SEC Filing | IsoPlexis

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iso-20220630

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 June 30, 2022


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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ISO	The 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 39,405,826 shares of common stock as of August 12, 2022.

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TABLE OF CONTENTS


Part I - Financial Information
Item 1. Financial Statements (Unaudited)			4
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures about Market Risk			31
Item 4. Controls and Procedures			31
Part II - Other Information
Item 1. Legal Proceedings			33
Item 1A. Risk Factors			33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3. Defaults Upon Senior Securities			33
Item 4. Mine Safety Disclosures			33
Item 5. Other Information			33
Item 6. Exhibits			33
Signatures			35

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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)	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash	$	71,608	$	126,566
Accounts receivable, net	3,484		4,100
Inventories, net	38,988		24,299
Prepaid expenses and other current assets	2,139		3,478
Total current assets	116,219		158,443
Property and equipment, net	10,174		5,778
Intangible assets, net	20,478		21,008
Operating lease right-of-use assets	5,654		—
Other assets	441		2,243
Total assets	$	152,966	$	187,472
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,246	$	4,839
Accrued expenses and other current liabilities	6,172		7,827
Deferred revenue	972		915

Total current liabilities	11,390		13,581
Long-term operating lease obligations	5,104		—
Long-term debt	45,897		31,646
Total liabilities:	62,391		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 June 30, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value, 400,000,000 shares authorized; 39,378,424 and 39,036,010 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	39		39
Additional paid-in capital	278,840		276,179
Accumulated deficit	(188,304)		(133,973)
Total stockholders’ equity	90,575		142,245
Total liabilities and stockholders’ equity	$	152,966	$	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 June 30,				Six months ended June 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Revenue
Product revenue	$	3,323	$	4,089	$	7,777	$	7,016
Service revenue	682		200		1,139		507
Total revenue	4,005		4,289		8,916		7,523
Cost of product revenue	1,813		2,001		4,142		3,551
Cost of service revenue	116		4		142		28
Gross profit	2,076		2,284		4,632		3,944
Operating expenses:
Research and development expenses	7,056		5,495		14,190		9,169
General and administrative expenses	8,447		5,186		19,923		9,564
Sales and marketing expenses	7,246		9,957		19,289		17,031
Restructuring expenses	3,699		—		3,699		—
Total operating expenses	26,448		20,638		57,101		35,764
Loss from operations	(24,372)		(18,354)		(52,469)		(31,820)
Other income (expense):
Interest expense, net	(1,210)		(870)		(2,196)		(1,613)
Other income (expense), net	(24)		(1,330)		334		(2,680)
Net loss	$	(25,606)	$	(20,554)	$	(54,331)	$	(36,113)
Accrued dividends on preferred stock	—		(3,335)		—		(6,611)
Net loss attributable to common stockholders	(25,606)		(23,889)		(54,331)		(42,724)
Basic and diluted net loss per common share	$	(0.65)	$	(11.10)	$	(1.39)	$	(19.92)
Weighted-average common shares outstanding—basic and diluted	39,117,157		2,152,083		39,077,369		2,144,856

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 Preferred			Series A-2 Preferred			Series B Preferred			Series B-2 Preferred			Series C Preferred			Series C-2 Preferred			Series D Preferred			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
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
Exercise of common stock options	—	—		—	—		—	—		—	—		—	—		—	—		—	—		273,002	—		87		—		87
Restricted stock awards released	—	—		—	—		—	—		—	—		—	—		—	—		—	—		62,303	—		—		—		—
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		1,395		—		1,395
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—		(25,606)		(25,606)
Balance at June 30, 2022	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	39,378,424	$	39	$	278,840	$	(188,304)	$	90,575


	Series A Preferred			Series A-2 Preferred			Series B Preferred			Series B-2 Preferred			Series C Preferred			Series C-2 Preferred			Series D Preferred			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts)	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at January 1, 2021	253,862	$	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, 2021	253,862	$	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)
Issuance of Preferred Stock	—	—		3,178	247		—	—		—	—		—	—		—	—		—	—		—	—		—		—		—
Exercise of common stock options	—	—		—	—		—	—		—	—		—	—		—	—		—	—		68,016	—		4		—		4
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		234		—		234
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—	—		—	—		—		(20,554)		(20,554)
Balance at June 30, 2021	253,862	$	1,596	293,180	$	3,870	376,061	$	6,606	237,183	$	6,991	564,287	$	24,839	515,218	$	24,929	1,105,045	$	84,876	2,212,832	$	2	$	1,489	$	(88,517)	$	(87,026)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six months ended June 30,
(in thousands)	2022		2021
Cash flows from operating activities
Net loss	$	(54,331)	$	(36,113)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,913		764
Provision for warranty costs	300		150
Change in fair value of warrants and loan commitment	—		4,007
Amortization of debt discount	745		301
Amortization of right-of-use assets	648		—
Share-based compensation	2,272		329
Provision for excess and obsolete inventories	61		40
Changes in operating assets and liabilities:
Accounts receivable	616		(1,438)
Inventories	(14,750)		(8,970)
Prepaid expenses and other current assets	1,339		(529)
Other assets	608		36
Accounts payable	(593)		4,886
Accrued liabilities	(2,477)		2,334
Deferred revenue	57		342
Operating lease obligations	(676)		—
Net cash used in operating activities	(64,268)		(33,861)
Cash flows from investing activities
Purchases of property and equipment	(5,524)		(1,961)
Payments for patents acquired and capitalized	(255)		(20,149)
Net cash used in investing activities	(5,779)		(22,110)
Cash flows from financing activities
Proceeds from issuance of Preferred Stock - Series A-2	—		40
Proceeds from issuance of Preferred Stock - Series D	—		10,000
Proceeds received from borrowings on credit agreement	15,000		10,000
Payment of deferred offering costs	—		(1,798)
Exercise of common stock options	89		9
Net cash provided by financing activities	15,089		18,251
Net change in cash	(54,958)		(37,720)
Cash beginning	126,566		106,641
Cash ending	$	71,608	$	68,921
Non-cash investing and financing activities
Transfer of Tranche B loan commitment to contra-debt upon additional borrowing under credit agreement	$	—	$	841
Transfer of Tranche C loan commitment to contra-debt upon additional borrowing under credit agreement	$	497	$	—
Transfer of Tranche D loan commitment to contra debt upon additional borrowing under credit agreement	$	822	$	—
Increase in right-of-use asset	$	642	$	—
Increase in operating lease liability obligations	$	642	$	—
Supplemental disclosure of cash flow information
Cash paid for interest	$	2,200	1,546

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 and 2022, 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

During the six months ended June 30, 2022 and 2021, the Company incurred a net loss of $54.3 million and $36.1 million, respectively, and used $64.3 million and $33.9 million in cash for operations, respectively. In addition, as of June 30, 2022, the Company had an accumulated deficit of $188.3 million. The Company expects to continue to generate operating losses and negative cash flows for the foreseeable future.

In addition, the Company’s Credit Agreement and Guaranty, dated as of December 30, 2020 (as amended, the “Credit Agreement”), between the Company and Perceptive Credit Holdings III, LP, as administrative agent and as a lender, includes a quarterly minimum total revenue covenant for the applicable trailing twelve month period through December 31, 2025. Although the Company remains in compliance with its covenants as of June 30, 2022, based on our current projections, the Company does not expect to meet certain of its financial covenants within one year following the date that these financial statements are issued. Therefore, the Company may be required to repay its outstanding debt within the next 12 months, the principal balance of which was $50.0 million as of June 30, 2022. We are currently working with the lenders to lower the existing revenue covenants in the Credit Agreement, although there can be no assurance that such revisions will be implemented on a timely basis or at all.

Accordingly, the foregoing conditions, taken together, raise substantial doubt about the Company’s ability to continue as a going concern for at least a period of one year from the issuance of these unaudited consolidated interim financial statements.

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 and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

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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 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

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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.

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:

June 30, 2022

(in thousands)

Level 1

Level 2

Level 3

Total

Loan commitment

—


	December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
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 six months ended June 30, 2022 and 2021.

The commitment for an additional tranche under the Credit Agreement (see Note 7) qualified 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 June 30, 2022 and December 31, 2021, respectively.

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The following table presents changes during the six months ended June 30, 2022 and 2021 in Level 3 liabilities measured at fair value on a recurring basis:


(in thousands)	Loan Commitment		Series D Warrants		Series A Warrants
Balance at January 1, 2022	$	1,169	$	—	$	—
Exercise of Tranche C loan commitment	(497)		—		—
Change in warrant exercise price	150		—		—
Balance at March 31, 2022	822		—		—
Exercise of Tranche D loan commitment	(822)		—		—
Balance at June 30, 2022	—		—		—


(in thousands)	Loan Commitment		Series D Warrants		Series A Warrants
Balance as January 1, 2021	$	2,240	$	4,430	$	207
Change in estimated fair value	(139)		1,807		—
Balance at March 31, 2021	2,101		6,237		207
Change in estimated fair value	—		2,061		—
Exercise of warrant	—		—		(207)
Exercise of Tranche B loan commitment	(841)		—		—
Balance at June 30, 2021	1,260		8,298		—

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 Company’s 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 was drawn upon on June 29, 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 other half was recognized on June 29, 2022, when Tranche D was drawn upon.

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.

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Revenue by source


	Three months ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Instruments	$	2,066	$	2,849	$	5,101	$	4,968
Consumables	1,257		1,239		2,676		2,048
Extended service warranty	276		146		502		297
Other service revenue	406		55		637		210
Total revenue	$	4,005	$	4,289	$	8,916	$	7,523

Revenue by geographic area


	Three months ended June 30,				Six Months Ended June 30,
Based on region of destination (in thousands)	2022		2021		2022		2021
Americas (1)	$	3,069	$	3,386	$	6,428	$	5,621
Europe (2)	279		174		646		739
Greater China (3)	542		286		1,509		512
Asia-Pacific (4)	115		443		333		651
Total revenue	$	4,005	$	4,289	$	8,916	$	7,523

__________

(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

(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 June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $0.7 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 June 30, 2022 and December 31, 2021 was $1.0 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 six months ended June 30, 2022 included $0.2 million of previously deferred revenue that was included in contract liabilities as of December 31, 2021.

As of June 30, 2022 and December 31, 2021, no single customer represented 10% or more of accounts receivable. For the three months ended June 30, 2022 and June 30, 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)	June 30, 2022		December 31, 2021
Accounts receivable	$	3,530	$	4,146
Allowance for doubtful accounts	(46)		(46)
Total accounts receivable net of allowance	$	3,484	$	4,100

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Inventories, net consists of the following:


(in thousands)	June 30, 2022		December 31, 2021
Raw materials	$	36,254	$	22,179
Work in process	628		—
Finished goods	2,414		2,481
Reserve for excess and obsolete inventory	(308)		(361)
Total inventories, net	$	38,988	$	24,299

Property and equipment, net consist of the following:


(in thousands)	June 30, 2022		December 31, 2021
Furniture and equipment	$	9,622	$	5,585
Computers and technology	3,155		2,139
Leasehold improvements	1,544		1,073
Total	14,321		8,797
Accumulated depreciation	(4,147)		(3,019)
Property and equipment, net	$	10,174	$	5,778

Depreciation expense was $1.1 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

Accrued expenses and other current liabilities consist of the following:


(in thousands)	June 30, 2022		December 31, 2021
Accrued compensation	$	2,043	$	3,656
Accrued operating expenses	2,647		3,556
Short-term operating lease liability	812		—
Other, including warranties	670		615
Total accrued liabilities	$	6,172	$	7,827

On April 11, 2022, the Company completed a re-organization of the Commercial team and company-wide RIF (Reduction in Force). This action resulted in non-recurring restructuring expenses of $3.7 million which were primarily associated with severance, benefits, and outplacement services. Restructuring liability is included within other current liabilities on the consolidated balance sheets. The following table summarizes the restructuring liability accrual activity during the six months ended June 30, 2022:


(in thousands)	Costs Incurred for the Six Months Ended June 30, 2022	Payments Made During the Six Months Ended June 30, 2022	Liability as of June 30, 2022
Severance related	$3,019	$2,954	$65
Outplacement services	259	213	46
Stock-based compensation expense	176	176	—
Consultant fees	138	138	—
Other	108	108