UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___ to___

Commission file number: 001-39388

~~Berkeley Lights,~~PhenomeX Inc.

(Exact name of registrant as specified in its charter)


Delaware			35-2415390
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5858 Horton Street, Suite 320

Emeryville, California 94608

(Address of principal executive offices) (Zip code)

(510) 858-2855

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $0.00005 par value

~~BLI~~CELL

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 ☒ No ☐

~~Table of Contents~~

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 ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒☐

Accelerated filer

☐

Non-accelerated filer

☐☒

Smaller reporting company

☐☒

Emerging growth company

☐

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.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 31, 2022, 68,283,926~~April 30, 2023, 98,795,621 shares of the registrant’s common stock, $0.00005 par value per share, were outstanding.

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~~BERKELEY LIGHTS,~~PHENOMEX INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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		Page(s)

Part I.	Financial Information	1

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of ~~June 30, 202~~2 March 31, 2023 and December 31, ~~202~~12022	1

	Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31 , 202 23 and 202 12	2

	Condensed Consolidated Statements of Comprehensive Loss for the three ~~and six~~ months ended ~~June 30, 2022~~March 31 , 202 3 and ~~2021~~202 2	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 202 23 and 202 12	4

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~ March 3 1 ,202 23 and 202 12	65

	Notes to Condensed Consolidated Financial Statements	76

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2332

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3844

Item 4.	Controls and Procedures	3844

Part II.	Other Information	4045

Item 1.	Legal Proceedings	4045

Item 1A.	Risk Factors	4045

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4049

Item 3.	Defaults Upon Senior Securities	4149

Item 4.	Mine Safety Disclosures	4149

Item 5	Other Information	4149

Item 6.	Exhibits	4250

	Signatures	4352

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

~~Berkeley Lights,~~PhenomeX Inc.

Condensed Consolidated Balance Sheets

June 30,
2022 December 31,
2021
(In thousands, except share and per share data) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ 143,024 $ 178,096
Short-term marketable securities 9,361 —
Trade accounts receivable 13,815 25,942
Inventory 15,664 14,547
Prepaid expenses and other current assets 10,606 11,985
Total current assets 192,470 230,570
Restricted cash — 270
Property and equipment, net 29,317 27,992
Operating lease right-of-use assets 24,522 26,060
Other assets 2,397 2,361
Total assets $ 248,706 $ 287,253
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable $ 8,499 $ 8,198
Accrued expenses and other current liabilities 11,945 12,425
Deferred revenue 8,694 12,128
Total current liabilities 29,138 32,751
Notes payable 19,794 19,762
Deferred revenue, net of current portion 1,221 2,187
Lease liability, long-term 24,137 24,337
Total liabilities 74,290 79,037
Commitments and contingencies (Note 14) 0 0
Stockholders’ equity:
Common stock, $0.00005 par value. Authorized 300,000,000 shares at June 30, 2022 and December 31, 2021; issued and outstanding 68,273,932 and 67,595,535 shares at June 30, 2022 and December 31, 2021, respectively 4 4
Additional paid-in capital 485,212 471,820
Accumulated deficit (310,781) (263,608)
Accumulated other comprehensive loss (19) —
Total stockholders’ equity 174,416 208,216
Total liabilities and stockholders’ equity $ 248,706 $ 287,253
(Unaudited)


	March 31, 2023		December 31, 2022
(In thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	51,606	$	86,522
Short-term marketable securities	—		46,252
Trade accounts receivable, net	25,119		18,534
Inventory	45,539		18,861
Prepaid expenses and other current assets	9,378		6,783
Total current assets	131,642		176,952
Restricted cash	70,093		—
Property and equipment, net	33,842		23,847
Operating lease right-of-use assets	27,449		23,326
Goodwill	12,246		—
Intangible assets, net	23,072		—
Other assets	2,217		1,969
Total assets	$	300,561	$	226,094
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	17,051	$	10,092
Accrued expenses and other current liabilities	19,645		21,340
Current portion of long-term debt	—		4,966
Deferred revenue	10,746		9,092
Total current liabilities	47,442		45,490
Long-term debt	68,886		14,860
Deferred revenue, net of current portion	1,259		963
Lease liability, long-term	25,234		22,726

Total liabilities	142,821		84,039
Commitments and contingencies (Note 17)
Stockholders’ equity:

Common stock, $0.00005 par value. Authorized 300,000,000 shares at March 31, 2023 and December 31, 2022; issued and outstanding 98,744,915 and 72,169,052 shares at March 31, 2023 and December 31, 2022, respectively	5		4
Additional paid-in capital	542,805		503,708
Accumulated deficit	(385,067)		(361,648)
Accumulated other comprehensive loss	(3)		(9)
Total stockholders’ equity	157,740		142,055
Total liabilities and stockholders’ equity	$	300,561	$	226,094

See accompanying notes to these condensed consolidated financial statements.

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~~Berkeley Lights,~~PhenomeX Inc.

Condensed Consolidated Statements of Operations (Unaudited)


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
(In thousands, except share and per share data)	(In thousands, except share and per share data)	2022		2021		2022		2021		(In thousands, except share and per share data)	2023		2022
Revenue:	Revenue:									Revenue:
Product revenue	Product revenue	$	9,468	$	13,021	$	19,242	$	26,554	Product revenue	$	8,378	$	9,774
Service revenue		9,682		6,229		20,114		11,324
Service and other revenue										Service and other revenue	10,138		10,432
Total revenue	Total revenue	19,150		19,250		39,356		37,878		Total revenue	18,516		20,206
Cost of sales:	Cost of sales:									Cost of sales:
Product cost of sales	Product cost of sales	2,614		3,332		5,309		7,035		Product cost of sales	3,912		2,695
Service cost of sales	Service cost of sales	3,610		3,190		7,294		5,664		Service cost of sales	1,176		3,684
Total cost of sales	Total cost of sales	6,224		6,522		12,603		12,699		Total cost of sales	5,088		6,379
Gross profit	Gross profit	12,926		12,728		26,753		25,179		Gross profit	13,428		13,827
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	18,178		13,535		35,751		26,562		Research and development	8,421		17,573
General and administrative		13,024		11,725		24,740		20,692
Sales and marketing		7,271		5,317		13,082		10,923
Selling, general and administrative										Selling, general and administrative	26,547		17,527
Restructuring										Restructuring	1,290		—
Total operating expenses	Total operating expenses	38,473		30,577		73,573		58,177		Total operating expenses	36,258		35,100
Loss from operations	Loss from operations	(25,547)		(17,849)		(46,820)		(32,998)		Loss from operations	(22,830)		(21,273)
Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(227)		(356)		(451)		(710)		Interest expense	(384)		(224)
Interest income	Interest income	53		43		87		109		Interest income	827		34
Other income (expense), net	Other income (expense), net	(22)		34		35		53		Other income (expense), net	(1,012)		57
Loss before income taxes	Loss before income taxes	(25,743)		(18,128)		(47,149)		(33,546)		Loss before income taxes	(23,399)		(21,406)
Provision for income taxes	Provision for income taxes	4		26		24		43		Provision for income taxes	20		20
Net loss	Net loss	$	(25,747)	$	(18,154)	$	(47,173)	$	(33,589)	Net loss	$	(23,419)	$	(21,426)

Net loss attributable to common stockholders per share, basic and diluted	Net loss attributable to common stockholders per share, basic and diluted	$	(0.38)	$	(0.27)	$	(0.70)	$	(0.51)	Net loss attributable to common stockholders per share, basic and diluted	$	(0.31)	$	(0.32)
Weighted-average shares used in calculating net loss per share, basic and diluted	Weighted-average shares used in calculating net loss per share, basic and diluted	67,985,664		66,790,755		67,842,372		66,029,307		Weighted-average shares used in calculating net loss per share, basic and diluted	75,759,771		67,697,488

See accompanying notes to these condensed consolidated financial statements.

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~~Berkeley Lights,~~PhenomeX Inc.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022

Net loss	Net loss	$	(25,747)	$	(18,154)	$	(47,173)	$	(33,589)	Net loss	$	(23,419)	$	(21,426)
Other comprehensive loss:	Other comprehensive loss:									Other comprehensive loss:
Unrealized loss on marketable securities, net of tax		(19)		—		(19)		—
Other comprehensive loss:		(19)		—		(19)		—
Foreign currency translation adjustments										Foreign currency translation adjustments	(3)		—
Unrealized gain on marketable securities, net of tax										Unrealized gain on marketable securities, net of tax	9		—
Other comprehensive income:										Other comprehensive income:	6		—
Comprehensive loss	Comprehensive loss	$	(25,766)	$	(18,154)	$	(47,192)	$	(33,589)	Comprehensive loss	$	(23,413)	$	(21,426)

See accompanying notes to these condensed consolidated financial statements.

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~~Berkeley Lights,~~PhenomeX Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three Months Ended June 30, 2022
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated Other Comprehensive Loss Total
Stockholders'
Equity
(In thousands, except share data) Shares Amount
Balances at March 31, 2022 67,820,115 $ 4 $ 478,231 $ (285,034) $ — $ 193,201
Shares issued in connection with:
Exercise of stock options 181,013 — 354 — — 354
Vesting of restricted stock units 272,804 — — — — —
Stock-based compensation — — 6,627 — — 6,627
Other comprehensive loss — — — — (19) (19)
Net loss — — — (25,747) — (25,747)
Balances at June 30, 2022 68,273,932 $ 4 $ 485,212 $ (310,781) $ (19) $ 174,416
Three Months Ended June 30, 2021
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated Other Comprehensive Loss Total
Stockholders'
Equity
(In thousands, except share data) Shares Amount
Balances at March 31, 2021 66,384,736 $ 4 $ 449,681 $ (207,319) $ — $ 242,366
Shares issued in connection with:
Exercise of stock options 644,610 — 1,985 — — 1,985
Vesting of restricted stock units 14,191 — — — — —
Stock-based compensation — — 5,642 — — 5,642
Net loss — — — (18,154) — (18,154)
Balances at June 30, 2021 67,043,537 $ 4 $ 457,308 $ (225,473) $ — $ 231,839

~~Table of Contents~~


																						Three Months Ended March 31, 2023
																						Common Stock								Additional Paid-in Capital					Accumulated Deficit				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
(In thousands, except share data)																					(In thousands, except share data)	Shares					Amount
Balances at December 31, 2022																					Balances at December 31, 2022	72,169,052					$	4					$	503,708					$	(361,648)			$	(9)			$	142,055
Common stock issued for IsoPlexis Merger																					Common stock issued for IsoPlexis Merger	24,945,611					1			31,929					—				—				31,930
Fair value of vested IsoPlexis options attributable to pre-merger service																					Fair value of vested IsoPlexis options attributable to pre-merger service	—					—			306					—				—				306
Fair value of IsoPlexis warrant at Acquisition Date																					Fair value of IsoPlexis warrant at Acquisition Date	—					—			170					—				—				170
Shares issued in connection with:																					Shares issued in connection with:
Exercise of stock options																					Exercise of stock options	78,359					—			29					—				—				29
Vesting of restricted stock units																					Vesting of restricted stock units	285,129					—			—					—				—				—
Employee stock purchase plan																					Employee stock purchase plan	121,863					—			166					—								166
RSUs issued for 2022 Bonuses (1)																					RSUs issued for 2022 Bonuses (1)	1,144,901					—			2,107					—				—				2,107
Stock-based compensation																					Stock-based compensation	—					—			4,390					—				—				4,390
Unrealized gain (loss) on marketable securities																					Unrealized gain (loss) on marketable securities	—					—			—					—				9				9
Foreign currency translation adjustments																					Foreign currency translation adjustments	—					—			—					—				(3)				(3)
Net loss																					Net loss	—					—			—					(23,419)				—				(23,419)
Balances at March 31, 2023																					Balances at March 31, 2023	98,744,915					$	5		$	542,805				$	(385,067)			$	(3)			$	157,740

		Six Months Ended June 30, 2022																				Three Months Ended March 31, 2022
		Common Stock			Additional Paid-in Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss					Total Stockholders' Equity				Common Stock								Additional Paid-in Capital					Accumulated Deficit				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
(In thousands, except share data)	(In thousands, except share data)	Shares	Amount								(In thousands, except share data)	Shares									Amount
Balances at December 31, 2021	Balances at December 31, 2021	67,595,535	$	4			$	471,820							$	(263,608)				$	—				$	208,216	Balances at December 31, 2021		67,595,535			$	4				$	471,820			$	(263,608)			$	—			$	208,216
Shares issued in connection with:	Shares issued in connection with:																				Shares issued in connection with:
Exercise of stock options	Exercise of stock options	262,667	—		766				—				—					766			Exercise of stock options	81,654					—				412					—				—				412
Vesting of restricted stock units	Vesting of restricted stock units	300,384	—		—				—				—					—			Vesting of restricted stock units	27,580					—			—					—				—				—

Employee stock purchase plan		115,346	—		610				—				—					610
Stock-based compensation		—	—		12,016				—				—					12,016
Other comprehensive loss		—	—		—				—				(19)					(19)
Net loss		—��	—		—				(47,173)				—					(47,173)
Balances at June 30, 2022		68,273,932	$	4	$	485,212			$	(310,781)			$	(19)				$	174,416

		Six Months Ended June 30, 2021
		Common Stock			Additional Paid-in Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss					Total Stockholders' Equity
(In thousands, except share data)		Shares	Amount
Balances at December 31, 2020		64,486,246	$	3			$	436,662								$	(191,884)						$	—				$	244,781
Shares issued in connection with:
Exercise of stock options		2,422,740	1		8,346				—				—					8,347
Vesting of restricted stock units		19,191	—		—				—				—					—
Employee stock purchase plan	Employee stock purchase plan	115,360			2,157								—					2,157			Employee stock purchase plan	115,346					—			610					—				—				610
Stock-based compensation	Stock-based compensation	—	—		10,143				—				—					10,143			Stock-based compensation	—					—			5,389					—				—				5,389

Net loss	Net loss	—	—		—				(33,589)				—					(33,589)			Net loss	—					—			—					(21,426)				—				(21,426)
Balances at June 30, 2021		67,043,537	$	4	$	457,308			$	(225,473)			$	—				$	231,839
Balances at March 31, 2022																					Balances at March 31, 2022	67,820,115					$	4		$	478,231				$	(285,034)			$	—			$	193,201

See accompanying notes to these condensed consolidated financial statements.

(1) Annual bonuses for certain employees related to fiscal year 2022 were not paid in cash and instead the Company issued fully vested RSUs on March 3, 2023 with a grant date fair value of $1.84 per share. The associated expense was recorded in 2022, the period in which the bonus was earned.

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~~Berkeley Lights,~~

PhenomeX Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)


		Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(47,173)	$	(33,589)	Net loss	$	(23,419)	$	(21,426)
Adjustments to reconcile net loss to cash used in operating activities:	Adjustments to reconcile net loss to cash used in operating activities:					Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		4,431		2,654
Depreciation and amortization						Depreciation and amortization	2,100		1,944
Stock-based compensation	Stock-based compensation	11,958		10,123		Stock-based compensation	4,388		5,393
RSUs issued for 2022 Bonuses						RSUs issued for 2022 Bonuses	2,107		—
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	1,538		994		Amortization of operating lease right-of-use assets	852		735
Non-cash interest and other expense related to debt and note receivable agreements	Non-cash interest and other expense related to debt and note receivable agreements	32		36		Non-cash interest and other expense related to debt and note receivable agreements	16		16
Provision for excess and obsolete inventory		479		330

Provision for doubtful accounts						Provision for doubtful accounts	173		—
Loss on debt extinguishment						Loss on debt extinguishment	162		—
Loss on disposal and impairment of property and equipment	Loss on disposal and impairment of property and equipment	27		31		Loss on disposal and impairment of property and equipment	151		28

Realized loss on marketable securities						Realized loss on marketable securities	6		—
Other non-cash	Other non-cash	271		—		Other non-cash	(638)		—

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts receivable	Trade accounts receivable	12,128		(6,820)		Trade accounts receivable	(3,684)		8,221
Inventory	Inventory	(1,539)		(5,710)		Inventory	964		(1,122)
Prepaid expenses, other current assets and other assets	Prepaid expenses, other current assets and other assets	1,340		(639)		Prepaid expenses, other current assets and other assets	1,865		2,057
Trade accounts payable	Trade accounts payable	1,000		4,512		Trade accounts payable	5,373		298
Deferred revenue	Deferred revenue	(4,400)		2,942		Deferred revenue	551		(2,935)
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(585)		1,872		Accrued expenses and other current liabilities	(9,660)		(2,552)
Operating lease liabilities	Operating lease liabilities	(95)		(831)		Operating lease liabilities	(860)		(726)

Net cash used in operating activities	Net cash used in operating activities	(20,588)		(24,095)		Net cash used in operating activities	(19,553)		(10,069)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of property and equipment	Purchase of property and equipment	(6,758)		(4,382)		Purchase of property and equipment	(414)		(4,375)
Purchase of marketable securities	Purchase of marketable securities	(9,372)		—		Purchase of marketable securities	(2,451)		—

Net cash used in investing activities		(16,130)		(4,382)
Proceeds from sales of marketable securities						Proceeds from sales of marketable securities	36,749		—
Proceeds from maturities of marketable securities						Proceeds from maturities of marketable securities	12,400		—
Asset acquisition						Asset acquisition	(264)		—
Acquisitions, net of cash acquired						Acquisitions, net of cash acquired	(40,285)		—
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	5,735		(4,375)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayment of term loan						Repayment of term loan	(20,000)		—
Proceeds from issuance of debt						Proceeds from issuance of debt	70,000		—
Payment of debt issuance costs						Payment of debt issuance costs	(1,200)		—

Payment of debt issuance costs		—		(358)
Proceeds from issuance of common stock upon exercise of stock options	Proceeds from issuance of common stock upon exercise of stock options	766		8,347		Proceeds from issuance of common stock upon exercise of stock options	29		412
Proceeds from issuance of common stock under employee stock purchase plan	Proceeds from issuance of common stock under employee stock purchase plan	610		2,157		Proceeds from issuance of common stock under employee stock purchase plan	166		610
Net cash provided by financing activities	Net cash provided by financing activities	1,376		10,146		Net cash provided by financing activities	48,995		1,022
Net decrease in cash and cash equivalents and restricted cash		(35,342)		(18,331)
Cash and cash equivalents and restricted cash at beginning of period		178,366		233,678
Cash and cash equivalents and restricted cash at end of period		$	143,024	$	215,347
Net increase (decrease) in cash and cash equivalents and restricted cash						Net increase (decrease) in cash and cash equivalents and restricted cash	35,177		(13,422)
Cash, cash equivalents and restricted cash at beginning of period						Cash, cash equivalents and restricted cash at beginning of period	86,522		178,366
Cash, cash equivalents and restricted cash at end of period						Cash, cash equivalents and restricted cash at end of period	$	121,699	$	164,944

See accompanying notes to these condensed consolidated financial statements.

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1)The Company and Basis of Presentation

Description of Business

~~Berkeley Lights,~~PhenomeX Inc. (the “Company” or ~~“Berkeley Lights”~~“PhenomeX”) is a ~~leading Digital Cell Biology~~functional cell biology company ~~focused~~that provides live cell biology research tools which deliver deep insights into cellular function and new perspectives on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. Berkeley Lights’ platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including the Company’s OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software.phenomes.

~~Berkeley Lights~~PhenomeX and its consolidated subsidiaries are hereinafter referred to as the “Company.” The Company’s headquarters are in Emeryville, California.

Basis of Presentation

On December 21, 2022, Berkeley Lights, Inc. (“Berkeley Lights”) entered into an Agreement and Plan of Merger (“Merger Agreement”) with Iceland Merger Sub Inc., a wholly owned subsidiary of Berkeley Lights (“Merger Sub”) and IsoPlexis Corporation (“IsoPlexis”). Pursuant to the Merger Agreement on March 21, 2023 (“Acquisition Date”), Merger Sub was merged with IsoPlexis, with IsoPlexis surviving the merger as a wholly owned subsidiary of Berkeley Lights (“IsoPlexis Merger”). The newly combined company has been renamed PhenomeX. The historical financial statements of PhenomeX for periods prior to the IsoPlexis Merger are the historical financial statements of Berkeley Lights.

The accompanying unaudited condensed consolidated financial statements ~~(the “condensed~~(“condensed consolidated financial statements”) have been prepared in accordance with generally accepted accounting principles in the United States of America. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates.

Liquidity

The Company has experienced losses from its operations since its inception and has relied primarily on equity and debt financing to fund its operations to date. For the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the Company had a consolidated net loss of ~~$25.7~~$23.4 million ~~and $47.2 million, respectively,~~ and as of ~~June 30, 2022~~March 31, 2023 had an accumulated deficit of ~~$310.8~~$385.1 million. ~~Unrestricted cash,~~Cash, cash equivalents and marketable securities were $51.6 million as of March 31, 2023.

On March 21, 2023, the Company acquired IsoPlexis which also had experienced losses since its inception, and entered into the second amended and restated credit agreement with East West Bank (“EWB”), which increased the Company’s term loan with EWB from $20.0 million to $70.0 million, of which $52.5 million (including prepayment premium and interest) was ~~$152.4~~used to repay indebtedness of IsoPlexis. The second amended and restated credit agreement with EWB requires the Company to maintain $70.0 million ~~at June 30, 2022. Management expects~~of cash in a deposit account with EWB that is assigned to EWB. This deposit is recorded as restricted cash on the Company’s condensed consolidated balance sheet. See Note 12 for additional information on our second amended and restated credit agreement with EWB including the covenants contained therein.

These factors raise substantial doubt about the Company’s ability to continue ~~to incur significant expenses for~~as a going concern within one year after these financial statements are issued. The accompanying financial statements have been prepared on a going concern basis, which contemplates the ~~foreseeable future~~realization of assets and ~~to incur operating losses~~the settlement of liabilities and commitments in the ~~near term while~~normal course of business. The financial statements do not reflect any adjustment that might result if the Company ~~makes investments~~is unable to ~~support its anticipated growth.~~continue as a going concern.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Management’s intent is to implement plans that will allow the Company to continue as a going concern. The Company ~~believes that~~intends to improve operating cash flow by increasing its ~~cash, cash equivalents~~revenue and ~~marketable securities balance~~lowering its operational costs. New commercial leadership, geographic expansion, and a refined product roadmap are expected to drive revenue growth, and significant cost synergies as ~~of June 30, 2022 provides sufficient capital resources to continue its operations for at least 12 months from the issuance date~~a result of the ~~accompanying consolidated financial statements.~~IsoPlexis Merger and are expected to lower operating expenses. Cost synergies are expected to be accomplished by eliminating duplicative costs associated with maintaining the infrastructure needed by public companies, complementary R&D capabilities, marketing resources and sales operations, and manufacturing, supply chain, logistics and operations synergies. In addition, the Company is evaluating financing options including the potential to raise equity and debt financing. While management is focused on these efforts, there can be no assurance that the Company will be successful in doing so.

(2)Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange ~~Commission and have not materially changed during~~Commission.

Updates to those policies are below, including updates related to the ~~six months ended June 30, 2022, with the exception of the accounting policies as described further below.~~IsoPlexis Merger.

~~Short-Term Marketable Securities~~Cash, cash equivalents and restricted cash

The Company ~~designates~~considers all highly liquid investments ~~in debt securities as available-for-sale. Available-for-sale debt securities~~ with ~~original maturities~~a maturity of three months or less ~~from the date of purchase are classified within~~when purchased to be cash equivalents.

The Company records cash and cash ~~equivalents. Available-for-sale debt securities~~equivalents as restricted when it is unable to freely use such cash and cash equivalents for general operating purposes. As of March 31, 2023, restricted cash consisted of $70.0 million in a deposit account with ~~original maturities longer than three months are available~~EWB that is assigned to ~~fund current operations~~EWB as a result of refinancing the Company’s term loan and ~~are classified as marketable securities within “current assets” on the Company’s~~$0.1 million related to a letter of credit with an international customer.

The following table provides a reconciliation of cash, cash equivalents and restricted cash included in our condensed consolidated balance ~~sheets.~~sheets to the totals presented on the condensed consolidated statements of cash flows (in thousands):


	March 31, 2023		December 31, 2022
Cash	$	45,015	$	63,596
Cash equivalents	6,591		22,926
Restricted cash	70,093		—
Total cash, cash equivalents and restricted cash as presented on the condensed consolidated statements of cash flows	$	121,699	$	86,522

Accounts Receivables and Allowance for Credit Losses

Trade accounts receivable are recorded at the invoiced amount as a result of the transaction with customers. The Company ~~records these securities at fair value and~~maintains allowances for credit losses for uncollectible accounts ~~for the net unrealized gains and losses related to them as part of “other comprehensive loss” on its condensed consolidated statement of comprehensive loss.~~receivable. The Company ~~records realized gains~~estimates anticipated losses from doubtful accounts based on days past due, historical collection history, and ~~losses~~other factors. Write-offs are recorded at the time all collection efforts have been exhausted. The Company reviews its allowance for doubtful accounts on ~~the sale of its marketable securities in “Other income, net” in its condensed consolidated statement of operations.~~a quarterly basis.

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At each reporting date, the Company performs an evaluation of impairment of its short-term available-for-sale marketable debt securities to determine if the fair value of its investment is less than its amortized cost basis. Impairment is assessed

Inventory

Inventories are recorded at the ~~individual security level. Factors considered~~lower of cost, determined on a first-in, first-out basis, or net realizable value. Inventory that is obsolete or in ~~determining whether an investment~~excess of forecasted usage is ~~impaired include the Company’s intent~~written down to its estimated net realizable value based on assumptions about future demand and ~~ability~~market conditions. Inventory write-downs are charged to ~~hold the investment until the recovery~~cost of ~~its amortized~~goods sold and establish a new cost basis ~~any historical failure~~for the inventory. Costs included in inventories are raw materials, labor, supplies, allocable depreciation of the issuer to make scheduled interest or principal payments, any change to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, manufacturing facilities, equipment and ~~any significant deterioration in economic conditions.~~overhead.

~~Stock-Based Compensation~~Stock-based compensation

The Company maintains the 2020 Incentive Award Plan (“2020 Plan”), an incentive compensation plan under which stock options, ~~and~~ restricted stock units (“~~RSU”~~RSUs”) and restricted stock awards (“RSAs”) are granted to employees, non-employee consultants and ~~non-employee consultants.~~

directors.

Stock-based compensation expense is calculated based on the grant date fair value of the award. The Company determines the fair value of RSUs and RSAs based on the closing ~~value~~price of ~~its~~the Company’s common stock ~~price listed~~as reported by Nasdaq on ~~the Nasdaq at~~ the date of the grant.

The Company estimates the fair value of the majority of stock option awards on the grant date using the Black-Scholes option-pricing model. For option awards that include a goal tied to the Company share price (i.e. a market condition) the Company uses a Monte Carlo simulation to estimate the fair value.

The fair value of stock options, RSUs and ~~RSUs~~RSAs with only a service condition is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they occur.

Stock options and RSUs that include a service condition and a performance condition are considered expected to vest when the performance condition is probable of being met. Compensation expense associated with performance awards that are determined to be probable of achievement is recognized over the requisite service period on a tranche-by-tranche basis.

For performance stock options and ~~awards~~RSUs not initially assessed as probable of achievement, the Company records a cumulative adjustment to compensation expense in the period the Company changes its determination that a performance condition becomes probable of being achieved. The Company ceases recognition of compensation expense in any periods where the Company determines the attainment of a performance condition is no longer probable. If the performance goals are determined to be improbable, any previously recognized compensation expense is reversed.

The fair value of stock options with a market condition is recognized over the requisite service period for each tranche of the award and is recognized regardless of whether (or to what extent) the market condition is ultimately achieved.

Business Combinations

We account for business combinations using the acquisition method of accounting, which generally requires that assets acquired and liabilities assumed be recorded at their fair values as of the Acquisition Date on our Condensed Consolidated Balance Sheets. Any excess of consideration over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires us to make significant estimates and assumptions. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

within the measurement period (up to one year from the Acquisition Date) with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the Acquisition Date and may be subject to adjustment within the measurement period, which may be up to one year from the Acquisition Date. The Company does not amortize goodwill and intangible assets with indefinite useful lives. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in the Company’s stock price or market capitalization. During the three months ended March 31, 2023, the Company experienced a decline in its market capitalization as a result of a sustained decrease in the Company’s stock price. Although the Company only recently acquired goodwill, as the Company operates as a single reporting unit, this sustained decrease was considered to represent a triggering event requiring management to perform a quantitative goodwill impairment test as of March 31, 2023. Refer to Note 8, Goodwill and Other Intangible Assets, for further information.

Intangible assets with finite useful lives are amortized over their estimated useful lives, generally on a straight-line basis, and are reviewed for impairment when facts or circumstances indicate that the carrying value of these assets may not be recoverable.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances indicate that the carrying value of an asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

Foreign currency translation and transactions

The Company assesses the functional currency of each of its international subsidiaries. For subsidiaries where the functional currency is the U.S. dollar, gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the U.S. dollar are included in other income (expense), net.

For subsidiaries where the functional currency is the local currency, the translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and revenue and expense accounts using the average exchange rate during each period. The gains and losses resulting from the translation are included in accumulated other comprehensive income in stockholders’ equity and are excluded from net income. The portions of intercompany accounts receivable and accounts payable that are intended for settlement are translated at exchange rates in effect at the balance sheet date.

Research and development state tax credits

Research and development (“R&D”) tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program, which permits a qualified small business engaged in R&D activities within Connecticut to exchange its unused R&D tax credits for a cash amount equal to 65% of the value of exchanged credits, are

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

recorded as a receivable and other income in the year the R&D tax credits relate to, as it is reasonably assured that the R&D tax credits will be received, based upon the Company’s history of filing for and receiving the tax credits. R&D tax credits receivable where cash is expected to be received by the Company more than one year after the balance sheet date are classified as noncurrent in the consolidated balance sheets. The Company has recorded $0.2 million of R&D tax credits receivable as of March 31, 2023.

Warrants

On March 21, 2023 and in connection with the closing of the IsoPlexis Merger, PhenomeX, IsoPlexis and Perceptive Credit Holdings III, LP (“Perceptive”) executed a warrant certificate to purchase shares of PhenomeX stock (“Warrant Certificate”). The Company accounts for these common stock warrants as equity classified instruments in accordance with ASC 480, Distinguishing Liabilities from Equity.

(3)Marketable Securities

Short-Term Marketable Securities

The Company ~~invests~~may invest in available-for-sale marketable debt securities generally consisting of commercial paper and U.S. government securities with contractual maturities due within one year.

The ~~Company did not hold any investments in marketable debt~~following tables summarize the amortized costs and carrying value of the Company’s available-for-sale securities, by balance sheet classification and major security type, as of March 31, 2023 and December 31, ~~2021.~~2022 (in thousands):

Marketable Securities reported as Cash Equivalents


	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	6,591	$	—	$	—	$	6,591



Total	$	6,591	$	—	$	—	$	6,591


	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	2,354	$	—	$	—	$	2,354
Commercial paper	16,606		—		(4)		16,602
U.S. agency securities	3,969		1		—		3,970
U.S. government securities	—		—		—		—
Total	$	22,929	$	1	$	(4)	$	22,926

810

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The following table summarizes~~Marketable Securities reported as Short-term Marketable Securities

As of March 31, 2023, the ~~amortized costs and carrying value~~Company did not hold any short-term marketable securities. Realized gains/losses from the sale of short-term marketable securities during the ~~Company’s available-for-sale~~three months ended March 31, 2023 were immaterial.

Short-term marketable ~~debt~~ securities ~~by major security type,~~at December 31, 2022 were as ~~of June 30, 2022~~follows (in thousands):

As of June 30, 2022
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Commercial paper $ 5,395 $ — $ (8) $ 5,387
U.S. government securities 3,982 — (8) 3,974
Total $ 9,377 $ — $ (16) $ 9,361


	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	22,158	$	1	$	(11)	$	22,148
U.S. agency securities	4,941		1		—		4,942
U.S. government securities	19,159		5		(2)		19,162
Total	$	46,258	$	7	$	(13)	$	46,252

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Unrealized losses on available-for-sale debt securities as of ~~June 30,~~December 31, 2022 were not significant and were primarily market driven due to changes in interest rates, and not due to increased credit risk associated with specific securities. Accordingly, the Company did not record an allowance for credit losses on these short term investments as of ~~June 30,~~December 31, 2022.

See Note 9 for information about the fair value of the Company’s short-term marketable securities.

(4)Significant Risks and Uncertainties Including Business and Credit Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term available-for-sale debt securities and trade receivables. ~~The Company’s cash, cash equivalents and short-term available-for-sale marketable securities are held by large, credit worthy financial institutions.~~ The Company invests its excess cash in money market funds and short-term available-for-sale debt securities with the primary objective of facilitating liquidity and capital preservation. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in ~~these banks~~financial institutions may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any material realized losses on its deposits of cash, cash equivalents and marketable securities.

The Company controls credit risk through credit approvals and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the related invoices and represents the Company’s best estimate of expected credit losses in its existing trade accounts receivable. At ~~each~~March 31, 2023, the Company recorded an allowance for doubtful accounts of ~~June 30, 2022 and~~$0.9 million. At December 31, ~~2021,~~2022 , the Company had not recorded any material allowance for doubtful accounts.

~~Most of the Company’s customers are located in the United States and Asia Pacific.~~ For the three months ended ~~June 30, 2022,~~March 31, 2023, three customers accounted for ~~20%~~39%, ~~11%, and~~ 10% ~~of revenue. For the six months ended June 30. 2022, three customers accounted for 16%, 11%~~ and 10% of revenue. For the three months ended ~~June 30, 2021,~~March 31, 2022, three customers accounted for ~~27%~~18%, ~~18% and 11%, of revenue. For the six months ended June 30, 2021, three customers accounted for 14%, 11%~~13% and 10% of revenue.

~~As of June 30, 2022, three customers comprised 27%, 12% and 11% of accounts receivable. As of December 31, 2021, three customers accounted for 15%, 11% and 11% of accounts receivable.~~

911

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of March 31, 2023, three customers comprised 25%, 14% and 12% of accounts receivable. As of December 31, 2022, two customers accounted for 24% and 11% of accounts receivable.

(5)Business Combinations

IsoPlexis Merger

On March 21, 2023, the Company completed the IsoPlexis Merger. Under the terms of the Merger Agreement, IsoPlexis shareholders received, for each share of IsoPlexis stock, 0.612 shares of Berkeley Lights common stock (which was automatically converted into shares of PhenomeX common stock).

Consideration Transferred

The Acquisition Date fair value of consideration transferred in the IsoPlexis Merger totaled $84.9 million, summarized as follows (in thousands):


Fair value of PhenomeX common stock issued to IsoPlexis stockholders (1)	$	31,930
Repayment of IsoPlexis debt (2)	52,482
Fair value of vested IsoPlexis options attributable to pre-merger service (3)	306
Fair value of IsoPlexis warrant at Acquisition Date (4)	170
Total purchase consideration	$	84,888

(1) Represents the fair value of PhenomeX common stock issued to IsoPlexis stockholders pursuant to the Merger Agreement. The fair value is based on 24,945,611 shares of PhenomeX common stock at $1.28 per share on March 21, 2023 issued to IsoPlexis stockholders. IsoPlexis stockholders received 0.612 shares of PhenomeX stock for each IsoPlexis share they held.

(2) Represents $50 million in principal repayment to retire debt of IsoPlexis, as required by change in control provisions of the debt, as well as prepayment penalties and accrued interest.

(3) Represents the fair value at March 21, 2023 of IsoPlexis options assumed by PhenomeX attributable to pre-combination service (see Note 13 for additional information).

(4) Represents the fair value of the IsoPlexis warrant assumed by PhemoneX at March 21, 2023 (see Note 13 for additional information).

Fair Value of Assets Acquired and Liabilities Assumed

The Company accounted for the IsoPlexis Merger as a business combination. The identifiable assets acquired and liabilities assumed were recorded at their preliminary fair values as of the Acquisition Date and are consolidated into our financial statements. The assignment of fair market value requires significant judgments regarding the estimates and assumptions used to value the acquired assets and liabilities assumed. For the preliminary fair values of the assets acquired and liabilities assumed, we utilized the cost, income and market approaches from the perspective of a market participant.

The following table summarizes the preliminary fair values for each major class of assets acquired and liabilities assumed at the Acquisition Date (in thousands). The Company used third party valuation professionals to aid in the determination of the estimated fair value of certain assets acquired and liabilities assumed. The Company is in the process of finalizing the purchase price allocation associated with this transaction. As such, the preliminary purchase allocation set forth below is subject to revision as additional information is obtained and the valuation process is completed.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


Cash and cash equivalents	$	12,197
Accounts receivable	3,075
Inventories	27,287
Prepaid expenses and other current assets	4,190
Property and equipment, net	11,206
Intangible assets	22,900
Goodwill	12,246
Operating lease right-of-use assets	4,975
Other assets	526
Total assets acquired	98,602
Accounts payable	2,367
Accrued expenses and other current liabilities	4,912
Deferred revenue	1,399
Operating lease obligations	5,036

Total liabilities assumed	13,714
Total consideration transferred	$	84,888

Acquired Receivables

The fair value of assets acquired includes accounts receivable of $3.1 million, which is net of an associated allowance for credit losses of $0.7 million.

Inventory

The fair value of inventory acquired was $27.3 million, which included a step up of $4.9 million from the book value as a result of the valuation at the Acquisition Date. The original cost basis of the inventory acquired from IsoPlexis was $22.4 million, which was net of a reserve for excess and obsolete inventory of $15.4 million.

Intangible Assets and Goodwill

Intangible assets includes $11.7 million of patented technology, $7.7 million of customer relationships and $3.5 million of IsoPlexis trade names and trademarks. The intangible assets will be amortized over their respective useful lives which range from eight to fourteen years. Goodwill with a provisional assigned value of $12.2 million represents the excess of the consideration transferred over the estimated fair values of assets and liabilities assumed. None of the goodwill resulting from the IsoPlexis Merger is deductible for tax purposes.

Transaction Costs

The Company recognized transaction costs associated with the IsoPlexis Merger of $3.5 million for the three months ended March 31, 2023 plus $2.8 million which was recognized in the fourth quarter of 2022. These costs are primarily related to professional services and are recorded in “Selling, general, and administrative” expenses in the Company’s condensed consolidated statement of operations.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Supplemental Pro Forma Information

The following unaudited pro forma financial information gives effect to the IsoPlexis Merger as if it had been completed on January 1, 2022. The unaudited pro forma information was prepared in accordance with the requirements of ASC 805, which is a different basis than pro forma information prepared under Article 11 of Regulation S-X (“Article 11”). As such, they are not directly comparable with historical results for stand-alone Berkeley Lights prior to March 21, 2023 or our previously provided pro forma financials prepared in accordance with Article 11. The pro forma adjustments are based on historical reported transactions by the respective companies and do not include any anticipated synergies or other expected benefits of the acquisition.


(in thousands)	Three months ended March 31, 2023		Three months ended March 31, 2022

Total revenue	$	20,170	$	25,117
Net loss	$	(66,463)	$	(50,419)

Pro forma adjustments consisted of:

•Amortization/Depreciation- Tangible and intangible assets are assumed to be recorded at their assigned fair values as of January 1, 2022. Historical depreciation and amortization for IsoPlexis has been removed and the new fair values of the assets are depreciated or amortized over their estimated useful lives.

•Interest Expense- Entry into the Second Amended Term Loan and repayment of the Perceptive Credit Agreement are assumed to have occurred on January 1, 2022. Historical interest expense has been removed and replaced with the applicable interest rate as of March 21, 2023 associated with the Second Amended Term Loan, which was 8.5%.

•Transaction costs- Both entities incurred transaction costs, which totaled $13.7 million. Of the $13.7 million, approximately $4.4 million was incurred in the first quarter of 2023 and has been eliminated as it is not recurring.

•Accounting policies adjustment- IsoPlexis historically classified certain operations, quality and facility related costs in selling, general and administrative expenses. To align with PhenomeX accounting policies, these costs were reclassified to costs of goods sold or research and development. However, since this is a reclassification between expense line items on the statement of operations, the adjustment does not have an impact on revenue or net loss for purposes of the pro forma financial information disclosed above.

For the period subsequent to the Acquisition Date, IsoPlexis contributed total revenues and operating loss of $1.0 million and $1.1 million, respectively, for the three months ended March 31, 2023, that were included in the Company’s Condensed Consolidated Statements of Operations. In addition, the Company signed an agreement to license, on an exclusive and perpetual basis, certain intellectual property acquired in the IsoPlexis Merger for $7.3 million (See Note 6 for additional information).

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(6)Revenue From Contracts With Customers

~~Disaggregation~~The Company’s revenue consists of ~~Revenue~~both product revenue and service and other revenue, which is primarily generated through the following revenue streams: (i) platform, (ii) recurring and (iii) partnership, license and other.

The ~~following table depicts~~Company in the ~~disaggregation~~first quarter entered into a license arrangement whereby certain patents were licensed to a third party and for which the customer agreed to pay a non-refundable fee. For licenses of intellectual property the Company recognizes revenue ~~by type of~~from non-refundable fees when the license is transferred to the customer ~~or sales channel~~ and ~~market segment as defined by nature of workflows~~the customer is able to use and ~~activities of~~benefit from the ~~end customer (in thousands):~~license.

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Type of Sales Channel
Direct sales channel $ 14,067 $ 10,103 $ 29,553 $ 20,542
Distributor channel 5,083 9,147 9,803 17,336
Net revenues $ 19,150 $ 19,250 $ 39,356 $ 37,878
Market
Antibody therapeutics $ 12,984 $ 13,672 $ 27,209 $ 28,786
Synthetic biology 2,067 1,856 4,539 3,840
Agricultural biology 1,854 — 3,345 —
Gene therapy 2,028 2,058 3,802 3,283
Cell therapy 217 1,664 461 1,969
Net revenues $ 19,150 $ 19,250 $ 39,356 $ 37,878
The following tables provide an overview of the Company’s revenue streams and how the Company reports revenue in its consolidated statements of operations:

Income Statement Classification

Product or Service sold

Revenue Stream

Product revenue

Sale of advanced automation systems (Beacon and Lightning systems, Culture Station)

Platform

Software and workflow licenses

Platform

Fixed term sales-type lease arrangements with qualified customers

Platform

Quarterly workflow subscriptions, annual or multi-year subscriptions arrangements (e.g. TechAccess)

Recurring

Consumables and reagent kits (e.g. OptoSelect chips)

Recurring

Service and other revenue

Strategic partnerships, joint development and collaboration agreements where we provide services for development of new workflows, cells or organism types

Partnership, License and Other

Application support, installation and training

Platform

Fixed fee extended warranty and service programs

Recurring

IP license revenue

Partnership, License and Other (1)

(1) License revenue relates to certain intellectual property acquired in the IsoPlexis Merger and subsequently licensed to a third party. License revenue related to our platforms (e.g. workflow licenses) is reported as Platform product revenue.

~~Revenues~~

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables provide information by ~~market are determined by~~revenue stream for the ~~revenue associated with workflows that~~periods presented:


	Three Months Ended March 31, 2023
(in thousands)	Product		Service and other		Total
Platform	$	5,773	$	330	$	6,103
Recurring	2,605		2,558		5,163
Partnership, License and Other (1)	—		7,250		7,250
Total revenue	$	8,378	$	10,138	$	18,516

(1) During the ~~Company’s customers are utilizing, primarily on the Company’s Beacon platform, or by the nature of the workflows that~~three months ended March 31, 2023, the Company ~~is developing under strategic partnerships~~signed an agreement to license, on an exclusive and ~~services agreements.~~ perpetual basis, certain intellectual property acquired in the IsoPlexis Merger for $7.3 million (“License Agreement”). As the $7.3 million represented a non-refundable fee and the license was transferred to the customer during the quarter, the $7.3 million was recognized as revenue during the quarter, which represents all the Partnership, License, and Other revenue during the quarter.


	Three Months Ended March 31, 2022
(in thousands)	Product		Service and other		Total
Platform	$	6,747	$	657	$	7,404
Recurring	3,027		2,416		5,443
Partnership, License and Other	—		7,359		7,359
Total revenue	$	9,774	$	10,432	$	20,206

Revenues by geographical markets are presented in Note ~~16 to these condensed consolidated financial statements.~~19.

Performance Obligations

A significant number of the Company’s product and service sales, as well as its feasibility study arrangements, are short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

As of ~~June 30, 2022,~~March 31, 2023, the aggregate amount of remaining performance obligations that are unsatisfied or partially unsatisfied related to customer contracts in excess of one year was ~~$6.4~~$12.0 million, which, to the extent invoiced, is included in deferred revenue on the Company’s condensed consolidated balance sheets, of which approximately ~~20%~~50% is expected to be recognized as revenue in the next 12 months, with the remainder recognized afterwards.

1016

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Contract Balances

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Trade accounts receivable		$	13,815	$	25,942
Trade accounts receivable, net						Trade accounts receivable, net	$	25,119	$	18,534
Contract assets, which are included in “Prepaid expenses and other current assets”	Contract assets, which are included in “Prepaid expenses and other current assets”	$	3,765	$	1,736	Contract assets, which are included in “Prepaid expenses and other current assets”	$	367	$	1,283
Contract assets, long-term, which are included in “Other assets”	Contract assets, long-term, which are included in “Other assets”	$	996	$	1,070	Contract assets, long-term, which are included in “Other assets”	$	514	$	549
Deferred revenue (current)	Deferred revenue (current)	$	8,694	$	12,128	Deferred revenue (current)	$	10,746	$	9,092
Deferred revenue (non-current)	Deferred revenue (non-current)	$	1,221	$	2,187	Deferred revenue (non-current)	$	1,259	$	963

The contract liabilities of ~~$9.9~~$12.0 million and ~~$14.3~~$10.1 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, consisted of deferred revenue related to extended warranty service agreements, strategic partnerships and services agreements and advanced automation systems arrangements. Revenue recorded during the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 included $~~2.7~~2.8 million ~~and $9.9 million, respectively,~~ of previously deferred revenue that was included in contract liabilities as of December 31, ~~2021.~~2022.

Sales-type Lease Arrangements

The Company also enters into sales-type lease arrangements with certain qualified customers. Revenue related to lease elements from sales-type leases is presented as product revenue and was none for the three ~~and six~~ months ended ~~June 30, 2022, respectively,~~March 31, 2023 and ~~$1.0 million and $2.7 million for the three and six months ended June 30, 2021, respectively.~~2022.

The following table presents the future maturity of the Company’s fixed-term customer leases and reconciles the undiscounted cash flows from the amounts due from customers under such arrangements as of ~~June 30, 2022~~March 31, 2023 (in thousands):


Year ending December 31,	Year ending December 31,	Sales-Type Leases		Year ending December 31,	Sales-Type Leases
Remainder of 2022		$	1,212
2023		445
Remainder of 2023(1)				Remainder of 2023(1)	$	334
2024	2024	853		2024	445

2025				2025	408
2026				2026	—
Total undiscounted cash flows	Total undiscounted cash flows	2,510		Total undiscounted cash flows	1,187
Less: unearned income	Less: unearned income	305		Less: unearned income	(171)
Total amounts due from customers(2)	Total amounts due from customers(2)	$	2,205	Total amounts due from customers(2)	$	1,016

(1) During the three months ended March 31, 2023, the Company impaired the net investment of a sales type lease with a customer. The write down of the respective contract asset of $0.8 million, net of the return of the underlying asset, was recorded as an impairment charge of $0.6 million within selling, general and administrative expense in the Company’s condensed consolidated statement of operations and the resulting return of the underlying asset was recorded as an addition to fixed assets in the Company’s condensed consolidated balance sheet.

(2) Of the $1.0 million, $0.1 million is recorded in trade accounts receivable, with the remaining balance recorded in contract assets.

1117

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(6)~~ (7)Balance Sheet Accounts

Trade accounts receivable, net consists of the following (in thousands):


	March 31, 2023		December 31, 2022

Trade accounts receivable	$	26,013	$	18,534
Allowance for doubtful accounts	(894)		—
Total	$	25,119	$	18,534

Changes in the allowance for doubtful accounts were as follows (in thousands):


	Three months ended March 31, 2023

Allowance for doubtful accounts, beginning of year	$	—
Allowance assumed in IsoPlexis Merger	(721)
Write-offs of uncollectible accounts	—
Provision for doubtful accounts	(173)
Allowance for doubtful accounts, end of period	$	(894)

Inventory

The following table shows the components of inventory (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Raw materials	Raw materials	$	10,861	$	8,296	Raw materials	$	32,816	$	11,946
Work in progress						Work in progress	1,106		—
Finished goods	Finished goods	4,803		6,251		Finished goods	11,617		6,915
Total	Total	$	15,664	$	14,547	Total	$	45,539	$	18,861

Prepaid expenses and other current assets

The following table shows the components of prepaid expenses and other current assets (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Contract asset	Contract asset	$	3,765	$	1,736	Contract asset	$	367	$	1,283
Vendor deposits	Vendor deposits	2,679		2,802		Vendor deposits	421		126
Deferred costs	Deferred costs	537		561		Deferred costs	365		472
Prepaid insurance	Prepaid insurance	399		2,944		Prepaid insurance	3,534		2,025
Other (1)	Other (1)	3,226		3,942		Other (1)	4,691		2,877
Total	Total	$	10,606	$	11,985	Total	$	9,378	$	6,783

(1) Other includes primarily prepaid rent expenses, software licenses and prepaid VAT.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Accrued expenses and other current liabilities

The following table shows the components of accrued expenses and other current liabilities (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Accrued payroll and employee related expenses	Accrued payroll and employee related expenses	$	6,400	$	6,757	Accrued payroll and employee related expenses	$	6,611	$	7,410
Lease liability – short-term	Lease liability – short-term	3,046		2,941		Lease liability – short-term	4,958		3,291
Accrued product warranty	Accrued product warranty	752		1,085		Accrued product warranty	788		749
Accrued legal expenses	Accrued legal expenses	1,087		504		Accrued legal expenses	5,499		8,271
Other (1)	Other (1)	660		1,138		Other (1)	1,789		1,619
Total	Total	$	11,945	$	12,425	Total	$	19,645	$	21,340

(1) Other includes ~~primarily~~ accrued income taxes, sales taxes, accrued royalties and other miscellaneous accruals.

~~(7)~~(8)Goodwill and Other Intangible Assets

Goodwill

On March 21, 2023, the Company completed the IsoPlexis Merger. Under the purchase method of accounting, the Company preliminarily recorded the $12.2 million excess of the Acquisition Date fair value of the consideration transferred over the estimated fair value of net tangible and identifiable intangible assets that it acquired as goodwill. At March 31, 2023, the carrying amount of this goodwill was $12.2 million.

During the three months ended March 31, 2023, the Company experienced a decline in its market capitalization as a result of a sustained decrease in the Company’s stock price. The Company considered such sustained decrease to represent a triggering event requiring management to perform a quantitative goodwill impairment test as of March 31, 2023. Based on the results of the quantitative goodwill impairment test, it was concluded that the estimated fair value of the Company’s reporting unit was greater than its carrying value, as such, the Company did not record a goodwill impairment charge during the three months ended March 31, 2023. In future periods, if the Company were to experience a further decline in its market capitalization or expected results for a sustained period of time, the Company may be required to perform an additional quantitative goodwill impairment assessment at an interim or annual period and could be required to recognize a non-cash goodwill impairment charge at that time, which could be material.

Acquired Intangible Assets

In connection with the IsoPlexis Merger, the Company identified certain intangible assets summarized in the table below (see Note 5 for further information). In addition, on February 15, 2023, the Company acquired certain tangible and intangible assets from Evorion Biotechnologies for a total purchase price of $0.3 million, of which $0.2 million related to intangible assets attributable to patents and technology. These intangible assets are also included in the table below.


	March 31, 2023
(in thousands):	Remaining Useful Life (Years)	Gross		Accumulated Amortization		Net
Customer relationships	8	$	7,700	$	(5)	$	7,695
Trade names	10	3,500		(11)		3,489
Patented technology	14	11,911		(23)		11,888
Total intangible assets		$	23,111	$	(39)	$	23,072

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Amortization expense was $39,000 for the three months ended March 31, 2023. In connection with the License Agreement, the Company reviewed the patented technology intangible for indicators of impairment, noting that the patented technology was valued using the relief from royalty approach based on projected revenues from products and services of IsoPlexis, which did not contemplate the License Agreement. In addition, the Company still owns, and retains certain rights to, the intellectual property that was licensed under the License Agreement. Accordingly the Company concluded that an impairment was not necessary.

The estimated annual amortization of intangible assets for the remainder of 2023 and the next four years is presented in the table below (in thousands). Actual amortization expense to be reported in future periods could differ from these estimates as a result of the finalization of the preliminary purchase price allocation of the IsoPlexis Merger, divestitures and other factors.


	March 31, 2023
Year Ending December 31:
Remainder of 2023	$	1,689
2024	$	2,163
2025	$	2,163
2026	$	2,163
2027	$	2,163

(9)Fair Value of Financial Instruments

~~Fair value~~The following is ~~defined as the price that would be received to sell an asset or paid to transfer~~ a ~~liability (an exit price) in an orderly transaction between market participants at the reporting date. The categorization~~description of ~~a financial instrument within~~ the valuation ~~hierarchy is based on~~techniques the ~~lowest level of input that is significant~~Company uses to measure the fair value ~~measurement.~~

~~The fair value~~ of ~~the Company’s~~ assets and ~~liabilities, including cash equivalents and marketable debt securities, are measured at~~reports fair value on a recurring ~~basis. As~~basis:

•Cash equivalents: At March 31, 2023, the Company’s cash equivalents consisted of ~~June 30, 2022~~money market funds. Money market funds are highly liquid investments and are actively traded and pricing information is readily available. Accordingly, the Company ~~held investments~~classifies these securities as Level 1 of the fair value hierarchy.

•Short Term Marketable Securities: At March 31, 2023, the Company did not hold any short term marketable securities. Generally, the Company values short-term marketable securities using quoted prices in active markets for similar instruments. Accordingly, the Company classifies marketable securities ~~classified~~ as ~~cash equivalents.~~ Level 2 of the fair value hierarchy.

The carrying amounts of the Company’s cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses and other current liabilities as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 approximate fair value due to their relatively short maturities.

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~The following tables set forth~~At March 31, 2023 and December 31, 2022, the fair value measurements of the Company’s ~~financial~~ assets ~~and liabilities by level within the fair value hierarchy~~measured on a recurring basis were as follows: (in thousands):

June 30,
2022 Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
Money market funds $ 32,233 $ 32,233 $ — $ —
Commercial paper 22,595 — 22,595 —
U.S. government securities 5,986 — 5,986 —
Total cash equivalents 60,814 32,233 28,581 —
Debt securities, available for sale:
Commercial paper 5,387 — 5,387 —
U.S. government securities 3,974 — 3,974 —
Total debt securities, available for sale 9,361 — 9,361 —
Total assets measured at fair value $ 70,175 $ 32,233 $ 37,942 $ —


	March 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	6,591	$	6,591	$	—	$	—










Total assets measured at fair value	$	6,591	$	6,591	$	—	$	—


		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
											December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	25,138	$	25,138	$	—	$	—	Money market funds	$	2,354	$	2,354	$	—	$	—
Commercial paper										Commercial paper	16,602		—		16,602		—
U.S. agency securities										U.S. agency securities	3,970		—		3,970		—

Total cash equivalents	Total cash equivalents	$	25,138	$	25,138	$	—	$	—	Total cash equivalents	22,926		2,354		20,572		—

Debt securities, available for sale:										Debt securities, available for sale:
Commercial paper										Commercial paper	22,148		—		22,148		—
U.S. agency securities										U.S. agency securities	4,942		—		4,942		—
U.S. government securities										U.S. government securities	19,162		—		19,162		—
Total debt securities, available for sale										Total debt securities, available for sale	46,252		—		46,252		—
Total assets measured at fair value										Total assets measured at fair value	$	69,178	$	2,354	$	66,824	$	—

The carrying values and fair values of the Company’s financial instruments not measured at fair value were as follows (in thousands):

June 30, 2022 December 31, 2021
Carrying
Value Fair Value Carrying
Value Fair Value
Long-term debt, including current maturities $ 19,794 $ 19,287 $ 19,762 $ 19,298


	March 31, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt, including current maturities	$	68,886	$	70,000	$	19,826	$	17,443

The Company estimated the fair value of its long-term debt using a market-based approach that considers an average cost of debt. The Company has incorporated its own credit risk for all liability fair value measurements. Such fair value measurements are considered Level 2 under the fair value hierarchy.

The Company did not have any transfers of financial assets measured at fair value on a recurring basis between the levels of the fair value measurement hierarchy during the periods presented.

1321

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(8)~~(10)Property and Equipment, net

Property and equipment, net comprised the following (in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Equipment, tooling and molds	Equipment, tooling and molds	$	38,599	$	33,972	Equipment, tooling and molds	$	47,577	$	36,152
Computer software and equipment	Computer software and equipment	2,929		3,019		Computer software and equipment	8,037		2,667
Furniture, fixtures and other	Furniture, fixtures and other	1,957		1,891		Furniture, fixtures and other	2,600		2,007
Leasehold improvements	Leasehold improvements	10,820		6,105		Leasehold improvements	12,509		10,836
Construction in process	Construction in process	778		4,803		Construction in process	1,370		1,409
Total property and equipment	Total property and equipment	55,083		49,790		Total property and equipment	72,093		53,071
Less: Accumulated depreciation	Less: Accumulated depreciation	(25,766)		(21,798)		Less: Accumulated depreciation	(38,251)		(29,224)
Property and equipment, net(1)	Property and equipment, net(1)	$	29,317	$	27,992	Property and equipment, net(1)	$	33,842	$	23,847

(1) Property and equipment, net at each of March 31, 2023 and December 31, 2022 includes $0.1 million of assets held for sale.

~~Total depreciation~~
Depreciation expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was ~~$2.5~~$2.1 million and ~~$4.4, respectively. Total depreciation expense for three and six months ended June 30, 2021 was $1.4 million and $2.7~~$1.9 million, respectively.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ losses on the impairment and disposal of property and equipment ~~was~~were not material.

~~(9)~~(11)Leases

The Company leases office, manufacturing, distribution and laboratory facilities in various locations in the United States, primarily in Emeryville, California ~~under multiple operating leases. During the third quarter of 2021, the Company extended the term for its leases related to the facilities in Emeryville~~ and ~~these leases will now expire in 2029. Also, during the third quarter of 2021, the Company entered into a seven year lease of space for office and laboratory operations in Lexington, Massachusetts.~~

Branford, Connecticut. The Company also leases 2 facilities in Shanghai, China for office and laboratory ~~facilities under operating lease agreements that were~~facilities. On December 28, 2022, the Company entered into a sub-lease arrangement for its facility in ~~July 2020. These leases expire at various dates,~~Lexington, Massachusetts. Sub-lease income for the ~~latest of which is August 2023.~~three months ended March 31, 2023 was $0.1 million and was recorded as an offset to rent expense.

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Future payments associated with the Company’s operating lease liabilities as of ~~June 30, 2022 is~~March 31, 2023 are as follows (in thousands):


		Operating leases			Operating leases

Undiscounted lease payments for the year ending December 31,	Undiscounted lease payments for the year ending December 31,			Undiscounted lease payments for the year ending December 31,
Remainder of 2022		$	2,101
2023		4,273
Remainder of 2023				Remainder of 2023	$	4,691
2024	2024	4,355		2024	6,297
2025	2025	4,486		2025	5,952
2026	2026	4,621		2026	5,398
2027				2027	4,759
Thereafter	Thereafter	12,223		Thereafter	7,464
Total undiscounted lease payments	Total undiscounted lease payments	32,059		Total undiscounted lease payments	34,561
Less: implied interest	Less: implied interest	(4,811)		Less: implied interest	(4,304)
Less: tenant improvement allowances receivable	Less: tenant improvement allowances receivable	(65)		Less: tenant improvement allowances receivable	(65)
Present value of operating lease payments	Present value of operating lease payments	27,183		Present value of operating lease payments	30,192
Less: current portion (1)	Less: current portion (1)	(3,046)		Less: current portion (1)	(4,958)
Total long-term operating lease liabilities	Total long-term operating lease liabilities	$	24,137	Total long-term operating lease liabilities	$	25,234

(1) Included in the balance sheet caption “Accrued expenses and other current liabilities.”

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Rent expense, net for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~was $1.4 million and $2.5 million, respectively. Rent expense for the three and six months ended June 30, 2021~~ was $0.9 million and ~~$1.7~~$1.1 million, respectively. Under the terms of the lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for operating leases were ~~$1.0~~$0.8 million and ~~$1.8~~$0.8 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, respectively, including non-lease components such as common area maintenance fees. Variable lease payments for operating leases were $0.6 million and $1.1 million for the three and six months ended June 30, 2021, respectively, including non-lease components such as common area maintenance fees.

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):


		Six months ended June 30, 2022		Six months ended June 30, 2021			Three months ended March 31, 2023		Three months ended March 31, 2022

Right-of-use assets obtained for new operating lease liabilities	Right-of-use assets obtained for new operating lease liabilities	$	—	$	—	Right-of-use assets obtained for new operating lease liabilities	$	—	$	—
Right-of-use lease assets assumed in IsoPlexis Merger						Right-of-use lease assets assumed in IsoPlexis Merger	$	4,975	$	—
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities	$	1,070	$	796	Cash paid for amounts included in the measurement of lease liabilities	$	989	$	1,098

The following summarizes additional information related to operating leases:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Weighted-average remaining lease term (years)	Weighted-average remaining lease term (years)	7.02		7.51		Weighted-average remaining lease term (years)	5.71		6.48
Weighted-average discount rate	Weighted-average discount rate	4.67	%	4.67	%	Weighted-average discount rate	4.73	%	4.66	%

The Company also enters into leasing transactions in which the Company is the lessor, which to date have been classified as sales-type leases. See Note ~~5 of these condensed consolidated financial statements~~6 for the related lease disclosures.

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(10)~~(12)~~Notes Payable~~Long-term Debt

On May 23, 2018, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with ~~East West Bank~~EWB to provide a $20.0 million term loan facility (“~~EWB”~~Term Loan”) ~~providing it the ability to borrow up to $20.0 million.~~. The loan facility was fully drawn as of May 23, 2018.

On June 30, 2021, the Company entered into an Amended and Restated Loan and Security Agreement ~~(the “Agreement”~~(“Amended Loan Agreement”) with EWB. Pursuant to the Amended Loan Agreement, EWB provided a $20.0 million term loan ~~(the “Term~~(“Amended Term Loan”) which was used to refinance the ~~term loan~~Term Loan outstanding under the Loan ~~and Security~~ Agreement dated May 23, 2018. The Amended Term Loan ~~matures in~~had a maturity of 48 months and ~~bears~~ a fixed interest rate of 4.17%. ~~The~~In addition, the Amended Term Loan ~~has~~had an initial interest-only period of 24 months, which ~~can be~~could have been extended to up to 36 months based on the achievement of certain liquidity measures, and ~~can be~~could have been pre-paid without penalty at any time.

On March 21, 2023, the Company entered into a Second Amended and Restated Loan and Security Agreement (“Second Amended Loan Agreement”) with EWB. Pursuant to the Second Amended Loan Agreement, EWB increased the existing Amended Term Loan amount of $20.0 million by $50.0 million to an aggregate outstanding principal of $70.0 million (“Second Amended Term Loan”). The Company used the proceeds from the Second Amended Term Loan to repay $52.5 million of indebtedness (including prepayment premium and interest) with Perceptive held by IsoPlexis (“Perceptive Credit Agreement”). Associated with these transactions, a $0.2 million loss on extinguishment of debt and a $0.7 million commitment fee associated with the Loan Agreement, was recorded in Other expense, net on our condensed consolidated statement of operations during the three months ended March 31, 2023.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Second Amended Term Loan has a maturity of 60 months and bears interest at a variable rate per annum equal to (i) the greater of 6.25% or the variable rate of interest, per annum, most recently announced by EWB as its prime rate, plus (ii) one-half of one percent (0.5%). In addition, the Second Amended Term Loan has an initial interest-only period of 24 months, which can be extended up to two times, each by an additional six months, if certain EBITDA tests as set forth in the Second Amended Loan Agreement are satisfied. The Second Amended Term loan carries a prepayment penalty equal to one percent (1%) of the amount of any prepayment of the outstanding balance, if the prepayment is made before the first anniversary of the loan closing date. The Second Amended Loan Agreement was accounted for as a debt extinguishment and the Company capitalized incremental debt issuance costs.

The Second Amended Term Loan is guaranteed by certain domestic subsidiaries of the Company (such subsidiaries, together with the Company, the “Credit Parties”). The Second Amended Loan Agreement grants EWB a security interest in and liens on substantially all assets of the Company and the other Credit Parties, excluding intellectual property, ~~which is subject~~provided, that if the Company does not satisfy a liquidity test set forth in the Second Amended Loan Agreement, the Credit Parties will be required to grant a ~~double negative pledge.~~first-priority security interest in their intellectual property. In addition, certain other terms of the original agreements as previously in effect were amended by the Second Amended Loan Agreement, including certain financial covenants. ~~The Amended and Restated Loan and Security Agreement was accounted for as a debt modification and~~For example, the Company ~~capitalized incremental debt issuance costs.~~

~~Furthermore,~~must maintain cash and cash equivalents of no less than $70.0 million in the ~~Agreement also provided~~aggregate at all times in a deposit account with EWB that is assigned to EWB. As a result, the deposit of $70.0 million was recorded as restricted cash on the Company’s condensed consolidated balance sheet. In addition, if the Company’s cash and cash equivalents balance at EWB falls below $100.0 million, the Company ~~with a new~~ ~~$10.0 million~~ ~~revolving credit (the “Revolving Line”), which bears interest on the outstanding daily balance thereof of~~ ~~0.70%~~ ~~above the Prime Rate (as defined in the Agreement).~~ Nois then required to maintain specific minimum EBITDA amounts ~~were outstanding under the Revolving Line as of June 30, 2022.~~at all times thereafter.

The Second Amended Loan Agreement contains ~~certain financial~~customary affirmative and ~~non-financial covenants.~~negative covenants, including limitations on mergers, asset sales, liens, investments and indebtedness. See Exhibit 10.1 for the Second Amended Loan Agreement. As of ~~June 30, 2022,~~March 31, 2023, the Company was in compliance with the terms and covenants of the Agreement.

The following is a schedule of payments due on notes payable as of ~~June 30, 2022~~March 31, 2023 (in thousands):


		June 30, 2022			March 31, 2023
Year Ending December 31:	Year Ending December 31:			Year Ending December 31:
Remainder of 2022		$	426
2023		6,617
Remainder of 2023				Remainder of 2023	$	4,545
2024	2024	10,406		2024	6,049
2025	2025	4,210		2025	13,680

2026				2026	15,437
2027				2027	14,532
2028				2028	41,990
Total payments due	Total payments due	21,659		Total payments due	96,233
Less:	Less:			Less:
Interest payments, loan discounts and financing costs	Interest payments, loan discounts and financing costs	(1,865)		Interest payments, loan discounts and financing costs	(27,347)
Current portion, less loan discounts and financing costs	Current portion, less loan discounts and financing costs	—		Current portion, less loan discounts and financing costs	—
Notes payable, net of current portion	Notes payable, net of current portion	$	19,794	Notes payable, net of current portion	$	68,886

Total interest cost incurred for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~was $0.2 million and $0.5 million, respectively. Total interest cost incurred for the three and six months ended June 30, 2021~~ was $0.4 million and ~~$0.7~~$0.2 million, respectively.

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(11)~~(13)Equity and Stock Compensation Plans

IsoPlexis Merger

On March 21, 2023, in connection with the completion of the IsoPlexis Merger:

•All outstanding IsoPlexis RSAs were assumed by PhenomeX and converted into PhenomeX RSAs based on the 0.612 conversion ratio (see Note 5) and on the same terms and conditions (including with respect to vesting schedules and restrictions) as applied to IsoPlexis RSAs immediately prior to the closing of the IsoPlexis Merger.

•All outstanding IsoPlexis stock options (whether vested or unvested) that had a per share exercise price of less than $1.28 and were held by continuing employees were assumed by PhenomeX and converted into PhenomeX stock options based on the 0.612 conversion ratio (and rounded down) and on the same terms and conditions (including with respect to time-based vesting) as applied to IsoPlexis stock options immediately prior to the closing of the IsoPlexis Merger, with the exercise price per share of the assumed stock options determined by dividing the per share exercise price of the IsoPlexis options by the 0.612 conversion ratio (and rounded up to the nearest whole cent). The assumed stock options expire 10 years from their original date of grant. The assumed stock options and RSAs generally vest 25% upon the one-year anniversary of the service inception date and then ratably each month over the remaining 36 months.

On March 21, 2023, PhenomeX assumed 304,619 IsoPlexis RSAs and 378,767 IsoPlexis stock options after applying the 0.612 conversion ratio. The Company accounted for the assumed equity awards as a modification under ASC 718 and recorded stock compensation expense of $0.1 million during the three months ended March 31, 2023 associated with the modification.

Future grants of equity awards will be issued under the Company’s 2020 Plan.

Warrant Certificate

On March 21, 2023 and in connection with the closing of the IsoPlexis Merger, PhenomeX, IsoPlexis and Perceptive executed the Warrant Certificate. Under the Warrant Certificate, the outstanding warrant (“IsoPlexis Warrant”) to purchase shares of common stock, par value $0.001, of IsoPlexis (“IsoPlexis Common Stock”), issued by IsoPlexis to Perceptive was assumed by PhenomeX and converted into a warrant (“PhenomeX Warrant”) to purchase shares of common stock, par value $0.00005, of PhenomeX (“PhenomeX Common Stock”), on the same terms and subject to the same conditions as were applicable to the IsoPlexis Warrant as of immediately prior to the Acquisition Date; provided, that the PhenomeX Warrant is exercisable for 496,560 shares of PhenomeX Common Stock (i.e., a number of shares of PhenomeX Common Stock equal to the number of shares of IsoPlexis Common Stock that were subject to the IsoPlexis Warrant multiplied by the 0.612 exchange ratio and has an exercise price of $9.80 per share of PhenomeX Common Stock (i.e., the exercise price per share of IsoPlexis Common Stock that was applicable to the IsoPlexis Warrant divided by 0.612).

Restricted stock awards

As a result of the IsoPlexis Merger and discussed above, the Company now has RSAs outstanding. RSAs are rights to receive shares of the Company’s Common Stock upon meeting specified vesting requirements. The fair value of a RSA is the market value as determined by the closing price of the Company’s stock on the original grant date.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Stock-based compensation

Stock-based compensation related to the ~~Company's~~Company’s stock-based awards was recorded as an expense and allocated as follows (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022

Cost of sales	Cost of sales	$	68	$	63	$	119	$	105	Cost of sales	$	16	$	51
Research and development	Research and development	2,292		1,599		3,873		2,660		Research and development	548		1,581
General and administrative		2,318		2,497		4,529		3,869
Sales and marketing		1,887		1,470		3,437		3,489
Selling, general and administrative										Selling, general and administrative	3,824		3,761
Total stock-based compensation	Total stock-based compensation	$	6,565	$	5,629	$	11,958	$	10,123	Total stock-based compensation	$	4,388	$	5,393

Stock-based compensation capitalized in inventory was not material as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~

~~Option Repricing~~

On May 19, 2022, the Company’s Board of Directors elected to reprice all outstanding stock options granted to non-executive employees of the Company under the Berkeley Lights, Inc. 2020 Incentive Plan with a strike price above the closing price of the Company’s common stock as reported on Nasdaq as of May 19, 2022 (which was $4.91). There were no other modifications to these options, including vesting schedules. Options representing 763,307 underlying shares were included in this repricing and the total incremental expense associated with the modification of these options was $1.5 million, of which $0.5 million was recorded in the second quarter of 2022.

In addition, non-executive employees with outstanding options granted under the Berkeley Lights 2011 Equity Incentive Plan with a strike price above the closing price of the Company’s common stock as reported on Nasdaq as of May 19, 2022 were granted an RSU for every two stock options held with a strike price above the closing price as of May 19, 2022. These RSUs were granted on June 1, 2022 and vest in full on June 1, 2024. An aggregate total of 353,625 RSUs were granted to such employees resulting in $1.5 million of compensation expense, of which approximately $55 thousand was recorded in the second quarter of 2022.

(14)Restructuring

~~CEO Equity Grant~~

~~On March 10,~~During 2022, the Company ~~granted~~adopted a new strategic plan with the ~~newly appointed Chief Executive Officer~~intention of reducing costs and better aligning the organization with the Company’s long-term goals. As a result, the Company ~~1,017,177 RSUs, 339,059 stock options~~approved a set of restructuring initiatives in 2022 and ~~678,118 performance-based stock options (“PSOs”). The RSUs and stock options vest quarterly over 3 years and~~continued with similar initiatives in the ~~stock options have a 10 year term.~~

The PSOs have a 7-year performance period, a 10-year term and vest based upon certain market conditions and a continued service-based requirement. Market condition-related vesting is triggered based onfirst quarter of 2023. During the ~~Company’s stock price reaching certain goals that range from 2 to 20 times~~three months ended March 31, 2023, the Company ~~share price on~~incurred restructuring charges of $1.3 million, related to severance and other employee-related restructuring costs associated with the ~~date~~termination of ~~grant.~~

~~Although no awards will vest until a market condition is satisfied, as~~approximately 16% of total full-time employees. As of March 31, ~~2022~~2023, the Company ~~began recording stock-based compensation expense for each vesting tranche based on~~has not fully completed its restructuring efforts. It is unable to currently estimate future restructuring charges, but will record any additional restructuring-related expenses as they are incurred.

Changes in the ~~estimated achievement date of~~Company’s restructuring liability are set forth in the ~~specified stock price target. The valuation~~table below (in thousands):


	Employee severance and termination benefits		Non labor restructuring		Total
Accrual at January 1, 2023	$	130	$	107	$	237
Restructuring liability assumed in IsoPlexis Merger	834		—		834
Restructuring charges	1,290		—		1,290
Cash payments	(1,010)		(107)		(1,117)
Non-cash settlements	—		—		—
Accrual at March 31, 2023	$	1,244	$	—	$	1,244

Restructuring liabilities are included in accrued expenses and ~~probability of achievement for each tranche is determined using a Monte Carlo simulation. The same Monte Carlo simulation is used as~~other current liabilities in the basis for determining the expected achievement date. As the probability of achievement is factored in as part of the Monte Carlo simulation, the expense for these tranches will be recognized concurrently over each tranche’s estimated achievement date even if

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

some or all of the options never vest. If the related market condition for a tranche is achieved earlier than expected, all unamortized expense for such tranche will be recognized immediately. As of June 30, 2022, none of the PSOs had vested.condensed consolidated balance sheet.

~~(12)~~(15)Income Taxes

The Company’s provision for income taxes was ~~$4,000 and $24,000, respectively,~~$20,000 for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~$26,000~~$20,000 and ~~$43,000, respectively,~~ for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ income from operations before taxes consisted of amounts related to U.S. operations and the Company’s foreign operations. The Company maintains a full valuation allowance on its deferred tax assets, and intends to do so until there is sufficient evidence to support the reversal of all or some portion of this allowance.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~(13)~~(16)Statements of Cash Flows

The supplemental cash flow information consists of the following (in thousands):


		Six months ended June 30,					Three months ended March 31,
		2022		2021			2023		2022
Cash paid for interest	Cash paid for interest	$	278	$	681	Cash paid for interest	$	439	$	137
Cash paid for income taxes	Cash paid for income taxes	$	—	$	3	Cash paid for income taxes	$	19	$	—

Non-cash investing and financing activities	Non-cash investing and financing activities					Non-cash investing and financing activities

Inventory transferred to property and equipment (1)		$	—	$	3,827
Non-cash consideration for the acquisition of IsoPlexis						Non-cash consideration for the acquisition of IsoPlexis	$	32,406	$	—
Property and equipment transferred to inventory						Property and equipment transferred to inventory	$	352	$	—

Customer return of Beacon transferred to property and equipment (1)						Customer return of Beacon transferred to property and equipment (1)	$	201	$	—
Change in accounts payable and accrued liabilities related to purchases of property and equipment	Change in accounts payable and accrued liabilities related to purchases of property and equipment	$	(699)	$	723	Change in accounts payable and accrued liabilities related to purchases of property and equipment	$	684	$	482

(1) ~~The non-cash transfer of inventory~~Refer to property and equipment principally relates to Beacons that were transferred to the Company’s BioFoundry operations in the first and second quarter of 2021. As a result of the growth of the Company’s BioFoundry operations, including growth in the number of Beacons used to fulfill strategic partnerships and services agreements, beginning in the third quarter of 2021, Beacons that at inception are planned to be used in the Company’s BioFoundry operations will be categorized as “Purchase of property and equipment.”

Note 6 under “Sales-type Lease Arrangements” for further information.

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(14)~~(17)Commitments and Contingencies

Legal Proceedings

From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its financial statements for these matters when a loss is known and considered probable and the amount can be reasonably estimated. The Company does not recognize gain contingencies until they are realized. Legal costs incurred relating to loss contingencies are expensed as incurred.

AbCellera Biologics Litigation

In July through September 2020, AbCellera Biologics Inc. (“AbCellera”) filed a ~~complaint~~series of complaints in the United States District Court for the District of Delaware, alleging that the Company infringed and continues to infringe, directly and indirectly, the following patents exclusively licensed by AbCellera by making, using, offering for sale, selling and/or importing the Company’s Beacon and Culture Station instruments and the OptoSelect chips, and sale of the Opto Plasma B Discovery Workflow: U.S. Patent Nos. 10,107,812, 10,274,494, 10,466,241, 10,578,618, 10,697,962, 10,087,408, 10,421,936, ~~and~~ 10,704,018, ~~(“AbCellera I”).~~

~~In August 2020, AbCellera filed a second complaint in the United States District Court for the District of Delaware, making the same allegations with regard to U.S. Patent Nos.~~ 10,718,768, 10,738,270, 10,746,737, 10,753,933, 10,775,376, 10,775,377, and ~~10,753,933 (“AbCellera II”). In September 2020, AbCellera filed amended complaints in each of AbCellera I and AbCellera II adding~~10,775,378. The University of British Columbia (“UBC”), the owner of the patents, joined AbCellera as a named ~~plaintiff. Also in September 2020, AbCellera and UBC filed a third complaint~~plaintiff in the ~~United States District Court for the District of Delaware, making the same allegations with regard to U.S. Patent Nos. 10,775,376, 10,775,377, and 10,775,378 (“AbCellera III”).~~lawsuits. AbCellera and UBC are seeking, among other things, judgment of infringement, a permanent injunction and damages (including lost profits, a reasonable royalty, reasonable costs and attorney’s fees, and treble damages for willful infringement). In addition to procedural motions, the Company has filed an answer and counterclaims in response to each of the ~~AbCellera I, AbCellera II and AbCellera III~~ lawsuits. The Company’s counterclaims in each lawsuit include counts for declaratory judgment of non-infringement of the asserted patents, for declaratory judgment of invalidity of the asserted patents, ~~and~~ for declaratory judgment of unenforceability of the asserted patents due to inequitable ~~conduct.~~ conduct, and unfair competition under state and federal law.

The Company filed a motion to transfer the ~~AbCellera I, AbCellera II and AbCellera III~~ lawsuits to the United States District Court for the Northern District of California, which was granted and where the lawsuits have been consolidated and are now pending ~~(the “consolidated lawsuit”~~(“Consolidated Lawsuit”). On May 6, 2021 and pursuant to Court Order, AbCellera and UBC reduced, without prejudice, the asserted patents in the consolidated lawsuit to the following: US Patent Nos. 10,087,408, 10,421,936, 10,738,270, 10,697,962, 10,753,933, 10,775,376 and 10,775,378.

On July 1, 2021, the court granted the Company’s motion to amend its answer and counterclaims to add federal and state unfair competition counterclaims against AbCellera Biologics; on July 22, 2021, the Company filed its amended answer and counterclaims. Also on July 1, 2021, the court issued a Case Management Order that, among other things, requires AbCellera and UBC to further reduce the number of asserted patents to no more than 2,two, and the total asserted patent claims to no more than 4four per patent prior to the trial.

PhenomeX Inc.

~~Also in~~Notes to Condensed Consolidated Financial Statements

(Unaudited)

In July 2021 and August 2021, the Company filed petitions for Inter Partes Review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the United States Patent & Trademark Office (“USPTO”), challenging the validity of various asserted claims of U.S. Patent No. 10,087,408 and all asserted claims of U.S. Patent ~~No.~~Nos. 10,421,936 ~~then filed a motion in the district court to stay the consolidated lawsuit pending the outcome of the IPR proceedings.~~and 10,739,270. In August 2021, in response to a Motion to Stay filed by the Company, ~~filed a third petition for IPR with the USPTO, challenging the validity of all asserted claims of U.S. Patent No. 10,739,270. Also in August 2021,~~ the court ~~granted~~stayed the ~~Company’s motion to stay the consolidated AbCellera I, AbCellera II, and AbCellera III lawsuits~~Consolidated Lawsuit pending the outcome of the IPR proceedings.

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

In January 2022, the ~~Patent Trial and Appeal Board (“PTAB”)~~PTAB of the USPTO issued a decision instituting IPR on U.S. Patent No. 10,087,408 and a decision denying IPR on U.S. Patent No. 10,421,936. In February 2022, the PTAB issued a decision denying IPR on U.S. Patent No. 10,739,270. ~~In May 2022, UBC filed~~And in January 2023, the PTAB issued a ~~Patent Owner’s Response (“POR”)~~decision upholding the validity of the challenged claims in ~~the IPR of~~ U.S. Patent No. ~~10,087,408. Also in May 2022,~~10,087,408: the Company has requested a rehearing of the PTAB’s decision. The Consolidated Lawsuit remains stayed at this time, AbCellera ~~and UBC~~has filed a motion in- opposed by the ~~United States District Court for the Northern District of California~~Company - to lift the stay of the consolidated AbCellera I, AbCellera II, and AbCellera III lawsuits, citing lack of institution of the IPRs of U.S. Patent Nos. 10,421,936 and 10,739,270. The Company has opposed the motion, and a hearing on thestay. AbCellera’s motion to lift the stay is ~~scheduled for August 2022.~~

~~In August 2020,~~fully briefed and awaiting a decision from the Company filed a complaint in the United States District Court for the Northern District of California against AbCellera and Lineage BioSciences, Inc., an entity previously acquired by AbCellera (“AbCellera IV”). The complaint included 2 counts of unfair competition and 1 count of a declaratory judgment of non-infringement of U.S. Patent No. 10,058,839. The Company was seeking, among other things, damages and a judgment of non-infringement. In October 2020, the Company filed an amended complaint asserting the same 3 counts and AbCellera and Lineage filed a motion to dismiss the amended complaint, which was granted, without prejudice, in part. In light of the Company’s amended answer and counterclaims in the consolidated lawsuits, which were amended to include its federal and state unfair competition claims as discussed above, in July 2021 the Company filed a notice of dismissal without prejudice in the AbCellera IV lawsuit, resulting in its termination.

court.

The Company believes that the patent assertions by AbCellera and UBC are without merit and it intends to defend itself vigorously. The Company also intends to proceed with its claims and counterclaims against AbCellera and UBC. Outcomes in litigation can be uncertain and it is possible a court may disagree with the Company’s ~~positions.~~position. An adverse determination in these lawsuits could subject the Company to significant liabilities, require it to seek licenses from or pay royalties to AbCellera and/or UBC, or prevent it from manufacturing, selling or using certain of ~~its~~the Company’s products, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects.

Securities Class Action

In December 2021, Victor J. Ng filed a securities class action complaint ~~(the “Securities~~in the Northern District of California (“Securities Class Action”), which was amended on July 25, 2022. The Securities Class Action is on behalf of all persons who purchased or otherwise acquired: (a) Berkeley Lights common stock pursuant and/or traceable to certain July 2020 ~~IPO~~Initial Public Offering (“IPO”) offering documents and/or (b) securities of Berkeley Lights between July 17, 2020 and January 5, 2022, inclusive. The complaint alleges claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder as well as §§11, 12(a)(2) and 15 of the Securities Act of 1933. It names as defendants the Company, certain of the Company’s current and former senior executives and directors, the underwriter firms that sponsored the Company’s July 2020 IPO, and 3three firms that invested in the Company. The Company believes that the assertions in the Securities Class Action are without merit and intends to defend itself vigorously. The Company’s pending Motion to Dismiss is set for hearing on June 22, 2023. Outcomes in litigation can be uncertain and it is possible a court may disagree with the Company’s positions. An adverse determination in the Securities Class Action could subject the Company to significant liabilities, which could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects.

Derivative Action

In March 2022, Trung Nguyen filed a shareholder derivative complaint on behalf of nominal defendant Berkeley Lights, Inc., alleging that certain of the Company’s current and former directors and certain of the Company’s current and former senior executives breached their fiduciary duties to the Company. The complaint also alleged that certain of the Company’s current and former directors and former senior executives used material, non-public information to improperly profit from the sale of Company stock, and that certain of the Company’s current and

~~Berkeley Lights, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

former senior executives owe the Company contribution for violations of ~~sections~~Sections 10(b) and 21D of the ~~Securities~~ Exchange ~~Act of 1934.~~Act.

The Company is not currently involved in any other claims or legal actions, nor is management aware of any potential claims or legal actions, for which the ultimate disposition could have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

No provision has been made for litigation because the Company believes that it is not probable that a liability ~~had~~has been incurred as of ~~June 30, 2022.~~March 31, 2023.

Purchase commitments

The Company has entered into various purchase agreements, including inventory-related agreements with its contract manufacturers. Once these orders are placed, they are generally cancelable by providing notice prior to the expected ship date, however such cancellations could result in the Company incurring certain charges depending on the timing. The Company had non-cancellable purchase obligations to contract manufacturers and other suppliers of $29.7 million at March 31, 2023.

Product Warranty

The Company generally provides a ~~13-month~~one year assurance-type warranty ~~generally beginning on the shipment date,~~ on its platforms and chip consumables. The table below represents the activity in the product warranty accrual included in accrued expenses and other current liabilities on the condensed consolidated balance sheets (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022
Balance, beginning of period	Balance, beginning of period	$	914	$	1,268	$	1,085	$	1,271	Balance, beginning of period	$	749	$	1,085
Warranty accrual assumed in IsoPlexis Merger										Warranty accrual assumed in IsoPlexis Merger	128		—
Adjustments to existing warranties	Adjustments to existing warranties	(185)		(148)		(430)		(366)		Adjustments to existing warranties	(111)		(245)
Provision for new warranties	Provision for new warranties	179		242		342		617		Provision for new warranties	133		163
Settlement of pre-existing warranties	Settlement of pre-existing warranties	(156)		(172)		(245)		(332)		Settlement of pre-existing warranties	(111)		(89)
Balance, end of period	Balance, end of period	$	752	$	1,190	$	752	$	1,190	Balance, end of period	$	788	$	914

~~(15)~~(18)Net Loss Attributable to Common Stockholders Per Share

Potentially issuable shares of common stock include shares issuable upon the exercise of outstanding employee stock option ~~awards. Awards granted with performance conditions are excluded from the shares used to compute diluted earnings per share until the performance conditions associated with the~~ awards ~~are met.~~and unvested restricted stock units.

The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except share and per share data):


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022

Numerator	Numerator									Numerator
Net loss attributable to common stockholders, basic and diluted	Net loss attributable to common stockholders, basic and diluted	$	(25,747)	$	(18,154)	$	(47,173)	$	(33,589)	Net loss attributable to common stockholders, basic and diluted	$	(23,419)	$	(21,426)
Denominator	Denominator									Denominator
Weighted-average shares used to compute net income per share, basic and diluted	Weighted-average shares used to compute net income per share, basic and diluted	67,985,664		66,790,755		67,842,372		66,029,307		Weighted-average shares used to compute net income per share, basic and diluted	75,759,771		67,697,488
Net loss per share	Net loss per share									Net loss per share
Net loss per share attributable to common stockholders, basic and diluted	Net loss per share attributable to common stockholders, basic and diluted	$	(0.38)	$	(0.27)	$	(0.70)	$	(0.51)	Net loss per share attributable to common stockholders, basic and diluted	$	(0.31)	$	(0.32)

2129

~~Berkeley Lights,~~PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Since the Company was in a loss position for all periods presented, basic net loss per share attributable to common stockholders is the same as diluted net loss per share attributable to common stockholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following ~~weighted-average~~shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented as they had an anti-dilutive effect:

Three and six months ended June 30,
2022 2021
Options to purchase common stock 7,750,612 7,619,929
Restricted stock units 4,241,025 470,985
Total 11,991,637 8,090,914


	March 31,
	2023	2022

Warrants to purchase common stock	496,560	—
Options to purchase common stock	7,685,997	7,020,591
Restricted stock awards	290,846	—
Restricted stock units	5,517,488	3,629,310
Total	13,990,891	10,649,901

~~(16)~~(19)Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company has one business activity and there are no segment managers who are held accountable for operations. Accordingly, the Company has 1one operating segment. The IsoPlexis Merger on March 21, 2023 did not change the Company’s assessment about operating segments. The Company’s principal operations and decision-making functions are located in the United States.

The following table provides the Company’s revenues by geographical market based on the location where the services were provided or to which product was shipped (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended March 31,
		2022		2021		2022		2021			2023		2022

North America	North America	$	9,891	$	8,874	$	23,585	$	16,236	North America	$	14,055	$	13,715
Asia Pacific (1)	Asia Pacific (1)	7,201		9,268		12,236		17,699		Asia Pacific (1)	3,147		5,035
Europe	Europe	2,058		1,108		3,535		3,943		Europe	1,314		1,456
		$	19,150	$	19,250	$	39,356	$	37,878		$	18,516	$	20,206

(1) Asia Pacific includes Australia.

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, substantially all of the Company’s long-lived assets were located in the United States.

~~(17)~~(20)Subsequent Events

~~On July 21, 2022, to improve efficiency and manage operating expenses~~

In April 2023, Phenomenex, Inc. (“Phenomenex”) filed a complaint against the Company ~~terminated~~in the ~~employment~~U.S. District Court for the Central District of California, alleging trademark infringement and unfair competition in relation to the Company’s name and seeking injunctive relief and damages. As of the filing date for this Quarterly Report on Form 10-Q, the Company has not been served with the complaint from Phenomenex. The Company believes that Phenomenex’s complaint is without merit and intends to vigorously defend itself.

PhenomeX Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Restructuring

During the second quarter of 2023, the Company announced a reduction in force terminating approximately 12% of total full-time employees. The Company estimates it will incur severance and employee-related restructuring costs of approximately ~~$1.1~~$0.8 million related to this activity, substantially all of which the Company expects to incur in the ~~third~~second quarter of ~~2022.~~

2023.

2231

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

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Examples of forward-looking statements include, among others: our ability to continue as a going concern; our intention to improve operating cash flow by increasing our revenue and lowering our operational costs; our expectations regarding the drivers of expected revenue growth, including new commercial leadership, geographic expansion, and a refined product roadmap; our expectations regarding the timing to achieve our goal of generating positive operating cash flow in the fourth quarter of 2024; our expectations regarding anticipated returns on investment through increased focus and rigor on development initiatives; our strategy, plans and timing for acquisitions, growth, product development and expansion, the expected benefits of the IsoPlexis Merger, including the estimated cost synergies of the combined company in order to pursue profitability, lower operating expenses and advance the path to cash flow breakeven; our expectations regarding the drivers of our expected cost synergies, including eliminating duplicative costs associated with maintaining the infrastructure needed by public companies, complementary R&D capabilities, marketing resources and sales operations, and manufacturing, supply chain, logistics and operations synergies; and other expectations, outlooks and forecasts on our future business, operational and financial performance.

Forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements 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 the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, ~~2021~~2022 included in the Annual Report on Form 10-K and filed with the Securities and Exchange Commission (the “SEC”) on February ~~28, 2022 (the “Annual~~23, 2023 (“Annual Report”). Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including

those discussed in Item 1A. “Risk Factors” of our Annual Report, Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q, and our other reports filed with the SEC.

Overview

PhenomeX is the combination of two companies, Berkeley Lights and IsoPlexis. Berkeley Lights acquired IsoPlexis on March 21, 2023 (the “IsoPlexis Merger”) and the newly combined company was rebranded as PhenomeX.

PhenomeX is a ~~leading Digital Cell Biology~~life sciences tools company focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. The Berkeley Lights Platform captures deep phenotypic, functional and genotypic information for thousands of single cells in parallel and can also deliver the live biology customers desire in the form of the best cells. This iswith a ~~new way to capture and interpret the qualitative language of biology and translate it into single-cell specific digital information, referred to as Digital Cell Biology. We currently~~ focus on ~~enabling~~functional cell biology. Our products and services provide customers with, among other offerings, Optofluidic platforms such as the ~~large~~Beacon and ~~rapidly growing markets of antibody therapeutics,~~Beacon Select (developed by Berkeley Lights) as well as Proteomic Barcoding platforms, such as the IsoLight System and the IsoSpark System (developed by IsoPlexis). These platforms provide scientists with opportunities to perform cell ~~therapy, gene therapy, agricultural~~ biology ~~and synthetic biology with~~research through experiments using our ~~platform.~~

proprietary consumables.

The ~~Berkeley Lights Platform can be used~~mission of PhenomeX is to ~~characterize~~empower scientists to leverage the ~~performance~~full potential of ~~cells relevant to~~each cell and drive the desired cell-based product early in the discovery process and then connect this phenotypic data to the genetic code for each cell. In contrast, current genomic technologies find sequences first and fail to deliver thenext era of functional information early in the process. Performing functional validation early means letting poorly performing cells fail early while rapidly advancing the best candidates forward, before incurring significant research and development expense. Our platform repeats this process of fail andcell biology that will advance ~~many times throughout the process, delivering the best cells for what we believe will deliver the best product.~~human health.

~~Our platform~~

PhenomeX’s strategy is a fully integrated, end-to-end solution, comprised of advanced automation systems, proprietary consumables, including our OptoSelect chips and reagent kits, and advanced application and workflow software. Customers load onto our system their live cell samples, as well as media and reagents, thenorganized around the cells are imported onto our OptoSelect chips where integrated workflows are performed to assess specific cell functions and attributes. Our platform captures and delivers rich single-cell data to find the best cells. Our platform leverages our proprietary OptoElectro Positioning (“OEP”) technology, which enables deterministic positioning of living single cells and other micro-objects using light. OEP is a core technology of our platform and allows for a high level of control over live single cells or other micro-objects throughout the functional characterization process.following five key pillars:

~~Our commercial workflows, each~~1. Generate positive operating cash flow in the fourth quarter of which are distinct offerings, are made up of four modules we call Import, Culture, Assay and Export. These modules can be adapted, interchanged and deployed with a variety of single-cell assays to address specific applications and a variety of cell types. We believe this versatility facilitates rapid development of new workflow offerings and virtually unlimited workflow commercialization opportunities. We have developed and will continue to develop and commercialize proprietary workflows across large markets by leveraging existing workflows and assays. Over time, our goal is to enable customers to standardize many of their processes on our platform utilizing our workflows. We believe we are the only company commercializing a platform that can do this in a scalable way.2024.

~~We commercially launched our platform in December of 2016, which included the Beacon system~~2. Prioritize research and ~~the alpha version of our Opto Cell Line Development 1.0 workflow, targeted to the antibody therapeutics market. From the initial launch of our platform~~development’s return on investment through ~~June 30, 2022, we have commercially launched ten workflows. In June of 2019, we launched our desktop Lightning system targeted for assay~~increased focus and rigor on development ~~and lower throughput workflows, and in early 2020 we launched our Culture Station instrument.~~initiatives.

~~We focus~~3. Deliver consistent commercial execution through a ~~substantial portion of our resources on platform, workflow~~new sales structure and ~~assay development, as well as on business development~~enhanced product portfolio and sales and marketing. Our research and development efforts are primarily focused on developing new workflows and assay capabilities, as well as new advanced systems and OptoSelect chips and reagent kits, to meet both our customers’ needs and to address new markets.pricing strategy.

During 2022, we validated the unique capability on our platform to select and retrieve high-value stable producer cell lines that will improve the cost and therapeutically relevant yields for manufacturing Adeno-associated virus (“AAV”)-based gene therapies, which we believe represents4. Build a ~~significant return on investment opportunity~~world-class life sciences leadership team with a proven track record in ~~the near term. As such, we intend to dedicate a significant number of our resources towards development of this workflow in the second half of 2022 and in 2023.~~profitably scaling life sciences tools companies.

5. Evaluate merger and acquisition opportunities that will help us accelerate profitable growth and leverage our current cost structure.

Recent Events

As noted above, on March 21, 2023 we completed the IsoPlexis Merger.As Berkeley Lights was the acquiring company, historical financials included herein are the financials of Berkeley Lights. The results of IsoPlexis are included in the combined results of PhenomeX from the acquisition date (March 21, 2023). We ~~generally outsource all of~~believe the IsoPlexis Merger enhances our ~~production manufacturing. Design work, prototyping and pilot manufacturing are performed in-house before outsourcing to third party contract manufacturers. Our outsourced production~~ strategy ~~is intended to drive cost leverage and~~by, among other things, the following:

•Offering an expanded product portfolio at different price points with a focus on recurring revenue;

•Growing the combined company’s share in a larger cell biology market through expanding its diversified customer base;

•Enhancing the combined company's commercial scale and ~~avoid~~execution;

•Delivering an expected $70 million in cost synergies to pursue profitability and advance the ~~high capital outlays~~path to cash flow breakeven; and ~~fixed costs related to constructing and operating~~

• Serving as a ~~manufacturing facility. The contract manufacturers of our systems are located~~platform for further consolidation in the United States. Contract manufacturers for reagent kits and OptoSelect chip components are located in the United States, Asia and Europe. Certain of our suppliers of components and materials are single source suppliers. We perform final manufacture and assembly steps of our OptoSelect chips in-house.high-growth, single-cell biology tools space.

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Our customer base includes several of the largest biopharmaceutical companies in the world, as well as biotechnology companies, leading contract research organizations, synthetic biology companies and academic institutions. While we have seen significant growth in our customer and installed base, we believe we are still in the very early stages of platform adoption, with the majority our historical revenue derived from early adopters of our technology for research and development purposes.

We have financed our operations primarily from the issuance and sale of equity securities, borrowings under our long-term debt agreement, and to a lesser extent from cash generated by product and service sales. On July 21, 2020, we closed our initial public offering (the “IPO”), in which we sold 9,315,000 shares of common stock (which included 1,215,000 shares that were sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares) at a price to the public of $22.00 per share. We received aggregate net proceeds of $187.9 million after deducting, offering costs, underwriting discounts and commissions of $17.0 million.

Since our inception in 2011, we have incurred net losses in each year. Our net losses were $25.7 million and $18.2 million for the three months ended June 30, 2022 and 2021, respectively and $47.2 million and $33.6 million for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $310.8 million and cash, cash equivalents and marketable securities totaling $152.4 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future.

~~Certain of our financial results and other key operational developments for the three and six months ended June 30, 2022 include the following:~~

•Total revenue for the three and six months ended June 30, 2022 was $19.2 million and $39.4 million, respectively, compared to $19.3 million and $37.9 million for the same periods in 2021, respectively.

•Gross profit in absolute dollars slightly increased during the three months ended June 30, 2022 compared to the same period in 2021. Gross margin increased to 67% from 66% during the three months ended June 30, 2022 compared to the same period in 2021. Gross profit increased in absolute dollars during the six months ended June 30, 2022 compared to the same period in 2021. Gross margin for the six months ended June 30, 2022 increased to 68% compared to 66% for the six months ended June 30, 2021.

Recent Trends

There are multiple broad based factors impacting our business:

1.~~First,~~Macroeconomic factors, including the ~~COVID-19 pandemic~~war between Ukraine and Russia as well as political instability elsewhere, has ~~had,~~resulted in unfavorable global economic conditions, including increased inflation and ~~continues~~interest rates, and may lead to ~~have,~~ a ~~significant impact around the world, prompting governments and businesses to take unprecedented measures, including temporary closures of businesses, quarantines and shelter in place orders.~~recession.

2.Global and domestic supply chains and the timely availability of raw materials and ~~products have been and may continue to be materially disrupted by quarantines,~~product as a result of the COVID-19 pandemic factory slowdowns or shutdowns, border ~~closings~~closing and ~~travel restrictions resulting from the COVID-19 pandemic.~~other measures has previously impacted our operational and financial performance and its impact in future periods remains uncertain.

3.~~The COVID-19 pandemic, in addition to other macroeconomic factors~~Adverse developments affecting financial institutions and the financial services industry, including the ~~war between Ukraine~~government closure of Silicon Valley Bank, have affected certain of our vendors, suppliers, investors and ~~Russia as well as political instability in the United States, has resulted in unfavorable global economic conditions including increased inflation~~customers and ~~interest rates.~~may lead to market-wide liquidity problems.

Our business has been impacted and will continue to be impacted by the above ~~factors, by among other things, the following:~~

In the second half of 2022, certain of our strategic partnership and services engagements are ending. Coupled with our focus on the AAV opportunity discussed above, we expect revenue from strategic partnership and services agreements to decline in the near term.

In addition, pandemic related lockdowns in China throughout the first quarter of 2022 adversely impacted the operation of our office in Shanghai, in which the majority of our employees in our Asia Pacific region reside. While the city-wide lockdowns were lifted in the second quarter of 2022, localized lockdowns still remain.

factors. To date, our production, shipping and customer service functions have remained operational to maintain a continuous supply of products both to our customers and for our internal research and development activities. Any manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future activities. We continue to closely monitor global supply issues around materials, parts and components, including plastics and integrated circuit chips, and we have not experienced any material supply issue to date.

The ultimate impact of ~~COVID-19 and unfavorable economic conditions~~the foregoing factors on our operations and financial performance in future periods remains uncertain and will depend on many factors outside of our control, including the timing, extent, trajectory, and duration of the pandemic as well as the magnitude of any potential recession and related government actions to prevent and manage these issues, all of which are uncertain and cannot be predicted. While the overall impact of ~~COVID-19 and unfavorable economic conditions~~these matters is impossible to measure, they have resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and, ultimately our business and operations. Refer to Part I, Item 1A of our Annual Report on Form 10-K and Part II, Item 1A in this Quarterly Report on Form 10-Q under the heading “Risk Factors” for more information.

Results of operations

Comparison of the three months ended March 31, 2023 and 2022

Revenue


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Platform	$	6,103	$	7,404	$	(1,301)	(18)	%
Recurring	5,163		5,443		(280)		(5)	%
Partnership, License and Other	7,250		7,359		(109)		(1)	%
Total revenue	$	18,516	$	20,206	$	(1,690)	(8)	%

See Note 6 to our condensed consolidated financial statements for additional information regarding how our product and service revenue is generated through our Platform, Recurring and Partnership, License and Other revenue streams.

Platform revenue decreased by $1.3 million, or 18%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to decreased revenue from Optofluidic platform sales, partially offset by $0.5 million of Proteomic platform sales associated with the operations of IsoPlexis, which we acquired in March of 2023.

Recurring revenue decreased by $0.3 million, or 5%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The decrease was primarily driven by a decrease in Optofluidic consumables revenue, offset by $0.5 million of Proteomic consumables revenue associated with the operations of IsoPlexis.

Partnership, License and Other revenue for the three months ended March 31, 2023 was comprised entirely of license revenue related to certain intellectual property acquired in the IsoPlexis Merger and subsequently licensed to a third party. Partnership, License, and Other revenue for the three months ended March 31, 2022 related to multiple strategic partnership and service engagements, all of which were completed or terminated in the second half of 2022.

See below for details of our installed base. Note that the significant majority of our installed base relates to platform sales, with a much smaller percentage being provided under leasing programs.


	Optofluidic Platforms	Proteomic Platforms	Total
Installed base at January 1, 2023	135	0	135
Acquired in IsoPlexis Merger	0	287	287
Q1 2023 Placements	4	4	8
Installed base at March 31, 2023	139	291	430

Cost of sales, gross profit and gross margin


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Cost of sales	$	5,088	$	6,379	$	(1,291)	(20	%)
Gross profit	$	13,428	$	13,827	$	(399)	(3	%)
Gross margin	73 %		68 %

Cost of sales for the three months ended March 31, 2023 decreased by $1.3 million compared to the three months ended March 31, 2022 and was primarily due to the declines in Platform and Recurring revenue as the License Agreement that comprises all of our Partnership, License and Other revenue in 2023 does not have associated cost of sales.

Gross margin for the three months ended March 31, 2023 increased compared to the three months ended March 31, 2022 due to the revenue recognized from the License Agreement, which does not have associated cost of sales. Without the impact of this transaction, gross margin declined due to increased costs per unit as a result of lower production volumes, increased inventory reserves, and lower margins from IsoPlexis from March 21, 2023.

Operating Expenses

Organizational and presentational changes

Starting in the third quarter of 2022, we made certain changes to our operating structure to align with our new business strategy. These changes included reorganizing our go-to-market efforts, employee terminations and additional organizational changes (see also Note 14 to our condensed consolidated financial statements for further information).

As part of these changes, our “service center,” a team of scientists and engineers who perform services for both our internal and external projects, is now part of our platform sales and support organization. The service center historically reported to our former Chief Product Officer.

As a result of these changes, we now classify expenses associated with our service center as “Selling, general and administrative” instead of “Research and development” expenses on our condensed consolidated statements of operations starting in the third quarter of 2022. Service center expenses recorded in “Research and development” during the three months ended March 31, 2022 were $4.6 million. Service center expenses recorded in “Selling, general and administrative” during the three months ended March 31, 2023 were $4.6 million.


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Research and development	$	8,421	$	17,573	$	(9,152)	(52	%)
Selling, general and administrative	26,547		17,527		9,020		51	%
Restructuring	1,290		—		$	1,290	100	%
Total operating expenses	$	36,258	$	35,100	$	1,158	3	%

Operating expenses increased by $1.2 million, or 3%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The increase is primarily due to restructuring expenses incurred in connection with the employee terminations.

Research and development expense decreased by $9.2 million, or 52%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. This decrease reflects the impact of the $4.6 million reclassification of the service center expenses discussed above.In addition, research and development expense decreased during the period due to the impact of workforce reductions and overall lowered spend due to our strategy to prioritize research and development return on investment through increased focus and rigor on development initiatives.

Selling, general and administrative expense increased by $9.0 million, or 51%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. This increase reflects the impact of the $4.6 million reclassification of the service center expenses discussed above. In addition, selling, general and administrative costs increased due to transaction costs associated with the IsoPlexis Merger of $3.5 million and $0.9 million in costs associated with the operations of IsoPlexis since March 21, 2023.

Interest expense


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Interest expense	$	384	$	224	$	160	71	%

Interest expense increased by $0.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was primarily due to the refinancing of our term loan with EWB on March 21, 2023, which increased the loan amount from $20.0 million to $70.0 million and also increased the interest rate from 4.17% to the Prime Rate plus one-half of one percent (0.5%).

Interest income


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Interest income	$	827	$	34	$	793	2332	%

Interest income increased by $0.8 million during the three months ended March 31, 2023 as compared to the corresponding periods in 2022. These increases are primarily the result of higher yields received on our cash management program.

Other income (expense), net


	Three months ended March 31,				Three month change
(in thousands, except percentages)	2023		2022		Amount		%
Other income (expense), net	$	(1,012)	$	57	$	(1,069)	(1875	%)

Other expense, net for the three months ended March 31, 2023 includes $0.9 million of debt refinancing costs. Other income, net for the three months ended March 31, 2022 was mainly comprised of foreign exchange gains and losses and other miscellaneous income and expense items.

Components of results of operations

Revenue

Our revenue consists of ~~both~~i) platform, ii) recurring and iii) partnership, license and other revenue. Platform revenue consists of the sale of Optofluidic and Proteomic platforms (including the Beacon, Beacon Quest, IsoSpark and IsoLight), associated software, fixed-term sales-type lease arrangements with qualified customers, as well as application support, installation and training. Recurring revenue includes, consumables and reagent kits, quarterly workflow subscriptions, annual or multi-year subscriptions arrangements (e.g. Reagent Rental), and fixed fee extended warranty and service programs. Partnership, license and other revenue consists of strategic partnerships, as well as joint development and collaboration agreements where we provide services for the development of new workflows, cells or organism types, revenue from licenses of intellectual property, and other revenue. See Note 6 to our condensed consolidated financial statements for additional information regarding how our product ~~revenue~~ and service revenue ~~which~~ is generated through ~~the following~~our platform, recurring and partnerships, license and other revenue ~~streams: (i) direct platform sales, (ii) recurring revenue,~~streams.~~and (iii) strategic partnerships and services~~agreements. Sales of advanced automation systems, recurring revenue from consumables, workflow subscription agreements, and workflow licenses are defined as product revenue, and revenue from strategic partnership and services agreements and extended or enhanced warranty contracts, feasibility studies and platform support are defined as service revenue in our consolidated results of operations. We launched our Tech Access subscription model in June 2021.

~~The following tables provide an overview of our revenue streams and how we report revenue in our consolidated statements of operations (in thousands):~~

~~Income Statement Classification~~

~~Product or Service sold~~

~~Revenue Stream~~

~~Product revenue~~

~~Sale of advanced automation system (Beacon and Lightning system, Culture Station)~~

~~Direct platform sales~~

~~Software~~

~~Direct platform sales~~

~~Fixed term sales-type lease arrangements with qualified customers~~

~~Direct platform sales~~

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~~Annual renewable workflow licenses, quarterly workflow subscriptions, annual or multi-year subscriptions arrangements (e.g. TechAccess)~~

~~Recurring revenue~~

~~Consumables and reagent kits (e.g. OptoSelect chips)~~

~~Recurring revenue~~

~~Service revenue~~

~~Strategic partnerships, joint development and collaboration agreements where we provide services for development of new workflows, cells or organism types~~

~~Strategic partnerships and services~~

~~Application support, installation and training~~

~~Direct platform sales~~

~~Fixed fee extended warranty and service programs~~

~~Recurring revenue~~

~~We renamed our joint development and partnership offering to strategic partnerships and services in the fourth quarter of 2021.~~

Three months ended June 30, 2022 Six months ended June 30, 2022
(in thousands) Product Service Total Product Service Total
Direct platform sales $ 6,226 $ 200 $ 6,426 $ 12,973 $ 857 $ 13,830
Recurring revenue 3,242 2,687 5,929 6,269 5,103 11,372
Strategic partnerships and services — 6,795 6,795 — 14,154 14,154
Total revenue $ 9,468 $ 9,682 $ 19,150 $ 19,242 $ 20,114 $ 39,356

Three months ended June 30, 2021 Six months ended June 30, 2021
(in thousands) Product Service Total Product Service Total
Direct platform sales $ 10,717 $ 672 $ 11,389 $ 21,303 $ 1,202 $ 22,505
Recurring revenue 2,304 1,642 3,946 5,251 3,089 8,340
Strategic partnerships and services — 3,915 3,915 — 7,033 7,033
Total revenue $ 13,021 $ 6,229 $ 19,250 $ 26,554 $ 11,324 $ 37,878

~~The following tables provide information by revenue stream for the periods presented:~~

Three months ended June 30,
(in thousands, except percentages) 2022 2021 Change
Direct platform sales $ 6,426 $ 11,389 $ (4,963) (44) %
Recurring revenue 5,929 3,946 1,983 50 %
Strategic partnerships and services 6,795 3,915 2,880 74 %
Total revenue $ 19,150 $ 19,250 $ (100) (1) %

Six months ended June 30,
(in thousands, except percentages) 2022 2021 Change
Direct platform sales $ 13,830 $ 22,505 $ (8,675) (39) %
Recurring revenue 11,372 8,340 3,032 36 %
Strategic partnerships and services 14,154 7,033 7,121 101 %
Total revenue $ 39,356 $ 37,878 $ 1,478 4 %

~~Costs~~Cost of sales, gross profit and gross margin

~~Product cost~~Cost of sales. Cost of sales ~~associated with our products primarily consists of~~includes manufacturing related costs incurred in the production process, including personnel and related costs, costs of component materials, labor and overhead, packaging and delivery costs and allocated costs, including facilities and information technology. ~~These costs also include the costs associated with the standard assurance-type product warranty provided on our platforms, which are recorded at the time of sale.~~

~~Service~~Also included in cost of sales are the personnel and related costs~~. Cost of sales~~ associated with our services, ~~primarily consists of personnel and related costs,~~ expenses related to the development of customized platforms and workflows, feasibility studies on our platforms and service and warranty costs to support our customers. We ~~maintain continuous efforts to increase reliability and uptime~~also include the costs associated with the standard assurance-type product warranty provided on our platforms, which are recorded at the time of ~~our advanced automation systems.~~sale.

Gross profit and gross margin. Gross profit is calculated as revenue less cost of sales. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including: market conditions that may impact our pricing; sales mix among platform access options, including the regional mix of sales; sales mix changes among consumables, ~~advanced automation systems~~platforms and services; product mix changes between established products and new products; excess and obsolete inventories; our cost structure for manufacturing operations relative to volume; and product warranty obligations. We expect cost of sales to increase in absolute dollars in future periods as our revenue grows, and as we plan to hire additional employees to support our manufacturing, operations, service and support organizations.

Gross profit was $12.9 million and $26.8 million for the three and six months ended June 30, 2022, respectively. Gross profit was $12.7 million and $25.2 million for the three and six months ended June 30, 2021, respectively.

Operating expenses

Research and development. Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies, materials expenses and allocated facilities and IT costs for employees and contractors engaged in research and product development. We expense all research and development costs in the period in which they are incurred.

We plan to continue to invest in our research and development efforts, including hiring additional employees, to enhance existing products and develop new products. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods. We expect these expenses to vary from period to period as a percentage of revenue.

~~General~~Selling, general and administrative. Our selling, general and administrative expenses primarily consist of costs related to the selling and marketing of our products and services and costs associated with our executive, finance, accounting, legal, human resources and administrative functions. These costs include salaries, benefits, sales commissions and stock-based compensation ~~costs~~ for ~~employees in~~ our ~~executive, accounting and finance, legal and human resource functions,~~employees, as well as advertising and marketing costs and professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. We expect that our general and administrative expenses will continue to increase in absolute dollars, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company. We expect these expenses to vary from period to period as a percentage of revenue.

~~Sales and marketing.~~Restructuring. Our ~~sales and marketing expenses consist~~restructuring expense primarily consists of ~~salaries,~~one-time cash severance benefits ~~sales commissions and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses and allocated~~associated with the termination of certain employees. Restructuring expense can also include infrastructure charges to vacate facilities and ITcontract cancellation costs. ~~We expect~~(see Note 14 to our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams, increase our presence globally and increase marketing activities to drive awareness and adoption of our platform. While these expenses may vary from period to period as a percentage of revenue, we expect these expenses to increase as a percent of sales in the short-term as we continue to grow our commercial organization to support anticipated growth in the business.condensed consolidated financial statements for additional information).

Other income (expense)

Interest expense. Interest expense consists primarily of interest related to borrowings under our debt obligations.

Interest income. Interest income primarily consists of interest earned on our cash, ~~and~~ cash equivalents ~~which are invested in cash deposits~~ and ~~in money market funds.~~short-term available-for-sale debt securities. We sold our short-term available for sale debt securities during March 2023.

Other income (expense), net. Other income (expense), net consists primarily of foreign currency exchange gains and losses. Foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar, primarily related to our operations in the United Kingdom and China. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. During the three months ended March 31, 2023, other income (expense) also included debt refinancing costs.

Provision for income taxes

Our provision for income taxes consists primarily of foreign taxes and state taxes in the United States. The Company maintains a full valuation allowance on its deferred tax assets and intends to do so until there is sufficient evidence to support the reversal of all or some portion of these allowances. As we expand the scale and scope of our international business activities, any changes in taxation of such activities may increase our overall provision for income taxes in the future.

~~Results of operations~~

~~The following tables set forth our results of operations for the periods presented:~~

Three months ended June 30, Six months ended June 30,
(in thousands) 2022 2021 2022 2021
Revenue:
Product revenue $ 9,468 $ 13,021 $ 19,242 $ 26,554
Service revenue 9,682 6,229 20,114 11,324
Total revenue 19,150 19,250 39,356 37,878
Cost of sales:
Product cost of sales 2,614 3,332 5,309 7,035
Service cost of sales 3,610 3,190 7,294 5,664
Total cost of sales (1)
6,224 6,522 12,603 12,699
Gross profit 12,926 12,728 26,753 25,179
Operating expenses:
Research and development (1)
18,178 13,535 35,751 26,562
General and administrative (1)
13,024 11,725 24,740 20,692
Sales and marketing (1)
7,271 5,317 13,082 10,923
Total operating expenses 38,473 30,577 73,573 58,177
Loss from operations (25,547) (17,849) (46,820) (32,998)
Other income (expense):
Interest expense (227) (356) (451) (710)
Interest income 53 43 87 109
Other income (expense), net (22) 34 35 53
Loss before income taxes (25,743) (18,128) (47,149) (33,546)
Provision for income taxes 4 26 24 43
Net loss $ (25,747) $ (18,154) $ (47,173) $ (33,589)

~~(1)Amounts include stock-based compensation as follows:~~

Three months ended June 30, Six months ended June 30,
(in thousands) 2022 2021 2022 2021
Cost of sales $ 68 $ 63 $ 119 $ 105
Research and development 2,292 1,599 3,873 2,660
General and administrative 2,318 2,497 4,529 3,869
Sales and marketing 1,887 1,470 3,437 3,489
Total stock-based compensation expense $ 6,565 $ 5,629 $ 11,958 $ 10,123

~~Comparison of the three and six months ended June 30, 2022 and 2021~~

~~Revenue~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Product revenue $ 9,468 $ 13,021 $ (3,553) (27 %) $ 19,242 $ 26,554 $ (7,312) (28 %)
Service revenue 9,682 6,229 3,453 55 % 20,114 11,324 $ 8,790 78 %
Total revenue $ 19,150 $ 19,250 $ (100) (1) % $ 39,356 $ 37,878 $ 1,478 4 %

Product revenue decreased by $3.6 million, or 27%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The decrease was primarily due to lower platform and system sales of $4.5 million, including sales-type lease arrangements, partially offset by an increase of $0.9 million in consumable sales driven by a higher installed platform base and an increase of $0.1 million in subscription arrangements and related revenue. During the three months ended June 30, 2022 we placed five platforms, compared to seven platforms placed during the three months ended June 30, 2021.

Service revenue increased by $3.5 million, or 55%, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase was primarily driven by higher revenue associated with strategic partnerships and services agreements of $2.9 million, due to work performed on agreements signed in the second half of 2021, as well as an increase in service warranty and application support agreements of $0.6 million, which resulted from a higher installed platform base.

Product revenue decreased by $7.3 million, or 28%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The decrease was primarily due to lower platform and system sales of $8.3 million, including sales-type lease arrangements, partially offset by an increase of $0.8 million in consumable sales due to a higher installed platform base and an increase of $0.2 million in subscription arrangements and related revenue. During the six months ended June 30, 2022 we placed nine platforms, compared to seventeen platforms placed during the six months ended June 30, 2021.

Service revenue increased by $8.8 million, or 78%, for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. The increase was primarily driven by higher revenue associated with strategic partnerships and services agreements of $7.1 million as well as an increase in service warranty and application support agreements of $1.7 million, which resulted from a higher installed platform base.

~~Cost of sales, gross profit and gross margin~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Product cost of sales $ 2,614 $ 3,332 $ (718) (22 %) $ 5,309 $ 7,035 $ (1,726) (25 %)
Service cost of sales 3,610 3,190 420 13 % 7,294 5,664 1,630 29 %
Total cost of sales $ 6,224 $ 6,522 $ (298) (5 %) $ 12,603 $ 12,699 $ (96) (1 %)
Gross profit $12,926 $12,728 $ 198 2 % $ 26,753 $ 25,179 $ 1,574 6 %
Gross margin 67 % 66 % 68 % 66 %

Product cost of sales for the three months ended June 30, 2022 decreased by $0.7 million, or 22%, compared to the three months ended June 30, 2021 and was due to the decline in product revenue and the favorable impact of settlements and adjustments to our warranty liabilities.

~~Service cost of sales~~ ~~increased~~ ~~by $0.4 million, or~~ ~~13%, by during the three months ended June 30, 2022, compared to the three months ended June 30, 2021 due to increased costs for our strategic partnerships and services agreements.~~

Product cost of sales for the six months ended June 30, 2022 decreased by $1.7 million, or 25%, compared to the six months ended June 30. 2022. The decrease was primarily driven by lower revenue from our platform and system sales, including sales-type lease arrangements and the favorable impact of settlements and adjustments to our warranty liabilities.

~~Service cost of sales for the six months ended June 30, 2022 increased by $1.6 million, or~~ ~~29%~~, compared to the six months ended June 30, 2021 primarily as a result of higher costs associated with our extended warranty plans and increased costs associated with our strategic partnerships and services agreements.

~~Gross profit increased by $0.2 million, or~~ 2%~~, during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. Gross margin increased to~~ ~~67%~~ ~~from~~ ~~66%~~ ~~for the three months ended June 30, 2022, compared to the three months ended June 30, 2021.~~

~~Gross profit increased by $1.6 million, or~~ 6%~~, during the six months ended June 30, 2022, compared to the six months ended June 30, 2021. Gross margin increased to~~ ~~68%~~ ~~from~~ ~~66%~~ ~~for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.~~

Gross profit for both the three months and six months ended June 30, 2022 were positively impacted by the fact that the strategic partnerships and services agreements we entered into in 2021 have a higher margin than our previous strategic partnership and services agreements, of which the largest was our collaboration agreement with Ginkgo Bioworks, Inc.

~~Operating Expenses~~

~~Research and development~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Research and development $ 18,178 $ 13,535 $ 4,643 34 % $ 35,751 $ 26,562 $ 9,189 35 %

Research and development expense increased by $4.6 million, or 34%, and by $9.2 million, or 35%, respectively, for the three and six months ended June 30, 2022, compared to the three and six months ended June, 30, 2021. The increases were primarily due to increased personnel-related expenses, including a $0.7 million and $1.2 million increase in stock-based compensation in each of the periods, respectively, as well as increases in other costs, including testing and qualification materials and other costs related to various projects to develop and improve systems, workflows, consumables and assays.

~~General and administrative~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
General and administrative $ 13,024 $ 11,725 $ 1,299 11 % $ 24,740 $ 20,692 $ 4,048 20 %

~~General and administrative expense increased by $1.3 million, or~~ ~~11%, and by $4.0 million, or~~ ~~20%~~, respectively, for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021. The increases were primarily due to increased personnel-related expenses, including an increase (decrease) in stock-based compensation expense of ($0.2 million) and $0.7 million for the three and six months ended June 30, 2022, respectively, and increased costs to improve our information processes and other infrastructure required for a public company, partially offset by a decrease in outside legal fees related to patent litigation.

~~Sales and marketing~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Sales and marketing $ 7,271 $ 5,317 $ 1,954 37 % $ 13,082 $ 10,923 $ 2,159 20 %

Sales and marketing expense increased by $2.0 million, or 37%, and by $2.2 million, or 20%, respectively, for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021. The increase was primarily due to increased personnel-related expenses, including an increase (decrease) in stock-based compensation expense of $0.4 million and ($0.1 million) for the three and six months ended June 30, 2022, respectively, and also due to an overall increase in marketing, advertising and other sales costs.

~~Interest expense~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Interest expense $ 227 $ 356 $ (129) (36 %) $ 451 $ 710 $ (259) (36 %)

Interest expense decreased by $0.1 million, or 36%, and $0.3 million, or 36%, respectively, for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021, as a result of refinancing our loan from East West Bank, which now carries a lower interest rate.

~~Interest income~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Interest income $ 53 $ 43 $ 10 23 % $ 87 $ 109 $ (22) (20 %)

Interest income was flat for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021. We generate interest income through our cash and short-term deposits, and also through short-term available-for-sale marketable securities, which we invested during the latter part of the second quarter of 2022.

~~Other income (expense), net~~

Three months ended June 30, Three month change Six months ended June 30, Six month change
(in thousands, except percentages) 2022 2021 Amount % 2022 2021 Amount %
Other income (expense), net $ (22) $ 34 $ (56) (165 %) $ 35 $ 53 $ (18) (34 %)

~~Other income for the three and six months ended June 30, 2022 and 2021 was mainly comprised of foreign exchange gains and losses and other miscellaneous income and expense items.~~

Liquidity and capital resources

As of ~~June 30, 2022,~~March 31, 2023, we had approximately ~~$152.4~~$51.6 million in cash, ~~and~~ cash equivalents and marketable securities which were primarily held in U.S. short-term bank deposit accounts and ~~other investment grade short-term available-for-sale debt securities.~~money market funds. Restricted cash of $70.1 million at ~~December~~March 31, ~~2021~~2023 relates to a letter of ~~$0.3 million served as collateral for our corporate~~ credit ~~card program. This amount is no longer restricted as of June 30, 2022.~~ with an international customer. We have generated negative cash flows from operations since inception through ~~June 30, 2022.~~March 31, 2023.

We expect to incur additional operating losses in the foreseeable future as we continue to invest in the research and development of our product offerings, commercialize and launch platforms, and expand into new markets. Our future capital requirements will depend on many factors including our revenue growth rate, research and development efforts, the timing and extent of additional capital expenditures to invest in existing and new facilities as well as our manufacturing operations, the expansion of sales and marketing and the introduction of

new products. Our future capital needs may also depend upon factors affecting the ~~impacts of the COVID-19 pandemic.~~macroeconomic environment. We have ~~and may~~implemented measures to reduce our costs to extend our cash runway, including conducting reductions in force.

On March 21, 2023, we completed the IsoPlexis Merger. In the future we may enter into additional arrangements to acquire or invest in businesses, services and technologies, and any such acquisitions or investments could significantly increase our capital needs.

~~Based~~As discussed in Note 1 to our condensed consolidated financial statements, certain factors raise substantial doubt about our ability to continue as a going concern within one year from the issuance of such financial statements. Management’s intent is to implement plans that will allow us to continue as a going concern. We intend to improve operating cash flow by increasing our revenue and lowering our operational costs. New commercial leadership, geographic expansion, and a refined product roadmap are expected to drive revenue growth, and significant cost synergies as a result of the IsoPlexis Merger and are expected to lower operating expenses. Cost synergies are expected to be accomplished by eliminating duplicative costs associated with maintaining the infrastructure needed by public companies, complementary R&D capabilities, marketing resources and sales operations, and manufacturing, supply chain, logistics and operations synergies. In addition, we are evaluating financing options including the potential to raise equity and debt financing. While management is focused on ~~our current business plan,~~these efforts, there can be no assurance that we ~~believe our existing cash and cash equivalents and anticipated cash flows from operations~~ will be ~~sufficient to meet our working capital and capital expenditure needs over at least the next 12 months.~~successful in doing so.

Sources of liquidity

Since our inception, we have financed our operations primarily from the issuance and sale of our equity securities, borrowings under long-term debt agreements, and to a lesser extent, cash generated by product and service sales. In July 2020, we completed our IPO, resulting in the receipt of aggregate proceeds of $187.9 million, net of offering costs, underwriter discounts and commissions of $17.0 million.

East West Bank Loan and Security Agreement

On May 23, 2018, we entered into a Loan and Security Agreement (“Loan Agreement”) with East West Bank (“EWB”) ~~providing us the ability~~ to ~~borrow up to~~ ~~$20.0 million.~~provide a $20.0 million term loan facility (“Term Loan”). The loan facility was fully drawn as of May 23, 2018.

On June 30, 2021, we entered into an Amended and Restated Loan and Security Agreement ~~(the “Agreement”~~(“Amended Loan Agreement”) with EWB. Pursuant to the Amended Loan Agreement, EWB provided a ~~$20.0~~$20.0 million term loan ~~(the “Term~~(“Amended Term Loan”) which was used to refinance the ~~term loan~~Term Loan outstanding under the Loan ~~and Security~~ Agreement dated May 23, 2018. The Amended Term Loan ~~matures~~had a maturity of 48 months and a fixed interest rate of 4.17%. In addition, the Amended Term Loan had an initial interest-only period of 24 months, which could have been extended up to two times, each by an additional six months, if certain EBITDA tests as set forth in 48the Amended Loan Agreement are satisfied.

On March 21, 2023, we entered into a Second Amended and Restated Loan and Security Agreement (“Second Amended Loan Agreement”) with EWB. Pursuant to the Second Amended Loan Agreement, EWB increased the existing Amended Term Loan amount of $20.0 million by $50.0 million to an aggregate outstanding principal of $70.0 million (“Second Amended Term Loan”). We used the proceeds from the Second Amended Term Loan to repay $52.5 million of indebtedness (including prepayment premium and interest) with Perceptive held by IsoPlexis (“Perceptive Credit Agreement”). Associated with these transactions, a $0.9 million loss on extinguishment of debt was recorded in Other expense, net on our condensed consolidated statement of operations during the three months ended March 31, 2023.

The Second Amended Term Loan has a maturity of 60 months and bears interest at a ~~fixed~~variable rate per annum equal to (i) the greater of 6.25% or the variable rate of ~~4.17%~~interest, per annum, most recently announced by EWB as its prime rate, plus (ii) one-half of one percent (0.5%). ~~The~~ In addition, the Second Amended Term Loan has an initial interest-only period of 24 months, which can be extended to up to 36two times, each by an additional six months, ~~based on~~if certain EBITDA tests as set forth in the ~~achievement~~Second Amended Loan Agreement are satisfied. The Second Amended Term loan carries a prepayment penalty equal to one percent (1%) of ~~certain liquidity measures,~~the amount of any prepayment of the outstanding balance, if the prepayment is made before the first anniversary of the loan closing date. The Second Amended Loan Agreement was accounted for as a debt extinguishment and ~~can be pre-paid without penalty at any time.~~we capitalized incremental debt issuance costs.

The Second Amended Term Loan is guaranteed by certain of our domestic subsidiaries (such subsidiaries, together with the Company, the “Credit Parties”). The Second Amended Loan Agreement grants EWB a security interest in and liens on substantially all assets of ~~our assets,~~the Company and the other Credit Parties, excluding intellectual property, ~~which is subject~~provided, that if we do not satisfy a liquidity test set forth in Second Amended Loan Agreement, the Credit Parties will be required to grant a ~~double negative pledge.~~first-priority security interest in their intellectual property. In addition, certain other terms of the original agreements as previously in effect were amended by the Second Amended Loan Agreement, including certain financial covenants. ~~The Amended~~For example, we must maintain cash and ~~Restated Loan~~cash equivalents of no less than $70.0 million in the aggregate at all times in a deposit account with EWB that is assigned to EWB, which was recorded as restricted cash on the condensed consolidated balance sheets. As a result, the deposit of $70.0 million was recorded as restricted cash on our condensed consolidated balance sheet. In addition, if our cash and ~~Security Agreement was accounted for as a debt modification and~~cash equivalents balance at EWB falls below $100.0 million, we ~~capitalized incremental debt issuance costs.~~are then required to maintain specific minimum EBITDA amounts at all times thereafter.

~~Furthermore, the~~The Second Amended Loan Agreement ~~also provided the Company with a new $10.0 million revolving credit line (the “Revolving Line”), which bears interest~~contains customary affirmative and negative covenants, including limitations on ~~the outstanding daily balance thereof~~mergers, asset sales, liens, investments, and indebtedness. As of ~~0.70% above the Prime Rate (as defined in the Agreement). No amount was outstanding under the Revolving Line as at June 30, 2022.~~

WeMarch 31, 2023, we were in compliance with ~~all covenants under~~ the ~~Agreement as of June 30, 2022.~~Second Amended Loan Agreement.

Cash flows

The following table summarizes our cash flows for the periods presented:

Six months ended June 30,
(in thousands) 2022 2021
Net cash (used in) provided by:
Operating activities $ (20,588) $ (24,095)
Investing activities (16,130) (4,382)
Financing activities 1,376 10,146
Net decrease in cash and cash equivalents and restricted cash $ (35,342) $ (18,331)


	Three months ended March 31,
(in thousands)	2023		2022
Net cash (used in) provided by:
Operating activities	$	(19,553)	$	(10,069)
Investing activities	5,735		(4,375)
Financing activities	48,995		1,022
Net increase (decrease) in cash, cash equivalents and restricted cash	$	35,177	$	(13,422)

Operating activities

Net cash used in operating activities of ~~$20.6~~$19.6 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was attributable to a net loss of ~~$47.2~~$23.4 million and a net cash outflow of $5.5 million from changes in our operating assets and liabilities. These were partially offset by non-cash adjustments of ~~$18.7~~$9.3 million, mainly consisting of stock-based compensation, equity awards issued for bonuses and depreciation and amortization expense.

Net cash used in operating activities of $10.1 million for the three months ended March 31, 2022 was primarily due to a net loss of $21.4 million, partially offset by non-cash adjustments of $8.1 million, mainly consisting of stock-based compensation and depreciation expense and a net cash inflow from changes in our operating assets and liabilities of ~~$7.8~~$3.2 million, primarily due to a decrease in our accounts receivable.

Net cash used in operating activities of $24.1 million for the six months ended June 30, 2021 was attributable to a net loss of $33.6 million and cash outflows from changes in our net operating assets and liabilities of $4.7 million, partially offset by $14.2 million of non-cash charges, primarily related to stock-based compensation and depreciation and amortization. Cash outflow from our net operating assets and liabilities was primarily due to an increase in inventories resulting from an increase in raw materials and finished goods, an increase in accounts receivable due to an increase in revenue and the timing of invoicing, partially offset by an increase in deferred revenue and accounts payable due to the timing of advanced billings and revenue recognition as well as the timing of vendor invoicing and related payments.

Investing activities

Net cash ~~used in~~provided by investing activities ~~was $16.1~~of $5.7 million during the ~~six~~three months ended ~~June 30, 2022, compared to $4.4 million during the six months ended June 30, 2021. The increase~~March 31, 2023 was primarily ~~driven by~~attributable to the ~~purchase~~net sale of ~~$9.4~~$46.7 million of available-for-sale marketable securities during the ~~second~~ quarter, partially offset by $40.3 million in cash paid for the IsoPlexis Merger (net of cash acquired in the acquisition).

Net cash used in investing activities was $4.4 million during the three months ended March 31, 2022 and ~~$6.8 million of purchases~~was entirely attributable to the purchase of property, plant and equipment. Capital expenditures for the first ~~six months~~quarter of 2022 ~~include~~included the expansion of our BioFoundry ~~laboratory~~ operations to support current and planned programs as well as leasehold improvements related to our ~~new~~ offices in Boston, Massachusetts.

Net cash used in investing activities was $4.4 million for the six months ended June 30, 2021 and related to capital expenditures for the expansion of our BioFoundry laboratory. Capital expenditures for the six months ended June 30, 2021, exclude a $3.8 million non-cash transfer of Beacons that were purchased into inventory and later transferred to property and equipment. As a result of the growth of our BioFoundry operations, including growth in the number of Beacons used to fulfill strategic partnerships and services agreements, beginning in the third quarter of 2021, Beacons that at inception are planned to be used in our BioFoundry operations are categorized as “Purchase of property and equipment.”

Financing activities

Net cash provided by financing activities was ~~$1.4~~$49.0 million during the ~~six~~three months ended ~~June 30, 2022, compared~~March 31, 2023 and was primarily related to ~~$10.1~~$48.8 million ~~for~~in proceeds from the ~~six months ended June 30, 2021.~~ issuance of long-term debt, net of issuance costs as a result of refinancing our term loan with EWB.

Net cash provided by financing activities was $1.0 million during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and ~~2021~~ primarily related to proceeds received from the issuance of common stock upon the exercise of stock options as well as proceeds received related to the issuance of common stock under our employee stock purchase plan.

Concentration of credit risk

Most of ~~the Company’s~~our customers are located in the United States and Asia Pacific. For the three months ended ~~June 30, 2022,~~March 31, 2023 and, three customers accounted for ~~20%~~39%, ~~11%, and~~ 10% ~~of revenue. For the six months ended June 30. 2022, three customers accounted for 16%, 11%~~ and 10% of revenue. For the three months ended ~~June 30, 2021,~~March 31, 2022, three customers accounted for ~~27%,~~ 18%, ~~and 11% of revenue. For the six months ended June 30, 2021, three customers accounted for 14%~~13%, ~~11%~~ and 10% of revenue.

As of ~~June 30, 2022,~~March 31, 2023, three customers comprised ~~27%~~25%, ~~12%,~~14% and ~~11%~~12% of accounts receivable. As of December 31, ~~2021, three~~2022, two customers accounted for ~~15%, 11%~~24% and 11% of accounts receivable.

Contractual obligations and commitments

~~There have been no material changes~~The following table summarizes our commitments to ~~our~~settle contractual obligations as of March 31, 2023:


	Payments due by period
(in thousands)	Total		Less than 1 year		1 - 3 years		3 -5 years		More than 5 years
Debt obligations, including interest (1)	$	96,233	$	4,545	$	19,729	$	71,959	$	—
Lease commitments (2)	34,561		4,691		12,249		10,157		7,464
Purchase Obligations (3)	29,736		21,660		8,076		—		—
Total	$	160,530	$	30,896	$	40,054	$	82,116	$	7,464

(1)As of March 31, 2023, the outstanding balance of our term loan under the EWB Loan Agreement was $70.0 million. Borrowings under the term loan mature on June 30, ~~2022,~~2025 and accrue interest at a variable rate per annum equal to the Prime Rate plus one-half of one percent (0.5%).

(2)Represents commitments under our non-cancelable office and facility leases.

(3)Purchase obligations relate primarily to our contract manufacturer which manufactures our Optofluidic instruments and makes advance purchases of components based on our sales forecasts and the placement of property by us, as ~~compared~~well as the commitments made to ~~those disclosed in~~certain providers of components of our consumable manufacturing. To the ~~Annual Report~~extent components are purchased by the contract manufacturer on ~~Form 10-K for~~our behalf and cannot be used by the ~~year ended December 31, 2021.~~contract manufacturer’s other customers, we are obligated to purchase such components.

Off-balance sheet arrangements

We do not have, and did not have during the periods presented, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical accounting policies and estimates

We have prepared our condensed consolidated financial statements in accordance with United States generally accepted accounting principles. Our preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Annual Report on Form 10-K, ~~for the year ended December 31, 2021 filed~~ with the ~~SEC on February 28, 2022, with~~exception of the following ~~exceptions.~~critical accounting policies and estimates related to the IsoPlexis Merger.

~~Stock-Based Compensation~~Goodwill and Intangible Assets

~~We maintain an incentive compensation plan under which stock options and restricted stock units (“RSU”) are granted to employees and non-employee consultants.~~

~~Stock-based compensation expense is based on~~Goodwill represents the ~~grant date~~excess of the consideration transferred over the estimated fair value of ~~the award. We determine the~~assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair ~~value of RSUs based on the closing value of our stock price listed on the Nasdaq at the date~~values as of the ~~grant.~~

~~We estimate~~Acquisition Date and may be subject to adjustment within the ~~fair value of the majority of stock option awards on the grant date using the Black-Scholes option-pricing model. For option awards that include a goal tied~~measurement period, which may be up to ~~the Company share price (i.e. a market condition) we use a Monte Carlo simulation to estimate the fair value.~~

The fair value of stock options and RSUs with only a service condition is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they occur.

For performance stock options and awards not initially assessed as probable of achievement, we record a cumulative adjustment to compensation expense in the period we change our determination that a performance condition becomes probable of being achieved. We cease recognition of compensation expense in any periodsone

3742

~~where~~year from the Acquisition Date. We do not amortize goodwill and intangible assets with indefinite useful lives. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in our stock price or market capitalization. During the three months ended March 31, 2023, we ~~determine the attainment~~experienced a decline in our market capitalization as a result of a ~~performance condition is no longer probable.~~sustained decrease in our stock price. Although we only recently acquired goodwill, as we operate as a single reporting unit, this sustained decrease was considered to represent a triggering event requiring management to perform a quantitative goodwill impairment test as of March 31, 2023. Refer to Note 8, Goodwill and Other Intangible Assets, for further information.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances indicate that the carrying value of an asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the ~~performance goals are~~asset or asset group is determined to be ~~improbable,~~impaired, any ~~previously recognized compensation expense is reversed.~~

~~The~~excess of the carrying value of the asset or asset group over its estimated fair value ~~of stock options with a market condition~~ is recognized ~~over the requisite service period for each tranche of the award and is recognized regardless of whether (or to what extent) the market condition is ultimately achieved.~~as an impairment loss.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

~~Interest rate risk~~

~~Customer financing exposure.~~ ~~We are indirectly exposed~~Not applicable to ~~interest rate risk because many~~a “smaller reporting company” as defined in Rule 12b-2 of ~~our customers depend on debt financings to purchase our platforms and systems. An increase in interest rates could make it challenging for our customers to obtain~~ the capital necessary to make such purchases on favorable terms, or at all. Such factors could reduce demand or lower the price we can charge for our platforms and systems, thereby reducing our net sales and gross profit.

~~Bank deposit, money market and marketable securities exposure.~~ As of June 30, 2022, we had cash and cash equivalents and available-for-sale marketable debt securities, of $152.4 million, which consisted primarily of money market funds, bank deposits and debt instruments of high quality corporate issuers and the U.S. government. The primary objective of our investments is to facilitating liquidity and capital preservation. None of our investments are held for trading purposes. These short-term investments generate interest income at rates typically between 1% and 3%. A hypothetical 100 basis point decrease in interest rates would have no material effect on our interest income and financial results.

~~Foreign currency risk~~

Through June 30, 2022, we did not generate any revenue denominated in foreign currencies. While we incur certain expenses in foreign currencies, especially related to our foreign offices, the impact of changes in exchange rates has been immaterial as of June 30, 2022 for these expenses. As we expand our presence in international markets, to the extent we are required to enter into agreements denominated in a currency other than the U.S. dollar, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.Exchange Act.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our ~~principal executive officer~~Principal Executive Officer and ~~principal financial officer,~~Principal Financial Officer, of the effectiveness of our “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~(the “Exchange~~(“Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that as of ~~June 30, 2022~~March 31, 2023 our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

~~We also carried out an evaluation, under~~On March 21, 2023, we completed the ~~supervision~~IsoPlexis Merger. This resulted in us implementing new processes and internal controls to assist us in the preparation and disclosure of financial information associated with the ~~participation~~transaction. Given the magnitude of ~~management, including~~the IsoPlexis Merger and the complexity of the applicable systems and business processes, we have excluded IsoPlexis from our ~~principal executive officer~~assessment and ~~principal financial officer, of our “internal control over financial reporting” to determine whether any changes in our~~report on internal control over financial reporting ~~occurred~~(as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act), during the three months ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there were no such changes in our internal control over financial reporting that occurred during the three months ended June 30, 2022.most recently completed fiscal quarter.

Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any system of controls must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

3944

Part II. OTHER INFORMATION.

Item 1. Legal Proceedings.

See Note ~~14, “Commitments and Contingencies” under the heading “Legal Proceedings” in the Notes~~17 to ~~the Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q~~our condensed consolidated financial statements for legal proceedings and related matters.

Item 1A. Risk Factors.

Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in our Annual Report ~~and below in this Quarterly Report:~~

~~Our revenue under our customer sales engagements, program and service agreements and strategic partnerships and services for any particular period can be difficult to forecast.~~

~~Because of~~on Form 10-K filed with the ~~complexities and long sales cycles inherent~~SEC on February 23, 2023. The risks described in our ~~business, including, in particular, certain customer feasibility study agreements~~Form 10-K and collaboration and development agreements, it is difficult to predict the timing of a customer’s purchase of our system and of the performance and completion of milestones under our customer and collaboration agreements. As a result, our revenue for any particular period can be difficult to forecast, especially in light of the challenging and inconsistent global macroeconomic environment and related market uncertainty. Our revenue may grow at a slower rate than in past periods or even decline on a year-over-year basis. For example, under our collaboration agreement with Ginkgo Bioworks, or Ginkgo, the agreement provides that we are eligible to receive certain minimum annual payments from Ginkgo for purchases and services, as well as milestone payments upon the achievement of certain development and regulatory milestones resulting from the use of certain of our proprietary workflows. However, we are unable to predict with precision whether and the extent to which Ginkgo will exceed the minimum annual payments under our agreement, or the timing of the achievement of any milestones under the agreement, if achieved at all, even though we maintain discussions on such matters. In some cases, the timing and likelihood of payments to us under these agreements is dependent on our customers’ successful utilization of our products and workflows, which is outside of our control. In the near term, we expect revenue from our strategic partnerships and services engagements to decline; more generally, our operating results could vary materially from quarter to quarter from our forecasts due to the foregoing uncertainties.

~~The risk factors included in our Annual Report and in~~ this ~~Quarterly~~ Report are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.

~~Except~~Our negative cash flows and current lack of financial resources raise substantial doubt as ~~provided above, there~~to our ability to continue as a going concern. If we are unable to raise additional funding to meet our operational needs, we may be forced to limit or cease our operations and/or liquidate our assets.

Although our unaudited consolidated interim financial statements have been prepared assuming our company will continue as a going concern, our negative cash flows and current lack of financial resources raise substantial doubt as to our ability to satisfy our obligations as they become due within one year from the date of filing of this Quarterly Report on Form 10-Q. For the three months ended March 31, 2023, we had a consolidated net loss of $23.4 million and had an accumulated deficit of $385.1 million as of March 31, 2023. Cash, cash equivalents and marketable securities were $51.6 million as of March 31, 2023. We expect to incur additional operating losses in the foreseeable future as we continue to invest in the research and development of our product offerings, commercialize and launch platforms, and expand into new markets. Although we intend to improve operating cash flow by increasing our revenue and lowering our operational costs, we may not succeed in driving revenue growth, including through new commercial leadership, geographic expansion or a refined product roadmap, or in lowering operating expenses, including through the cost synergies expected as a result of the IsoPlexis Merger by eliminating duplicative costs associated with maintaining the infrastructure needed by public companies, complementary R&D capabilities, marketing resources and sales operations, and manufacturing, supply chain, logistics and operations synergies. If at any time in the future we are unable to continue as a going concern, we may be forced to seek protection from our creditors through bankruptcy proceedings, discontinue operations, and liquidate our assets, and we may receive less than the value at which those assets are carried on our unaudited interim financial statements. Any of these outcomes could cause our stockholders to lose some or all of their investment.

Even if we are able to raise significant additional capital necessary to continue our operations over the next year, if we are unable to obtain additional adequate financing on terms satisfactory to us, or at all, when we require it, our ability to continue to pursue our business objectives, develop our technology and products, and respond to business opportunities, challenges, unforeseen circumstances or developments could be significantly limited, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

The failure to successfully integrate the businesses and operations of Berkeley Lights and IsoPlexis in the expected time frame may adversely affect the combined company’s future results.

On March 21, 2023, we completed the IsoPlexis Merger, and the newly combined company was renamed PhenomeX. The future success of the IsoPlexis Merger, including its anticipated benefits, depends, in part, on our ability to optimize our combined operations, which is a complex, costly and time-consuming process. There can be no ~~material changes~~assurances that the businesses can be integrated successfully. It is possible that the integration process could

result in the loss of key employees, the loss of customers, the disruption of ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Berkeley Lights and IsoPlexis in order to realize the anticipated benefits of the merger so the combined company performs as expected:

•combining the companies’ operations and corporate functions;

•combining the companies’ businesses and meeting the capital requirements of the combined company, in a manner that permits the combined company to achieve any cost savings or other synergies anticipated to result from the merger, the failure of which would result in the anticipated benefits of the merger not being realized in the time frame currently anticipated or at all;

•integrating personnel from the two companies;

•integrating the companies’ technologies;

•integrating and unifying the offerings and services available to customers;

•identifying and eliminating redundant and underperforming functions and assets;

•harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

•maintaining existing agreements with customers, suppliers, distributors and vendors and avoiding delays in entering into new agreements with prospective customers, suppliers, distributors and vendors;

•addressing possible differences in business backgrounds, corporate cultures and management philosophies;

•consolidating the companies’ administrative and information technology infrastructure;

•coordinating distribution and marketing efforts;

•managing the movement of certain positions to different locations;

•coordinating geographically dispersed organizations; and

•effecting actions that may be required in connection with obtaining regulatory approvals.

In addition, at times the attention of certain members of management and resources may be focused on the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to us, which may disrupt the business of the combined company.

If our goodwill or intangible assets become impaired, we may be required to record a significant charges against earnings.

We have recorded goodwill related to the ~~risk factors set forth~~closing of the IsoPlexis Merger, and a significant portion of the purchase price of any companies we acquire in the ~~Annual Report.~~future may be allocated to acquired goodwill and other intangible assets. Under accounting principles generally accepted in the United States, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value of our goodwill and other intangible assets may not be recoverable. Goodwill is required to be tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in our stock price or market capitalization. If our acquisitions do not yield expected returns, our stock price declines or any other adverse change in market conditions occurs, a change to the estimation of fair value could result.

For example, during the three months ended March 31, 2023, we experienced a decline in our market capitalization as a result of a sustained decrease in our stock price. Although we only recently acquired goodwill, as we operate as a single reporting unit, this sustained decrease was considered to represent a triggering event requiring management to perform a quantitative goodwill impairment test as of March 31, 2023. While we ultimately did not record a goodwill impairment charge during the three months ended March 31, 2023, any further adverse changes in our business environment, stock price, market capitalization and future cash flow projections could result in additional impairment charges to our intangible assets or goodwill, particularly if such change impacts any of our critical assumptions or estimates, and may have a negative impact on our financial position and operating results.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Events or factors such as a severe or prolonged economic downturn, or additional global financial crises, whether related to the ongoing COVID-19 pandemic or not, or macroeconomic issues caused by events such as the Russia-Ukraine conflict, inflation, rising interest rates, availability of capital markets, concerns about the stability and liquidity of certain financial institutions, energy availability and costs or governmental initiatives to manage economic conditions, could result in a variety of risks to our business, including weakened demand for our platforms and our workflows, systems and instruments, or our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption.

Adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the U.S. Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, other institutions have been and may continue to be swept into receivership. Given that our balance in our deposit account with SVB does not exceed the FDIC-insured limit of $250,000, we have not yet experienced an adverse impact to our liquidity or to our business operations, financial condition, or results of operations as a result of these recent events. However, there is no guarantee that the federal government would guarantee all depositors as they did with SVB depositors in the event of further bank closures. Uncertainty may remain over liquidity concerns in the broader financial services industry, and there may be unpredictable impacts to our business and our industry.

We cannot predict changes in worldwide or regional economic conditions and government policies, as such conditions are highly volatile and beyond our control. If these conditions deteriorate for extended periods, however, our business, results of operations and financial condition could be materially adversely affected.

Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay employees, key vendors and others. For example, on March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver, which resulted in all funds held at SVB being temporarily inaccessible by SVB’s customers. If other banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds, may be threatened and could have a material adverse

effect on our business and financial condition. In addition, in such circumstances we might not be able to timely pay employees, key vendors and others. We regularly maintain cash balances that are not insured or are in excess of the FDIC’s current insurance limit. For example, the Second Amended Loan Agreement with EWB requires us to maintain $70.0 million of cash in a deposit account with EWB that is assigned to EWB. Any delay in our ability to access our cash, cash equivalents and investments (or the loss of some or all of such funds) or to timely pay employees, key vendors and others could have a material adverse effect on our operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Sale of Unregistered Securities

There were no unregistered sales of the Company's equity securities during the three months ended ~~June 30, 2022.~~

~~Use of Proceeds from our IPO~~

On July 21, 2020, we closed our IPO, in which we issued and sold 9,315,000 shares of our common stock, including the full exercise of the underwriters’ over-allotment option, at a public offering price of $22.00 per share for aggregate offering proceeds of $204.9 million. All of the shares of common stock issued and sold in the

~~offering were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File No. 333-239487), which was declared effective by the SEC on July 16, 2020.~~

Cash used since the IPO is described elsewhere in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our periodic reports filed with the SEC. As of the date of this filing, there has been no material change in the planned use of proceeds from our IPO as described in the final prospectus for our IPO dated July 16, 2020 filed with the SEC on July 17, 2020.March 31, 2023.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

4149

Item 6. Exhibits.

The following exhibits are filed with this Quarterly Report on Form 10-Q:

Incorporated by Reference
Exhibit Number Exhibit Title Form File No. Exhibit Filing Date Filed Herewith
3.1
Amended and Restated Certificate of Incorporation of Berkeley Lights, Inc.
8-K 001-39388 3.1 7/21/2020
3.2
Amended and Restated Bylaws of Berkeley Lights, Inc.
8-K 001-39388 3.2 7/21/2020
10.5
Employment Offer Letter by and between Berkeley Lights , Inc. and Mehul Joshi
X
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1*
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2*
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS XBRL Instance Document. X
101.SCH XBRL Taxonomy Extension Schema Document. X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101 X

Incorporated by Reference

Exhibit Number

Exhibit Title

Form

File No.

Exhibit

Filing Date

Filed Herewith

3.1

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Berkeley Lights, Inc.

8-K

001-39388

3.1

3/21/2023

3.2

Amended and Restated Bylaws of PhenomeX Inc.

8-K

001-39388

3.2

3/21/2023

4.1

Warrant Certificate, dated as of March 21, 2023, by and between PhenomeX Inc., IsoPlexis Corporation and Perceptive Credit Holdings III, LP.

8-K

001-39388

10.2

3/21/2023

10.1

Second Amended and Restated Loan and Security Agreement, dated March 21, 2023, by and between East West Bank, Berkeley Lights, Inc. and IsoPlexis Corporation

8-K

001-39388

10.1

3/21/2023

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101

*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the

Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filings

4251

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized.

~~Berkeley Lights,~~PhenomeX Inc.


Date: ~~August 9, 2022~~May 15, 2023	By:	/s/ ~~J. Paul McClaskey~~Mehul Joshi
		~~J. Paul McClaskey~~Mehul Joshi Chief ~~Accounting~~Financial Officer (~~Authorized Signatory and Chief Accounting~~Principal Financial Officer)

4352


	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(In thousands, except share data)	Shares	Amount
Balances at March 31, 2022	67,820,115	$	4	$	478,231	$	(285,034)	$	—	$	193,201
Shares issued in connection with:
Exercise of stock options	181,013	—		354		—		—		354
Vesting of restricted stock units	272,804	—		—		—		—		—

Stock-based compensation	—	—		6,627		—		—		6,627
Other comprehensive loss	—	—		—		—		(19)		(19)
Net loss	—	—		—		(25,747)		—		(25,747)
Balances at June 30, 2022	68,273,932	$	4	$	485,212	$	(310,781)	$	(19)	$	174,416


	Three Months Ended June 30, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(In thousands, except share data)	Shares	Amount
Balances at March 31, 2021	66,384,736	$	4	$	449,681	$	(207,319)	$	—	$	242,366
Shares issued in connection with:
Exercise of stock options	644,610	—		1,985		—		—		1,985
Vesting of restricted stock units	14,191	—		—		—		—		—
Stock-based compensation	—	—		5,642		—		—		5,642

Net loss	—	—		—		(18,154)		—		(18,154)
Balances at June 30, 2021	67,043,537	$	4	$	457,308	$	(225,473)	$	—	$	231,839


	As of June 30, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	5,395	$	—	$	(8)	$	5,387
U.S. government securities	3,982		—		(8)		3,974
Total	$	9,377	$	—	$	(16)	$	9,361


	Three and six months ended June 30,
	2022	2021

Options to purchase common stock	7,750,612	7,619,929
Restricted stock units	4,241,025	470,985
Total	11,991,637	8,090,914