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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number: 001-40592
________________________________________
Rapid Micro Biosystems, Inc.
(Exact name of registrant as specified in its charter)
https://cdn.kscope.io/c73e06137cf6007099a4307bdcae9a06-23-9-22.jpg
________________________________________
Delaware20-8121647
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
1001 Pawtucket Boulevard West, Suite 280
 Lowell, MA
(Address of Principal Executive Offices)
 01854
(Zip Code)
(978) 349-3200
(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 Exchange on which registered
Class A common stock, $0.01 par value per share
RPID
The Nasdaq Global Select Market
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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyxEmerging growth companyx
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 Exchange Act). Yes o No x
As of May 1, 2023, there were 36,768,540 shares of the registrant’s Class A common stock, par value $0.01, outstanding.
As of May 1, 2023, there were 5,553,379 shares of the registrant’s Class B common stock, par value $0.01, outstanding.


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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:
our business strategy for our Growth Direct platform and systems;
our future results of operations and financial position, including our expectations regarding revenue, gross margin, operating expenses and ability to generate cash flow;
our expectations and assumptions related to our future funding requirements and available capital resources, which may be impacted by market uptake of our Growth Direct system, our management of inventory and supply chain, our research and development activities and the expansion of our sales, marketing, manufacturing and distribution capabilities;
our ability to maintain and expand our customer base for our Growth Direct platform and systems;
our exploration of strategic alternatives for the Company;
the effectiveness of enhancements of our sales processes;
the impact of our restructuring on the Company;
anticipated trends and growth rates in our business and in the markets in which we operate;
our research and development activities and prospective new features, products and product approvals;
our ability to anticipate market needs and successfully develop new and enhanced solutions to meet those needs, including prospective products;
our ability to hire and retain necessary qualified employees to grow our business and expand our operations;
our expectations regarding the potential impact of the ongoing coronavirus pandemic on our business, operations and the markets in which we and our customers operate;
our expectations regarding the potential impact of inflation and fluctuations in interest rates on our business and operating costs;
our expectations regarding the potential impact of ongoing conditions in the banking system and financial markets on our operations and financial results; and
our ability to adequately protect our intellectual property.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Risk Factors.” The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our
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actual future results, levels of activity, performance and achievements may be materially different from what we expect. We caution you not to place undue reliance on forward-looking statements which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


TRADEMARKS
Solely for convenience, our trademarks and trade names in this Quarterly Report on Form 10-Q are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.


INTERNET POSTING OF INFORMATION
We routinely post information that may be important to investors in the “Investors” section of our website at www.rapidmicrobio.com. We encourage investors and potential investors to consult our website regularly for important information about us. The contents of our website are not incorporated by reference in this Quarterly Report on Form 10-Q and shall not be deemed “filed” under the Exchange Act.
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PART I —FINANCIAL INFORMATION
Item 1. Financial Statements
RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated balance sheets
(Unaudited)
(In thousands, except share and per share amounts)
March 31,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$24,410 $27,064 
Short-term investments75,276 81,584 
Accounts receivable5,510 5,369 
Inventory20,944 21,187 
Prepaid expenses and other current assets3,005 3,372 
Total current assets129,145 138,576 
Property and equipment, net13,509 13,818 
Right-of-use assets, net6,825 7,063 
Long-term investments22,462 29,790 
Other long-term assets1,056 1,119 
Restricted cash284 284 
Total assets$173,281 $190,650 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$1,287 $5,428 
Accrued expenses and other current liabilities6,104 8,150 
Deferred revenue5,496 4,706 
Lease liabilities, short-term773 766 
Total current liabilities13,660 19,050 
Lease liabilities, long-term6,940 7,202 
Other long-term liabilities238 229 
Total liabilities20,838 26,481 
Commitments and contingencies (Note 17)
Stockholders’ equity:
Class A common stock, $0.01 par value; 210,000,000 shares authorized at March 31, 2023 and December 31, 2022; 36,768,540 shares and 36,538,805 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
368 366 
Class B common stock, $0.01 par value; 10,000,000 shares authorized at March 31, 2023 and December 31, 2022; 5,553,379 shares issued and outstanding at March 31, 2023 and December 31, 2022
55 55 
Preferred stock, $0.01 par value: 10,000,000 shares authorized at March 31, 2023 and December 31, 2022; zero shares issued and outstanding at March 31, 2023 and December 31, 2022
  
Additional paid-in capital542,487 540,775 
Accumulated deficit(389,805)(375,918)
Accumulated other comprehensive loss(662)(1,109)
Total stockholders’ equity152,443 164,169 
Total liabilities and stockholders’ equity$173,281 $190,650 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of operations
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended March 31,
20232022
Revenue:
Product revenue$3,324 $2,563 
Service revenue1,711 1,597 
Total revenue5,035 4,160 
Costs and operating expenses:
Cost of product revenue4,981 4,358 
Cost of service revenue1,844 1,726 
Research and development3,153 3,525 
Sales and marketing3,462 3,456 
General and administrative6,467 6,094 
Total costs and operating expenses19,907 19,159 
Loss from operations(14,872)(14,999)
Other income (expense):
Interest income, net1,003 108 
Other expense, net(11)(16)
Total other income (expense), net992 92 
Loss before income taxes(13,880)(14,907)
Income tax expense7 23 
Net loss(13,887)(14,930)
Net loss per share — basic and diluted$(0.32)$(0.35)
Weighted average common shares outstanding — basic and diluted42,812,58042,197,887
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of comprehensive loss
(Unaudited)
(In thousands)
Three Months Ended March 31,
20232022
Net loss$(13,887)$(14,930)
Other comprehensive income:
Unrealized gain (loss) on investments, net of tax447 (588)
Comprehensive loss$(13,440)$(15,518)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of stockholders’ equity
(Unaudited)
(In thousands, except share amounts)
Class A
Common stock
Class B
Common stock
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
SharesAmountSharesAmount
Balances at December 31, 202236,538,805$366 5,553,379$55 $540,775 $(375,918)$(1,109)$164,169 
Issuance of Class A common stock under ESPP125,5361 0— 123 — — 124 
Vesting of restricted stock units96,303 1 — — (1)— —  
Restricted stock award liability accretion— — 341 — — 341 
Issuance of Class A common stock upon exercise of common stock options7,896— — 6 — — 6 
Stock-based compensation expense— — 1,243 — — 1,243 
Net loss— — — (13,887)— (13,887)
Other comprehensive income— — — — 447 447 
Balances at March 31, 202336,768,540$368 5,553,379$55 $542,487 $(389,805)$(662)$152,443 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of stockholders’ equity
(Unaudited), continued
(In thousands, except share amounts)
Class A
Common stock
Class B
Common stock
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
SharesAmountSharesAmount
Balances at December 31, 202134,564,040$346 6,903,37969 $535,693 $(315,112)$(16)$220,980 
Conversion of Class B common stock to Class A common stock1,350,00014 (1,350,000)(14)— — — — 
Restricted stock award liability accretion— — 154 — — 154 
Issuance of Class A common stock upon exercise of common stock options475,0335 — 466 — — 471 
Stock-based compensation expense— — 983 — — 983 
Net loss— — — (14,930)— (14,930)
Other comprehensive loss— — — — (588)(588)
Balances at March 31, 202236,389,073$365 5,553,37955 $537,296 $(330,042)$(604)$207,070 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of cash flows
(Unaudited)
(In thousands)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net loss$(13,887)$(14,930)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense759 560 
Stock-based compensation expense1,243 983 
Provision for excess and obsolete inventory34  
Noncash lease expense297 261 
Accretion on investments(586)6 
Other9 8 
Changes in operating assets and liabilities:
Accounts receivable(142)1,169 
Inventory209 (2,041)
Prepaid expenses and other current assets367 839 
Other long-term assets(23)(51)
Accounts payable(4,141)(372)
Accrued expenses and other current liabilities(1,615)(3,880)
Deferred revenue790 647 
Net cash used in operating activities(16,686)(16,801)
Cash flows from investing activities:
Purchases of property and equipment(759)(2,353)
Purchases of investments(17,831)(97,195)
Maturity of investments32,500  
Net cash provided by (used) investing activities13,910 (99,548)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock - stock option exercise7 471 
Proceeds from issuance of Class A common stock - employee stock purchase plan124  
Payments on finance lease obligations(9)(8)
Net cash provided by financing activities122 463 
Net decrease in cash, cash equivalents and restricted cash(2,654)(115,886)
Cash, cash equivalents and restricted cash at beginning of period27,348 178,671 
Cash, cash equivalents and restricted cash at end of period$24,694 $62,785 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Condensed consolidated statements of cash flows, continued
(Unaudited)
(In thousands)
Three Months Ended March 31,
20232022
Supplemental disclosure of cash flow information
Cash paid for interest$10 $11 
Supplemental disclosure of non-cash investing activities
Establishment of right of use operating assets$ $6,932 
Purchases of property and equipment in accounts payable$154 $1,503 
Supplemental disclosure of non-cash financing activities
Establishment of right of use finance assets$ $366 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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RAPID MICRO BIOSYSTEMS, INC.
Notes to condensed consolidated financial statements
(Amounts in thousands, except share and per share amounts)
(Unaudited)
1. Nature of the business and basis of presentation
Rapid Micro Biosystems, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on December 29, 2006. The Company develops, manufactures, markets and sells Growth Direct systems (“Systems”) proprietary consumables, laboratory information management system (“LIMS”) connection software, and services to address rapid microbial analysis used for quality control in the manufacture of pharmaceuticals, medical devices and personal care products. The Company’s technology uses a highly sensitive camera and the natural auto fluorescence of living cells to identify and quantify microbial growth faster and more accurately than the traditional method, which relies on the human eye. The Company currently sells to customers in North America, Europe and the Asia-Pacific region. The Company is headquartered in Lowell, Massachusetts.
Basis of presentation
These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries in Germany and Switzerland. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s audited consolidated financial statements for the year ended December 31, 2022. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2023 and the results of its operations and its cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three months ended March 31, 2023 and 2022 are also unaudited. The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.
Liquidity
The Company has incurred recurring losses and net cash outflows from operations since its inception. The Company expects to continue to generate significant operating losses for the foreseeable future. The Company expects that its existing cash and cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months following the date these unaudited interim condensed consolidated financial statements were issued.
2. Summary of significant accounting policies
Use of estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, calculating the standalone selling price
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for revenue recognition, the valuation of inventory, and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific and relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
There have been no significant changes to the significant accounting policies during the three months ended March 31, 2023, as compared to the significant accounting policies disclosed in Note 2 of the audited consolidated financial statements as of December 31, 2022 filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Risk of concentrations of credit, significant customers and significant suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company maintains its cash and cash equivalents and investments with financial institutions that management believes to be of high credit quality. The Company has not experienced any other-than-temporary losses with respect to its cash equivalents and investments and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Significant customers are those which represent more than 10% of the Company’s total revenue or accounts receivable balance at each respective balance sheet date. The following table presents customers that represent 10% or more of the Company’s total revenue:
Three Months Ended March 31,
20232022
Customer A27.0 %*
Customer B20.1 %15.6 %
Customer C*12.9 %
Customer D*10.1 %
47.1 %38.6 %
____________________________
*– less than 10%
The following table presents customers that represent 10% or more of the Company’s accounts receivable:
March 31,December 31,
20232022
Customer A35.5 %11.8 %
Customer B20.2 %21.4 %
Customer C*16.7 %
55.7 %49.9 %
____________________________
*– less than 10%
The Company relies on third parties for the supply and manufacture of certain components of its products as well as third-party logistics providers. There are no significant concentrations around a single third-party supplier or manufacturer for the three months ended March 31, 2023 or 2022.
Cash equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents that are readily convertible to cash are stated at cost, which approximates
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fair value. At March 31, 2023 and December 31, 2022, the Company held cash of less than $0.1 million and $0.2 million, respectively, in banks located outside of the United States.
Restricted cash
As of March 31, 2023 and December 31, 2022, the Company was required to maintain guaranteed investment certificates of $0.3 million with maturities of three months to one year that are subject to an insignificant risk of changes in value. The guaranteed investment certificates are held for the benefit of the landlord in connection with operating leases which have remaining terms of greater than one year and are classified as restricted cash (non-current) on the Company’s consolidated balance sheets.
Software Development Costs
The Company accounts for software development costs for internal-use software under the provisions of ASC 350-40, “Internal-Use Software” (“ASC 350”). Accordingly, certain costs to develop internal-use computer software are capitalized, provided these costs are expected to be recoverable. The Company had $1.0 million of software development costs, net of amortization, capitalized in other long-term assets at March 31, 2023. These capitalized costs are being amortized on a straight-line basis over the initial subscription term of five years. For the three months ended March 31, 2023 and 2022, there was $0.1 million of amortization expense related to capitalized software development costs recorded in the condensed consolidated statements of operations.
Fair value measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s cash equivalents, short-term and long-term investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts
receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.
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Product warranties
The Company offers a one-year limited assurance warranty on System sales, which is included in the selling price. The accrual for these warranty obligations is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. The following table presents a summary of changes in the amount reserved for warranty cost (in thousands):
Three Months Ended March 31,
20232022
Balance, beginning of period$872 $598 
Warranty provisions 10 
Warranty repairs(346)(13)
Balance, end of period$526 $595 
Segment information
The Company determined its operating segment after considering the Company’s organizational structure and the information regularly reviewed and evaluated by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has determined that its CODM is its Chief Executive Officer. The CODM reviews the financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources. On the basis of these factors, the Company determined that it operates and manages its business as one operating segment, that develops, manufactures, markets and sells Systems and related LIMS connection software, consumables and services; and accordingly has one reportable segment for financial reporting purposes. Substantially all of the Company’s long-lived assets are held in the United States.
Revenue recognition
Remaining performance obligations
The Company does not disclose the value of remaining performance obligations for (i) contracts with an original contract term of one year or less, (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice when that amount corresponds directly with the value of services performed, and (iii) variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied distinct service that forms part of a single performance obligation. The Company does not have material remaining performance obligations associated with contracts with terms greater than one year.
Contract balances from contracts with customers
Contract assets arise from customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is conditional and not only subject to the passage of time. The Company had $0.1 million in contract assets as of March 31, 2023 and December 31, 2022, included in prepaid expenses and other current assets.
Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. The Company has a contract liability related to service revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue and amounts expected to be recognized as revenue beyond 12 months of the balance sheet date are classified as noncurrent deferred revenue. The Company did not record any non-current deferred revenue as of March 31, 2023 or December 31, 2022. Deferred revenue was $5.5 million and $4.7 million at March 31, 2023 and December 31, 2022, respectively. Revenue recognized during the three months ended March 31, 2023 and 2022 that was included in deferred revenue at the prior period-end was $1.0 million and $1.1 million, respectively.
Disaggregated revenue
The Company disaggregates revenue based on the recurring and non-recurring nature of the underlying sale. Recurring revenue includes sales of consumables and service contracts. The Company considers these to be recurring
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revenues because customers typically place purchase orders on a periodic basis as they use their Growth Direct system over time. These arrangements typically contain a single performance obligation and thus the entire consideration to which the Company is entitled is allocated entirely to that performance obligation. Non-recurring revenue includes sales of systems, LIMS connection software, validation services, and field services, and typically contains multiple performance obligations. The Company considers these to be non-recurring revenues because customers typically place single purchase orders for a bundle of products and services on a one-time or infrequent basis. For these arrangements, significant judgment is applied in identifying the distinct performance obligations, determination of the transaction price, transaction price allocation, and determination of standalone selling price for each of the distinct performance obligations.
The following table presents the Company’s revenue by the recurring or non-recurring nature of the revenue stream (in thousands):
Three Months Ended March 31,
20232022
Product and service revenue — recurring$3,253 $2,658 
Product and service revenue — non-recurring1,782 1,502 
Total revenue$5,035 $4,160 
The following table presents the Company’s revenue by customer geography (in thousands):
Three Months Ended March 31,
20232022
United States$1,703 $2,042 
Japan1,386  
Germany413 424 
Switzerland973 879 
All other countries560 815 
Total revenue$5,035 $4,160 
Advertising costs
Advertising costs are expensed as incurred and are included in sales and marketing expenses in the condensed consolidated statements of operations. Advertising costs were less than $0.1 million during the three months ended March 31, 2023 and 2022.
Stock-based compensation
The Company measures all stock-based awards granted to employees, officers and directors based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company issues stock-based awards with service-based vesting conditions only and stock-based awards with both service-based and Company performance vesting conditions, and records the expense for these awards using the straight-line method. Forfeitures are accounted for prospectively as they occur.
The Company measures all restricted common stock and restricted stock units granted to employees based on the common stock value on the date of grant. The purchase price of the restricted common stock is the common stock value on the date of grant.
Comprehensive loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the three months ended March 31, 2023 and 2022, there were $0.4 million and $0.6 million, respectively, of unrealized gains and losses, respectively, on investments, net of tax, included in comprehensive loss.
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Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016- 13”). The new standard adjusts the accounting for assets held at amortized costs basis, including marketable securities accounted for as available for sale, and trade receivables. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The new standard was effective for the Company beginning January 1, 2023 and primarily impacted trade accounts receivable. The amendments in this update were adopted using a modified retrospective transition method as of January 1, 2023, which had no cumulative impact to retained earnings. The adoption of this new standard had no material impact on the Company's unaudited consolidated financial statements. The Company's concentrations of credit risks are limited due to the large number of customers and their dispersion across a number of geographic areas. Substantially all of the Company's trade receivables are concentrated in the pharmaceuticals industry in the U.S. and internationally or with distributors who operate in international markets. The Company's historical credit losses have not been significant due to this dispersion and the financial stability of the Company's customers. The Company considers its historical credit losses to be immaterial to its business and, therefore, has not provided all the disclosures otherwise required by the standard. The Company updated its accounting policy disclosure for accounts receivable as follows:
Accounts receivable are customer obligations that are unconditional. Accounts receivable are presented net of an allowance for doubtful accounts for expected credit losses, which represents an estimate of amounts that may not be collectible. The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for doubtful accounts and expected credit losses. A provision to the allowances for doubtful accounts for expected credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment, the geographic market, and the Company’s historical experience. Provisions to the allowances for doubtful accounts for expected credit losses are recorded to general and administrative expenses. The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. The Company does not have any off-balance-sheet credit exposure related to customers. As of March 31, 2023 and December 31, 2022, the allowance for doubtful accounts for expected credit losses was zero.
Recently issued accounting pronouncements
The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the newer revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

3. Fair value of financial assets and liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
Fair value measurements as of March 31, 2023
Level 1Level 2Level 3Total
Assets    
Cash equivalents$20,175 $ $ $20,175 
Short-term investments73,793 1,483  75,276 
Long-term investments18,853 3,609  22,462 
$112,821 $5,092 $ $117,913 
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Fair value measurements at December 31, 2022
Level 1Level 2Level 3Total
Assets
Cash equivalents$22,072 $ $ $22,072 
Short-term investments81,093 491  81,584 
Long-term investments26,431 3,359  29,790 
$129,596 $3,850 $ $133,446 
During the three months ended March 31, 2023 and 2022, respectively, there were no transfers between Level 1, Level 2 and Level 3.
Valuation of short-term and long-term investments
U.S. Treasury bills and notes included in short-term and long-term investments were valued by the Company using quoted prices in active markets for identical securities, which represents a Level 1 measurement within the fair value hierarchy. The Company's certificates of deposit included in short-term and long-term investments were valued using quoted prices for similar assets in active markets (or identical assets in inactive markets), which represent a Level 2 measurement within the fair value hierarchy.
4. Investments
Short-term and long-term investments by investment type consisted of the following (in thousands):
March 31, 2023
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Short-term investments
Certificates of Deposit$1,488 $ $(5)$1,483 
U.S. Government Treasury Bills27,121 9 (13)27,117 
U.S. Government Treasury Notes47,114 3 (441)46,676 
$75,723 $12 $(459)$75,276 
Long-term Investments
Certificates of Deposit3,655  (46)3,609 
U.S. Government Treasury Notes - Maturity Up To Two Years19,021 24 (192)18,853 
$22,676 $24 $(238)$22,462 
December 31, 2022
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Short-term investments
Certificates of Deposit$491 $ $ $491 
U.S. Government Treasury Bills32,115 1 (40)32,076 
U.S. Government Treasury Notes49,625  (608)49,017 
$82,231 $1 $(648)$81,584 
Long-term Investments
Certificates of Deposit$3,391 $4 $(36)$3,359 
U.S. Government Treasury Notes - Maturity Up To Two Years26,861 1 (431)26,431 
$30,252 $5 $(467)$29,790 
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5. Inventory
Inventory consisted of the following (in thousands):
March 31,December 31,
20232022
Raw materials$15,173 $15,014 
Work in process1,505 1,599 
Finished goods4,266 4,574 
Total$20,944 $21,187 
Raw materials, work in process and finished goods were net of adjustments to net realizable value of $0.7 million and $1.1 million as of March 31, 2023 and December 31, 2022, respectively.
6. Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31,December 31,
20232022
Prepaid insurance$971 $1,500 
Contract asset112 112 
Deposits835 1,055 
Other1,087 705 
$3,005 $3,372 
7. Property and equipment, net
Property and equipment, net consisted of the following (in thousands):
March 31,December 31,
20232022
Manufacturing and laboratory equipment$13,464 $13,408 
Computer hardware and software1,791 1,651 
Office furniture and fixtures589 589 
Leasehold improvements8,512 8,260 
Construction-in-process1,616 1,712 
25,972 25,620 
Less: Accumulated depreciation(12,463)(11,802)
$13,509 $13,818 
Depreciation and amortization expense related to property and equipment was $0.7 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.
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8. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
March 31,December 31,
20232022
Accrued employee compensation and benefits expense$2,776 $3,217 
Accrued vendor expenses1,972 3,212 
Accrued warranty expense526 872 
Accrued taxes266 329 
Other564 520 
$6,104 $8,150 
On August 11, 2022, the board of directors of the Company approved an organizational restructuring plan (the “Restructuring Plan”) to right-size its cost structure based on its lowered 2022 outlook. The Company will continue to invest in key growth initiatives including enhancing commercial execution and key product development programs that are expected to drive future revenue growth. The Restructuring Plan involved an approximately 20% reduction in the Company’s workforce, including employees, contractors and temporary employees, which is largely focused on non-commercial functions. The Company recorded a restructuring charge of $1.1 million in the third quarter of 2022 primarily related to severance, employee benefits, outplacement and related costs under the Restructuring Plan. The Company made payments of $0.3 million during the three months ended March 31, 2023 related to the Restructuring Plan and had $0.2 million recorded within accrued expenses as of March 31, 2023.
9. Common stock and common stock warrants
As of March 31, 2023 and December 31, 2022, the Company’s restated certificate of incorporation authorized the issuance of 210,000,000 shares of $0.01 par value Class A common stock.
On June 25, 2021, the Company filed an amended and restated certificate of incorporation, which effected a recapitalization of the Company’s then outstanding common stock to Class A common stock and authorized an additional new class of common stock (Class B common stock). Rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. On July 19, 2021, the Company filed an amended and restated certificate of incorporation which authorized Class A common stock and Class B common stock to 210,000,000 shares and 10,000,000 shares, respectively. As of March 31, 2023, there were 36,768,540 shares of Class A common stock issued and outstanding, and 5,553,379 shares of Class B common stock issued and outstanding.
Each share of Class A common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. The Company’s Class B common stock is non-voting. Class A and Class B common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of Preferred Stock. As of March 31, 2023, no cash dividends had been declared or paid.
As of March 31, 2023, the Company had reserved 22,081,371 shares of Class A common stock for the exercise of outstanding stock options, vesting of restricted stock units, the number of shares remaining available for grant under the Company’s 2021 Incentive Award Plan (see Note 10), the number of shares available for purchase under the Company’s Employee Stock Purchase Plan (see Note 10), shares of common stock for the exercise of outstanding common stock warrants and the conversion of Class B common stock.
Prior to its IPO, the Company issued warrants to purchase preferred stock in conjunction with previous financing arrangements. In connection with the IPO, all outstanding preferred stock warrants were automatically converted to Class A common stock warrants. The contractual terms of the converted Class A common stock warrants remained consistent with the original terms of the preferred stock warrants. The Company determined the event resulted in equity classification of the Class A common stock warrants and reclassified the fair value of the preferred stock warrant liability as of the IPO date into equity.
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As of March 31, 2023 and December 31, 2022, outstanding warrants to purchase common stock consisted of the following:
Issuance dateContractual termBalance sheet
classification
Shares of
common stock
issuable upon
exercise of warrant
Weighted average
exercise price
(in years)
July 24, 201710Equity17,194$292.81 
April 12, 201810Equity30,000$1.00 
July 14, 202110Equity975,109$1.46 
1,022,303
10. Stock-based compensation
2010 Stock Option and Grant Plan
The Company’s 2010 Stock Option and Grant Plan (the “2010 Plan”) provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards and other stock-based awards to employees, officers, directors and consultants of the Company.
In March 2021, the board of directors approved an increase to the 2010 Plan shares of 382,889 shares. Following the effectiveness of the IPO, no additional awards are being granted under the 2010 Plan and shares of existing outstanding options that were issued under the 2010 Plan and are forfeited or canceled will be available for grant under the 2021 Incentive Award Plan.
2021 Incentive Award Plan
In July 2021, the board of directors adopted, and the Company’s stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective in connection with the IPO. The 2021 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and cash-based awards. The 2021 Plan has a term of ten years. The aggregate number of shares of Class A common stock available for issuance under the 2021 Plan is equal to (i) 4,200,000 shares; (ii) any shares which are subject to the 2010 Plan awards that become available for issuance under the 2021 Plan; and (iii) an annual increase for ten years on the first day of each calendar year beginning on January 1, 2022, equal to the lesser of (A) 5% of the aggregate number of shares of Class A common stock outstanding on the last day of the immediately preceding calendar year and (B) such smaller amount of shares as determined by the board of directors. No more than 33,900,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. As of March 31, 2023, there are 4,155,355 shares available for issuance under the 2021 Plan.
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees and directors:
Three Months Ended March 31,
20232022
Risk-free interest rate 4.2 %1.9 %
Expected term (in years)6.06.0
Expected volatility47.8 %43.0 %
Expected dividend yield0 %0 %
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Stock options
The following table summarizes the Company’s stock option activity since December 31, 2022:
Number of
shares
Weighted
average
exercise price
Weighted
average
remaining
contractual term
Aggregate
intrinsic value
(in years)(in thousands)
Outstanding as of December 31, 20225,041,308$5.05 7.55$532 
Granted 1,109,0001.24 
Exercised(7,896)0.83 
Expired(31,249)10.91 
Forfeited(46,798)5.53 
Outstanding as of March 31, 20236,064,365$2.87 7.80$1,109 
Options vested and expected to vest as of March 31, 20236,064,365$2.87 7.80$1,109 
Options exercisable as of March 31, 20232,950,908$2.52 6.53$801 
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class A common stock for those options that had exercise prices lower than such fair value.
The intrinsic value of stock options exercised during the three months ended March 31, 2023 and 2022 was less than $0.1 million and $2.8 million, respectively.
The weighted average grant-date fair value per share of stock options granted during the three months ended March 31, 2023 and 2022 was $0.63 and $3.41, respectively.
On March 9, 2023, the board of directors approved a one-time repricing of certain outstanding stock options held by non-executive employees. As a result of the repricing, the exercise prices of eligible vested and unvested stock options were adjusted to reflect the fair market value of Class A common stock on the date of the repricing. The repricing was immaterial to the Company's financial results.
Restricted stock
In February 2021, the Company granted 248,903 shares of restricted stock to an employee under the 2010 Plan with a four-year vesting term. In connection with the grant, the employee paid $0.5 million, which represents the $2.10 per share fair value of the common stock on the date of the restricted stock grant. At March 31, 2023 and December 31, 2022, the Company had zero and $0.3 million, respectively, in unvested restricted common stock liability included in other current liabilities and other long-term liabilities, respectively, related to these shares. The restricted common stock is no longer vesting due to the employee's termination and the Company waived its repurchase right during the first quarter of 2023, which resulted in all then-outstanding and unvested shares becoming fully vested.
The following table summarizes the Company’s restricted stock activity since December 31, 2022:
Number of
shares
Weighted
average
fair value
Unvested as of December 31, 2022155,565$2.10 
Granted
Vested(155,565)$2.10 
Forfeited
Unvested as of March 31, 2023 $ 
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Restricted stock units
Restricted stock unit grants to employees typically have a three-year service-based vesting term in which vesting occurs annually on the anniversary of the grant date. During the three months ended March 31, 2023, the Company granted restricted stock units with service-based vesting conditions only as well as restricted stock units with a combination of service-based and Company performance-based vesting conditions. The Company expenses the fair value of the restricted stock units over the expected vesting period and accounts for forfeitures prospectively as they occur. The following table summarizes restricted stock units granted to Company employees during the three months ended March 31, 2023:
Number of
shares
Weighted
average
fair value
Unvested as of December 31, 2022532,121$7.06 
Granted878,125$1.20 
Vested(147,782)7.74 
Forfeited(6,775)$6.17 
Unvested as of March 31, 20231,255,689$2.90 
The weighted average grant-date fair value per share of restricted stock units granted during the three months ended March 31, 2023 and 2022 was $1.20 and $7.73, respectively.
2021 Employee Stock Purchase Plan
In July 2021, the board of directors adopted, and the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective in connection with the IPO of Class A common stock. The aggregate number of shares of Class A common stock available for issuance under the 2021 ESPP is equal to (i) 400,000 shares and (ii) an annual increase for ten years on the first day of each calendar year beginning on January 1, 2022, equal to the lesser of (A) 1% of the aggregate number of shares of Class A common stock outstanding on the last day of the immediately preceding calendar year and (B) such smaller amount of shares as determined by the board of directors. No more than 6,300,000 shares of Class A common stock may be issued under the 2021 ESPP.
Under the 2021 ESPP, eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15% of eligible compensation during an offering period. Generally, each offering period will be for 6 months as determined by the Company's board of directors. In no event may an employee purchase more than 100,000 shares per offering period based on the closing price on the first trading date of an offering period or the last trading date of an offering period, or more than $25,000 worth of stock during any calendar year. The purchase price for shares to be purchased under the 2021 ESPP is 85% of the lesser of the market price of the Company's common stock on the first trading date of an offering period or on any purchase date during an offering period (March 14 or September 14).
During the three months ended March 31, 2023, there were 125,536 shares of Class A common stock purchased under the 2021 ESPP. The Company recognized less than $0.1 million of expense related to the 2021 ESPP for each of the three months ended March 31, 2023 and 2022. As of March 31, 2023, 933,659 shares were available for future issuance under the 2021 ESPP.
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The Company estimates the fair value of shares issued to employees under the 2021 ESPP using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the calculation of fair value of shares under the 2021 ESPP at the grant date for the three months ended March 31, 2023 and 2022: