ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF STOCKHOLDERS' EQUITY

Unaudited

(in ~~thousands, except per share data)~~

thousands)

Shares Common
Stock
Amount Contributed
Capital Accumulated Deficit Treasury
stock Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
Equity
Balances, December 31, 2018 54,232
54
432,885
(330,348 ) (45,067 ) (149 ) 57,375
Net Loss —
—
—
(21,721 ) —
—
(21,721 )
Exercise of options 215
—
3,677
—
—
—
3,677
Issuance of common stock under employee purchase plan 7
—
139
—
—
—
139
Unrealized loss on available-for-sale securities —
—
—
—
—
121
121
Foreign currency translation adjustment —
—
—
—
—
(76 ) (76 )
Equity-based compensation —
—
3,453
—
—
—
3,453
Balances, March 31, 2019 54,454
54
440,154
(352,069 ) (45,067 ) (104 ) 42,968



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Common stock shares outstanding
Beginning	54,512		54,091		54,232		55,674
Proceeds from issuance of common stock	56		—		56		—
Exercise of options	66		98		334		360
Issuance of common stock under employee purchase plan	7		8		19		22
Repurchase of common stock under prepaid forward contract	—		—		—		(1,859		)
Ending	54,641		54,197		54,641		54,197

Common stock
Beginning	$	55	$	54	$	54	$	56
Proceeds from issuance of common stock	—		—		—		—
Exercise of Options	—		—		1		—
Repurchase of common stock under prepaid forward contract	—		—		—		(2		)
Ending	$	55	$	54	$	55	$	54

Contributed capital
Beginning	$	443,857	$	426,091	$	432,885	$	360,620
Proceeds from issuance of common stock	1,000		—		1,000		—
Exercise of options	510		954		4,879		3,710
Issuance of common stock under employee purchase plan	112		171		362		447
Issuance of convertible note	—		—		—		53,283
Equity based compensation	3,130		3,518		9,483		12,674
Ending	$	448,609	$	430,734	$	448,609	$	430,734

See accompanying notes to consolidated financial statements.

ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

Unaudited

(in ~~thousands, except per share data)~~

thousands)

Shares Common
Stock
Amount Contributed
Capital Accumulated Deficit Treasury
stock Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
Equity
Balances, December 31, 2017 55,674
56
360,620
(241,972 ) —
—
118,704
Net Loss —
—
—
(20,812 ) —
—
(20,812 )
Exercise of options 128
—
1,112
—
—
—
1,112
Issuance of common stock under employee purchase plan 7
—
134
—
—
—
134
Unrealized loss on available-for-sale securities —
—
—
—
—
(53 ) (53 )
Foreign currency translation adjustment —
—
—
—
—
112
112
Repurchase of common stock under Prepaid Forward contract (1,859 ) (2 ) —
—
(45,067 ) —
(45,069 )
Issuance of convertible note —
—
46,614
—
—
—
46,614
Cumulative impact of accounting change —
—
—
(49 ) —
—
(49 )
Equity-based compensation —
—
5,782
—
—
—
5,782
Balances, March 31, 2018 53,950
54
414,262
(262,833 ) (45,067 ) 59
106,475



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Accumulated deficit
Beginning	$	(372,884	)	$	(286,058	)	$	(330,348	)	$	(241,972	)
Cumulative effect of accounting changes	—			—			—			(49		)
Net loss	(20,434		)	(22,098		)	(62,970		)	(66,135		)
Ending	$	(393,318	)	$	(308,156	)	$	(393,318	)	$	(308,156	)

Treasury stock
Beginning	$	(45,067	)	$	(45,067	)	$	(45,067	)	$	—
Repurchase of common stock under prepaid forward contract	—			—			—			(45,067		)
Ending	$	(45,067	)	$	(45,067	)	$	(45,067	)	$	(45,067	)

Accumulated other comprehensive (loss) income
Beginning	$	44		$	(134	)	$	(149	)	$	—
Unrealized gain (loss) on available-for-sale securities	10			1			229			(54		)
Foreign currency translation adjustment	(113		)	(26		)	(139		)	(105		)
Ending	$	(59	)	$	(159	)	$	(59	)	$	(159	)

Total stockholders' equity	$	10,220		$	77,406		$	10,220		$	77,406

See accompanying notes to consolidated financial statements.

ACCELERATE DIAGNOSTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

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

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on March 1, 2019.

The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date, but does not include all disclosures such as notes required by U.S. GAAP.

The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the entire year ending December 31, 2019, or any future period.

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

Principles of Consolidation

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

Use of Estimates

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

Estimated Fair Value of Financial Instruments

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

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

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

the asset or liability;

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

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

The estimated fair value of the Company’s long-term debt represents a Level 2 measurement. See Note 10, Convertible Notes for further detail on the Company’s long-term debt.

Cash and Cash Equivalents

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

Investments

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

The Company assesses whether an other-than-temporary impairment loss has occurred due to declines in fair value or other market conditions when an investment’s fair value remains less than its cost for more than twelve months. This assessment includes a determination of whether the investment is expected to recover in value and whether the Company has the intent and ability to hold the investment until the anticipated recovery in value occurs. When an investment is identified as having an other-than-temporary impairment loss, we adjust the cost basis of the investment down to fair value resulting in a realized loss. The new cost basis is not changed for subsequent recoveries in fair value and temporary future increases or decreases in fair value are included in other comprehensive ~~income (loss)~~loss.

Inventory

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

Accounts Receivable

Accounts receivable consist of amounts due to the Company for sales to customers and are based on what we expect to collect in exchange for goods and services. Receivables are written off if reasonable collection efforts prove unsuccessful. The Company provides for allowances on a specific account basis by recording adjustments to revenue, if necessary. No allowances were recorded at ~~March 31,~~September 30, 2019 and December 31, 2018.

Property and Equipment

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

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

Long-lived Assets

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

Warranty Reserve

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

Warranty reserve activity for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 is as follows (in thousands):



	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
Beginning balance	$	196		$	199		$	215		$	192
Provisions	77			128			147			394
Warranty incurred	(51		)	(138		)	(140		)	(397		)
Ending balance	$	222		$	189		$	222		$	189

Three Months Ended
March 31, March 31,
2019 2018
Beginning balance $ 215
$ 192
Provisions 70
121
Warranty incurred (79 ) (137 )
Ending balance $ 206
$ 176

Convertible Notes

The Company issued convertible notes in 2018 that had conversion prices which resulted in an embedded beneficial conversion feature. The intrinsic value of the beneficial conversion feature was recorded as a debt discount with the corresponding amount recorded to contributed capital. The debt discount is amortized to interest expense over the life of the convertible notes using the effective interest method.

Revenue Recognition

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

We determine revenue recognition through the following steps:

Identification of the contract with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations

Recognition of revenue as we satisfy a performance obligation

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

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

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine relative standalone selling prices based on the price charged to customers for each individual performance obligation.

~~Our payment terms vary by the type and location of our customers and the product or services offered and range between 30 and 150 days.~~

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. The Company has determined these costs would have an amortization period of less than one year and has elected to recognize them as an expense when incurred. Contract asset opening and closing balances were immaterial for the three and nine months ended ~~March 31,~~September 30, 2019.

Cost of Sales

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

Shipping and Handling

Shipping and handling costs billed to customers are included as a component of revenue. The corresponding expense incurred with third party carriers is included as a component of sales, general and administrative costs on the condensed consolidated statements of operations and comprehensive loss. Most such billable shipping and handling costs are in connection with consumable test kits. Unlike test kits, for instruments the Company typically pays for shipping and handling.

Leases

The Company accounts for leases in accordance with ASC 842, Leases, which was adopted on January 1, 2019. We determine if an arrangement is or contains a lease and the type of lease at inception. The Company classifies leases as finance leases (lessee) or sales-type leases (lessor) when there is either a transfer of ownership of the underlying asset by the end of the lease term, the lease contains an option to purchase the asset that we are reasonably certain will be exercised, the lease term is for the major part of the remaining economic life of the asset, the present value of the lease payments and any residual value guarantee equals or substantially exceeds all the fair value of the asset, or the asset is of such a specialized nature that it will have no alternative use to the lessor at the end of the lease term. Payments contingent on future events (i.e. based on usage) are considered variable and

excluded from lease payments for the purposes of classification and initial measurement. Several of our leases include

options to renew or extend the term upon mutual agreement of the parties and others include one-year extensions exercisable by the lessee. None of our leases contain residual value guarantees, restrictions, or covenants.

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

Lessee

Operating leases are included in right-of-use (“ROU”) assets and operating lease liabilities within our condensed consolidated balance sheets. These assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and their related liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Typically, we use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. We use the implicit rate when readily determinable. ROU assets are net of lease payments made and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term, which may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. As of adoption of ASC 842 and as of ~~March 31,~~September 30, 2019, the Company was not party to finance lease arrangements.

Our leases consist primarily of leased office, factory, and laboratory space in the United States and office space and automobiles in Europe, have between two and ~~five-year~~six-year terms, and typically contain penalizing, early-termination provisions.

Lessor

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

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

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

Equity-Based Compensation

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

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

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

Expected term: The estimated expected term for employee awards is based on the calculation published by the SEC in SAB110 for use when there is not a sufficient history of employee exercise patterns. For consultant awards, the estimated expected term is the same as the life of the award.

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

Dividend yield: The dividend yield is estimated as ~~zero~~0 as the Company has not paid dividends in the past and does not have any plans to pay any dividends in the foreseeable future.

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

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

Deferred Tax Assets

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

The Company follows the provisions of ASC 740, Income Taxes, to account for any uncertainty in income taxes with respect to the accounting for all tax positions taken (or expected to be taken) on any income tax return. This guidance applies to all open tax periods in all tax jurisdictions in which the Company is required to file an income tax return. Under U.S. GAAP, in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not certain of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more likely than not to be realized upon resolution of the position. Interest and penalties, if any, would be recorded within tax expense.

Foreign Currency Translation and Foreign Currency Transactions

Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive ~~income (loss).~~loss.

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

Earnings Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Potentially dilutive common shares consist of shares issuable from stock options and unvested RSUs. Potentially dilutive common shares would also include common shares that would be outstanding if notes convertible at the balance sheet date were converted. Diluted earnings are not presented when the effect of adding such additional common shares is antidilutive.

Earnings per share are restated when certain transactions or events, including rights offerings determined to have bonus elements, have occurred.

NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Standards that were recently adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2016-02, ~~“Leases,”~~Leases, which together with subsequent amendments is included in ASC 842. ASC 842 requires a lessee to recognize a liability to make lease payments and an asset with respect to its right to use the underlying asset for the lease term. ASC 842 also addresses accounting and reporting by lessors, which is not significantly different from ~~current~~ accounting and reporting under the prior standard, and further provides for qualitative and quantitative disclosures. We adopted ASC 842 on January 1, 2019 using the optional transition method allowed by ASU 2018-11. This optional transition method allowed the Company to apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. For contracts where we are the lessee, we recorded lease liabilities and right of use assets for contracts in effect on January 1, 2019 based on the facts and circumstances as of that date. The Company elected not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, and not to separate the lease components from the non-lease components for all classes of underlying assets. No cumulative-effect adjustment was recorded to the opening balance of retained earnings. We recognized right of use assets and lessee lease liabilities of $0.6 million with respect to operating leases where we are the lessee. We also implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The adoption of ASC 842 did not have a material effect on our consolidated financial position, results of operations or cash flows.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718); Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share-based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting, which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. The Company adopted ASU 2018-07 on January 1, 2019, which ~~did not have an effect on~~had no impact to our consolidated financial statements as all share-based awards granted to nonemployees are fully vested.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) that the FASB refers to as having been stranded in AOCI. The Company adopted ASU 2018-02 on January 1, 2019, ~~with~~which had no impact to our consolidated financial statements as no amounts were reclassified from accumulated other comprehensive income to retained earnings for tax effects resulting from the Tax Act.

In March 2017, the FASB issued ASU 2017-08, Receivable - Nonrefundable Fees and Other Costs (Topic 310-20); Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendment requires premiums to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted ASU 2017-08 on January 1, 2019, ~~with~~which had no impact to ~~the~~our consolidated financial statements as we do not carry callable securities held at a premium.

Standards not yet adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820); Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements. This ASU is effective for us on January 1, 2020, with early adoption permitted. We are currently assessing the impact this will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326); Measurement of Credit Losses on Financial ~~Instruments.~~Instruments, which was subsequently clarified and amended by ASU 2019-05, ASU 2019-04 and ASU ~~2018-19 were issued which amended the standard.~~2018-19. ASU 2016-13 amends the guidance on measuring credit losses on financial assets ~~(including~~

(including trade accounts receivable and available for sale debt securities) held at amortized cost. Currently, an “incurred loss” methodology is used for recognizing credit losses which delays recognition until it is probable a loss has been incurred. The amendment

requires assets valued at amortized cost to be presented at the net amount expected to be collected using an allowance for credit losses. Reversal of credit losses on available for sale debt securities will be recorded in the current period net income. This ASU is effective for us on January 1, 2020, with early adoption permitted. We do not anticipate this will have a significant impact on our consolidated financial statements.

NOTE 3. CONCENTRATION OF CREDIT RISK

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

The Company has financial institutions for banking operations that hold 10% or more of the Company’s cash and cash equivalents. As of ~~March 31,~~September 30, 2019, two of the Company's financial institutions held ~~47%~~71% and ~~46%~~26% of the Company’s cash and cash equivalents, respectively. As of December 31, 2018, two of the Company's financial institutions held 46% and 43% of the Company’s cash and cash equivalents, respectively.

The Company grants credit to domestic and international customers. Exposure to losses on accounts receivable is principally dependent on each client's financial position. The Company had one customer that accounted for ~~17%~~14% of the Company’s net accounts receivable balance as of ~~March 31,~~September 30, 2019, and one customer that accounted for 10% of the Company's net accounts receivable balance as of December 31, 2018.

Customers who represented 10% or more of the Company’s total revenue for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 were as follows:

Three Months Ended

Nine Months Ended

March 31,

September 30,

2019

2018

2019

2018

2019

2018

Company A

19%

14%

20%

Company B

26%

18%

Company C

12%

17%

Company D

11%

* Less than 10% for the period indicated

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables represent the financial instruments measured at fair value on a recurring basis in the financial statements of the Company and the valuation approach applied to each class of financial instruments at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):


	March 31, 2019								September 30, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	47,788	$	—	$	—	$	47,788	$	69,750	$	—	$	—	$	69,750
Commercial paper	—		5,182		—		5,182
Corporate notes and bonds	—		1,227		—		1,227
Total cash and cash equivalents	$	47,788	$	6,409	$	—	$	54,197	$	69,750	$	—	$	—	$	69,750
Investments:
Certificates of deposit	—		8,809		—		8,809		—		4,183		—		4,183
U.S. Treasury securities	25,387		—		—		25,387		12,001		—		—		12,001
U.S. Agency securities	—		6,501		—		6,501		—		1,505		—		1,505
Commercial paper	—		8,463		—		8,463
Asset-backed securities	—		4,391		—		4,391		—		1,107		—		1,107
Corporate notes and bonds	—		21,999		—		21,999		—		10,182		—		10,182
Total investments	25,387		50,163		—		75,550		12,001		16,977		—		28,978
Total assets measured at fair value	$	73,175	$	56,572	$	—	$	129,747	$	81,751	$	16,977	$	—	$	98,728



	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	38,444	$	—	$	—	$	38,444
Commercial paper	—		1,493		—		1,493
Total cash and cash equivalents	38,444		1,493		—		39,937
Investments:
Certificates of deposit	—		10,787		—		10,787
U.S. Treasury securities	22,120		—		—		22,120
U.S. Agency securities	—		7,980		—		7,980
Commercial paper	—		17,025		—		17,025
Asset-backed securities	—		11,998		—		11,998
Corporate notes and bonds	—		30,308		—		30,308
Total investments	22,120		78,098		—		100,218
Total assets measured at fair value	$	60,564	$	79,591	$	—	$	140,155

December 31, 2018
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total
Assets:
Cash and cash equivalents:
Money market funds $ 38,444
$ —
$ —
$ 38,444
Commercial paper —
1,493
—
1,493
Total cash and cash equivalents 38,444
1,493
—
39,937
Investments:
Certificates of deposit —
10,787
—
10,787
U.S. Treasury securities 22,120
—
—
22,120
U.S. Agency securities —
7,980
—
7,980
Commercial paper —
17,025
—
17,025
Asset-backed securities —
11,998
—
11,998
Corporate notes and bonds —
30,308
—
30,308
Total investments 22,120
78,098
—
100,218
Total assets measured at fair value $ 60,564
$ 79,591
$ —
$ 140,155

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

Level 1 assets are priced using quoted prices in active markets for identical assets which include money market

funds and U.S. Treasury securities as these specific assets are liquid.

Level 2 available-for-sale securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs. There were no transfers between levels during the ~~three~~nine months ended ~~March 31,~~September 30, 2019.

On March 27, 2018, the Company issued $150.0 million aggregate principal amount of 2.50% Convertible Senior Notes due 2023 (“Notes”). In connection with the offering of the Notes, the Company granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $22.5 million aggregate principal amount of the Notes on the same terms and conditions. On April 4, 2018 the option was partially exercised, which resulted in $21.5 million of additional proceeds, for total proceeds of $171.5 million, as described in Note 10, Convertible Notes. At ~~March 31,~~September 30, 2019 and December 31, 2018, the ~~respective~~ fair value of the Notes was ~~$141.5~~$142.5 million and $121.4 ~~million.~~million, respectively. The fair value of the Notes is highly correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value. The fair value of the Notes are classified as Level 2 within the fair value hierarchy.

NOTE 5. INVESTMENTS

The following tables summarize the Company’s available-for-sale investments at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):


	March 31, 2019									September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	8,817	$	9	$	(17	)	$	8,809	$	4,163	$	21	$	(1	)	$	4,183
U.S. Treasury securities	25,401		8		(22		)	25,387		11,975		26		—			12,001
U.S. Agency securities	6,521		—		(20		)	6,501		1,505		—		—			1,505
Commercial paper	8,463		—		—			8,463
Asset-backed securities	4,390		1		—			4,391		1,107		—		—			1,107
Corporate notes and bonds	22,008		4		(13		)	21,999		10,170		12		—			10,182
Total	$	75,600	$	22	$	(72	)	$	75,550	$	28,920	$	59	$	(1	)	$	28,978



	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	10,787	$	—	$	—		$	10,787
U.S. Treasury securities	22,185		1		(66		)	22,120
U.S. Agency securities	8,024		1		(45		)	7,980
Commercial paper	17,025		—		—			17,025
Asset-backed securities	12,007		—		(9		)	11,998
Corporate notes and bonds	30,361		—		(53		)	30,308
Total	$	100,389	$	2	$	(173	)	$	100,218

December 31, 2018
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
Certificates of deposit $ 10,787
$ —
$ —
$ 10,787
U.S. Treasury securities 22,185
1
(66 ) 22,120
U.S. Agency securities 8,024
1
(45 ) 7,980
Commercial paper 17,025
—
—
17,025
Asset-backed securities 12,007
—
(9 ) 11,998
Corporate notes and bonds 30,361
—
(53 ) 30,308
Total $ 100,389
$ 2
$ (173 ) $ 100,218

The following table summarizes the maturities of the Company’s available-for-sale securities at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):



	September 30, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in less than 1 year	$	28,920	$	28,978	$	83,030	$	82,893
Due in 1-3 years	—		—		17,359		17,325
	$	28,920	$	28,978	$	100,389	$	100,218

March 31, 2019 December 31, 2018
Amortized
Cost Fair Value Amortized
Cost Fair Value
Due in less than 1 year $ 68,462
$ 68,394
$ 83,030
$ 82,893
Due in 1-3 years 7,138
7,156
17,359
17,325
Total $ 75,600
$ 75,550
$ 100,389
$ 100,218

There were no sales of marketable securities for the three months ended September 30, 2019 and 2018. Proceeds from sales of marketable securities (including principal paydowns) for the ~~three~~for the nine months ended ~~March 31,~~September 30, 2019 and 2018 were ~~$9.0~~$13.4 million and $3.0 million, respectively. The Company determines gains and losses of marketable securities based on specific identification of the securities sold. There were no0 material realized gains from sales of marketable securities for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018. No material balances were reclassified out of accumulated other comprehensive ~~income (loss)~~loss for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018.

The Company monitors investments for other-than-temporary impairment. It was determined that unrealized gains and losses as of ~~March 31,~~September 30, 2019 and December 31, 2018 are temporary in nature because the change in market value for those securities has resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. The Company does not intend to sell investments and it is more likely than not that we will not be required to sell investments before recovering the amortized cost.

NOTE 6. INVENTORY

Inventories consisted of the following at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):



	September 30,		December 31,
	2019		2018
Raw materials	$	5,088	$	4,064
Work in process	1,604		495
Finished goods	1,189		3,187
	$	7,881	$	7,746

March 31, December 31,
2019 2018
Raw materials $ 5,080
$ 4,064
Work in process 735
495
Finished goods 2,784
3,187
Inventory $ 8,599
$ 7,746

NOTE 7. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):



	September 30,			December 31,
	2019			2018
Computer equipment	$	2,726		$	2,700
Technical equipment	3,949			3,868
Facilities	4,016			4,037
Instruments	7,747			5,318
Capital projects in progress	206			91
Total property and equipment	$	18,644		$	16,014
Accumulated depreciation	(10,078		)	(8,711		)
Property and equipment, net	$	8,566		$	7,303

March 31, December 31,
2019 2018
Computer equipment $ 2,733
$ 2,700
Technical equipment 3,949
3,868
Facilities 4,031
4,037
Instruments 5,663
5,318
Capital projects in progress 38
91
Total property and equipment $ 16,414
$ 16,014
Accumulated depreciation (9,172 ) (8,711 )
Property and equipment, net $ 7,242
$ 7,303

Depreciation expense for the three months ended ~~March 31,~~September 30, 2019 and 2018 was $0.6 million and ~~$0.5~~$0.7 million, ~~respectively.~~respectively, and $1.7 million for each of the nine months ended September 30, 2019 and 2018.

The underlying gross assets under operating leases where the Company is the lessor is ~~$0.7~~$1.3 million at ~~March 31,~~September 30, 2019. The underlying accumulated depreciation under operating leases ~~were~~where the Company is the lessor is ~~$0.1~~$0.2 million at ~~March 31,~~September 30, 2019.

NOTE 8. LICENSE AGREEMENTS AND GRANTS

National Institute of Health Grant

In February 2015, the National Institute of Health awarded Denver Health and the Company a five-year, $5.0 million grant to develop a fast and reliable identification and categorical susceptibility test for carbepenem-resistant Enterobacteriaceae directly from whole blood. The grant is paid to the Company incrementally through sub-awards. The cumulative amount awarded to date under these subawards is $1.3 million. The amount invoiced for ~~each of~~ the three months ended ~~March 31,~~September 30, 2019 and 2018 was ~~$0.1~~$42,000 and $69,000, respectively, and for each of the nine months ended September 30, 2019 and 2018 was $0.2 million.

Arizona Commerce Authority

In August 2012, the Company entered into a Grant Agreement (the “Grant Agreement”) with the Arizona Commerce Authority, an agency of the State of Arizona (the “Authority”), pursuant to which the Authority provided certain state and county sponsored incentives for the Company relocating its corporate headquarters to, and expanding its business within, the State of Arizona. Pursuant to the Grant Agreement, the Authority provided a total grant in the amount of $1.0 million, which was recognized in January 2018 as an offset to expense after the achievement of all grant requirements.

NOTE 9. DEFERRED REVENUE ~~INCOME~~ AND REMAINING PERFORMANCE OBLIGATIONS

Deferred revenue consists of amounts received for products or services not yet delivered or earned. Deferred ~~income~~revenue consists of amounts received for commitments not yet fulfilled. If we anticipate ~~that the~~ revenue ~~or income~~ will not be earned within the following twelve months, the amount is reported as ~~long-term deferred income.~~other non-current liabilities. A summary of the balances as of ~~March 31,~~September 30, 2019 and December 31, 2018 follows (in thousands):

March 31, December 31,
2019 2018
Products and services not yet delivered $ 291
$ 217

We recognized ~~$37,000~~$0.2 million and $0.3 million of revenues that were included in the beginning contract liabilities balances during ~~each of~~ the three and nine months ended ~~March 31,~~September 30, 2019, respectively. We recognized $30,000 and ~~2018.~~$65,000 of revenues that were included in the contract liabilities balances during the three and nine months ended September 30, 2018, respectively. No material amount of revenue recognized during the period was from performance obligations satisfied in prior periods.

Transaction Price Allocated to Remaining Performance Obligations

As of ~~March 31,~~September 30, 2019, ~~$1.9~~$2.5 million of revenue is expected to be recognized from remaining performance obligations. This balance primarily relates to executed service contracts that begin as warranty periods expire. These service contracts typically provide for four-year terms and revenue is recognized on a straight-line basis. The balance also includes product shipments for reagent rental, sales-type lease agreements. The agreements have between two and four year terms and revenue is recognized as product is shipped, typically inon a straight-line ~~pattern.~~basis.

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

NOTE 10. CONVERTIBLE NOTES

On March 27, 2018, the Company issued $150.0 million aggregate principal amount of 2.50% Senior Convertible Notes due 2023. In connection with the offering of the Notes, the Company granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $22.5 million aggregate principal amount of the Notes on the same terms and conditions. On April 4, 2018 the option was partially exercised, which resulted in $21.5 million of additional proceeds, for total proceeds of $171.5 million. The Notes are the Company's senior unsecured obligations and mature on March 15, 2023 (the “Maturity Date”), unless earlier repurchased or converted into shares of common stock under certain circumstances described below. The Notes are convertible into shares of the Company’s common

stock, can be repurchased for cash, or a combination thereof, at the Company’s election, at an initial conversion rate of 32.3428 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $30.92 per share of common stock, subject to adjustment. The Company will pay interest on the Notes semi-annually in arrears on March 15 and September 15 of each year.

The $171.5 million of proceeds received from the issuance of the Notes were allocated between long-term debt (the “liability component”) of $116.6 million and contributed capital (the “equity component”) of $54.9 million. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the Notes. The liability component will be accreted up to the face value of the Notes of $171.5 million, which will result in additional non-cash interest expense being recognized through the Maturity Date. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.

The Company incurred approximately $5.0 million of issuance costs related to the issuance of the Notes, of which $3.4 million and $1.6 million were recorded to long-term debt and contributed capital, respectively. The $3.4 million of issuance costs recorded as long-term debt on the condensed consolidated balance sheet are being amortized over the five-year contractual term of the Notes using the effective interest method. The effective interest rate on the Notes, including accretion of the Notes to par and debt issuance cost amortization, is 11.52%.

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

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

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

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

At any time on or after December 15, 2022, a holder may convert its Notes in multiples of $1,000 principal amount. Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture pursuant to which the Notes were issued) are, under certain circumstances, entitled to an increase in the conversion rate. In addition, in the event of a fundamental change or event of default prior to the Maturity Date, holders will, subject to certain conditions, have the right, at their option, to require the Company to repurchase for cash all or part of the Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date.

~~Convertible notes consisted of the following as of March 31,~~The Notes at September 30, 2019 and December 31, 2018 ~~follows~~consisted of the following (in thousands):



	September 30,			December 31,
	2019			2018
Outstanding principal	$	171,500		$	171,500
Unamortized debt discount	(41,490		)	(48,430		)
Unamortized debt issuance	(2,566		)	(2,996		)
Net carrying amount of the liability component	127,444			120,074

March 31, December 31,
2019 2018
Outstanding principal $ 171,500
$ 171,500
Unamortized debt discount (46,182 ) (48,430 )
Unamortized debt issuance (2,857 ) (2,996 )
Net carrying amount of the liability component 122,461
120,074

The Company recorded $1.1 ~~million and $0.1~~ million for contractual coupon interest for each of the three months ended ~~March 31,~~September 30, 2019 and 2018,, and $3.2 million and $2.2 million for the nine months ended September 30, 2019 and 2018, respectively. The Company also recorded $0.1 million ~~and no material amounts~~ for amortization of debt issuance ~~costs~~ for each of the three months ended ~~March 31,~~September 30, 2019 and 2018,~~, respectively,~~ and ~~$2.2~~$0.4 million and ~~$0.1~~$0.3 million for ~~amortization~~the nine months ended September 30, 2019 and 2018, respectively.Amortization of the debt discount for the three months ended ~~March 31,~~September 30, 2019 and 2018, was $2.4 million and $2.1 million, respectively, and for the nine months endedSeptember 30, 2019 and 2018 was $6.9 million and $4.3 million, respectively. As of ~~March 31,~~September 30, 2019, no Notes were convertible pursuant to their terms.

In connection with the ~~debt~~Notes issuance, the Company entered into a prepaid forward stock repurchase transaction (“Prepaid Forward”) with a financial institution (“Forward Counterparty”). Pursuant to the Prepaid Forward, the Company

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

NOTE 11. EARNINGS PER SHARE

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

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect for the three and nine months ended ~~March 31,~~ September 30, 2019 and 2018 (in thousands):



	Three Months Ended		Nine Months Ended
	September 30,	September 30,	September 30,	September 30,
	2019	2018	2019	2018
Shares issuable upon the release of restricted stock awards	20	66	20	66
Shares issuable upon exercise of stock options	10,159	8,182	10,159	8,182
	10,179	8,248	10,179	8,248

2019 2018
Shares issuable upon the release of restricted stock awards 30
16
Shares issuable upon exercise of stock options 9,160
8,084
9,190
8,100

Potentially dilutive common shares would also include common shares that would be outstanding if Notes convertible at the balance sheet date were converted. As discussed in Note 10, Convertible Notes, the Company issued $171.5 million of Notes due 2023. The Notes are convertible into shares of the Company’s common stock, can be repurchased for cash, or a combination thereof, at the Company’s election, at an initial conversion rate of 32.3428 shares of common stock per $1,000 principal amount of the Notes. As of ~~March 31,~~September 30, 2019, no0 Notes were convertible pursuant to their terms. The number of shares issuable upon conversion of the Notes is 5.5 million shares.

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

NOTE 12. EMPLOYEE EQUITY-BASED COMPENSATION

The following table summarizes option activity under all plans during the ~~three~~nine months ended ~~March 31,~~ September 30, 2019:



	Number of Shares		Weighted Average Exercise Price per Share
Options Outstanding January 1, 2019	8,090,636		$	12.22
Granted	2,883,596		14.47
Forfeited	(420,098	)	20.74
Exercised	(327,215	)	14.91
Expired	(67,574	)	23.41
Options Outstanding September 30, 2019	10,159,345		$	12.34

Number of Shares Weighted Average Exercise Price per Share
Options Outstanding January 1, 2019 8,090,636
$ 12.22
Granted 1,468,949
11.66
Forfeited (169,423 ) 21.05
Exercised (208,044 ) 17.68
Expired (22,576 ) 23.27
Options Outstanding March 31, 2019 9,159,542
$ 11.81

The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded during the periods shown below:



	Three Months Ended
	September 30,			September 30,
	2019			2018
Expected term (in years)	6.46			5.53
Volatility	59		%	58		%
Expected dividends	—			—
Risk free interest rates	1.47		%	2.75		%
Weighted average fair value	$	9.66		$	11.48

Three Months Ended
March 31, March 31,
2019 2018
Expected term (in years) 6.17
6.11
Volatility 62 % 68 %
Expected dividends —
—
Risk free interest rates 2.59 % 2.69 %
Weighted average fair value $ 6.90
$ 16.25

The following table shows summary information for outstanding options and options that are exercisable (vested) as of ~~March 31,~~September 30, 2019:



	Options Outstanding		Options Exercisable
Number of options	10,159,345		6,137,856
Weighted average remaining contractual term (in years)	6.14		4.32
Weighted average exercise price	$	12.34	$	9.03
Weighted average fair value	$	8.01	$	6.06
Aggregate intrinsic value (in thousands)	$	76,923	$	65,271

Options
Outstanding
Options
Exercisable
Number of options 9,159,542
5,987,089
Weighted average remaining contractual term (in years) 6.08
4.63
Weighted average exercise price $ 11.81
$ 8.75
Weighted average fair value $ 7.91
$ 5.95
Aggregate intrinsic value (in thousands) $ 92,541
$ 76,978

The following table summarizes RSU and restricted stock award activity during the ~~three~~nine months ended ~~March 31,~~ September 30, 2019:



	Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding January 1, 2019	76,000		$	18.70
Granted	11,000		20.32
Forfeited	(60,500	)	19.74
Vested/released	(7,000	)	19.47
Outstanding September 30, 2019	19,500		16.13

Number of Shares Weighted Average Grant Date Fair Value per Share
Outstanding January 1, 2019 76,000
$ 18.70
Granted 11,000
20.32
Forfeited (50,000 ) 20.80
Vested/released (7,000 ) 19.47
Outstanding March 31, 2019 30,000
15.62

Equity-based compensation expense is summarized below (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2019		2018		2019		2018
Cost of sales	$	65	$	68	$	172	$	172
Research and development	897		1,476		3,226		3,926
Sales, general and administrative	2,169		1,921		6,011		8,378
	$	3,131	$	3,465	$	9,409	$	12,476

Three Months Ended
March 31, March 31,
2019 2018
Cost of sales $ 55
$ 46
Research and development 1,527
1,612
Sales, general and administrative 1,815
3,944
Equity-based compensation expense $ 3,397
$ 5,602

~~During~~For each of the three months ended ~~March 31,~~September 30, 2019 and 2018, $0.1 million of share-based compensation cost was capitalized to inventory or inventory transferred to property and ~~$0.2~~equipment (also referred to as instruments). During the nine months ended September 30, 2019 and 2018, $0.3 million and $0.4 million, respectively, of share-based compensation cost was capitalized to inventory or inventory ~~transfered~~transferred to property and equipment (also referred to as instruments).

As of ~~March 31,~~September 30, 2019, unrecognized equity-based compensation expense related to unvested stock options and unvested RSUs was ~~$22.5~~$27.1 million and ~~$0.4~~$0.2 million, respectively. This is expected to be recognized over the years 2019 through 2024.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options which vest only upon the achievement of certain targets. Performance-based options are generally granted at-the-money, contingently vest over a period of 1 to 2 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These options were valued in the same manner as the time-based options, with the assumption that performance goals will be achieved. The inputs for expected volatility, expected dividends, and risk-free rate used in estimating those options’ fair value are the same as the time-based options issued under the plan. The expected term for performance-based options granted in 2018 is 5 to 6 years. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. In 2018, the Company granted 225,000 performance based-options to certain ~~employees.~~employees, of which 125,000 were outstanding as of September 30, 2019. The Company recognized $0.1 million of stock compensation expense for the ~~three~~nine months ended ~~March 31,~~ September 30, 2019 for performance-based stock options.

NOTE 13. INCOME TAXES

For the three months ended ~~March 31,~~September 30, 2019, the Company recorded ~~a provision for~~an income ~~taxes~~tax benefit amount of $0.2 million ~~which primarily relates~~ to ~~profitable~~reverse the foreign ~~jurisdictions without~~income tax expense recorded in prior quarters as the Company no longer expects to pay current year income taxes in any ~~net operating loss carryforwards.~~of the foreign jurisdictions. For the nine months ended September 30, 2019, the Company did 0t carry an income tax provision amount as the Company does not recognize tax benefits from current year tax losses in the U.S. and other foreign jurisdictions. The Company’s tax expense for the three and nine

months ended ~~March 31,~~September 30, 2019 differs from the tax expense computed by applying the U.S. statutory tax rate to its year-to-date pre-tax loss of ~~$21.5~~$20.7 million and $63.0 million, respectively, as no tax benefits were recorded for tax losses generated in the U.S. and other foreign jurisdictions. At ~~March 31,~~September 30, 2019, the Company had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards and a deferred tax liability related to amortization of the ~~convertible notes.~~Notes. The Company provided a valuation allowance against its net deferred tax assets as future realization of such assets is not more likely than not to occur.

~~We account~~The Company accounts for uncertain tax positions pursuant to the recognition and measurement criteria under ASC 740, Income Taxes. For the three and nine months ended ~~March 31,~~September 30, 2019, we did not note any significant changes to our uncertain tax positions. We do not anticipate significant changes to uncertain tax ~~position~~positions within the next 12 months.

NOTE 14. COMMITMENTS

Clinical Trial & Study Agreements

The Company has entered into master agreements with clinical trial and study sites in which we typically pay a set amount for start-up costs and then pay for work performed. These agreements typically indemnify the clinical trial sites from any and all losses arising from third party claims as a result of the Company's negligence, willful misconduct or misrepresentation. The expenses for start-up costs and work performed for these trials and studies is recorded as research and development or sales, general and administrative expenses on the Company's condensed consolidated statements of operations and comprehensive loss. No commitments were recorded in connection with ~~indemnify~~indemnifying these sites for losses.

NOTE 15. LEASES

The following presents supplemental information related to our leases in which we are the lessee for the three and nine months ended ~~March 31,~~September 30, 2019 (in ~~thousands except~~thousands):



	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019
Cash paid for amounts included in lease liabilities
Operating cash flows from operating leases	$	168	$	333
ROU assets obtained in exchange for lease obligations
Operating leases	$	3,639	$	3,639
Lease Cost
Operating leases	$	213	$	378
Short-term leases	$	103	$	697

The weighted average remaining lease term ~~and~~on our operating leases is 5.6 years. The weighted average discount ~~rate):~~

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 82
Right-of-use assets obtained in exchange for lease obligations
Operating leases $ —
Lease Cost
Operating leases $ 82
Short-term leases (including leases with a term of one month or less) $ 295
Weighted average remaining lease term (years)
Operating leases 2.3 years
Weighted average discount rate (%)
Operating leases 6.9 %

~~Total rent~~rate on those leases is 7.1%. Rent expense including common area charges was ~~$342,000~~$0.3 million and $1.0 million for the three and nine months ended ~~March 31, 2018.~~September 30, 2018, respectively.

The following presents maturities of operating lease liabilities in which we are the lessee as of ~~March 31,~~September 30, 2019 (in thousands):



Remainder of 2019	$	180
2020	637
2021	687
2022	818
2023	913
Thereafter	1,583
Total lease payments	4,818
Less imputed interest	(939		)
	$	3,879

Remainder of 2019 $ 195
2020 174
2021 116
2022 44
2023 —
Thereafter —
Total lease payments 529
Less imputed interest (42 )
Total $ 487

The net investment in sales-type leases, where we are the lessor, is a component of other current assets and other non-current assets in our condensed consolidated balance sheet. As of ~~March 31,~~September 30, 2019, the total net investment in these leases was ~~$0.5~~$0.6 million. The following presents maturities of lease receivables under sales-type leases ~~which we are the lessor~~ as of ~~March 31,~~September 30, 2019 (in thousands):



Remainder of 2019	$	62
2020	197
2021	139
2022	106
2023	53
Thereafter	13
Total undiscounted cash flows	570
Less imputed interest	(3		)
Present value of lease payments	$	567

Remainder of 2019 $ 135
2020 139
2021 91
2022 73
2023 36
Thereafter 7
Total undiscounted cash flows 481
Less imputed interest (5 )
Present value of lease payments $ 476

NOTE 16. INDUSTRY, GEOGRAPHIC AND REVENUE DISAGGREGATION

The Company operates as ~~one~~1 operating segment. Sales to customers outside the United States represented ~~33%~~23% and 14% for the three months ended September 30, 2019 and 2018, respectively, and 26% and 22% for the ~~three~~nine months ended~~March 31,~~September 30, 2019 and 2018, respectively.

As of ~~March 31,~~September 30, 2019 and December 31, 2018, balances due from foreign customers, in U.S. dollars, were ~~$1.2~~$1.5 million and $0.9 million, respectively.

The following presents total net sales by geographic territory for the three and nine months ended~~March 31,~~September 30, 2019 and 2018 (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Domestic	$	1,757	$	1,172	$	4,308	$	2,988
Foreign	514		183		1,519		860
	$	2,271	$	1,355	$	5,827	$	3,848

2019 2018
Domestic $ 1,169
$ 595
Foreign 581
206
Net sales $ 1,750
$ 801

The following presents total net sales by line of business for the three and nine months ended~~March 31,~~September 30, 2019 and 2018 (in thousands):


					Three Months Ended				Nine Months Ended
					September 30,				September 30,
	2019		2018		2019		2018		2019		2018
Accelerate Pheno™ revenue	$	1,705	$	770	$	2,221	$	1,325	$	5,702	$	3,760
Other revenue	45		31		50		30		125		88
Net sales	$	1,750	$	801
					$	2,271	$	1,355	$	5,827	$	3,848

The following presents total net sales by products and services for the three and nine months ended~~March 31,~~September 30, 2019 and 2018 (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Products	$	2,143	$	1,331	$	5,531	$	3,798
Services	128		24		296		50
	$	2,271	$	1,355	$	5,827	$	3,848

2019 2018
Products $ 1,693
$ 796
Services 57
5
Net sales $ 1,750
$ 801

Lease income included in net sales ~~for the~~ ~~three months endedMarch 31, 2019~~ ~~and~~ ~~2018~~was $0.2 million for each of the three months endedSeptember 30, 2019and ~~no material amounts,~~2018, respectively, and $0.6 million and $0.4 million for the nine months ended September 30, 2019 and 2018, respectively, which does not represent revenues recognized from contracts with customers.

The following presents ~~long-lived assets (excluding intangible assets)~~property and equipment, net by geographic territory (in thousands):



	September 30,		December 31,
	2019		2018
Domestic	$	7,726	$	6,309
Foreign	840		994
	$	8,566	$	7,303

March 31, December 31,
2019 2018
Domestic $ 6,315
$ 6,309
Foreign 927
994
Property and equipment, net $ 7,242
$ 7,303

NOTE 17. RELATED PARTY TRANSACTIONS

As ~~part of the transaction~~ discussed in Note 10, Convertible Notes the Company issued Notes in March 2018. As part of this issuance, an ~~affiliate of~~entity controlled by one member of the Company's board of directors purchased an aggregate of $30.0 million of the Notes. In May 2019, this affiliate purchased an additional $10.0 million of Notes on the open market. The affiliated entity is a Qualified Institutional Buyer which purchased and holds an aggregate of $40.0 million of the Notes at ~~March 31,~~September 30, 2019.

On August 20, 2019, the Company and an entity affiliated with the Chief Operating Officer of the Company entered into a securities purchase agreement (the “Purchase Agreement”) for the issuance and sale by the Company of an aggregate of 55,586 shares of the Company’s common stock (the “Shares”) in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. The Shares were sold at a purchase price (determined in accordance with Nasdaq rules relating to the “market value” of the shares) of $17.99 per share, which was equal to the consolidated closing bid price reported by Nasdaq immediately preceding the time the Company entered into the Purchase Agreement. The $1.0 million of proceeds were recorded to contributed capital.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introductory Note

Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-Q (this “Form 10-Q”) to the “Company,” “Accelerate,” “we,” “us” or “our” are references to the combined business of Accelerate Diagnostics, Inc.

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements within the meaning of 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”), and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements, which can be identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or variations thereon or comparable terminology, include the plans and objectives of management for future operations, including plans and objectives relating to the products and future economic performance of the Company. In addition, all statements other than statements of historical facts that address activities, events, or developments the Company expects, believes, or anticipates will or may occur in the future, and other such matters, are forward-looking statements.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on assumptions that the Company will retain key management personnel, the Company will be successful in the commercialization of the Accelerate Pheno™ system, the Company will obtain sufficient capital to commercialize the Accelerate Pheno™ system and continue development of complementary products, the Company will be able to protect its intellectual property, the Company’s ability to respond to technological change, the Company will accurately anticipate market demand for the Company’s products and there will be no material adverse change in the Company’s operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) summarizes the significant factors affecting our results of operations, liquidity, capital resources and contractual obligations. The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included elsewhere herein. Certain information contained in the discussion and analysis set forth below and elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that

involve risks and uncertainties. The Company’s future operating results may be affected by various trends and factors which are beyond the Company’s control. These include, among other factors, general public perception of issues and solutions, and other uncertain business conditions that may affect the Company’s business. The Company cautions the reader that a number of important factors discussed herein, and in other reports filed with the SEC including but not limited to the risks in the section entitled “Risk Factors” in its Annual Report on Form 10-K for the year ended December 31, 2018 and in the Company's subsequent filings with the SEC, could affect the Company’s actual results and cause actual results to differ materially from those discussed in forward-looking statements.

All amounts in the MD&A have been rounded to the nearest thousand unless otherwise indicated.

Overview

Accelerate Diagnostics, Inc. (“Accelerate”) is an in vitro diagnostics company dedicated to providing solutions that improve patient outcomes and lower healthcare costs through the ~~fast~~rapid diagnosis of serious infections. Microbiology laboratories are in need of new tools to address what the U.S. Centers for Disease Control and Prevention (the “CDC”) calls one of the most serious healthcare threats of our time, antibiotic resistance. A significant contributing factor to the rise of resistance is the overuse and misuse of antibiotics, which is exacerbated by a lack of timely diagnostic results. The delay of identification and antibiotic susceptibility results is often due to the reliance by microbiology laboratories on traditional culture-based tests that often take two to three days to complete. Our technology

platform is built to address these challenges by delivering significantly faster testing of infectious pathogens in various patient sample types.

Our first system to address these challenges is the Accelerate Pheno™ system. The Accelerate Pheno™ system utilizes genotypic technology to identify (ID) infectious pathogens and phenotypic technology to conduct antibiotic susceptibility testing (AST), which determines whether live bacterial and fungal cells are resistant or susceptible to a particular antimicrobial. The Accelerate PhenoTest™ BC Kit, which is the first test kit for the system, provides ID and AST results for patients suspected of bacteremia or fungemia, both life-threatening conditions with high morbidity and mortality risk. This information is used to rapidly modify antibiotic therapy to lessen ~~side-affects,~~side-effects, improve clinical outcomes, and help preserve the useful life of antibiotics.

On June 30, 2015, we declared our conformity to the European In Vitro Diagnostic Directive 98/79/EC and applied a CE Mark to the Accelerate Pheno™ system and the Accelerate PhenoTest™ BC Kit for in vitro diagnostic use. On February 23, 2017, the U.S. Food and Drug Administration (“FDA”) granted our de novo request to market our Accelerate Pheno™ system and Accelerate PhenoTest™ BC Kit.

In 2017, we began selling the Accelerate Pheno™ system in hospitals in the United States, Europe, and the Middle East. Consistent with the Company's “razor” / “razor-blade” business model, revenues to date have principally been generated from the sale of the instruments and the sale of single use consumable test kits.

Changes in Results of Operations: Three and nine months ended ~~March 31,~~September 30, 2019 compared to three and nine months ended ~~March 31,~~September 30, 2018

Three Months Ended
March 31,
(in thousands)
2019 2018 $ Change % Change
Net sales $ 1,750
$ 801
$ 949
118 %



	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	(in thousands)								(in thousands)
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
Net sales	$	2,271	$	1,355	$	916	68	%	$	5,827	$	3,848	$	1,979	51	%

For the three and nine months ended ~~March 31,~~September 30, 2019, total revenues increased as compared to the three and nine months ended September 30, 2018 due to increased sales of Accelerate ~~Pheno™ systems and Accelerate~~ PhenoTest™ BC Kits.


	Three Months Ended								Three Months Ended								Nine Months Ended
	March 31,								September 30,								September 30,
	(in thousands)								(in thousands)								(in thousands)
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
Cost of sales	$	916	$	492	$	424	86	%	$	1,117	$	680	$	437	64	%	$	2,940	$	1,889	$	1,051	56	%
Gross profit	$	834	$	309	$	525	170	%	$	1,154	$	675	$	479	71	%	$	2,887	$	1,959	$	928	47	%



Delaware			84-1072256
(State or other jurisdiction			(I.R.S. Employer Identification No.)
of incorporation or organization)

3950 South Country Club Road,		Suite 470
Tucson,	Arizona		85714
(Address of principal executive offices)			(Zip Code)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par ~~value per share~~	AXDX	The Nasdaq Stock Market LLC
value per share		(The Nasdaq Capital Market)



Large accelerated filer		þ☑
Accelerated filer		o☐
Non-accelerated ~~file~~filer		o☐
Smaller reporting company		þ☑
Emerging growth company		o☐



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
~~Item 4. Controls and Procedures~~	33
~~Part II - OTHER INFORMATION~~
Item ~~1. Legal Proceedings~~4. Controls and Procedures	34
Part II - OTHER INFORMATION
Item ~~1A. Risk Factors~~1. Legal Proceedings	3435
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3435
Item 3. Defaults Upon Senior Securities	34
~~Item 4. Mine Safety Disclosures~~	34
~~Item 5. Other Information~~	34
~~Item 6. Exhibits~~	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36


	March 31,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
	Unaudited						Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	75,309		$	66,260		$	92,938		$	66,260
Investments	75,550			100,218			28,978			100,218
Trade accounts receivable	1,950			1,860			2,642			1,860
Inventory	8,599			7,746			7,881			7,746
Prepaid expenses	1,880			980			1,163			980
Other current assets	712			576			793			576
Total current assets	164,000			177,640			134,395			177,640
Property and equipment, net	7,242			7,303			8,566			7,303
Right of use assets	487			—			3,834			—
Intellectual property, net	108			114
Other non-current assets	348			208			483			322
Total assets	$	172,185		$	185,265		$	147,278		$	185,265

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	2,505		$	1,322		$	2,281		$	1,322
Accrued liabilities	3,236			4,962			2,985			4,962
Accrued interest	191			1,262			191			1,262
Deferred revenue and income	291			217
Deferred revenue							250			217
Current operating lease liability	244			—			421			—
Total current liabilities	6,467			7,763			6,128			7,763
Noncurrent operating lease liability	243			—
Other long term liabilities	46			53
Non-current operating lease liability							3,458			—
Other non-current liabilities							28			53
Convertible notes	122,461			120,074			127,444			120,074
Total liabilities	$	129,217		$	127,890		$	137,058		$	127,890

Commitments and contingencies

Stockholders’ equity:
Preferred shares, $0.001 par value;
5,000,000 preferred shares authorized and none outstanding as of March 31, 2019 and December 31, 2018	—			—
5,000,000 preferred shares authorized and none outstanding as of September 30, 2019 and December 31, 2018							—			—
Common stock, $0.001 par value;
75,000,000 common shares authorized with 54,454,347 shares issued and outstanding on March 31, 2019 and 54,231,876 shares issued and outstanding on December 31, 2018	54			54
85,000,000 common shares authorized with 54,641,187 shares issued and outstanding on September 30, 2019 and 75,000,000 common shares authorized with 54,231,876 shares issued and outstanding on December 31, 2018							55			54
Contributed capital	440,154			432,885			448,609			432,885
Treasury Stock	(45,067		)	(45,067		)
Treasury stock							(45,067		)	(45,067		)
Accumulated deficit	(352,069		)	(330,348		)	(393,318		)	(330,348		)
Accumulated other comprehensive loss	(104		)	(149		)	(59		)	(149		)
Total stockholders’ equity	42,968			57,375			10,220			57,375
Total liabilities and stockholders’ equity	$	172,185		$	185,265		$	147,278		$	185,265



	Shares	Common Stock Amount	Contributed Capital	Accumulated Deficit		Treasury stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balances, December 31, 2018	54,232	54	432,885	(330,348	)	(45,067	)	(149	)	57,375
Net Loss	—	—	—	(21,721	)	—		—		(21,721	)
Exercise of options	215	—	3,677	—		—		—		3,677
Issuance of common stock under employee purchase plan	7	—	139	—		—		—		139
Unrealized loss on available-for-sale securities	—	—	—	—		—		121		121
Foreign currency translation adjustment	—	—	—	—		—		(76	)	(76	)
Equity-based compensation	—	—	3,453	—		—		—		3,453
Balances, March 31, 2019	54,454	54	440,154	(352,069	)	(45,067	)	(104	)	42,968



Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	82
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—
Lease Cost
Operating leases	$	82
Short-term leases (including leases with a term of one month or less)	$	295
Weighted average remaining lease term (years)
Operating leases	2.3 years
Weighted average discount rate (%)
Operating leases	6.9		%


Cash Flow Summary (in thousands)	Cash Flow Summary (in thousands)									Cash Flow Summary (in thousands)
	Three Months Ended									Nine Months Ended
	March 31,						Change			September 30,						Change
	2019			2018						2019			2018
Net cash used in operating activities	$	(19,505	)	$	(16,068	)	$	(3,437	)	$	(50,929	)	$	(53,430	)	$	2,501
Net cash provided by investing activities	24,799			12,475			12,324
Net cash provided by (used in) investing activities										71,464			(38,980		)	110,444
Net cash provided by financing activities	3,816			101,847			(98,031		)	6,242			125,596			(119,354		)



Exhibit No.	Description	Filing Information
3.1	Certificate of Incorporation of Registrant	Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on November 13, 2012
3.1.1	Certificate of Amendment to Certificate of Incorporation of Registrant	Incorporated by reference to Exhibit A to the Registrant’s Definitive Information Statement on Schedule 14C filed on July 12, 2013
3.1.2	Certificate of Amendment to Certificate of Incorporation of Registrant	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 15, 2016
~~3.2~~ 3.1.3	~~Bylaws~~Certificate of ~~Registrant~~	~~Incorporated by reference to Exhibit 3.2~~Amendment to the ~~Registrant’s Annual Report on Form 10-K for the fiscal year ended July 31, 2012, filed on October 26, 2012~~
~~3.2.1~~	~~Amendment No. 1 to the By-laws~~Certificate of Incorporation of Registrant	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on ~~November 16, 2017~~May 15, 2019
3.2	~~31.1~~Amended and Restated Bylaws of Registrant	Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on August 8, 2019
10.1	Offer Letter between Accelerate Diagnostics, Inc. and John J. Phillips, dated August 6, 2019	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 8, 2019
10.2	Nonqualified Stock Option Agreement between Accelerate Diagnostics, Inc. and John J. Phillips, dated August 6, 2019	Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on August 8, 2019
10.3	Securities Purchase Agreement, dated August 20, 2019, between Accelerate Diagnostics, Inc. and John J. Phillips Investment Irrevocable Trust, dated July 31, 2019	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 21, 2019
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)	Filed herewith



~~May 9,~~November 8, 2019	/s/ Lawrence Mehren
	Lawrence Mehren President and Chief Executive Officer
	(Principal Executive Officer)

~~May 9,~~November 8, 2019	/s/ Steve Reichling
	Steve Reichling Chief Financial Officer
	(Principal Financial and Accounting Officer)

September 30,

December 31,

Products and services not yet delivered