Form 10-Q Accelerate Diagnostics, For: Sep 30

---

---

---

---

---

---

---

---

---

NOTE 1. ORGANIZATION AND NATURE OF BUSINESS; BASIS OF PRESENTATION; PRINCIPLES OF CONSOLIDATION; SIGNIFICANT ACCOUNTING POLICIES

Accelerate Diagnostics, Inc. (“we” or “us” or “our” or “Accelerate” or the “Company”) is an in vitro diagnostics company dedicated to providing solutions that improve patient outcomes and lower healthcare costs through the rapid diagnosis of serious infections.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 14, 2022.

The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date but does not include all disclosures such as notes required by U.S. GAAP.

The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the entire year ending December 31, 2022, or any future period.

All amounts are rounded to the nearest thousand dollars unless otherwise indicated.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after elimination of intercompany transactions and balances.

Risk and Uncertainties

The future success of the Company is dependent on its ability to successfully commercialize its products, obtain regulatory clearance for and successfully launch its future product candidates, obtain additional capital and ultimately attain profitable operations. Historically, the Company has funded its operations primarily through multiple equity raises, one convertible debt offering, and Secured Note (as defined in Note 11). The Company is subject to a number of risks similar to other early commercial stage life science companies, including, but not limited to commercially launching the Company’s products, development and market acceptance of the Company’s product candidates, development by its competitors of new technological innovations, protection of proprietary technology, and raising additional capital.

The COVID-19 pandemic, containment measures, and downstream impacts to hospital staffing and financial stability have caused business slowdowns or shutdowns in affected areas, both, as well as disruptions to global supply chains and workforce participation. These effects have significantly impacted the Company’s business and results of operations, starting in the first quarter of 2020 and continuing through the current quarter, albeit to a lesser degree. These impacts include diminished access to the Company’s customers, principally hospitals, which has severely limited the ability to sell or implement products. Furthermore, the expected rate of growth of the Company’s consumable test kit sales has been reduced because of the negative impact of the COVID-19 pandemic on Accelerate Pheno system new sales and implementations. The Company has reviewed its suppliers and quantities of key materials and believes that it has sufficient stocks and alternate sources of critical materials should the supply chains become further disrupted, although raw materials for the manufacturing of

---

reagents is in high demand, and interruptions in supply are difficult to predict. The COVID-19 pandemic also caused the Company to reassess its build plan and evaluate its inventories accordingly, which resulted in additional charges to cost of sales for excess inventories in the prior year.

The Company may seek to fund its operations through public equity, private equity or debt financings, as well as other sources. However, the Company may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms, or at all. The Company’s failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on the Company’s business, results of operations, financial condition and the Company’s ability to develop new products. To the extent the Company raises additional funds through the sale of equity, issue convertible debt securities or exchange convertible debt for equity, the issuance of securities will result in dilution to stockholders. Investors purchasing shares or other securities in the future could have rights superior to existing stockholders. In addition, the Company has a significant number of options and restricted stock units (“RSUs”) outstanding in addition to the Warrant (as defined in Note 11). If these options or the Warrant are exercised or such RSUs are released, or shares of the Company’s common stock are issued upon conversion of the Company’s outstanding 2.50% Senior Convertible Notes due 2023 (the “Notes”) or Series A Preferred Stock, further dilution may occur.

Liquidity

The Company continues to assess liquidity needs and manage cash flows. As a result of the steps the Company has taken to enhance its liquidity, the Company currently believes that cash on hand and cash flows from operations will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least one year from the date this Quarterly Report on Form 10-Q (this “Form 10-Q”) is issued. The Company’s view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 12 months from the date these condensed consolidated financial statements are filed, which is impacted by, among other things, various assumptions regarding demand and sales prices for our products. Our financial forecasts in recent periods have proven less reliable due to conditions created by the pandemic. As a result, there is no guarantee our financial forecast, which projects sufficient cash will be available to meet planned operating expenses and other cash needs, will be accurate. In the event the Company experiences lower customer demand, lower prices for its products and services, or higher expenses than it forecasted or if the Company underperforms relative to its forecast, the Company could experience negative cash flows from operations, as has been the case in prior years, which would reduce its cash balances and liquidity.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to accounts receivable, inventory, property and equipment, accrued liabilities, warranty liabilities, convertible notes, notes from related parties, tax valuation accounts, equity–based compensation, warrants, revenue and leases. Actual results could differ materially from those estimates.

Estimated Fair Value of Financial Instruments

The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which has defined fair value and requires the Company to establish a framework for measuring and disclosing fair value. The framework requires the valuation of assets and liabilities subject to fair value measurements using a three-tiered approach and fair value measurement be classified and disclosed in one of the following three categories:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

---

The carrying amounts of financial instruments such as cash and cash equivalents, trade accounts receivable, prepaid expenses, other current assets, accounts payable, accrued liabilities, and other current liabilities approximate the related fair values due to the short-term maturities of these instruments.

See Note 4, Fair Value of Financial Instruments, for further information and related disclosures regarding the Company’s fair value measurements.

The estimated fair value of the Notes represents a Level 2 measurement. See Note 10, Convertible Notes for further detail on the Notes.

The long-term debt with a related-party consisting of the Secured Note (as defined in Note 11) and the Warrant are instruments measured at fair value on a non-recurring basis using Level 3 inputs. See Note 11, Long-Term Debt Related-Party for further detail on the Secured Note and the Warrant.

Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or less at time of purchase are considered to be cash equivalents. Cash and cash equivalents include overnight repurchase agreement accounts and other investments. As part of our cash management process, excess operating cash is invested in overnight repurchase agreements with our bank. Repurchase agreements and other investments classified as cash and cash equivalents are not deposits and are not insured by the U.S. Government, the FDIC or any other government agency and involve investment risk including possible loss of principal. We believe however, that the market risk arising from holding these financial instruments is minimal.

Investments

The Company invests in various debt and equity securities which are primarily held in the custody of major financial institutions. Debt securities consist of certificates of deposit, U.S. government and agency securities, commercial paper, and corporate notes and bonds. Equity securities consist of mutual funds. The Company records these investments in the condensed consolidated balance sheet at fair value. Unrealized gains or losses for debt securities available-for-sale are included in accumulated other comprehensive income (loss), a component of stockholders’ deficit. Unrealized gains or losses for equity securities are included in other income (expense), net, a component of condensed consolidated statements of operations and comprehensive loss. The Company considers all debt securities available-for-sale, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs. The Company classifies its investments as current based on the nature of the investments and their availability for use in current operations.

We perform an assessment to determine whether there have been any events or economic circumstances to indicate that a debt security available-for-sale in an unrealized loss position has suffered impairment as a result of credit loss or other factors. A debt security is considered impaired if its fair value is less than its amortized cost basis at the reporting date. If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is recognized and the unrealized loss is recorded as a direct write-down of the security's amortized cost basis with an offsetting entry to earnings. If we do not intend to sell the debt security or believe we will not be required to sell the debt security before the recovery of its amortized cost basis, the impairment is assessed to determine if a credit loss component exists. We use a discounted cash flow method to determine the credit loss component. In the event a credit loss exists, an allowance for credit losses is recorded in earnings for the credit loss component of the impairment while the remaining portion of the impairment attributable to factors other than credit loss is recognized, net of tax, in accumulated other comprehensive income (loss). The amount of impairment recognized due to credit factors is limited to the excess of the amortized cost basis over the fair value of the security.

Inventory

Inventory is stated at the lower of cost or net realizable value. The Company determines the cost of inventory using the first-in, first-out method. The Company estimates the recoverability of inventory by reference to internal estimates of future demands and product life cycles, including expiration. The Company periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value and records a charge to expense for such inventory as appropriate.

---

We charge cost of sales for inventory provisions to write-down our inventory to the lower of cost or net realizable value or for obsolete or excess inventory. Most of our inventory provisions relate to excess quantities of products, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions. Once inventory has been written-off or written-down, it creates a new cost basis for the inventory that is not subsequently written-up.

See Note 6, Inventory, for further information and related disclosures.

Accounts Receivable

Accounts receivable consist of amounts due to the Company for sales to customers and are based on what we expect to collect in exchange for goods and services. Receivables are considered past due based on the contractual payment terms and are written off if reasonable collection efforts prove unsuccessful.

We maintain an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the consolidated statements of operations. We assess collectibility by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectibility issues. In determining the amount of the allowance for credit losses, we consider historical collectibility and make judgments about the creditworthiness of customers based on credit evaluations. Our customers typically have good credit quality. We also consider customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data.

The allowance for credit losses for the three and nine months ended September 30, 2022 and 2021 is comprised of the following (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Beginning balance			$	150		$	213					140			445
(Reversals) provisions, net			(12)			78						18			114
Write-offs			—			(77)						(20)			(345)
			$	138		$	214					$	138		$	214

The write-offs recorded during the nine months ended September 30, 2021 were in connection with a one-time restructuring activity of the Company's Europe, Middle East and Africa (“EMEA”) business. These credit losses were incurred as part of the Company terminating agreements with select distributors in geographies it exited and did not pursue collection of these accounts receivables.

Property and Equipment

Property and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred and expenditures for major improvements are capitalized. Gains and losses from retirement or replacement are included in costs and expenses. Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the assets, ranging from one to seven years. Leasehold improvements are depreciated over the remaining life of the lease or the life of the asset, whichever is less.

Instruments Classified as Property and Equipment

Property and equipment includes Accelerate Pheno systems (also referred to as instruments) used for sales demonstrations, instruments under rental agreements and instruments used for research and development. Depreciation expense for instruments used for sales demonstrations is recorded as a component of sales, general and administrative expense. Depreciation expense for instruments placed at customer sites pursuant to reagent rental agreements is recorded as a component of cost of sales. Depreciation expense for instruments used in our laboratory and research is recorded as a component of research and development expense. The Company retains title to these instruments and depreciates them over five years. Losses from the retirement of returned instruments are included in costs and expenses.

---

The Company evaluates the recoverability of the carrying amount of its instruments whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable, and at least annually. This evaluation is based on our estimate of future cash flows and the estimated fair value of such long-lived assets, and provides for impairment if such undiscounted cash flows or the estimated fair value are insufficient to recover the carrying amount of instruments. No impairment charges have been recorded as of for the three and nine months ended September 30, 2022.

See Note 7, Property and Equipment, for further information and related disclosures.

Long-lived Assets

Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows from and the estimated fair value of such long-lived assets, and provides for impairment if such undiscounted cash flows or the estimated fair value are insufficient to recover the carrying amount of the long-lived asset.

Warranty Reserve

Instruments are typically sold with a one year limited warranty, while kits and accessories are typically sold with a sixty days limited warranty. Accordingly, a provision for the estimated cost of the limited warranty repair is recorded at the time revenue is recognized. Our estimated warranty provision is based on our estimate of future repair events and the related estimated cost of repairs. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. The cost incurred for these provisions is included in cost of sales on the condensed consolidated statements of operations and comprehensive loss.

Warranty reserve activity for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Beginning balance			$	255		$	169					$	139		$	232
Provisions (reversals), net			(4)			(31)						134			(41)
Warranty cost incurred			(29)			(17)						(51)			(70)
Ending balance			$	222		$	121					$	222		$	121

Convertible Notes

On January 1, 2022 the Company adopted Accounting Standards Update (“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). As a result, the Notes are now accounted for as a single liability measured at their amortized cost. The Notes are no longer bifurcated between debt and equity and are instead accounted for entirely as debt at face value net of any discount or premium and issuance costs. Interest expense is comprised of (1) cash interest payments, (2) amortization of any debt discounts or premiums based on the original offering, and (3) amortization of any debt issuance costs. Gain or loss on extinguishment of Notes is calculated as the difference between the (i) fair value of the consideration transferred and (ii) the sum of the carrying value of the debt at the time of repurchase.

The Company classifies the Notes as a non-current liability as the Company has sufficient shares and non-cash alternatives to settle the Notes.

See Note 2, Recently Issued Accounting Pronouncements and Note 10, Convertible Notes, for further information and related disclosures.

---

Revenue Recognition

The Company recognizes revenue when control of the promised good or service is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales taxes are excluded from revenues.

The Company determines revenue recognition through the following steps:

•Identification of the contract with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations

•Recognition of revenue as we satisfy a performance obligation

Product revenue is derived from the sale or rental of instruments and sales of related consumable products. When an instrument is sold, revenue is generally recognized upon installation of the unit consistent with contract terms, which do not include a right of return. When a consumable product is sold, revenue is generally recognized upon shipment. Invoices are generally issued when revenue is recognized. Payment terms vary by the type and location of the customer and the products or services offered. The term between invoicing and when payment is due is not significant.

Service revenue is derived from the sale of extended service agreements which are generally non-cancellable. This revenue is recognized on a straight-line basis over the contract term beginning on the effective date of the contract because the Company is standing ready to provide services. Invoices are generally issued annually and coincide with the beginning of individual service terms.

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines relative standalone selling prices based on the price charged to customers for each individual performance obligation.

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined these costs would have an amortization period of less than one year and has elected to recognize them as an expense when incurred. Contract asset opening and closing balances were immaterial for the three and nine months ended September 30, 2022.

Gross Profit and Gross Margin

Gross profit consists of total revenue, net of allowances, less cost of sales. Cost of sales includes cost of materials, direct labor, equity-based compensation, facility and other manufacturing overhead costs for consumable tests and instruments sold to customers. Cost of sales for instruments also includes depreciation on revenue generating instruments that have been placed with our customers under a reagent rental agreement. Cost of sales includes repair and maintenance cost for instruments covered by a service agreement or instruments covered by a reagent rental agreement. Cost of sales also includes warranty related costs.

The Company’s overall gross margin was 26% and 32% for the three months ended September 30, 2022 and 2021, respectively, and 27% and 35% for the nine months ended September 30, 2022 and 2021, respectively. The decreases were primarily due to increases in the costs to manufacture consumables due to supply chain inflationary factors and a decrease in our average unit sales price period over period.

Shipping and Handling

Shipping and handling costs billed to customers are included as a component of revenue. The corresponding expense incurred with third party carriers is included as a component of sales, general and administrative costs on the consolidated statements of operations and comprehensive loss.

---

Leases

The Company accounts for leases in accordance with ASC 842, Leases. The Company determines if an arrangement is or contains a lease and the type of lease at inception. The Company classifies leases as finance leases (lessee) or sales-type leases (lessor) when there is either a transfer of ownership of the underlying asset by the end of the lease term, the lease contains an option to purchase the asset that we are reasonably certain will be exercised, the lease term is for the major part of the remaining economic life of the asset, the present value of the lease payments and any residual value guarantee equals or substantially exceeds all the fair value of the asset, or the asset is of such a specialized nature that it will have no alternative use to the lessor at the end of the lease term. Payments contingent on future events (i.e. based on usage) are considered variable and excluded from lease payments for the purposes of classification and initial measurement. Several of our leases include options to renew or extend the term upon mutual agreement of the parties and others include one-year extensions exercisable by the lessee. None of our leases contain residual value guarantees, restrictions, or covenants.

To determine whether a contract contains a lease, the Company uses its judgment in assessing whether the lessor retains a material amount of economic benefit from an underlying asset, whether explicitly or implicitly identified, which party holds control over the direction and use of the asset, and whether any substantive substitution rights over the asset exist.

Leases as Lessee

Operating leases are included in right-of-use (“ROU”) assets and corresponding lease liabilities, and finance leases are included in ROU assets and corresponding lease liabilities within our condensed consolidated balance sheets. These assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and their related liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Typically, we use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. We use the implicit rate when readily determinable. ROU assets are net of lease payments made and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term, which may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option.

Our operating leases consist primarily of leased office, factory, and laboratory space in the U.S. and office space in Europe, have between two and six-year terms, and typically contain penalizing, early-termination provisions. Our finance leases consist of leased equipment and have three-year terms.

Leases as Lessor

The Company leases instruments to customers under “reagent rental” agreements, whereby the customer agrees to purchase consumable products over a stated term, typically five years or less, for a volume-based price that includes an embedded rental for the instruments. When collectibility is probable, that amount is recognized as income at lease commencement for sales-type leases and as product is shipped, typically in a straight–line pattern, over the term for operating leases, which typically include a termination without cause or penalty provision given a short notice period.

Consideration is allocated between lease and non-lease components based on stand-alone selling price in accordance with ASC 606, Revenue from Contracts with Customers.

Net investment in sales-type leases are included within our condensed consolidated balance sheets as a component of other current assets and other non-current assets, which include the present value of lease payments not yet received and the present value of the residual asset, which are determined using the information available at commencement, including the lease term, estimated useful life, rate implicit in the lease, and expected fair value of the instrument.

Nonqualified Cash Deferral Plan

The Company's Cash Deferral Plan (the “Deferral Plan”) provides certain key employees with an opportunity to defer the receipt of such participant's base salary. The Deferral Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code. All of

---

the investments held in the Deferral Plan are equity securities consisting of mutual funds and recorded at fair value with changes in the investments’ fair value recognized as earnings in the period they occur. The corresponding liability for the Deferral Plan is included in other non-current liabilities in the condensed consolidated balance sheet.

Equity-Based Compensation

The Company may award stock options, RSUs, performance-based awards and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity-based instruments is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period on a straight-line basis over the vesting period for each tranche (an accelerated attribution method) except for performance-based awards. Performance-based awards vest based on the achievement of performance targets. Compensation costs associated with performance-based awards are recognized over the requisite service period based on probability of achievement. Performance-based awards require management to make assumptions regarding the likelihood of achieving performance targets.

The Company estimates the fair value of service based and performance based stock option awards, including modifications of stock option awards, using the Black-Scholes option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield.

•Volatility: The expected volatility is based on the historical volatility of the Company's stock price over the most recent period commensurate with the expected term of the stock option award.

•Expected term: The estimated expected term for employee awards is based on a simplified method that considers an insufficient history of employee exercises. For consultant awards, the estimated expected term is the same as the life of the award.

•Risk-free interest rate: The risk-free interest rate is based on published U.S. Treasury rates for a term commensurate with the expected term.

•Dividend yield: The dividend yield is estimated as zero as the Company has not paid dividends in the past and does not have any plans to pay any dividends in the foreseeable future.

The Company records the fair value of RSUs or stock grants based on the published closing market price on the day before the grant date.

The Company accounts for forfeitures as they occur rather than on an estimated basis.

The Company also has an employee stock purchase program whereby eligible employees can elect payroll deductions that are subsequently used to purchase common stock at a discounted price. There is no compensation recorded for this program as (i) the purchase discount does not exceed the issuance costs that would have been incurred to raise a significant amount of capital by a public offering, (ii) substantially all employees that meet limited employment qualifications may participate on an equitable basis, and (iii) the plan doesn't incorporate option features that would require compensation to be recorded.

See Note 13, Employee Equity-Based Compensation for further information.

Deferred Tax

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheet. The change in deferred tax assets and liabilities for the period represents the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws in deferred tax assets and liabilities are reflected as an adjustment to the tax provision or benefit in the period of enactment.

The Company follows the provisions of ASC 740, Income Taxes, to account for any uncertainty in income taxes with respect to the accounting for all tax positions taken (or expected to be taken) on any income tax return. This guidance applies to all open tax periods in all tax jurisdictions in which the Company is required to file an income tax return. Under U.S. GAAP, in order to recognize an uncertain tax benefit the taxpayer must be more

---

likely than not certain of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more likely than not to be realized upon resolution of the position. Interest and penalties, if any, would be recorded within tax expense.

Foreign Currency Translation and Foreign Currency Transactions

Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive loss in the condensed consolidated statements of stockholders’ deficit.

The Company has assets and liabilities, including receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in foreign currency exchange gain and loss, within the condensed consolidated statement of operations and comprehensive loss.

Loss Per Share

Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested RSUs and the Warrant. Potentially dilutive common shares would also include common shares that would be outstanding if the Notes and the Series A Preferred Stock outstanding at the balance sheet date were converted and shares issuable in connection with the March 2022 Securities Purchase Agreement (as defined in Note 18). Diluted earnings are not presented when the effect of adding such additional common shares is antidilutive.

See Note 12, Loss Per Share, for further information.

Comprehensive Loss

In addition to net loss, comprehensive loss includes all changes in equity during a period, except those resulting from investments by and distributions to owners. The Company holds debt securities as available-for-sale and records the change in fair market value as a component of comprehensive loss. The Company also has adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars which is included as a component of comprehensive loss.

NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Standards that were recently adopted

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). This update simplifies the accounting for convertible debt instruments by removing the beneficial conversion and cash conversion separation models for convertible instruments. Under the update, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives or that do not result in substantial premiums accounted for as paid-in capital. The update also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will no longer be available. The Company adopted the standard on January 1, 2022 through application of the modified retrospective method of transition. The Company applied the standard to the Notes outstanding as of January 1, 2022, as discussed in Note 10, Convertible Notes. As a result, the Notes are now accounted for as a single liability measured at their amortized cost. The Notes are no longer bifurcated between debt and equity and are instead accounted for entirely as debt at face value net of any discount or premium and issuance costs. Interest expense is comprised of (1) cash interest payments, (2) amortization of any debt discounts or premiums based on the original offering, and (3) amortization of any debt issuance costs. On January 1, 2022, the cumulative effect of adoption resulted in an increase in the net carrying amount of the Notes, of $11.5 million, a decrease in additional-paid-in-capital of $37.4 million, and a decrease in accumulated deficit of $25.9 million. ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share. This change has no impact on the Company given the Company was already using the if-converted method to calculate diluted earnings per share.

---

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Topic 815 - 40). ASU 2021-04 codifies the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. This ASU was adopted January 1, 2022, and did not impact the Company's consolidated financial statements at January 1, 2022.

Standards not yet adopted

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. ASU 2022-01 is related to the portfolio layer method of hedge accounting. The amendments in this update clarify the accounting and promote consistency in reporting for hedges where the portfolio layer method is applied. This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. We do not expect the update to have a material effect on our condensed consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 relates to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables. The amendments in this update eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the update to have a material effect on our condensed consolidated financial statements.

NOTE 3. CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments and accounts receivable.

The Company has financial institutions for banking operations that hold 10% or more of the Company’s cash and cash equivalents. As of September 30, 2022, three of the Company's financial institutions held 74%, 12% and 13% of the Company’s cash and cash equivalents. As of December 31, 2021, two of the Company's financial institutions held 72% and 13% of the Company’s cash and cash equivalents.

The Company grants credit to domestic and international customers. Exposure to losses on accounts receivable is principally dependent on each client's financial position. The Company had one customer that accounted for 16% and 13% of the Company’s net accounts receivable balance as of September 30, 2022 and December 31, 2021, respectively.

The Company did not have any customers that represented 10% or more of the Company’s total revenue for the three and nine months ended September 30, 2022 and 2021.

---

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables represent the financial instruments measured at fair value on a recurring basis in the financial statements of the Company and the valuation approach applied to each class of financial instruments at September 30, 2022 and December 31, 2021 (in thousands):

			September 30, 2022
			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Assets:
Cash and cash equivalents:
Money market funds			$	5,145		$	—		$	—		$	5,145
Total cash and cash equivalents			5,145			—			—			5,145
Equity investments:
Mutual funds			808			—			—			808
Total equity investments			808			—			—			808
Debt securities available-for-sale:
Certificates of deposit			—			3,382			—			3,382
U.S. Treasury securities			5,228			—			—			5,228
Commercial paper			—			2,893			—			2,893
Corporate notes and bonds			—			4,096			—			4,096
Debt securities available-for-sale			5,228			10,371			—			15,599
Total assets measured at fair value			$	11,181		$	10,371		$	—		$	21,552

			December 31, 2021
			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Assets:
Cash and cash equivalents:
Money market funds			$	5,563		$	—		$	—		$	5,563
Commercial paper			—			200			—			200
Total cash and cash equivalents			5,563			200			—			5,763
Equity investments:
Mutual funds			841			—			—			841
Total equity investments			841			—			—			841
Debt securities available-for-sale:
Certificates of deposit			—			1,351			—			1,351
U.S. Treasury securities			250			—			—			250
Commercial paper			—			8,046			—			8,046
Corporate notes and bonds			—			13,232			—			13,232
Debt securities available-for-sale			250			22,629			—			22,879
Total assets measured at fair value			$	6,654		$	22,829		$	—		$	29,483

---

Highly liquid investments with an original maturity of three months or less at time of purchase are included in cash and cash equivalents on the condensed consolidated balance sheet.

Level 1 assets are priced using quoted prices in active markets for identical assets which include money market funds, U.S. Treasury securities and mutual funds as these specific assets are liquid.

Level 2 available-for-sale securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs.

At September 30, 2022, the Notes had an outstanding principal amount of $56.6 million with a fair value of $51.7 million. At December 31, 2021, the Notes had an outstanding principal amount of $120.5 million with a fair value of $89.4 million. The fair value of the Notes represents a Level 2 measurement. The fair value of the Notes is typically correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value. See Note 10, Convertible Notes for further detail on the Notes.

The Secured Note is an instrument measured at fair value on a non-recurring basis using Level 3 inputs. The estimated fair value of the Secured Note on August 15, 2022 was $16.0 million. See Note 11, Long-Term Debt Related-Party for further detail on the Secured Note.

The warrant is an instrument measured at fair value on a non-recurring basis using Level 3 inputs. The estimated fair value of the warrant on August 15, 2022 was $3.8 million. See Note 11, Long-Term Debt Related-Party for further detail on the Company’s warrant with a related-party.

NOTE 5. INVESTMENTS

The following tables summarize the Company’s debt securities available-for-sale investments at September 30, 2022 and December 31, 2021 (in thousands):

			September 30, 2022
			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Certificates of deposit			$	3,400		$	—		$	(18)		$	3,382
U.S. Treasury securities			5,266			—			(38)			5,228
Commercial paper			2,901			—			(8)			2,893
Corporate notes and bonds			4,131			—			(35)			4,096
Total			$	15,698		$	—		$	(99)		$	15,599

			December 31, 2021
			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Certificates of deposit			$	1,351		$	—		$	—		$	1,351
U.S. Treasury securities			250			—			—			250
Commercial paper			8,048			—			(2)			8,046
Corporate notes and bonds			13,245			—			(13)			13,232
Total			$	22,894		$	—		$	(15)		$	22,879

---

The following table summarizes the maturities of the Company’s debt securities available-for-sale investments at September 30, 2022 and December 31, 2021 (in thousands):

			September 30, 2022						December 31, 2021
			Amortized Cost			Fair Value			Amortized Cost			Fair Value
Due in less than 1 year			$	15,698		$	15,599		$	22,663		$	22,649
Due in 1-3 years			—			—			231			230
Total			$	15,698		$	15,599		$	22,894		$	22,879

There were no proceeds from sales of debt securities available-for-sale (including principal paydowns) for the three and nine months ended September 30, 2022 and 2021. The Company determines gains and losses of marketable securities based on specific identification of the securities sold. There were no material realized gains or losses from debt securities available-for-sale for the three and nine months ended September 30, 2022 and 2021. No material balances were reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021. No unrealized losses on debt securities available-for-sale have been recognized in income for the three and nine months ended September 30, 2022 and 2021, as the issuers of such securities held by us were of high credit quality.

As of September 30, 2022, there were no holdings of debt securities available-for-sale of any one issuer, other than the U.S. government, in an amount greater than 10%.

As of September 30, 2022 the Company did not carry any debt securities available-for-sale that were below the Company's minimum credit rating. All debt securities available-for-sale had a credit rating of A- or better as of September 30, 2022.

Equity securities are comprised of investments in mutual funds. The fair value of equity securities for each of the periods ended September 30, 2022 and December 31, 2021 was $0.8 million.

Unrealized losses or gains on equity securities recorded in income during the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Unrealized (loss) gain on equity investments			$	(50)		$	(5)					$	(206)		$	39

These unrealized gains or losses are recorded as a component of other income (expense), net. There were no realized gains or losses from equity securities for each of the three and nine months ended September 30, 2022 and 2021.

NOTE 6. INVENTORY

Inventories consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

			September 30,			December 31,
			2022			2021
Raw materials			$	1,769		$	1,343
Work in process			2,133			1,625
Finished goods			1,490			2,099
			$	5,392		$	5,067

---

NOTE 7. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

			September 30,			December 31,
			2022			2021
Computer equipment			$	3,866		$	3,181
Technical equipment			3,259			3,285
Facilities			3,674			3,675
Instruments			3,594			5,364
Capital projects in progress			48			683
Total property and equipment			$	14,441		$	16,188
Accumulated depreciation			(10,820)			(10,799)
Property and equipment, net			$	3,621		$	5,389

Depreciation expense for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Depreciation expense			$	381		$	487					$	1,284		$	1,540

Instruments at cost and accumulated depreciation where the Company is the lessor under operating leases consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

			September 30,			December 31,
			2022			2021
Instruments at cost under operating leases			$	2,452		$	3,110
Accumulated depreciation under operating leases			(1,109)			(1,165)
Net property and equipment under operating leases			$	1,343		$	1,945

NOTE 8. DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Deferred revenue consists of amounts received for products or services not yet delivered or earned. If we anticipate revenue will not be earned within the following twelve months, the amount is reported as other non-current liabilities. A summary of the balances as of September 30, 2022 and December 31, 2021 follows (in thousands):

			September 30,			December 31,
			2022			2021
Products and services not yet delivered			$	524		$	451

We recognized $0.2 million and $0.4 million of revenues that were included in the beginning contract liabilities balances during the three and nine months ended September 30, 2022, respectively, and $0.1 million and $0.3 million of revenues that were included in the beginning contract liabilities balances during the three and nine months ended September 30, 2021, respectively. No material amount of revenue recognized during the period was from performance obligations satisfied in prior periods.

---

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2022, $9.0 million of revenue is expected to be recognized from remaining performance obligations. This balance primarily relates to product shipments for reagents sold to customers under sales-type lease agreements. These agreements have between two and four year terms and revenue is recognized as product is shipped, typically on a straight-line basis. The remaining balance relates to executed service contracts that begin as warranty periods expire. These service contracts typically provide for four-year terms and revenue is recognized on a straight-line basis.

The Company elects not to disclose the value of unsatisfied performance obligations for (i) contracts with an expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

NOTE 9. LONG-TERM DEBT

The Company entered into two loan agreements with one financing company in 2020. Loan proceeds were $0.2 million, with interest rates ranging from 9.8% to 12.4% and maturities becoming due through 2022.

As of September 30, 2022 and December 31, 2021, long-term debt consisted of the following (in thousands):

			September 30,			December 31,
			2022			2021
Loans - various interest			$	80		$	80
Current portion of long-term debt			80			80
Long-term debt			$	—		$	—

The following presents maturities of future principal obligations of long-term debt as of September 30, 2022 (in thousands):

Remainder of 2022			$	80
2023			—
2024			—
2025			—
2026			—
Thereafter			—
Total			$	80

Paycheck Protection Program (PPP) Loan

On April 14, 2020, the Company entered into a promissory note (the “PPP Note”) evidencing an unsecured loan in the amount of $4.8 million made to the Company under the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act.

On July 15, 2021, the Small Business Administration (“SBA”) informed the Company of its full forgiveness for the entire PPP Note amount plus accrued interest, which was $4.8 million as of the date of forgiveness. The SBA’s determination of loan forgiveness does not preclude further investigation by the SBA according to its rules and regulations. With approval of the Company's application for forgiveness the Company recorded a gain on extinguishment of the entire PPP Note amount of $4.8 million during the three and nine months ended September 30, 2021.

---

NOTE 10. CONVERTIBLE NOTES

The Notes are the Company’s senior unsecured obligations and mature on March 15, 2023 (the “Maturity Date”), unless earlier repurchased or converted into shares of common stock under certain circumstances described below. Upon conversion of the Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election. The initial conversion rate of the Notes is 32.3428 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $30.92 per share of common stock, subject to adjustment. The Company pays interest on the Notes semi-annually in arrears on March 15 and September 15 of each year. The Company’s Notes have a fixed coupon rate of 2.5% per annum on the principal amount.

The Company incurred issuance costs related to the issuance of the Notes which is amortized over the five-year contractual term of the Notes using the effective interest method. The effective interest rate on the Notes, including accretion of the Notes to par was 3.2%.

The Notes include customary terms and covenants, including certain events of default upon which the Notes may be due and payable immediately. Holders have the option to convert the Notes in multiples of $1,000 principal amount at any time prior to December 15, 2022, but only in the following circumstances:

•if the Company’s stock price exceeds 130% of the conversion price for 20 of the last 30 trading days of any calendar quarter after June 30, 2018;

•during the 5 business day period after any 5 consecutive trading day period in which the Notes’ trading price is less than 98% of the product of the common stock price times the conversion rate; or

•the occurrence of certain corporate events, such as a change of control, merger or liquidation.

At any time on or after December 15, 2022, a holder may convert its Notes in multiples of $1,000 principal amount. Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture pursuant to which the Notes were issued) are, under certain circumstances, entitled to an increase in the conversion rate. In addition, in the event of a fundamental change or event of default prior to the Maturity Date, holders will, subject to certain conditions, have the right, at their option, to require the Company to repurchase for cash all or part of the Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date. As of September 30, 2022 and December 31, 2021, no Notes were convertible pursuant to their original terms.

Interest expense during the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Contractual coupon interest			$	79		$	1,024					$	1,528		$	3,168
Amortization of debt issuance costs			121			185						386			539
Amortization of the debt discount			—			$	2,987					$	—		$	8,711
Total interest expense on convertible notes			$	200		$	4,196					$	1,914		$	12,418

Gain on extinguishment of exchanged Notes during the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Gain on extinguishment			$	—		$	4,999					$	3,565		$	4,999

---

The carrying value of the Notes at September 30, 2022 consisted of the following (in thousands):

			September 30,
			2022
Outstanding principal at par			$	56,595
Unamortized debt issuance			(270)
Net carrying amount			$	56,325

In connection with the Notes issuance, the Company entered into a prepaid forward stock repurchase transaction (“Prepaid Forward”) with a financial institution (“Forward Counterparty”). Pursuant to the Prepaid Forward, the Company used approximately $45.1 million of the net proceeds from its issuance of the Notes to fund the Prepaid Forward. The aggregate number of shares of the Company’s common stock underlying the Prepaid Forward was approximately 1,858,500. The expiration date for the Prepaid Forward is March 15, 2023, although it may be settled earlier in whole or in part. Upon settlement of the Prepaid Forward, at expiration or upon any early settlement, the Forward Counterparty will deliver to the Company the number of shares of common stock underlying the Prepaid Forward or the portion thereof being settled early. The shares purchased under the Prepaid Forward are treated as treasury stock and not outstanding for purposes of the calculation of basic and diluted earnings per share, but will remain outstanding for corporate law purposes, including for purposes of any future stockholders’ votes, until the Forward Counterparty delivers the shares underlying the Prepaid Forward to the Company. The Company’s Prepaid Forward hedge transaction exposes the Company to credit risk to the extent that its counterparty may be unable to meet the terms of the transaction. The Company mitigates this risk by limiting its counterparty to a major financial institution.

2021 Exchange Transactions

In September 2021, the Company entered into separate exchange agreements with certain holders of the Notes. Under the terms of the exchange agreements, such holders agreed to exchange Notes held by them for shares of the Company’s common stock (the “2021 Exchange Transactions”). During the nine months ended September 30, 2021, such holders exchanged $46.0 million in aggregate principal amount of Notes held by them for 5,945,718 shares of the Company’s common stock. The net carrying value of the Notes exchanged was $40.4 million which the Company repurchased for $34.5 million of common stock. The Company also incurred $0.8 million of reacquisition costs, which was recorded as an offset to gain on extinguishment of debt. The 2021 Exchange Transaction resulted in a net gain of $5.0 million reflected in other income (expense), net for the three and nine months ended September 30, 2021. See Note 18, Stockholders' Equity for additional information.

March 2022 Exchange Transaction

On March 21, 2022, the Company entered into a privately negotiated exchange agreement (the “March 2022 Exchange Agreement”) with a holder of the Notes. Under the terms of the March 2022 Exchange Agreement, the note holder agreed to exchange with the Company $14.0 million in aggregate principal amount of Notes held by it in eight equal tranches as follows for each tranche: (a) 22.64 shares per $1,000 principal amount of Notes exchanged, plus (b) an additional number of shares of the Company’s common stock per $1,000 principal amount of Notes exchanged equal to the sum, for each of the trading days during a separate agreed upon reference period for each tranche commencing on March 21, 2022 for the first tranche, of the quotient of (i) $155.67 divided by (ii) the daily volume-weighted average price for such trading day (collectively, the “March 2022 Exchange Transaction”). The closing of the March 2022 Exchange Transaction occurred in eight tranches (“Obligation to Exchange”), with the first closing occurring on March 29, 2022 and the last closing on May 18, 2022.

On March 21, 2022 the Obligation to Exchange the $14.0 million of Notes in the March 2022 Exchange Transaction was accounted for as an extinguishment and was replaced by new notes with an embedded feature (the “New Notes”). The New Notes were elected to be carried using the fair value option. The New Notes were recorded at fair value on initial measurement and remeasured at fair value (“mark to market”) at each reporting period with changes in fair value reported in other income and expense, net. This fair value election was exclusive to the New Notes and did not extend to other Notes. The embedded feature was no longer outstanding on September 30, 2022 as the New Notes were exchanged and the Obligation to Exchange retired on May 18, 2022.

---

During the nine months ended September 30, 2022 the holder of the Notes exchanged $14.0 million in aggregate principal amount of Notes held by it for 10,798,482 shares of the Company’s common stock pursuant to the March 2022 Exchange Agreement. The net carrying value of the Notes exchanged was $14.0 million which the Company repurchased for $10.2 million of common stock. The Company also incurred $0.2 million of reacquisition costs, which was recorded as an offset to gain on extinguishment of debt. This exchange transaction resulted in a net gain of $3.6 million reflected in other income (expense), net for the nine months ended September 30, 2022. See Note 18, Stockholders' Equity for additional information.

August 2022 Exchange Transaction

On August 15, 2022, the Company entered into an exchange agreement (the “August 2022 Exchange Agreement”) with the Jack W. Schuler Living Trust (the “Schuler Trust”), as discussed in Note 11, Long-Term Debt Related-Party. Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it for (a) the Secured Note in an aggregate principal amount of $34.9 million and (b) the Warrant to acquire the Company’s common stock.

Under ASC 470-50-40, the transaction qualified as an extinguishment of debt. Under extinguishment accounting, the Notes were derecognized and the new instruments, which include the Secured Note and the Warrant, were recorded at their fair values. The difference between the fair values of the new instruments and the net carrying amount of the Notes being extinguished was included in the calculation of gain. The gain from the extinguishment of the Notes was treated as a capital transaction. The Secured Note includes various features that were advantageous to the Company, including a lower interest rate compared to current market rates and a share conversion feature. There were no other negotiating parties that had similar terms or economic outcomes. As such, the exchange was considered not to be an arm’s length transaction, and therefore the resulting gain was accounted for as a capital transaction. The net carrying amount of the extinguished Notes was $49.6 million. The estimated fair value of the Secured Note and the Warrant on August 15, 2022 was $16.0 million and $3.8 million, respectively, which resulted in a net gain of $29.8 million that was recorded to contributed capital. See Note 18, Stockholders' Equity and Note 11, Long-Term Debt Related-Party for additional information.

NOTE 11. LONG-TERM DEBT RELATED-PARTY

On August 15, 2022, the Company entered into the August 2022 Exchange Agreement with the Schuler Trust, a holder of the Notes. Jack Schuler, who serves as a member of the Company’s board of directors, is the sole trustee of the Schuler Trust. Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it for (a) a secured promissory note in an aggregate principal amount of $34.9 million (the “Secured Note”) and (b) a Warrant to acquire the Company’s common stock at an exercise price of $2.12 per share (the “Warrant”).

The Secured Note has a scheduled maturity date of August 15, 2027 and will be repayable upon written demand at any time on or after such date. The Company may, at its option, repay the note in (i) cash or (ii) in the form of common stock of the Company, in a number of shares that is obtained by dividing the total amount of such payment by $2.12. The Secured Note bears interest at a rate of 5.0% per annum, payable at the option of the Company in the same form, at the earlier of (i) any prepayment of principal and (ii) maturity. The Company may prepay the Secured Note at any time without premium or penalty. The Secured Note is secured by substantially all of the assets of the Company, subject to customary exceptions and limitations, pursuant to a security agreement, dated as of August 15, 2022. The Secured Note does not restrict the incurrence of future indebtedness by the Company but shall become subordinated in right of payment and lien priority upon the request of any future senior lender.

Under ASC 470-50-40, the transaction qualified as an extinguishment of debt. Under extinguishment accounting, the Notes were derecognized and the new instruments, which include the Secured Note and the Warrant, were recorded at their fair values. See Note 10, Convertible Notes for additional information. The Secured Notes is an instrument measured at fair value on a non-recurring basis using Level 3 inputs. To estimate the Secured Note’s fair value, the Company applied a Monte Carlo simulation which simulated the share price of the Company over the remaining term to the maturity date of the Secured Note. The simulated per-share price in a given iteration determined if the Company settled in cash or shares. The estimated fair value of the Secured Note on August 15, 2022 was $16.0 million. This valuation estimated an issuance discount of $18.9 million. The effective interest rate on the Secured Note is 24.60%.

---

The carrying value of the Secured Note at September 30, 2022 consisted of the following (in thousands):

			September 30,
			2022
Outstanding principal			$	34,934
Unamortized debt issuance discount			(18,635)
Net carrying amount			$	16,299

Interest expense in connection with the Secured Note during the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Contractual interest			$	220		$	—					$	220		$	—
Amortization of the debt discount			275			—						275			—
Total interest expense			$	495		$	—					$	495		$	—

Warrant

The Warrant may be exercised from February 15, 2023 through the earlier of (i) August 15, 2029 and (ii) the consummation of certain acquisition transactions involving the Company, as set forth in the Warrant. The Warrant is exercisable for up to 2,471,710 shares of common stock. The Warrant meets the criteria for classification in stockholders’ equity and was recorded in equity and initially measured at fair value. The Warrant was measured at fair value on a non-recurring basis using Level 3 inputs. The fair value of the warrant on August 15, 2022 was $3.8 million.

The table below summarizes the inputs used to calculate the estimated fair value of the Warrant issued during the three months ended September 30, 2022:

Contractual term (in years)			7.0
Volatility			76.10		%
Expected dividends			—
Risk free interest rates			2.86		%

---

NOTE 12. LOSS PER SHARE

Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share are the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive due to the Company’s losses.

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect for each of the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Shares issuable upon the release of RSUs			4,619			2,320						4,619			2,320
Shares issuable upon exercise of stock options			5,665			7,634						5,665			7,634
Shares issuable upon the exercise of the Warrant			2,472			—						2,472			—
			12,756			9,954						12,756			9,954

Potentially dilutive common shares would include common shares that would be outstanding if Notes convertible at the balance sheet date were converted. As discussed in Note 10, Convertible Notes, upon conversion of the Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election. The initial conversion rate of the Notes is 32.3428 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $30.92 per share of common stock. As of September 30, 2022, no Notes were convertible pursuant to the original terms. The number of shares of common stock issuable upon conversion of the outstanding Notes based on the initial conversion rate was approximately 1,830,441 shares as of September 30, 2022. Historically the Company has engaged in privately negotiated exchanges of Notes for a substantially greater number of shares than the initial conversion rate of the Notes described above because the Company’s stock price at the time of such exchanges was significantly less than the $30.92 initial conversion price of the Notes.

In connection with the Notes, the Company entered into a prepaid forward stock repurchase transaction. The aggregate number of shares of the Company’s common stock underlying the Prepaid Forward was approximately 1,858,500. The shares purchased under the Prepaid Forward are treated as treasury stock and not outstanding for purposes of the calculation of basic and diluted earnings per share, but will remain outstanding for corporate law purposes, including for purposes of any future stockholders’ votes, until the Forward Counterparty delivers the shares underlying the Prepaid Forward to the Company.

Potentially dilutive common shares include common shares that would be outstanding if Series A Preferred Stock were converted into common stock. Each share of Series A Preferred Stock is convertible, at the option of the holder, at any time into one share of the Company’s common stock. Additionally, each share of Series A Preferred Stock will automatically be converted into one share of the Company’s common stock immediately upon a sale of all outstanding stock of the Company or a merger of the Company into another corporation where the pre-merger Company’s stockholders cease to be the controlling stockholders of the post-merger corporation. The number of shares of common stock issuable upon conversion of the Series A Preferred Stock is 3,954,546 as of September 30, 2022.

As discussed in Note 18, Stockholders' Equity, the Company entered into a securities purchase agreement with the Schuler Trust for the issuance and sale by the Company of an aggregate of 2,439,024 shares of the Company’s common stock. The closing of the transaction is expected to occur on December 30, 2022, subject to the satisfaction of customary closing conditions and is considered an equity forward agreement. The shares to be issued from this agreement were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect due to net losses.

As discussed in Note 11, Long-Term Debt Related-Party, the Company may, at its option, repay the Secured

---

NOTE 13. EMPLOYEE EQUITY-BASED COMPENSATION

The following table summarizes option activity under the Company's equity-based compensation plans for the nine months ended September 30, 2022:

			Number of Shares			Weighted Average Exercise Price per Share
Options outstanding January 1, 2022			7,192,540			$	13.89
Granted			140,000			3.05
Forfeited			(204,232)			12.49
Exercised			(6,105)			1.04
Expired			(1,457,019)			10.33
Options outstanding September 30, 2022			5,665,184			$	14.60

No stock options were granted during the three months ended September 30, 2022 and 2021.

The following table shows summary information for outstanding options and options that are exercisable (vested) as of September 30, 2022:

			Options Outstanding			Options Exercisable
Number of options			5,665,184			4,422,595
Weighted average remaining contractual term (in years)			5.54			5.04
Weighted average exercise price			$	14.60		$	15.32
Weighted average fair value			$	9.10		$	9.44
Aggregate intrinsic value (in thousands)			$	—		$	—

The following table summarizes RSU and restricted stock award activity for the nine months ended September 30, 2022:

			Number of Shares			Weighted Average Grant Date Fair Value per Share
Outstanding January 1, 2022			2,090,182			$	10.77
Granted			4,107,083			1.55
Forfeited			(451,703)			8.68
Released			(1,127,017)			3.43
Outstanding September 30, 2022			4,618,545			$	4.57

---

The table below summarizes equity-based compensation expense for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Cost of sales			$	167		$	82					$	570		$	257
Research and development			151			266						1,052			4,340
Sales, general and administrative			911			3,281						6,557			14,461
			$	1,229		$	3,629					$	8,179		$	19,058

The table below summarizes share-based compensation cost capitalized to inventory for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Cost capitalized to inventory			$	69		$	77					$	186		$	319

As of September 30, 2022, unrecognized equity-based compensation expense related to unvested stock options and unvested RSUs was $2.3 million and $7.8 million, respectively. This is expected to be recognized over the years 2022 through 2027.

Included in the above-noted stock options outstanding and stock compensation expense are performance-based stock options which vest only upon the achievement of certain targets. Performance-based stock options are generally granted at-the-money, contingently vest over a period of 1 to 2 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These options were valued in the same manner as the time-based options, with the assumption that performance goals will be achieved. The inputs for expected volatility, expected dividends, and risk-free rate used in estimating those options’ fair value are the same as the time-based options issued under the Company's equity incentive plans. The expected term for performance-based stock options is 5 to 7 years. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

During 2020, the Company granted 105,000 performance-based stock options. Of these performance-based stock options, performance obligations had been met for 90,000 options which became exercisable in a prior period. Of these performance-based stock options, 90,000 options expired during the nine months ended September 30, 2022. No performance-based stock options were outstanding as of September 30, 2022.

The table below summarizes share-based compensation cost in connection with performance-based stock options for the nine months ended September 30, 2022 and 2021 (in thousands):

			Nine Months Ended September 30,
			2022			2021
Performance-based stock option expense			$	—		$	230

Included in the above-noted RSU and restricted stock award outstanding amounts are performance-based RSUs which vest only upon the achievement of certain targets. Performance-based RSUs contingently vest over a period of 1 to 3 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These units were valued in the same manner as other RSUs, based on the published closing market price on the day before the grant date. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

During 2020, the Company granted performance-based RSUs of which 165,974 were outstanding as of September 30, 2022. No changes occurred during the nine months ended September 30, 2022.

During 2021, the Company granted performance-based RSUs of which 111,806 were outstanding as of September 30, 2022. No changes occurred during the nine months ended September 30, 2022.

---

The table below summarizes share-based compensation cost in connection with performance-based RSUs for the nine months ended September 30, 2022 and 2021 (in thousands):

			Nine Months Ended September 30,
			2022			2021
Performance-based RSU expense			$	—		$	818

NOTE 14. INCOME TAXES

For the nine months ended September 30, 2022, the Company did not carry an income tax provision amount as the Company does not recognize tax benefits from current year tax losses in the U.S. and other foreign jurisdictions. The Company’s tax expense for the nine months ended September 30, 2022 differs from the tax expense computed by applying the U.S. statutory tax rate to its year-to-date pre-tax loss of $47.7 million, as no tax benefits were recorded for tax losses generated in the U.S. and other foreign jurisdictions due to the valuation allowance. At September 30, 2022, the Company had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards and a deferred tax liability related to amortization of the Notes. The Company provided a valuation allowance against its net deferred tax assets as future realization of such assets is not more likely than not to occur.

The Company accounts for uncertain tax positions pursuant to the recognition and measurement criteria under ASC 740, Income Taxes. For the three and nine months ended September 30, 2022, we did not note any significant changes to our uncertain tax positions. We do not anticipate significant changes to uncertain tax positions within the next 12 months.

NOTE 15. COMMITMENTS

During April 2022, the Company entered into a non-cancellable purchase obligation with a supplier to acquire raw materials for a total commitment of $11.9 million. Under the terms of this agreement the Company has until March 15, 2027 to take delivery of purchased items. This commitment was entered into to ensure proper material quantities to develop and commercialize our next generation AST platform.

As of September 30, 2022 the commitment remains $11.9 million as the Company has not taken delivery of any inventory.

---

NOTE 16. LEASES

The following presents supplemental information related to our leases in which we are the lessee for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Cash paid for amounts included in lease liabilities:
Operating cash flows from operating leases			$	219		$	195					$	712		$	502
Operating cash flows from finance leases			$	684		$	—					$	1,109		$	—
ROU assets obtained in exchange for lease obligations:
Operating leases			$	—		$	—					$	—		$	—
Finance leases			$	—		$	—					$	2,760		$	—
Lease Cost:
Operating leases			$	254		$	257					$	818		$	816
Finance leases			$	240		$	—					$	462		$	—
Short-term leases			$	26		$	40					$	67		$	99

The weighted average remaining lease term on our operating leases is 2.8 years. The weighted average discount rate on those leases is 7.1%. The weighted average remaining lease term on our finance leases is 2.5 years. The weighted average discount rate on those leases is 4.6%.

The following presents maturities of lease liabilities in which we are the lessee as of September 30, 2022 (in thousands):

			Operating			Finance
Remainder of 2022			$	227		$	180
2023			968			721
2024			1,047			721
2025			584			173
2026			—			—
Thereafter			—			—
Total lease payments			2,826			1,795
Less imputed interest			(278)			(144)
			$	2,548		$	1,651

---

The net investment in sales-type leases, where we are the lessor, is a component of other current assets and other non-current assets in our condensed consolidated balance sheet. As of September 30, 2022, the total net investment in these leases was $3.0 million. The following presents maturities of lease receivables under sales-type leases as of September 30, 2022 (in thousands):

Remainder of 2022			$	351
2023			1,154
2024			661
2025			206
2026			640
Thereafter			—
Total undiscounted cash flows			3,012
Less imputed interest			—
Present value of lease payments			$	3,012

NOTE 17. GEOGRAPHIC AND REVENUE DISAGGREGATION

The Company operates as one operating segment. Sales to customers outside the U.S. represented 14% and 8% for the three months ended September 30, 2022 and 2021, respectively, and 14% and 12% for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, balances due from foreign customers, in U.S. dollars, were $0.6 million and $0.7 million, respectively.

The following presents total net sales by geographic territory for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Domestic			$	2,551		$	2,874					$	8,390		$	7,406
Foreign			409			248						1,390			1,033
			$	2,960		$	3,122					$	9,780		$	8,439

The following presents total net sales by line of business for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Accelerate Pheno revenue			$	2,933		$	3,084					$	9,669		$	8,324
Other revenue			27			38						111			115
			$	2,960		$	3,122					$	9,780		$	8,439

The following presents total net sales by products and services for the three and nine months ended September 30, 2022 and 2021 (in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
			2022			2021						2022			2021
Products			$	2,532		$	2,773					$	8,554		$	7,474
Services			428			349						1,226			965
			$	2,960		$	3,122					$	9,780		$	8,439

---

Lease revenue included in net sales was $0.2 million and $0.5 million for the three months ended September 30, 2022 and 2021, respectively, and $1.3 million for each of the nine months ended September 30, 2022 and 2021.

The following presents property and equipment, net by geographic territory (in thousands):

			September 30,			December 31,
			2022			2021
Domestic			$	3,383		$	5,014
Foreign			238			375
			$	3,621		$	5,389

NOTE 18. STOCKHOLDERS' EQUITY

December 2020 Securities Purchase Agreement

During December 2020, the Company entered into a securities purchase agreement (the “December 2020 Securities Purchase Agreement”) with Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips, or entities affiliated with such persons (collectively, the “Original Purchasers”), for the issuance and sale by the Company of an aggregate of 4,166,663 shares of the Company’s common stock. Each of Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips is a member of the Company’s board of directors. Mr. Phillips also serves as the Company’s President and Chief Executive Officer.

The Schuler Trust, which was the entity affiliated with Jack W. Schuler that originally entered into the December 2020 Securities Purchase Agreement for the purchase of 3,964,843 shares for an aggregate purchase price of approximately $30.5 million, subsequently entered into an assignment and assumption agreement whereby it assigned all of its rights and obligations as an Original Purchaser to three other entities under the December 2020 Securities Purchase Agreement (collectively, the “Schuler Purchasers”). These three entities are related to Jack W. Schuler but are not affiliates of his.

Pursuant to the December 2020 Securities Purchase Agreement, the Original Purchasers agreed to purchase the shares at a purchase price (determined in accordance with Nasdaq rules relating to the “market value” of the Company’s common stock) of $7.68 per share, for an aggregate purchase price of approximately $32 million.

The December 2020 Securities Purchase Agreement contemplated that the closing of the purchase and sale of the shares would occur in three tranches, with the first and second tranches having closed on February 19, 2021 and April 9, 2021, respectively, whereby the Company received total proceeds of approximately $21.3 million which were recorded to contributed capital.

On September 17, 2021, the Company entered into a rescission agreement (the “Rescission Agreement”) with the Schuler Purchasers and the Schuler Trust pursuant to which, effective as of January 29, 2021, the Company and the Schuler Purchasers agreed to rescind and unwind the December 2020 Securities Purchase Agreement for all legal, tax and financial purposes ab initio as if the related transactions, including the issuance and sale of an aggregate of 2,643,228 shares in the first two tranche closings and the third tranche (as discussed below) under the December 2020 Purchase Agreement, had never occurred with respect to the Schuler Purchasers and the Company. The 2,643,228 Shares re-acquired by the Company from the Schuler Purchasers as a result of the Rescission Agreement were treated as a reduction to contributed capital and were not outstanding for purposes of the calculation of basic and diluted earnings per share.

On September 30, 2021, the Company closed the final third tranche in connection with the December 2020 Securities Purchase Agreement and received total proceeds of approximately $0.5 million. In accordance with the Rescission Agreement, the Schuler Purchasers did not participate in the third tranche. During the nine months ended September 30, 2021, the Company issued 201,820 shares and received total proceeds of approximately $1.5 million under the December 2020 Securities Purchase Agreement, which were recorded to contributed capital, after giving effect to the Rescission Agreement.

---

September 2021 Securities Purchase Agreement

During September 2021, the Company entered into a new securities purchase agreement (the “September 2021 Securities Purchase Agreement”) with the Schuler Purchasers for the issuance and sale by the Company of an aggregate of 3,954,546 shares of the Company’s newly designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Shares”). Each share of Series A Preferred Stock is convertible, at the option of the holder, at any time into one share of the Company’s common stock.

Pursuant to the September 2021 Securities Purchase Agreement, the Schuler Purchasers agreed to purchase the Series A Preferred Shares at a purchase price of $7.70 per share for an aggregate purchase price of approximately $30.5 million.

The September 2021 Securities Purchase Agreement contemplated the closing of the purchase and sale of the Series A Preferred Shares would occur in two tranches. The first tranche closed on the date of the execution of the September 2021 Securities Purchase Agreement whereby an aggregate of 2,636,364 Series A Preferred Shares were issued and sold to the Schuler Purchasers. The Company received total proceeds of approximately $20.3 million, which was recorded to contributed capital during the three months ended September 30, 2021.

The second tranche (the “Tranche Right”) had not closed by September 30, 2021 and was concluded to be an obligation of the Schuler Purchasers to acquire, and the Company to sell an additional 1,318,182 Series A Preferred Shares at a purchase price of $7.70 per share for proceeds of $10.2 million, subsequent to the September 30, 2021 balance sheet date. The Company concluded the Tranche Right met the definition of a freestanding financial instrument which was recorded within stockholder’s equity. The value of this Tranche Right as September 30, 2021 was $2.5 million. The estimated fair value of the Tranche Right represented a Level 3 measurement as this financial instrument has no market activity. The estimated fair value of the Tranche Right was determined as the excess value of the forward contract when compared to the underlying asset. The fair value of this forward contract can be represented by the difference between the contractual forward price of $7.70 and the prevailing exchange-traded common stock price ($5.81 at September 22, 2021 and $5.83 at September 30, 2021), multiplied by 1,318,182 Series A Preferred Shares. On October 29, 2021, the Company closed the final second tranche in connection with the September 2021 Securities Purchase Agreement whereby the Company issued and sold an aggregate of 1,318,182 Series A Preferred Shares to the Schuler Purchasers and received total proceeds of approximately $10.2 million.

2021 Exchange Transactions

During the none months ended September 30, 2021, certain holders of the Notes exchanged $46.0 million in aggregate principal amount of Notes held by them for 5,945,718 shares of the Company’s common stock pursuant to their respective exchange agreement. Using the closing stock price on September 22, 2021 of $5.81, the 5,945,718 shares of the Company’s common stock were determined to have a value of $34.5 million, which was recorded to contributed capital during the nine months ended September 30, 2021. See Note 10, Convertible Notes, for additional information.

March 2022 Exchange Transaction

During the nine months ended September 30, 2022, a holder of the Notes exchanged $14.0 million in aggregate principal amount of Notes held by it for 10,798,482 shares of the Company's common stock pursuant to the March 2022 Exchange Agreement. The 10,798,482 shares of the Company’s common stock were determined to have a value of $10.2 million, which was recorded to contributed capital during the nine months ended September 30, 2022. See Note 10, Convertible Notes for additional information.

March 2022 Securities Purchase Agreement

On March 24, 2022, the Company entered into a securities purchase agreement (the “March 2022 Securities Purchase Agreement”) with the Schuler Trust for the issuance and sale by the Company of an aggregate of 2,439,024 shares of the Company’s common stock to the Schuler Trust in an offering (the “Private Placement”) exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.

---

Pursuant to the March 2022 Securities Purchase Agreement, the Schuler Trust agreed to purchase the shares at a purchase price (determined in accordance with Nasdaq rules relating to the “market value” of the Company’s common stock) of $1.64 per share, for an aggregate purchase price of $4.0 million.

On June 29, 2022, the Company and the Schuler Trust agreed to extend the closing date of the Private Placement (the “Closing Date”) from June 30, 2022 to September 26, 2022, subject to the satisfaction of customary closing conditions. On September 29, 2022, the parties agreed to further extend the Closing Date to December 30, 2022, effective as of September 26, 2022.

August 2022 Exchange Transaction

On August 15, 2022, the Company entered into the August 2022 Exchange Agreement with the Schuler Trust. Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it for (a) the Secured Note in an aggregate principal amount of $34.9 million and (b) the Warrant to acquire the Company’s common stock. The gain from the extinguishment of the Notes was treated as a capital transaction. The net gain on extinguishment was $29.8 million during the three months ended months ended September 30, 2022, and was recorded to contributed capital. See Note 10, Convertible Notes and Note 11, Long-Term Debt Related-Party for additional information.

The Warrant meets the criteria for classification in stockholders’ equity and was recorded in contributed capital at fair value of $3.8 million on August 15, 2022.

August 2022 Public Offering

On August 23, 2022, the Company completed a public offering 17,500,000 shares of its common stock at a public offering price of $2.00 per share. The Company received net proceeds of approximately $32.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company.

NOTE 19. RELATED-PARTY TRANSACTIONS

2021 Exchange Transactions

As discussed in Note 10, Convertible Notes, the Company carries Notes. The Schuler Family Foundation (the “Foundation”) previously held an aggregate of $42.0 million of the Notes. Jack W. Schuler, a member of the Company’s board of directors, is the President of the Foundation.

During the three months ended September 30, 2021, the Foundation transferred by gift the $42.0 million aggregate principal amount of Notes held by the Foundation to the Schuler Initiative Supporting Charitable Trust (the “Supporting Organization”), a tax-exempt organization that is not an affiliate of Jack W. Schuler.

In connection with the 2021 Exchange Transactions the Supporting Organization exchanged $42.0 million in aggregate principal amount of Notes held by it for 5,428,699 shares of the Company's common stock. Using the closing stock price on September 22, 2021 of $5.81, the 5,428,699 shares of the Company's common stock were determined to have a value of $31.5 million which was recorded to contributed capital for the three months ended September 30, 2021. The Supporting Organization had the same or similar terms as the other counter parties. The Company determined the 2021 Exchange Transactions did not meet the criteria of a capital transaction and was recorded as a gain on extinguishment of debt. See Note 10, Convertible Notes and Note 18, Stockholders' Equity, for additional information.

December 2020 Securities Purchase Agreement

On December 24, 2020, the Company entered into the December 2020 Securities Purchase Agreement with the Original Purchasers for the issuance and sale by the Company of 4,166,663 shares of the Company’s common stock. The Original Purchasers are comprised of certain directors and officers of the Company, or entities affiliated or related to such persons. See Note 18, Stockholders' Equity, for further information.

On September 17, 2021, the Company entered into the Rescission Agreement with the Schuler Purchasers and the Schuler Trust, an entity affiliated with Jack W. Schuler, pursuant to which, effective as of January 29, 2021, the Company and the Schuler Purchasers agreed to rescind and unwind the December 2020 Securities Purchase

---

Agreement for all legal, tax and financial purposes ab initio as if the related transactions, including the issuance and sale of an aggregate of 2,643,228 Shares in the first two tranche closings and the third tranche under the December 2020 Purchase Agreement, had never occurred with respect to the Schuler Purchasers and the Company. The Schuler Purchasers are related to Jack W. Schuler but are not affiliates of his. See Note 18, Stockholders' Equity, for further information.

During the nine months ended September 30, 2021, the Company issued 201,820 shares and received total proceeds of approximately $1.5 million under the December 2020 Securities Purchase Agreement after giving effect to the Rescission Agreement.

September 2021 Securities Purchase Agreement

On September 22, 2021, the Company entered into the September 2021 Securities Purchase Agreement with the Schuler Purchasers for the issuance and sale by the Company of 3,954,546 Series A Preferred Shares. The Schuler Purchasers are related to Jack W. Schuler but are not affiliates of his.

During the nine months ended September 30, 2021, the Company issued 2,636,364 Series A Preferred Shares and received total proceeds of approximately $20.3 million under the September 2021 Securities Purchase Agreement. See Note 18, Stockholders' Equity, for further information.

March 2022 Securities Purchase Agreement

On March 24, 2022, the Company entered into the March 2022 Securities Purchase Agreement with the Schuler Trust for the issuance and sale by the Company of 2,439,024 shares of the Company’s common stock. Jack Schuler serves as a member of the Company’s board of directors and is the sole trustee of the Schuler Trust. See Note 18, Stockholders’ Equity, for further information.

August 2022 Exchange Transaction

On August 15, 2022, the Company entered into the August 2022 Exchange Agreement with the Schuler Trust. Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it for the Secured Note in an aggregate principal amount of $34.9 million and a warrant to acquire the Company’s common stock. The net gain on extinguishment was $29.8 million during the nine months ended September 30, 2022, and was recorded as contributed capital. See Note 10, Convertible Notes and Note 11, Long-Term Debt Related-Party for additional information.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

ATTACHMENTS / EXHIBITS

EX-10.5

EX-31.1

EX-31.2

EX-32

XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

IDEA: R1.htm

IDEA: R2.htm

IDEA: R3.htm

IDEA: R4.htm

IDEA: R5.htm

IDEA: R6.htm

IDEA: R7.htm

IDEA: R8.htm

IDEA: R9.htm

IDEA: R10.htm

IDEA: R11.htm

IDEA: R12.htm

IDEA: R13.htm

IDEA: R14.htm

IDEA: R15.htm

IDEA: R16.htm

IDEA: R17.htm

IDEA: R18.htm

IDEA: R19.htm

IDEA: R20.htm

IDEA: R21.htm

IDEA: R22.htm

IDEA: R23.htm

IDEA: R24.htm

IDEA: R25.htm

IDEA: R26.htm

IDEA: R27.htm

IDEA: R28.htm

IDEA: R29.htm

IDEA: R30.htm

IDEA: R31.htm

IDEA: R32.htm

IDEA: R33.htm

IDEA: R34.htm

IDEA: R35.htm

IDEA: R36.htm

IDEA: R37.htm

IDEA: R38.htm

IDEA: R39.htm

IDEA: R40.htm

IDEA: R41.htm

IDEA: R42.htm

IDEA: R43.htm

IDEA: R44.htm

IDEA: R45.htm

IDEA: R46.htm

IDEA: R47.htm

IDEA: R48.htm

IDEA: R49.htm

IDEA: R50.htm

IDEA: R51.htm

IDEA: R52.htm

IDEA: R53.htm

IDEA: R54.htm

IDEA: R55.htm

IDEA: R56.htm

IDEA: R57.htm

IDEA: R58.htm

IDEA: R59.htm

IDEA: R60.htm

IDEA: R61.htm

IDEA: R62.htm

IDEA: R63.htm

IDEA: R64.htm

IDEA: R65.htm

IDEA: R66.htm

IDEA: R67.htm

IDEA: R68.htm

IDEA: R69.htm

IDEA: R70.htm

IDEA: R71.htm

IDEA: R72.htm

IDEA: R73.htm

IDEA: R74.htm

IDEA: R75.htm

IDEA: R76.htm

IDEA: R77.htm

IDEA: R78.htm

IDEA: R79.htm

IDEA: R80.htm

IDEA: R81.htm

IDEA: R82.htm

IDEA: axdx-20220930_htm.xml

IDEA: Financial_Report.xlsx

IDEA: FilingSummary.xml

IDEA: MetaLinks.json