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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 001-40894
___________________________________
IsoPlexis Corporation
___________________________________
(Exact name of Registrant as Specified in its Charter)
Delaware
46-2179799
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
35 NE Industrial Road, Branford, CT 06405
(Address of principal executive offices and zip code)

(203) 208-4111
Registrant’s telephone number, including area code
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareISOThe Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
The registrant had outstanding 39,078,949 shares of common stock as of May 9, 2022.


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TABLE OF CONTENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements.” These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies and other future conditions. Such forward-looking statements may include, without limitation, statements about future opportunities for us and our products and services, our future operations, financial or operating results, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions and other expectations and targets for future periods. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “predict,” “project,” “target,” “potential,” “seek,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “plan,” and other words and terms of similar meaning.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and cash flows, and the development of the markets in which we operate, are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, among others, the following:

estimates of our addressable market, market growth, future revenue, expenses, capital requirements and our needs for additional financing;

the implementation of our business model and strategic plans for our products and technologies;

competitive companies and technologies and our industry;

our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers;

our ability to develop and commercialize new products;

our ability to establish and maintain intellectual property protection for our products or avoid or defend claims of infringement;

the performance of third party suppliers;

our ability to hire and retain key personnel and to manage our future growth effectively;

our ability to obtain additional financing in future offerings;

the volatility of the trading price of our common stock;

the potential effects of government regulation;

the impact of COVID-19 on our business; and

our expectations about market trends.

For a further discussion of these and other factors that could impact our future results, performance or transactions, see Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and our other subsequent filings with the Securities and Exchange Commission (the “SEC”). Given these uncertainties, you should not place undue reliance on these forward-looking statements.
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You should read this Form 10-Q and the documents that we reference within it completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Form 10-Q by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Unless the context otherwise requires, we use the terms “IsoPlexis,” the “Company,” “we,” “us” and “our” in this Form 10-Q to refer to IsoPlexis Corporation and our consolidated subsidiaries.

Channels for Disclosure of Information

Investors and others should note that we may announce material information to the public through filings with the SEC, our website (www.isoplexis.com), press releases, public conference calls, public webcasts and our social media accounts (including https://www.linkedin.com/company/isoplexis-inc-/). We use these channels to communicate with our customers and the public about the Company, our products, our services and other matters. We encourage our investors, the media and others to review the information disclosed through such channels as such information could be deemed to be material information. The information on such channels, including on our website and our social media accounts, is not incorporated by reference in this Form 10-Q and shall not be deemed to be incorporated by reference into any other filing under the Securities Act (as defined below) or the Exchange Act (as defined below), except as expressly set forth by specific reference in such a filing. Please note that this list of disclosure channels may be updated from time to time.
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Part I - Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share amounts)March 31,
2022
December 31,
2021
Assets
Current assets:
Cash$97,608 $126,566 
Accounts receivable, net3,937 4,100 
Inventories, net34,504 24,299 
Prepaid expenses and other current assets3,241 3,478 
Total current assets139,290 158,443 
Property and equipment, net9,610 5,778 
Intangible assets, net20,750 21,008 
Operating lease right-of-use assets5,338  
Other assets1,124 2,243 
Total assets$176,112 $187,472 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$10,239 $4,839 
Accrued expenses and other current liabilities6,828 7,827 
Deferred revenue846 915 
Total current liabilities17,913 13,581 
Long-term operating lease obligations4,598  
Long-term debt38,902 31,646 
Total liabilities:61,413 45,227 
Commitments and contingencies (Notes 10 and 12)
Stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2022 and December 31, 2021
  
Common stock, $0.001 par value, 400,000,000 shares authorized; 39,043,119 and 39,036,010 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
39 39 
Additional paid-in capital277,358 276,179 
Accumulated deficit(162,698)(133,973)
Total stockholders’ equity114,699 142,245 
Total liabilities and stockholders’ equity
$176,112 $187,472 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
(in thousands, except share and per share amounts)20222021
Revenue
Product revenue$4,454 $2,927 
Service revenue457 307 
Total revenue4,911 3,234 
Cost of product revenue2,329 1,550 
Cost of service revenue27 24 
Gross profit2,555 1,660 
Operating expenses:
Research and development expenses7,133 3,674 
General and administrative expenses11,476 4,378 
Sales and marketing expenses12,043 7,074 
Total operating expenses30,652 15,126 
Loss from operations(28,097)(13,466)
Other income (expense):
Interest expense, net(986)(743)
Other income (expense), net358 (1,350)
Net loss$(28,725)$(15,559)
Accrued dividends on preferred stock (3,276)
Net loss attributable to common stockholders(28,725)(18,835)
Basic and diluted net loss per common share$(0.74)$(8.81)
Weighted-average common shares outstanding—basic and diluted39,037,528 2,137,624 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
Series A PreferredSeries A-2 PreferredSeries B PreferredSeries B-2 PreferredSeries C PreferredSeries C-2 PreferredSeries D PreferredCommon StockAdditional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
(in thousands, except share amounts)SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 1, 2022 $  $  $  $  $ $ $  $ 39,036,010 $39 $276,179 $(133,973)$142,245 
Exercise of common stock options— — — — — — — — — — — — — — 7,109 — 2 — 2 
Stock-based compensation— — — — — — — — — — — — — — — — 877 — 877 
Warrant modification expense— — — — — — — — — — — — — — — — 300 — 300 
Net loss— — — — — — — — — — — — — — — — — (28,725)(28,725)
Balance at March 31, 2022 $  $  $  $  $ $ $  $ 39,043,119 $39 $277,358 $(162,698)$114,699 
Series A PreferredSeries A-2 PreferredSeries B PreferredSeries B-2 PreferredSeries C PreferredSeries C-2 PreferredSeries D PreferredCommon StockAdditional Paid-In
Capital
Accumulated DeficitTotal Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 1, 2021253,862 $1,596 290,002 $3,623 376,061 $6,606 237,183 $6,991 564,287 $24,839 515,218 $24,929 975,039 $74,876 2,133,904 $2 $1,151 $(52,404)$(51,251)
Issuance of Preferred Stock— — — — — — — — — — — — 130,006 10,000 — — — — — 
Exercise of common stock options— — — — — — — — — — — — — — 10,912 — 5 — 5 
Stock-based compensation— — — — — — — — — — — — — — — — 95 — 95 
Net loss— — — — — — — — — — — — — — — — — (15,559)(15,559)
Balance at March 31, 2021253,862 $1,596 290,002 $3,623 376,061 $6,606 237,183 $6,991 564,287 $24,839 515,218 $24,929 1,105,045 $84,876 2,144,816 $2 $1,251 $(67,963)$(66,710)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended March 31,
(in thousands)20222021
Cash flows from operating activities
Net loss$(28,725)$(15,559)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization980 308 
Provision for warranty costs136 84 
Change in fair value of warrants and loan commitment 1,946 
Amortization of debt discount428 155 
Amortization of right-of-use assets322  
Share-based compensation877 95 
Provision for excess and obsolete inventories45  
Changes in operating assets and liabilities:

Accounts receivable163 (803)
Inventories(10,250)(2,600)
Prepaid expenses and other current assets237 (1,136)
Operating lease right-of-use assets(5,660) 
Other assets747 135 
Accounts payable5,400 1,990 
Accrued liabilities(1,135)677 
Deferred revenue(69)287 
Operating lease obligations4,598  
Net cash used in operating activities(31,906)(14,421)
Cash flows from investing activities
Purchases of property and equipment(4,394)(739)
Payments for patents acquired and capitalized(160)(86)
Net cash used in investing activities(4,554)(825)
Cash flows from financing activities
Proceeds from issuance of Preferred Stock - Series D 10,000 
Proceeds received from borrowings on credit agreement7,500  
Exercise of common stock options2 5 
Net cash provided by financing activities7,502 10,005 
Net change in cash(28,958)(5,241)
Cash beginning126,566 106,641 
Cash ending$97,608 $101,400 
Non-cash investing and financing activities
Transfer of Tranche C loan commitment to contra-debt upon additional borrowing under credit agreement$672 $ 
Supplemental disclosure of cash flow information
Cash paid for interest$987 719 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Nature of operations
IsoPlexis Corporation (together with its subsidiaries, the “Company”) was incorporated in the State of Delaware in March 2013. The Company is a life sciences company building solutions to accelerate the development of curative medicines and personalized therapeutics. The Company’s award-winning single-cell proteomics systems reveal unique biological activity in small subsets of cells, allowing researchers to connect more directly to in-vivo biology and develop more precise and personalized therapies. The Company’s products have been adopted by researchers around the world, including each of the top 15 global pharmaceutical companies by revenue and by approximately 75% of the comprehensive cancer centers in the United States. On December 28, 2018, the Company created IsoPlexis UK Limited (“IsoPlexis UK”), which has remained dormant. IsoPlexis (Shanghai) Trading Co., Ltd. was created on October 9, 2021.
COVID - 19
The COVID-19 pandemic developed rapidly in 2021, with a significant number of cases. Measures taken by various governments to contain the virus have affected economic activity. The Company has taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for the Company’s employees (such as social distancing and working from home) and securing the supply of materials that are essential to the production process.
At this stage, the impact on the Company’s business and results has not been significant and based on the Company’s experience to date management expects this to remain the case. The Company will continue to follow the various government policies and advice.
Liquidity and ability to continue as a going concern
Since its inception, the Company has incurred net losses and negative cash flows from operations.

During the three months ended March 31, 2022 and 2021, the Company incurred a net loss of $28.7 million and $15.6 million, respectively, and used $31.9 million and $14.4 million in cash for operations, respectively. In addition, as of March 31, 2022, the Company had an accumulated deficit of $162.7 million. The Company expects to continue to generate operating losses and negative cash flows for the foreseeable future. 
The Company may seek additional funding in order to reach its business objectives. The Company may seek these funds either through public debt or equity offerings or further private equity financings, debt financings, and strategic alliances. The Company may not be able to obtain funding on acceptable terms, or at all, and the terms of any funding may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain additional funding, it could adversely affect the Company’s business prospects.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of assets or the amounts classification of liabilities that might be necessary if the company is unable to continue as a going concern.
Note 2 - Summary of significant accounting policies
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IsoPlexis UK and Isoplexis (Shanghai) Trading Co., Ltd. All intercompany transactions have been eliminated.
Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).
The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and
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footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from these condensed consolidated financial statements, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2021 and the notes thereto. The results for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.
In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Significant Accounting Policies

With the exception of the following policy, the Company’s significant accounting policies are unchanged from those disclosed in Note 2, “Summary of significant accounting policies” in our consolidated financial statements as of and for the year ended December 31, 2021.

Recently adopted accounting pronouncements

The Company adopted ASU No. 2016-02 as of January 1, 2022, using a modified retrospective transition approach and elected the optional transition method to apply the provision of ASC 842 as of the effective date, rather than the earliest period presented. The Company elected the “package of practical expedients”, which permits it to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company made an accounting policy election to exempt short-term leases of 12 months or less from balance sheet recognition requirements associated with the new standard. Leases with an initial term of twelve months or less, or on a month-to-month basis, are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. The Company also elected the practical expedient for use-of-hindsight to conclude on lease term. If applicable, the Company combines lease and non-lease components, which primarily relate to ancillary expenses associated with real estate leases such as common area maintenance charges and management fees.

The Company determines if an arrangement is a lease at inception and determines the classification of the lease, as either operating or finance, at commencement. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued expenses and other current liabilities and long-term operating lease obligations on our consolidated balance sheets. The Company presently does not have any finance leases.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company’s leases do not provide a readily determinable implicit discount rate. The Company’s borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. Operating lease ROU assets also factor in any lease payments made, initial direct costs and lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Some of the Company’s leases include options to extend the lease term. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The adoption of this accounting standard resulted in recording operating lease ROU assets for six real estate and three equipment operating lease arrangements and corresponding operating lease liabilities of $5.7 million and $5.9 million, respectively, as of January 1, 2022. The operating lease assets at adoption were lower than the operating lease liabilities because of the balance of the Company’s deferred rent liabilities of $0.2 million at December 31, 2021, which was reclassified into operating lease assets. The adoption of the standard did not have a material effect on the Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows.
See Note 10 for further information concerning the Company’s leases.

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New accounting standards not yet effective
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard will be effective for the Company on January 1, 2023. The Company has not yet determined the impact the adoption of this standard will have on the consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides companies with temporary optional financial reporting alternatives to ease the potential burden in accounting for reference rate reform and includes a provision that allows companies to account for a modified contract as a continuation of an existing contract. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company has certain debt instruments for which the interest rates are indexed to LIBOR, and as a result, is currently evaluating the effect that the implementation of this standard will have on the Company’s consolidated operating results, cash flows, financial condition and related disclosures.
Note 3 - Fair Value Measurement
Certain of the Company’s assets and liabilities are recorded at fair value, as described below.
The following tables set forth the Company’s financial instruments that were measured at fair value on recurring basis by level within the fair value hierarchy:
March 31, 2022
(in thousands)Level 1Level 2Level 3Total
Loan commitment$ $ $822 $822 
December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Loan commitment$ $ $1,169 $1,169 
During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the three months ended March 31, 2022 and 2021.
The commitment for an additional tranche under the Credit Agreement (see Note 7) qualifies as a freestanding financial instrument required to be recorded at estimated fair value. The fair value of the loan commitment was estimated based on the present value of future expected cash flows discounted at the Company’s effective interest rate of 14.09% and 14.12% at March 31, 2022 and December 31, 2021, respectively.
The following table presents changes during the three months ended March 31, 2022 and 2021 in Level 3 liabilities measured at fair value on a recurring basis:
(in thousands)Loan CommitmentSeries D WarrantsSeries A Warrants
Balance at January 1, 2022$1,169 $ $ 
Exercise of Tranche C loan commitment(497)— — 
Change in warrant exercise price150 — — 
Balance at March 31, 2022822   
(in thousands)Loan CommitmentSeries D WarrantsSeries A Warrants
Balance as January 1, 2021$2,240 $4,430 $207 
Change in estimated fair value(139)1,807  
Balance at March 31, 20212,101 6,237 207 
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Under ASC Topic 480, Distinguishing Liabilities from Equity, the warrants (see Note 7) were freestanding financial instruments that qualified as liabilities required to be recorded at their estimated fair value at the inception date and remeasured at each reported balance sheet date thereafter until settlement. The Series A-2 Preferred Stock Warrant was exercised on May 11, 2021, at an exercise price of $12.58606 per share for 3,178 shares of Series A-2 redeemable convertible preferred stock. Upon closing of the initial public offering (“IPO”) on October 12, 2021, the warrant held by Perceptive Credit Holdings III, LP to purchase Series D redeemable convertible preferred stock was converted into a warrant exercisable for a total of 811,374 shares of common stock. This common stock warrant is no longer considered “potentially redeemable” and the outstanding balance of the warrant liability has been reclassified into equity in accordance with ASC 480 for the year ended December 31, 2021.

On March 30, 2022, the Company entered into a Third Amendment to Credit Agreement and Guaranty with Perceptive Credit Holdings III, LP pursuant to which the prior $15.0 million Tranche C term loan, which was available through March 31, 2022 subject to several conditions, was changed to $7.5 million and such amount was borrowed on March 30, 2022. In addition, the Third Amendment added a new $7.5 million Tranche D term loan, which remains available through June 30, 2022. In connection with entering into the above-referenced Third Amendment to the Credit Agreement, on March 30, 2022, the Company amended the warrant that had been previously issued to Perceptive Credit Holdings III, LP to purchase up to 811,374 shares of common stock at an exercise price of $9.62 per share. The warrant exercise price was amended to $6.00 per share. The change in exercise price resulted in an increase to debt issuance costs of $0.3 million, half of which was recognized with the Tranche C term loan draw as shown in the table above.

The above fair value measurements are sensitive to changes in underlying unobservable inputs. A change in those inputs could result in a significantly higher or lower fair value measurement.
Changes in fair value of the warrants and loan commitment is included in other expense in the statements of operations.
Note 4 - Revenue
The Company’s revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of instruments and consumables used in single cell research equipment. Service and other revenue primarily consists of revenue generated from measuring immune responses using the Company’s technology.
Revenue by source
Three months ended March 31,
(in thousands)20222021
Instruments$3,035 $2,119 
Consumables1,419 809 
Extended service warranty226 151 
Other service revenue231 155 
Total revenue$4,911 $3,234 
Revenue by geographic area
Three months ended March 31,
Based on region of destination (in thousands)20222021
Americas (1)
$3,359 $2,235 
Europe (2)
367 565 
Greater China (3)
967 226 
Asia-Pacific (4)
218 208 
Total revenue$4,911 $3,234 
__________
(1)Region includes revenue from the United States of America and Canada
(2)Region includes revenue from the United Kingdom, Belgium, Czech Republic, Portugal, France, Spain, Germany, Sweden, Italy, Israel and Switzerland
(3)Region includes revenue from China and Taiwan
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(4)Region includes revenue from Singapore, Japan, Australia and South Korea
Performance obligations
The Company regularly enters into contracts with multiple performance obligations. Most performance obligations are generally satisfied within a short time after the contract execution date. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $0.8 million, of which substantially all is expected to be recognized as revenue during 2022.
Contract balances
Contract balances represent amounts presented in the consolidated balance sheets when either the Company has transferred goods or services to the customer, or the customer has paid consideration to the Company under the contract. These contract balances included accounts receivable (see Note 5) and deferred revenue. Accounts receivable balances represent amounts billed to customers for goods and services when the Company has an unconditional right to payment of the amount billed. Deferred revenue, as of March 31, 2022 and December 31, 2021 was $0.8 million and $0.9 million, respectively. Deferred revenue represents cash consideration received from customers for which all services or products have not yet been transferred. Revenue recorded during the three months ended March 31, 2022 included $0.2 million of previously deferred revenue that was included in contract liabilities as of December 31, 2021.
As of March 31, 2022 and December 31, 2021, no single customer represented 10% or more of accounts receivable. For the three months ended March 31, 2022 and March 31, 2021, no single customer represented 10% or more of revenue.
Note 5 - Supplemental Balance Sheet Details
Accounts receivable, net consists of the following:
(in thousands)March 31,
2022
December 31,
2021
Accounts receivable$3,983 $4,146 
Allowance for doubtful accounts(46)(46)
Total accounts receivable net of allowance$3,937 $4,100 
Inventories, net consists of the following:
(in thousands)March 31,
2022
December 31,
2021
Raw materials$33,180 $22,179 
Work in process  
Finished goods1,695 2,481 
Reserve for excess and obsolete inventory(371)(361)
Total inventories, net$34,504 $24,299 
Property and equipment, net consist of the following:
(in thousands)March 31,
2022
December 31,
2021
Furniture and equipment$8,956 $5,585 
Computers and technology2,916 2,139 
Leasehold improvements1,319 1,073 
Total13,191 8,797 
Accumulated depreciation(3,581)(3,019)
Property and equipment, net$9,610 $5,778 
Depreciation expense was $0.6 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.
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Accrued expenses and other current liabilities consist of the following:
(in thousands)March 31,
2022
December 31,
2021
Accrued compensation$1,854 $3,656 
Accrued operating expenses3,564 3,556 
Short-term operating lease liability1,006 — 
Other, including warranties404 615 
Total accrued liabilities$6,828 $7,827 
Note 6 - Intangible assets
Intangible assets consist of the following:
March 31, 2022
(in thousands)Remaining Useful Life (Years)GrossAccumulated AmortizationNet
Patents
9 - 14
$21,767 $1,365 $20,402 
Capitalized licenses
1 - 4
670 322 348 
Total intangible assets$22,437 $1,687 $20,750 
December 31, 2021
(in thousands)Remaining Useful Life (Years)GrossAccumulated AmortizationNet
Patents
9 - 14
$21,607 $981 $20,626 
Capitalized licenses
1 - 4
670 288 382 
Total intangible assets$22,277 $1,269 $21,008 
During the three months ended March 31, 2022, there were $0.2 million of additions to patents with a weighted average useful life of 13.1 years.

Amortization expense was $0.4 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively. The amortization of intangible assets attributable to product sales is recognized in cost of product and service revenue. The amortization of intangible assets not attributable to product sales is recognized in general and administrative operating expenses.
As of March 31, 2022, the estimated annual amortization of intangible assets for the remainder of 2022 and the next four years is shown in the following table. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors.
Year (in thousands)Estimated Annual Amortization
2022 (remaining nine months)$1,264 
20231,685 
20241,685 
20251,602 
20261,574 
Note 7 - Debt
On December 30, 2020, the Company closed on a $50.0 million Credit Agreement with a significant equity investor, of which the Company borrowed $25.0 million immediately upon closing. In May 2021, the Company borrowed an additional $10.0 million. On March 30, 2022, the Company entered into a Third Amendment to Credit Agreement and
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Guaranty with Perceptive Credit Holdings III, LP pursuant to which the prior remaining $15.0 million Tranche C term loan was changed to $7.5 million and such amount was borrowed on March 30, 2022. In addition, the Third Amendment added a new $7.5 million Tranche D term loan, which remains available through June 30, 2022 subject to several conditions, including compliance with the covenant showing total revenue of at least $16.8 million for the twelve-month period ending March 31, 2022.

Borrowings under the Credit Agreement bear interest at the one-month LIBOR, with a 1.75% floor, plus a 9.50% margin (11.25% at March 31, 2022). Monthly payments of interest-only are due over the term of the loan with no scheduled loan amortization. Amounts borrowed are due and payable on the maturity date, December 30, 2025. The loan is secured by substantially all of the Company’s assets. Financial covenants include a $3.0 million minimum cash balance at all times and trailing twelve-month minimum revenue amounts measured on a quarterly basis. On October 29, 2021, the Company entered into the Second Amendment to, among other things, eliminate the minimum total revenue covenant for the twelve months ending December 31, 2021 and reset the minimum total revenue covenants thereafter. Pursuant to the Second Amendment, the minimum total revenue covenant, as amended, has resumed testing for the twelve months ending March 31, 2022. As of March 31, 2022, the Company was in compliance with the minimum total revenue covenant requirement of $16.8 million and minimum cash balance covenant requirement of $3.0 million.

The total minimum revenue covenant requirements for the next twelve months are as follows:
Twelve-Month Period EndingMinimum Total Revenue (in thousands)
June 30, 2022$18,256 
September 30, 202221,722 
December 31, 202226,545 
March 31, 202330,179 

In connection with the Credit Agreement closing, the Company issued to the lender warrants to purchase 97,504 shares of Series D preferred stock. The warrants have a 10-year contractual life and had an exercise price of $76.92 per warrant share. The fair value at issuance was estimated at $4.4 million and was recorded as a warrant liability. Upon closing of the IPO on October 12, 2021, the Series D redeemable convertible preferred stock warrant was converted into a warrant exercisable for a total of 811,374 shares of common stock with an exercise price of $9.62 per warrant share. In connection with the Third Amendment to the Credit Agreement dated March 30, 2022, warrants were reissued and the exercise price was changed from $9.62 per warrant share to $6.00 per warrant share. The change in exercise price resulted in an increase to debt issuance costs of $0.3 million, half of which was recognized with the Tranche C term loan which was drawn on March 30, 2022. This common stock warrant is no longer considered “potentially redeemable” and the fair value of the warrant liability as of October 12, 2021 has been reclassified into equity in accordance with ASC 480 for the year ended December 31, 2021 (see Note 3).

In addition, given that the Credit Agreement contained additional tranches of potential borrowings at inception, the Company identified and recorded within other assets on the balance sheet a $2.2 million asset related to future loan commitments at December 30, 2020. During 2021, $0.8 million was reclassified as a reduction in the carrying value of the $10.0 million tranche drawn in May 2021 on a pro-rata basis, and will be amortized over the remaining term of the debt. In connection with the Tranche C draw on March 30, 2022, $0.5 million was reclassified as a reduction in the carrying value of the $7.5 million tranche and will be amortized over the remaining term of the debt. As of March 31, 2022, a $0.6 million asset related to the future loan commitment remains within other assets on the balance sheet. The Company determined that the loan commitment meets the definition within ASC 480 as a freestanding financial instrument to be recorded at fair value given that it is both (1) legally detachable per the explicit ability provided to the creditor allowing it to assign all or part of its interest under the Credit Agreement to any person or entity; and (2) separately exercisable given that it can be exercised or not exercised at the Company’s option without impacting the outstanding balance of the original $25.0 million borrowed upon execution of the Credit Agreement. The remaining proceeds were allocated to the value of the initial debt borrowed and the discount resulting on such debt is being amortized over the term of the Credit Agreement.

On December 31, 2021, the process of cessation of LIBOR as a reference rate took effect. After December 31, 2021, new borrowings will no longer use LIBOR as a reference rate. Instead, these borrowings will be subject to an interest rate based on either the Secured Overnight Financing Rate (“SOFR”), which is deemed a replacement benchmark for LIBOR under the Credit Agreement, or an alternate index to be agreed upon; provided that if such alternate rate of interest shall be less than 1.75%, such rate shall be deemed to be 1.75% for the purposes of the Credit Agreement. Between December 31,
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2021 and June 30, 2023, any legacy borrowings may continue to use LIBOR as the basis for interest rates. After June 30, 2023, all borrowings will be based on SOFR or the alternate index.
Note 8 - Equity
Common stock
As of March 31, 2022, the Company had authorized 400,000,000 shares of Common Stock, of which a total of 39,043,119 and 39,036,010 shares were outstanding, as of March 31, 2022 and December 31, 2021, respectively.
Preferred stock
Upon closing of the IPO on October 12, 2021, all 3,344,836 shares of Preferred Stock that were outstanding immediately prior to the closing of the IPO automatically converted into 26,758,688 shares of Common Stock. In addition, the Company issued 1,643,374 shares of Common Stock to the holders of the outstanding Preferred Stock in respect of accrued dividends thereon accrued to but not including October 12, 2021, based on the IPO price of $15.00 per share.
Under the Amended and Restated Certificate of Incorporation filed upon the Company’s IPO, the Company authorized 20,000,000 shares of non-redeemable preferred stock, $0.001 par value per share (“Preferred Stock”), of which no shares were outstanding at March 31, 2022 and December 31, 2021.
Note 9 - Equity based compensation

The Company’s 2014 Stock Plan (the “Plan”) provides for the granting of stock options or restricted stock to key employees, officers, directors and consultants. Upon effectiveness of the 2021 Plan (as defined below), no further issuances were made under the 2014 Plan.

The Company’s 2021 Omnibus Incentive Compensation Plan (the “2021 Plan”) was adopted by its board of directors and became effective on October 7, 2021. Following the IPO, all equity-based awards are granted under the 2021 Plan. The 2021 Plan provides for the grant of both non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred share units, cash incentive awards and other equity-based or equity-related awards to the Company’s employees, officers, directors and consultants. The terms of equity awards granted under the 2021 Plan to date are consistent with those granted under the 2014 Plan, as described below. The maximum number of shares outstanding under the 2021 Plan is 5,223,601, plus the number of shares of the Company’s common stock underlying awards under the 2014 Plan, not to exceed 5,113,324 shares, that become available again for grant under the 2014 Plan in accordance with its terms.

Stock options

Stock options expire 10 years from the date of grant. The stock options generally vest 25% upon the one-year anniversary of the service inception date and then ratably each month over the remaining 36 months. Upon termination of service, any unvested stock options are automatically returned to the Company. Vested stock options that are not exercised within the specified period, according to the terms and conditions of the option plan, following the termination as an employee, consultant, or service provider to the Company are surrendered back to the Company. Those stock options are added back to the plan pool and made available for future grants. Compensation cost is recorded on a straight-line basis over the requisite service period of the award based on the fair value of the options issued on the measurement date.
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The following table summarizes stock option activity for the three months ended March 31, 2022:
Stock Options
SharesWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
(In thousands)
Outstanding as of December 31, 2021
5,105,278 $2.62 7.7
Granted
  
Forfeited
(6,596)1.38 
Exercised
(7,109)0.71 
Outstanding as of March 31, 2022
5,091,573 $2.60 7.4$8,674 
Vested and expected to vest as of March 31, 2022
5,091,573 $2.60 7.4$8,674 
Exercisable at March 31, 2022
2,535,176 $0.74 5.9$6,832 
No stock options were granted during the three months ended March 31, 2022. The weighted-average grant date fair value of stock options awarded during the three months ended March 31, 2021 was approximately $2.77 per share. As of March 31, 2022, there was a total of $11.7 million of unrecognized employee compensation costs related to non-vested stock option awards expected to be recognized over a weighted average period of 3.2 years.
The Company estimates the fair value of stock-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables, such as expected term, volatility, risk-free interest rate, and expected dividends. Each of these inputs is subjective and generally requires significant judgment to determine.
The following table summarizes the range of key assumptions used to determine the fair value of stock options granted during:
Three Months Ended March 31,
20222021
Risk-free interest rate
 %
0.94 - 1.4%
Expected term (in years)
zero7
Expected volatility
 %50 %
Expected dividend yield
  
Exercise prices
$ $1.83 
Estimated fair value of common stock options
$ 
$3.96 - $4.93
Restricted stock awards

Restricted stock awards are rights to receive shares of the Company’s Common Stock upon meeting specified vesting requirements. The fair value of a restricted stock award is the market value as determined by the closing price of the stock on the day of grant. These awards were granted under the Company’s 2021 Plan.

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The following table summarizes restricted stock award activity for the three months ended March 31, 2022:
Restricted Stock AwardsWeighted
Average
Grant Date Fair Value
Unvested as of December 31, 2021
507,013 $8.46 
Granted301,883 6.06 
Vested  
Forfeited(16,650)6.74 
Unvested as of March 31, 2022
792,246 $7.59 
No restricted stock awards vested during the three months ended March 31, 2022. As of March 31, 2022, there was approximately $5.4 million of total unrecognized compensation cost related to restricted stock awards. This amount is expected to be recognized over the remaining weighted-average vesting period of 3.8 years.

Employee stock purchase plan

In the third quarter of 2021, the Company approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective upon completion of the IPO. As of March 31, 2022, there has not been an offering under the ESPP and no shares of Common Stock have been purchased under the ESPP.

Expense

The following table summarizes stock-based compensation expense, and also the allocation within the consolidated statements of operations:
Three Months Ended March 31,
(in thousands)20222021
Research and development
$134 $19 
General and administrative
582 47 
Sales and marketing
161 29 
Total stock-based compensation expense
$877 $95 

Note 10 - Commitments
Operating leases
At March 31, 2022, our operating leases had remaining lease terms of up to 4.75 years, including any reasonably probable extensions.

Lease balances within our consolidated balance sheet were as follows:
(in thousands)March 31, 2022
Assets:
Operating lease right-of-use assets
$5,338 
Liabilities:
Accrued expenses and other current liabilities$1,006 
Long-term operating lease obligations4,598 
Total lease liabilities$5,604 

Operating lease expense, including variable and short-term lease costs, which were insignificant to the total operating lease cash flows and supplemental cash flow information were as follows:
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Three Months Ended March 31,
(in thousands)2022
Cost of product revenue$30 
Research and development expenses97
Sales and marketing expenses158
General and administrative expenses133
Total operating lease expense
$418 
Operating cash outflows from operating leases$418 

The weighted average remaining lease liability term and the weighted average discount rate were as follows:

March 31, 2022
Weighted average lease liability term (in years)4.01
Weighted average discount rate5.00 %



The following table reconciles the undiscounted cash flows for each of the first five years and thereafter to the operating lease liabilities recognized in our consolidated balance sheet at March 31, 2022. The reconciliation excludes short-term leases that are not recorded on the balance sheet.
(in thousands)March 31, 2022
2022 (remaining nine months)$1,194 
20231,585 
20241,645 
20251,155 
2026607 
Thereafter 
Total lease payments6,186 
Less: imputed interest(582)
Total lease liabilities$5,604 
We had one lease commence in December 2021 with payments beginning in February 2022.
Purchase Commitments
On May 12, 2021 the Company entered into a Supply Agreement with QIAGEN GmbH, pursuant to which they have agreed to supply certain reagents to the Company, and the Company has agreed to certain annual minimum purchases. The future minimum purchase values are as follows:
(in millions)Year Ending December 31,
2022$2.5 
20234.0 
20245.0 
20257.0 
20269.0 
202710.0 
Total$37.5 
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Note 11 - Product warranties
The Company warrants certain products generally for periods of one year following the delivery date. Accrued warranty costs are included in accrued expenses and other current liabilities.
Three Months Ended March 31,
(in thousands)20222021
Accrued warranty cost, beginning$285 $135 
Cost of warranty services(69)(43)
Estimated provision for warranty cost136 84 
Accrued warranty cost, end$352 $176 
Note 12 - Legal proceedings