SEC Filing - Telesis Bio

View:

dnay-20220331

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 March 31, 2022


¨			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 001-40497

CODEX DNA, INC.

(Exact name of registrant as specified in its charter)


Delaware			45-1216839
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
9535 Waples Street, Suite 100, San Diego, CA			92121-2993
(Address of Principal Executive Offices)			(Zip Code)

(858) 228-4115

Registrant's telephone number, including area code

9535 Waples Street, Suite 100

San Diego, CA 92121-2993

(858) 228-4115

(Former name, former address and former fiscal year, if changed since last report)

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, $0.0001 par value per share	DNAY	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 ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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


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 Act). Yes ☐ No ☒

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

The registrant had outstanding 29,398,463 shares of common stock as of April 20, 2022.

Table of Contents


			Page
Part I - Financial Information
Item 1. Financial Statements (Unaudited)			4
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Operations and Comprehensive Loss			5
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			30
Part II - Other Information
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			64
Item 3. Defaults Upon Senior Securities			65
Item 4. Mine Safety Disclosures			65
Item 5. Other Information			65
Item 6. Exhibits			66
Signatures			67

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal” “intend,” “may,” “objective” “plan,” “predict,” “potential,” “project,” “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. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•estimates of the synthetic biology market, market growth, and new market expansion;

•our future revenue, expenses, capital requirements and our needs for additional financing;

•our expectations regarding the rate and degree of market acceptance of our BioXp system, BioXp kits and benchtop reagents;

•the ability of our products to facilitate the design-build-test paradigm of synthetic biology;

•the size and growth of the synthetic biology market and competitive companies and technologies and our industry;

•our ability to manage and grow our business;

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

•the performance of third-party manufacturers and suppliers and our ability to qualify second-source suppliers;

•the potential effects of government regulation;

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

•our ability to obtain additional financing in future offerings;

•the volatility of the trading price of our common stock;

•the impact of local, regional, and national and international economic conditions and events, including the war between Russia and Ukraine;

•the impact of COVID-19 on our business;

•our expectations about market trends;

•our anticipated use of our existing resources; and

•other risks and uncertainties, including those listed in the section titled “Risk Factors.”

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained herein to reflect events or circumstances after the date of this Quarterly Report, whether as a result of any new information, future events or otherwise.

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, 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 you are cautioned not to unduly rely upon these statements.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Codex DNA, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	March 31, 2022		December 31, 2021
Assets			(See Note 2)
Current assets:
Cash and cash equivalents	$	31,359	$	82,806
Short-term investments	45,408		—
Accounts receivable, net of allowance for bad debts of $13 and $0 at March 31, 2022 and December 31, 2021, respectively	4,561		3,665
Inventory	2,536		2,368
Prepaid expenses and other current assets	4,014		4,345
Total current assets	87,878		93,184
Property and equipment, net	3,968		3,456
Right-of-use assets	2,018		2,281
Long-term deposits	656		609
Goodwill	14,330		14,330
Other intangible assets, net	2,284		2,397
Total Assets	$	111,134	$	116,257
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,853	$	2,499
Accrued employee expenses	2,798		3,849
Finance lease liability, current portion	60		81
Operating lease liability, current portion	880		1,156
Deferred revenue, current portion	4,072		205
Other accrued liabilities	1,637		1,005
Notes payable, current portion	2,382		603
Other current liabilities	341		335
Total current liabilities	16,023		9,733
Operating lease liability, net of current portion	1,322		1,394
Notes payable, net of discount and current portion	12,405		14,088
Derivative liabilities	85		108
Deferred revenue, net of current portion	3,199		150
Total liabilities	$	33,034	$	25,473
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock, $.0001 par value; 100,000,000 shares authorized at March 31, 2022 and December 31, 2021; 29,389,112 and 29,318,578 shares issued and outstanding at March 31, 2022 and December 31, 2021,respectively	5		5
Additional paid-in capital	156,575		156,049
Accumulated other comprehensive loss	(16)		—
Accumulated deficit	(78,464)		(65,270)
Total stockholders' equity	78,100		90,784
Total liabilities and stockholders' equity	$	111,134	$	116,257

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

Table of Contents

Codex DNA, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Revenue:
Product sales	$	4,128	$	1,799
Royalties and other revenue	1,508		528
Total revenue	5,636		2,327
Cost of revenue	2,858		1,025
Gross profit	2,778		1,302
Operating expenses:
Research and development	6,381		2,878
Sales and marketing	3,461		2,275
General and administrative	5,799		2,413
Total operating expenses	15,641		7,566
Loss from operations	(12,863)		(6,264)
Other income (expense), net:
Interest expense, net	(336)		(241)
Change in fair value of derivative liabilities	23		(296)
Loss on extinguishment of debt	—		(618)
Other expense, net	(12)		(19)
Total other expense, net	(325)		(1,174)
Loss before provision for income taxes	(13,188)		(7,438)
Provision for income taxes	(6)		(4)
Net loss	(13,194)		(7,442)
Other comprehensive loss:
Unrealized loss on available-for-sale short-term investments	(16)		—
Total comprehensive loss	$	(13,210)	$	(7,442)
Net loss attributable to common stockholders	$	(13,194)	$	(7,442)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.45)	$	(1.43)
Weighted average common stock outstanding—basic and diluted	29,331,325		5,193,098

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

Table of Contents

Codex DNA, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share data)

(Unaudited)


	Convertible Preferred Stock			Common Stock			Additional Paid-In Capital			Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balances at December 31, 2020	15,079,329	$	38,914	5,023,957	$	2	$	851		$	(26,312)	—		$	(25,459)
Issuance of Common Stock upon exercise of stock options	—	—		223,216	—		133			—		—		133
Stock-based compensation expense	—	—		—	—		67			—		—		67
Net loss	—	—		—	—		—			(7,442)		—		(7,442)
Balances at March 31, 2021	15,079,329	$	38,914	5,247,173	$	2	$	1,051		$	(33,754)	$	—	$	(32,701)

Balances at December 31, 2021	—	$	—	29,318,578	$	5	$	156,049		$	(65,270)	$	—	$	90,784
Issuance of Common Stock upon exercise of stock options	—	—		70,534	—		78			—		—		78
Stock-based compensation expense	—	—		—	—		448			—		—		448
Unrealized loss on available- for-sale short-term investments	—	—		—	—		—			—		(16)		(16)
Net loss	—	—		—	—		—			(13,194)		—		(13,194)
Balances at March 31, 2022	—	$	—	29,389,112	$	5	$	156,575	—	$	(78,464)	$	(16)	$	78,100

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

Table of Contents

Codex DNA, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash Flows From Operating Activities:
Net loss	$	(13,194)	$	(7,442)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	217		90
Amortization of intangible assets	113		113
Amortization of debt discount	95		161
Loss on debt extinguishment	—		618
Stock-based compensation	448		67
Amortization of operating lease right-of-use assets	263		156
Change in fair value of derivative liabilities	(23)		296
Non-cash interest on finance leases	(1)		(3)
Changes in assets and liabilities:
Accounts receivable	(896)		550
Inventories	(168)		(122)
Deposits, prepaid expenses and other current assets	284		(772)
Accounts payable, accrued payroll and accrued liabilities	673		1,330
Deferred revenue	6,915		4
Operating lease liabilities	(348)		(163)
Net cash used in operating activities	(5,622)		(5,117)
Cash Flows From Investing Activities:
Purchase of property and equipment	(459)		(99)
Purchases of short-term investments	(45,424)		—
Net cash used in investing activities	(45,883)		(99)
Cash Flows From Financing Activities:
Borrowings on term loan	—		14,872
Repayment of term loan	—		(5,000)
Debt extinguishment costs	—		(391)
Payments on finance leases	(20)		(27)
Proceeds from the exercise of common stock options	78		133
Net cash provided by financing activities	58		9,587
Net (Decrease) Increase In Cash and Cash Equivalents	(51,447)		4,371
Cash and cash equivalents at beginning of period	82,806		13,463
Cash and cash equivalents at end of period	$	31,359	$	17,834

Supplemental Disclosure Of Cash Flow Information:
Cash paid for interest	$	273	$	163
Purchases of property and equipment included in accounts payable	$	269	$	23
Issuance of preferred stock warrant in connection with term loan	$	—	$	322
Extinguishment of put option derivative liability in connection with term loan	$	—	$	(51)
Issuance of put option derivative liability in connection with term loan	$	—	$	303

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

Table of Contents

Codex DNA, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.ORGANIZATION AND OPERATIONS

Business

Codex DNA, Inc. (the Company) was incorporated in the state of Delaware in March 2011, as Synthetic Genomics Solution, Inc., a wholly owned subsidiary of Synthetic Genomics, Inc. (SGI). The Company changed its name to SGI-DNA, Inc. (SGI-DNA) in February 2013, and then to Codex DNA, Inc. in March 2020. SGI-DNA Limited, a United Kingdom company focused on sales and marketing activities, is a wholly owned subsidiary of Codex DNA, Inc. The Company manufactures and sells laboratory equipment, specifically synthetic biology instruments, reagents and associated products and related services, primarily to pharmaceutical and academic laboratories worldwide.

On November 18, 2021, the Company entered into a Share Purchase Agreement, with the stockholders of EtonBio Inc., a California corporation (Eton), pursuant to which, the Company agreed to purchase all of the outstanding shares of capital stock of Eton (see Note 6). The total purchase price was approximately $13.6 million, which was funded with the Company’s existing cash on hand. Eton is a San Diego-based biotech company specializing in synthetic biology products and services, including DNA sequencing and oligo synthesis, for the global academic research, pharmaceutical, and biotechnology industries. Eton also markets DNA prep services and products such as antibodies, peptides, and metabolism assay kits.

Since its inception, the Company has devoted substantially all of its efforts to raising capital, commercializing its current products, and developing new product offerings. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of products. Principal among these risks are a dependence on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and manufacturing of its products. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, commercialize its products, generate revenue, meet its obligations, and, ultimately, become profitable.

Products currently under development will require significant additional research and development efforts. These efforts require significant amounts of additional capital, adequate personnel and infrastructure.

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the filing of this Form 10-Q.

Since inception, the Company has incurred cumulative operating losses and negative cash flows from operations. These operating losses and negative cash flows have been financed principally from the issuance of equity securities and debt. The Company’s ability to continue as a going concern is dependent upon the ability to raise additional debt or equity capital. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to the Company. Risks to which the Company is exposed include uncertainties related to the ability to achieve revenue-generating products; current and potential competitors with greater financial, technological, production, and marketing resources; dependence on key management personnel; and raising additional capital, as needed. Based upon the Company’s current plans, management believes it has sufficient financial resources to fund the Company’s operations for at least twelve months from the issuance date of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and include the accounts of the Company and its wholly owned subsidiaries after the elimination of all significant intercompany accounts and transactions. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (ASC) and as amended by Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive

Table of Contents

loss, condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on March 23, 2022 (the Annual Report). The condensed consolidated balance sheet data as of December 31, 2021 presented for comparative purposes was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 included in the Annual Report. Since the date of the audited consolidated financial statements for the year ended December 31, 2021 included in the Annual Report, there have been no changes to its significant accounting policies except as noted below.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss, the condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022 and the results of its operations for the three months ended March 31, 2022 and 2021, and its cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are also unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods presented. Key estimates in the consolidated financial statements include the Company’s ability to continue as a going concern, revenue recognition, impairment assessment for goodwill and intangible assets, allowance for doubtful accounts, estimated useful lives of property and equipment, valuation of inventory, accrued expenses, valuation of deferred income tax assets, valuation of derivative liabilities, share-based compensation, fair value of common stock prior to the Company’s initial public offering and accrued warranty are subject to significant estimation. Actual results could differ from those estimates.

Short-term Investments

As of March 31, 2022, short-term investments primarily consisted of corporate debt securities, commercial paper, and U.S. Government securities. The Company classifies its investments in securities as available-for-sale because, for accounting purposes, they are not considered to be either held-to-maturity securities or trading securities. They are not considered to be held-to-maturity securities because the Company does not have the intent to hold those securities to maturity. They are not considered trading securities because they were not acquired with the intent of selling them within hours or days. The Company’s investments in securities are classified as current as they are available for use in current operations. Short-term investments are carried at fair value with the unrealized gains and losses included in other comprehensive loss as a component of stockholders’ equity until realized. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity and recorded as interest income. Realized gains and losses are determined using the specific identification method and are included in other expense, net.

The Company evaluates its investments in securities that are in an unrealized loss position quarterly to determine if those securities are other-than-temporarily-impaired. If the Company intends to sell or if it is more likely than not that the Company will be required to sell those securities prior to the recovery of their book value, then those securities would be considered other-than-temporarily-impaired, and the Company would record this impairment as a loss through other expense, net. During the three months ended March 31, 2022, the Company concluded that none of its investments in securities were other-than-temporarily-impaired and thus recorded no impairment losses for its investments in securities.

The following tables summarize the short-term investments held at March 31, 2022 (in thousands):

Table of Contents


	March 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Assets
Commercial paper	$	7,478	$	—	$	—	$	7,478
Corporate bonds	8,469		2		(5)		8,466
U.S. Government agencies	29,477		—		(13)		29,464
Total	$	45,424	$	2	$	(18)	$	45,408

As of March 31, 2022, all short-term investments held by the Company had remaining contractual maturities of one year or less.

3.FAIR VALUE MEASUREMENT

The following table summarizes the fair values of the Company’s assets and liabilities on the condensed consolidated balance sheets which comprise money market funds and the contingent put option liability (in thousands):


	Fair value measurements as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	30,083	$	—	$	—	$	30,083
Commercial paper	—		7,478		—		7,478
Corporate bonds	—		8,466		—		8,466
U.S. Government agencies	—		29,464		—		29,464
Total	$	30,083	$	45,408	$	—	$	75,491

Liabilities


Contingent put option liability	$	—	$	—	$	85	$	85
Total	$	—	$	—	$	85	$	85


	Fair value measurements as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	79,893	$	—	$	—	$	79,893
Total	$	79,893	$	—	$	—	$	79,893

Liabilities
Contingent put option liability	$	—	$	—	$	108	$	108
Total	$	—	$	—	$	108	$	108

During the three months ended March 31, 2022 and the year ended December 31, 2021 there were no transfers between Level 1, Level 2 and Level 3.

Contingent Put Option Liability

The contingent put option liability consists of the fair value of the contingent interest feature and acceleration clause (contingent put option) under the 2019 Loan Agreement and 2021 Loan Agreement (see Note 8). The fair value of the contingent put option liability was based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the contingent put option liability utilized a risk-neutral valuation model wherein the fair value of the underlying debt facility is estimated, both with and without the presence of the default provisions, holding all other assumptions constant. The Company assesses these assumptions and estimates at least annually as additional information impacting the assumptions are obtained. Changes in the fair value of the contingent put option liability are

Table of Contents

recognized in other income (expense) as part of the change in fair value of derivative liabilities in the condensed consolidated statements of operations and comprehensive loss. The significant inputs not observable in the market consist of the adjusted market rate of debt and the probability of default. As of March 31, 2022 and 2021, the adjusted market rate of debt was 5.58% and 8.25%, respectively and the probability of default was 18% and 52%, respectively. A significant change in those inputs could cause a significant change in valuation.

The following table provides a roll-forward of the aggregate fair value of the Company’s derivative liabilities for which fair value is determined using Level 3 inputs (in thousands):










	Contingent put option liability
Fair value at December 31, 2021	$	108
Change in fair value	(23)
Fair value at March 31, 2022	$	85



	Contingent put option liability
Fair value at December 31, 2020	$	51
Extinguishment of liability	(51)
Issuance of liability	303
Fair value at March 31, 2021	$	303

For the three months ended March 31, 2022 and 2021, the Company recorded a change in fair value of the contingent put option liability included in other income of $23,000 and $0, respectively.

4.INVENTORY

Inventories include material, labor and overhead and are stated at the lower of cost (first-in and first-out method) or net realizable value. The components of inventory are as follows as of March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022		December 31, 2021
Raw materials	$	1,130	$	962
Work in process and sub-assemblies	908		896
Finished goods	498		510
Total	$	2,536	$	2,368

5.PROPERTY AND EQUIPMENT

Property and equipment consisted of the following on March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022		December 31, 2021
Machinery and equipment	$	3,257	$	2,589
Furniture and fixtures	64		—
Computer hardware and software	61		29
Leasehold improvements	95		95
Construction in progress	1,498		1,536
Total	4,975		4,249
Less: Accumulated depreciation and amortization	(1,007)		(793)
Total property and equipment, net	$	3,968	$	3,456

Depreciation expense for the three months ended March 31, 2022 and 2021 was $0.2 million and $0.1 million, respectively, and is included in operating expenses.

Table of Contents

6.GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

In 2019, SGI sold SGI-DNA to GATTACA Mining, LLC. As part of the transaction, the Company acquired its intangible assets with resulting goodwill. The goodwill carries a fair value of approximately $3.5 million. Due to the recent decline in global economic and labor market conditions caused by the global outbreak of the COVID-19 pandemic, the Company considered the effects on its goodwill and determined that there was no significant impact that would cause the goodwill to be impaired. There were no other events or circumstances that have changed since the last annual assessment that could reduce the fair value of the Company’s reporting segments below its carrying values.

In connection with the Eton acquisition in November 2021, the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired has been assigned to goodwill at a fair value of $10.8 million.

For the three months ended March 31, 2022 and 2021, the Company did not record any impairment of goodwill.

Other Intangible Assets

Other intangible assets acquired in the sale of SGI-DNA to GATTACA Mining, LLC include the rights to technology and the SGI-DNA trade name. The Company engaged an independent consultant to value the intangible assets and to determine their useful lives. The technology was valued at approximately $3.2 million with a seven year useful life and the SGI-DNA trade name at approximately $0.1 million with a three year useful life. During 2020, the Company changed its name to Codex DNA, Inc., the amount allocated to the trade name of $0.1 million was deemed impaired and written off in April 2020.

Other intangible assets acquired in the Eton acquisition include the Eton trade name, customer relationships and non-competition agreements. The Company engaged an independent consultant to value the intangible assets and to determine their useful lives. The trade name was valued at $0.1 million with a three year useful life, the customer relationships at $0.4 million with a 15 year useful life and the non-competition agreements at approximately $30,000 with a three year useful life.

Amortization expense for each of the three months ended March 31, 2022 and 2021 was approximately $0.1 million.

The following table summarizes the estimated future amortization expense of the intangible assets as of March 31, 2022 (in thousands):


Years ending December 31:
2022	$	402
2023	515
2024	510
2025	478
2026	103
Thereafter	276
Total	$	2,284

7.LEASES

As of March 31, 2022, the Company had six outstanding leases for office and laboratory space and scientific manufacturing equipment. The leases have terms between 6 and 68 months.

Corporate Headquarters

In September 2021, the Company entered into the Wateridge Pointe lease for future office and laboratory space and concurrently signed a second amendment to the operating lease agreement for its corporate headquarters located at 9535 Waples Street, San Diego, California (the Second Amendment). Under the Second Amendment, the lease at 9535 Waples Street will terminate upon the occupancy of office and laboratory space at 10421 and 10431 Wateridge Circle, San Diego, California, which will occur subsequent to the renovation and build-out of the spaces. The Wateridge Pointe lease provides for a tenant improvement (TI) allowance for the renovation and build-out of the spaces up to $185.00 per square foot, or approximately $12.3 million, with an additional allowance of up to $10.00 per square foot, or approximately $0.7 million if properly requested by the Company. The lessor is solely responsible for the management and payment of the tenant improvements and these expenses will be recorded as lessor improvements per ASC 842 guidance. Rent for the Wateridge Pointe lease will be approximately $3.9 million per year beginning upon lease commencement, subject to annual increases of 3%. The Wateridge Pointe lease provides for a 10 year and 3 month term and the Company is entitled to one option to extend

Table of Contents

the lease term for an additional five years. Occupancy of 10421 and 10431 Wateridge Circle and the corresponding termination of the lease at 9535 Waples Street are expected to occur in the second half of 2022.

Upon the execution of the Second Amendment, which was deemed to be a lease modification, the Company re-evaluated the assumptions made at the original lease commencement date. The Company determined the Second Amendment consists of a single contract under ASC 842. Accordingly, the Company bifurcated the components of the modified lease. Upon execution of the Second Amendment the Company adjusted the right-of-use asset and lease liability for the reduced term of the 9535 Waples Street lease component. In addition the Company will record a right-of-use asset and lease liability on the commencement date of the 10421 and 10431 Wateridge Circle lease components.

The components of lease cost under ASC 842 are as follows (in thousands):


	March 31, 2022		March 31, 2021
Lease costs
Finance lease cost:
Payment of finance lease liability	$	20	$	27
Interest on lease liabilities	1		3
Amortization of right-of-use asset	263		156
Variable lease cost	119		112
Total lease cost	$	403	$	298

Supplemental disclosure of cash flow information related to leases are as follows (in thousands):


	March 31, 2022		March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	396	$	238
Operating cash flows from finance leases	$	1	$	3
Financing cash flows from finance leases	$	20	$	27

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


	March 31, 2022		March 31, 2021
Weighted-average remaining lease term
Finance leases	0.7 years		1.7 years
Operating leases	4.0 years		3.8 years
Weighted-average discount rate
Finance leases	7.7	%	7.7	%
Operating leases	8.5	%	8.9	%

Table of Contents

The following table summarizes the minimum lease payments of the Company’s operating and finance lease liabilities as of March 31, 2022 (in thousands):


Year Ending December 31,	Operating		Finance
2022	$	914	$	62
2023	388		—
2024	323		—
2025	333		—
2026	343		—
Thereafter	307		—
Total future minimum lease payments	2,608		62
Less: imputed interest	(406)		(2)
Present value of operating lease liability	$	2,202	$	60

Less: current portion of lease liability	(880)		(60)
Non-current portion of lease liability	1,322		—

The table above excludes an estimated $45.1 million of legally binding minimum lease payments to be made over a period of approximately 10 years for the lease at 10421 and 10431 Wateridge Circle, San Diego, California that has been executed but not yet commenced as of September 30, 2021. Commencement of the lease at 10421 and 10431 Wateridge Circle is expected to occur in the second half of 2022.

8.NOTES PAYABLE

Loan and Security Agreement

As of March 31, 2022 and December 31, 2021, the loans payable on the condensed consolidated balance sheets pertains to the Loan and Security Agreement with Silicon Valley Bank and the Loan and Security Agreement with Oxford, respectively, and consists of the following (in thousands):


	March 31, 2022		December 31, 2021
Principal amount of loans payable	$	15,000	$	15,000
Less: Current portion of loans payable	(2,382)		(603)
Loans payable, net of current portion	12,618		14,397
Accrued Interest	94		94
Final debt payment liability	400		400
Debt discount and financing costs, net of accretion	(707)		(803)
Loans payable, net of discount and current portion	$	12,405	$	14,088

2019 Loan and Security Agreement

On September 5, 2019, the Company entered into a Loan and Security Agreement with Oxford Finance LLC as the lender (the 2019 Loan Agreement). Under the 2019 Loan Agreement the Company borrowed a total of $5.0 million in secured loans. These loans were repaid in full in March 2021 with the proceeds from the 2021 Loan Agreement discussed below. In connection with the repayment, the Company recognized a loss on debt extinguishment of $0.6 million. These loans bore interest at the greater of (i) 8.79% per annum and (ii) the sum of (a) the thirty (30) day U.S. LIBOR rate reported in The Wall Street Journal on the last Business Day of the month that immediately precedes the month in which the interest will accrue, plus (b) 6.38%. They would have matured on October 1, 2023 and were secured by substantially all of the Company’s assets, other than intellectual property, which was subject to a negative pledge. Payments on the loans were interest-only until May 1, 2021, followed by equal monthly principal payments and accrued interest through the scheduled maturity date of October 1, 2023.

In connection with the 2019 Loan Agreement, the Company had a contingent obligation to pay Oxford a success fee of $0.8 million upon the completion of the Company’s IPO.The Company had also identified a bifurcated compound derivative liability related to a contingent interest feature and acceleration clause (contingent put option). The fair value of the success fee and the contingent put option were recorded within derivative liabilities on the condensed consolidated balance sheets and

Table of Contents

corresponding discount to the loans under the 2019 Loan Agreement. The Company remeasured both liabilities to fair value at each reporting date, and recognized changes in the fair value as a component of other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The Company continued to recognize changes in the fair value of the success fee contingent liability until the success fee was paid. The success fee contingent liability was paid in full during the three months ended September 30, 2021. The contingent put option liability was extinguished when the 2019 Loan Agreement was terminated in March 2021.

2021 Loan Agreement

On March 4, 2021, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (SVB) as the lender (the 2021 Loan Agreement). Under the 2021 Loan Agreement, the Company borrowed a $15.0 million senior secured term loan, the proceeds of which were used to repay all existing obligations under the 2019 Loan Agreement, with the remaining proceeds available for working capital and general corporate purposes. Under the 2021 Loan Agreement, the Company may elect to obtain a second term loan from SVB in a principal amount up to but not exceeding $5.0 million, provided certain revenue milestones are achieved.

In connection with the 2021 Loan Agreement, the Company issued to SVB a warrant to purchase a number of shares of preferred stock (the Preferred Warrant). The Preferred Warrant was exercisable into the number of preferred shares equal to approximately $0.2 million divided by the applicable warrant price. The Preferred Warrant also provides for the grant of additional shares upon the disbursement of an advance under the 2021 Loan Agreement. Such additional shares will be equal to 1.5% of the principal amount of the advance divided by the warrant price. The Preferred Warrant was exercisable at the original purchase price of the Series A-1 convertible preferred stock. When the Series A-1 convertible preferred stock in which the warrant would have been exercisable into converted into common stock, the warrant holder gained the right to exercise the warrant for such number of shares of common stock into which the preferred shares would have converted into had they been exercised prior to the conversion. The Preferred Warrant was exercised in June 2021 in exchange for 51,409 shares of common stock.

The term loan bears interest at a per annum rate equal to the greater of (a) 4.0% above the prime rate and (b) 7.25%. The interest rate as of March 5, 2021 was 7.25% per annum. The loan is secured by substantially all of the Company’s assets, other than intellectual property. The Company has agreed not to encumber its intellectual property assets, except as permitted by the 2021 Loan Agreement. For the three months ended March 31, 2022, the effective interest rate on outstanding borrowings was approximately 10.15%.

A final payment (the Final Payment) equal to $0.4 million will be due at the earlier of the maturity date, acceleration of the loans, or a voluntary or mandatory prepayment of the loan. The Final Payment is being accrued through interest expense using the effective interest method.

The Company bifurcated a compound derivative liability related to the contingent interest feature and acceleration clause (contingent put option) under the 2021 Loan Agreement. The contingent put option liability was valued and separately accounted for in the Company’s condensed consolidated financial statements. The contingent put option liability is classified as a component of derivative liabilities on the condensed consolidated balance sheet. As of March 31, 2022, the estimated fair value of the contingent put option liability was $0.1 million, which was determined by using a risk-neutral valuation model wherein the fair value of the underlying debt facility is estimated, both with and without the presence of the default provisions, holding all other assumptions constant (see Note 3).

The estimated future principal payments due under the 2021 Loan Agreement were as follows:


	March 31, 2022
Estimated future principal payments due
2022	$	—
2023	7,500
2024	7,500
Total	$	15,000

9.STOCKHOLDERS’ EQUITY

On June 18, 2021, the Company completed its IPO of 7,666,664 shares of its common stock, including the exercise in full by the underwriters of their option to purchase up to 999,999 additional shares of common stock, for aggregate gross proceeds of $122.7 million. The Company’s common stock began trading on the Nasdaq Global Select Market under the ticker symbol “DNAY” on June 18, 2021. The Company received $112.5 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by the Company. Upon closing of the IPO, all outstanding convertible

Table of Contents

preferred stock converted into 15,079,329 shares of common stock and SGI’s outstanding warrants were automatically exercised into 1,201,059 shares of common stock. Subsequent to the closing of the IPO, all outstanding warrants issued pursuant to the 2021 Loan Agreement were exercised into 51,409 shares of common stock.

10.STOCK-BASED COMPENSATION

For the three months ended March 31, 2022 and 2021, the Company recorded stock-based compensation expense of approximately $0.4 million and $0.1 million, respectively. No income tax benefit was recognized in the accompanying condensed consolidated statements of operations and comprehensive loss for the Company’s equity incentive plan.

The Company’s Board of Directors approved the adoption of the SGI-DNA, Inc. 2019 Stock Plan (the 2019 Plan) in March 2019. The 2019 Plan permitted the Company to grant up to 5,544,187 shares for options and restricted stock units of the Company’s common stock. On March 3, 2021, the Company’s Board of Directors and stockholders approved the termination of the 2019 Plan and the adoption of the 2021 Equity Incentive Plan (the 2021 Plan). 6,000,000 shares of common stock were reserved for issuance under the 2021 Plan.

The 2021 Plan provided for the grant of incentive and non-statutory stock options to employees, non-employee directors and consultants of the Company. Options granted under the 2019 Plan and 2021 Plan generally become exercisable over a 4-year period following the date service begins and expire 10 years from the date of grant. The exercise price of incentive stock options granted under the 2019 Plan and 2021 Plan must be at least equal to 100% of the fair value of the Company’s common stock at the date of the grant, except for greater than 10% stockholders for which the exercise price of incentive stock options granted under the 2019 Plan and 2021 Plan must be at least equal to 110% of the fair value of the Company’s common stock at the date of the grant, as determined by the Board of Directors. The exercise price of non-statutory options granted under the 2019 Plan and 2021 Plan must be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board of Directors. The 2019 Plan and 2021 Plan granted the Company a right of first refusal to repurchase shares issued under the plan at a price set by the optionee, which right terminated upon the IPO. As of March 31, 2022 and December 31, 2021, there were no outstanding shares subject to these repurchase rights.

In June 2021, the Company established the 2021 Stock Incentive Plan (the 2021 SIP). The 2021 SIP became effective on the effective date of the IPO, at which time the Company ceased granting awards under the 2021 Plan. The 2021 SIP allows the Company’s compensation committee to grant equity-based awards to the Company’s employees, directors and consultants. A total of 3,500,000 shares of common stock were initially reserved for issuance under the 2021 SIP, plus the number of shares (not to exceed 2,459,970 shares) consisting of (i) the shares of common stock that were available for the issuance of awards under the 2021 Plan at the time the 2021 SIP became effective, which ceased to be available for future issuance under the 2021 Plan at such time and (ii) any shares subject to outstanding options or other share awards that were granted under the 2019 Plan and the 2021 Plan that terminate or expire prior to exercise or settlement; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares reserved and available for issuance under the 2021 SIP automatically increases each January 1, beginning on January 1, 2022 and each January 1 thereafter by the lesser of 5,250,000 shares or 5% of the outstanding number of shares of common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors. As of March 31, 2022, the number of shares of common stock reserved for issuance under the 2021 SIP was 3,876,659.

Stock option activity under the 2019 Plan, the 2021 Plan and the 2021 SIP for the three months ended March 31, 2022 is as follows:


	Number of options	Weighted average exercise price		Weighted average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Balances at December 31, 2021	2,550,984	$	6.09	9.1	$	12,417
Options granted	1,173,550	10.10
Options exercised	(70,534)	1.15
Options cancelled	(17,179)	6.74
Balances at March 31, 2022	3,636,821	$	7.48	9.2	$	1,891
Vested and expected to vest at March 31, 2022	2,820,668	$	7.35	9.2	$	1,716
Exercisable at March 31, 2022	343,640	$	3.39	8.4	$	721

There were 1,173,550 options granted during the three months ended March 31, 2022. The weighted average grant date calculated fair value of options granted during the three months ended March 31, 2022 was $6.02 per share.

Table of Contents

The calculated value of option grants during the three months ended March 31, 2022 was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:


	March 31, 2022
Risk free interest rate	1.7	%
Expected dividend yield	—	%
Expected term	5.0 years
Expected volatility	53.9	%

The Company has granted restricted stock units with vesting based conditions. Unvested shares of restricted common stock may not be sold or transferred by the holder. They are legally issued and outstanding. These restrictions lapse accordingly to the time-based vesting of each award.

A summary of the restricted stock unit activity during the three months ended March 31, 2022 is as follows:


	Restricted Stock Units	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2021	—	$	—
Granted	174,400	10.20
Unvested at March 31, 2022	174,400	$	10.20

No restricted stock units vested during the three months ended March 31, 2022.

Stock-based compensation expense related to stock-based awards was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three months ended March 31, 2022

Research and development	$	77
Sales and marketing	43
General and administrative	328
Total	$	448

Effective in connection with the IPO, the Company established the 2021 Employee Stock Purchase Plan (the ESPP). The maximum number of shares of common stock that may be issued under the ESPP was initially 350,000. Additionally, the number of shares reserved and available for issuance under the ESPP automatically increases each January 1, beginning on January 1, 2022 and each January 1 thereafter, by the lesser of (i) 1,050,000 shares of common stock, (ii) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (iii) such smaller number of shares of common stock as the Company’s board of directors may designate. As of March 31, 2022, the number of shares of common stock that may be issued under the ESPP is 643,185.

The ESPP enables eligible employees to purchase shares of common stock of the Company at the end of each offering period at a price equal to 85% of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. Participation in the ESPP is voluntary. Eligible employees become participants in the ESPP by enrolling in the plan and authorizing payroll deductions. At the end of each offering period, payroll deductions that have accumulated are used to purchase shares of the Company’s shares at the discounted price. The Company makes no contributions to the ESPP. A participant may withdraw from the ESPP or suspend contributions to the ESPP. If the participant elects to withdraw during an offering, all contributions are refunded as soon as administratively practicable. If a participant elects to withdraw or suspend contributions, they will not be able to re-enroll in the current offering but may elect to participate in future offerings. The ESPP purchases only whole shares of the Company’s shares. The Company’s first ESPP offering period began December 1, 2021 and will end on June 1, 2022, with a second offering period commencing on June 1, 2022. Subsequent offering periods will be on a rolling six-month basis.

Table of Contents

As of March 31, 2022, no shares of common stock have been issued under the ESPP. Share-based compensation expense related to the ESPP of $0.1 million for the three months ended March 31, 2022 was recorded in operating expenses.

As of March 31, 2022, total unrecognized stock-based compensation expense related to unvested stock-based awards was $9.2 million, which is expected to be recognized over a weighted average period of 3.5 years.

11.INCOME TAXES

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2022, as the Company incurred losses for the three months ended March 31, 2022 and is forecasting additional losses through the remainder of fiscal year ending December 31, 2022, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2022. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method.

Due to the Company’s history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not.

As of March 31, 2022, the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

12.COMMITMENTS AND CONTINGENCIES

Litigation

The Company may become involved in various claims, suits, and legal proceedings from time to time in the ordinary course of its business. The Company accrues a liability when it believes that it is both probable and the amount of loss can be reasonably estimated. While the outcome of such claims, lawsuits or other proceedings cannot be predicted with certainty, management expects that any liability, to the extent not provided for by insurance or otherwise, will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Codexis Trademark Litigation

In May 2020 Codexis, Inc. (Codexis) filed a complaint against the Company relating to its CODEX DNA name based on Codexis’ rights in the CODEX and CODEXIS mark in the U.S. District Court, Northern District of California for federal and common law trademark infringement and unfair competition/false designation (the Complaint). Codexis seeks injunctive relief, including that the Company cease all use of the term CODEX and any other trademark confusingly similar to the marks CODEX and CODEXIS and not apply for registration of or register the CODEX mark or any other mark confusingly similar to the CODEX or CODEXIS marks, transfer to Codexis all domain names and social media accounts/user names that include the term “codex” and pay damages (consisting of Codexis’s actual damages, a disgorgement of the Company’s profits and punitive damages as permitted by California common law) as well as attorneys’ fees and costs.

Eurofins Pharma Non-Competition/Non-Solicitation Litigation

In October 2018, Eurofins Pharma US Holdings II, Inc. (EPUSH II) and Eurofins DiscoverX Corporation (Eurofins DiscoverX) (collectively, Plaintiffs) filed a complaint against Todd R. Nelson, SGI-DNA, Inc. (SGI-DNA, which is the Company’s prior name) and Synthetic Genomics, Inc. (the Company’s former parent company, and together with Dr. Nelson and SGI-DNA, the Defendants) to enforce non-competition and non-solicitation provisions of an agreement.

The complaint, filed in the Superior Court of California, County of San Diego, charges Dr. Nelson with breach of contract, SGI-DNA with tortious interference, and both with unfair competition. The complaint seeks permanent injunctive relief, monetary damages and other equitable relief (including restitution) against the Defendants. The civil jury trial, initially scheduled for April 24, 2020, and rescheduled to August 27, 2021, is now a bench trial that is scheduled to begin May 6, 2022.

It is not possible at this time to assess whether the outcome of the Eurofins matter will have a material adverse effect on the Company’s condensed consolidated results of operations, cash flows or financial position. Therefore, in accordance with ASC 450, the Company has not accrued any contingent liability associated with these legal proceedings based on its belief that a liability, while possible, is not probable nor estimable, and any range of potential contingent liability amounts cannot be reasonably estimated at this time.

Leases

The Company’s non-cancelable lease commitments are described in Note 7.

Table of Contents

13.NET LOSS PER SHARE

Net loss per share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):


	Three Months Ended March 31,
	2022		2021
Numerator:
Net loss	$	(13,194)	$	(7,442)
Net loss attributable to common stockholders	$	(13,194)	$	(7,442)
Denominator:
Weighted average common stock outstanding - basic and diluted	29,331,325		5,193,098
Net loss per share attributable to common stockholders - basic and diluted	$	(0.45)	$	(1.43)

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:


	March 31,
	2022	2021
Series Z convertible preferred stock (as converted to common stock)	—	2,500,000
Series A convertible preferred stock (as converted to common stock)	—	7,599,274
Series A-1 convertible preferred stock (as converted to common stock)	—	4,980,055
Warrants to purchase common stock	—	1,081,745
Warrants to purchase Series A-1 convertible preferred stock (as converted to common stock)	—	216,428
Stock options to purchase common stock	3,636,821	1,146,750
Restricted stock units that vest into common stock	174,400	—
Total	3,811,221	17,524,252

14.RETIREMENT PLAN

The Company has a retirement saving plan (the 401(k) Plan) that allows participating employees to defer a portion of their annual compensation on a pretax basis. The Company made no contributions to the 401(k) Plan for the three months ended March 31, 2022 and 2021.

15.COLLABORATION

In December 2021, the Company entered into a Research Collaboration and License Agreement (Pfizer Agreement) with Pfizer Inc. (Pfizer), pursuant to which the Company agreed to collaborate with Pfizer to further develop the Company’s novel enzymatic DNA synthesis technology for Pfizer’s use in its research and development of mRNA-based vaccines and biotherapies. The financial terms of the deal include an upfront payment from Pfizer to the Company, along with success-based technical milestone payments that could be earned in the near term. The Company is also eligible to receive additional milestone payments based on the achievement of specified development, regulatory and commercialization goals associated with any products developed from the application of the Company’s technology developed and licensed under the agreement.

The Company granted Pfizer a non-exclusive, worldwide license to use the Company’s enzymatic DNA synthesis technology for purposes of researching, developing, manufacturing and commercializing pharmaceutical and biopharmaceutical products and a limited-time option to convert such license to exclusive for specific applications. If Pfizer exercises its option for these application(s) within the applicable period, then the license to Pfizer will become exclusive for products for such application(s); provided that Pfizer may later convert the particular application back to non-exclusive.

Table of Contents

Under the Pfizer Agreement, Pfizer made an upfront payment to the Company of $8.0 million and if the Company meets certain technical milestones, the Company will be eligible to receive an additional $10.0 million in near-term milestone payments associated with the Research Plan.

In addition to the upfront payment and technical milestone payments, Pfizer has agreed to make milestone payments to the Company upon the products meeting certain clinical milestones, with each product (other than exclusive products) being eligible for milestone payments up to $20.0 million if it were to meet the applicable clinical milestones and the first exclusive product in each exclusive field being eligible for milestone payments up to $55.0 million if it were to meet the applicable clinical milestones. Pfizer has also agreed to pay the Company up to $60.0 million in sales milestones for products (other than exclusive products) if aggregate net sales of such products meet certain thresholds and up to $180.0 million in sales milestones for exclusive products if aggregate net sales of the exclusive products meet certain thresholds. Provided the Pfizer Agreement remains in place, Pfizer will also pay escalating royalties from a low to mid-fraction of one percent of net sales of all products. Pfizer’s obligations to pay royalties with respect to a product within a country will expire after specific criteria including such product no longer being covered by patent rights licensed to Pfizer by the Company in such country. Royalty payments are subject to reduction after the introduction of a biosimilar product in such country by a third party.

The Company assessed the collaboration and license agreement in accordance with ASC 606, Revenue from Contracts with Customers, and concluded that Pfizer is a customer based on the agreement structure. The Company identified a single combined performance obligation under the arrangement which includes performance under the research plan, technology transfer between the parties, participation in the Joint Research Committee, research licenses exchanged by the parties and the non-exclusive commercial license. In addition, the Company identified a material right for the option granted to Pfizer to extend the research term by an additional year. The $8.0 million upfront payment represents the transaction price at inception.

The Company determined that the $8.0 million upfront payment represents the entirety of the consideration to be included in the transaction price as of the outset of the arrangement. The potential milestone payments that the Company may have been eligible to receive were initially excluded from the transaction price at the outset of the arrangement because (i) all technical and development milestone payments did not meet the criteria for inclusion using the most-likely amount method and (ii) the Company recognizes as revenue sales-based milestones and royalties when the related sales occur. As of March 31, 2022 no milestones or royalties have been deemed likely to be achieved or have been achieved.

In accordance with ASC 606, the Company allocated the transaction price, comprising the upfront payment of $8.0 million, based on the standalone selling price of the combined performance obligation and the material right. Based on management's analysis, the material right was allocated $0.3 million of the transaction price, while the combined performance obligation was allocated $7.7 million of the transaction price.

The $7.7 million of revenue allocated to the combined performance obligation will be recognized using the input method based on time elapsed as compared to the research term of 24 months, and the $0.3 million of revenue allocated to the material right will be recognized over the third year of services performed under the research plan in the event the option to extend the research plan is exercised, or when the option expires in the event the option to extend the research plan is not exercised. During the three months ended March 31, 2022, the Company recognized $1.0 million of collaboration revenue.

16.RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2022 and 2021, the Company made payments to related parties of approximately $0.1 million and $25,000, respectively, for services relating to intellectual property matters, including patent filings, patent prosecution, sequencing and oligo services and board members.

17.SUBSEQUENT EVENTS

In April 2022, Codexis and the Company reached a mutually agreeable resolution to the Codexis trademark litigation.

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us, or “our” refer to the business of Codex DNA, Inc. and its subsidiaries.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes, appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2021 included in our Annual Report on Form 10-K (the Annual Report) filed with the Securities and Exchange Commission (the SEC) on March 23, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a leading synthetic biology company focused on enabling researchers to rapidly, accurately and reproducibly build or “write” high-quality synthetic DNA and mRNA that is ready to use in many downstream synthetic biology enabled markets. Our synthetic biology solution addresses the bottlenecks across the multi-step process of building DNA and mRNA, as well as the significant limitations of existing solutions that prevent the rapid building of virtually error-free DNA and mRNA at a useable scale. A key part of our solution is our BioXp system, an end-to-end automated workstation that fits on the benchtop and is broadly accessible due to its ease-of-use and hands-free automation. We believe our BioXp system can democratize synthetic biology by simplifying the process of building DNA and mRNA, thereby accelerating the discovery, development and production of novel high-value products, including antibody-based biologics, mRNA-based vaccines and therapeutics and precision medicines.

Our synthetic biology solution is comprised of our:

■BioXp system: which we believe is the first commercially available push-button, walkaway, end-to-end automated workstation that empowers researchers to go from a digital DNA sequence to endpoint-ready synthetic DNA in as few as 8 hours and mRNA in less than 24 hours, exclusive of shipment time;

■BioXp portal: a user-friendly online portal that offers an intuitive guided workflow and design tools for building new DNA sequences and assembling them into vector(s) of choice;

■BioXp kits: contain all the necessary building blocks and reagents, including our proprietary Gibson Assembly branded reagents, for specific synthetic biology workflow applications;

■Benchtop reagents: contain all the reagents necessary to proceed with a specific synthetic biology workflow on the benchtop using products generated on the BioXp system;

■Biofoundry Services: enable a customer to order and receive any of the BioXp system endpoint-ready products, such as genes, clones, cell-free amplified DNA and variant libraries; and

■Short Oligo Ligation Assembly (SOLA) enzymatic DNA synthesis (EDS): SOLA EDS is a sustainable, scalable, and cost-effective approach designed to significantly reduce timelines for constructing synthetic DNA, RNA, and proteins compared to traditional chemical synthesis, paving the way for more efficient and effective development of mRNA-based vaccines, diagnostics, therapeutics, and personalized medicines. SOLA EDS technology will be integrated into Codex DNA’s future BioXp Oligo Printer and BioXp Digital-to-Biological Converter systems, providing customers with an end-to-end solution for their life science research and synthetic biology needs.

We have developed and commercialized products that include BioXp systems, including our current BioXp 3250 system, BioXp kits for generating a wide array of synthetic DNA and mRNA, and benchtop reagents that complement the automated synthetic biology workflow applications and workflow solutions. We believe that our integrated BioXp systems and BioXp kits represent the industry’s leading synthetic biology workflow automation solution and provide us with a first mover advantage in the rapidly growing synthetic biology market. As part of our continuing effort to improve the processes of synthetic biology, we are currently developing next-generation BioXp systems and BioXp kits with the goal of transforming rapid demand-response workflows in synthetic biology and consolidating supply chains and enabling global distributed manufacturing for discovery, preclinical and clinical applications. We also use our BioXp 3250 system, BioXp kits and benchtop reagents to perform services for customers.

We were incorporated in the state of Delaware in March 2011, as Synthetic Genomics Solution, Inc., a wholly owned subsidiary of Synthetic Genomics, Inc. (SGI). We changed our name to SGI-DNA, Inc. (SGI-DNA) in February 2013. On March 8, 2019, SGI sold SGI-DNA to GATTACA Mining, LLC (GATTACA) by entering into a stock purchase agreement to sell all of our outstanding common and preferred stock in exchange for a $10 million non-recourse promissory note (the Purchase Note) and

Table of Contents

a warrant to purchase common stock equal to 6% of the shares of common stock issued and outstanding as of the time of exercise, which will automatically be exercised immediately prior to the consummation of an initial public offering. This warrant and participation right were later amended in August 2019 to provide a warrant on 1,081,745 shares of common stock, a participation right to receive property with a value equal to the net proceeds a person would receive as a holder of 1,081,745 shares of common stock in a change of control transaction, and additional warrants equal to 3% of the shares sold in future equity financings prior to an initial public offering or certain change of control transactions. In connection with our Series A-1 convertible preferred stock financing in December 2019, we issued SGI warrants in connection with the participation right described above to purchase Series A-1 convertible preferred stock. These warrants have an exercise price of $3.61 per share. The common stock warrant has an aggregate exercise price of $3.00. We were a co-borrower with GATTACA on the Purchase Note. Subsequently, we focused our efforts on launching new synthetic biology products and expanding our distribution and marketing efforts on our existing research using only products. We also changed our name to Codex DNA, Inc. in March 2020.

We commercially launched our current synthetic biology solution in September 2019, which now includes the BioXp 3250 system, BioXp kits with associated cloud-based application scripts, and benchtop reagent kits. Since the introduction of our solution through March 31, 2022, we have launched eight BioXp kits, three benchtop reagent kits, and several other synthetic biology products, which currently includes 11 SARS-CoV-2 full-length genomes and RNA controls as well as our Vmax X2 cells. We have placed approximately 200 BioXp systems globally. We target customers in the fields of personalized medicine, biologics drug discovery, vaccine development, genome editing and cell and gene therapy. As of March 31, 2022, our customer base was composed of over 450 customers and included 15 of the 25 largest biopharmaceutical companies in the world ranked by 2020 revenue, excluding affiliates of those companies. Our customer base also includes leading academic research institutions, government institutions, CROs and synthetic biology companies.

Since our inception as a stand-alone company on March 8, 2019, we have devoted substantially all of our efforts to raising capital, organizing, and staffing our company, commercializing existing products and developing new products. On June 18, 2021, we completed our IPO of 7,666,664 shares of common stock, including the exercise in full by the underwriters of their option to purchase up to 999,999 additional shares of common stock, for aggregate gross proceeds of $122.7 million. We received $112.5 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us. Prior to our IPO, we had funded our operations with proceeds from the issuance of convertible notes and convertible preferred stock, payments received from royalties and product sales, and proceeds from borrowings under our credit facilities. Prior to our IPO, we had received gross proceeds of $32.8 million from sales of our convertible preferred stock, $6.8 million from the issuance of our convertible notes and and gross proceeds of $20.0 million through borrowings under our loan and security agreements with Oxford Finance LLC (the 2019 Loan Agreement) and Silicon Valley Bank (the 2021 Loan Agreement).

We have incurred significant operating losses since our inception. During the three months ended March 31, 2022 and 2021, our revenue was $5.6 million and $2.3 million, respectively. As of March 31, 2022, we had cash and cash equivalents of $31.4 million and short-term investments of $45.4 million. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of our products. We reported net losses of $13.2 million and $7.4 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $156.6 million.

Eton Acquisition

On November 18, 2021 (the Acquisition Date), we entered into a Share Purchase Agreement, with the stockholders of EtonBio Inc. (Eton), a California corporation, pursuant to which we agreed to purchase all of the outstanding shares of capital stock of Eton. The total purchase price was approximately $13.6 million, which was funded with our existing cash on hand.

Eton is a San Diego-based biotech company specializing in synthetic biology products and services, including DNA sequencing and oligo synthesis, for the global academic research, pharmaceutical, and biotechnology industries. Eton also markets DNA prep services and products such as antibodies, peptides, and metabolism assay kits.

Components of Results of Operations

Revenue

Revenue consists of product sales and royalties and other revenue. Net product sales primarily consist of sales of our BioXp systems, BioXp kits, benchtop reagents and biofoundry services. In providing biofoundry services, we use our own instruments and reagents to create DNA products for our customers. Royalties and other revenue consist of fees charged for the license of non-exclusive rights of our patents to third parties and grant revenue received from government entities as reimbursement of

Table of Contents

expenses related to the development and use of synthetic biology tools to develop solutions to address various areas of concern. The grants typically require the performance of specific activities and timely reporting of results.

Historically, revenue growth has come from BioXp systems, BioXp kits and biofoundry services. Growth in BioXp systems sales has come from investments in direct and indirect distribution channels and new product introductions. Growth in BioXp kit sales has come from the growth of the installed base of BioXp systems and new application kits. Biofoundry services were launched late in 2019. Growth in biofoundry services has been driven by new product introductions and prospective customers using biofoundry services to validate our BioXp systems. We have also seen an increase in demand for our biofoundry services driven by COVID-19-related access problems to researchers’ labs. As we continue to expand our revenue opportunities, we launched our collaboration research program which works with government entities to develop solutions to specific areas of concern.

Cost of Revenue

Cost of revenue primarily consists of material and labor costs, freight and indirect overhead costs associated with sales of our BioXp instruments, BioXp kits, benchtop reagents, biofoundry services and collaboration research programs. Cost of revenue also includes period costs related to certain inventory adjustment charges, and unabsorbed manufacturing and overhead costs, as well as any write-offs of inventory that fail to meet specification or are otherwise no longer suitable for commercial manufacture. Cost of revenue is expected to increase as revenue increases.

Research and Development Expenses

Research and development expenses include pre-production costs related to the design, development and improvement of our products and technologies, including employee compensation, benefits and related costs of sustaining our engineering teams, project material costs, third party fees paid to consultants, prototype development expenses, legal costs related to intellectual property, patent fees, and other costs incurred in the product design and development process. We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.

We expect that our research and development expenses will increase significantly, both in the near term and subsequently, in connection with our planned product development activities. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any of our future products. The successful development and commercialization of our future products is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including but not limited to the following:

■we can never be certain that we can solve any technical challenge;

■if such solution can be found, we can never be certain of the timing of such a solution;

■once we find a technical solution, we cannot be certain that the solution will be commercially feasible; and

■any solution may not be desired by our customers.

These uncertainties with respect to the development of any of our future products could significantly impact the costs and timing associated with the development of these products.

Sales and Marketing Expenses

Sales and marketing expenses include employee compensation, including compensation and benefits for sales, marketing, customer service, corporate development personnel and related administrative expenses. In addition, sales and marketing expenses also include costs for international employees and facility overhead based on headcount. We anticipate that our sales and marketing expenses will increase in the future as we increase our headcount to support increasing sales and expanding our international operations. Sales and marketing costs are expensed as incurred.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, and administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs, administrative travel expenses, other operating costs; and facility costs not otherwise included in research and development or sales and marketing expenses.

We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount to support our continued research, development and commercialization activities. We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a publicly traded company. General and administrative expenses are expensed as incurred.

Table of Contents

Other Income (Expense), Net

Interest Expense, Net

Interest expense, net primarily consists of cash and non-cash interest on our term loan facilities and our finance leases and of interest income earned on our cash equivalents and investment balances.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities consists of the change in fair value of our SGI participation right liability, warrant liabilities, contingent put option liability, and success fee contingent liability. We classify derivative liabilities as a liability on our condensed consolidated balance sheets that we remeasure to fair value at each reporting date. We recognize changes in the fair value of the derivative liabilities as a component of other income (expense) in our condensed consolidated statements of operations and comprehensive loss. In connection with our IPO in June 2021, the participation right was extinguished and the warrants underlying our warrant liability were exercised. The success fee contingent liability was paid in full in July 2021. At March 31, 2022, the contingent put option liability is listed as a derivative liability on our condensed consolidated balance sheets.

Other Expense, Net

Other expense, net consists primarily of gains on the disposal of fixed assets, losses on the write off of intangible assets and the loss on extinguishment of debt.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net operating loss carryforwards (NOLs) we have incurred in each year or for our earned research and development tax credits generated in each period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credit carryforwards will not be realized. As of December 31, 2021 and 2020, we had federal NOL carryforwards of $62.1 million and $28.4 million, respectively and state NOL carryforwards of $38.5 million and $15.9 million, respectively. The federal NOL carryforwards of $1.3 million generated before January 1, 2018 will begin to expire in 2034, but can be used to offset up to 100% of taxable income. Amounts generated after December 31, 2017 will carryforward indefinitely, but will be subject to 80% taxable income limitation. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Table of Contents

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021		Change
	(in thousands)
Revenue
Product sales	$	4,128	$	1,799	$	2,329
Royalties and other revenue	1,508		528		980
Total revenue	5,636		2,327		3,309
Cost of revenue	2,858		1,025		1,833
Gross profit	2,778		1,302		1,476
Operating expenses:
Research and development	6,381		2,878		3,503
Sales and marketing	3,461		2,275		1,186
General and administrative	5,799		2,413		3,386
Total operating expenses	15,641		7,566		8,075
Loss from operations	(12,863)		(6,264)		(6,599)
Other income (expense), net:
Interest expense, net	(336)		(241)		(95)
Change in fair value of derivative liabilities	23		(296)		319
Loss on extinguishment of debt	—		(618)		618
Other expense, net	(12)		(19)		7
Total other income (expense), net	(325)		(1,174)		849
Loss before provision for income taxes	(13,188)		(7,438)		(5,750)
Provision for income taxes	(6)		(4)		(2)
Net loss	$	(13,194)	$	(7,442)	$	(5,752)

Revenue

Revenue for the three months ended March 31, 2022 was $5.6 million, compared to $2.3 million for the three months ended March 31, 2021. The increase of $3.3 million was primarily driven by a $2.3 million increase in product sales consisting of $1.4 million in revenue attributable to the Eton acquisition, mainly from DNA sequencing, a $0.8 million increase in revenue related to our BioXp instruments, and a $0.1 million increase in biofoundry services. Royalties and other revenue increased $1.0 million mainly due to revenue associated with the Pfizer agreement which was signed in December 2021, as well as our existing collaboration research program revenue which began in the second quarter of 2021.

Cost of Revenue

Cost of revenue for the three months ended March 31, 2022 was $2.9 million, compared to $1.0 million for the three months ended March 31, 2021. The increase of $1.8 million was primarily driven by an increased volume of revenue, including $1.0 million in costs primarily related to DNA sequencing, $0.4 million of higher raw material costs associated with sales of reagents and biofoundry services, a $0.2 million increase due to higher instrument sales, $0.1 million of costs related to our collaboration research programs, and $0.1 million in other costs, which are composed of overhead, indirect costs, manufacturing and pricing variances.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2022 were $6.4 million, compared to $2.9 million for the three months ended March 31, 2021. The $3.5 million increase was primarily due to higher personnel expenses, consulting and professional services, as well as facility and other costs, offset in part by increased allocations of research and development costs attributable to our revenue from collaborations. Personnel expenses increased $2.1 million as we continue to increase our headcount in support of ongoing product development efforts, as well as costs associated with our Eton

Table of Contents

acquisition. Consulting and professional services increased $0.8 million, which was related to our ongoing product development efforts, and facility and other costs increased $0.6 million based on increased allocations due to higher headcount over the prior period.

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended March 31, 2022 were $3.5 million, compared to $2.3 million for the three months ended March 31, 2021, an increase of $1.2 million. The increase was primarily attributable to higher personnel related costs of $0.9 million as we continue to expand our global sales and marketing teams to support our increased revenue, $0.1 million in increased marketing activities related to our revenue growth and $0.2 million of higher facility related and travel costs due to increased headcount.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2022 were $5.8 million, compared to $2.4 million for the three months ended March 31, 2021. The $3.4 million increase was primarily due to an increase of $1.6 million in personnel expenses due to higher headcount, including additions to our executive leadership team and costs related to our Eton acquisition, as well as employee stock compensation expense, a $1.1 million increase in professional services due to higher utilization of consultants and legal expenses and $0.7 million in higher insurance costs related to being a publicly traded company.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2022 was a net expense of $0.3 million, compared to a net expense of $1.2 million for the three months ended March 31, 2021. The decrease of $0.9 million was primarily due to the absence of the one-time $0.6 million loss on extinguishment of debt in 2021 and a $0.3 million reduction in fair value changes of our derivatives, offset in part by higher interest expense as a result of the 2021 Loan Agreement.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant operating losses. On June 18, 2021, we completed our IPO of 7,666,664 shares of common stock, including the exercise in full by the underwriters of their option to purchase up to 999,999 additional shares of common stock, for aggregate gross proceeds of $122.7 million. We received $112.5 million in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by us. Prior to our IPO, we had funded our operations with proceeds from the issuance of convertible notes and convertible preferred stock, payments received from royalties and product sales, and proceeds from borrowings under our credit facilities. Prior to our IPO, we had received gross proceeds of $32.8 million from sales of our convertible preferred stock, $6.8 million from the issuance of our convertible notes and gross proceeds of $20.0 million through borrowings under our loan and security agreements with Oxford Finance LLC (the 2019 Loan Agreement) and Silicon Valley Bank (the 2021 Loan Agreement). As of March 31, 2022, we had cash and cash equivalents of $31.4 million and short-term investments of $45.4 million.

We will continue to incur significant expenses and expect to incur increasing operating losses for the foreseeable future. We also expect that our expenses and capital expenditures will increase substantially in connection with our ongoing activities, particularly as we:

■seek to develop new products and services and hire additional research, development and engineering personnel;

■expand our distribution and marketing infrastructure to further commercialize current and future products and support our growing customer base;

■add operational, financial, and administrative systems and personnel to support growing sales; and

■maintain, expand, enforce, defend and protect our intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio;

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, or other capital sources, including collaborations with other companies, and other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing and equity offerings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common shares. If we are unable to raise additional funds through equity or debt financings when

Table of Contents

needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

The field of synthetic biology is rapidly developing and subject to numerous risks and uncertainties associated with new technologies and novel products. Consequently, we are unable to accurately predict the timing or amount of increased product sales or expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to continue to generate significant product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Cash Flows

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our consolidated cash flows for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
Net cash used in operating activities	$	(5,622)	$	(5,117)
Net cash used in investing activities	(45,883)		(99)
Net cash provided by financing activities	58		9,587
Net (decrease) increase in cash	$	(51,447)	$	4,371

Operating Activities

During the three months ended March 31, 2022, operating activities used $5.6 million of cash, primarily resulting from our net loss of $13.2 million, partially offset by changes in our operating assets and liabilities of $6.5 million and non-cash charges of $1.1 million. Net changes in our operating assets and liabilities for the three months ended March 31, 2022 consisted primarily of a $6.9 million increase in deferred revenue related to the Pfizer Agreement and a $0.7 million increase in accounts payable, accrued payroll and accrued liabilities, partially offset by a $0.9 million increase in accounts receivable. Non-cash charges consisted primarily of $ 0.4 million in stock-based compensation, depreciation and amortization expense of $0.3 million, and amortization of our right-of-use operating lease asset of $0.3 million.

During the three months ended March 31, 2021, operating activities used $5.1 million of cash, primarily resulting from our net loss of $7.4 million, partially offset by non-cash charges of $1.5 million and net cash provided by changes in our operating assets and liabilities of $0.8 million. Non-cash charges consisted primarily of the loss on debt extinguishment of $0.6 million, depreciation and amortization expense of $0.2 million, amortization of our right-of-use operating lease asset of $0.2 million, and change in fair value of derivative liabilities of $0.3 million. Net changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $1.3 million increase in accounts payable, accrued payroll and accrued liabilities, and a $0.6 million decrease in accounts receivable, partially offset by a $0.8 million increase in deposits, prepaid expenses and other current assets.

Investing Activities

During the three months ended March 31, 2022, net cash used in investing activities was $45.9 million, consisting primarily of purchases of short-term investments.

During the three months ended March 31, 2021, net cash used in investing activities was $0.1 million, consisting of purchases of property and equipment.

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities was $0.1 million, consisting primarily of proceeds from the exercise of common stock options.

During the three months ended March 31, 2021, net cash provided by financing activities was $9.6 million, consisting primarily of proceeds from borrowings of $14.9 million from the issuance of deb