applicable issued patent or the timing of any approval or grant of a patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, Rockley cannot be certain that the patent applications that it files will issue, or that its issued patents will afford protection against competitors with similar technology. In addition, Rockley’s competitors may design around Rockley’s registered or issued intellectual property, which may adversely affect Rockley’s business, prospects, financial condition, and operating results.

In addition to patented technology, Rockley relies on its unpatented proprietary technology, trade secrets, designs, experiences, workflows, data, processes, software, and know-how.

Rockley relies on proprietary information (such as trade secrets, designs, experiences, workflows, data, know-how, and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress, or service mark protection, or that Rockley believes is best protected by means that do not require public disclosure. Rockley generally seeks to protect this proprietary information by entering into confidentiality agreements, or consulting, services, or employment agreements that contain non-disclosure and non-use provisions with its employees, consultants, contractors, and third parties. However, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement, or misappropriation of its proprietary information, may be limited as to their term, and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. Rockley has limited control over the protection of trade secrets used by its current or future manufacturing counterparties and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, Rockley’s proprietary information may otherwise become known or be independently developed by its competitors or other third parties. To the extent that its employees, consultants, contractors, advisors, and other third parties use intellectual property owned by others in their work for Rockley, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of Rockley’s proprietary rights, and failure to obtain or maintain protection for its proprietary information could adversely affect its competitive business position. Furthermore, laws regarding trade secret rights in certain markets where Rockley operates may afford little or no protection to its trade secrets.

Rockley also relies on physical and electronic security measures to protect its proprietary information, but it cannot provide assurance that these security measures will not be breached or provide adequate protection for its property. There is a risk that third parties may obtain and improperly utilize Rockley’s proprietary information to its competitive disadvantage. Rockley may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce its intellectual property rights.

Rockley may be subject to damages resulting from claims that it or its current or former employees have wrongfully used or disclosed alleged trade secrets of its current or former employees’ former employers. Rockley may be subject to damages if its current or former employees wrongfully use or disclose Rockley’s trade secrets.

Rockley may be subject to claims that it or its current or former employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of a current or former employee’s former employers. Litigation may be necessary to defend against these claims. If Rockley fails to defend against such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or talent. A loss of key talent or their work product could hamper or prevent Rockley’s ability to commercialize its products, which could severely harm its business. Even if Rockley is successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

Risks Related to Infrastructure, Cybersecurity and Privacy

A network or data security incident may allow unauthorized access to Rockley’s network or data, harm its reputation, create additional liability, and adversely impact its financial results.

Rockley and its third-party service providers may face security threats and attacks from a variety of sources. In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse,

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and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in attacks (including advanced persistent threat intrusions) and increase the risks to Rockley’s internal networks and customer facing environments and the information they store and process. These risks may increase due to COVID-19. A breach in Rockley’s data or an attack against its service availability, or that of its third-party service providers, could impact Rockley’s networks, creating system disruptions or slowdowns and exploiting security vulnerabilities of Rockley’s products, and the information stored on Rockley’s networks or those of its third-party service providers could be accessed, publicly disclosed, altered, lost, or stolen, which could subject Rockley to liability and cause it financial harm.

Unauthorized access by a third party to Rockley’s internal network, any actual or perceived breach of network security in its systems or networks, or any other actual or perceived data security incident Rockley or its third-party service providers suffer, could result in damage to its reputation, negative publicity, loss of channel partners, end-customers and sales, loss of competitive advantages over its competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, costly litigation, and other liability. In addition, Rockley may incur significant costs to investigate and remediate any security breaches and other security incidents. Rockley’s data, corporate systems, third-party systems, and security measures may be breached due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to its data. For example, in late 2020, Rockley was subject to phishing attacks, one involving a spoofed email whereby certain vendor account information was charged and payment was made to a fraudulent account and a second closely timed incident where a “forwarding” rule was applied to the spoofed email’s recipient. While no personal data was accessed and the issue was addressed, the incident resulted in a net loss of approximately $66,345, which loss has been accounted for in Rockley’s 2020 financial statements (which amount has been offset by a payout under our cybersecurity insurance policy in March 2021). While Rockley maintains cybersecurity insurance, such insurance may be insufficient to cover all liabilities incurred by these incidents, and any incidents may result in loss or increased costs of its cybersecurity insurance. Any of these negative outcomes could adversely impact the market perception of, and investor confidence in, Rockley.

Any disruption or performance issues with Rockley’s network infrastructure could harm its brand, reputation, and business.

Rockley has experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints, and fraud. Any disruptions or other performance problems with Rockley’s products or reliability or security of Rockley’s systems could harm its reputation, brand, and Rockley’s business and operating results. In addition, Rockley must continually improve its computer network and infrastructure to avoid service interruptions or slower system performance. Rockley will need to devote additional resources to improving its platform architecture and its infrastructure. Any failure or delays in Rockley’s computer systems could cause service interruptions or slower system performance. These performance issues could harm Rockley’s business operations and financial condition.

Rockley relies on third parties to maintain and operate certain elements of its network infrastructure.

Rockley relies on third parties to operate and maintain certain elements of its network infrastructure. Interruptions in Rockley’s systems or the third-party systems on which it relies, whether due to system failures, computer viruses, physical or electronic break-ins, or other factors, could affect the security or availability of Rockley’s network infrastructure and website. Rockley’s existing data center facilities and third-party hosting providers have no obligations to renew their agreements with Rockley on commercially reasonable terms or at all, and certain of the agreements governing these relationships may be terminated by either party at any time, with no or limited notice. If any of these arrangements with third parties are terminated, Rockley could experience interruptions, as well as downtime, delays, and additional expenses in arranging alternative cloud infrastructure services. Rockley may incur significant liability from those customers and from third parties with respect to any breach of security affecting third parties’ infrastructure.

Risks Related to Financial and Accounting Matters

Rockley’s failure to raise additional capital or generate the significant capital necessary to expand its operations could reduce its ability to compete and could harm its business.

Rockley intends to continue to make investments to support its product development efforts and overall business growth and may require additional funds to respond to business challenges, including the need to develop new features to enhance its products or acquire complementary businesses and technologies. Accordingly, Rockley may in the long-term need to engage in equity or debt financings to secure additional funds. If Rockley raises additional equity or equity-linked financing, shareholders may experience dilution of their ownership interests. Current and future indebtedness may also contain terms that, among other things, restrict Rockley’s ability to incur additional indebtedness. Rockley may also be required to take other actions that would

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otherwise be in the interests of the debt holders and would require it to maintain specified liquidity or other ratios, any of which could harm Rockley’s business, operating results, and financial condition. Rockley may not be able to obtain additional financing on terms favorable to it, if at all. If Rockley is unable to obtain adequate financing or financing on satisfactory terms when required, Rockley’s ability to continue to support its business growth and to respond to business challenges could be significantly impaired, and its business may be adversely affected.

The nature of Rockley’s business requires the application of complex revenue recognition rules. Significant changes in current principles will affect its consolidated financial statements and changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and harm its results of operations.

The accounting rules and regulations with which Rockley must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (“FASB”), the U.S. Securities and Exchange Commission (the “SEC”), and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public. Further, the accounting rules and regulations are continually changing in ways that could impact Rockley’s financial statements.

In preparing Rockley’s consolidated financial statements, Rockley makes good faith estimates and judgments that may change or turn out to be erroneous, which could adversely affect Rockley’s operating results.

In preparing Rockley’s consolidated financial statements in conformity with GAAP, Rockley must make estimates and judgments in applying Rockley’s most critical accounting policies. Those estimates and judgments have a significant impact on the results Rockley reports in its consolidated financial statements. The most difficult estimates and subjective judgments that Rockley makes relate to (i) revenue recognition including variable consideration, (ii) useful lives and recoverability of property and equipment and long-lived assets, (iii) incremental borrowing rates on the Company’s finance and operating leases, (iv) valuation of our convertible loan notes, (v) valuation allowances for income taxes, (vi) stock-based compensation including the valuation of ordinary shares, (vii) valuation of warrants and (viii) contingencies. Rockley bases its estimates on historical experience, input from outside experts, and on various other assumptions that Rockley believe to be 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. Rockley also has other key accounting policies that are not as subjective, and therefore, their application would not require Rockley to make estimates or judgments that are as difficult, but which nevertheless could significantly affect its financial reporting. Actual results may differ materially from these estimates. In general, if Rockley’s estimates, judgments, or assumptions relating to its critical accounting policies are inaccurate or change or if actual circumstances differ from its estimates, judgments, or assumptions, including uncertainty in the current economic environment due to COVID-19, its operating results may be adversely affected and could fall below Rockley’s publicly announced projections or the expectations of securities analysts and investors.

Additionally, Rockley regularly monitors its compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to it. As a result of new standards, changes to existing standards, and changes in their interpretation, Rockley might be required to change its accounting policies, alter its operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or Rockley may be required to restate its published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on Rockley’s reputation, business, financial position, and profit, or cause an adverse deviation from Rockley’s revenue and operating profit target, which may negatively impact Rockley’s financial results. For more information, refer to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in this Annual Report on Form 10-K.

Rockley’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2021, Rockley had $132.3 million of U.K. net operating loss carryforwards available to reduce future taxable income and will be carried forward indefinitely. To the extent Rockley is not able to offset future taxable income with its net operating losses, Rockley’s cash flows may be adversely affected.

Risks Related to Being a Public Company

Rockley’s management team has varying degrees of experience managing and operating a public company.

Members of Rockley’s management team have varying degrees of experience managing and operating a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Rockley’s management team may not successfully or efficiently manage their new roles and responsibilities.

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Rockley’s transition to being a public company subjects it to significant regulatory oversight and reporting obligations under the U.S. securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from Rockley’s senior management and could divert their attention away from the day-to-day management of Rockley’s business. Rockley may not have adequate key talent with the appropriate level of knowledge, experience, and training in the accounting policies, practices, or internal controls over financial reporting required of public companies. The development and implementation of the standards and controls necessary to achieve the level of accounting standards required of a public company may require costs greater than expected. It is possible that Rockley will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods. These factors could adversely affect Rockley’s business, financial condition, and operating results.

If Rockley fails to maintain an effective system of internal controls, its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected.

Rockley is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the New York Stock Exchange (“NYSE”). Rockley expects that the requirements of these rules and regulations will continue to increase its legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on its talent, systems, and resources.

The Sarbanes-Oxley Act requires, among other things, that Rockley maintain effective disclosure controls and procedures and internal control over financial reporting. Rockley is continuing to develop and refine its disclosure controls, internal control over financial reporting, and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to Rockley’s principal executive and financial officers.

Rockley’s current controls and any new controls that it develops may be inadequate because of changes in conditions in its business. Further, additional weaknesses in Rockley’s internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect Rockley’s operating results or cause it to fail to meet its reporting obligations and may result in a restatement of Rockley’s financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of Rockley’s internal control over financial reporting that it is required to include in its periodic reports Rockley will file with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in Rockley’s reported financial and other information.

In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Rockley has expended and anticipates that it will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of its internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase Rockley’s operating costs and could materially and adversely affect its ability to operate its business. If Rockley’s internal controls are perceived as inadequate or if it is unable to produce timely or accurate financial statements, investors may lose confidence in Rockley’s operating results and the stock price could decline.

Rockley's independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over financial reporting until after Rockley is no longer an emerging growth company. At such time, Rockley's independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which Rockley’s controls are documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on the Rockley's business and operating results.

In addition to Rockley’s results determined in accordance with GAAP, Rockley believes certain non-GAAP measures may be useful in evaluating its operating performance. Rockley presents certain non-GAAP financial measures in this Annual Report on Form 10-K and intends to continue to present certain non-GAAP financial measures in future filings with the SEC and other public statements. Any failure to accurately report and present its non-GAAP financial measures could cause investors to lose confidence in its reported financial and other information, which would likely have a negative effect on the trading price of its ordinary shares.

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The requirements of being a public company may strain Rockley’s resources, divert management’s attention, and affect its ability to attract and retain qualified board members.

Rockley is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the NYSE, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase Rockley’s legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on its systems and resources. Among other things, the Exchange Act requires that public companies file annual, quarterly, and current reports with respect to their business and operating results. In addition, the Sarbanes-Oxley Act requires, among other things, that companies maintain effective disclosure controls and procedures and internal control over financial reporting. In order to meet the requirements of this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm Rockley’s business and operating results. Although Rockley has already hired additional employees to comply with these requirements, it may need to hire even more employees in the future and will need to engage its auditors to review its quarterly and annual reports, which will increase its costs and expenses.

In addition, changing laws, regulations, and standards related to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Rockley intends to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If Rockley’s efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against Rockley and its business may be harmed.

General Risks

The global COVID-19 pandemic could harm Rockley’s business and results of operations.

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. Since then, extraordinary actions have been taken by international, federal, state, and local public health and governmental authorities and organizations to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. These actions include travel bans, quarantines, “stay-at-home” orders, and similar mandates and guidelines for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

The COVID-19 pandemic has negatively impacted, and will likely continue to have a negative impact on, worldwide economic activity and financial markets and has impacted, and will further impact, Rockley’s workforce and operations, the operations of its customers, and those of their respective channel partners, vendors, and suppliers. In light of the uncertain and evolving situation and various international and government restrictions and guidelines, Rockley has taken measures intended to mitigate the spread of the virus and minimize the risk to its employees, channel partners, end-customers, and the communities in which it operates. Certain key laboratory employees and facilities were designated as Essential Critical Infrastructure and Rockley was able to continue internal testing and laboratory work to the extent necessary to service customer commitments. To facilitate on-site operations, revised operational and manufacturing plans were implemented that conform to COVID-19 precautionary health guidelines, including universal requirement of facial coverings, rearranging facilities to follow social distancing protocols, conducting active daily temperature checks, regular and thorough disinfecting of surfaces and tools, and regular testing of its employees for COVID-19. The remaining non-essential workforce was required to perform their duties from home.

Rockley intends to continue to monitor the situation and may adjust its current policies as more information and public health guidance become available. Any precautionary measures that Rockley has adopted or may adopt could negatively affect Rockley’s sales and marketing efforts, delay and lengthen its sales cycles, and create operational or other challenges, any of which could harm its business and results of operations. In addition, COVID-19 may disrupt the operations of Rockley’s customers and channel partners for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact Rockley’s business and results of operations, including cash flows.

The ongoing impact will depend on the duration of the pandemic, which is being mitigated by advances in the treatment of the disease, prevention efforts including vaccines, broad government measures to contain the spread of the virus, and related government stimulus measures. However, should Rockley experience sustained impact from the pandemic, additional actions

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such as cost reduction measures may need to be implemented. The impact of COVID-19 is fluid and uncertain, but it has caused and may continue to cause various negative effects, including an inability to meet with actual or potential customers; customers deciding to delay or abandon their planned product development programs and product commercialization timelines; increased requests for delayed payment terms by customers and channel partners; changes in the demand of Rockley’s products, which may cause it to reprioritize its engineering and research and development efforts; and delays or possible disruptions in its supply chain. Until the COVID-19 pandemic is contained and global economic activity stabilizes, it will continue to be more difficult for Rockley to forecast its operating results.

The recurrence or continued effects of a global economic downturn as a result of the COVID-19 pandemic, political instability, and geopolitical conflicts could have an adverse effect on Rockley’s business and operating results.

Rockley operates globally and as a result its business and revenue are impacted by global macroeconomic conditions. The multinational efforts to contain the spread of COVID-19 had a significant adverse effect on the global macroeconomic environment. In addition, the instability in the global credit markets, uncertainties regarding the effects of Brexit, uncertainties related to the timing of the lifting of governmental restrictions to mitigate the spread of COVID-19, uncertainties related to changes in public policies such as domestic and international regulations, taxes, or international trade agreements, international trade disputes, government shutdowns, geopolitical turmoil such as the conflict between Russian and Ukraine, and other disruptions to global and regional economies and markets could continue to add uncertainty to global economic conditions.

These adverse conditions could result in longer sales, development, and production cycles, slower adoption of new technologies, and increased price competition. As a result, any continued or further uncertainty, weakness, or deterioration in global macroeconomic and market conditions may cause Rockley’s customers to modify spending priorities or delay purchasing decisions, and result in lengthened sales, development, and production cycles, any of which could harm its business and operating results.

Rockley is an “emerging growth company” within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make Rockley’s securities less attractive to investors and may make it more difficult to compare Rockley’s performance to the performance of other public companies.

Rockley is an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups, or JOBS Act. As such, the Company is eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of Company ordinary shares that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of SC Health Ordinary shares in the IPO. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as the Company is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Rockley has elected not to opt out of such extended transition period and, therefore, Rockley may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find Rockley’s ordinary shares less attractive because the Company will rely on these exemptions, which may result in a less active trading market for Rockley’s ordinary shares and their price may be more volatile.

Several of Rockley’s directors and officers live outside the United States and certain assets of Rockley are located outside the United States; therefore, investors may not be able to enforce federal securities laws or their other legal rights.

Several of Rockley's directors and officers reside outside of the United States and certain assets of the Company are located outside of the United States. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon Rockley or any of its directors or officers or to enforce

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judgments of U.S. courts predicated upon civil liabilities and criminal penalties on its directors and officers under U.S. laws, including federal securities laws.

If securities or industry analysts do not publish or cease publishing research or reports about Rockley, its business, or its market, or if they change their recommendations regarding Rockley’s securities adversely, the price and trading volume of Rockley’s securities could decline.

The trading market for Rockley’s securities will be influenced by the research and reports that industry or securities analysts may publish about the Company, its business, market or competitors. If any of the analysts who cover Rockley change their recommendation regarding Rockley’s shares adversely, or provide more favorable relative recommendations about Rockley’s competitors, the price of Rockley’s shares would likely decline. If any analyst who covers Rockley were to cease coverage of Rockley or fail to regularly publish reports on it, Rockley could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

Item 2.Properties

As at December 31, 2021, we held interest in 13 properties. All of our facilities are located on real estate that is leased from third parties. Our properties consisted of (1) 10 office and/or lab properties, (2) two corporate apartment properties, and (3) one clinical trials property. Our headquarters are currently located in the United Kingdom.

In the US, we have premises in Pasadena, California, US under multiple leases for approximately 18,000 square feet. The majority of the premises in Pasadena leased expire in June 2023 and are predominantly used for engineering and finance and general administration services. We also lease spaces in Irvine, California for approximately 12,800 square feet under multiple leases all expiring in 2027, predominantly used for engineering and general administration services; we lease a property in San Jose, California for approximately 4,600 square feet under a lease expiring in 2024, which is predominantly used for finance and general administration services; we lease separate small office spaces in Irvine, California and Bloomington, Minnesota and; we also lease two corporate apartments in Pasadena, California.

In the United Kingdom, we have a lease on our lab facilities in Wales for approximately 1,733 square feet, due to expire in 2024. Across Europe, we also operate our research, administrative and support functions out of small leased office spaces in Wiltshire, UK; Oxford, UK; Espoo, Finland; Cork, Ireland; Zug, Switzerland.

Item 3.Legal Proceedings

We are from time to time subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. However, we do not consider any such claims, lawsuits or proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition or cash flows.

Item 4.Mine Safety Disclosures

Not applicable.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our ordinary shares and public warrants are traded on the NYSE under the symbol “RKLY" and "RKLY.WS.”

Holders

As of March 10, 2022, there were approximately 153 holders of record of our ordinary shares.

Dividend Policy

We have not paid any cash dividends on our ordinary shares to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and we have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the ordinary shares in the foreseeable future.

Recent Sales of Unregistered Equity Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchaser

None.

Item 6.Selected Financial Data

The Company is a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and is not required to provide this item.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis provides information that Rockley’s management believes is relevant to an assessment and understanding of Rockley’s consolidated results of operations and financial condition. The discussion should be read together with the audited annual consolidated financial statements as of and for the years ended December 31, 2021 and 2020 and the related notes thereto, included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements. Unless the context otherwise requires, references in these notes to "Rockley", the “Company”, "we", "us", or "our" and any related terms are intended to mean the Company, Rockley Photonics Holdings Limited, while "Legacy Rockley" and "SC Health" refers to the entities prior to the Business Combination.

Overview

We have developed a unique sensing platform that we believe can reshape the wellness and healthcare industries through multiple applications in non-invasive, multi-modal biomarker monitoring. We believe products based on our technology platform could have the potential to unlock and accelerate advancements in areas such as early disease detection, nutrition management, and preventative healthcare delivery through continuous health and wellness monitoring.

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To date, we have been engaged in developing customer-specific designs of our silicon photonics chipsets for incorporation into our customers’ end products. Accordingly, all of our products are presently in the development stage and we do not currently have any of our own end products in commercial production and have not yet shipped any products commercially. Our unique sensing platform has been built upon our silicon photonics technology, which enables compelling sensor performance, power, resolution, and density. This technology has the potential to allow monitoring devices, currently the size of clinical machines, to be condensed to the size of a wearable device. We believe this in turn has the potential to unlock additional uses in consumer electronics and medical devices. The resulting combination of technologies and manufacturing know-how is the “full-stack Rockley Platform” which is made up of PICs in silicon with integrated III-V devices (devices incorporating certain conductor elements that offer superior electronic properties, such as lasers), ASICs, photonic and electronic co-packaging, together with biosensing algorithms and AI cloud analytics, firmware/software, system architecture, and hardware design.

As testament to the relevance of our product development, we have captured the attention of several consumer electronics companies and, as of the date of this Annual Report on Form 10-K, we have established strategic relationships with six of the world’s top-ten largest manufacturers of smart watches and wristbands (based on volume as reported by IDC). We plan to leverage this attention to develop new capabilities in consumer wearables in the near term, and to expand over time into medical devices and other industry applications.

Our vision is to address many pressing healthcare concerns using our technology and we believe that there exists a large market opportunity for our platform. We estimate that the TAM for the consumer wearables, mobile device, and medical device markets is projected to be over $48 billion by 2025, based on data sourced from the Yole Report, the IDtexEx Report, the TrendForce Report, and our internal volume forecasts for smartphone, smart watch, and smart earbuds through 2025 (based on customer data), as the universe of healthcare and consumer wearable devices incorporating additional sensing capabilities emerges. Our target biomarkers for consumer healthcare include lactate, alcohol, glucose (indicator), carbon monoxide, blood pressure, blood oxygen, and core body temperature, among others. Our high-performance lasers have up to 1,000,000 times higher resolution, 1,000 times higher accuracy and 100 times broader range in wavelengths compared with existing LED offerings in wearable solutions (based on product analysis undertaken by Rockley comparing the Rockley silicon photonics-based spectrometer chip to existing solutions). We believe our platform will also be able to address existing applications in consumer wearable devices with significantly higher resolution, accuracy, and range. Further, we believe there are multiple additional markets and concrete opportunities for our technology platform in areas such as data center connectivity (optical transceivers), machine vision (robotic and automotive LiDAR), and compute connectivity (co-packaged optics, or CPO).

To date, we have generated revenue primarily from non-recurring engineering ("NRE") and development services for customer-specific designs of silicon photonics chipsets for incorporation into their customers’ end products and we have financed our operations primarily through the Business Combination, issuance of convertible loan notes, as well as private placements of ordinary shares. From the date of our formation through December 31, 2021. we have raised aggregate gross proceeds of approximately $290.0 million from the issuance of convertible loan notes and ordinary shares. For the year ended December 31, 2021, we incurred a net loss of $168.0 million and utilized $126.0 million in cash to fund our operations.

We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:

•continue to invest in our technology and our silicon photonics solutions;

•continue to develop innovative solutions and applications for our technology;

•commercialize our silicon photonics solutions;

•continue to invest in our sales and marketing activities and distribution channels;

•invest and improve our operational, financial, and management information systems;

•retain key talent and increase our headcount;

•maintain and expand our intellectual property portfolio; and

•enhance internal functions to support our operations as a public company.

Impact of COVID-19

The COVID-19 global pandemic has prompted extraordinary measures by governments and businesses to contain and combat the spread of COVID-19 in regions throughout the world. These actions include travel bans, quarantines, “stay-at-

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home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

The COVID–19 pandemic has adversely impacted our operational efficiency and caused delays in operational activities. For the year ended December 31, 2021, we continue to take cautious steps to protect our workforce, support community efforts, and follow local government guidelines. Certain key laboratory employees and facilities have continued internal testing and laboratory work to the extent necessary to service customer commitments. The remaining non-essential workforce were recommended to continue performing their duties from home. The ongoing impact will depend on the duration of the pandemic which is being mitigated by the vaccination of the general population and gradual easing of restrictions. For more information on risks associated with the COVID-19 pandemic and regulatory actions, see “Risk Factors — General Risks.”

Comparability of Financial Information

Our results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Business Combination and becoming a public company. As a consequence of the Business Combination, we became a NYSE listed company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees.

Business Combination and Public Company Costs

As described in “Note 1 – Description of Business and Significant Accounting Policies” and “Note 2 – Note 2 – Business Combination” of the notes to the consolidated financial statements, we completed the Business Combination on August 11, 2021, with Legacy Rockley surviving the Business Combination as a wholly owned subsidiary of the Company.

Prior to the Business Combination, Legacy Rockley financed its operations primarily from the issuance of convertible loan notes and private placements of ordinary shares. From the date Legacy Rockley was incorporated in 2013 through August 11, 2021, the date of the consummation of the Business Combination, Legacy Rockley raised aggregate gross proceeds of approximately $290.0 million from the issuance of convertible loan notes and ordinary shares.

Upon the consummation of the Business Combination, we issued 104.0 million shares of ordinary shares for all the issued and outstanding equity interests of Legacy Rockley inclusive of ordinary shares issued in exchange for the issued and outstanding convertible loan notes (inclusive of interest accrued thereon) and warrants, as if each had converted into the Company's ordinary shares immediately prior to the Business Combination. In addition, certain accredited investors (including entities affiliated with the SC Health Sponsor) purchased an aggregate of 15.0 million ordinary shares for a purchase price of $10.00 per share, or an aggregate purchase price of $150.0 million. The net cash received from the Business Combination after underwriter and transaction costs was $122.5 million.

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The Business Combination was accounted for as a forward recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, SC Health was treated as the acquired company and Rockley was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the evaluation of the following facts and circumstances:

•Legacy Rockley's existing shareholders hold a majority voting interest in the combined company, and as such, have the power to appoint a majority of the members of the Company’s Board;

•Legacy Rockley's senior management team comprise the majority of the senior management of the combined company;

•Legacy Rockley is the larger of the companies based on historical operating activity and employee base; and

•Legacy Rockley's operations comprise the ongoing operations of the combined entity.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Rockley with the acquisition being treated as the equivalent of Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization.

As a consequence of the Business Combination, the Company became an SEC-registered and NYSE-listed company, which requires us to hire additional talent and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur incremental annual expenses as a public company for, among other things, increased directors’ and officers’ liability insurance; director fees; and additional internal and external accounting, legal, and administrative resources.

Key Factors Affecting Operating Results

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including, without limitation, the following:

Resource Constraints

Our products are currently under development and we do not have any products in commercial production. Our ability to achieve our product roadmaps and development timelines, including our ability to commence commercial production of our products, may be impacted by resource constraints, including the need for additional capital. We have a history of losses and our determination of substantial doubt as a going concern could materially limit our ability to raise additional funds through the issuance of equity securities or otherwise. Further, our products must also meet certain technical standards and customer requirements, which in turn require additional funds and other resources. Additional financing and resources may not be available to us when needed or on commercially reasonable terms.

Ability to Achieve Design Wins or Long-Term Production Contracts

We may engage in discussions with customers and co-develop products but we may not be able to convert the relationship into a design win or a long-term production contract due to resource constraints, delays, or technical challenges. We work closely with our customers and potential customers to understand their product roadmaps and strategies. Our customers also continuously develop new products in existing and new application areas. We believe achieving design wins and the ability to secure long-term production contracts will be critical to our future success. The selection process is typically lengthy and may require us to incur significant design and development expenditures in pursuit of a design win with no assurance that our products will be selected. The failure to secure a design win or long-term production contract could adversely affect our business.

Customer Orders and Forecasts

We currently anticipate that sales of our future products will be made pursuant to standard purchase orders, which may be cancelled, reduced, or rescheduled with little or no notice and without penalty. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers, including if and when we commence commercial production of our products, could expose us to the risks of inventory shortages or excess inventory.

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Pricing and Customer Demand

We expect our operating results, including if and when we commence commercial production of our products, will be impacted by the pricing of our products, our average selling prices, and fluctuations in customer purchasing volumes. If and when we begin commercial production of our products, we may not be able to fulfill customer demand in a timely manner or at all. We monitor and work to reduce our product manufacturing costs and improve the potential value our products can provide to our customers’ end products. The cost of raw materials and components critical for the manufacture of our anticipated products is largely out of our control and may fluctuate significantly. Since we rely on third-party wafer foundries and assembly and test contractors to manufacture, assemble, and test our products, we maintain a close relationship with our suppliers to improve quality, increase yields, and lower manufacturing costs.

New Markets and Applications

As we evaluate potential markets and applications for the products we are developing, we analyze forecasts by industry analysts, the adoption curve of technology, and potential competing forces that could hinder such adoption. If we fail to anticipate or respond to technological shifts or market demands, or to timely develop products or technologies in response to the same, it could result in our inability to achieve revenue growth and could harm our business and operations.

Cyclical Nature of the Semiconductor Industry

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. Downturns in the semiconductor industry have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices. Any prolonged or significant downturn in the semiconductor industry generally could adversely affect our business and reduce demand for our products and otherwise harm our financial condition and results of operations.

See the “Risk Factors” section of this annual report on Form 10-K for additional discussion of the risks and challenges facing our business.

Basis of Presentation

Currently, we conduct business through one operating and reportable segment. All long-lived assets are maintained in, and all losses are attributable to the one segment. See Note 1 in our accompanying audited consolidated financial statements for more information about our operating segment.

Components of Results of Operations

The following discusses certain line items in our consolidated statements of operations and comprehensive loss.

Revenue

To date, we have primarily generated revenue from development services, which entail developing customer-specific designs of silicon photonics chipsets. Our contracts with customers include specific achievement of agreed-upon projects and a substantive acceptance criteria for each agreed-upon project. In the event an agreed-upon project is successful and the customer provides acceptance, we allocate the contract consideration related to the performance obligations that are satisfied during the period and recognize the revenue at that point in time.

Following the completion of our product development phase and introduction of our spectra-sense chipsets to the wearable devices market, we expect the majority of our revenue to be derived from sales of high-volume consumer wearable products. In addition, we plan to offer advanced module applications with biomarker detection capabilities for advanced health metrics that can detect, classify, and potentially prevent disease. We also expect to offer a cloud analytics platform to provide a full range of subscription services, including the deployment of our technology through a subscription and cloud-based software as a service.

Cost of Revenue

To date, our cost of revenue has included cost related to our development services, which include cost of materials, cost associated with packaging and assembly, testing and shipping, cost of talent, including stock-based compensation, and

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equipment associated with manufacturing support, logistics, and quality assurance, overhead, and occupancy costs. Once we commence commercial production of our silicon photonics chipsets, cost of revenues will include direct parts, material, and labor costs, manufacturing overhead, including amortized tooling costs, shipping and logistics costs, and reserves for estimated warranty expenses.

Gross Profit and Gross Margin

Gross profit is calculated based on the difference between our revenue and cost of revenue. Gross margin is the percentage obtained by dividing gross profit by our revenue. As we approach commercial production of spectra-sense chipsets, advanced module applications, and Rockley Photonics Cloud Analytics technology, we expect our gross profit and gross margin to vary.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing, and human resources; depreciation expense and rent relating to facilities; travel costs; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, benefits, bonuses, and stock-based compensation. We expect our selling, general and administrative expense to increase in absolute dollars for the foreseeable future as we increase our headcount to support the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional general and director and officer insurance expenses, investor relations activities, and other administrative and professional services.

Research and Development Expense

Research and development expense consists primarily of talent costs for engineers and third parties engaged in the design and development of products, software, and technologies, including salary, bonus, and stock-based compensation expense, project material costs, services, and depreciation of our research and development facilities and equipment. We expense research and development costs as they are incurred. Research and development expense also includes the research and development tax credits that we are able to claim in accordance with the relevant U.K. tax legislation. These tax credits are payable to us in cash and are carried on the consolidated balance sheets at the amount claimed and expected to be received from the U.K. government within the next 12 months. We expect research and development expense to increase in absolute dollars as we continue to invest in the development of our products and technology.

Other Income (Expense)

Other income consists of miscellaneous non-operating items, such as forgiveness of debt and related accrued interest.

Interest Income (Expense)

Interest income consists primarily of interest received or earned on our cash, cash equivalents, and investment balances held in interest-bearing deposit accounts. Interest expense consists of interest paid on our convertible loan notes and capital lease obligations.

Equity Method Investment

Equity method investments consist of entities over which we have significant influence but not control or joint control. Under the equity method of accounting, all of our investments are initially recognized at cost and adjusted thereafter to recognize our share of the post-acquisition profits or losses of the investee in our consolidated statements of operations.

Change in Fair Value of Debt Instruments

Gains or losses from the change in fair value of debt instruments are recorded from the remeasurement of the fair value of our convertible loan notes using a discounted cash flow methodology based upon certain valuation assumptions.

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Change in Fair Value of Warrant Liabilities

Gains or losses from the change in fair value of warrants are recorded from the remeasurement of the fair value of our private placement warrants based upon certain valuation assumptions.

Gain (Loss) on Foreign Currency

We have significant international operations that are denominated in foreign currencies, primarily the British Pound and Euro, subjecting us to foreign currency exchange risk that may adversely impact our financial results. We calculate the year-over-year impact of foreign currency movement on our business using foreign currency exchange rates that are applied to transactional currency amounts.

Provision for Income Tax

We are subject to income taxes in the United Kingdom, the United States, Finland, Ireland, and Switzerland. Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. Due to cumulative losses, we maintain a valuation allowance against our U.S. federal and foreign deferred tax assets.

Results of Operations for the Years Ended December 31, 2021 and 2020

The following table sets forth our historical operating results for the periods indicated (in thousands):

	Years Ended December 31,
	2021		2020
Revenue	$	8,213	$	22,343
Cost of revenue	11,416		24,240
Gross profit	(3,203)		(1,897)
Operating expenses:
Selling, general, and administrative expenses	39,976		20,260
Research and development expenses	72,573		35,900
Total operating expenses	112,549		56,160
Loss from operations	(115,752)		(58,057)
Other income (expense):
Forgiveness of PPP loan	2,860		—
Interest expense, net	(4,781)		(189)
Equity method investment loss	(703)		(1,274)
Change in fair value of debt instruments	(59,916)		(20,163)
Change in fair value of warrant liabilities	10,827		—
Gain (loss) on foreign currency	119		(25)
Total other income (expense)	(51,594)		(21,651)
Loss before income taxes	(167,346)		(79,708)
Provision for income tax	667		569
Net loss and comprehensive loss	$	(168,013)	$	(80,277)

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Discussion and Analysis of Results of Operations

Revenue (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Revenue	$	8,213	$	22,343	$	(14,130)	(63)	%

Revenue decreased by $14.1 million, or 63% to $8.2 million for the year ended December 31, 2021 from $22.3 million for the year ended December 31, 2020. This decrease is primarily driven by an ongoing backlog of project deliverables in fiscal 2021 when compared to fiscal 2020 where we completed and delivered on project milestones for our significant customers.

Cost of Revenue and Gross Profit (in thousands, except for percentages)

	Years Ended December 31,						Change
	2021			2020			$		%
Cost of revenue	$	11,416		$	24,240		$	(12,824)	(53)	%
Gross Profit	$	(3,203)		$	(1,897)		$	(1,306)	NM
Gross Margin	(28)		%	(8)		%	NM		NM

NM – Not meaningful

Cost of revenue decreased by $12.8 million, or 53%, to $11.4 million for the year ended December 31, 2021 from $24.2 million for the year ended December 31, 2020. This decrease in cost of revenue was primarily driven by a decrease of $9.9 million from engineering, fab, partner and stock-based compensation costs. The decrease was partially offset by an increase of $1.6 million in research and development tax credits and grants we received in 2021 compared to the prior period due to higher claims for our research and development activities. Gross profit decreased by $1.3 million to $(3.2) million for the year ended December 31, 2021 from $(1.9) million for the year ended December 31, 2020. The decrease in gross profit was primarily driven by a decrease in revenue for the year ended December 31, 2021. Our revenue is recognized at the achievement of milestones and is not necessarily aligned with the timing of costs we incur. In the quarter ended December 31, 2021, we revised the rate of accrual of a certain R&D tax credit based on new information received from Her Majesty’s Revenue and Customs. The one-time revision of the accrual resulted in an offset to cost of revenue and R&D expense in the quarter ended December 31, 2021.

Our gross margin has fluctuated and may fluctuate from period to period based on a number of factors, including the timing of completion of project milestones, with each project requiring differing levels of time and costs. The projects we undertake are determined by our customer commitments and our long-term strategy goals.

Selling, General and Administrative Expenses (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Selling, general and administrative expenses	$	39,976	$	20,260	$	19,716	97	%

Selling, general and administrative expenses increased by $19.7 million, or 97%, to $40.0 million for the year ended December 31, 2021 from $20.3 million for the year ended December 31, 2020. The increase was primarily due to general corporate growth, of which $6.0 million was from additional professional fees related to accounting, legal and audit matters, and $6.0 million and $1.5 million were due to increased human capital and stock-based compensation costs, respectively.

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Research and Development Expenses (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Research and development expenses	$	72,573	$	35,900	$	36,673	102	%

Research and development expenses increased by $36.7 million, or 102%, to $72.6 million for the year December 31, 2021 from $35.9 million for the year ended December 31, 2020. The increase was primarily attributable to growth of $17.8 million from engineering, fab partners, and engineering research and development headcount. This also led to an increase in human capital and stock-based compensation expenses of $22.0 million and $4.7 million, respectively. In addition, the increase is also driven by $11.0 million in research and development tax credits and grants we received in 2021 compared to the prior period due to higher claims for our research and development activities and grants.

Other income, net (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Other income, net	$	2,860	$	—	$	2,860	100	%

Other income, net during the year ended December 31, 2021 consisted of debt forgiveness and related accrued interest of the $2.9 million PPP Loan.

Interest Expense, net (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Interest expense, net	$	(4,781)	$	(189)	$	(4,592)	2,430	%

The change in interest expense, net by $4.6 million, or 2,430%, for the years ended December 31, 2021 and December 31, 2020, respectively was primarily due to the interest expense recorded in 2021 related to the 2020 Term Facility Loan using the effective interest rate method.

Equity Method Investment Loss (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Equity method investment loss	$	(703)	$	(1,274)	$	571	(45)	%

Change in equity method investment captures our share of losses of the investment in HRT according to our percentage of ownership.

Change in Fair Value of Debt Instruments (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Change in fair value of debt instruments	$	(59,916)	$	(20,163)	$	(39,753)	197	%

Change in fair value of debt instruments captures losses from a change in fair value estimates using discounted cash flow and binomial lattice methodologies that are based upon a set of valuation assumptions. As of December 31, 2021, there were no debt instruments requiring fair value adjustments. All convertible debt instruments previously held by the Company were converted to ordinary shares in the Company as part of the Business Combination, completed in August 2021.

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Change in Fair Value of Warrant Liabilities (in thousands, except for percentages)

	Years Ended December 31,			Change
	2021	2020		$		%
Change in fair value of warrant liabilities	10,827	$	—	$	10,827	NM

Change in fair value of warrant liabilities captures activity from a change in fair value estimates based upon a set of valuation assumptions. The Private Placement Warrants were assumed from SC Health and recorded as part of the Business Combination in August 2021.

Gain (Loss) on Foreign Currency (in thousands, except for percentages)

 

	Years Ended December 31,				Change
	2021		2020		$		%
Gain (loss) on foreign currency	$	119	$	(25)	$	144	(576)	%

Change in gain (loss) on foreign currency captures losses from the impact of foreign currency exchange rates as a result of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. For the years ended December 31, 2021 and 2020, most of our balances are held in the reporting currency, which decrease the impact of foreign currency fluctuations on the results of our operations.

Provision for Income Tax (in thousands, except for percentages)

	Years Ended December 31,				Change
	2021		2020		$		%
Provision for income tax	$	667	$	569	$	98	17	%

Change in provision for income tax expense for the years ended December 31, 2021 and 2020 is due to an overall increase in expenditures. The effective income tax rate was less than 1.0% for the years ended December 31, 2021 and 2020. Our effective tax rate differs from the U.K. statutory rate primarily due to a substantially full valuation allowance against our net deferred tax assets where it is more likely than not that some or all of the deferred tax assets will not be realized. The income tax expenses shown above are primarily related to corporate income taxes in the United States, which operates on a cost-plus arrangement and minimum filing fees in the foreign jurisdictions where we have operations.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively and in context, may be helpful to investors in assessing our operating performance and trends and in comparing our financial measures with those of comparable companies which may present similar non-GAAP financial measures.

Limitations of Non-GAAP Measures

These non-GAAP financial measures are not prepared in accordance with GAAP, are supplemental in nature, and are not intended, and should not be construed, as the sole measure of our performance, and should not be considered in isolation from or as a substitute for comparable financial measures prepared in accordance with GAAP. There are a number of limitations related to EBITDA and Adjusted EBITDA, including the following:

•EBITDA and Adjusted EBITDA exclude certain recurring, non-cash charges, such as depreciation of property and equipment and/or amortization of intangible assets. While these are non-cash charges, we may need to replace the assets being depreciated and amortized in the future and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash requirements for these replacements or new capital expenditure requirements.

•EBITDA and Adjusted EBITDA do not reflect interest expense, net, which may constitute a significant recurring expense in the future.

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•Adjusted EBITDA excludes stock-based compensation, which may constitute a significant recurring expense in the future, as equity awards are expected to continue to be an important component of our compensation strategy.

•Future expenses may be similar to the non-recurring special items that are excluded from Adjusted EBITDA.

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

EBITDA and Adjusted EBITDA

We define “EBITDA” as net loss before interest expense, net, income tax expense, and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA adjusted for stock-based compensation, non-capitalized transaction costs, and other non-recurring special items determined by management that are not considered representative of our underlying operating performance. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA or Adjusted EBITDA in the same fashion.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of our net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

Reconciliation

The following table reconciles our net loss (the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA) to EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020 (in thousands): 

	Years Ended December 31,
	2021		2020
Net Loss	$	(168,013)	$	(80,277)
Interest expense, net	4,781		189
Provision for income tax	667		569
Depreciation and amortization	4,640		2,787
EBITDA	(157,925)		(76,732)
Non-capitalized transaction costs*	$	4,337	$	3,611
Stock-based compensation	12,013		8,043
Equity-method investment loss	323		1,274
Change in fair value of debt instruments	59,916		20,163
Change in fair value of warrants liabilities	(10,827)		—
Forgiveness of PPP loan	(2,860)		—
Adjusted EBITDA	$	(95,023)	$	(43,641)

* Non-capitalized transaction costs include non-recurring expense related to the issuance of convertible loan notes in 2021 and the Business Combination.

Liquidity and Capital Resources

Due to Rockley’s history of recurring losses from operations, negative cash flows from operations, and a significant accumulated deficit, management concluded that there is substantial doubt about Rockley’s ability to continue as a going concern. In addition, our independent registered public accounting firm has included an explanatory paragraph in their opinion for the year ended December 31, 2021 as to the substantial doubt about our ability to continue as a going concern. Since inception, Rockley has financed its operations primarily through the issuance and sale of convertible loan notes, ordinary shares and agreed-upon projects. As of December 31, 2021, the Company had cash, cash equivalents and investments of approximately $81.4 million.

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Short-Term Liquidity Requirements

As of the date of this Annual Report on Form 10-K, we have yet to generate any material revenue from our business operations. On August 11, 2021, the consummation of the Business Combination resulted in net cash proceeds of $122.5 million of cash, net of transaction costs, which will be used to fund our future capital and liquidity needs in order to support our core business operations and overall growth of our business and to execute our current growth strategies.

As of the date of this Annual Report on Form 10-K, management believes that the cash generated by the closing of the Business Combination and the PIPE Financing is sufficient to fund both our cash needs for the execution of our business strategy for the next 9 months, including (1) investing in research and developments activities, including completion and commercialization of our wearables, smart phone and point-of-care technologies, (2) investing in backend processing, intellectual property protection, quality control and process, (3) expanding sales and marketing activities, and (4) pursuing strategic partnerships. However, our anticipated cash needs could vary materially and negatively as a result of a number of factors, including:

•Timing and the costs involved in bringing our products to market;

•Anticipated customer contracts and design wins may not materialize;

•Delay in launching our products due to technical challenges from our customers or our product development team;

•Pricing and the volume of sales of our products may be different from our forecast;

•Execution delays due to resources constraints;

•Assisting our fab partners with expansion of production capacity;

•The cost of maintaining, expanding and protecting our intellectual property portfolio, including litigation costs and liabilities;

•The cost of additional general and administrative talent, including accounting and finance, legal and human resources, as a result of becoming a public company;

•Rockley’s additional investment requirement needed for HRT to be self-sufficient; and

•Other risks discussed in the section entitled “Risk Factors.”

Long-Term Liquidity Requirements

If we do not generate sufficient revenue, we will be required to explore various options to fund future cash needs through sale of additional equity, debt financing, and others. There can be no assurance that any such issuance of equity securities, debt financing or other means of financing will be available in the future, or the terms of any such financing will be acceptable to us. If we raise funds by issuing equity securities, there will be dilution to the existing shareholders. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to the holders of ordinary shares. The term of debt securities or borrowing could impose significant restriction on our operations. The credit market and financial service industry have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.

If adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.

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Historical Cash flows

For the Years Ended December 31, 2021 and 2020

	Years Ended December 31,
	2021		2020
(in thousands)
Net cash used in operating activities	$	(126,001)	$	(48,354)
Net cash used in investing activities	(52,842)		(6,656)
Net cash provided by financing activities	196,401		53,334
Net increase (decrease) in cash and cash equivalents	$	17,558	$	(1,676)

Cash Flows from Operating Activities

During the year ended December 31, 2021, net cash used in operating activities was $126.0 million, primarily consisting of net losses of $168.0 million, adjusted by non-cash depreciation and amortization of $4.6 million, bad debt expense and allowance for doubtful accounts of $0.8 million, stock-based compensation of $12.0 million, equity-method investment loss of $0.3 million, and changes in fair value of debt instruments and warrants of $59.9 million and $(10.8) million, respectively. Changes in assets and liabilities for the year ended December 31, 2021 included the following: decreases in accounts receivable, offset by increases in other receivables, trade payables and accrued expenses.

During the year ended December 31, 2020, net cash used in operating activities was $48.4 million, primarily consisting of net losses of $80.3 million, adjusted by non-cash depreciation and amortization of $2.8 million, stock-based compensation of $8.0 million, equity-method investment loss of $1.3 million, and change in fair value of debt instruments of $20.2 million. Changes in assets and liabilities for the year ended December 31, 2020 included the following: increases in other receivables and accrued expenses offset by decreases in accounts receivable, other current assets, and trade payables.

Cash Flows from Investing Activities

Net cash used in investing activities was $52.8 million for the year ended December 31, 2021, primarily related to the purchase and the sale of marketable securities of $54.7 million and $10.0 million, respectively, and also from the purchases of property and equipment to be used in the ordinary course of business. Net cash used in investing activities was $6.7 million for the year ended December 31, 2020, primarily related to the investment in our HRT of $5.0 million and the remaining 1.4 million was related to purchases of property and equipment to be used in the ordinary course of business.

Cash Flows from Financing Activities

Net cash provided by financing activities was $196.4 million for the year ended December 31, 2021, primarily related to the proceeds received from the Business Combination and convertible loan notes. Net cash provided by financing activities was $53.3 million for the year ended December 31, 2020, primarily consisting of proceeds received for convertible loan notes and Paycheck Protection Program.

Contractual Obligations and Commitments

Purchase obligations include commitments to third-party suppliers for various research and development activities. As of December 31, 2021 and December 31, 2020, we had $13.6 million and $3.0 million, respectively in contractual obligations for which we have not yet received services.

Off-Balance Sheet Arrangements

Since the date of our incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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Recent Accounting Pronouncements

Please refer to Note 1 - Description of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification, and we consider the various staff accounting bulletins and other applicable guidance issued by the SEC. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

See Note 1 - Description of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of our significant accounting policies and the effect on our financial statements.

Revenue Recognition

We generate revenue principally from development services, which entails developing customer-specific designs of photonics chipsets. Our contracts with customers include specific achievement milestones and a substantive acceptance criteria for each milestone. In the event a milestone is achieved and the customer provides acceptance, the Company allocates the contract consideration related to the performance obligations that are satisfied during the period and recognizes the revenue at that point in time.

Stock-based Compensation

We recognize the cost of stock-based awards granted to our employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. We have elected to recognize the effect of forfeitures in the period they occur. We determine the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:

•Expected Term—This is the period that the awards that have been granted are expected to remain unexercised. The Company employs the average period the awards are expected to remain outstanding;

•Volatility—Our stock was not publicly traded prior to August 11, 2021. The volatility used in stock grants made prior to that date was based on a benchmark of comparable companies within the silicon photonics industries;

•Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award; and

•Dividend Yield—The dividend rate used is zero as we have never paid any cash dividends on our ordinary shares and do not anticipate doing so in the foreseeable future.

Following the Business Combination, the fair value of our ordinary shares is now determined based on the quoted market price. Prior to the Business Combination, our management and board of directors considered various objectives and subjective factors to determine the fair value of Legacy's Rockley ordinary shares as of each grant date, including the value determined by a third-party valuation firm. These factors included, among other things, financial performance, capital structure, forecasted operating results and market performance analyses of similar companies in our industry.

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Warrants

We classify the Private Placement Warrants as long-term liability on our consolidated balance sheet as of December 31, 2021. The Private Placement Warrants were traded on the NYSE prior to their redemption and recorded at fair value using a Black-Scholes option-pricing model. The Private Placement Warrants are re-measured to fair value at each subsequent reporting date. We will continue to adjust the liability for changes in fair value for the Private Placement Warrants until the warrants are exercised, redeemed or cancelled and present the changes in fair value in the consolidated statement of operations at each reporting period.

We classify the Public Warrants as equity and present within Additional Paid-In Capital on our consolidated balance sheet as of December 31, 2021. Although an event such as a qualifying cash tender offer could occur outside of the company’s control that would require net cash settlement, equity classification for the Public Warrants is not precluded per ASC 815-40-25. The Public Warrants were initially recorded using the closing stock price as of the measurement date, with no subsequent measurement.

Income Taxes

We record income tax expense for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of asset and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record valuation allowances to reduce its deferred tax assets to the net amount that it believes is more likely than not to be realized. Its assessment considers the realization of deferred tax assets on a jurisdictional basis. We recognize the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The income tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and is not required to provide this item.

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Item 8.Financial Statements and Supplementary Data

ROCKLEY PHOTONICS HOLDINGS LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2021 and 2020

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID:42)	67
Consolidated Balance Sheets	68
Consolidated Statements of Operations and Comprehensive Loss	69
Consolidated Statements of Shareholders’ Equity (Deficit)	70
Consolidated Statements of Cash Flows	71
Notes to Consolidated Financial Statements	72
1. Description of Business and Significant Accounting Policies	72
2. Business Combination	79
3. Segment, Geographic, and Significant Customer Information	80
4. Equity Method Investment	81
5. Fair Value Measurements	81
6. Balance Sheet Components	86
7. Debt	88
8. Warrants	92
9. Income Taxes	93
10. Shareholders' Equity (Deficit)	95
11. Net loss Per Share	96
12. Stock-Based Compensation	96
13. Related Party Transactions	99
14. Leases	100
15. Commitments and Contingencies	101
16. Defined Contribution Plan	101
17. Supplemental Cash Flow Information	102

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Rockley Photonics Holdings Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rockley Photonics Holdings Limited (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit) and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses from operations since inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

San Jose, California

March 10, 2022

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ROCKLEY PHOTONICS HOLDINGS LIMITED

Consolidated Balance Sheets

(in thousands, except share amounts and par value)

	December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	36,786	$	19,228
Short-term investments, at fair value	26,965		—
Accounts receivable, net of allowance of $302 and $0	1,359		4,925
Other receivables, net of allowance of $141 and $0	47,462		18,024
Prepaid expenses	6,795		1,605
Other current assets	7		609
Total current assets	119,374		44,391
Long-term investments, at fair value	17,659		—
Property, equipment, net	10,187		6,182
Equity method investment	4,879		5,202
Intangible assets	3,048		3,048
Other non-current assets	7,683		1,607
Total assets	$	162,830	$	60,430
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities
Trade payables	$	6,882	$	4,413
Accrued expenses	17,360		10,395
Debt, current portion	26,312		—
Other current liabilities	1,238		998
Total current liabilities	51,792		15,806
Long-term debt, net of current portion	—		74,804
Warrant liabilities	3,477		—
Other long-term liabilities	3,743		1,127
Total liabilities	59,012		91,737
Commitments and contingencies (Note 15)
Shareholders’ equity (deficit)
Ordinary shares, $0.000004 par value; 12,417,500,000 and 139,033,366 authorized as of December 31, 2021 and December 31, 2020; 127,860,639 and 83,539,382 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively	—		—
Additional paid-in-capital	504,714		201,576
Accumulated deficit	(400,896)		(232,883)
Total shareholders’ equity (deficit)	103,818		(31,307)
Total liabilities and shareholders’ equity (deficit)	$	162,830	$	60,430

See accompanying notes to consolidated financial statements.

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ROCKLEY PHOTONICS HOLDINGS LIMITED

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

	Years Ended December 31,
	2021		2020
Revenue	$	8,213	$	22,343
Cost of revenue	11,416		24,240
Gross profit	(3,203)		(1,897)
Operating expenses:
Selling, general, and administrative expenses	39,976		20,260
Research and development expenses	72,573		35,900
Total operating expenses	112,549		56,160
Loss from operations	(115,752)		(58,057)
Other income (expense):
Forgiveness of PPP loan	2,860		—
Interest expense, net	(4,781)		(189)
Equity method investment loss	(703)		(1,274)
Change in fair value of debt instruments	(59,916)		(20,163)
Change in fair value of warrant liabilities	10,827		—
Gain (loss) on foreign currency	119		(25)
Total other income (expense)	(51,594)		(21,651)
Loss before income taxes	(167,346)		(79,708)
Provision for income tax	667		569
Net loss and comprehensive loss	$	(168,013)	$	(80,277)
Net loss per share:
Basic and diluted	$	(1.66)	$	(0.96)
Weighted-average shares outstanding:
Basic and diluted	100,917,939		83,457,400

See accompanying notes to consolidated financial statements.

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ROCKLEY PHOTONICS HOLDINGS LIMITED

Consolidated Statements of Shareholders’ Equity (Deficit)

(in thousands, except share amounts)

	Number of Ordinary Shares	Ordinary Shares and Additional Paid-in Capital		Accumulated Deficit		Total Shareholders’ Equity (Deficit)
Balance, December 31, 2019	82,792,725	$	188,865	$	(152,606)	$	36,259
Net loss	—	—		(80,277)		(80,277)
Exercise of stock options	19,404	42		—		42
Exercise of warrants	13,716	7		—		7
Issuance of warrants	—	360		—		360
Stock-based compensation	—	8,043		—		8,043
Ordinary share issuance for acquisition of in-process    research and development	347,389	2,298		—		2,298
Ordinary share issuance, net of issuance costs	366,148	1,961		—		1,961
Balance, December 31, 2020	83,539,382	$	201,576	$	(232,883)	$	(31,307)
Net loss	—	—		(168,013)		(168,013)
Exercise of stock options	1,557,218	932		—		932
Exercise of warrants	4,115,118	379		—		379
Issuance of warrants	—	263		—		263
Conversion of convertible notes to ordinary shares	15,896,210	181,404		—		181,404
Equity consideration issued to SC Health	1,777,031	17,966		—		17,966
Equity consideration issued to PIPE	10,000,000	100,000		—		100,000
Equity consideration issued to SC Health Sponsor	10,562,500	50,000		—		50,000
Vesting of restricted stock units	24,668	—		—		—
Stock-based compensation	—	12,013		—		12,013
Transaction costs	—	(45,515)		—		(45,515)
Private warrants	—	(14,304)		—		(14,304)
Ordinary share issuance, net of issuance costs	388,512	—		—		—
Balance, December 31, 2021	127,860,639	$	504,714	$	(400,896)	$	103,818

See accompanying notes to consolidated financial statements.

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ROCKLEY PHOTONICS HOLDINGS LIMITED

Consolidated Statements of Cash Flows

(in thousands)

	Years Ended December 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(168,013)	$	(80,277)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	4,640		2,787
Gain on disposal of property and equipment	—		(107)
Bad debt expense and allowance for doubtful accounts	820		—
Accretion of marketable securities to redemption value	(122)		—
Stock-based compensation	12,013		8,043
Change in equity-method investment	323		1,274
Change in fair value of debt instrument	59,916		20,163
Change in fair value of warrant liabilities	(10,827)		—
Forgiveness of Paycheck Protection Program loan	(2,860)		—
Changes in operating assets and liabilities:
Accounts receivable	2,887		1,458
Other receivables	(29,579)		(2,074)
Prepaid expenses and other current assets	(4,868)		1,307
Other non-current assets	(5,795)		604
Trade payables	1,663		(3,126)
Accrued expenses	10,946		3,537
Other current and long-term liabilities	2,855		(1,943)
Net cash used in operating activities	(126,001)		(48,354)
Cash flows from investing activities:
Purchase of property and equipment	(7,840)		(1,416)
Purchase of marketable securities	(54,688)		—
Proceeds from sale of marketable securities	10,000		—
Proceeds from maturity of marketable securities	186		—
Payment for asset acquisition	(500)		(250)
Investment in equity method investee	—		(4,990)
Net cash used in investing activities	(52,842)		(6,656)
Cash flows from financing activities:
Proceeds from convertible loan notes	76,723		51,781
Principal payments on long-term debt	(5,000)		(1,952)
Proceeds from issuance of ordinary shares	167,966		1,961
Proceeds from Paycheck Protection Program loan	—		2,860
Proceeds from exercise of options	932		42
Proceeds from the exercise of warrants	379		7
Proceeds from issuance of warrants	263		360
Debt issuance costs incurred	(383)		(494)
Transaction costs	(44,479)		—
Principal payments on finance lease	—		(1,231)
Net cash provided by financing activities	196,401		53,334
Net increase (decrease) in cash and cash equivalents	17,558		(1,676)
Cash and cash equivalents:
Beginning of period	19,228		20,904
End of period	$	36,786	$	19,228

See accompanying notes to consolidated financial statements.

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ROCKLEY PHOTONICS HOLDINGS LIMITED

Notes to Consolidated Financial Statements

1.Description of Business and Significant Accounting Policies

Description of Business

Rockley specializes in the research and development of integrated silicon photonics chipsets. Rockley has developed a versatile, application specific, third-generation silicon photonics platform specifically designed for the optical integration challenges facing numerous mega-trend markets. Rockley has partnered with multiple tier-1 customers across the markets to deliver complex optical systems required for transformational sensors, communications, and medical product realization.

On August 11, 2021, Rockley Photonics Limited ("Legacy Rockley") completed a business combination (the "Business Combination") with SC Health Corporation, a special purpose acquisition company ("SC Health"), with Rockley Photonics Holdings Limited and its subsidiaries surviving the merger. Upon the consummation of the Business Combination, the Company became a publicly traded company listed on the New York Stock Exchange ("NYSE") under the symbol "RKLY". For additional information on the Business Combination, please refer to Note 2, Business Combination, to these consolidated financial statements. Unless the context otherwise requires, references in these notes to "Rockley", the "Company", "we", "us", or "our" and any related terms are intended to mean the post-Business Combination consolidated company, Rockley Photonics Holdings Limited, while "Legacy Rockley" and "SC Health" refers to the entities prior to the Business Combination.

Going Concern

The Company has incurred net losses since inception, has an accumulated deficit of $400.9 million as of December 31, 2021 and negative cash flow from operations of $126.0 million for the year ended December 31, 2021 and expects to incur losses from operations for the foreseeable future. As of December 31, 2021, the Company had cash, cash equivalents and investments of approximately $81.4 million. The Company’s ability to meet its obligations in the ordinary course of business is dependent on its ability to obtain additional financing. As a result, there is substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company's future liquidity needs, and ability to address those needs, will largely be determined by its ability to obtain additional financing on terms acceptable to us. The Company will continue to seek additional capital through the sale of debt or equity, or other arrangements, however, there can be no assurance that we will be able to raise additional capital when needed or under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders. If the Company raises funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to the holders of ordinary shares. Issued debt securities may contain covenants that limit the Company's ability to pay dividends or make other distributions to shareholders. If we are unable to obtain additional financing, operations may be scaled back or discontinued.

Global Pandemic

The COVID-19 global pandemic has prompted extraordinary measures by governments and businesses to control the spread of COVID-19 in most or all regions throughout the world. These actions have included travel bans, quarantines, and similar mandates for individuals to substantially restrict normal activities and for businesses to curtail normal operations.

The COVID–19 pandemic has adversely impacted our operational efficiency and caused delays in operational activities. During the year ended December 31, 2021,we continued to take cautious steps to protect our workforce, support community efforts, and follow local government guidelines. Certain key laboratory employees and facilities have continued internal testing and laboratory work to the extent necessary to service customer commitments. The remaining non-essential workforce were recommended to continue performing their duties from home. The ongoing impact will depend on the duration of the pandemic which is being mitigated by the vaccination of the general population and gradual easing of restrictions.

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Basis of Presentation and Preparation

The accompanying consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and shareholders’ equity for the periods presented. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. SEC. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation.

We accounted for the Business Combination as a forward recapitalization in accordance with GAAP (the "Forward Recapitalization"). Under this method of accounting, SC Health was treated as the acquired company and Legacy Rockley was deemed to be the accounting acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Forward Recapitalization was treated as the equivalent of Legacy Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization. The net assets of SC Health are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Forward Recapitalization are those of Legacy Rockley. The consolidated financial statements of the combined company post-Forward Recapitalization represents the combined results of Rockley and SC Health beginning August 11, 2021, the date the Business Combination was consummated. The shares, corresponding capital amounts and earnings per share available for shareholders of Legacy Rockley, prior to the Business Combination, converted into the right to receive 2.4835 shares (the "Exchange Ratio") of ordinary shares, par value $0.000004 (the "ordinary shares"). The recapitalization of the number of ordinary shares attributable to Legacy Rockley is reflected retroactively as shares reflecting the Exchange Ratio to the earliest period presented and is utilized for calculating earnings per share in all prior periods presented.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; valuation of intangibles; product warranties; employee compensation and benefit accruals; stock-based compensation; loss contingencies; income taxes; fair value measurements; and warrant liabilities. Actual results could differ materially from those estimates. Management’s estimates include, as applicable, the anticipated impacts of the COVID-19 pandemic.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments with an original maturity of three months or less at the time of purchase.

Accounts Receivable

Accounts receivable is recorded at the invoiced amount and do not bear interest. We assess the need for an allowance for doubtful accounts based upon an analysis of past credit history and the current financial condition of its customers, as well as the consideration of expected trends based upon characteristics of the accounts and general economic conditions. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Equity Method Investments

Equity method investments are all entities over which we have significant influence but not control or joint control. Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses of the investee in the consolidated statement of operations and comprehensive loss. Earnings and losses of equity method investments are based on the most recently available financial statements of the investee. Basis differences between the cost of an equity method investment and the underlying equity in the long-lived assets are amortized over the estimated economic useful life of the underlying long-lived asset. We periodically review our equity method investments for impairment and record a reduction in the carrying value, if and when necessary. To date, no such impairment losses have been recorded.

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Available-for-Sale Investments

The investments in debt securities are classified as available-for-sale investments. Debt securities primarily consist of corporate bonds, commercial paper and U.S. Treasury debt securities. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.

Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) ("AOCI"). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.

We classify our investments as current or non-current based on the nature of the investment and their availability for use in current operations.

Other-than-Temporary Impairments on Investments

All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, it is deemed impaired, and we assess whether the impairment is other-than-temporary. An impairment is considered other-than-temporary if (i) we have the intent to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis, or (iii) we do not expect to recover the entire amortized cost basis of the security. If impairment is considered other-than-temporary based on condition (i) or (ii) described above, the entire difference between the amortized cost and the fair value of the debt security is recognized in the results of operations. If an impairment is considered other-than-temporary based on condition (iii) described above, the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI).

Property and Equipment, Net

Property and equipment are recorded at cost and presented net of accumulated depreciation and amortization. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs are expensed as incurred. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the useful life of the assets. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets.

Computer equipment	3 years
Lab equipment	3 years
Furnitures and fixtures	4 years
Leasehold improvements	Shorter of the lease term and the useful life

Impairment of Long-Lived Assets

We evaluate our long-lived assets, such as property and equipment, and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets or asset group may not be recoverable. Recoverability of these assets or asset groups is measured by comparing their carrying value to the future net undiscounted cash flows the assets are expected to generate over their remaining economic life. If such assets or asset groups are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their fair value.

The Company tests other intangible assets not subject to amortization for impairment annually and more frequently if events or changes in circumstances between annual tests indicate that it is more likely than not that the asset is impaired.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. To date, no such impairment losses have been recorded.

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Revenue Recognition

We generate our revenue principally from development services, which entails developing the customer-specific designs of photonics chips. Revenue is recognized when control of promised goods and services are transferred to customers in an amount that reflects the expected consideration in exchange for those products and services. This principle is achieved by applying the following five-step approach:

•Identification of the contract with a customer—A contract with a customer exists when we enter into an enforceable contract with a customer that defines each party’s rights and obligations regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, the contract has commercial substance, and we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We consider the terms and conditions of the contracts and customary business practices in identifying contracts under Topic 606 Revenue from Contracts with Customers. Our contracts with a customer generally consist of a development services contract against which statements of work (“SOW”) are issued. Each SOW contains one or more agreed-upon projects. We consider the arrangement to be the development services contract combined with the SOW. While the typical duration of a development services contract is multiple years, we generally expect the duration of agreed-upon projects to be six months or less. Generally, our customers have the right to cancel their contracts at any time.

•Identification of the performance obligations in the contract—Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. The individual components of the development services are generally capable of being distinct but not distinct in the context of the contract unless all the goods and services within a certain agreed-upon project of the contract are completed. Generally, the deliverables associated with each agreed-upon project, when combined, are considered a distinct performance obligation.

•Determination of the transaction price—The transaction price is determined based on the consideration to which we are entitled in exchange for transferring goods or services to the customer. Our contracts generally do not contain a significant amount of variable consideration as the price of our services are generally fixed at the inception of the agreed-upon project. The Company excludes sales taxes and other taxes from the measurement of transaction price. None of the contracts contain a significant financing component.

•Allocation of the transaction price to the performance obligations in the contract—Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). The Company prices each agreed-upon project with an SOW at SSP based on the expected cost plus a margin approach.

•Recognition of revenue when or as performance obligations are satisfied—We satisfy performance obligations at a point in time for the development services since the customers do not simultaneously receive and consume the benefits, we do not create or enhance an asset that the customer controls, and we do not have an enforceable right to payment for the performance completed to date. The contracts also contain substantive acceptance terms for each agreed-upon project. Revenue is recognized at the time the related performance obligation is satisfied through the transfer of control of a promised good or service to a customer, which is upon achievement of the agreed-upon project and acceptance by the customer.

Contract balances—The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable is recorded when the right to consideration is unconditional. We generally have the right to invoice the customer upon acceptance of the agreed-upon project. The payment terms on invoiced amounts are typically 30-45 days, and such amounts are nonrefundable. In situations where revenue recognition occurs before invoicing, an unbilled receivable is recorded, which represents a contract asset. Deferred revenue is recognized if we have an unconditional right to bill or have collected consideration in advance of the right to recognize revenue. There have been no contract balances recorded to date.

Costs to obtain and fulfill a contract—Incremental costs incurred to obtain a contract with a customer are required to be capitalized and amortized over the period in which the goods and services to which the asset relates are transferred to the customer. We have not incurred any incremental costs in connection with obtaining the revenue contracts. We recognize an asset from the costs to fulfill a contract only if, the costs relate directly to a contract or an anticipated

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contract, the costs generate or enhance resources of the Company that will be used in satisfying a performance obligation in the future, and the costs are expected to be recovered. These costs have been insignificant to date.

Foreign Currency Transactions

The Company’s reporting currency is the U.S. dollar and the functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into the functional currency with any related gain or loss recorded in earnings.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in realized and unrealized losses/(gains) on foreign currency in the accompanying consolidated statements of operations and comprehensive loss.

Segment Information

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company determined that it has one operating and reportable segment.

Concentration of Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, available-for-sale investments, accounts receivable and revenue. We maintain cash balances at financial institutions that management believes are high-credit, quality financial institutions, where deposits, at times, exceed the Federal Deposit Insurance Corporation limits.

Net Loss Per Share

Basic earnings per share is calculated using our weighted-average outstanding ordinary shares. Diluted earnings per share is calculated using our weighted-average outstanding ordinary shares including the dilutive effect of outstanding equity instruments as determined under the treasury stock method. For periods in which we report net losses, diluted net loss per ordinary share attributable to ordinary stockholders is the same as basic net loss per ordinary share attributable to ordinary stockholders, because all potentially dilutive ordinary shares are anti-dilutive.

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant. Compensation expense is generally recognized as expense on a straight-line basis over the service period based on the vesting requirements. We recognize forfeitures as they occur. We estimate the fair value of stock options granted to employees using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the fair value of ordinary shares, (ii) the expected stock price volatility, (iii) the expected term of the award, (iv) the risk-free interest rate and (v) expected dividends. The grant-date fair value of restricted stock is calculated based on the fair value of the underlying ordinary shares .

We measure nonemployee awards at their fair value on the adoption date of ASU No. 2018-07. Following the adoption of ASU No. 2018-07 on January 1, 2018, the accounting for nonemployee awards is consistent with the accounting for employee stock-based compensation as described above.

We granted options and restricted stock units which vest on the satisfaction of a service-based condition.

Warrants

We determine the accounting classification of warrants, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock. Under ASC 480,

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warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the company also assesses whether the warrants are indexed to the Company’s ordinary shares and whether the warrants are classified as equity under ASC 815-40 or other U.S. GAAP. After all such assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations and comprehensive loss. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

Leases

Our lease portfolio is comprised of two major classes: real estate leases, which are the majority of our leased assets, are accounted for as operating leases and a manufacturing equipment lease accounted for as a finance lease on the consolidated balance sheet.

We classify leases as either operating or financing. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all the economic benefits from and have the ability to direct the use of the asset. Operating lease assets are included under other non-current assets and operating lease liabilities under other current and long-term liabilities, respectively in the consolidated balance sheets. We recognize lease expense for operating leases on a straight-line basis over the term of the lease. Finance lease asset is included under property, equipment, and finance lease right-of-use assets, net and finance lease liabilities, current portion under other current liabilities in the consolidated balance sheets. Finance ROU assets are amortized on a straight-line basis over their estimated useful lives.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments is used. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally combined.

We elected, as an accounting policy for leases of real estate, to account for lease and non-lease components in a contract as a single lease component. In addition, the recognition requirements are not applied to leases with a term of twelve months or less. Rather, the lease payments for short-term leases are recognized on the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Variable payments, such as common area charges, maintenance, insurance and taxes, are primarily based on the amount of space occupied. These payments in the Company’s leases are not dependent on an index or a rate and are excluded from the measurement of the lease liabilities and recognized in the consolidated statements of operations and comprehensive loss in the period in which the obligation for those payments is incurred. The Company remeasures lease payments when the contingency underlying such variable payments is resolved such that some or all of the remaining payments become fixed.

Cost of Revenue

Our cost of revenue consists of costs related to the Company’s development services which includes cost of materials, cost associated with packaging and assembly, testing and shipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance, overhead and occupancy costs.

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Research and Development Expenses (R&D)

Research and development expense consists primarily of personnel costs for engineers and third parties engaged in the design and development of products, software and technologies, including salary, bonus and share-based compensation expense, project material costs, services and depreciation. The Company expenses research and development costs as they are incurred.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing, and human resources; depreciation expense and rent relating to facilities; travel costs; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, benefits, bonuses and stock-based compensation. As we continue to grow as a company, we expect that our selling, general and administrative costs will increase on an absolute dollar basis.

Income Taxes

Deferred income taxes are provided on a liability method, whereby deferred income tax assets are recognized for deductible temporary differences, operating losses, and tax loss carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets are reduced by a valuation allowance when, considering all sources of taxable income, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The income tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, and are meant to simplify and reduce the cost of accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and simplifies areas including franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The Company adopted this guidance on January 1, 2021. The adoption of the guidance did not have a material impact on the consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In May 2021, the FASB issued ASU 2021-04, Modification of Equity Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options such as warrants that remain equity classified after modification or exchange based on consideration of the economic substance of the modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the

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potential impacts of ASU 2021-04, it does not expect ASU 2021-04 to have a material effect on its consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance. This amendment in ASU 2021-10 aims to increase transparency about government assistance transactions that are not in the scope of other GAAP guidance. The ASU requires disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects of those transactions. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is in the process of assessing the impacts of ASU 2021-10 on its consolidated financial statements.

2. Business Combination

On August 11, 2021 (the "Closing Date"), Legacy Rockley, SC Health, and Rockley Mergersub Limited, an exempted company incorporated in the Cayman Islands as a direct wholly owned subsidiary of the Company (“Merger Sub”), consummated the business combination contemplated by the Business Combination Agreement and Plan of Merger, dated as of March 19, 2021 (the “Business Combination Agreement”). Immediately upon the consummation of the Business Combination, Legacy Rockley became a wholly owned subsidiary of the Company and Merger Sub merged with and into SC Health, with SC Health surviving the merger and becoming a direct wholly owned subsidiary of the Company. Subsequently, SC Health's ordinary shares and warrants ceased trading on the NYSE while the Company's ordinary shares and warrants began trading on the NYSE under the symbols “RKLY” and “RKLY.WS,” respectively.

Pursuant to the Business Combination Agreement, each of the following transactions occurred in the following order: (i) pursuant to a scheme of arrangement approved by the UK courts (the “Scheme”), on August 9, 2021, all of Legacy Rockley’s ordinary shares, including shares issued immediately prior to the Scheme becoming effective as a result of the conversion of then-outstanding convertible loan notes and the exercise of warrants, were transferred by Rockley shareholders in exchange for an equivalent number of shares in the Company; (ii) the holders of options over shares in Legacy Rockley rolled over their options into new options to purchase shares in the Company; (iii) warrants to purchase shares in Legacy Rockley (other than one warrant instrument that by its terms was replicated at the Company) not exercised for shares in Legacy Rockley prior to the effectiveness of the Scheme described above were cancelled, such that immediately following the Scheme, Legacy Rockley became a direct wholly-owned subsidiary of the Company; (iv) the Company subsequently completed a stock-split to prepare its share capital for Merger Sub’s merger into SC Health; (v) certain accredited investors (including entities affiliated with the SC Health Sponsor) purchased an aggregate of 15 million ordinary shares for a purchase price of $10.00 per share, or an aggregate purchase price of $150.0 million; (vi) on August 11, 2021, Merger Sub was merged with and into SC Health, with SC Health surviving the merger and becoming a direct wholly-owned subsidiary of the Company; and (vii) the ordinary shares and warrants in SC Health were exchanged for ordinary shares and warrants in the Company.

The Business Combination was accounted for as a forward recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, SC Health was treated as the acquired company and Legacy Rockley was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the existing shareholders of Legacy Rockley obtaining a majority voting power in the Company, and as such, having the power to appoint a majority of the members of the Company’s board of directors (the "Board"); the operations of Legacy Rockley prior to the acquisition comprising the only ongoing operations of the combined entity based on the historical operating activity and employee base; and the senior management of Legacy Rockley comprising the majority of the senior management of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Rockley with the acquisition being treated as the equivalent of Legacy Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization.

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As a result of the Business Combination, the Company incurred equity issuance costs and other costs considered direct and incremental to the transaction, totaling $45.5 million and consisting of legal, accounting, financial advisory and other professional fees. These amounts are reflected within additional paid-in capital in the consolidated balance sheet as of December 31, 2021.

Summary of Net Proceeds

The following table reconciles the elements of the net proceeds from the Business Combination as of December 31, 2021 (in thousands):

	Recapitalization
Cash inflow from SC Health's trust account, net of redemptions	$	17,966
Cash inflow from PIPE	100,000
Cash inflow from SC Health Sponsor	50,000
Less: Transaction Costs	(45,515)
Net cash received from the Business Combination	$	122,451

Summary of Shares Issued

The total number of shares of the Company's ordinary shares issued and outstanding immediately following the consummation of the Business Combination was approximately 126.7 million, comprising (in thousands):

	Number of Shares
Current Rockley's shareholders prior to the Business Combination	104,016
SC Health Shareholders	1,777
Sponsor Shareholders	10,563
PIPE Investors	10,000
Other Shareholders1	319
Total number of shares	126,675

1 The Company issued 319,000 ordinary shares at a value of $10.0 per share to Cowen and Company LLC ("Cowen") and BCW Securities LLC in lieu of cash payment for a portion of the fees payable $3.2 million to Cowen as part of the transaction costs.

3.Segment, Geographic, and Significant Customer Information

The following table presents our revenue disaggregated by primary geographical market where revenues are attributable to the region in which the billing address of the customer is located (in thousands):

	December 31,
	2021		2020
United States	$	6,778	$	17,037
Rest of World	1,435		5,306
Total revenue	$	8,213	$	22,343

The following tables summarize our most significant customers as of and for the years ended December 31, 2021 and 2020:

	Revenue				Accounts receivable
	December 31,				December 31,
	2021		2020		2021		2020
Customer A	82	%	76	%	72	%	33	%
Customer B	4	%	24	%	—	%	67	%

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The following table presents property, equipment and intangible assets held in the U.S. and internationally in various foreign subsidiaries as of December 31, 2021 and 2020:

	December 31,
	2021		2020
United States	$	8,442	$	6,390
Rest of World	3,031		708
Total property, equipment and intangible assets	$	11,473	$	7,098

4.Equity Method Investment

As of December 31, 2021 and 2020, we held an investment in Hengtong Rockley Technology Co., Ltd (“HRT”) and we appointed two of the HRT's five board members. HRT manufactures and sells optical fiber transceivers based on silicon photonics chipsets. HRT has share capital consisting solely of ordinary shares. We hold 24.9% of HRT’s ordinary shares, and the same proportion of its voting rights. We consider HRT to be a variable interest entity upon which the Company does exercise significant influence. However, considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions, the Company concluded it does not control the investment. Accordingly, the investment in HRT is accounted for under the equity method. We elected to use a three-month lag to record our share of HRT’s results. See Note 13, Related Party Transactions for details of the Company’s transactions with HRT.

The following table summarizes our investment in HRT for the years ended December 31, 2021 and 2020 (in thousands):

	December 31,
	2021		2020
Balance at the beginning of the year	$	5,202	$	1,486
Investment in HRT	—		4,990
Remeasurement gain on HRT	380		—
Share of loss of HRT	(703)		(1,274)
Balance at the end of the year	$	4,879	$	5,202

Our maximum exposure to loss as a result of our involvement with HRT is limited to the balance of our investment.

5.Fair Value Measurements

The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis, whereby the inputs used in valuation techniques are assigned a hierarchical level. The following are the three levels of inputs to measure fair value:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs that reflect quoted prices for identical assets or liabilities in less active markets; quoted prices for similar assets or liabilities in active markets; benchmark yields, reported trades, broker/dealer quotes, inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs that reflect our own assumptions incorporated in valuation techniques used to measure fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty’s non-performance risk is considered in measuring the fair values of liabilities and assets, respectively.

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Investments

The following is a summary of our investments at their cost or amortized cost for the years ended December 31, 2021 and 2020 (in thousands):

	As of
	December 31, 2021		December 31, 2020
Corporate bonds and commercial paper	$	20,042	$	—
U.S. Treasury securities	24,587		—
Total investments	$	44,629	$	—

The fair value of our investments approximates their cost or amortized cost for both periods presented.

The following table presents the contractual maturities of our debt investments as of December 31, 2021 (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	26,945	$	26,961
Due after one year through five years	17,684		17,663
	$	44,629	$	44,624

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

Fair Value of Financial Instruments

The following table summarizes our financial assets measured at fair value on a recurring basis (in thousands):

	December 31, 2021
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	36,786	$	36,786	$	—
Corporate bonds and commercial paper	20,037		—		20,037
U.S. Treasury securities	24,587		24,587		—
Total cash, cash equivalents and investments	$	81,410	$	61,373	$	20,037

	December 31, 2020
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	19,228	$	19,228	$	—
Total cash and cash equivalents	$	19,228	$	19,228	$	—

The financial liabilities subject to fair value measurement on a recurring basis, were as follows (in thousands):

	As of
	December 31, 2021		December 31, 2020
Financial Liabilities
3.00% – 2020 Convertible Notes	$	—	$	32,106
8.00% – 2020 Convertible Notes	—		14,789
2020 Term Facility Loan	—		25,049
Private Placement Warrants	3,477		—
Total financial liabilities	$	3,477	$	71,944

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As of December 31, 2021, there was no fair value associated with the convertible debt instruments due to the conversion of the debt securities into the Company's ordinary shares in connection with the Business Combination. The estimated fair value of the debt securities prior to their conversion into the Company's ordinary shares was $208.6 million. The estimated fair value of the convertible securities on the Closing Date was calculated as the product of (i) the number of conversion shares at the Closing Date and (ii) the marketable value per ordinary share at the Closing Date. Changes in the fair value of debt that is accounted for at fair value are presented as gains or losses in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

3.00% – 2020 Convertible Notes

On March 9, 2020, Legacy Rockley issued $21.3 million of the 3.00% Convertible Notes and elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, the outstanding principal and interest of the 3.00% Convertible Notes Due 2025 were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 3.00% Convertible Notes at December 31, 2021.

For the year ended December 31, 2021 and 2020, we recorded a loss of $6.0 million and $10.8 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 3.00% Convertible Notes, as follows (in thousands):

Fair value at March 9, 2020	$	21,281
Plus: Loss from change in fair value	10,825
Fair value at December 31, 2020	32,106
Plus: Loss from change in fair value	5,986
Less: Fair value adjustment extinguished upon conversion of debt	(38,092)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 3.00% Convertible Notes based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC or maturity, the convertible notes may be converted to ordinary shares or redeemed at principal and accrued interest; and (ii) upon qualified financing event, the convertible notes will automatically convert to ordinary shares. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

8.00% – 2020 Convertible Notes

On February 19, 2020, Legacy Rockley issued $8.0 million of 8.00% Convertible Notes and elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, the outstanding principal, interest and warrants of the 8.00% Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 8.00% Convertible Notes at December 31, 2021.

For the years ended December 31, 2021 and 2020, we recorded a loss of $16.1 million and $4.4 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 8.00% Convertible Notes, as follows (in thousands):

Fair value at February 19, 2020	$	10,415
Plus: Loss from change in fair value	4,374
Fair value at December 31, 2020	14,789
Plus: Loss from change in fair value	16,108
Less: Fair value adjustment extinguished upon conversion of debt	(30,897)
Fair value at December 31, 2021	$	—

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A binomial lattice model was used to determine the fair value of the 8.00% Convertible Notes Due 2025 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC or maturity, the convertible notes may be converted to ordinary shares or put at 125.0% of principal and accrued interest; and (ii) upon financing event, the convertible notes may be converted to ordinary shares. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

2020 Term Facility Loan

On September 29, 2020, Legacy Rockley issued $35.0 million of convertible notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, thirty percent (30%) of the outstanding principal and interest balance of the 2020 Term Facility Loan were cancelled and converted into the right to receive ordinary shares of the Company and seventy percent (70%) of the outstanding principal and interest balance is required to be repaid in full on or prior to August 31, 2022. At December 31, 2021, the remaining contractual outstanding principal and interest on the 2020 Term Facility Loan was $32.3 million.

For the years ended December 31, 2021 and 2020, we recorded a loss of $15.1 million and $1.7 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 2020 Term Facility Loans, as follows (in thousands):

Fair value at September 29, 2020	$	23,320
Plus: Loss from change in fair value	1,729
Fair value at December 31, 2020	25,049
Plus: Loss from change in fair value	15,134
Less: Fair value adjustment extinguished upon conversion of debt	(13,003)
Fair value at August 11, 2021	$	27,180

At August 11, 2021, the fair value of the 2020 Term Facility Loan was $27.2 million. The interest expense is subsequently accreted to statements of operations and comprehensive loss using the effective interest rate method over the term of the loan. See Note 7, Debt for information regarding the subsequent accounting for the 2020 Term Facility Loan.

A binomial lattice model was used to determine the fair value of the 2020 Term Facility Loan based on assumptions as to when the loan would be converted upon IPO/Sale/Merger/SPAC. Upon such event, the convertible notes may be paid off as following: (i) if par value exit, repayment of base multiple times principal plus unpaid interest; (ii) if greater value exit, repayment of base multiple plus add-on multiple ratio times principal plus unpaid interest.

5.00% – $50.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued $50.0 million of the 5.00% – $50.0 Million Convertible Notes (the "5.00% – $50.0 Million Convertible Notes") and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal and interest of the 5.00% – $50.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.00 million outstanding balance on the 5.00% – $50.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded a loss of $2.3 million, from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $50.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	10,274
Plus: Loss from change in fair value	2,310
Less: Fair value adjustment extinguished upon conversion of debt	(12,584)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% – $50.0 Million Convertible Notes Due 2026 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC, the convertible notes may be converted to

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ordinary shares or put at principal and accrued interest; and (ii) upon qualified financing event or maturity, the convertible notes will automatically convert to ordinary shares at base price. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

5.00% – $25.0 Million Convertible Notes

On December 31, 2020, Legacy Rockley issued $25.0 million of the 5.00% – $25.0 Million Convertible Notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal, interest and warrants of the 5.00% – $25.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 5.00% – $25.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded an adjustment of $5.0 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $25.0 Million Convertible Notes, as follows (in thousands):

Fair value at December 31, 2020	$	37,592
Plus: Loss from change in fair value	4,977
Less: Fair value adjustment extinguished upon conversion of debt	(42,569)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% – $25.0 Million Convertible Notes Due 2025 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon SPAC, the convertible notes may be converted to ordinary shares or put at principal and accrued interest; (ii) upon qualified financing event, the convertible notes may be converted to ordinary shares with discount any time after financing date; and (iii) upon maturity, the convertible notes may be converted to ordinary shares at $675.0 million divided by the number of fully diluted shares. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

5.00% – $30.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued $30.0 million of the 5.00% Convertible Notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal and interest of the 5.00% – $30.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 5.00% – $30.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded an adjustment of $5.9 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $30.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	38,403
Plus: Loss from change in fair value	5,855
Less: Fair value adjustment extinguished upon conversion of debt	(44,258)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% Convertible Notes Due 2026 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon SPAC, the convertible notes may be converted to ordinary shares or put at principal and accrued interest; and (ii) upon qualified financing event or maturity, the convertible notes will automatically convert to ordinary shares at base price. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

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At December 31, 2021 and 2020, the carrying value of certain financial instruments, such as cash, accounts receivable, other receivable, prepaid expenses and other current assets, trade payable and other current accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable.

Private Placement Warrants

The Private Placement Warrants are accounted for as liabilities in accordance with the FASB's Accounting Standards Codification ("ASC") 815-40 and are presented within the Warrants Liabilities on the consolidated balance sheet. The warrant liabilities were measured at fair value at inception and are measured on a recurring basis, with changes in fair value presented within change in fair value of warrants liabilities in the consolidated statement of operations and comprehensive loss.

The Private Placement Warrants are measured at fair value on a recurring basis. The measurement of the warrants as of December 31, 2021 was $3.5 million. The Company has classified the Private Placement Warrants as a liability due to certain settlement terms and provisions related to certain tender offers and indexation characteristics following the Business Combination and has accounted for them as liability instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period. Additionally, the Company has determined that the Private Placement Warrants are classified within Level 3 of the fair value hierarchy as the fair value is estimated using the Modified Black Scholes Option Pricing Model.

The following table presents the changes in the fair value of the Private Placement Warrants (in thousands):

Initial measurement, August 11, 2021	$	14,304
Mart-to-market adjustment	(10,827)
Warrant Liabilities balance, December 31, 2021	$	3,477

6.Balance Sheet Components

Cash and cash equivalents

Our cash and cash equivalents balances were concentrated by location as follows:

	December 31,
	2021		2020
United Kingdom	97	%	96	%
United States	3	%	3	%
Other	—	%	1	%

Other receivables

	December 31,
	2021		2020
R&D tax credit receivable	$	45,632	$	17,412
Grants receivable	753		—
VAT receivable	1,073		607
Other receivable, net	4		5
Total other receivables	$	47,462	$	18,024

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Property and equipment, net (in thousands):

	December 31,
	2021		2020
Computer equipment	$	1,998	$	1,218
Lab equipment	13,940		7,607
Motor vehicles	31		31
Furniture and fixtures	315		265
Leasehold improvements	1,230		704
Assets under construction	—		27
Total property and equipment	$	17,514	$	9,852
Less: accumulated depreciation	(9,088)		(5,802)
Total property and equipment, net	$	8,426	$	4,050

Total depreciation expense was $4.2 million and $2.3 million for the years ended December 31, 2021, and 2020, respectively.

Finance lease right-of-use assets, net (in thousands):

	December 31,
	2021		2020
Finance lease right-of-use assets	$	2,966	$	2,966
Less: accumulated amortization	(1,205)		(834)
Total finance lease right-of-use assets, net	$	1,761	$	2,132

Amortization expense was $0.4 million and $0.4 million for the years ended December 31, 2021, and 2020, respectively.

Intangible assets, net (in thousands):

	December 31,
	2021		2020
In-process research and development	$	3,048	$	3,048
Total intangible assets, net	$	3,048	$	3,048

The Company reviews its intangible assets for potential impairment whenever events or circumstances indicate that the carrying value of the intangible assets may not be recoverable. No impairment charges were recorded for the years ended December 31, 2021, and 2020, respectively.

Other non-current assets (in thousands):

	December 31,
	2021		2020
Capitalized transaction costs	$	—	$	121
Security deposits	280		—
Operating right of use assets	4,577		1,486
Prepaid asset, net of current portion	$	2,826	$	—
Total other non-current assets	$	7,683	$	1,607

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Accrued expenses (in thousands):

	December 31,
	2021		2020
Accrued bonus	$	7,546	$	3,349
Accrued payroll and benefits	2,750		1,524
Accrued taxes	439		332
Accrued fabrication costs	3,110		2,321
Share appreciation rights	—		706
Accrued transaction costs	1,004		335
Other accrued expenses	2,511		1,828
Total accrued expenses	$	17,360	$	10,395

7.Debt

The following table summarizes information relating to our long-term debt, (in thousands):

	December 31, 2021
	Principal		Change in Fair Value		Conversion of Debt	Accreted Debt Interest	Principal Payments in Cash	Net
3.00% – 2020 Convertible Notes	$	21,281	$	16,811	(38,092)	—	—	$	—
8.00% – 2020 Convertible Notes	8,000		22,897		(30,897)	—	—	—
2020 Term Facility Loan	33,949		6,234		(13,003)	4,132	(5,000)	26,312
5.00% – $50.0 Million Convertible Notes	10,274		2,310		(12,584)	—	—	—
5.00% – $25.0 Million Convertible Notes	25,000		17,569		(42,569)	—	—	—
5.00% – $30.0 Million Convertible Notes	30,000		14,258		(44,258)	—	—	—
Total Long-term debt	$	128,504	$	80,079	(181,403)	4,132	(5,000)	$	26,312
Less: current portion of long-term debt								(26,312)
Long-term debt, net of current portion								$	—

	December 31, 2020
	Principal		Change in Fair Value		Net
3.00% – 2020 Convertible Notes	$	21,281	$	10,825	$	32,106
8.00% – 2020 Convertible Notes	8,000		6,789		14,789
2020 Term Facility Loan	22,500		2,549		25,049
Paycheck Protection Program	2,860		—		2,860
Total long-term debt	$	54,641	$	20,163	$	74,804
Less: current portion of long-term debt					—
Long-term debt, net of current portion					$	74,804

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Future minimum payments under the debt agreements as of December 31, 2021 are as follows (in thousands):

	2020 Term Facility Loan
2022	$	32,303
2023	—
2024	—
2025	—
2026	—
Thereafter	—
Total future minimum payments	32,303
Less: current portion of debt principal	(32,303)
Non-current portion of debt principal	$	—

3.00% – 2020 Convertible Notes

On March 9, 2020, Legacy Rockley issued convertible loan notes in an aggregate principal amount of $21.3 million (the “3.0% Convertible Notes”). The 3.00% – 2020 Convertible Notes had an interest rate of 3.00% per annum and contained no financial covenants. The 3.00% – 2020 Convertible Notes were issued in two tranches $20.0 million on March 9, 2020 and $1.3 million on October 20, 2020.

The 3.00% – 2020 Convertible Notes were subject to conversion as follows:

(a)If in an equity financing raised total proceeds for the Company of not less than $10.0 million then the outstanding principal amount of all notes and any unpaid accrued interest shall automatically convert into the most senior class of equity share at a conversion price of $14.298 per share; or

(b)if an equity financing is not raised for the Company, then the outstanding principal amount of all notes and any unpaid accrued interest may convert into the most senior class of share at a conversion price of $14.298 per share.

(c)At an exit event, redeem the outstanding notes for an amount equal to the outstanding principal plus accrued interests or convert the outstanding principal amount of all notes and any unpaid accrued interest thereon into the most senior class of share of the Company, at a conversion price equal to the issuance price of $14.298 per share.

(d)At the maturity date, convert into the most senior class of shares at a conversion price equal to the issuance price of $14.298 per share.

Legacy Rockley elected to account for the 3.00% – 2020 Convertible Notes at fair value as of the issuance date, with the changes in fair value reported in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $21.9 million for the 3.00% – 2020 Convertible Notes were cancelled and converted into the right to receive 3.8 million ordinary shares of the Company, with a fair value of $38.1 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $38.1 million adjustment upon extinguishment of the 3.00% – 2020 Convertible Notes.

8.00% – 2020 Convertible Notes

On February 19, 2020, Legacy Rockley issued convertible loan notes to our board member in an aggregate principal amount of $8.0 million (the “8.00% Convertible Notes"). The 8.00% Convertible Notes had an interest rate of 8.00% per annum and contained no financial covenants.

The 8.00% Convertible Notes were convertible as follows:

(a)In the event of an equity financing, the outstanding principal amount of all notes and any unpaid accrued interest shall automatically convert into the most senior class of share at a conversion price being the lower of $14.298 per share or a discounted subscription price of the equity shares; or

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(b)At an exit event, convert the outstanding principal amount of all notes and any unpaid accrued interest thereon into the most senior class of share of the Company, at a conversion price, equal to a 25% discount to the Series E issuance price of $14.298 per share.

(c)At the maturity date, convert into the most senior class of equity share at a conversion price of $14.298.

Legacy Rockley elected to account for the 8.00% Convertible Notes s at fair value as of the issuance date, with the changes in fair value reported in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $8.9 million for the 8.00% Convertible Notes were cancelled and converted into the right to receive 1.5 million ordinary shares of the Company, with a fair value of $15.5 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. In addition, the warrants issued in conjunction with the 8.00% Convertible Note were also cancelled and converted into the right to receive 1.5 million ordinary shares of the Company, with a fair value of $15.5 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $30.9 million adjustment upon extinguishment of the 8.00% Convertible Notes and warrants.

2020 Term Facility Loan

On September 29, 2020, Legacy Rockley secured a term facility loan of $35.0 million (“2020 Term Facility Loan”). Legacy Rockley had the option to repay the aggregate amount of the loans utilized in full on the maturity date, subject to no Qualified Exit occurring at the time plus the applicable repayment premium payable. The Qualified Exit meant: 1) qualified listing—a flotation or a public offering, the value of which is equal to or exceeds the free float value of $350.0 million; 2) non-qualified trade. Upon any occurrence of a non-qualified trade sale or qualified listing, amounts due to Argentum would have been discharged in full by way of conversion into the Company's most senior class of shares.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, thirty percent (30%) of the outstanding principal and interest balance of $10.2 million for the 2020 Term Facility Loan were cancelled and converted into the right to receive 1.3 million ordinary shares of the Company, with a fair value of $13.0 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $13.0 million adjustment upon extinguishment of debt. The seventy percent (70%) of the outstanding principal and interest balance remained as debt and is required to be repaid in full on or prior to August 31, 2022, in the total amount of $37.3 million. At August 11, 2021, the Company recorded a fair value of $27.1 million for the seventy percent (70%) of the outstanding principal and interest balance. The Company accreted the adjusted interest expense over the amended term of the loan using the effective interest rate method. The Company accrued interest expense of $4.1 million for the year ended December 31, 2021. As of December 31, 2021, the total outstanding debt for the 2020 Term Facility Loan balance was $26.3 million. The 2020 Term Facility Loan includes a financial covenant that requires the Company to maintain a cash balance of at least $35.0 million. As of December 31, 2021, the Company was not in default on any covenants.

5.00% – $50.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued convertible loan notes for an aggregate principal amount of $50.0 million. The 5.00% – $50.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants. The total amount borrowed was $10.3 million.

The 5.00% – $50.0 Million Convertible Notes were subject to conversion as follows:

(a)In the event of a qualified financing even with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 15% discount to the per share subscription price of the equity shares or the price obtained by diving $1,500.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding principal amount and any unpaid accrued interest on the original principal or convert the outstanding principal amount of all notes and any unpaid accrued interest into the most senior class of share of the Company at a conversion price equal to the lower of 15% discount to the price per share and the price obtained by dividing $1,500.0 million by fully diluted share capital of the Company at the date of conversion;

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(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $1,500.0 million by fully diluted share capital of the Company at the date of conversion.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $10.6 million for the 5.00% – $50.0 Million Convertible Notes were cancelled and converted into the right to receive 1.3 million ordinary shares of the Company, with a fair value of $12.6 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recognized a $12.6 million adjustment upon extinguishment of the 5.00% – $50.0 Million Convertible Notes.

5.00% – $25.0 Million Convertible Notes

On December 31, 2020, Legacy Rockley issued convertible loan notes in an aggregate principal amount of $25.0 million. The 5.00% – $25.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants.

The 5.00% – $25.0 Million Convertible Notes were subject to conversion as follows:

(a)In an equity qualified financing event with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 25% discount to the per share subscription price of the equity shares or the price obtained by diving $800.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding notes for an amount equal to 100% of the outstanding principal plus accrued interest or convert the outstanding principal amount into the most senior class of share of the Company, at a conversion price equal to the lower of 25% discount to the price per share and the price obtained by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion; or

(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $675.0 million by the number of issued shares in the capital of the Company on a fully diluted basis or repay the amount equal to 100% of the outstanding principal amount plus any accrued interest.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $25.7 million for the 5.00% – $25.0 Million Convertible Notes were cancelled and converted into the right to receive 3.6 million ordinary shares of the Company, with a fair value of $35.6 million, recorded in the consolidated balance sheet. In addition, the warrants issued in conjunction with the 5.00% – $25.0 Million Convertible Notes were also cancelled and converted into the right to receive 0.7 million ordinary shares of the Company, with a fair value of $7.0 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a total $42.6 million adjustment upon extinguishment of the 5.00% – $25.0 Million Convertible Notes and warrants.

5.00% – $30.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued the 5.00% – $30.0 Million Convertible Notes. The 5.00% – $30.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants.

The 5.00% – $30.0 Million Convertible Notes were subject to conversion as follows:

(a)In an equity qualified financing event with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 25% discount to the per share subscription price of the equity shares or the price obtained by diving $800.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding notes for an amount equal to the outstanding principal plus any unpaid accrued interest or convert the outstanding principal amount of all notes and any unpaid accrued interest into the most senior class of share of the Company, at a conversion price equal to the lower of a 25% discount to the price per share and the price obtained by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion; or

(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion.

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Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $30.8 million for the 5.00%– $30.0 Million Convertible Notes were cancelled and converted into the right to receive 4.4 million ordinary shares of the Company, with a fair value of $44.3 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $44.3 million adjustment upon extinguishment of the 5.00%– $30.0 Million Convertible Notes.

Paycheck Protection Program Loan

On April 21, 2020 (the "Origination Date"), Legacy Rockley received loan proceeds of approximately $2.9 million (“PPP Loan”) from Silicon Valley Bank (the “Lender”) pursuant to the Paycheck Protection Program (“PPP”) established under the CARES (the Coronavirus Aid, Relief and Economic Security) Act of 2020. Payments of principal and interest were deferred for the first six months following the Origination Date, and the PPP Loan was maturing in two years after the Origination Date. The PPP Loan bore interest at 1.0% per annum.

In June 2021, the $2.9 million of borrowings outstanding under the PPP was forgiven in full. Forgiveness income was recorded as a component of other income, net in the consolidated statements of operations and comprehensive loss.

8.Warrants

As of December 31, 2021, the Company had 8,625,000 Public Warrants outstanding with a balance of $28.0 million, and classified as equity, and 5,450,000 Private Placement Warrants outstanding with a balance of $3.5 million, and classified as liability. These warrants are exercisable for the Company’s ordinary shares. Warrants may only be exercised for a whole number of shares at an exercise price of $11.50. These warrants expire five years from the closing of the Forward Recapitalization.

The ordinary shares underlying the warrants were registered on Rockley Photonics Holdings Limited's Registration Statement on Form S-4 (File No. 333-255019), filed with the SEC on April 2, 2021 and declared effective on July 22, 2021. The Company is obligated to issue ordinary shares upon exercise of a warrant.

Redemption of warrants when the ordinary share price equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the warrants in whole and not in part, at a price of $0.01 per warrant, upon not less than 30 days’ prior written notice of redemption to each warrant holder and if, and only if, the closing price of the Company’s ordinary shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the notice of redemption is given to the warrant holders.

The Company may redeem the warrants in whole and not in part no earlier than 90 days after they are first exercisable and prior to their expiration at a price equal to a number of the Company's ordinary shares based on the redemption date and the “fair market value” of the ordinary shares, upon not less than 30 days' prior written notice of redemption each warrant holder, and if, and only if, the closing price of the ordinary shares equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, reclassifications, recapitalizations and the like) on the trading day before the Company sends the notice of redemption to the warrant holders.

The Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity, and are presented within warrant liabilities on our balance sheet. The warrant liabilities assumed from SC Health, and on a recurring basis, changes in fair value will be presented in the consolidated statement of operations at each reporting period. The Private Placement Warrants are considered to be a Level 3 liability, see Note 5 – Fair Value Measurements for description of the valuation methodology of the Private Placement Warrants.

The Public Warrants were accounted for as equity and are presented within Additional Paid-In Capital on our balance sheet. Although an event such as a qualifying cash tender offer could occur outside of the company’s control that would require net cash settlement, equity classification for the public warrants is not precluded per ASC 815-40-25 as such an event would be in connection with a change in control and all of the Company’s ordinary shareholders, as well as warrant holders, could participate and receive cash from the settlement.

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9.Income Taxes

For the years ended December 31, 2021 and 2020, loss before income taxes were as follows (in thousands):

	Years Ended December 31,
	2021		2020
U.K. Operations	$	(174,298)	$	(82,705)
Foreign operations	6,952		2,997
Loss before income taxes	$	(167,346)	$	(79,708)

The components of provision for income tax for the years ended December 31, 2021 and 2020 are as follows (in thousands):

	Current		Deferred		Total
Year ended December 31, 2021
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	667		—		667
	$	667	$	—	$	667

	Current		Deferred		Total
Year ended December 31, 2020
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	569		—		569
	$	569	$	—	$	569

The effective tax rate of the Company’s provision for income taxes differs from the 19% statutory rate of the Company’s U.K. headquarters entity (in thousands, except percentages):

	December 31,
	2021				2020
U.K. Statutory Rate	$	(31,796)	19.0	%	$	(15,145)	19.0	%
Foreign income tax	8		—	%	308		(0.4)	%
Research & Development credit	(2,061)		1.2	%	(628)		0.8	%
Stock-based compensation	34		—	%	1,293		(1.6)	%
Permanent differences	(156)		0.1	%	3,325		(4.2)	%
Change in valuation allowance	32,402		(19.4)	%	7,480		(9.4)	%
Rate Change on Deferred Taxes	(11,197)		6.7	%	(977)		1.2	%
Uncertain Tax Liabilities	64		—	%	245		(0.3)	%
Losses not benefited	12,625		(7.5)	%	3,999		(5.0)	%
Others, net	744		(0.4)	%	668		(0.8)	%
Total	$	667	(0.40)	%	$	569	(0.71)	%

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

We record income tax expense for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using tax rates that

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are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records valuation allowances to reduce its deferred tax assets to the net amount that it believes is more likely than not to be realized. Its assessment considers the realization of deferred tax assets on a jurisdictional basis.

The significant components of the Company’s deferred taxes are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	33,068	$	15,066
Research and development credits	549		—
Stock-based compensation	4,859		1,476
Lease liabilities	1,394		482
Interest Limitation	10,202		—
Accounts and other receivables	—		—
Accrued liabilities	1,765		788
Other	64		2
Total gross deferred tax assets	51,900		17,814
Less valuation allowance	(50,139)		(16,377)
Net deferred tax assets	1,761		1,437
Deferred tax liabilities:
Right-of-use Assets	$	(1,281)	$	(821)
Property and equipment, principally due to differences in depreciation	(480)		(592)
Other	—		(24)
Total gross deferred tax liabilities	(1,761)		(1,437)
Net deferred tax assets	$	—	$	—

ASC 740 requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of our future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits from operating loss carryforwards is currently not likely to be realized and, accordingly, has provided a valuation allowance has provided a full valuation allowance against its deferred tax assets.

The changes in valuation allowance related to operating activity was an increase in the amount of $33.8 million and $6.9 million during the years ended December 31, 2021 and 2020, respectively.

NOLs and tax credit gross carryforwards as of December 31, 2021 are as follows (in thousands):

	Amount		Expiration Years
NOLs, Federal	$	132,272	carried forward indefinitely
NOLs, State	$	—	—
Tax credits, Federal	$	467	—
Tax credits, State	$	—	—

Uncertain Tax Positions

The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. As the Company expands, it will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. The Company’s policy is to adjust these reserves when facts and circumstances change, such as the closing of a tax audit or refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the income tax expense in the period in which such determination is made and could have a material impact on its financial condition and operating results. The income tax expense includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest

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and penalties. As of December 31, 2021 and 2020, the Company had total uncertain tax positions of $3.2 million and $2.2 million, which is recorded as a reduction of the deferred tax asset related research and developments. No interest or penalties have been recorded related to the uncertain tax positions. None of the unrecognized tax benefits, if recognized, would affect the effective tax rate. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands): 

	Years Ended December 31,
	2021		2020
Balance at beginning of the year	$	2,236	$	405
Increases based on tax positions related to current year	1,061		733
Increases based on tax positions related to prior years	165		1,199
Decreases based on tax positions related to prior years	(245)		(101)
Balance at end of year	$	3,217	$	2,236

It is not expected that there will be a significant change in uncertain tax position in the next 12 months. We are subject to income tax in the U.K., U.S. federal and various states and three other foreign jurisdictions. Our U.S. income tax filings are currently under audit for the tax year ended December 31, 2018. The statute of limitations for U.K. and foreign tax jurisdictions other than the U.S. are no longer subject to audit for tax years before December 31, 2019. We are no longer subject to U.S. federal income tax audit for the tax years before the year ended December 31, 2018 and are no longer subject to state income tax audit for tax years before December 31, 2015.

10.Shareholders’ Equity (Deficit)

The Company is authorized to issue 12,417,500,000 ordinary shares with par value of $0.000004 per share. Each holder of the Company's ordinary shares is entitled to one vote per share. As of December 31, 2021, there were 127,860,639 of the Company's ordinary shares issued and outstanding. Holders of the Company's ordinary shares do not have cumulative voting rights. Additionally, the Company has 14,074,986 warrants outstanding as of December 31, 2021. See Note 8, Warrants for additional information.

Each holder of the Company's ordinary shares is entitled to the payment of dividends and other distributions as may be declared by the Board from time to time out of the Company’s assets or funds legally available for dividends or other distributions. The Company has not declared or paid any dividends with respect to its ordinary shares for the periods presented.

If the Company is involved in voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, or a similar event, each holder of the Company ordinary shares will participate pro rata in all assets remaining after payment of liabilities, subject to prior distribution rights of the Company preferred shares, if any, then outstanding.

Equity Line of Credit

In October 2021, the Company entered into an equity line of credit arrangement (“ELOC”) with Lincoln Park Capital Fund, LLC, an Illinois limited liability company ("LPCF"). The ELOC is a private placement with registration rights, providing LPCF the ability to purchase up to 7.8 million of the Company's ordinary shares for $50.0 million over 24 months. Proceeds from the sale of shares will go towards the Company to be used for working capital.

No amounts were drawn against the ELOC during any of the periods presented.

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11.Net Loss per Share

The following is a calculation of basic and diluted net loss per share (in thousands, except for share and per share amounts):

	Years Ended December 31,
	2021		2020
Basic and diluted:
Net loss	$	(168,013)	$	(80,277)
Weighted average ordinary shares outstanding	100,917,939		83,457,400
Basic and diluted net loss per share	$	(1.66)	$	(0.96)

Basic net loss per share is calculated by dividing net loss for the period by the weighted average number of the ordinary shares outstanding plus outstanding warrants with a 0.01 exercise price during the period.

 For the years ended December 31, 2021 and 2020, we excluded the potential effect of outstanding and exercisable options (including performance options) and warrants in the calculation of the diluted loss per share, as the effect would be anti-dilutive due to losses incurred. As of December 31, 2021 and 2020, there were approximately 12.6 million and 13.8 million potentially issuable shares respectively, with dilutive effect.

12.Stock-Based Compensation

The Company has established a number of share-based incentive plans for current employees, directors and others, which include Share Appreciation Rights ("SARs"), 2013 Share Option Plan (the "2013 Plan"), 2021 Share Option Plan (the "2021 Plan"), Restricted Stock Units ("RSUs"), 2021 Employee Stock Purchase Plan (the "ESPP"),  and Warrants.

Share Appreciation Rights

As of December 31, 2021, there were no SARs outstanding. As of December 31, 2020, there were 30,000 SARs outstanding at an exercise price of $0.00001 per share. In connection with the Business Combination on August 11, 2021, the liability associated with outstanding SARs was settled with a cash payment of $0.7 million.

2013 Share Option Plan

The holders of Legacy Rockley options under the 2013 Plan continue to hold such options and such options remain subject to the same vesting, exercise and other terms and conditions. In connection with the Business Combination, the holders of Legacy Rockley options may exercise their options to purchase a number of ordinary shares equal to the number of Legacy Rockley ordinary shares subject to such Legacy Rockley options multiplied by the Exchange Ratio of 2.4835 (rounded down to the nearest whole share) at an exercise price per share divided by the Exchange Ratio (rounded to the nearest whole cent). The information presented herein is as if the exchange of stock options occurred as of the earliest period presented.

As of December 31, 2021, there were no options available for grant. Any new grants will become available for issuance under the 2021 Plan.

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The following table summarizes the stock option activity related to the 2013 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value4
					(In thousands)
Options outstanding at December 31, 2019	14,663,610	$	4.05	6.94	$	54,100
Granted	5,782,544	$	8.67
Exercised	(19,404)	$	5.36
Forfeited	(2,052,583)	$	8.62
Expired	(475,548)	$	6.92
Options outstanding at December 31, 2020	17,898,619	$	4.94	6.75	$	110,552
Granted	—	$	—
Exercised	(1,557,214)	$	0.60
Forfeited	(912,912)	$	4.07
Expired	(46,757)	$	3.08
Options outstanding at December 31, 2021	15,381,736	$	2.00	5.83	$	36,093
Options exercisable at December 31, 2021	12,546,315	$	1.68	5.25	$	33,464

4 The aggregated intrinsic value represents the difference between the exercise price and the closing stock price of $4.35 for the Company’s ordinary shares on December 31, 2021.

2021 Share Option Plan

On March 31, 2021, the Board approved the 2021 Plan. The purpose of the 2021 Plan is to attract, retain, incentivize and reward top talent through stock ownership, to improve operating and financial performance and strengthen the mutuality of interest between eligible service providers and shareholders.

As of December 31, 2021, there were 15,375,644 shares authorized for issuance under the Plan, of which 10,207,656 shares were available for grant.

The following table summarizes the stock option activity related to the 2021 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Options outstanding at December 31, 2020	—	$	—	0.00	—
Granted	1,013,480	$	15.84
Exercised	—	$	—
Forfeited	—	$	—
Expired	—	$	—
Options outstanding at December 31, 2021	1,013,480	$	15.84	9.61	$	11,645
Options exercisable at December 31, 2021	81,538	$	15.84	9.61	$	937

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Restricted Stock Units

During the year ended December 31, 2021, the Company granted restricted RSUs to employees. Each award will vest based on continued service which is generally over a four-year period. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of RSUs was estimated on the date of grant based on the fair value of the Company’s ordinary shares.

Employee RSUs activity for the year ended December 31, 2021 was as follows:

	Number of RSUs Outstanding	Weighted Average Grant Date Fair Value		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Outstanding at December 31, 2020	—	$	—	0.00	$	—
Granted	4,181,607	$	6.71
Exercised	(24,668)	$	7.07
Forfeited	(2,431)	$	7.07
Expired	—	$	—
Outstanding at December 31, 2021	4,154,508	$	6.71	1.76	$	18,072

2021 Employee Stock Purchase Plan

On October 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the "ESPP"), which became effective on December 1, 2021. The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of our ordinary shares at a discounted price through payroll deductions with the goal of enhancing employees' sense of participation in the Company and further align employee interests with those of the Company's shareholders.

Under the ESPP, eligible employees may purchase shares of Company ordinary shares through payroll deductions of between 1% to 15% of after-tax compensation each pay period, with a maximum participation of $25,000 annually. The shares are purchased at the end of each six-month offering period at a 15% discount from the closing market price as reported on the New York Stock Exchange on the last trading day of the offering period.

Subject to adjustments provided in the ESPP, the maximum number of ordinary shares available for purchase under the ESPP is 1,526,239 plus an annual increase to be added on the first day of each of the Company’s fiscal years for a period of up to 10 years, beginning with the fiscal year that begins on January 1, 2022, equal to the least of (i) 1% of the outstanding shares on such date, (ii) 7,631,196 shares, or (iii) a lesser amount determined by the Board. As of December 31, 2021, 1,526,239 shares were available for issuance under the ESPP.

The initial offering period for the ESPP is one year, commencing on December 1, 2021 and ending on November 30, 2022. As of the date of this report, no shares of the Company's ordinary shares have been purchased or distributed pursuant to the ESPP.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of the purchase rights under the ESPP for the year ended December 31, 2021, were as follows:

	Year Ended  December 31, 2021
Expected term (in years)	0.5-1.0
Expected volatility (%)	54%
Risk-free interest rate (%)	0.10 - 0.25
Dividend yield	—

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Stock-based compensation expense

The following table summarizes our stock-based compensation expense for all equity arrangements and is included in the consolidated statements of operations and comprehensive loss as follows (in thousands):

	Years Ended December 31,
	2021		2020
Cost of revenue	$	1,825	$	2,271
Research and development	7,182		4,313
Selling, general, and administrative	3,006		1,459
Total stock-based compensation expense	$	12,013	$	8,043

As of December 31, 2021 and 2020, there was approximately $40.5 million and $19.5 million, respectively of total unrecognized stock based compensation expense related to our equity awards, which is expected to be recognized over a weighted average period of 1.5 years and 1.4 years, respectively.

Performance Awards

For the years December 31, 2021 and 2020, we recognized a total expense of $0.3 million and $0.2 million respectively in relation to the performance-based options. As of December 31, 2021 and 2020, there were approximately $0.9 million and $1.2 million of unrecognized stock-based compensation expense related to the performance-based awards. During the year ended December 31, 2021, no additional performance-based awards were granted.

Valuation of Stock Options

The fair values of options granted during the period were determined using a Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, risk-free interest rate and expected dividends.

We estimated expected volatility based on historical data of the price of our ordinary shares over the expected term of the options. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on guidelines provided in U.S. SEC Staff Accounting Bulletin No. 110 and represents the average of the vesting tranches and contractual terms. The risk-free rate assumed in valuing the options is based on the U.S. Treasury rate in effect at the time of grant for the expected term of the option. We do not anticipate paying any cash dividends in the foreseeable future and, therefore, used an expected dividend yield of zero in the option pricing model. Stock-based compensation awards (i.e. options and RSUs) are amortized on over a four-year period with 25% cliff vest at the first year anniversary of the grant and ratably over the next three years. We made an accounting policy election to account for forfeitures in the period they occur.

The weighted average assumptions used to value the grants are as follows:

	Years Ended December 31,
	2021	2020
Expected term (in years)	6.05	4.86 - 6.25
Expected volatility (%)	53.0	50.29 - 52.45
Risk-free interest rate (%)	0.96	0.30 - 1.75
Dividend yield	—	—

Warrants

During the year ended December 31, 2020, Legacy Rockley issued warrants to intermediaries for introducing new investors related to equity financings. In connection with the Business Combination on August 11, 2021, all outstanding warrants of Legacy Rockley were exercised on a cashless basis and converted into the right to receive 1.8 million ordinary shares of the Company, with a fair value of $18.1 million.

13.Related Party Transactions

The Company formed HRT, a joint venture with Hengtong Optic-Electric Co., Ltd. in 2017, which was recognized by the Company as an equity method investment. As of and in the year ended December 31, 2020, we made sales to and

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were owed from the HRT joint venture, $5.3 million and $3.3 million, respectively. The balance owed by the joint venture was included in accounts receivable in the consolidated balance sheet. As of and in the year ended December 31, 2021, sales to and balances owed from the HRT joint venture were immaterial.

14.Leases

We have operating leases for office space and finance leases for manufacturing equipment. These leases have remaining lease terms of 1 year to 5 years. Some leases include extension options for up to 5 years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

The weighted average remaining lease term was approximately 4 years for operating leases as of December 31, 2021. The weighted average discount rate was 6.0% for operating leases as of December 31, 2021.

The components of lease cost for the years ended December 31, 2021 and 2020, were as follows (in thousands):

	Years Ended December 31,
	2021		2020
Operating Lease Cost:
Fixed lease cost	$	1,103	851
Variable lease cost	354		154
Total operating lease cost	$	1,457	$	1,005

The supplemental cash flow information related to our operating leases is as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	936	$	916
Operating cash flows for finance leases	$	—	$	15
Financing cash flows for finance leases	$	—	$	1,192
Right-of-use assets obtained in exchange of lease obligations:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—

There are no finance lease liabilities as of December 31, 2021. Maturities of operating lease liabilities as of December 31, 2021, were as follows (in thousands):

	Operating Leases
Year Ending December 31:
2022	$	1,500
2023	1,394
2024	914
2025	818
2026	842
Thereafter	186
Total lease obligation	$	5,654
Less: Imputed interest	(679)
Total lease liabilities	$	4,975
Less: Current lease liabilities	(1,238)
Total non-current lease liabilities	$	3,737

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15.Commitments and Contingencies

Legal Contingencies

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. We apply accounting for contingencies to determine when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, we disclose contingencies deemed to be reasonably possible and accrue loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of December 31, 2021 there are no litigation pending that could have, individually and in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

Financial Commitments

In the ordinary course of business, we make commitments to third-party suppliers for various research and development activities. As of December 31, 2021 and 2020, we had $13.6 million and $3.0 million, respectively, in contractual obligations for which we have not yet received the services.

16.Defined Contribution Plan

We have defined contribution plans, under which we contribute based on a percentage of the employees’ elected contributions. We will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized within selling, general and administrative expenses and research and development in the consolidated statements of operations and comprehensive loss. Defined contributions were $0.7 million and $0.5 million for years ended December 31, 2021 and 2020, respectively.

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17.Supplemental Cash Flow Information

Non-cash operating, investing, and financing activities, and supplemental cash flow information are as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash payments for:
Interest paid	$	658	$	47
Income tax paid	$	978	$	313
Non-cash Operating Activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—
	$	4,008	$	—
Non-cash Investing Activities:
Unpaid property and equipment received	$	805	$	166
Unpaid balance related to the Trutouch Asset Acquisition	—		500
	$	805	$	666
Non-cash Financing Activities:
Conversion of convertible debt and accrued interest to ordinary shares	$	181,404	$	—
Conversion of Legacy Rockley ordinary shares to Rockley ordinary shares	206,888		—
Private Placement Warrants	14,304		—
Public Warrants	28,031		—
Issuance of ordinary shares in lieu of cash payment of transaction costs	3,190		—
Forgiveness of Paycheck Protection Program loan	2,860		$	—
Unpaid deferred transaction costs	1,034		—
Issuance of ordinary shares related to the Trutouch Asset Acquisition	—		2,298
Issuance of ordinary shares related to ELOC	472		—
	$	438,183	$	2,298

Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer and principal accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of and for the year ended December 31, 2021. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and internal control over financial reporting were effective at the reasonable level.

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Management’s Report on Internal Controls Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

No Attestation Report of Registered Public Accounting Firm

This Annual Report on Form 10-K does not contain an attestation report of our registered public accounting firm regarding internal control over financial reporting since the Company, as an “emerging growth company,” is not required to provide such report pursuant to Section 404 until we are no longer an 'emerging growth company" as defined by the JOBS Act.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including Rockley’s, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Item 9B.Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance

We will provide information that is responsive to this Item in our definitive proxy statement or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2021. Such information is incorporated into this Item by reference.

Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers, and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The full text of our code of conduct is posted on the investor relations section on our website, which is located at https://investors.rockleyphotonics.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information in the investor relations section of our website.

Item 11.Executive Compensation

We will provide information that is responsive to this Item in our definitive proxy statement or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2021. Such information is incorporated into this Item by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We will provide information that is responsive to this Item in our definitive proxy statement or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2021. Such information is incorporated into this Item by reference.

Item 13.Certain Relationships and Related Transactions, and Director Independence

We will provide information that is responsive to this Item in our definitive proxy statement or in an amendment to this Annual Report on Form 10-K not later than 120 days after December 31, 2021. Such information is incorporated into this Item by reference.

Item 14.Principal Accounting Fees and Services

We will provide information that is responsive to this Item in our definitive proxy statement or in an amendment to this

Annual Report on Form 10-K not later than 120 days after December 31, 2021. Such information is incorporated into this Item by reference.

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PART IV

Item 15.Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report

1.All Financial Statements

See index to Consolidated Financial Statements, Item 8 of this Form 10-K.

2.Financial Statement Schedules

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K.

3.Exhibits required by Item 601 of Regulation S-K

The information required by this Section (a)(3) of Item 15 is as follows:

Exhibit Number	Description
2.1	Business Combination Agreement and Plan of Merger, dated as of March 19, 2021, by and among SC Health Corporation, Rockley Photonics Limited, Rockley Photonics Holdings Limited and Rockley Mergersub Limited (incorporated by reference from Annex A contained in the Registration Statement on Form S-4 (File No. 333-255109)).
3.1	Second Amended and Restated Memorandum and Articles of Association of Rockley Photonics Holdings Limited. (incorporated by reference from Exhibit 3.1 to the Registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2021).
4.1	Assignment, Assumption and Amendment Agreement among Computershare Trust Company, N.A., Computershare Inc., SC Health Corporation, SC Health Holdings Limited and Rockley Photonics Holdings Limited (incorporated by reference from Exhibit 4.2 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
4.2	Form of Specimen Warrant Certificate of Rockley Photonics Holdings Limited (incorporated by reference from Exhibit 4.3 to the Registration Statement on Form S-4 (File No. 333-255109)).
4.3	Form of Specimen Ordinary Share Certificate of Rockley Photonics Holdings Limited (incorporated by reference from Exhibit 4.4 to the Registration Statement on Form S-4 (File No. 333-255109)).
4.4	Form of Lock-Up Agreement (incorporated by reference from Exhibit 4.5 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
10.1†	Form of Registration Rights and Lock-up Agreement (incorporated by reference from Annex G contained in the Registration Statement on Form S-4 (File No. 333-255109)).
10.2+	Form of Indemnification Agreement between Rockley Photonics Holdings Limited and its officers and directors (incorporated by reference from Exhibit 10.7 to the Registration Statement on Form S-4 (File No. 333-255109)).
10.3+	Rockley Photonics Holdings Limited 2021 Stock Incentive Plan and the Forms of Stock Option Agreement, Restricted Stock Unit Agreement and Restricted Stock Agreement (incorporated by reference from Exhibit 10.3 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).
10.4+	Equity Side Letter with Andrew Rickman (incorporated by reference from Exhibit 10.25 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
10.5+†	Deed of Amendment to Andrew Rickman’s Employment Agreement (incorporated by reference from Exhibit 10.26 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
10.6+	Deed of Termination to Rockley Ventures Limited Consultancy Agreement (incorporated by reference from Exhibit 10.27 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
10.7+	Amended and Restated Employment Agreement for Mahesh Karanth (incorporated by reference from Exhibit 10.28 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021)
10.8+	Amended and Restated Employment Agreement for Amit Nagra (incorporated by reference from Exhibit 10.29 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
10.9	Purchase Agreement, dated November 15, 2021, by and between Rockley Photonics Holdings Limited and Lincoln Park Capital Fund, LLC(incorporated by reference from Exhibit 10.9 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).

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Exhibit Number	Description
10.10	Registration Rights Agreement, dated November 15, 2021, by and between Rockley Photonics Holdings Limited and Lincoln Park Capital Fund, LLC (incorporated by reference from Exhibit 10.10 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).
10.11	Eighth Amendment to Lease Agreement, dated November 1, 2021, by and between 21st Century Techbanq Pasadena LLC and Rockley Photonics, Inc. (incorporated by reference from Exhibit 10.11 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).
10.12	Second Amendment to Office Lease, dated October 7, 2021 by and between Boardwalk Office Associates, LLC and Rockley Photonics, Inc.(incorporated by reference from Exhibit 10.12 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).
10.13	Consulting Agreement by and between Rockley Photonics Holdings Limited and HealthKapital LLC, dated March 15, 2021 Consulting Agreement by and between Rockley Photonics Holdings Limited and HealthKapital LLC, dated March 15, 2021 (incorporated by reference from Exhibit 10.13 to the Registrant's quarterly report on Form 10-Q for the quarter ended September 30, 2021).
10.14+	Rockley Photonics Limited 2013 Equity Incentive Plan and Forms of Stock Option Agreements (incorporated by reference from Exhibit 10.6 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 2021).
21.1*	List of Subsidiaries
23.1*	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
24.1*	Power of Attorney (included on signature page)
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1#	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2#	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data files pursuant to Rule 405 of Regulation S-T.

#	In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34 - 47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10 Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the Company specifically incorporates it by reference.
†	Certain exhibits and schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted exhibits or schedules to the SEC upon request.
+	Indicates a management contract or compensatory plan.
*	Filed herewith.

Item 16.Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ROCKLEY PHOTONICS HOLDINGS LIMITED
By:	/s/ Dr. Andrew Rickman, OBE
	Name:	Dr. Andrew Rickman, OBE
	Title:	Chief Executive Officer and Chairman of the Board of Directors
	/s/ Mahesh Karanth
	Name:	Mahesh Karanth
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Dr. Andrew Rickman and Mahesh Karanth, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this Registration Statement, and any registration statement relating to the offering covered by this Registration Statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Dr. Andrew Rickman, OBE	Chief Executive Officer (Principal Executive Officer)	March 10, 2022
Dr. Andrew Rickman, OBE
/s/ Mahesh Karanth	Chief Financial Officer (Principal Financial and Accounting Officer)	March 10, 2022
Mahesh Karanth
/s/ William Huyett	Lead Independent Director	March 10, 2022
William Huyett
/s/ Dr. Caroline Brown	Director	March 10, 2022
Dr. Caroline Brown
/s/ Karim Karti	Director	March 10, 2022
Karim Karti
/s/ Michele Klein	Director	March 10, 2022
Michele Klein

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Name	Title	Date
/s/ Pamela Puryear	Director	March 10, 2022
Pamela Puryear
/s/ Brian Blaser	Director	March 10, 2022
Brian Blaser
/s/ Dr. Nicolaus Henke	Director	March 10, 2022
Dr. Nicolaus Henke

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EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Legal Name	Jurisdiction of Incorporation
Rockley Photonics Holdings Limited	Cayman Islands
Rockley Photonics Cayman Limited	Cayman Islands
Rockley Photonics Limited	England and Wales
Rockley Photonics, Inc.	Delaware, US
Rockley Photonics Oy	Finland
Rockley Photonics Ireland Limited	Republic of Ireland
Rockley Photonics Hong Kong Limited	Hong Kong

EX-23.1

Exhibit 23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

•(Form S-8 No. 333-260329) pertaining to the 2021 Stock Incentive Plan of Rockley Photonics Holdings Limited and the 2021 Employee Stock Purchase Plan of Rockley Photonics Holdings Limited;

•(Form S-8 POS No. 333-255019) pertaining to the 2013 Stock Incentive Plan of Rockley Photonics Limited

of our report dated March 10, 2022, with respect to the consolidated financial statements of Rockley Photonics Holdings Limited included in this Annual Report (Form 10-K) for the year ended December 31, 2021.

/s/ Ernst & Young LLP

San Jose, California

March 10, 2022

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew Rickman, certify that:

1. I have reviewed this Annual Report on Form 10-K of Rockley Photonics Holdings Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Andrew Rickman

 Andrew Rickman

Chief Executive Officer

(Principal Executive Officer)

Date: March 10, 2022

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mahesh Karanth, certify that:

1. I have reviewed this Annual Report on Form 10-K of Rockley Photonics Holdings Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Mahesh Karanth

 Mahesh Karanth

Chief Financial Officer

(Principal Financial Officer)

Date: March 10, 2022

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Rockley Photonics Holdings Limited (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of and for the period covered by the Report.

/s/ Andrew Rickman

 Andrew Rickman

Chief Executive Officer

(Principal Executive Officer)

Date: March 10, 2022

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Rockley Photonics Holdings Limited (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Mahesh Karanth

 Mahesh Karanth

Chief Financial Officer

(Principal Financial Officer)

Date: March 10, 2022

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	Dec. 31, 2021	Mar. 03, 2022
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Entity Address, City or Town	Altrincham,
Entity Address, Country	GB
Entity Address, Postal Zip Code	WA14 2DT,
Country Region	+44
City Area Code	1865
Local Phone Number	292017
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		128,470,241
Documents Incorporated by Reference	Portions of the Registrant's definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders are incorporated herein by references in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended December 31, 2021.
Entity Tax Identification Number	98-1644526
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Entity Central Index Key	0001852117
Entity Public Float	$ 1.2
Number of Ordinary Shares
Document Information [Line Items]
Title of 12(b) Security	Ordinary shares, $0.000004026575398 par value per share
Trading Symbol	RKLY
Security Exchange Name	NYSE
Warrants
Document Information [Line Items]
Title of 12(b) Security	Warrants, each whole warrant exercisable for one ordinary share at an exercise price of $11.50 per share
Trading Symbol	RKLY.WS
Security Exchange Name	NYSE

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Audit Information	12 Months Ended
	Dec. 31, 2021
Audit Information [Abstract]
Auditor Name	Ernst & Young LLP
Auditor Location	San Jose, California
Auditor Firm ID	42

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 36,786	$ 19,228
Short-term investments, at fair value	26,965	0
Accounts receivable, net of allowance of $302 and $0	1,359	4,925
Other receivables, net of allowance of $141 and $0	47,462	18,024
Prepaid expenses	6,795	1,605
Other current assets	7	609
Total current assets	119,374	44,391
Long-term investments, at fair value	17,659	0
Property, equipment, net	10,187	6,182
Equity method investment	4,879	5,202
Intangible assets	3,048	3,048
Other non-current assets	7,683	1,607
Total assets	162,830	60,430
Current liabilities
Trade payables	6,882	4,413
Accrued expenses	17,360	10,395
Debt, current portion	26,312	0
Other current liabilities	1,238	998
Total current liabilities	51,792	15,806
Long-term debt, net of current portion	0	74,804
Warrant liabilities	3,477	0
Other long-term liabilities	3,743	1,127
Total liabilities	59,012	91,737
Commitments and contingencies (Note 15)
Shareholders’ equity (deficit)
Ordinary shares, $0.000004 par value; 12,417,500,000 and 139,033,366 authorized as of December 31, 2021 and December 31, 2020; 127,860,639 and 83,539,382 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively	0	0
Additional paid-in-capital	504,714	201,576
Accumulated deficit	(400,896)	(232,883)
Total shareholders’ equity (deficit)	103,818	(31,307)
Total liabilities and shareholders’ equity (deficit)	$ 162,830	$ 60,430

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowance for credit loss	$ 302	$ 0
Other receivable, allowance for credit loss	$ 141	$ 0
Ordinary shares, par value (in dollars per share)	$ 0.000004	$ 0.000004
Ordinary shares authorized (in shares)	12,417,500,000	139,033,366
Ordinary shares issued (in shares)	127,860,639	83,539,382
Ordinary shares outstanding (in shares)	127,860,639	83,539,382

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Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income Statement [Abstract]
Revenue	$ 8,213	$ 22,343
Cost of revenue	11,416	24,240
Gross profit	(3,203)	(1,897)
Operating expenses:
Selling, general, and administrative expenses	39,976	20,260
Research and development expenses	72,573	35,900
Total operating expenses	112,549	56,160
Loss from operations	(115,752)	(58,057)
Other income (expense):
Forgiveness of PPP loan	2,860	0
Interest expense, net	(4,781)	(189)
Equity method investment loss	(703)	(1,274)
Change in fair value of debt instruments	(59,916)	(20,163)
Change in fair value of warrant liabilities	10,827	0
Gain (loss) on foreign currency	119	(25)
Total other income (expense)	(51,594)	(21,651)
Loss before income taxes	(167,346)	(79,708)
Provision for income tax	667	569
Net loss and comprehensive loss	(168,013)	(80,277)
Net loss and comprehensive loss	$ (168,013)	$ (80,277)
Net loss per share:
Basic (in dollars per share)	$ (1.66)	$ (0.96)
Diluted (in dollars per share)	$ (1.66)	$ (0.96)
Weighted-average shares outstanding:
Basic (in shares)	100,917,939	83,457,400
Diluted (in shares)	100,917,939	83,457,400

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Consolidated Statements of Shareholders’ Equity (Deficit) - USD ($) $ in Thousands	Total	SC Health	SC Health Sponsor	Number of Ordinary Shares	Number of Ordinary Shares SC Health	Number of Ordinary Shares SC Health Sponsor	Ordinary Shares and Additional Paid-in Capital	Ordinary Shares and Additional Paid-in Capital SC Health	Ordinary Shares and Additional Paid-in Capital SC Health Sponsor	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2019				82,792,725
Beginning balance at Dec. 31, 2019	$ 36,259						$ 188,865			$ (152,606)
Increase (Decrease) in Stockholders' Equity
Net loss	(80,277)									(80,277)
Exercise of stock options (in shares)				19,404
Exercise of stock options	42						42
Exercise of warrants (in shares)				13,716
Exercise of warrants	7						7
Issuance of warrants	360						360
Stock-based compensation	8,043						8,043
Ordinary share issuance for acquisition of in-process research and development (in shares)				347,389
Ordinary share issuance for acquisition of in-process research and development	2,298						2,298
Ordinary share issuance, net of issuance costs (in shares)				366,148
Ordinary share issuance, net of issuance costs	1,961						1,961
Ending balance (in shares) at Dec. 31, 2020				83,539,382
Ending balance at Dec. 31, 2020	(31,307)						201,576			(232,883)
Increase (Decrease) in Stockholders' Equity
Net loss	(168,013)									(168,013)
Exercise of stock options (in shares)				1,557,218
Exercise of stock options	932						932
Exercise of warrants (in shares)				4,115,118
Exercise of warrants	379						379
Issuance of warrants	263						263
Conversion of convertible notes to ordinary shares (in shares)				15,896,210
Conversion of convertible notes to ordinary shares	181,404						181,404
Equity consideration issued (in shares)					1,777,031	10,562,500
Equity consideration issued		$ 17,966	$ 50,000					$ 17,966	$ 50,000
Equity consideration (in shares)				10,000,000
Equity consideration issued	100,000						100,000
Vesting of restricted stock units (in shares)				24,668
Stock-based compensation	12,013						12,013
Transaction costs	(45,515)						(45,515)
Private warrants	(14,304)						(14,304)
Ordinary share issuance, net of issuance costs (in shares)				388,512
Ordinary share issuance, net of issuance costs	0
Ending balance (in shares) at Dec. 31, 2021				127,860,639
Ending balance at Dec. 31, 2021	$ 103,818						$ 504,714			$ (400,896)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net loss	$ (168,013)	$ (80,277)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	4,640	2,787
Gain on disposal of property and equipment	0	(107)
Bad debt expense and allowance for doubtful accounts	820	0
Accretion of marketable securities to redemption value	(122)	0
Stock-based compensation	12,013	8,043
Change in equity-method investment	323	1,274
Change in fair value of debt instrument	59,916	20,163
Change in fair value of warrant liabilities	(10,827)	0
Forgiveness of Paycheck Protection Program loan	(2,860)	0
Changes in operating assets and liabilities:
Accounts receivable	2,887	1,458
Other receivables	(29,579)	(2,074)
Prepaid expenses and other current assets	(4,868)	1,307
Other non-current assets	(5,795)	604
Trade payables	1,663	(3,126)
Accrued expenses	10,946	3,537
Other current and long-term liabilities	2,855	(1,943)
Net cash used in operating activities	(126,001)	(48,354)
Cash flows from investing activities:
Purchase of property and equipment	(7,840)	(1,416)
Purchase of marketable securities	(54,688)	0
Proceeds from sale of marketable securities	10,000	0
Proceeds from maturity of marketable securities	186	0
Payment for asset acquisition	(500)	(250)
Investment in equity method investee	0	(4,990)
Net cash used in investing activities	(52,842)	(6,656)
Cash flows from financing activities:
Proceeds from convertible loan notes	76,723	51,781
Principal payments on long-term debt	(5,000)	(1,952)
Proceeds from issuance of ordinary shares	167,966	1,961
Proceeds from Paycheck Protection Program loan	0	2,860
Proceeds from exercise of options	932	42
Proceeds from the exercise of warrants	379	7
Proceeds from issuance of warrants	263	360
Debt issuance costs incurred	(383)	(494)
Transaction costs	(44,479)	0
Principal payments on finance lease	0	(1,231)
Net cash provided by financing activities	196,401	53,334
Net increase (decrease) in cash and cash equivalents	17,558	(1,676)
Cash and cash equivalents:
Beginning of period	19,228	20,904
End of period	$ 36,786	$ 19,228

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Description of Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Significant Accounting Policies

Description of Business and Significant Accounting Policies

Description of Business

Rockley specializes in the research and development of integrated silicon photonics chipsets. Rockley has developed a versatile, application specific, third-generation silicon photonics platform specifically designed for the optical integration challenges facing numerous mega-trend markets. Rockley has partnered with multiple tier-1 customers across the markets to deliver complex optical systems required for transformational sensors, communications, and medical product realization.

On August 11, 2021, Rockley Photonics Limited ("Legacy Rockley") completed a business combination (the "Business Combination") with SC Health Corporation, a special purpose acquisition company ("SC Health"), with Rockley Photonics Holdings Limited and its subsidiaries surviving the merger. Upon the consummation of the Business Combination, the Company became a publicly traded company listed on the New York Stock Exchange ("NYSE") under the symbol "RKLY". For additional information on the Business Combination, please refer to Note 2, Business Combination, to these consolidated financial statements. Unless the context otherwise requires, references in these notes to "Rockley", the "Company", "we", "us", or "our" and any related terms are intended to mean the post-Business Combination consolidated company, Rockley Photonics Holdings Limited, while "Legacy Rockley" and "SC Health" refers to the entities prior to the Business Combination.

Going Concern

The Company has incurred net losses since inception, has an accumulated deficit of $400.9 million as of December 31, 2021 and negative cash flow from operations of $126.0 million for the year ended December 31, 2021 and expects to incur losses from operations for the foreseeable future. As of December 31, 2021, the Company had cash, cash equivalents and investments of approximately $81.4 million. The Company’s ability to meet its obligations in the ordinary course of business is dependent on its ability to obtain additional financing. As a result, there is substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company's future liquidity needs, and ability to address those needs, will largely be determined by its ability to obtain additional financing on terms acceptable to us. The Company will continue to seek additional capital through the sale of debt or equity, or other arrangements, however, there can be no assurance that we will be able to raise additional capital when needed or under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders. If the Company raises funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to the holders of ordinary shares. Issued debt securities may contain covenants that limit the Company's ability to pay dividends or make other distributions to shareholders. If we are unable to obtain additional financing, operations may be scaled back or discontinued.

Global Pandemic

The COVID-19 global pandemic has prompted extraordinary measures by governments and businesses to control the spread of COVID-19 in most or all regions throughout the world. These actions have included travel bans, quarantines, and similar mandates for individuals to substantially restrict normal activities and for businesses to curtail normal operations.

The COVID–19 pandemic has adversely impacted our operational efficiency and caused delays in operational activities. During the year ended December 31, 2021,we continued to take cautious steps to protect our workforce, support community efforts, and follow local government guidelines. Certain key laboratory employees and facilities have continued internal testing and laboratory work to the extent necessary to service customer commitments. The remaining non-essential workforce were recommended to continue performing their duties from home. The ongoing impact will depend on the duration of the pandemic which is being mitigated by the vaccination of the general population and gradual easing of restrictions.

Basis of Presentation and Preparation

The accompanying consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and shareholders’ equity for the periods presented. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. SEC. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation.

We accounted for the Business Combination as a forward recapitalization in accordance with GAAP (the "Forward Recapitalization"). Under this method of accounting, SC Health was treated as the acquired company and Legacy Rockley was deemed to be the accounting acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Forward Recapitalization was treated as the equivalent of Legacy Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization. The net assets of SC Health are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Forward Recapitalization are those of Legacy Rockley. The consolidated financial statements of the combined company post-Forward Recapitalization represents the combined results of Rockley and SC Health beginning August 11, 2021, the date the Business Combination was consummated. The shares, corresponding capital amounts and earnings per share available for shareholders of Legacy Rockley, prior to the Business Combination, converted into the right to receive 2.4835 shares (the "Exchange Ratio") of ordinary shares, par value $0.000004 (the "ordinary shares"). The recapitalization of the number of ordinary shares attributable to Legacy Rockley is reflected retroactively as shares reflecting the Exchange Ratio to the earliest period presented and is utilized for calculating earnings per share in all prior periods presented.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; valuation of intangibles; product warranties; employee compensation and benefit accruals; stock-based compensation; loss contingencies; income taxes; fair value measurements; and warrant liabilities. Actual results could differ materially from those estimates. Management’s estimates include, as applicable, the anticipated impacts of the COVID-19 pandemic.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments with an original maturity of three months or less at the time of purchase.

Accounts Receivable

Accounts receivable is recorded at the invoiced amount and do not bear interest. We assess the need for an allowance for doubtful accounts based upon an analysis of past credit history and the current financial condition of its customers, as well as the consideration of expected trends based upon characteristics of the accounts and general economic conditions. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Equity Method Investments

Equity method investments are all entities over which we have significant influence but not control or joint control. Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses of the investee in the consolidated statement of operations and comprehensive loss. Earnings and losses of equity method investments are based on the most recently available financial statements of the investee. Basis differences between the cost of an equity method investment and the underlying equity in the long-lived assets are amortized over the estimated economic useful life of the underlying long-lived asset. We periodically review our equity method investments for impairment and record a reduction in the carrying value, if and when necessary. To date, no such impairment losses have been recorded.

Available-for-Sale Investments

The investments in debt securities are classified as available-for-sale investments. Debt securities primarily consist of corporate bonds, commercial paper and U.S. Treasury debt securities. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.

Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) ("AOCI"). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.

We classify our investments as current or non-current based on the nature of the investment and their availability for use in current operations.

Other-than-Temporary Impairments on Investments

All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, it is deemed impaired, and we assess whether the impairment is other-than-temporary. An impairment is considered other-than-temporary if (i) we have the intent to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis, or (iii) we do not expect to recover the entire amortized cost basis of the security. If impairment is considered other-than-temporary based on condition (i) or (ii) described above, the entire difference between the amortized cost and the fair value of the debt security is recognized in the results of operations. If an impairment is considered other-than-temporary based on condition (iii) described above, the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI).

Property and Equipment, Net

Property and equipment are recorded at cost and presented net of accumulated depreciation and amortization. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs are expensed as incurred. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the useful life of the assets. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets.

Computer equipment	3 years
Lab equipment	3 years
Furnitures and fixtures	4 years
Leasehold improvements	Shorter of the lease term and the useful life

Impairment of Long-Lived Assets

We evaluate our long-lived assets, such as property and equipment, and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets or asset group may not be recoverable. Recoverability of these assets or asset groups is measured by comparing their carrying value to the future net undiscounted cash flows the assets are expected to generate over their remaining economic life. If such assets or asset groups are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their fair value.

The Company tests other intangible assets not subject to amortization for impairment annually and more frequently if events or changes in circumstances between annual tests indicate that it is more likely than not that the asset is impaired.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. To date, no such impairment losses have been recorded.

Revenue Recognition

We generate our revenue principally from development services, which entails developing the customer-specific designs of photonics chips. Revenue is recognized when control of promised goods and services are transferred to customers in an amount that reflects the expected consideration in exchange for those products and services. This principle is achieved by applying the following five-step approach:

•Identification of the contract with a customer—A contract with a customer exists when we enter into an enforceable contract with a customer that defines each party’s rights and obligations regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, the contract has commercial substance, and we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We consider the terms and conditions of the contracts and customary business practices in identifying contracts under Topic 606 Revenue from Contracts with Customers. Our contracts with a customer generally consist of a development services contract against which statements of work (“SOW”) are issued. Each SOW contains one or more agreed-upon projects. We consider the arrangement to be the development services contract combined with the SOW. While the typical duration of a development services contract is multiple years, we generally expect the duration of agreed-upon projects to be six months or less. Generally, our customers have the right to cancel their contracts at any time.

•Identification of the performance obligations in the contract—Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. The individual components of the development services are generally capable of being distinct but not distinct in the context of the contract unless all the goods and services within a certain agreed-upon project of the contract are completed. Generally, the deliverables associated with each agreed-upon project, when combined, are considered a distinct performance obligation.

•Determination of the transaction price—The transaction price is determined based on the consideration to which we are entitled in exchange for transferring goods or services to the customer. Our contracts generally do not contain a significant amount of variable consideration as the price of our services are generally fixed at the inception of the agreed-upon project. The Company excludes sales taxes and other taxes from the measurement of transaction price. None of the contracts contain a significant financing component.

•Allocation of the transaction price to the performance obligations in the contract—Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). The Company prices each agreed-upon project with an SOW at SSP based on the expected cost plus a margin approach.

•Recognition of revenue when or as performance obligations are satisfied—We satisfy performance obligations at a point in time for the development services since the customers do not simultaneously receive and consume the benefits, we do not create or enhance an asset that the customer controls, and we do not have an enforceable right to payment for the performance completed to date. The contracts also contain substantive acceptance terms for each agreed-upon project. Revenue is recognized at the time the related performance obligation is satisfied through the transfer of control of a promised good or service to a customer, which is upon achievement of the agreed-upon project and acceptance by the customer.

Contract balances—The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable is recorded when the right to consideration is unconditional. We generally have the right to invoice the customer upon acceptance of the agreed-upon project. The payment terms on invoiced amounts are typically 30-45 days, and such amounts are nonrefundable. In situations where revenue recognition occurs before invoicing, an unbilled receivable is recorded, which represents a contract asset. Deferred revenue is recognized if we have an unconditional right to bill or have collected consideration in advance of the right to recognize revenue. There have been no contract balances recorded to date.

Costs to obtain and fulfill a contract—Incremental costs incurred to obtain a contract with a customer are required to be capitalized and amortized over the period in which the goods and services to which the asset relates are transferred to the customer. We have not incurred any incremental costs in connection with obtaining the revenue contracts. We recognize an asset from the costs to fulfill a contract only if, the costs relate directly to a contract or an anticipated

contract, the costs generate or enhance resources of the Company that will be used in satisfying a performance obligation in the future, and the costs are expected to be recovered. These costs have been insignificant to date.

Foreign Currency Transactions

The Company’s reporting currency is the U.S. dollar and the functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into the functional currency with any related gain or loss recorded in earnings.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in realized and unrealized losses/(gains) on foreign currency in the accompanying consolidated statements of operations and comprehensive loss.

Segment Information

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company determined that it has one operating and reportable segment.

Concentration of Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, available-for-sale investments, accounts receivable and revenue. We maintain cash balances at financial institutions that management believes are high-credit, quality financial institutions, where deposits, at times, exceed the Federal Deposit Insurance Corporation limits.

Net Loss Per Share

Basic earnings per share is calculated using our weighted-average outstanding ordinary shares. Diluted earnings per share is calculated using our weighted-average outstanding ordinary shares including the dilutive effect of outstanding equity instruments as determined under the treasury stock method. For periods in which we report net losses, diluted net loss per ordinary share attributable to ordinary stockholders is the same as basic net loss per ordinary share attributable to ordinary stockholders, because all potentially dilutive ordinary shares are anti-dilutive.

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant. Compensation expense is generally recognized as expense on a straight-line basis over the service period based on the vesting requirements. We recognize forfeitures as they occur. We estimate the fair value of stock options granted to employees using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the fair value of ordinary shares, (ii) the expected stock price volatility, (iii) the expected term of the award, (iv) the risk-free interest rate and (v) expected dividends. The grant-date fair value of restricted stock is calculated based on the fair value of the underlying ordinary shares .

We measure nonemployee awards at their fair value on the adoption date of ASU No. 2018-07. Following the adoption of ASU No. 2018-07 on January 1, 2018, the accounting for nonemployee awards is consistent with the accounting for employee stock-based compensation as described above.

We granted options and restricted stock units which vest on the satisfaction of a service-based condition.

Warrants

We determine the accounting classification of warrants, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock. Under ASC 480,

warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the company also assesses whether the warrants are indexed to the Company’s ordinary shares and whether the warrants are classified as equity under ASC 815-40 or other U.S. GAAP. After all such assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations and comprehensive loss. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

Leases

Our lease portfolio is comprised of two major classes: real estate leases, which are the majority of our leased assets, are accounted for as operating leases and a manufacturing equipment lease accounted for as a finance lease on the consolidated balance sheet.

We classify leases as either operating or financing. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all the economic benefits from and have the ability to direct the use of the asset. Operating lease assets are included under other non-current assets and operating lease liabilities under other current and long-term liabilities, respectively in the consolidated balance sheets. We recognize lease expense for operating leases on a straight-line basis over the term of the lease. Finance lease asset is included under property, equipment, and finance lease right-of-use assets, net and finance lease liabilities, current portion under other current liabilities in the consolidated balance sheets. Finance ROU assets are amortized on a straight-line basis over their estimated useful lives.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments is used. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally combined.

We elected, as an accounting policy for leases of real estate, to account for lease and non-lease components in a contract as a single lease component. In addition, the recognition requirements are not applied to leases with a term of twelve months or less. Rather, the lease payments for short-term leases are recognized on the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Variable payments, such as common area charges, maintenance, insurance and taxes, are primarily based on the amount of space occupied. These payments in the Company’s leases are not dependent on an index or a rate and are excluded from the measurement of the lease liabilities and recognized in the consolidated statements of operations and comprehensive loss in the period in which the obligation for those payments is incurred. The Company remeasures lease payments when the contingency underlying such variable payments is resolved such that some or all of the remaining payments become fixed.

Cost of Revenue

Our cost of revenue consists of costs related to the Company’s development services which includes cost of materials, cost associated with packaging and assembly, testing and shipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance, overhead and occupancy costs.

Research and Development Expenses (R&D)

Research and development expense consists primarily of personnel costs for engineers and third parties engaged in the design and development of products, software and technologies, including salary, bonus and share-based compensation expense, project material costs, services and depreciation. The Company expenses research and development costs as they are incurred.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing, and human resources; depreciation expense and rent relating to facilities; travel costs; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, benefits, bonuses and stock-based compensation. As we continue to grow as a company, we expect that our selling, general and administrative costs will increase on an absolute dollar basis.

Income Taxes

Deferred income taxes are provided on a liability method, whereby deferred income tax assets are recognized for deductible temporary differences, operating losses, and tax loss carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets are reduced by a valuation allowance when, considering all sources of taxable income, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The income tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, and are meant to simplify and reduce the cost of accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and simplifies areas including franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The Company adopted this guidance on January 1, 2021. The adoption of the guidance did not have a material impact on the consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In May 2021, the FASB issued ASU 2021-04, Modification of Equity Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options such as warrants that remain equity classified after modification or exchange based on consideration of the economic substance of the modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the

potential impacts of ASU 2021-04, it does not expect ASU 2021-04 to have a material effect on its consolidated financial statements.In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance. This amendment in ASU 2021-10 aims to increase transparency about government assistance transactions that are not in the scope of other GAAP guidance. The ASU requires disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects of those transactions. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is in the process of assessing the impacts of ASU 2021-10 on its consolidated financial statements.

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Business Combination

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combination

Business Combination

On August 11, 2021 (the "Closing Date"), Legacy Rockley, SC Health, and Rockley Mergersub Limited, an exempted company incorporated in the Cayman Islands as a direct wholly owned subsidiary of the Company (“Merger Sub”), consummated the business combination contemplated by the Business Combination Agreement and Plan of Merger, dated as of March 19, 2021 (the “Business Combination Agreement”). Immediately upon the consummation of the Business Combination, Legacy Rockley became a wholly owned subsidiary of the Company and Merger Sub merged with and into SC Health, with SC Health surviving the merger and becoming a direct wholly owned subsidiary of the Company. Subsequently, SC Health's ordinary shares and warrants ceased trading on the NYSE while the Company's ordinary shares and warrants began trading on the NYSE under the symbols “RKLY” and “RKLY.WS,” respectively.

Pursuant to the Business Combination Agreement, each of the following transactions occurred in the following order: (i) pursuant to a scheme of arrangement approved by the UK courts (the “Scheme”), on August 9, 2021, all of Legacy Rockley’s ordinary shares, including shares issued immediately prior to the Scheme becoming effective as a result of the conversion of then-outstanding convertible loan notes and the exercise of warrants, were transferred by Rockley shareholders in exchange for an equivalent number of shares in the Company; (ii) the holders of options over shares in Legacy Rockley rolled over their options into new options to purchase shares in the Company; (iii) warrants to purchase shares in Legacy Rockley (other than one warrant instrument that by its terms was replicated at the Company) not exercised for shares in Legacy Rockley prior to the effectiveness of the Scheme described above were cancelled, such that immediately following the Scheme, Legacy Rockley became a direct wholly-owned subsidiary of the Company; (iv) the Company subsequently completed a stock-split to prepare its share capital for Merger Sub’s merger into SC Health; (v) certain accredited investors (including entities affiliated with the SC Health Sponsor) purchased an aggregate of 15 million ordinary shares for a purchase price of $10.00 per share, or an aggregate purchase price of $150.0 million; (vi) on August 11, 2021, Merger Sub was merged with and into SC Health, with SC Health surviving the merger and becoming a direct wholly-owned subsidiary of the Company; and (vii) the ordinary shares and warrants in SC Health were exchanged for ordinary shares and warrants in the Company.

The Business Combination was accounted for as a forward recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, SC Health was treated as the acquired company and Legacy Rockley was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the existing shareholders of Legacy Rockley obtaining a majority voting power in the Company, and as such, having the power to appoint a majority of the members of the Company’s board of directors (the "Board"); the operations of Legacy Rockley prior to the acquisition comprising the only ongoing operations of the combined entity based on the historical operating activity and employee base; and the senior management of Legacy Rockley comprising the majority of the senior management of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Rockley with the acquisition being treated as the equivalent of Legacy Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization.

As a result of the Business Combination, the Company incurred equity issuance costs and other costs considered direct and incremental to the transaction, totaling $45.5 million and consisting of legal, accounting, financial advisory and other professional fees. These amounts are reflected within additional paid-in capital in the consolidated balance sheet as of December 31, 2021.

Summary of Net Proceeds

The following table reconciles the elements of the net proceeds from the Business Combination as of December 31, 2021 (in thousands):

	Recapitalization
Cash inflow from SC Health's trust account, net of redemptions	$	17,966
Cash inflow from PIPE	100,000
Cash inflow from SC Health Sponsor	50,000
Less: Transaction Costs	(45,515)
Net cash received from the Business Combination	$	122,451

Summary of Shares Issued

The total number of shares of the Company's ordinary shares issued and outstanding immediately following the consummation of the Business Combination was approximately 126.7 million, comprising (in thousands):

	Number of Shares
Current Rockley's shareholders prior to the Business Combination	104,016
SC Health Shareholders	1,777
Sponsor Shareholders	10,563
PIPE Investors	10,000
Other Shareholders1	319
Total number of shares	126,675

1 The Company issued 319,000 ordinary shares at a value of $10.0 per share to Cowen and Company LLC ("Cowen") and BCW Securities LLC in lieu of cash payment for a portion of the fees payable $3.2 million to Cowen as part of the transaction costs.

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Segment, Geographic, and Significant Customer Information

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segment, Geographic, and Significant Customer Information

Segment, Geographic, and Significant Customer Information

The following table presents our revenue disaggregated by primary geographical market where revenues are attributable to the region in which the billing address of the customer is located (in thousands):

	December 31,
	2021		2020
United States	$	6,778	$	17,037
Rest of World	1,435		5,306
Total revenue	$	8,213	$	22,343

The following tables summarize our most significant customers as of and for the years ended December 31, 2021 and 2020:

	Revenue				Accounts receivable
	December 31,				December 31,
	2021		2020		2021		2020
Customer A	82	%	76	%	72	%	33	%
Customer B	4	%	24	%	—	%	67	%

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Equity Method Investment

12 Months Ended

Dec. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investment

Equity Method Investment

As of December 31, 2021 and 2020, we held an investment in Hengtong Rockley Technology Co., Ltd (“HRT”) and we appointed two of the HRT's five board members. HRT manufactures and sells optical fiber transceivers based on silicon photonics chipsets. HRT has share capital consisting solely of ordinary shares. We hold 24.9% of HRT’s ordinary shares, and the same proportion of its voting rights. We consider HRT to be a variable interest entity upon which the Company does exercise significant influence. However, considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions, the Company concluded it does not control the investment. Accordingly, the investment in HRT is accounted for under the equity method. We elected to use a three-month lag to record our share of HRT’s results. See Note 13, Related Party Transactions for details of the Company’s transactions with HRT.

The following table summarizes our investment in HRT for the years ended December 31, 2021 and 2020 (in thousands):

	December 31,
	2021		2020
Balance at the beginning of the year	$	5,202	$	1,486
Investment in HRT	—		4,990
Remeasurement gain on HRT	380		—
Share of loss of HRT	(703)		(1,274)
Balance at the end of the year	$	4,879	$	5,202

Our maximum exposure to loss as a result of our involvement with HRT is limited to the balance of our investment.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis, whereby the inputs used in valuation techniques are assigned a hierarchical level. The following are the three levels of inputs to measure fair value:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs that reflect quoted prices for identical assets or liabilities in less active markets; quoted prices for similar assets or liabilities in active markets; benchmark yields, reported trades, broker/dealer quotes, inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs that reflect our own assumptions incorporated in valuation techniques used to measure fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty’s non-performance risk is considered in measuring the fair values of liabilities and assets, respectively.

Investments

The following is a summary of our investments at their cost or amortized cost for the years ended December 31, 2021 and 2020 (in thousands):

	As of
	December 31, 2021		December 31, 2020
Corporate bonds and commercial paper	$	20,042	$	—
U.S. Treasury securities	24,587		—
Total investments	$	44,629	$	—

The fair value of our investments approximates their cost or amortized cost for both periods presented.

The following table presents the contractual maturities of our debt investments as of December 31, 2021 (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	26,945	$	26,961
Due after one year through five years	17,684		17,663
	$	44,629	$	44,624

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

Fair Value of Financial Instruments

The following table summarizes our financial assets measured at fair value on a recurring basis (in thousands):

	December 31, 2021
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	36,786	$	36,786	$	—
Corporate bonds and commercial paper	20,037		—		20,037
U.S. Treasury securities	24,587		24,587		—
Total cash, cash equivalents and investments	$	81,410	$	61,373	$	20,037

	December 31, 2020
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	19,228	$	19,228	$	—
Total cash and cash equivalents	$	19,228	$	19,228	$	—

The financial liabilities subject to fair value measurement on a recurring basis, were as follows (in thousands):

	As of
	December 31, 2021		December 31, 2020
Financial Liabilities
3.00% – 2020 Convertible Notes	$	—	$	32,106
8.00% – 2020 Convertible Notes	—		14,789
2020 Term Facility Loan	—		25,049
Private Placement Warrants	3,477		—
Total financial liabilities	$	3,477	$	71,944

As of December 31, 2021, there was no fair value associated with the convertible debt instruments due to the conversion of the debt securities into the Company's ordinary shares in connection with the Business Combination. The estimated fair value of the debt securities prior to their conversion into the Company's ordinary shares was $208.6 million. The estimated fair value of the convertible securities on the Closing Date was calculated as the product of (i) the number of conversion shares at the Closing Date and (ii) the marketable value per ordinary share at the Closing Date. Changes in the fair value of debt that is accounted for at fair value are presented as gains or losses in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

3.00% – 2020 Convertible Notes

On March 9, 2020, Legacy Rockley issued $21.3 million of the 3.00% Convertible Notes and elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, the outstanding principal and interest of the 3.00% Convertible Notes Due 2025 were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 3.00% Convertible Notes at December 31, 2021.

For the year ended December 31, 2021 and 2020, we recorded a loss of $6.0 million and $10.8 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 3.00% Convertible Notes, as follows (in thousands):

Fair value at March 9, 2020	$	21,281
Plus: Loss from change in fair value	10,825
Fair value at December 31, 2020	32,106
Plus: Loss from change in fair value	5,986
Less: Fair value adjustment extinguished upon conversion of debt	(38,092)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 3.00% Convertible Notes based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC or maturity, the convertible notes may be converted to ordinary shares or redeemed at principal and accrued interest; and (ii) upon qualified financing event, the convertible notes will automatically convert to ordinary shares. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

8.00% – 2020 Convertible Notes

On February 19, 2020, Legacy Rockley issued $8.0 million of 8.00% Convertible Notes and elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, the outstanding principal, interest and warrants of the 8.00% Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 8.00% Convertible Notes at December 31, 2021.

For the years ended December 31, 2021 and 2020, we recorded a loss of $16.1 million and $4.4 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 8.00% Convertible Notes, as follows (in thousands):

Fair value at February 19, 2020	$	10,415
Plus: Loss from change in fair value	4,374
Fair value at December 31, 2020	14,789
Plus: Loss from change in fair value	16,108
Less: Fair value adjustment extinguished upon conversion of debt	(30,897)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 8.00% Convertible Notes Due 2025 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC or maturity, the convertible notes may be converted to ordinary shares or put at 125.0% of principal and accrued interest; and (ii) upon financing event, the convertible notes may be converted to ordinary shares. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

2020 Term Facility Loan

On September 29, 2020, Legacy Rockley issued $35.0 million of convertible notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination on August 11, 2021, thirty percent (30%) of the outstanding principal and interest balance of the 2020 Term Facility Loan were cancelled and converted into the right to receive ordinary shares of the Company and seventy percent (70%) of the outstanding principal and interest balance is required to be repaid in full on or prior to August 31, 2022. At December 31, 2021, the remaining contractual outstanding principal and interest on the 2020 Term Facility Loan was $32.3 million.

For the years ended December 31, 2021 and 2020, we recorded a loss of $15.1 million and $1.7 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 2020 Term Facility Loans, as follows (in thousands):

Fair value at September 29, 2020	$	23,320
Plus: Loss from change in fair value	1,729
Fair value at December 31, 2020	25,049
Plus: Loss from change in fair value	15,134
Less: Fair value adjustment extinguished upon conversion of debt	(13,003)
Fair value at August 11, 2021	$	27,180

At August 11, 2021, the fair value of the 2020 Term Facility Loan was $27.2 million. The interest expense is subsequently accreted to statements of operations and comprehensive loss using the effective interest rate method over the term of the loan. See Note 7, Debt for information regarding the subsequent accounting for the 2020 Term Facility Loan.

A binomial lattice model was used to determine the fair value of the 2020 Term Facility Loan based on assumptions as to when the loan would be converted upon IPO/Sale/Merger/SPAC. Upon such event, the convertible notes may be paid off as following: (i) if par value exit, repayment of base multiple times principal plus unpaid interest; (ii) if greater value exit, repayment of base multiple plus add-on multiple ratio times principal plus unpaid interest.

5.00% – $50.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued $50.0 million of the 5.00% – $50.0 Million Convertible Notes (the "5.00% – $50.0 Million Convertible Notes") and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal and interest of the 5.00% – $50.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.00 million outstanding balance on the 5.00% – $50.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded a loss of $2.3 million, from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $50.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	10,274
Plus: Loss from change in fair value	2,310
Less: Fair value adjustment extinguished upon conversion of debt	(12,584)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% – $50.0 Million Convertible Notes Due 2026 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon IPO/Sale/Merger/SPAC, the convertible notes may be converted to

ordinary shares or put at principal and accrued interest; and (ii) upon qualified financing event or maturity, the convertible notes will automatically convert to ordinary shares at base price. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

5.00% – $25.0 Million Convertible Notes

On December 31, 2020, Legacy Rockley issued $25.0 million of the 5.00% – $25.0 Million Convertible Notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal, interest and warrants of the 5.00% – $25.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 5.00% – $25.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded an adjustment of $5.0 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $25.0 Million Convertible Notes, as follows (in thousands):

Fair value at December 31, 2020	$	37,592
Plus: Loss from change in fair value	4,977
Less: Fair value adjustment extinguished upon conversion of debt	(42,569)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% – $25.0 Million Convertible Notes Due 2025 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon SPAC, the convertible notes may be converted to ordinary shares or put at principal and accrued interest; (ii) upon qualified financing event, the convertible notes may be converted to ordinary shares with discount any time after financing date; and (iii) upon maturity, the convertible notes may be converted to ordinary shares at $675.0 million divided by the number of fully diluted shares. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

5.00% – $30.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued $30.0 million of the 5.00% Convertible Notes and at inception elected the fair value option of accounting for this debt instrument (see Note 7, Debt for details). In connection with the closing of the Business Combination, the outstanding principal and interest of the 5.00% – $30.0 Million Convertible Notes were cancelled and converted into the right to receive ordinary shares of the Company, resulting in $0.0 million outstanding balance on the 5.00% – $30.0 Million Convertible Notes at December 31, 2021.

For the year ended December 31, 2021, we recorded an adjustment of $5.9 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $30.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	38,403
Plus: Loss from change in fair value	5,855
Less: Fair value adjustment extinguished upon conversion of debt	(44,258)
Fair value at December 31, 2021	$	—

A binomial lattice model was used to determine the fair value of the 5.00% Convertible Notes Due 2026 based on assumptions as to when the notes would be converted or redeemed at each decision point. Within the lattice model, the following assumptions were made: (i) upon SPAC, the convertible notes may be converted to ordinary shares or put at principal and accrued interest; and (ii) upon qualified financing event or maturity, the convertible notes will automatically convert to ordinary shares at base price. The lattice model used the share price, conversion price, maturity date, risk-free rate, estimated stock volatility and estimated credit spread. The remeasurement of the fair value of the debt instrument was recorded as a gain or loss in the statements of operations and comprehensive loss for each reporting period.

At December 31, 2021 and 2020, the carrying value of certain financial instruments, such as cash, accounts receivable, other receivable, prepaid expenses and other current assets, trade payable and other current accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable.

Private Placement Warrants

The Private Placement Warrants are accounted for as liabilities in accordance with the FASB's Accounting Standards Codification ("ASC") 815-40 and are presented within the Warrants Liabilities on the consolidated balance sheet. The warrant liabilities were measured at fair value at inception and are measured on a recurring basis, with changes in fair value presented within change in fair value of warrants liabilities in the consolidated statement of operations and comprehensive loss.

The Private Placement Warrants are measured at fair value on a recurring basis. The measurement of the warrants as of December 31, 2021 was $3.5 million. The Company has classified the Private Placement Warrants as a liability due to certain settlement terms and provisions related to certain tender offers and indexation characteristics following the Business Combination and has accounted for them as liability instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period. Additionally, the Company has determined that the Private Placement Warrants are classified within Level 3 of the fair value hierarchy as the fair value is estimated using the Modified Black Scholes Option Pricing Model.

The following table presents the changes in the fair value of the Private Placement Warrants (in thousands):

Initial measurement, August 11, 2021	$	14,304
Mart-to-market adjustment	(10,827)
Warrant Liabilities balance, December 31, 2021	$	3,477

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Balance Sheet Components

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Components

Balance Sheet Components

Cash and cash equivalents

Our cash and cash equivalents balances were concentrated by location as follows:

	December 31,
	2021		2020
United Kingdom	97	%	96	%
United States	3	%	3	%
Other	—	%	1	%

Other receivables

	December 31,
	2021		2020
R&D tax credit receivable	$	45,632	$	17,412
Grants receivable	753		—
VAT receivable	1,073		607
Other receivable, net	4		5
Total other receivables	$	47,462	$	18,024

Property and equipment, net (in thousands):

	December 31,
	2021		2020
Computer equipment	$	1,998	$	1,218
Lab equipment	13,940		7,607
Motor vehicles	31		31
Furniture and fixtures	315		265
Leasehold improvements	1,230		704
Assets under construction	—		27
Total property and equipment	$	17,514	$	9,852
Less: accumulated depreciation	(9,088)		(5,802)
Total property and equipment, net	$	8,426	$	4,050

Total depreciation expense was $4.2 million and $2.3 million for the years ended December 31, 2021, and 2020, respectively.

Finance lease right-of-use assets, net (in thousands):

	December 31,
	2021		2020
Finance lease right-of-use assets	$	2,966	$	2,966
Less: accumulated amortization	(1,205)		(834)
Total finance lease right-of-use assets, net	$	1,761	$	2,132

Amortization expense was $0.4 million and $0.4 million for the years ended December 31, 2021, and 2020, respectively.

Intangible assets, net (in thousands):

	December 31,
	2021		2020
In-process research and development	$	3,048	$	3,048
Total intangible assets, net	$	3,048	$	3,048

The Company reviews its intangible assets for potential impairment whenever events or circumstances indicate that the carrying value of the intangible assets may not be recoverable. No impairment charges were recorded for the years ended December 31, 2021, and 2020, respectively.

Other non-current assets (in thousands):

	December 31,
	2021		2020
Capitalized transaction costs	$	—	$	121
Security deposits	280		—
Operating right of use assets	4,577		1,486
Prepaid asset, net of current portion	$	2,826	$	—
Total other non-current assets	$	7,683	$	1,607

Accrued expenses (in thousands):

	December 31,
	2021		2020
Accrued bonus	$	7,546	$	3,349
Accrued payroll and benefits	2,750		1,524
Accrued taxes	439		332
Accrued fabrication costs	3,110		2,321
Share appreciation rights	—		706
Accrued transaction costs	1,004		335
Other accrued expenses	2,511		1,828
Total accrued expenses	$	17,360	$	10,395

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Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt

Debt

The following table summarizes information relating to our long-term debt, (in thousands):

	December 31, 2021
	Principal		Change in Fair Value		Conversion of Debt	Accreted Debt Interest	Principal Payments in Cash	Net
3.00% – 2020 Convertible Notes	$	21,281	$	16,811	(38,092)	—	—	$	—
8.00% – 2020 Convertible Notes	8,000		22,897		(30,897)	—	—	—
2020 Term Facility Loan	33,949		6,234		(13,003)	4,132	(5,000)	26,312
5.00% – $50.0 Million Convertible Notes	10,274		2,310		(12,584)	—	—	—
5.00% – $25.0 Million Convertible Notes	25,000		17,569		(42,569)	—	—	—
5.00% – $30.0 Million Convertible Notes	30,000		14,258		(44,258)	—	—	—
Total Long-term debt	$	128,504	$	80,079	(181,403)	4,132	(5,000)	$	26,312
Less: current portion of long-term debt								(26,312)
Long-term debt, net of current portion								$	—

	December 31, 2020
	Principal		Change in Fair Value		Net
3.00% – 2020 Convertible Notes	$	21,281	$	10,825	$	32,106
8.00% – 2020 Convertible Notes	8,000		6,789		14,789
2020 Term Facility Loan	22,500		2,549		25,049
Paycheck Protection Program	2,860		—		2,860
Total long-term debt	$	54,641	$	20,163	$	74,804
Less: current portion of long-term debt					—
Long-term debt, net of current portion					$	74,804

Future minimum payments under the debt agreements as of December 31, 2021 are as follows (in thousands):

	2020 Term Facility Loan
2022	$	32,303
2023	—
2024	—
2025	—
2026	—
Thereafter	—
Total future minimum payments	32,303
Less: current portion of debt principal	(32,303)
Non-current portion of debt principal	$	—

3.00% – 2020 Convertible Notes

On March 9, 2020, Legacy Rockley issued convertible loan notes in an aggregate principal amount of $21.3 million (the “3.0% Convertible Notes”). The 3.00% – 2020 Convertible Notes had an interest rate of 3.00% per annum and contained no financial covenants. The 3.00% – 2020 Convertible Notes were issued in two tranches $20.0 million on March 9, 2020 and $1.3 million on October 20, 2020.

The 3.00% – 2020 Convertible Notes were subject to conversion as follows:

(a)If in an equity financing raised total proceeds for the Company of not less than $10.0 million then the outstanding principal amount of all notes and any unpaid accrued interest shall automatically convert into the most senior class of equity share at a conversion price of $14.298 per share; or

(b)if an equity financing is not raised for the Company, then the outstanding principal amount of all notes and any unpaid accrued interest may convert into the most senior class of share at a conversion price of $14.298 per share.

(c)At an exit event, redeem the outstanding notes for an amount equal to the outstanding principal plus accrued interests or convert the outstanding principal amount of all notes and any unpaid accrued interest thereon into the most senior class of share of the Company, at a conversion price equal to the issuance price of $14.298 per share.

(d)At the maturity date, convert into the most senior class of shares at a conversion price equal to the issuance price of $14.298 per share.

Legacy Rockley elected to account for the 3.00% – 2020 Convertible Notes at fair value as of the issuance date, with the changes in fair value reported in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $21.9 million for the 3.00% – 2020 Convertible Notes were cancelled and converted into the right to receive 3.8 million ordinary shares of the Company, with a fair value of $38.1 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $38.1 million adjustment upon extinguishment of the 3.00% – 2020 Convertible Notes.

8.00% – 2020 Convertible Notes

On February 19, 2020, Legacy Rockley issued convertible loan notes to our board member in an aggregate principal amount of $8.0 million (the “8.00% Convertible Notes"). The 8.00% Convertible Notes had an interest rate of 8.00% per annum and contained no financial covenants.

The 8.00% Convertible Notes were convertible as follows:

(a)In the event of an equity financing, the outstanding principal amount of all notes and any unpaid accrued interest shall automatically convert into the most senior class of share at a conversion price being the lower of $14.298 per share or a discounted subscription price of the equity shares; or

(b)At an exit event, convert the outstanding principal amount of all notes and any unpaid accrued interest thereon into the most senior class of share of the Company, at a conversion price, equal to a 25% discount to the Series E issuance price of $14.298 per share.

(c)At the maturity date, convert into the most senior class of equity share at a conversion price of $14.298.

Legacy Rockley elected to account for the 8.00% Convertible Notes s at fair value as of the issuance date, with the changes in fair value reported in the consolidated statements of operations and comprehensive loss under Change in Fair Value of Debt Instruments.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $8.9 million for the 8.00% Convertible Notes were cancelled and converted into the right to receive 1.5 million ordinary shares of the Company, with a fair value of $15.5 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. In addition, the warrants issued in conjunction with the 8.00% Convertible Note were also cancelled and converted into the right to receive 1.5 million ordinary shares of the Company, with a fair value of $15.5 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $30.9 million adjustment upon extinguishment of the 8.00% Convertible Notes and warrants.

2020 Term Facility Loan

On September 29, 2020, Legacy Rockley secured a term facility loan of $35.0 million (“2020 Term Facility Loan”). Legacy Rockley had the option to repay the aggregate amount of the loans utilized in full on the maturity date, subject to no Qualified Exit occurring at the time plus the applicable repayment premium payable. The Qualified Exit meant: 1) qualified listing—a flotation or a public offering, the value of which is equal to or exceeds the free float value of $350.0 million; 2) non-qualified trade. Upon any occurrence of a non-qualified trade sale or qualified listing, amounts due to Argentum would have been discharged in full by way of conversion into the Company's most senior class of shares.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, thirty percent (30%) of the outstanding principal and interest balance of $10.2 million for the 2020 Term Facility Loan were cancelled and converted into the right to receive 1.3 million ordinary shares of the Company, with a fair value of $13.0 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $13.0 million adjustment upon extinguishment of debt. The seventy percent (70%) of the outstanding principal and interest balance remained as debt and is required to be repaid in full on or prior to August 31, 2022, in the total amount of $37.3 million. At August 11, 2021, the Company recorded a fair value of $27.1 million for the seventy percent (70%) of the outstanding principal and interest balance. The Company accreted the adjusted interest expense over the amended term of the loan using the effective interest rate method. The Company accrued interest expense of $4.1 million for the year ended December 31, 2021. As of December 31, 2021, the total outstanding debt for the 2020 Term Facility Loan balance was $26.3 million. The 2020 Term Facility Loan includes a financial covenant that requires the Company to maintain a cash balance of at least $35.0 million. As of December 31, 2021, the Company was not in default on any covenants.

5.00% – $50.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued convertible loan notes for an aggregate principal amount of $50.0 million. The 5.00% – $50.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants. The total amount borrowed was $10.3 million.

The 5.00% – $50.0 Million Convertible Notes were subject to conversion as follows:

(a)In the event of a qualified financing even with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 15% discount to the per share subscription price of the equity shares or the price obtained by diving $1,500.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding principal amount and any unpaid accrued interest on the original principal or convert the outstanding principal amount of all notes and any unpaid accrued interest into the most senior class of share of the Company at a conversion price equal to the lower of 15% discount to the price per share and the price obtained by dividing $1,500.0 million by fully diluted share capital of the Company at the date of conversion;

(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $1,500.0 million by fully diluted share capital of the Company at the date of conversion.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $10.6 million for the 5.00% – $50.0 Million Convertible Notes were cancelled and converted into the right to receive 1.3 million ordinary shares of the Company, with a fair value of $12.6 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recognized a $12.6 million adjustment upon extinguishment of the 5.00% – $50.0 Million Convertible Notes.

5.00% – $25.0 Million Convertible Notes

On December 31, 2020, Legacy Rockley issued convertible loan notes in an aggregate principal amount of $25.0 million. The 5.00% – $25.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants.

The 5.00% – $25.0 Million Convertible Notes were subject to conversion as follows:

(a)In an equity qualified financing event with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 25% discount to the per share subscription price of the equity shares or the price obtained by diving $800.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding notes for an amount equal to 100% of the outstanding principal plus accrued interest or convert the outstanding principal amount into the most senior class of share of the Company, at a conversion price equal to the lower of 25% discount to the price per share and the price obtained by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion; or

(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $675.0 million by the number of issued shares in the capital of the Company on a fully diluted basis or repay the amount equal to 100% of the outstanding principal amount plus any accrued interest.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $25.7 million for the 5.00% – $25.0 Million Convertible Notes were cancelled and converted into the right to receive 3.6 million ordinary shares of the Company, with a fair value of $35.6 million, recorded in the consolidated balance sheet. In addition, the warrants issued in conjunction with the 5.00% – $25.0 Million Convertible Notes were also cancelled and converted into the right to receive 0.7 million ordinary shares of the Company, with a fair value of $7.0 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a total $42.6 million adjustment upon extinguishment of the 5.00% – $25.0 Million Convertible Notes and warrants.

5.00% – $30.0 Million Convertible Notes

On January 11, 2021, Legacy Rockley issued the 5.00% – $30.0 Million Convertible Notes. The 5.00% – $30.0 Million Convertible Notes had an interest rate of 5.00% per annum and contained no financial covenants.

The 5.00% – $30.0 Million Convertible Notes were subject to conversion as follows:

(a)In an equity qualified financing event with total proceeds raised not less than $25.0 million, the outstanding principal amount and any unpaid accrued interest automatically convert into the most senior class of share at a conversion price being lower of 25% discount to the per share subscription price of the equity shares or the price obtained by diving $800.0 million by fully diluted share capital of the Company at the date of conversion;

(b)At an exit event, redeem the outstanding notes for an amount equal to the outstanding principal plus any unpaid accrued interest or convert the outstanding principal amount of all notes and any unpaid accrued interest into the most senior class of share of the Company, at a conversion price equal to the lower of a 25% discount to the price per share and the price obtained by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion; or

(c)At the maturity date, convert into the most senior class of shares at a conversion price by dividing $800.0 million by fully diluted share capital of the Company at the date of conversion.

Upon consummation of the Business Combination discussed in Note 2, Business Combination, the total outstanding principal and accrued unpaid interest of $30.8 million for the 5.00%– $30.0 Million Convertible Notes were cancelled and converted into the right to receive 4.4 million ordinary shares of the Company, with a fair value of $44.3 million, recorded in the consolidated statement of shareholders' equity (deficit) with a corresponding decrease to the convertible note in the consolidated balance sheet. The Company recorded a $44.3 million adjustment upon extinguishment of the 5.00%– $30.0 Million Convertible Notes.

Paycheck Protection Program Loan

On April 21, 2020 (the "Origination Date"), Legacy Rockley received loan proceeds of approximately $2.9 million (“PPP Loan”) from Silicon Valley Bank (the “Lender”) pursuant to the Paycheck Protection Program (“PPP”) established under the CARES (the Coronavirus Aid, Relief and Economic Security) Act of 2020. Payments of principal and interest were deferred for the first six months following the Origination Date, and the PPP Loan was maturing in two years after the Origination Date. The PPP Loan bore interest at 1.0% per annum.

In June 2021, the $2.9 million of borrowings outstanding under the PPP was forgiven in full. Forgiveness income was recorded as a component of other income, net in the consolidated statements of operations and comprehensive loss.

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Warrants

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Warrants

Warrants

As of December 31, 2021, the Company had 8,625,000 Public Warrants outstanding with a balance of $28.0 million, and classified as equity, and 5,450,000 Private Placement Warrants outstanding with a balance of $3.5 million, and classified as liability. These warrants are exercisable for the Company’s ordinary shares. Warrants may only be exercised for a whole number of shares at an exercise price of $11.50. These warrants expire five years from the closing of the Forward Recapitalization.

The ordinary shares underlying the warrants were registered on Rockley Photonics Holdings Limited's Registration Statement on Form S-4 (File No. 333-255019), filed with the SEC on April 2, 2021 and declared effective on July 22, 2021. The Company is obligated to issue ordinary shares upon exercise of a warrant.

Redemption of warrants when the ordinary share price equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the warrants in whole and not in part, at a price of $0.01 per warrant, upon not less than 30 days’ prior written notice of redemption to each warrant holder and if, and only if, the closing price of the Company’s ordinary shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the notice of redemption is given to the warrant holders.

The Company may redeem the warrants in whole and not in part no earlier than 90 days after they are first exercisable and prior to their expiration at a price equal to a number of the Company's ordinary shares based on the redemption date and the “fair market value” of the ordinary shares, upon not less than 30 days' prior written notice of redemption each warrant holder, and if, and only if, the closing price of the ordinary shares equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share dividends, reorganizations, reclassifications, recapitalizations and the like) on the trading day before the Company sends the notice of redemption to the warrant holders.

The Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity, and are presented within warrant liabilities on our balance sheet. The warrant liabilities assumed from SC Health, and on a recurring basis, changes in fair value will be presented in the consolidated statement of operations at each reporting period. The Private Placement Warrants are considered to be a Level 3 liability, see Note 5 – Fair Value Measurements for description of the valuation methodology of the Private Placement Warrants.

The Public Warrants were accounted for as equity and are presented within Additional Paid-In Capital on our balance sheet. Although an event such as a qualifying cash tender offer could occur outside of the company’s control that would require net cash settlement, equity classification for the public warrants is not precluded per ASC 815-40-25 as such an event would be in connection with a change in control and all of the Company’s ordinary shareholders, as well as warrant holders, could participate and receive cash from the settlement.

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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the years ended December 31, 2021 and 2020, loss before income taxes were as follows (in thousands):

	Years Ended December 31,
	2021		2020
U.K. Operations	$	(174,298)	$	(82,705)
Foreign operations	6,952		2,997
Loss before income taxes	$	(167,346)	$	(79,708)

The components of provision for income tax for the years ended December 31, 2021 and 2020 are as follows (in thousands):

	Current		Deferred		Total
Year ended December 31, 2021
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	667		—		667
	$	667	$	—	$	667

	Current		Deferred		Total
Year ended December 31, 2020
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	569		—		569
	$	569	$	—	$	569

The effective tax rate of the Company’s provision for income taxes differs from the 19% statutory rate of the Company’s U.K. headquarters entity (in thousands, except percentages):

	December 31,
	2021				2020
U.K. Statutory Rate	$	(31,796)	19.0	%	$	(15,145)	19.0	%
Foreign income tax	8		—	%	308		(0.4)	%
Research & Development credit	(2,061)		1.2	%	(628)		0.8	%
Stock-based compensation	34		—	%	1,293		(1.6)	%
Permanent differences	(156)		0.1	%	3,325		(4.2)	%
Change in valuation allowance	32,402		(19.4)	%	7,480		(9.4)	%
Rate Change on Deferred Taxes	(11,197)		6.7	%	(977)		1.2	%
Uncertain Tax Liabilities	64		—	%	245		(0.3)	%
Losses not benefited	12,625		(7.5)	%	3,999		(5.0)	%
Others, net	744		(0.4)	%	668		(0.8)	%
Total	$	667	(0.40)	%	$	569	(0.71)	%

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

We record income tax expense for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using tax rates that

are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records valuation allowances to reduce its deferred tax assets to the net amount that it believes is more likely than not to be realized. Its assessment considers the realization of deferred tax assets on a jurisdictional basis.

The significant components of the Company’s deferred taxes are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	33,068	$	15,066
Research and development credits	549		—
Stock-based compensation	4,859		1,476
Lease liabilities	1,394		482
Interest Limitation	10,202		—
Accounts and other receivables	—		—
Accrued liabilities	1,765		788
Other	64		2
Total gross deferred tax assets	51,900		17,814
Less valuation allowance	(50,139)		(16,377)
Net deferred tax assets	1,761		1,437
Deferred tax liabilities:
Right-of-use Assets	$	(1,281)	$	(821)
Property and equipment, principally due to differences in depreciation	(480)		(592)
Other	—		(24)
Total gross deferred tax liabilities	(1,761)		(1,437)
Net deferred tax assets	$	—	$	—

ASC 740 requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of our future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits from operating loss carryforwards is currently not likely to be realized and, accordingly, has provided a valuation allowance has provided a full valuation allowance against its deferred tax assets.

The changes in valuation allowance related to operating activity was an increase in the amount of $33.8 million and $6.9 million during the years ended December 31, 2021 and 2020, respectively.

NOLs and tax credit gross carryforwards as of December 31, 2021 are as follows (in thousands):

	Amount		Expiration Years
NOLs, Federal	$	132,272	carried forward indefinitely
NOLs, State	$	—	—
Tax credits, Federal	$	467	—
Tax credits, State	$	—	—

Uncertain Tax Positions

The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. As the Company expands, it will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. The Company’s policy is to adjust these reserves when facts and circumstances change, such as the closing of a tax audit or refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the income tax expense in the period in which such determination is made and could have a material impact on its financial condition and operating results. The income tax expense includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest

and penalties. As of December 31, 2021 and 2020, the Company had total uncertain tax positions of $3.2 million and $2.2 million, which is recorded as a reduction of the deferred tax asset related research and developments. No interest or penalties have been recorded related to the uncertain tax positions. None of the unrecognized tax benefits, if recognized, would affect the effective tax rate. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands): 

	Years Ended December 31,
	2021		2020
Balance at beginning of the year	$	2,236	$	405
Increases based on tax positions related to current year	1,061		733
Increases based on tax positions related to prior years	165		1,199
Decreases based on tax positions related to prior years	(245)		(101)
Balance at end of year	$	3,217	$	2,236

It is not expected that there will be a significant change in uncertain tax position in the next 12 months. We are subject to income tax in the U.K., U.S. federal and various states and three other foreign jurisdictions. Our U.S. income tax filings are currently under audit for the tax year ended December 31, 2018. The statute of limitations for U.K. and foreign tax jurisdictions other than the U.S. are no longer subject to audit for tax years before December 31, 2019. We are no longer subject to U.S. federal income tax audit for the tax years before the year ended December 31, 2018 and are no longer subject to state income tax audit for tax years before December 31, 2015.

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Shareholders’ Equity (Deficit)

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Shareholders’ Equity (Deficit)

Shareholders’ Equity (Deficit)

The Company is authorized to issue 12,417,500,000 ordinary shares with par value of $0.000004 per share. Each holder of the Company's ordinary shares is entitled to one vote per share. As of December 31, 2021, there were 127,860,639 of the Company's ordinary shares issued and outstanding. Holders of the Company's ordinary shares do not have cumulative voting rights. Additionally, the Company has 14,074,986 warrants outstanding as of December 31, 2021. See Note 8, Warrants for additional information.

Each holder of the Company's ordinary shares is entitled to the payment of dividends and other distributions as may be declared by the Board from time to time out of the Company’s assets or funds legally available for dividends or other distributions. The Company has not declared or paid any dividends with respect to its ordinary shares for the periods presented.

If the Company is involved in voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, or a similar event, each holder of the Company ordinary shares will participate pro rata in all assets remaining after payment of liabilities, subject to prior distribution rights of the Company preferred shares, if any, then outstanding.

Equity Line of Credit

In October 2021, the Company entered into an equity line of credit arrangement (“ELOC”) with Lincoln Park Capital Fund, LLC, an Illinois limited liability company ("LPCF"). The ELOC is a private placement with registration rights, providing LPCF the ability to purchase up to 7.8 million of the Company's ordinary shares for $50.0 million over 24 months. Proceeds from the sale of shares will go towards the Company to be used for working capital.

No amounts were drawn against the ELOC during any of the periods presented.

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Net Loss per Share

12 Months Ended

Dec. 31, 2021

Earnings Per Share [Abstract]

Net Loss per Share

Net Loss per Share

The following is a calculation of basic and diluted net loss per share (in thousands, except for share and per share amounts):

	Years Ended December 31,
	2021		2020
Basic and diluted:
Net loss	$	(168,013)	$	(80,277)
Weighted average ordinary shares outstanding	100,917,939		83,457,400
Basic and diluted net loss per share	$	(1.66)	$	(0.96)

Basic net loss per share is calculated by dividing net loss for the period by the weighted average number of the ordinary shares outstanding plus outstanding warrants with a 0.01 exercise price during the period.

 For the years ended December 31, 2021 and 2020, we excluded the potential effect of outstanding and exercisable options (including performance options) and warrants in the calculation of the diluted loss per share, as the effect would be anti-dilutive due to losses incurred. As of December 31, 2021 and 2020, there were approximately 12.6 million and 13.8 million potentially issuable shares respectively, with dilutive effect.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company has established a number of share-based incentive plans for current employees, directors and others, which include Share Appreciation Rights ("SARs"), 2013 Share Option Plan (the "2013 Plan"), 2021 Share Option Plan (the "2021 Plan"), Restricted Stock Units ("RSUs"), 2021 Employee Stock Purchase Plan (the "ESPP"),  and Warrants.

Share Appreciation Rights

As of December 31, 2021, there were no SARs outstanding. As of December 31, 2020, there were 30,000 SARs outstanding at an exercise price of $0.00001 per share. In connection with the Business Combination on August 11, 2021, the liability associated with outstanding SARs was settled with a cash payment of $0.7 million.

2013 Share Option Plan

The holders of Legacy Rockley options under the 2013 Plan continue to hold such options and such options remain subject to the same vesting, exercise and other terms and conditions. In connection with the Business Combination, the holders of Legacy Rockley options may exercise their options to purchase a number of ordinary shares equal to the number of Legacy Rockley ordinary shares subject to such Legacy Rockley options multiplied by the Exchange Ratio of 2.4835 (rounded down to the nearest whole share) at an exercise price per share divided by the Exchange Ratio (rounded to the nearest whole cent). The information presented herein is as if the exchange of stock options occurred as of the earliest period presented.

As of December 31, 2021, there were no options available for grant. Any new grants will become available for issuance under the 2021 Plan.

The following table summarizes the stock option activity related to the 2013 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value4
					(In thousands)
Options outstanding at December 31, 2019	14,663,610	$	4.05	6.94	$	54,100
Granted	5,782,544	$	8.67
Exercised	(19,404)	$	5.36
Forfeited	(2,052,583)	$	8.62
Expired	(475,548)	$	6.92
Options outstanding at December 31, 2020	17,898,619	$	4.94	6.75	$	110,552
Granted	—	$	—
Exercised	(1,557,214)	$	0.60
Forfeited	(912,912)	$	4.07
Expired	(46,757)	$	3.08
Options outstanding at December 31, 2021	15,381,736	$	2.00	5.83	$	36,093
Options exercisable at December 31, 2021	12,546,315	$	1.68	5.25	$	33,464

4 The aggregated intrinsic value represents the difference between the exercise price and the closing stock price of $4.35 for the Company’s ordinary shares on December 31, 2021.

2021 Share Option Plan

On March 31, 2021, the Board approved the 2021 Plan. The purpose of the 2021 Plan is to attract, retain, incentivize and reward top talent through stock ownership, to improve operating and financial performance and strengthen the mutuality of interest between eligible service providers and shareholders.

As of December 31, 2021, there were 15,375,644 shares authorized for issuance under the Plan, of which 10,207,656 shares were available for grant.

The following table summarizes the stock option activity related to the 2021 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Options outstanding at December 31, 2020	—	$	—	0.00	—
Granted	1,013,480	$	15.84
Exercised	—	$	—
Forfeited	—	$	—
Expired	—	$	—
Options outstanding at December 31, 2021	1,013,480	$	15.84	9.61	$	11,645
Options exercisable at December 31, 2021	81,538	$	15.84	9.61	$	937

Restricted Stock Units

During the year ended December 31, 2021, the Company granted restricted RSUs to employees. Each award will vest based on continued service which is generally over a four-year period. The grant date fair value of the award will be recognized as stock-based compensation expense over the requisite service period. The fair value of RSUs was estimated on the date of grant based on the fair value of the Company’s ordinary shares.

Employee RSUs activity for the year ended December 31, 2021 was as follows:

	Number of RSUs Outstanding	Weighted Average Grant Date Fair Value		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Outstanding at December 31, 2020	—	$	—	0.00	$	—
Granted	4,181,607	$	6.71
Exercised	(24,668)	$	7.07
Forfeited	(2,431)	$	7.07
Expired	—	$	—
Outstanding at December 31, 2021	4,154,508	$	6.71	1.76	$	18,072

2021 Employee Stock Purchase Plan

On October 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the "ESPP"), which became effective on December 1, 2021. The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of our ordinary shares at a discounted price through payroll deductions with the goal of enhancing employees' sense of participation in the Company and further align employee interests with those of the Company's shareholders.

Under the ESPP, eligible employees may purchase shares of Company ordinary shares through payroll deductions of between 1% to 15% of after-tax compensation each pay period, with a maximum participation of $25,000 annually. The shares are purchased at the end of each six-month offering period at a 15% discount from the closing market price as reported on the New York Stock Exchange on the last trading day of the offering period.

Subject to adjustments provided in the ESPP, the maximum number of ordinary shares available for purchase under the ESPP is 1,526,239 plus an annual increase to be added on the first day of each of the Company’s fiscal years for a period of up to 10 years, beginning with the fiscal year that begins on January 1, 2022, equal to the least of (i) 1% of the outstanding shares on such date, (ii) 7,631,196 shares, or (iii) a lesser amount determined by the Board. As of December 31, 2021, 1,526,239 shares were available for issuance under the ESPP.

The initial offering period for the ESPP is one year, commencing on December 1, 2021 and ending on November 30, 2022. As of the date of this report, no shares of the Company's ordinary shares have been purchased or distributed pursuant to the ESPP.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of the purchase rights under the ESPP for the year ended December 31, 2021, were as follows:

	Year Ended  December 31, 2021
Expected term (in years)	0.5-1.0
Expected volatility (%)	54%
Risk-free interest rate (%)	0.10 - 0.25
Dividend yield	—

Stock-based compensation expense

The following table summarizes our stock-based compensation expense for all equity arrangements and is included in the consolidated statements of operations and comprehensive loss as follows (in thousands):

	Years Ended December 31,
	2021		2020
Cost of revenue	$	1,825	$	2,271
Research and development	7,182		4,313
Selling, general, and administrative	3,006		1,459
Total stock-based compensation expense	$	12,013	$	8,043

As of December 31, 2021 and 2020, there was approximately $40.5 million and $19.5 million, respectively of total unrecognized stock based compensation expense related to our equity awards, which is expected to be recognized over a weighted average period of 1.5 years and 1.4 years, respectively.

Performance Awards

For the years December 31, 2021 and 2020, we recognized a total expense of $0.3 million and $0.2 million respectively in relation to the performance-based options. As of December 31, 2021 and 2020, there were approximately $0.9 million and $1.2 million of unrecognized stock-based compensation expense related to the performance-based awards. During the year ended December 31, 2021, no additional performance-based awards were granted.

Valuation of Stock Options

The fair values of options granted during the period were determined using a Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, risk-free interest rate and expected dividends.

We estimated expected volatility based on historical data of the price of our ordinary shares over the expected term of the options. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on guidelines provided in U.S. SEC Staff Accounting Bulletin No. 110 and represents the average of the vesting tranches and contractual terms. The risk-free rate assumed in valuing the options is based on the U.S. Treasury rate in effect at the time of grant for the expected term of the option. We do not anticipate paying any cash dividends in the foreseeable future and, therefore, used an expected dividend yield of zero in the option pricing model. Stock-based compensation awards (i.e. options and RSUs) are amortized on over a four-year period with 25% cliff vest at the first year anniversary of the grant and ratably over the next three years. We made an accounting policy election to account for forfeitures in the period they occur.

The weighted average assumptions used to value the grants are as follows:

	Years Ended December 31,
	2021	2020
Expected term (in years)	6.05	4.86 - 6.25
Expected volatility (%)	53.0	50.29 - 52.45
Risk-free interest rate (%)	0.96	0.30 - 1.75
Dividend yield	—	—

Warrants

During the year ended December 31, 2020, Legacy Rockley issued warrants to intermediaries for introducing new investors related to equity financings. In connection with the Business Combination on August 11, 2021, all outstanding warrants of Legacy Rockley were exercised on a cashless basis and converted into the right to receive 1.8 million ordinary shares of the Company, with a fair value of $18.1 million.

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Related Party Transactions	12 Months Ended
	Dec. 31, 2021
Related Party Transactions [Abstract]
Related Party Transactions	Related Party TransactionsThe Company formed HRT, a joint venture with Hengtong Optic-Electric Co., Ltd. in 2017, which was recognized by the Company as an equity method investment. As of and in the year ended December 31, 2020, we made sales to and were owed from the HRT joint venture, $5.3 million and $3.3 million, respectively. The balance owed by the joint venture was included in accounts receivable in the consolidated balance sheet. As of and in the year ended December 31, 2021, sales to and balances owed from the HRT joint venture were immaterial.

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Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

Leases

We have operating leases for office space and finance leases for manufacturing equipment. These leases have remaining lease terms of 1 year to 5 years. Some leases include extension options for up to 5 years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

The weighted average remaining lease term was approximately 4 years for operating leases as of December 31, 2021. The weighted average discount rate was 6.0% for operating leases as of December 31, 2021.

The components of lease cost for the years ended December 31, 2021 and 2020, were as follows (in thousands):

	Years Ended December 31,
	2021		2020
Operating Lease Cost:
Fixed lease cost	$	1,103	851
Variable lease cost	354		154
Total operating lease cost	$	1,457	$	1,005

The supplemental cash flow information related to our operating leases is as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	936	$	916
Operating cash flows for finance leases	$	—	$	15
Financing cash flows for finance leases	$	—	$	1,192
Right-of-use assets obtained in exchange of lease obligations:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—

There are no finance lease liabilities as of December 31, 2021. Maturities of operating lease liabilities as of December 31, 2021, were as follows (in thousands):

	Operating Leases
Year Ending December 31:
2022	$	1,500
2023	1,394
2024	914
2025	818
2026	842
Thereafter	186
Total lease obligation	$	5,654
Less: Imputed interest	(679)
Total lease liabilities	$	4,975
Less: Current lease liabilities	(1,238)
Total non-current lease liabilities	$	3,737

Leases

Leases

We have operating leases for office space and finance leases for manufacturing equipment. These leases have remaining lease terms of 1 year to 5 years. Some leases include extension options for up to 5 years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

The weighted average remaining lease term was approximately 4 years for operating leases as of December 31, 2021. The weighted average discount rate was 6.0% for operating leases as of December 31, 2021.

The components of lease cost for the years ended December 31, 2021 and 2020, were as follows (in thousands):

	Years Ended December 31,
	2021		2020
Operating Lease Cost:
Fixed lease cost	$	1,103	851
Variable lease cost	354		154
Total operating lease cost	$	1,457	$	1,005

The supplemental cash flow information related to our operating leases is as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	936	$	916
Operating cash flows for finance leases	$	—	$	15
Financing cash flows for finance leases	$	—	$	1,192
Right-of-use assets obtained in exchange of lease obligations:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—

There are no finance lease liabilities as of December 31, 2021. Maturities of operating lease liabilities as of December 31, 2021, were as follows (in thousands):

	Operating Leases
Year Ending December 31:
2022	$	1,500
2023	1,394
2024	914
2025	818
2026	842
Thereafter	186
Total lease obligation	$	5,654
Less: Imputed interest	(679)
Total lease liabilities	$	4,975
Less: Current lease liabilities	(1,238)
Total non-current lease liabilities	$	3,737

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Contingencies

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. We apply accounting for contingencies to determine when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, we disclose contingencies deemed to be reasonably possible and accrue loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of December 31, 2021 there are no litigation pending that could have, individually and in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

Financial Commitments

In the ordinary course of business, we make commitments to third-party suppliers for various research and development activities. As of December 31, 2021 and 2020, we had $13.6 million and $3.0 million, respectively, in contractual obligations for which we have not yet received the services.

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Defined Contribution Plan	12 Months Ended
	Dec. 31, 2021
Retirement Benefits [Abstract]
Defined Contribution Plan	Defined Contribution PlanWe have defined contribution plans, under which we contribute based on a percentage of the employees’ elected contributions. We will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized within selling, general and administrative expenses and research and development in the consolidated statements of operations and comprehensive loss. Defined contributions were $0.7 million and $0.5 million for years ended December 31, 2021 and 2020, respectively.

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Non-cash operating, investing, and financing activities, and supplemental cash flow information are as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash payments for:
Interest paid	$	658	$	47
Income tax paid	$	978	$	313
Non-cash Operating Activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—
	$	4,008	$	—
Non-cash Investing Activities:
Unpaid property and equipment received	$	805	$	166
Unpaid balance related to the Trutouch Asset Acquisition	—		500
	$	805	$	666
Non-cash Financing Activities:
Conversion of convertible debt and accrued interest to ordinary shares	$	181,404	$	—
Conversion of Legacy Rockley ordinary shares to Rockley ordinary shares	206,888		—
Private Placement Warrants	14,304		—
Public Warrants	28,031		—
Issuance of ordinary shares in lieu of cash payment of transaction costs	3,190		—
Forgiveness of Paycheck Protection Program loan	2,860		$	—
Unpaid deferred transaction costs	1,034		—
Issuance of ordinary shares related to the Trutouch Asset Acquisition	—		2,298
Issuance of ordinary shares related to ELOC	472		—
	$	438,183	$	2,298

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Description of Business and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

Going Concern

The Company has incurred net losses since inception, has an accumulated deficit of $400.9 million as of December 31, 2021 and negative cash flow from operations of $126.0 million for the year ended December 31, 2021 and expects to incur losses from operations for the foreseeable future. As of December 31, 2021, the Company had cash, cash equivalents and investments of approximately $81.4 million. The Company’s ability to meet its obligations in the ordinary course of business is dependent on its ability to obtain additional financing. As a result, there is substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company's future liquidity needs, and ability to address those needs, will largely be determined by its ability to obtain additional financing on terms acceptable to us. The Company will continue to seek additional capital through the sale of debt or equity, or other arrangements, however, there can be no assurance that we will be able to raise additional capital when needed or under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders. If the Company raises funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to the holders of ordinary shares. Issued debt securities may contain covenants that limit the Company's ability to pay dividends or make other distributions to shareholders. If we are unable to obtain additional financing, operations may be scaled back or discontinued.

Global Pandemic

Global Pandemic

The COVID-19 global pandemic has prompted extraordinary measures by governments and businesses to control the spread of COVID-19 in most or all regions throughout the world. These actions have included travel bans, quarantines, and similar mandates for individuals to substantially restrict normal activities and for businesses to curtail normal operations.

The COVID–19 pandemic has adversely impacted our operational efficiency and caused delays in operational activities. During the year ended December 31, 2021,we continued to take cautious steps to protect our workforce, support community efforts, and follow local government guidelines. Certain key laboratory employees and facilities have continued internal testing and laboratory work to the extent necessary to service customer commitments. The remaining non-essential workforce were recommended to continue performing their duties from home. The ongoing impact will depend on the duration of the pandemic which is being mitigated by the vaccination of the general population and gradual easing of restrictions.

Basis of Presentation

Basis of Presentation and Preparation

The accompanying consolidated financial statements have been prepared by the Company, and reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations, comprehensive income, cash flows and shareholders’ equity for the periods presented. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. SEC. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation.

We accounted for the Business Combination as a forward recapitalization in accordance with GAAP (the "Forward Recapitalization"). Under this method of accounting, SC Health was treated as the acquired company and Legacy Rockley was deemed to be the accounting acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Forward Recapitalization was treated as the equivalent of Legacy Rockley issuing stock for the net assets of SC Health, accompanied by a recapitalization. The net assets of SC Health are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Forward Recapitalization are those of Legacy Rockley. The consolidated financial statements of the combined company post-Forward Recapitalization represents the combined results of Rockley and SC Health beginning August 11, 2021, the date the Business Combination was consummated. The shares, corresponding capital amounts and earnings per share available for shareholders of Legacy Rockley, prior to the Business Combination, converted into the right to receive 2.4835 shares (the "Exchange Ratio") of ordinary shares, par value $0.000004 (the "ordinary shares"). The recapitalization of the number of ordinary shares attributable to Legacy Rockley is reflected retroactively as shares reflecting the Exchange Ratio to the earliest period presented and is utilized for calculating earnings per share in all prior periods presented.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, revenue recognition, reserves and allowances; valuation of intangibles; product warranties; employee compensation and benefit accruals; stock-based compensation; loss contingencies; income taxes; fair value measurements; and warrant liabilities. Actual results could differ materially from those estimates. Management’s estimates include, as applicable, the anticipated impacts of the COVID-19 pandemic.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments with an original maturity of three months or less at the time of purchase.

Accounts Receivable

Accounts ReceivableAccounts receivable is recorded at the invoiced amount and do not bear interest. We assess the need for an allowance for doubtful accounts based upon an analysis of past credit history and the current financial condition of its customers, as well as the consideration of expected trends based upon characteristics of the accounts and general economic conditions. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Equity Method Investments

Equity Method InvestmentsEquity method investments are all entities over which we have significant influence but not control or joint control. Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses of the investee in the consolidated statement of operations and comprehensive loss. Earnings and losses of equity method investments are based on the most recently available financial statements of the investee. Basis differences between the cost of an equity method investment and the underlying equity in the long-lived assets are amortized over the estimated economic useful life of the underlying long-lived asset. We periodically review our equity method investments for impairment and record a reduction in the carrying value, if and when necessary.

Available-for-Sale Investments and Other-than-Temporary Impairments on Investments

Available-for-Sale Investments

The investments in debt securities are classified as available-for-sale investments. Debt securities primarily consist of corporate bonds, commercial paper and U.S. Treasury debt securities. These investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of debt securities sold. These investments are recorded in the consolidated balance sheets at fair value.

Unrealized gains and temporary losses, net of related taxes, are included in accumulated other comprehensive income (loss) ("AOCI"). Upon realization, those amounts are reclassified from AOCI to earnings. The amortization of premiums and discounts on the investments are included in our results of operations. Realized gains and losses are calculated based on the specific identification method.

We classify our investments as current or non-current based on the nature of the investment and their availability for use in current operations.

Other-than-Temporary Impairments on Investments

All of our available-for-sale investments are subject to periodic impairment review. When the fair value of a debt security is less than its amortized cost, it is deemed impaired, and we assess whether the impairment is other-than-temporary. An impairment is considered other-than-temporary if (i) we have the intent to sell the security, (ii) it is more likely than not that we will be required to sell the security before recovery of the entire amortized cost basis, or (iii) we do not expect to recover the entire amortized cost basis of the security. If impairment is considered other-than-temporary based on condition (i) or (ii) described above, the entire difference between the amortized cost and the fair value of the debt security is recognized in the results of operations. If an impairment is considered other-than-temporary based on condition (iii) described above, the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) is recognized in earnings, and the amount relating to all other factors is recognized in other comprehensive income (OCI).

Property and Equipment, Net

Property and Equipment, Net

Property and equipment are recorded at cost and presented net of accumulated depreciation and amortization. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs are expensed as incurred. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the useful life of the assets. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

We evaluate our long-lived assets, such as property and equipment, and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets or asset group may not be recoverable. Recoverability of these assets or asset groups is measured by comparing their carrying value to the future net undiscounted cash flows the assets are expected to generate over their remaining economic life. If such assets or asset groups are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their fair value.

The Company tests other intangible assets not subject to amortization for impairment annually and more frequently if events or changes in circumstances between annual tests indicate that it is more likely than not that the asset is impaired.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets.

Revenue Recognition

Revenue Recognition

We generate our revenue principally from development services, which entails developing the customer-specific designs of photonics chips. Revenue is recognized when control of promised goods and services are transferred to customers in an amount that reflects the expected consideration in exchange for those products and services. This principle is achieved by applying the following five-step approach:

•Identification of the contract with a customer—A contract with a customer exists when we enter into an enforceable contract with a customer that defines each party’s rights and obligations regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, the contract has commercial substance, and we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We consider the terms and conditions of the contracts and customary business practices in identifying contracts under Topic 606 Revenue from Contracts with Customers. Our contracts with a customer generally consist of a development services contract against which statements of work (“SOW”) are issued. Each SOW contains one or more agreed-upon projects. We consider the arrangement to be the development services contract combined with the SOW. While the typical duration of a development services contract is multiple years, we generally expect the duration of agreed-upon projects to be six months or less. Generally, our customers have the right to cancel their contracts at any time.

•Identification of the performance obligations in the contract—Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. The individual components of the development services are generally capable of being distinct but not distinct in the context of the contract unless all the goods and services within a certain agreed-upon project of the contract are completed. Generally, the deliverables associated with each agreed-upon project, when combined, are considered a distinct performance obligation.

•Determination of the transaction price—The transaction price is determined based on the consideration to which we are entitled in exchange for transferring goods or services to the customer. Our contracts generally do not contain a significant amount of variable consideration as the price of our services are generally fixed at the inception of the agreed-upon project. The Company excludes sales taxes and other taxes from the measurement of transaction price. None of the contracts contain a significant financing component.

•Allocation of the transaction price to the performance obligations in the contract—Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). The Company prices each agreed-upon project with an SOW at SSP based on the expected cost plus a margin approach.

•Recognition of revenue when or as performance obligations are satisfied—We satisfy performance obligations at a point in time for the development services since the customers do not simultaneously receive and consume the benefits, we do not create or enhance an asset that the customer controls, and we do not have an enforceable right to payment for the performance completed to date. The contracts also contain substantive acceptance terms for each agreed-upon project. Revenue is recognized at the time the related performance obligation is satisfied through the transfer of control of a promised good or service to a customer, which is upon achievement of the agreed-upon project and acceptance by the customer.

Contract balances—The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable is recorded when the right to consideration is unconditional. We generally have the right to invoice the customer upon acceptance of the agreed-upon project. The payment terms on invoiced amounts are typically 30-45 days, and such amounts are nonrefundable. In situations where revenue recognition occurs before invoicing, an unbilled receivable is recorded, which represents a contract asset. Deferred revenue is recognized if we have an unconditional right to bill or have collected consideration in advance of the right to recognize revenue. There have been no contract balances recorded to date.

Costs to obtain and fulfill a contract—Incremental costs incurred to obtain a contract with a customer are required to be capitalized and amortized over the period in which the goods and services to which the asset relates are transferred to the customer. We have not incurred any incremental costs in connection with obtaining the revenue contracts. We recognize an asset from the costs to fulfill a contract only if, the costs relate directly to a contract or an anticipated

contract, the costs generate or enhance resources of the Company that will be used in satisfying a performance obligation in the future, and the costs are expected to be recovered.

Foreign Currency Transactions

Foreign Currency Transactions

The Company’s reporting currency is the U.S. dollar and the functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into the functional currency with any related gain or loss recorded in earnings.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in realized and unrealized losses/(gains) on foreign currency in the accompanying consolidated statements of operations and comprehensive loss.

Segment Information

Segment Information

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company determined that it has one operating and reportable segment.

Concentration of Risk

Concentration of Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, available-for-sale investments, accounts receivable and revenue. We maintain cash balances at financial institutions that management believes are high-credit, quality financial institutions, where deposits, at times, exceed the Federal Deposit Insurance Corporation limits.

Net Loss Per Share

Net Loss Per Share

Basic earnings per share is calculated using our weighted-average outstanding ordinary shares. Diluted earnings per share is calculated using our weighted-average outstanding ordinary shares including the dilutive effect of outstanding equity instruments as determined under the treasury stock method. For periods in which we report net losses, diluted net loss per ordinary share attributable to ordinary stockholders is the same as basic net loss per ordinary share attributable to ordinary stockholders, because all potentially dilutive ordinary shares are anti-dilutive.

Stock-Based Compensation

Stock-Based Compensation

We recognize all stock-based awards to employees and directors as stock-based compensation expense based upon their fair values on the date of grant. Compensation expense is generally recognized as expense on a straight-line basis over the service period based on the vesting requirements. We recognize forfeitures as they occur. We estimate the fair value of stock options granted to employees using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including (i) the fair value of ordinary shares, (ii) the expected stock price volatility, (iii) the expected term of the award, (iv) the risk-free interest rate and (v) expected dividends. The grant-date fair value of restricted stock is calculated based on the fair value of the underlying ordinary shares .

We measure nonemployee awards at their fair value on the adoption date of ASU No. 2018-07. Following the adoption of ASU No. 2018-07 on January 1, 2018, the accounting for nonemployee awards is consistent with the accounting for employee stock-based compensation as described above.

We granted options and restricted stock units which vest on the satisfaction of a service-based condition.

Warrants

Warrants

We determine the accounting classification of warrants, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock. Under ASC 480,

warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the company also assesses whether the warrants are indexed to the Company’s ordinary shares and whether the warrants are classified as equity under ASC 815-40 or other U.S. GAAP. After all such assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations and comprehensive loss. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

Leases

Leases

Our lease portfolio is comprised of two major classes: real estate leases, which are the majority of our leased assets, are accounted for as operating leases and a manufacturing equipment lease accounted for as a finance lease on the consolidated balance sheet.

We classify leases as either operating or financing. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all the economic benefits from and have the ability to direct the use of the asset. Operating lease assets are included under other non-current assets and operating lease liabilities under other current and long-term liabilities, respectively in the consolidated balance sheets. We recognize lease expense for operating leases on a straight-line basis over the term of the lease. Finance lease asset is included under property, equipment, and finance lease right-of-use assets, net and finance lease liabilities, current portion under other current liabilities in the consolidated balance sheets. Finance ROU assets are amortized on a straight-line basis over their estimated useful lives.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments is used. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally combined.

We elected, as an accounting policy for leases of real estate, to account for lease and non-lease components in a contract as a single lease component. In addition, the recognition requirements are not applied to leases with a term of twelve months or less. Rather, the lease payments for short-term leases are recognized on the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Variable payments, such as common area charges, maintenance, insurance and taxes, are primarily based on the amount of space occupied. These payments in the Company’s leases are not dependent on an index or a rate and are excluded from the measurement of the lease liabilities and recognized in the consolidated statements of operations and comprehensive loss in the period in which the obligation for those payments is incurred. The Company remeasures lease payments when the contingency underlying such variable payments is resolved such that some or all of the remaining payments become fixed.

Cost of Revenue

Cost of Revenue

Our cost of revenue consists of costs related to the Company’s development services which includes cost of materials, cost associated with packaging and assembly, testing and shipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance, overhead and occupancy costs.

Research and Development Expenses (R&D)

Research and Development Expenses (R&D)

Research and development expense consists primarily of personnel costs for engineers and third parties engaged in the design and development of products, software and technologies, including salary, bonus and share-based compensation expense, project material costs, services and depreciation. The Company expenses research and development costs as they are incurred.

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing, and human resources; depreciation expense and rent relating to facilities; travel costs; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, benefits, bonuses and stock-based compensation. As we continue to grow as a company, we expect that our selling, general and administrative costs will increase on an absolute dollar basis.

Income Taxes

Income Taxes

Deferred income taxes are provided on a liability method, whereby deferred income tax assets are recognized for deductible temporary differences, operating losses, and tax loss carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets are reduced by a valuation allowance when, considering all sources of taxable income, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The income tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Recently Adopted Accounting Pronouncements and Accounting Pronouncements Issued but Not Yet Adopted

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which affects general principles within Topic 740, and are meant to simplify and reduce the cost of accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and simplifies areas including franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The Company adopted this guidance on January 1, 2021. The adoption of the guidance did not have a material impact on the consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In May 2021, the FASB issued ASU 2021-04, Modification of Equity Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options such as warrants that remain equity classified after modification or exchange based on consideration of the economic substance of the modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the

potential impacts of ASU 2021-04, it does not expect ASU 2021-04 to have a material effect on its consolidated financial statements.In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance. This amendment in ASU 2021-10 aims to increase transparency about government assistance transactions that are not in the scope of other GAAP guidance. The ASU requires disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects of those transactions. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is in the process of assessing the impacts of ASU 2021-10 on its consolidated financial statements.

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Organization, Consolidation and Presentation of Financial Statements (Tables)

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Property, Plant and Equipment

Computer equipment	3 years
Lab equipment	3 years
Furnitures and fixtures	4 years
Leasehold improvements	Shorter of the lease term and the useful life

Property and equipment, net (in thousands):

	December 31,
	2021		2020
Computer equipment	$	1,998	$	1,218
Lab equipment	13,940		7,607
Motor vehicles	31		31
Furniture and fixtures	315		265
Leasehold improvements	1,230		704
Assets under construction	—		27
Total property and equipment	$	17,514	$	9,852
Less: accumulated depreciation	(9,088)		(5,802)
Total property and equipment, net	$	8,426	$	4,050

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Business Combination (Tables)

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Schedule of Proceeds from Business Combination

The following table reconciles the elements of the net proceeds from the Business Combination as of December 31, 2021 (in thousands):

	Recapitalization
Cash inflow from SC Health's trust account, net of redemptions	$	17,966
Cash inflow from PIPE	100,000
Cash inflow from SC Health Sponsor	50,000
Less: Transaction Costs	(45,515)
Net cash received from the Business Combination	$	122,451

The total number of shares of the Company's ordinary shares issued and outstanding immediately following the consummation of the Business Combination was approximately 126.7 million, comprising (in thousands):

	Number of Shares
Current Rockley's shareholders prior to the Business Combination	104,016
SC Health Shareholders	1,777
Sponsor Shareholders	10,563
PIPE Investors	10,000
Other Shareholders1	319
Total number of shares	126,675

1 The Company issued 319,000 ordinary shares at a value of $10.0 per share to Cowen and Company LLC ("Cowen") and BCW Securities LLC in lieu of cash payment for a portion of the fees payable $3.2 million to Cowen as part of the transaction costs.

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Segment, Geographic, and Significant Customer Information (Tables)

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Disaggregation of Revenue

The following table presents our revenue disaggregated by primary geographical market where revenues are attributable to the region in which the billing address of the customer is located (in thousands):

	December 31,
	2021		2020
United States	$	6,778	$	17,037
Rest of World	1,435		5,306
Total revenue	$	8,213	$	22,343

Schedules of Concentration of Risk, by Customer

The following tables summarize our most significant customers as of and for the years ended December 31, 2021 and 2020:

	Revenue				Accounts receivable
	December 31,				December 31,
	2021		2020		2021		2020
Customer A	82	%	76	%	72	%	33	%
Customer B	4	%	24	%	—	%	67	%

Property Plant and Equipment and Intangible Assets by Geographic Areas

The following table presents property, equipment and intangible assets held in the U.S. and internationally in various foreign subsidiaries as of December 31, 2021 and 2020:

	December 31,
	2021		2020
United States	$	8,442	$	6,390
Rest of World	3,031		708
Total property, equipment and intangible assets	$	11,473	$	7,098

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Equity Method Investment (Tables)

12 Months Ended

Dec. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Summary of Investments

The following table summarizes our investment in HRT for the years ended December 31, 2021 and 2020 (in thousands):

	December 31,
	2021		2020
Balance at the beginning of the year	$	5,202	$	1,486
Investment in HRT	—		4,990
Remeasurement gain on HRT	380		—
Share of loss of HRT	(703)		(1,274)
Balance at the end of the year	$	4,879	$	5,202

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Summary of Debt Securities

The following is a summary of our investments at their cost or amortized cost for the years ended December 31, 2021 and 2020 (in thousands):

	As of
	December 31, 2021		December 31, 2020
Corporate bonds and commercial paper	$	20,042	$	—
U.S. Treasury securities	24,587		—
Total investments	$	44,629	$	—

The following table presents the contractual maturities of our debt investments as of December 31, 2021 (in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	26,945	$	26,961
Due after one year through five years	17,684		17,663
	$	44,629	$	44,624

Fair Value, by Balance Sheet Grouping

The following table summarizes our financial assets measured at fair value on a recurring basis (in thousands):

	December 31, 2021
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	36,786	$	36,786	$	—
Corporate bonds and commercial paper	20,037		—		20,037
U.S. Treasury securities	24,587		24,587		—
Total cash, cash equivalents and investments	$	81,410	$	61,373	$	20,037

	December 31, 2020
			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents	$	19,228	$	19,228	$	—
Total cash and cash equivalents	$	19,228	$	19,228	$	—

The financial liabilities subject to fair value measurement on a recurring basis, were as follows (in thousands):

	As of
	December 31, 2021		December 31, 2020
Financial Liabilities
3.00% – 2020 Convertible Notes	$	—	$	32,106
8.00% – 2020 Convertible Notes	—		14,789
2020 Term Facility Loan	—		25,049
Private Placement Warrants	3,477		—
Total financial liabilities	$	3,477	$	71,944

Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis

For the year ended December 31, 2021 and 2020, we recorded a loss of $6.0 million and $10.8 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 3.00% Convertible Notes, as follows (in thousands):

Fair value at March 9, 2020	$	21,281
Plus: Loss from change in fair value	10,825
Fair value at December 31, 2020	32,106
Plus: Loss from change in fair value	5,986
Less: Fair value adjustment extinguished upon conversion of debt	(38,092)
Fair value at December 31, 2021	$	—

For the years ended December 31, 2021 and 2020, we recorded a loss of $16.1 million and $4.4 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 8.00% Convertible Notes, as follows (in thousands):

Fair value at February 19, 2020	$	10,415
Plus: Loss from change in fair value	4,374
Fair value at December 31, 2020	14,789
Plus: Loss from change in fair value	16,108
Less: Fair value adjustment extinguished upon conversion of debt	(30,897)
Fair value at December 31, 2021	$	—

For the years ended December 31, 2021 and 2020, we recorded a loss of $15.1 million and $1.7 million, respectively from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 2020 Term Facility Loans, as follows (in thousands):

Fair value at September 29, 2020	$	23,320
Plus: Loss from change in fair value	1,729
Fair value at December 31, 2020	25,049
Plus: Loss from change in fair value	15,134
Less: Fair value adjustment extinguished upon conversion of debt	(13,003)
Fair value at August 11, 2021	$	27,180

For the year ended December 31, 2021, we recorded a loss of $2.3 million, from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $50.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	10,274
Plus: Loss from change in fair value	2,310
Less: Fair value adjustment extinguished upon conversion of debt	(12,584)
Fair value at December 31, 2021	$	—

For the year ended December 31, 2021, we recorded an adjustment of $5.0 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $25.0 Million Convertible Notes, as follows (in thousands):

Fair value at December 31, 2020	$	37,592
Plus: Loss from change in fair value	4,977
Less: Fair value adjustment extinguished upon conversion of debt	(42,569)
Fair value at December 31, 2021	$	—

For the year ended December 31, 2021, we recorded an adjustment of $5.9 million from a change in fair value of debt in connection with the subsequent fair value remeasurement of the 5.00% – $30.0 Million Convertible Notes, as follows (in thousands):

Fair value at January 11, 2021	$	38,403
Plus: Loss from change in fair value	5,855
Less: Fair value adjustment extinguished upon conversion of debt	(44,258)
Fair value at December 31, 2021	$	—

The following table presents the changes in the fair value of the Private Placement Warrants (in thousands):

Initial measurement, August 11, 2021	$	14,304
Mart-to-market adjustment	(10,827)
Warrant Liabilities balance, December 31, 2021	$	3,477

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Balance Sheet Components (Tables)

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Cash and Cash Equivalents

Cash and cash equivalents

Our cash and cash equivalents balances were concentrated by location as follows:

	December 31,
	2021		2020
United Kingdom	97	%	96	%
United States	3	%	3	%
Other	—	%	1	%

Schedule of Other Receivables

Other receivables

	December 31,
	2021		2020
R&D tax credit receivable	$	45,632	$	17,412
Grants receivable	753		—
VAT receivable	1,073		607
Other receivable, net	4		5
Total other receivables	$	47,462	$	18,024

Schedule of Property, Plant and Equipment

Computer equipment	3 years
Lab equipment	3 years
Furnitures and fixtures	4 years
Leasehold improvements	Shorter of the lease term and the useful life

Property and equipment, net (in thousands):

	December 31,
	2021		2020
Computer equipment	$	1,998	$	1,218
Lab equipment	13,940		7,607
Motor vehicles	31		31
Furniture and fixtures	315		265
Leasehold improvements	1,230		704
Assets under construction	—		27
Total property and equipment	$	17,514	$	9,852
Less: accumulated depreciation	(9,088)		(5,802)
Total property and equipment, net	$	8,426	$	4,050

Finance Lease, Right-Of-Use Assets

Finance lease right-of-use assets, net (in thousands):

	December 31,
	2021		2020
Finance lease right-of-use assets	$	2,966	$	2,966
Less: accumulated amortization	(1,205)		(834)
Total finance lease right-of-use assets, net	$	1,761	$	2,132

Schedule of Intangible Assets, Net

Intangible assets, net (in thousands):

	December 31,
	2021		2020
In-process research and development	$	3,048	$	3,048
Total intangible assets, net	$	3,048	$	3,048

Schedule of Other Non-current Assets

Other non-current assets (in thousands):

	December 31,
	2021		2020
Capitalized transaction costs	$	—	$	121
Security deposits	280		—
Operating right of use assets	4,577		1,486
Prepaid asset, net of current portion	$	2,826	$	—
Total other non-current assets	$	7,683	$	1,607

Schedule of Accrued Expenses

Accrued expenses (in thousands):

	December 31,
	2021		2020
Accrued bonus	$	7,546	$	3,349
Accrued payroll and benefits	2,750		1,524
Accrued taxes	439		332
Accrued fabrication costs	3,110		2,321
Share appreciation rights	—		706
Accrued transaction costs	1,004		335
Other accrued expenses	2,511		1,828
Total accrued expenses	$	17,360	$	10,395

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Debt (Tables)

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Schedule of Long-term Debt

The following table summarizes information relating to our long-term debt, (in thousands):

	December 31, 2021
	Principal		Change in Fair Value		Conversion of Debt	Accreted Debt Interest	Principal Payments in Cash	Net
3.00% – 2020 Convertible Notes	$	21,281	$	16,811	(38,092)	—	—	$	—
8.00% – 2020 Convertible Notes	8,000		22,897		(30,897)	—	—	—
2020 Term Facility Loan	33,949		6,234		(13,003)	4,132	(5,000)	26,312
5.00% – $50.0 Million Convertible Notes	10,274		2,310		(12,584)	—	—	—
5.00% – $25.0 Million Convertible Notes	25,000		17,569		(42,569)	—	—	—
5.00% – $30.0 Million Convertible Notes	30,000		14,258		(44,258)	—	—	—
Total Long-term debt	$	128,504	$	80,079	(181,403)	4,132	(5,000)	$	26,312
Less: current portion of long-term debt								(26,312)
Long-term debt, net of current portion								$	—

	December 31, 2020
	Principal		Change in Fair Value		Net
3.00% – 2020 Convertible Notes	$	21,281	$	10,825	$	32,106
8.00% – 2020 Convertible Notes	8,000		6,789		14,789
2020 Term Facility Loan	22,500		2,549		25,049
Paycheck Protection Program	2,860		—		2,860
Total long-term debt	$	54,641	$	20,163	$	74,804
Less: current portion of long-term debt					—
Long-term debt, net of current portion					$	74,804

Schedule of Future Maturities of Debt Agreements

Future minimum payments under the debt agreements as of December 31, 2021 are as follows (in thousands):

	2020 Term Facility Loan
2022	$	32,303
2023	—
2024	—
2025	—
2026	—
Thereafter	—
Total future minimum payments	32,303
Less: current portion of debt principal	(32,303)
Non-current portion of debt principal	$	—

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Schedule of Loss before Income Taxes

For the years ended December 31, 2021 and 2020, loss before income taxes were as follows (in thousands):

	Years Ended December 31,
	2021		2020
U.K. Operations	$	(174,298)	$	(82,705)
Foreign operations	6,952		2,997
Loss before income taxes	$	(167,346)	$	(79,708)

Schedule of Components of the Provision for Income Taxes

The components of provision for income tax for the years ended December 31, 2021 and 2020 are as follows (in thousands):

	Current		Deferred		Total
Year ended December 31, 2021
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	667		—		667
	$	667	$	—	$	667

	Current		Deferred		Total
Year ended December 31, 2020
U.K. operations	$	—	$	—	$	—
Foreign jurisdictions	569		—		569
	$	569	$	—	$	569

Schedule of Reconciliation of Effective Tax Rates

The effective tax rate of the Company’s provision for income taxes differs from the 19% statutory rate of the Company’s U.K. headquarters entity (in thousands, except percentages):

	December 31,
	2021				2020
U.K. Statutory Rate	$	(31,796)	19.0	%	$	(15,145)	19.0	%
Foreign income tax	8		—	%	308		(0.4)	%
Research & Development credit	(2,061)		1.2	%	(628)		0.8	%
Stock-based compensation	34		—	%	1,293		(1.6)	%
Permanent differences	(156)		0.1	%	3,325		(4.2)	%
Change in valuation allowance	32,402		(19.4)	%	7,480		(9.4)	%
Rate Change on Deferred Taxes	(11,197)		6.7	%	(977)		1.2	%
Uncertain Tax Liabilities	64		—	%	245		(0.3)	%
Losses not benefited	12,625		(7.5)	%	3,999		(5.0)	%
Others, net	744		(0.4)	%	668		(0.8)	%
Total	$	667	(0.40)	%	$	569	(0.71)	%

Schedule of Significant Components of Deferred Tax Assets and Liabilities

The significant components of the Company’s deferred taxes are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	33,068	$	15,066
Research and development credits	549		—
Stock-based compensation	4,859		1,476
Lease liabilities	1,394		482
Interest Limitation	10,202		—
Accounts and other receivables	—		—
Accrued liabilities	1,765		788
Other	64		2
Total gross deferred tax assets	51,900		17,814
Less valuation allowance	(50,139)		(16,377)
Net deferred tax assets	1,761		1,437
Deferred tax liabilities:
Right-of-use Assets	$	(1,281)	$	(821)
Property and equipment, principally due to differences in depreciation	(480)		(592)
Other	—		(24)
Total gross deferred tax liabilities	(1,761)		(1,437)
Net deferred tax assets	$	—	$	—

Schedule of Net Operating Loss Carryforwards

NOLs and tax credit gross carryforwards as of December 31, 2021 are as follows (in thousands):

	Amount		Expiration Years
NOLs, Federal	$	132,272	carried forward indefinitely
NOLs, State	$	—	—
Tax credits, Federal	$	467	—
Tax credits, State	$	—	—

Schedule of Unrecognized Tax Benefits

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands): 

	Years Ended December 31,
	2021		2020
Balance at beginning of the year	$	2,236	$	405
Increases based on tax positions related to current year	1,061		733
Increases based on tax positions related to prior years	165		1,199
Decreases based on tax positions related to prior years	(245)		(101)
Balance at end of year	$	3,217	$	2,236

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Net Loss per Share (Tables)

12 Months Ended

Dec. 31, 2021

Earnings Per Share [Abstract]

Schedule of Net Loss Per Share, Basic and Diluted

The following is a calculation of basic and diluted net loss per share (in thousands, except for share and per share amounts):

	Years Ended December 31,
	2021		2020
Basic and diluted:
Net loss	$	(168,013)	$	(80,277)
Weighted average ordinary shares outstanding	100,917,939		83,457,400
Basic and diluted net loss per share	$	(1.66)	$	(0.96)

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table summarizes the stock option activity related to the 2013 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value4
					(In thousands)
Options outstanding at December 31, 2019	14,663,610	$	4.05	6.94	$	54,100
Granted	5,782,544	$	8.67
Exercised	(19,404)	$	5.36
Forfeited	(2,052,583)	$	8.62
Expired	(475,548)	$	6.92
Options outstanding at December 31, 2020	17,898,619	$	4.94	6.75	$	110,552
Granted	—	$	—
Exercised	(1,557,214)	$	0.60
Forfeited	(912,912)	$	4.07
Expired	(46,757)	$	3.08
Options outstanding at December 31, 2021	15,381,736	$	2.00	5.83	$	36,093
Options exercisable at December 31, 2021	12,546,315	$	1.68	5.25	$	33,464

4 The aggregated intrinsic value represents the difference between the exercise price and the closing stock price of $4.35 for the Company’s ordinary shares on December 31, 2021.

The following table summarizes the stock option activity related to the 2021 Plan:

	Number of Options Outstanding	Average Exercise Price Per Share		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Options outstanding at December 31, 2020	—	$	—	0.00	—
Granted	1,013,480	$	15.84
Exercised	—	$	—
Forfeited	—	$	—
Expired	—	$	—
Options outstanding at December 31, 2021	1,013,480	$	15.84	9.61	$	11,645
Options exercisable at December 31, 2021	81,538	$	15.84	9.61	$	937

Summary of Restricted Stock Unit Activity

Employee RSUs activity for the year ended December 31, 2021 was as follows:

	Number of RSUs Outstanding	Weighted Average Grant Date Fair Value		Remaining Contractual Life (Years)	Intrinsic Value
					(In thousands)
Outstanding at December 31, 2020	—	$	—	0.00	$	—
Granted	4,181,607	$	6.71
Exercised	(24,668)	$	7.07
Forfeited	(2,431)	$	7.07
Expired	—	$	—
Outstanding at December 31, 2021	4,154,508	$	6.71	1.76	$	18,072

Schedule of Stock-Based Compensation Expense

The following table summarizes our stock-based compensation expense for all equity arrangements and is included in the consolidated statements of operations and comprehensive loss as follows (in thousands):

	Years Ended December 31,
	2021		2020
Cost of revenue	$	1,825	$	2,271
Research and development	7,182		4,313
Selling, general, and administrative	3,006		1,459
Total stock-based compensation expense	$	12,013	$	8,043

Schedule of Stock Options, Valuation Assumptions

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of the purchase rights under the ESPP for the year ended December 31, 2021, were as follows:

	Year Ended  December 31, 2021
Expected term (in years)	0.5-1.0
Expected volatility (%)	54%
Risk-free interest rate (%)	0.10 - 0.25
Dividend yield	—

The weighted average assumptions used to value the grants are as follows:

	Years Ended December 31,
	2021	2020
Expected term (in years)	6.05	4.86 - 6.25
Expected volatility (%)	53.0	50.29 - 52.45
Risk-free interest rate (%)	0.96	0.30 - 1.75
Dividend yield	—	—

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Leases (Tables)

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Summary of Operating Lease Information

The components of lease cost for the years ended December 31, 2021 and 2020, were as follows (in thousands):

	Years Ended December 31,
	2021		2020
Operating Lease Cost:
Fixed lease cost	$	1,103	851
Variable lease cost	354		154
Total operating lease cost	$	1,457	$	1,005

The supplemental cash flow information related to our operating leases is as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	936	$	916
Operating cash flows for finance leases	$	—	$	15
Financing cash flows for finance leases	$	—	$	1,192
Right-of-use assets obtained in exchange of lease obligations:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—

Schedule of Maturity of Operating Lease Liabilities

Maturities of operating lease liabilities as of December 31, 2021, were as follows (in thousands):

	Operating Leases
Year Ending December 31:
2022	$	1,500
2023	1,394
2024	914
2025	818
2026	842
Thereafter	186
Total lease obligation	$	5,654
Less: Imputed interest	(679)
Total lease liabilities	$	4,975
Less: Current lease liabilities	(1,238)
Total non-current lease liabilities	$	3,737

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

Non-cash operating, investing, and financing activities, and supplemental cash flow information are as follows (in thousands):

	Years Ended December 31,
	2021		2020
Supplemental Cash Flow Information:
Cash payments for:
Interest paid	$	658	$	47
Income tax paid	$	978	$	313
Non-cash Operating Activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,008	$	—
	$	4,008	$	—
Non-cash Investing Activities:
Unpaid property and equipment received	$	805	$	166
Unpaid balance related to the Trutouch Asset Acquisition	—		500
	$	805	$	666
Non-cash Financing Activities:
Conversion of convertible debt and accrued interest to ordinary shares	$	181,404	$	—
Conversion of Legacy Rockley ordinary shares to Rockley ordinary shares	206,888		—
Private Placement Warrants	14,304		—
Public Warrants	28,031		—
Issuance of ordinary shares in lieu of cash payment of transaction costs	3,190		—
Forgiveness of Paycheck Protection Program loan	2,860		$	—
Unpaid deferred transaction costs	1,034		—
Issuance of ordinary shares related to the Trutouch Asset Acquisition	—		2,298
Issuance of ordinary shares related to ELOC	472		—
	$	438,183	$	2,298

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Description of Business and Significant Accounting Policies - Narrative (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Aug. 11, 2021	Dec. 31, 2021 USD ($) segment $ / shares	Dec. 31, 2020 USD ($) $ / shares
Debt Instrument [Line Items]
Accumulated deficit		$ (400,896)	$ (232,883)
Net cash used in operating activities		(126,001)	$ (48,354)
Cash, cash equivalents, and investments		$ 81,400
Entity shares issued per acquiree share, ratio	2.4835
Ordinary shares, par value (in dollars per share) | $ / shares		$ 0.000004	$ 0.000004
Number of operating segments | segment		1
Number of reportable segments | segment		1
Convertible Notes | 8.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage		0.08%
Convertible Notes | 3.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage		3.00%

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Description of Business and Significant Accounting Policies - Property And Equipment (Details)	12 Months Ended
	Dec. 31, 2021
Computer equipment
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years
Lab equipment
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	4 years

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Business Combination - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	Aug. 11, 2021	Dec. 31, 2021	Dec. 31, 2020
Business Combination and Asset Acquisition [Abstract]
Sale of stock, number of shares issued in transaction (in shares)	15
Shares issued, price per share (in dollars per share)	$ 10.00
Sale of stock, consideration received on transaction	$ 150,000
Capitalized transaction costs	$ 45,500	$ 0	$ 121

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Business Combination - Summary of Proceeds from Business Combination (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Business Acquisition [Line Items]
Cash inflow from PIPE	$ 100,000
Capitalized transaction costs	(45,515)
Net cash received from the Business Combination	122,451
SC Health
Business Acquisition [Line Items]
Cash inflow from recapitalization	17,966
SC Health Sponsor
Business Acquisition [Line Items]
Cash inflow from recapitalization	$ 50,000

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Business Combination - Summary of Shares Issued (Details) - USD ($) $ / shares in Units, $ in Millions	Aug. 11, 2021	Dec. 31, 2021	Aug. 10, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Ordinary shares outstanding (in shares)	126,675,000	127,860,639		83,539,382
PIPE Investors (in shares)	10,000,000
Shares issued, price per share (in dollars per share)	$ 10.00
Legacy Rockley
Business Acquisition [Line Items]
Ordinary shares outstanding (in shares)			104,016,000
SC Health
Business Acquisition [Line Items]
Equity consideration issued (in shares)	1,777,000
SC Health Sponsor
Business Acquisition [Line Items]
Equity consideration issued (in shares)	10,563,000
Cowen and BCW Securities
Business Acquisition [Line Items]
Equity consideration issued (in shares)	319,000
Business combination, transaction costs payable to acquiree		$ 3.2

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Segment, Geographic, and Significant Customer Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Concentration Risk [Line Items]
Revenue	$ 8,213	$ 22,343
Total property, equipment and intangible assets	11,473	7,098
United States
Concentration Risk [Line Items]
Revenue	6,778	17,037
Total property, equipment and intangible assets	8,442	6,390
Rest of World
Concentration Risk [Line Items]
Revenue	1,435	5,306
Total property, equipment and intangible assets	$ 3,031	$ 708
Revenue | Customer Concentration Risk | Customer A
Concentration Risk [Line Items]
Concentration risk	82.00%	76.00%
Revenue | Customer Concentration Risk | Customer B
Concentration Risk [Line Items]
Concentration risk	4.00%	24.00%
Accounts receivable | Customer Concentration Risk | Customer A
Concentration Risk [Line Items]
Concentration risk	72.00%	33.00%
Accounts receivable | Customer Concentration Risk | Customer B
Concentration Risk [Line Items]
Concentration risk	0.00%	67.00%

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Equity Method Investment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Equity Method Investment
Beginning balance	$ 5,202
Investment in HRT	0	$ 4,990
Share of loss of HRT	(703)	(1,274)
Ending balance	$ 4,879	5,202
HRT | Variable Interest Entity
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	24.90%
Equity Method Investment
Beginning balance	$ 5,202	1,486
Investment in HRT	0	4,990
Remeasurement gain on HRT	380	0
Share of loss of HRT	(703)	(1,274)
Ending balance	$ 4,879	$ 5,202

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Fair Value Measurements - Financial Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	$ 44,629	$ 0
Corporate bonds and commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	20,042	0
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	$ 24,587	$ 0

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Fair Value Measurements - Summary of Debt Securities (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Amortized Cost
Due in one year or less	$ 26,945
Due after one year through five years	17,684
Debt securities, amortized cost	44,629
Fair Value
Due in one year or less	26,961
Due after one year through five years	17,663
Debt securities, fair value	$ 44,624

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Fair Value Measurements - Financial Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Aug. 10, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 36,786		$ 19,228
Debt securities, fair value	44,624
Total cash, cash equivalents and investments	81,410		19,228
2020 Term Facility Loan	0		25,049
Private Placement Warrants	3,477		0
Total financial liabilities	3,477		71,944
Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes		$ 208,600
3.00% – 2020 Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes	$ 0		32,106
3.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage	3.00%
8.00% – 2020 Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes	$ 0		14,789
8.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage	0.08%
Corporate bonds and commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	$ 20,037
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	24,587
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	36,786		19,228
Total cash, cash equivalents and investments	61,373		19,228
Level 1 | Corporate bonds and commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	0
Level 1 | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	24,587
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0		0
Total cash, cash equivalents and investments	20,037		$ 0
Level 2 | Corporate bonds and commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	20,037
Level 2 | U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, fair value	$ 0

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Fair Value Measurements - Narrative (Details) - USD ($)		3 Months Ended	10 Months Ended		12 Months Ended
	Aug. 11, 2021	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2021	Dec. 31, 2020	Aug. 12, 2021	Aug. 10, 2021	Jan. 11, 2021	Oct. 20, 2020	Sep. 29, 2020	Mar. 09, 2020	Feb. 19, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt		$ 74,804,000	$ 74,804,000	$ 74,804,000	$ 26,312,000	$ 26,312,000	$ 74,804,000
Gain (loss) on debt instrument						(59,916,000)	(20,163,000)
Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes									$ 208,600,000
Line of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes	$ 27,200,000
Debt instrument, face amount					35,000,000	35,000,000
Long-term debt		25,049,000	25,049,000	25,049,000	26,312,000	26,312,000	25,049,000
Gain (loss) on debt instrument		(1,729,000)				(15,134,000)	(1,700,000)
Debt conversion, percent converted	30.00%
Debt conversion, percent not converted	70.00%
Outstanding principal and interest	$ 10,200,000				32,300,000	32,300,000		$ 37,300,000
Private Placement Warrants, fair value		25,049,000	25,049,000	25,049,000	27,180,000	27,180,000	25,049,000					$ 23,320,000
3.00% – 2020 Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes		32,106,000	32,106,000	32,106,000	$ 0	$ 0	32,106,000
3.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage					3.00%	3.00%
Debt instrument, face amount					$ 21,300,000	$ 21,300,000					$ 1,300,000		$ 20,000,000
Long-term debt		32,106,000	32,106,000	32,106,000	0	0	32,106,000
Gain (loss) on debt instrument			(10,825,000)			(5,986,000)	(10,800,000)
Outstanding principal and interest	21,900,000
Private Placement Warrants, fair value		32,106,000	32,106,000	32,106,000	0	0	32,106,000						$ 21,281,000
8.00% – 2020 Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Convertible notes		14,789,000	14,789,000	14,789,000	$ 0	$ 0	14,789,000
8.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage					0.08%	0.08%
Debt instrument, face amount					$ 8,000,000	$ 8,000,000
Long-term debt		14,789,000	14,789,000	14,789,000	0	0	14,789,000
Gain (loss) on debt instrument				(4,374,000)		$ (16,108,000)	(4,400,000)
Debt instrument, redemption price, percentage						0.0125%
Outstanding principal and interest	8,900,000
Private Placement Warrants, fair value		14,789,000	14,789,000	14,789,000	$ 0	$ 0	14,789,000							$ 10,415,000
5.00% – $50.0 Million Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage					5.00%	5.00%
Debt instrument, face amount					$ 50,000,000.0	$ 50,000,000.0
Long-term debt					0	0
Gain (loss) on debt instrument					(2,310,000)	(2,300,000)
Outstanding principal and interest	10,600,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount					1,500,000,000	1,500,000,000
Private Placement Warrants, fair value					$ 0	$ 0				$ 10,274,000
5.00% – $25.0 Million Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage					5.00%	5.00%
Debt instrument, face amount					$ 25,000,000	$ 25,000,000
Long-term debt					0	0
Gain (loss) on debt instrument						(4,977,000)
Outstanding principal and interest	25,700,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount					675,000,000	675,000,000
Private Placement Warrants, fair value		$ 37,592,000	$ 37,592,000	$ 37,592,000	$ 0	$ 0	$ 37,592,000
5.00% – $30.0 Million Convertible Notes | Convertible Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, stated percentage					5.00%	5.00%
Debt instrument, face amount					$ 30,000,000.0	$ 30,000,000.0
Long-term debt					0	0
Gain (loss) on debt instrument					(5,855,000)	(5,900,000)
Outstanding principal and interest	$ 30,800,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount					800,000,000	800,000,000
Private Placement Warrants, fair value					$ 0	$ 0				$ 38,403,000

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Fair Value Measurements - Fair Value Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended	5 Months Ended	10 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Plus: Loss from change in fair value						$ 59,916	$ 20,163
Warrants
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance		$ 14,304
Plus: Loss from change in fair value		(10,827)
Ending balance		3,477			$ 3,477	3,477
Line of Credit
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 23,320					25,049
Plus: Loss from change in fair value	1,729					15,134	1,700
Less: Fair value adjustment extinguished upon conversion of debt						(13,003)
Ending balance	25,049	27,180	$ 25,049	$ 25,049	27,180	27,180	25,049
3.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance			21,281			32,106
Plus: Loss from change in fair value			10,825			5,986	10,800
Less: Fair value adjustment extinguished upon conversion of debt						(38,092)
Ending balance	32,106	0	32,106	32,106	0	0	32,106
8.00% – 2020 Convertible Notes | Convertible Notes
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance				10,415		14,789
Plus: Loss from change in fair value				4,374		16,108	4,400
Less: Fair value adjustment extinguished upon conversion of debt						(30,897)
Ending balance	14,789	0	14,789	14,789	0	0	14,789
5.00% – $50.0 Million Convertible Notes | Convertible Notes
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Plus: Loss from change in fair value					2,310	2,300
Less: Fair value adjustment extinguished upon conversion of debt					(12,584)
Ending balance		0			0	0
5.00% – $25.0 Million Convertible Notes | Convertible Notes
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance						37,592
Plus: Loss from change in fair value						4,977
Less: Fair value adjustment extinguished upon conversion of debt						(42,569)
Ending balance	$ 37,592	0	$ 37,592	$ 37,592	0	0	$ 37,592
5.00% – $30.0 Million Convertible Notes | Convertible Notes
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Plus: Loss from change in fair value					5,855	5,900
Less: Fair value adjustment extinguished upon conversion of debt					(44,258)
Ending balance		$ 0			$ 0	$ 0

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Balance Sheet Components - Cash and Cash Equivalents (Details) - Cash and Cash Equivalents - Geographic Concentration Risk	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
United Kingdom
Cash and Cash Equivalents [Line Items]
Concentration risk	97.00%	96.00%
United States
Cash and Cash Equivalents [Line Items]
Concentration risk	3.00%	3.00%
Other
Cash and Cash Equivalents [Line Items]
Concentration risk	0.00%	1.00%

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Balance Sheet Components - Other Receivables (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
R&D tax credit receivable	$ 45,632	$ 17,412
Grants receivable	753	0
VAT receivable	1,073	607
Other receivable, net	4	5
Total other receivables	$ 47,462	$ 18,024

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Balance Sheet Components - Long Lived Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 17,514	$ 9,852
Less: accumulated depreciation	(9,088)	(5,802)
Total property and equipment, net	8,426	4,050
Depreciation	4,200	2,300
Finance lease right-of-use assets	2,966	2,966
Less: accumulated amortization	(1,205)	(834)
Total finance lease right-of-use assets, net	$ 1,761	$ 2,132
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Property, equipment, net	Property, equipment, net
Amortization	$ 400	$ 400
Computer equipment
Property, Plant and Equipment [Line Items]
Total property and equipment	1,998	1,218
Lab equipment
Property, Plant and Equipment [Line Items]
Total property and equipment	13,940	7,607
Motor vehicles
Property, Plant and Equipment [Line Items]
Total property and equipment	31	31
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Total property and equipment	315	265
Leasehold improvements
Property, Plant and Equipment [Line Items]
Total property and equipment	1,230	704
Assets under construction
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 0	$ 27

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Balance Sheet Components - Schedule of Intangible Assets, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 3,048	$ 3,048
In-process research and development
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 3,048	$ 3,048

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Balance Sheet Components - Schedule of Other Non-current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Aug. 11, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Capitalized transaction costs	$ 0	$ 45,500	$ 121
Security deposits	$ 280		$ 0
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Total other non-current assets		Total other non-current assets
Operating right of use assets	$ 4,577		$ 1,486
Prepaid asset, net of current portion	2,826		0
Total other non-current assets	$ 7,683		$ 1,607

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Balance Sheet Components - Schedule of Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accrued bonus	$ 7,546	$ 3,349
Accrued payroll and benefits	2,750	1,524
Accrued taxes	439	332
Accrued fabrication costs	3,110	2,321
Share appreciation rights	0	706
Accrued transaction costs	1,004	335
Other accrued expenses	2,511	1,828
Total accrued expenses	$ 17,360	$ 10,395

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Debt - Summary of Long Term Debt (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Oct. 20, 2020	Mar. 09, 2020
Debt Instrument [Line Items]
Principal	$ 128,504,000	$ 54,641,000
Change in Fair Value	80,079,000	20,163,000
Conversion of Debt	(181,403,000)
Accreted Debt Interest	4,132,000
Principal payments on long-term debt	(5,000,000)	(1,952,000)
Total Long-term debt	26,312,000	74,804,000
Less: current portion of long-term debt	(26,312,000)	0
Long-term debt, net of current portion	$ 0	74,804,000
Convertible Notes | 3.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage	3.00%
Debt instrument, face amount	$ 21,300,000		$ 1,300,000	$ 20,000,000
Principal	21,281,000	21,281,000
Change in Fair Value	16,811,000	10,825,000
Conversion of Debt	(38,092,000)
Accreted Debt Interest	0
Principal payments on long-term debt	0
Total Long-term debt	$ 0	32,106,000
Convertible Notes | 8.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage	0.08%
Debt instrument, face amount	$ 8,000,000
Principal	8,000,000	8,000,000
Change in Fair Value	22,897,000	6,789,000
Conversion of Debt	(30,897,000)
Accreted Debt Interest	0
Principal payments on long-term debt	0
Total Long-term debt	$ 0	14,789,000
Convertible Notes | 5.00% – $50.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage	5.00%
Debt instrument, face amount	$ 50,000,000.0
Principal	10,274,000
Change in Fair Value	2,310,000
Conversion of Debt	(12,584,000)
Accreted Debt Interest	0
Principal payments on long-term debt	0
Total Long-term debt	$ 0
Convertible Notes | 5.00% – $25.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage	5.00%
Debt instrument, face amount	$ 25,000,000
Principal	25,000,000
Change in Fair Value	17,569,000
Conversion of Debt	(42,569,000)
Accreted Debt Interest	0
Principal payments on long-term debt	0
Total Long-term debt	$ 0
Convertible Notes | 5.00% – $30.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage	5.00%
Debt instrument, face amount	$ 30,000,000.0
Principal	30,000,000
Change in Fair Value	14,258,000
Conversion of Debt	(44,258,000)
Accreted Debt Interest	0
Principal payments on long-term debt	0
Total Long-term debt	0
Line of Credit
Debt Instrument [Line Items]
Debt instrument, face amount	35,000,000
Principal	33,949,000	22,500,000
Change in Fair Value	6,234,000	2,549,000
Conversion of Debt	(13,003,000)
Accreted Debt Interest	4,132,000
Principal payments on long-term debt	(5,000,000)
Total Long-term debt	$ 26,312,000	25,049,000
Paycheck Protection Program, CARES Act [Member]
Debt Instrument [Line Items]
Principal		2,860,000
Change in Fair Value		0
Total Long-term debt		$ 2,860,000

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Debt - Schedule of Future Minimum Payments (Details) - Convertible Notes $ in Thousands	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
2022	$ 32,303
2023	0
2024	0
2025	0
2026	0
Thereafter	0
Total future minimum payments	32,303
Less: current portion of debt principal	(32,303)
Non-current portion of debt principal	$ 0

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Debt - Narrative (Details) - USD ($) $ / shares in Units, shares in Millions		1 Months Ended	12 Months Ended
	Aug. 11, 2021	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2020	Aug. 12, 2021	Oct. 20, 2020	Mar. 09, 2020
Debt Instrument [Line Items]
Debt conversion, amount			$ 181,404,000	$ 0
Conversion of debt			181,403,000
Debt covenant, public float minimum			350,000,000
Long-term debt			26,312,000	74,804,000
Forgiveness of PPP loan		$ 2,900,000	2,860,000	0
3.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Additional funding amount triggering conversion feature			$ 10,000,000
Conversion price (in dollars per share)			$ 14.298
8.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Conversion price (in dollars per share)			$ 14.298
Convertible Notes | 3.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage			3.00%
Debt instrument, face amount			$ 21,300,000			$ 1,300,000	$ 20,000,000
Outstanding principal and interest	$ 21,900,000
Debt conversion, shares issued (in shares)	3.8
Debt conversion, amount	$ 38,100,000
Conversion of debt			38,092,000
Long-term debt			$ 0	32,106,000
Convertible Notes | 8.00% – 2020 Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage			0.08%
Debt instrument, face amount			$ 8,000,000
Outstanding principal and interest	$ 8,900,000
Debt conversion, shares issued (in shares)	1.5
Debt conversion, amount	$ 15,500,000
Conversion of debt			$ 30,897,000
Debt instrument, convertible, conversion price, discount			25.00%
Long-term debt			$ 0	14,789,000
Convertible Notes | 5.00% – $50.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage			5.00%
Debt instrument, face amount			$ 50,000,000.0
Outstanding principal and interest	$ 10,600,000
Debt conversion, shares issued (in shares)	1.3
Debt conversion, amount	$ 12,600,000
Conversion of debt			$ 12,584,000
Debt instrument, convertible, conversion price, discount			15.00%
Long-term debt			$ 0
Debt conversion, principal amount	10,300,000
Proceeds from equity triggering debt conversion, minimum, amount			25,000,000
Debt instrument, convertible, denominator used to calculate conversion price, amount			1,500,000,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount			$ 1,500,000,000
Convertible Notes | 5.00% – $25.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage			5.00%
Debt instrument, face amount			$ 25,000,000
Outstanding principal and interest	$ 25,700,000
Debt conversion, shares issued (in shares)	3.6
Debt conversion, amount	$ 35,600,000
Conversion of debt			$ 42,569,000
Debt instrument, convertible, conversion price, discount			25.00%
Long-term debt			$ 0
Proceeds from equity triggering debt conversion, minimum, amount			25,000,000
Debt instrument, convertible, denominator used to calculate conversion price, amount			800,000,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount			$ 675,000,000
Debt instrument, conversion price			100.00%
Convertible Notes | 5.00% – $25.0 Million Convertible Notes | Warrants
Debt Instrument [Line Items]
Debt conversion, shares issued (in shares)	0.7
Debt conversion, amount	$ 7,000,000
Convertible Notes | 5.00% – $30.0 Million Convertible Notes
Debt Instrument [Line Items]
Debt instrument, stated percentage			5.00%
Debt instrument, face amount			$ 30,000,000.0
Outstanding principal and interest	$ 30,800,000
Debt conversion, shares issued (in shares)	4.4
Debt conversion, amount	$ 44,300,000
Conversion of debt			$ 44,258,000
Debt instrument, convertible, conversion price, discount			25.00%
Long-term debt			$ 0
Proceeds from equity triggering debt conversion, minimum, amount			25,000,000
Debt instrument, convertible, denominator used to calculate conversion price, amount			800,000,000
Debt instrument, convertible, denominator used to calculate conversion price at maturity date, amount			800,000,000
Line of Credit
Debt Instrument [Line Items]
Debt instrument, face amount			35,000,000
Outstanding principal and interest	$ 10,200,000		32,300,000		$ 37,300,000
Debt conversion, shares issued (in shares)	1.3
Debt conversion, amount	$ 13,000,000
Conversion of debt			13,003,000
Debt conversion, percent converted	30.00%
Debt conversion, percent not converted	70.00%
Fair value of outstanding principal and interest	$ 27,100,000
Interest paid			4,100,000
Long-term debt			26,312,000	$ 25,049,000
Debt covenant, cash, minimum balance			$ 35,000,000

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Warrants (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) tradingDay $ / shares shares	Dec. 31, 2020 USD ($)
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares	14,074,986
Warrant liabilities | $	$ 3,477	$ 0
Warrants outstanding, exercise price (in dollars per share)	$ 11.50
Minimum days notice before redemption	30 days
Redemption period, threshold trading days | tradingDay	20
Redemption period, threshold consecutive trading days | tradingDay	30
Redemption, minimum days after exercisable date before redemption	90 days
Warrant Redemption Scenario One
Class of Warrant or Right [Line Items]
Warrants outstanding, exercise price (in dollars per share)	$ 0.01
Common stock, redemption price (in dollars per share)	18.00
Warrant Redemption Scenario Two
Class of Warrant or Right [Line Items]
Common stock, redemption price (in dollars per share)	$ 10.00
Public Warrants
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares	8,625,000
Warrant liabilities | $	$ 28,000
Private Placement Warrants
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares	5,450,000
Warrant liabilities | $	$ 3,500

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Income Taxes - Components of Income (Loss) Before Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income Tax Disclosure [Abstract]
U.K. Operations	$ (174,298)	$ (82,705)
Foreign operations	6,952	2,997
Loss before income taxes	$ (167,346)	$ (79,708)

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Income Taxes - Components of Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Current
U.K. operations	$ 0	$ 0
Foreign jurisdictions	667	569
Total current	667	569
Deferred
U.K. operations	0	0
Foreign jurisdictions	0	0
Total deferred	0	0
Total U.K. operations	0	0
Total Foreign jurisdictions	667	569
Total	$ 667	$ 569

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Income Taxes - Reconciliation of Effective Tax Rates (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Effective Income Tax Rate Reconciliation, Amount
U.K. Statutory Rate	$ (31,796)	$ (15,145)
Foreign income tax	8	308
Research & Development credit	(2,061)	(628)
Stock-based compensation	34	1,293
Permanent differences	(156)	3,325
Change in valuation allowance	32,402	7,480
Rate Change on Deferred Taxes	(11,197)	(977)
Uncertain Tax Liabilities	64	245
Losses not benefited	12,625	3,999
Others, net	744	668
Total	$ 667	$ 569
Effective Income Tax Rate Reconciliation, Percent
U.K. Statutory Rate	19.00%	19.00%
Foreign income tax	0.00%	(0.40%)
Research & Development credit	1.20%	0.80%
Stock-based compensation	0.00%	(1.60%)
Permanent differences	0.10%	(4.20%)
Change in valuation allowance	(19.40%)	(9.40%)
Rate Change on Deferred Taxes	6.70%	1.20%
Uncertain Tax Liabilities	0.00%	(0.30%)
Losses not benefited	(7.50%)	(5.00%)
Others, net	(0.40%)	(0.80%)
Total	(0.40%)	(0.71%)

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets:
Net operating loss carryforwards	$ 33,068	$ 15,066
Research and development credits	549	0
Stock-based compensation	4,859	1,476
Lease liabilities	1,394	482
Interest Limitation	10,202	0
Accounts and other receivables	0	0
Accrued liabilities	1,765	788
Other	64	2
Total gross deferred tax assets	51,900	17,814
Less valuation allowance	(50,139)	(16,377)
Net deferred tax assets	1,761	1,437
Deferred tax liabilities:
Right-of-use Assets	(1,281)	(821)
Property and equipment, principally due to differences in depreciation	(480)	(592)
Other	0	(24)
Total gross deferred tax liabilities	(1,761)	(1,437)
Net deferred tax assets	$ 0	$ 0

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Income Taxes - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Operating Loss Carryforwards [Line Items]
Valuation allowance, increase (decrease) during period	$ 33,800,000	$ 6,900,000
Unrecognized tax benefits	3,217,000	$ 2,236,000	$ 405,000
Unrecognized tax benefits, income tax penalties and interest expense	0
Unrecognized tax benefits that would impact effective tax rate	$ 0

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Income Taxes - Net Operating Losses and Tax Credit Carryforwards (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Federal
Operating Loss Carryforwards [Line Items]
Net operating losses	$ 132,272
Tax credits	467
State
Operating Loss Carryforwards [Line Items]
Net operating losses	0
Tax credits	$ 0

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Income Taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Balance at beginning of the year	$ 2,236	$ 405
Increases based on tax positions related to current year	1,061	733
Increases based on tax positions related to prior years	165	1,199
Decreases based on tax positions related to prior years	(245)	(101)
Balance at end of year	$ 3,217	$ 2,236

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Shareholders’ Equity (Deficit) (Details) - USD ($) $ / shares in Units, $ in Millions	Oct. 19, 2021	Aug. 11, 2021	Dec. 31, 2021	Dec. 31, 2020
Class of Stock [Line Items]
Ordinary shares authorized (in shares)			12,417,500,000	139,033,366
Ordinary shares, par value (in dollars per share)			$ 0.000004	$ 0.000004
Ordinary shares issued (in shares)			127,860,639	83,539,382
Ordinary shares outstanding (in shares)		126,675,000	127,860,639	83,539,382
Warrants outstanding (in shares)			14,074,986
Sale of stock, number of shares issued in transaction (in shares)		15,000,000
Sale of stock, consideration received on transaction		$ 150.0
Private Placement
Class of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	7,800,000
Sale of stock, consideration received on transaction	$ 50.0

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Net Loss per Share - Net Loss Available to Ordinary Shareholders (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Class of Warrant or Right [Line Items]
Net loss, basic	$ (168,013)	$ (80,277)
Net loss, diluted	$ (168,013)	$ (80,277)
Basic (in shares)	100,917,939	83,457,400
Diluted (in shares)	100,917,939	83,457,400
Basic (in dollars per share)	$ (1.66)	$ (0.96)
Diluted (in dollars per share)	(1.66)	$ (0.96)
Warrants outstanding, exercise price (in dollars per share)	11.50
Warrant Redemption Scenario One
Class of Warrant or Right [Line Items]
Warrants outstanding, exercise price (in dollars per share)	$ 0.01

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Net Loss per Share - Summary of Anti-dilutive Securities (Details) - $ / shares shares in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Earnings Per Share [Abstract]
Warrants outstanding, exercise price (in dollars per share)	$ 11.50
Antidilutive securities (in shares)	12.6	13.8

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Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Thousands			12 Months Ended
	Dec. 01, 2021 USD ($)	Aug. 11, 2021 USD ($) shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Entity shares issued per acquiree share, ratio		2.4835
Unrecognized compensation expense, options			$ 40,500	$ 19,500
Total stock-based compensation expense			12,013	8,043
Unrecognized compensation expense			900	1,200
Warrants exercised (in shares) | shares		1,800,000
Warrants exercised, fair value		$ 18,100
Selling, general, and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense			$ 3,006	$ 1,459
Share Appreciation Rights
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares outstanding (in shares) | shares			0	30,000
Shares exercisable, weighted average exercise price (in dollars per share) | $ / shares			$ 0.00001
Payment to settle awards		$ 700
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense, period for recognition			1 year 6 months	1 year 4 months 24 days
Options | 2013 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares) | shares			0
Options | 2021 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares) | shares			15,375,644,000,000
Number of shares available for grant (in shares) | shares			10,207,656,000,000
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares) | shares			1,526,239
Minimum employee subscription rate	1.00%
Maximum employee subscription rate	15.00%
Maximum employee subscription amount	$ 25
ESPP discount percentage from market price	15.00%
Period for annual increases to plan awards			10 years
Annual increase as a percentage of outstanding stock, maximum			1.00%
Number of additional shares allowable under the plan (in shares) | shares			7,631,196
Performance Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense			$ 300	$ 200

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Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Average Exercise Price Per Share
Sale of stock, price per share (in dollars per share)	$ 4.35
2013 Plan
Number of Options Outstanding
Beginning balance (in shares)	17,898,619	14,663,610
Granted (in shares)	0	5,782,544
Exercised (in shares)	(1,557,214)	(19,404)
Forfeited (in shares)	(912,912)	(2,052,583)
Expired (in shares)	(46,757)	(475,548)
Ending balance (in shares)	15,381,736	17,898,619	14,663,610
Options exercisable (in shares)	12,546,315
Average Exercise Price Per Share
Beginning balance (in dollars per share)	$ 4.94	$ 4.05
Granted (in dollars per share)	0	8.67
Exercised (in dollars per share)	0.60	5.36
Forfeited (in dollars per share)	4.07	8.62
Expired (in dollars per share)	3.08	6.92
Ending balance (in dollars per share)	2.00	$ 4.94	$ 4.05
Options exercisable (in dollars per share)	$ 1.68
Options outstanding, remaining contractual life	5 years 9 months 29 days	6 years 9 months	6 years 11 months 8 days
Options exercisable, remaining contractual life	5 years 3 months
Options outstanding, intrinsic value	$ 36,093	$ 110,552	$ 54,100
Options exercisable, intrinsic value	$ 33,464
2021 Plan
Number of Options Outstanding
Beginning balance (in shares)	0
Granted (in shares)	1,013,480
Exercised (in shares)	0
Forfeited (in shares)	0
Expired (in shares)	0
Ending balance (in shares)	1,013,480	0
Options exercisable (in shares)	81,538
Average Exercise Price Per Share
Beginning balance (in dollars per share)	$ 0
Granted (in dollars per share)	15.84
Exercised (in dollars per share)	0
Forfeited (in dollars per share)	0
Expired (in dollars per share)	0
Ending balance (in dollars per share)	15.84	$ 0
Options exercisable (in dollars per share)	$ 15.84
Options outstanding, remaining contractual life	9 years 7 months 9 days	0 years
Options exercisable, remaining contractual life	9 years 7 months 9 days
Options outstanding, intrinsic value	$ 11,645	$ 0
Options exercisable, intrinsic value	$ 937

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Stock-Based Compensation - RSU Activity (Details) - Restricted Stock Units (RSUs) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Number of RSUs Outstanding
Outstanding, beginning balance (in shares)	0
Granted (in shares)	4,181,607
Exercised (in shares)	(24,668)
Forfeited (in shares)	(2,431)
Expired (in shares)	0
Outstanding, ending balance (in shares)	4,154,508	0
Weighted Average Grant Date Fair Value
Outstanding, beginning balance (in dollars per share)	$ 0
Granted (in dollars per share)	6.71
Exercised (in dollars per share)	7.07
Forfeited (in dollars per share)	7.07
Expired (in dollars per share)	0
Outstanding, ending balance (in dollars per share)	$ 6.71	$ 0
Remaining Contractual Life (Years)	1 year 9 months 3 days	0 years
Intrinsic Value	$ 18,072	$ 0

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Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 12,013	$ 8,043
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	1,825	2,271
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	7,182	4,313
Selling, general, and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 3,006	$ 1,459

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Stock-Based Compensation - Summary of Valuation Assumptions (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility (%)	54.00%
Dividend yield	0.00%
Employee Stock Purchase Plan | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		6 months
Risk-free interest rate (%)		10.00%
Employee Stock Purchase Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		1 year
Risk-free interest rate (%)		25.00%
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 years 18 days
Expected volatility (%)	53.00%
Risk-free interest rate (%)	0.96%
Dividend yield	0.00%	0.00%
Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		4 years 10 months 9 days
Expected volatility (%)		50.29%
Risk-free interest rate (%)		0.30%
Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		6 years 3 months
Expected volatility (%)		52.45%
Risk-free interest rate (%)		1.75%

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Related Party Transactions (Details) - Variable Interest Entity - HRT $ in Millions	12 Months Ended
	Dec. 31, 2020 USD ($)
Related Party Transaction [Line Items]
Sales to related parties	$ 5.3
Accounts receivable, related parties, current	$ 3.3

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Leases - Additional Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Lessee, Lease, Description [Line Items]
Leases, renewal term	5 years
Operating lease, weighted average remaining lease term	4 years
Operating lease, weighted average discount rate	6.00%
Operating Lease Cost:
Fixed lease cost	$ 1,103	$ 851
Variable lease cost	354	154
Total operating lease cost	1,457	1,005
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	936	916
Operating cash flows for finance leases	0	15
Financing cash flows for finance leases	0	1,192
Right-of-use assets obtained in exchange of lease obligations:
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 4,008	$ 0
Minimum
Lessee, Lease, Description [Line Items]
Leases, term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Leases, term	5 years

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Leases - Schedule of Maturities of Operating Leases (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Leases [Abstract]
2022	$ 1,500
2023	1,394
2024	914
2025	818
2026	842
Thereafter	186
Total lease obligation	5,654
Less: Imputed interest	(679)
Total lease liabilities	$ 4,975
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Other current liabilities
Less: Current lease liabilities	$ (1,238)
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Other long-term liabilities
Less: Current lease liabilities	$ 3,737

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Commitments and Contingencies (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Contractual obligations	$ 13.6	$ 3.0

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Defined Contribution Plan (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Retirement Benefits [Abstract]
Defined contribution plan, employer contributions	$ 0.7	$ 0.5

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2020
Cash payments for:
Interest paid		$ 658	$ 47
Income tax paid		978	313
Non-cash Operating Activities:
Right-of-use assets obtained in exchange for new operating lease liabilities		4,008	0
Total non-cash operating activities		4,008	0
Non-cash Investing Activities:
Unpaid property and equipment received		805	166
Unpaid balance related to the Trutouch Asset Acquisition		0	500
Total non-cash investing activities		805	666
Non-cash Financing Activities:
Conversion of convertible debt and accrued interest to ordinary shares		181,404	0
Conversion of Legacy Rockley ordinary shares to Rockley ordinary shares		206,888	0
Private Placement Warrants		14,304	0
Public Warrants		28,031	0
Issuance of ordinary shares in lieu of cash payment of transaction costs		3,190	0
Forgiveness of PPP loan	$ 2,900	2,860	0
Unpaid deferred transaction costs		1,034	0
Issuance of ordinary shares related to the Trutouch Asset Acquisition		0	2,298
Issuance of ordinary shares related to ELOC		472	0
Total non-cash financing activities		$ 438,183	$ 2,298