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What changed in RAPID MICRO BIOSYSTEMS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RAPID MICRO BIOSYSTEMS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+407 added−328 removedSource: 10-K (2025-02-28) vs 10-K (2024-03-01)

Top changes in RAPID MICRO BIOSYSTEMS, INC.'s 2024 10-K

407 paragraphs added · 328 removed · 263 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

51 edited+16 added−10 removed139 unchanged
Biggest changeIn addition, we are preparing for the commercial launch of our proprietary growth-based rapid automated sterility test for use on the Growth Direct system by mid-year 2024. This new test will leverage our existing Growth Direct platform technology, providing customers with all the benefits they are accustomed to with the Growth Direct system.
Biggest changeThis new test leverages our existing Growth Direct platform technology, providing customers with all the benefits they are accustomed to with the Growth Direct system. These benefits include full automation, enhanced data integrity, reduced human error and lower hands-on labor costs.
When our customers invest in our technology, they commit to a long-term use of our products. Our customers regularly purchase our proprietary consumables to perform MQC testing and maintain their systems via annual service contracts. Our products are used daily in our customer’s facilities and their key workflows, reinforced by regulatory requirements that are driving the industry towards further automation.
When our customers invest in our technology, they commit to long-term use of our products. Our customers regularly purchase our proprietary consumables to perform MQC testing and maintain their systems via annual service contracts. Our products are used daily in our customer’s facilities and their key workflows, reinforced by regulatory requirements that are driving the industry towards further automation.
Our regulatory strategy has benefited our business in several ways, including: 1) by achieving the definition of the Growth Direct Technology as an “automated compendial validation” in key trade group and regulatory issuances, such as the Parenteral Drug Association, or PDA, Technical Report 33, and USP chapter ; 2) by working with industry and regulatory forums to define a fast validation strategy that allows a short timeline routine testing implementation, which is described in a case study written by us and several of our customers and published in the PDA Journal of Pharmaceutical Science and Technology in November 2022; and 3) and by helping our customers obtain regulatory acceptance from the FDA and EMA for the use of our technology and validation strategy for new drug applications with the bioburden application (environmental monitoring and water do not need regulatory license changes).
Our regulatory strategy has benefited our business in several ways, including: 1) by achieving the definition of the Growth Direct Technology as an “automated 15 Table of Contents compendial validation” in key trade group and regulatory issuances, such as the Parenteral Drug Association, or PDA, Technical Report 33, and USP chapter ; 2) by working with industry and regulatory forums to define a fast validation strategy that allows a short timeline routine testing implementation, which is described in a case study written by us and several of our customers and published in the PDA Journal of Pharmaceutical Science and Technology in November 2022; and 3) and by helping our customers obtain regulatory acceptance from the FDA and EMA for the use of our technology and validation strategy for new drug applications with the bioburden application (environmental monitoring and water do not need regulatory license changes).
We procure media from third-party suppliers and fill and assemble the final consumables in our Lowell facility. We contract with third party vendors to sterilize our consumables before shipping to customers.
We procure media from third-party suppliers and fill and assemble the final consumables in our Lowell facility. We currently contract with third party vendors to sterilize our consumables before shipping to customers.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 20 Table of Contents
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 21 Table of Contents
We then sell additional systems to support additional suites at existing sites as well as leverage our high customer satisfaction at existing facilities to drive adoption at new sites within our customers’ global manufacturing network. The majority of our customers have multiple Growth Direct systems and have deployed Growth Direct across multiple facility locations.
We then sell additional systems to support additional suites at existing sites as well as leverage our high customer satisfaction at existing facilities to drive adoption at new sites within our customers’ global manufacturing network. The majority of our customers have multiple Growth Direct systems and over 40% have deployed Growth Direct systems across multiple facility locations.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices, drugs and biological products to ensure that such products distributed domestically are safe and effective for their intended uses and otherwise meet the applicable requirements of the FDCA and the PHSA.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, 19 Table of Contents installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices, drugs and biological products to ensure that such products distributed domestically are safe and effective for their intended uses and otherwise meet the applicable requirements of the FDCA and the PHSA.
Examples of program content organized by this ERG include professional career panel discussions with company leaders, attendance sponsorship to leadership conferences such as Massachusetts Conference for Women, company-wide charity drives for local Women’s shelters, and celebration of global events such as International Women’s Day. Additional information Rapid Micro Biosystems, Inc., a Delaware corporation, was incorporated in December 2006.
Examples of program content organized by this ERG include professional career panel discussions with company leaders, attendance sponsorship to leadership conferences such as Massachusetts Conference for Women, company-wide charity drives for local Women’s shelters, and celebration of global events such as International Women’s Day. 20 Table of Contents Additional information Rapid Micro Biosystems, Inc., a Delaware corporation, was incorporated in December 2006.
Meanwhile, elimination of unnecessary manual labor allows skilled MQC specialists to spend time on test design, interventions, standard operating procedure, or SOP, updates and other critical tasks. 13 Table of Contents • Robust Security and Connectivity — The Growth Direct platform can integrate with existing LIMS, allowing for seamless data transfer from the system to the LIMS.
Meanwhile, elimination of unnecessary manual labor allows skilled MQC specialists to spend time on test design, interventions, standard operating procedure, or SOP, updates and other critical tasks. • Robust Security and Connectivity — The Growth Direct platform can integrate with existing LIMS, allowing for seamless data transfer from the system to the LIMS.
Based on total global sales of an estimated 10,000 Growth Direct systems and our current pricing for our products, we estimate the market for system sales to be approximately $5.0 billion.
Based on a total global sales opportunity of an estimated 10,000 Growth Direct systems and our current pricing for our products, we estimate the market for system sales to be approximately $5.0 billion.
We have demonstrated the value of our platform in cell 15 Table of Contents and gene therapy manufacturing with our early success in converting customers in this segment. Furthermore, companies in this space are developing new approaches to manufacture these complex products, including novel facility layouts, new processes and workflows, and new quality and risk management frameworks.
We have demonstrated the value of our platform in cell and gene therapy manufacturing with our early success in converting customers in this segment. Furthermore, companies in this space are developing new approaches to manufacture these complex products, including novel facility layouts, new processes and workflows, and new quality and risk management frameworks.
We guide these initial sites as they gain experience with the Growth Direct, assisting their validation of initial applications, proving the value of our systems, and establishing a relationship as a trusted and reliable vendor. Our system is specifically designed to absorb the daily MQC testing volume at our customer’s facilities.
We guide these initial sites as they gain experience with the Growth Direct, assisting their validation of initial applications, proving the value of our systems, and establishing a relationship as a trusted and reliable vendor. Our system is specifically designed to absorb the daily 16 Table of Contents MQC testing volume at our customer’s facilities.
We have a well-defined roadmap for our existing products, which includes new consumables to expand our platform’s MQC testing applications, such as in sterility testing; improvements to on-board algorithms that enable greater insight from our image analysis, such as our RMBNucleus™ Mold Alarm software; additional imaging modalities to unlock new testing functionality; additional system formats to accommodate new customer use cases; and new software to enable fleet management and analytics.
We have a well-defined roadmap for our existing products, which includes new consumables to expand our platform’s MQC testing applications, such as in sterility testing that we made available for commercial sale in 2024; improvements to on-board algorithms that enable greater insight from our image analysis, such as our RMBNucleus™ Mold Alarm software; additional imaging modalities to unlock new testing functionality; additional system formats to accommodate new customer use cases; and new software to enable fleet management and analytics.
At the appropriate stage, we may consider opportunistic investments, partnerships, and acquisitions which may strengthen our product platform, allow us to enter new markets, and enhance our growth profile. 16 Table of Contents Commercial We have a global commercial team that includes direct sales, commercial operations, validation, field services, strategic marketing, marketing communications and product management.
At the appropriate stage, we may consider opportunistic investments, partnerships, and acquisitions which may strengthen our product platform, allow us to enter new markets, and enhance our growth profile. Commercial We have a global commercial team that includes direct sales, commercial operations, validation, field services, strategic marketing, marketing communications and product management.
We expect our new rapid sterility test to deliver time to organism detection, or TTD, in as little as 12 hours and final time-to-result, or TTR, in as little as one to three days, enabling faster release of final pharmaceutical product, allowing manufacturers to benefit from faster time to market, less potential waste and reduced inventory and holding costs.
Our new rapid sterility test is designed to deliver time to organism detection, or TTD, in as little as 12 hours and final time-to-result, or TTR, in as little as one to three days, enabling faster release of final pharmaceutical product, allowing manufacturers to benefit from faster time to market, less potential waste and reduced inventory and holding costs.
Both types are custom-designed proprietary consumables with specific mechanical and optical features to facilitate automated handling and image processing within our Growth Direct system and have bar codes for tracking and data integrity.
All types are custom-designed proprietary consumables with specific mechanical and optical features to facilitate automated handling and image processing within our Growth Direct system and have bar codes for sample tracking and data integrity.
Drive new customer adoption of the Growth Direct platform by converting the leading manufacturers in our core markets, including top 50 pharmaceutical companies and leading CDMOs — With the launch of our latest generation Growth Direct in 2017, 40 global customers have adopted the Growth Direct platform to automate MQC testing in 85 manufacturing facilities.
Drive new customer adoption of the Growth Direct platform by converting the leading manufacturers in our core markets, including top 50 pharmaceutical companies and leading CDMOs — With the launch of our latest generation Growth Direct in 2017, 46 global customers have adopted the Growth Direct platform to automate MQC testing in 98 manufacturing facilities.
Through these efforts, we deliver high quality experiences at every step of the customer journey which creates and strengthens our customer loyalty. • Deep integration into heavily regulated pharmaceutical manufacturing processes — Our products are entrenched within our customers’ workflows and the majority of our customers have purchased multiple systems and 40% have them at multiple locations.
Through these efforts, we deliver high quality experiences at every step of the customer journey which creates and strengthens our customer loyalty. • Deep integration into heavily regulated pharmaceutical manufacturing processes — Our products are entrenched within our customers’ workflows and the majority of our customers have purchased multiple systems and over 40% have deployed Growth Direct systems at multiple locations.
MQC is a critical component of the bioprocess and pharmaceutical production process and is regulated and mandated by the U.S. Food and Drug Administration, or the FDA, under current good manufacturing practices, or cGMP, and by other international regulatory agencies. Current MQC testing methods are manual, laborious, and have lacked innovation over the past several decades.
MQC is a critical component of the bioprocess and pharmaceutical production process and is regulated and mandated by the FDA, under current good manufacturing practices, or cGMP, and by other international regulatory agencies. Current MQC testing methods are manual, laborious, and have lacked innovation over the past several decades.
We obtain components and subassemblies for our Growth Direct systems from multiple third-party suppliers and contract manufacturers. While some of these components are sourced from a single supplier, we have qualified second sources for most of our parts.
Our manufacturing strategy includes direct manufacturing of certain products, and third-party outsourcing for certain components and subassemblies. We obtain components and subassemblies for our Growth Direct systems from multiple third-party suppliers and contract manufacturers. While some of these components are sourced from a single supplier, we have qualified second sources for most of our parts.
The issued patents that we own or that we in-license from Thermo Fisher and any patents that may issue from pending applications that we own have expiration dates or, in the case of patent applications, projected statutory expiration dates, between 2024 and 2043, excluding, with respect to patents that may be issued from our patent applications, any additional term for patent term adjustments or patent term extensions, if applicable.
Any patents that may issue from pending applications that we own have expiration dates or, in the case of patent applications, projected statutory expiration dates, between 2032 and 2045, excluding, with respect to patents that may be issued from our patent applications, any additional term for patent term adjustments or patent term extensions, if applicable.
We believe that our Growth Direct platform leads the industry in throughput, accuracy, reliability, security, and data integrity.
We believe that our Growth Direct platform 14 Table of Contents leads the industry in throughput, accuracy, reliability, security, and data integrity.
Moreover, we have a strong intellectual property portfolio, including at least 95 granted and pending patents globally with eight unexpired U.S. granted patents and 14 U.S. pending patent applications as of December 31, 2023. • Top-tier customers establishing Growth Direct as an industry standard globally — We have cultivated long-standing and collaborative relationships with our significant and growing customer base.
Moreover, we have a strong intellectual property portfolio, with at least 80 granted and pending patents globally, including 10 granted unexpired patents and 17 pending patent applications in the U.S. as of December 31, 2024. • Top-tier customers establishing Growth Direct as an industry standard globally — We have cultivated long-standing and collaborative relationships with our significant and growing customer base.
Employees As of December 31, 2023, we had 193 full-time employees across the globe, of which 41 were engaged in sales and marketing, 37 in research and development, 84 in manufacturing and service, and 31 in general and administrative. None of our employees are covered by a collective bargaining agreement. We consider our relationships with our employees to be good.
Employees As of December 31, 2024, we had 163 full-time employees across the globe, of which 34 were engaged in sales and marketing, 31 in research and development, 72 in manufacturing and service, and 26 in general and administrative. None of our employees are covered by a collective bargaining agreement. We consider our relationships with our employees to be good.
We currently have customers across approximately 85 sites in 14 countries and the majority of our customers have multiple Growth Direct systems and have deployed Growth Direct across multiple facility locations. We launched our current, second generation Growth Direct system in 2017 and have placed 141 systems and sold over 4.5 million consumables globally.
We currently have customers across approximately 98 sites in 18 countries and the majority of our customers have multiple Growth Direct systems and have deployed Growth Direct across multiple facility locations. We launched our current, second generation Growth Direct system in 2017 and have placed 162 systems and sold over 6 million consumables globally.
As of December 31, 2023, we own eight granted unexpired patents in the United States, 50 issued patents in foreign jurisdictions, including Australia, Canada, China, countries in Europe, India, Japan and Mexico, and 14 pending patent applications in the United States.
As of December 31, 2024, we own 10 granted unexpired patents in the United States, 53 issued patents in foreign jurisdictions, including Australia, Canada, China, countries in Europe, India, Japan and Mexico, and 17 pending patent applications in the United States.
We also seek trademark protection where appropriate to protect the names that identify us as the source of our products and services. We own certain patents, patent applications and intellectual property and license certain patents and other intellectual property from third parties.
We also seek trademark protection where appropriate to protect the names that identify us as the source of our products and services. 18 Table of Contents We own certain patents, patent applications and intellectual property.
To support continuous supply for our customers, we have manufacturing redundancies and maintain inventory in multiple locations, including our Lowell facility, a second redundant storage location in the metropolitan Boston area, and at our third-party logistics, or 3PL, warehouses in Schiphol, Netherlands and Frankfurt, Germany. 17 Table of Contents Our manufacturing strategy includes direct manufacturing of certain products, and third-party outsourcing for certain components and subassemblies.
To support continuous supply for our customers, we have manufacturing redundancies and maintain inventory in multiple locations, including our Lowell facility, a second redundant storage location in the metropolitan Boston area, and at our third-party logistics, or 3PL, warehouses in Schiphol, Netherlands and Frankfurt, Germany.
The Growth Direct system brings the lab to the manufacturing floor, for automated MQC testing, anywhere in the facility or manufacturing campus. Proprietary consumables We offer two proprietary consumables plates to capture test samples for analysis on the Growth Direct: (1) an Environmental Monitoring, or EM, consumable and (2) a Water / Bioburden, or W/BB, consumable.
The Growth Direct system brings the lab to the manufacturing floor, for automated MQC testing, anywhere in the facility or manufacturing campus. Proprietary consumables We offer proprietary consumables plates to capture test samples for analysis on the Growth Direct system. These applications include Environmental Monitoring ("EM"), Water ("W"), Bioburden ("BB"), and Sterility ("ST").
In order to improve our gross margins, we are actively targeting numerous areas including: • Reducing instrument and consumable product costs (materials and labor) through activities including strategic sourcing and product redesign; • Increasing product manufacturing efficiency through activities including increased throughput on our automated consumables manufacturing line and manufacturing process optimization; and • Increasing productivity and efficiency in our service organization.
In addition, in order to further improve our gross margins, we seek to reduce such costs and are actively targeting numerous areas including: • Reducing instrument and consumable product costs (materials and labor) through activities including strategic sourcing and product redesign; • Increasing product manufacturing efficiency through activities including increased throughput of products currently manufactured and reduced variability of uptime on our automated consumables manufacturing line, moving manufacturing of other consumable products on to this automated line and manufacturing process optimization; and • Increasing productivity and efficiency in our service organization.
We have also entered into certain supply and commercial agreements with various vendors and suppliers under which we receive rights to their intellectual property for use in our products. Our material license agreement with Thermo Fisher is described in more detail above.
We have also entered into certain supply and commercial agreements with various vendors and suppliers under which we receive rights to their intellectual property for use in our products.
We seek to establish Growth Direct as the trusted global standard in automated MQC by delivering the speed, accuracy, security, data integrity and regulatory compliance that our customers depend on to ensure patient safety and consistent drug supply.
Once installed and validated in our customers’ facilities, Growth Direct provides for recurring revenues through ongoing consumables and service contracts. We seek to establish Growth Direct as the trusted global standard in automated MQC by delivering the speed, accuracy, security, data integrity and regulatory compliance that our customers depend on to ensure patient safety and consistent drug supply.
The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at www.sec.gov .
Our Code of Business Conduct and Ethics is also posted on our website located at https://investors.rapidmicrobio.com/corporate-governance/documents-and-charters. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at www.sec.gov.
Market opportunity Our core market of MQC testing encompasses a ubiquitous and high-volume testing process deployed across all pharmaceutical manufacturing operations.
Market opportunity Our core market of MQC testing encompasses a ubiquitous and high-volume testing process deployed across all pharmaceutical manufacturing operations. We believe the total addressable market for MQC testing is large and growing.
We also compete with a limited number of companies that have or are attempting to enter the MQC testing market with alternative automated solutions, such as Interscience, which has developed a partially-automated system for MQC testing.
We also compete with a limited number of companies that have or are attempting to enter the MQC testing market with alternative automated solutions, such as Interscience, which offers a partially-automated system for MQC testing, and Clever Culture Systems, which offers an environmental monitoring product focused on the pharmaceutical microbiology market.
Through this offering, we help our customers validate their Growth Direct system for full routine use faster, typically in just three to nine months after the Growth Direct system is placed and installed, and develop confidence in the operation of our platform.
Through this offering, we help our customers validate their Growth Direct system for full routine use faster, typically in just three to nine months after the Growth Direct system is placed and installed, and develop confidence in the operation of our platform. 12 Table of Contents Support begins prior to system purchase when our sales representative brings in one of our validation experts for consultation about specific application requirements.
This competition includes both small companies and large companies with greater financial and technical resources and longer operating histories than our own. 18 Table of Contents The key competitive factors affecting the success of the products that we develop are likely to be the continued growth of our market position, our ability to expand our integration with existing customers, our ability to develop new products and improve our existing products, and our ability to grow our sales and marketing capabilities.
The key competitive factors affecting the success of the products that we develop are likely to be the continued growth of our market position, our ability to expand our integration with existing customers, our ability to develop new products and improve our existing products, and our ability to grow our sales and marketing capabilities.
This staff is located in North America, Europe and the Asia-Pacific region, and we also maintain direct customer support teams providing validation and/or field service capabilities in these territories.
This staff is located in North America, Europe and the Asia-Pacific region, and we also maintain direct customer support teams providing validation and/or field service capabilities in these territories. We intend to regularly evaluate and, as appropriate, adjust or expand our sales, support, and marketing efforts, including in the context of our distribution and collaboration arrangements.
As such, we are subject to certain laws and regulations applicable to companies 19 Table of Contents doing business with the government, as well as with those concerning government contracts, including being subject to potential investigation for compliance with government contract regulations.
As such, we are subject to certain laws and regulations applicable to companies doing business with the government, as well as with those concerning government contracts, including being subject to potential investigation for compliance with government contract regulations. Human capital resources Our key human capital objectives in managing our business include attracting, developing and retaining top talent.
As part of our commitment to diversity and inclusion, we proudly support employee-initiated and -led employee resource groups, or ERGs, to provide business insights, solve unique business problems, build leadership skills, and represent the company within the communities we serve.
We proudly support employee-initiated and -led employee resource groups, or ERGs, to provide business insights, solve unique business problems, build leadership skills, and represent the company within the communities we serve. For example, our Women’s ERG was established in 2021 and focuses on the engagement, empowerment, and elevation of women within the company.
These benefits include full automation, enhanced data integrity, reduced human error and lower hands-on labor costs. Sterility testing is utilized for final release testing in any facility that manufactures sterile products such as biologics and sterile injectables, as a final quality check before shipment.
Sterility testing is utilized for final release testing in any facility that manufactures sterile products such as biologics and sterile injectables, as a final quality check before shipment.
For every drug product manufactured or in development, our customers are required to establish a validated QC process that they can execute consistently and reliably. 14 Table of Contents Customers typically dismantle manual testing infrastructure after switching to our platform, creating enormous costs to switch away from our systems that are amplified by the network effect of linked systems and data aggregation across customer sites.
Customers typically dismantle manual testing infrastructure after switching to our platform, creating enormous costs to switch away from our systems that are amplified by the network effect of linked systems and data aggregation across customer sites.
Our issued patents and pending patent applications cover our technologies and products, including machines, manufactures, compositions of matter, and methods of use with respect thereto, related to the Growth Direct platform. Additionally, as of December 31, 2023, we license three issued patents in the United States, Canada and Europe from Thermo Fisher relating to a robotic carousel workstation.
Our issued patents and pending patent applications cover our technologies and products, including machines, manufactures, compositions of matter, and methods of use with respect thereto, related to the Growth Direct platform.
Two bar codes are used—one applied during our manufacturing process to define the media type and expiration dates, and a second that is generated by the Growth Direct system at time of testing that defines the sample ID and LIMS number. The consumables incorporate multiple standard media for each application as both products are based on the traditional growth-based method.
Two bar code options can be used—one generated during our manufacturing process to define the test application, media type and expiration dates, and a second generated by the Growth Direct system at time of testing to define the sample ID and LIMS reference number.
Validation services As part of our customer support experience, we offer full validation support to ensure customer success with the Growth Direct platform.
Our service team works directly with customers’ IT teams to help integrate Growth Direct software into their LIMS for seamless connectivity. Validation services As part of our customer support experience, we offer full validation support to ensure customer success with the Growth Direct platform.
Competition As a life sciences technology company, we face competition from a wide array of companies in the pharmaceutical manufacturing industry.
Competition As a life sciences technology company, we face competition from a wide array of companies in the pharmaceutical manufacturing industry. This competition includes both small companies and large companies with greater financial and technical resources and longer operating histories than our own.
In order to meet the expectations of our customers, we have made significant investments to build infrastructure and develop capabilities in areas such as procurement, manufacturing, distribution, quality and after sales service. Given our current business scale, our revenues are not yet sufficient to fully cover these costs, impacting our current gross margin profile.
In order to meet the expectations of our customers, we have made significant investments to build infrastructure and develop capabilities in areas such as procurement, manufacturing, distribution, quality and after sales service. In the third and fourth quarters of 2024, we achieved positive gross margins for the first time in our company's history.
Our customer base includes 70% of the top twenty largest pharmaceutical companies as measured by revenue and the manufacturers of approximately 24% of globally approved cell and gene therapies, including 100% of approved gene-modified autologous CAR-T cell therapies. Once installed and validated in our customers’ facilities, Growth Direct provides for recurring revenues through ongoing consumables and service contracts.
Our customer base includes 70% of the top twenty largest pharmaceutical companies as measured by revenue and the manufacturers of approximately 17% of U.S. Food and Drug Administration ("FDA") approved cell and gene therapies, including 86% of approved gene-modified autologous CAR-T cell therapies.
This represents a significant improvement over widely used traditional test methods and provides compelling differentiation when compared to current rapid sterility products. The TTR and TTD data for our new rapid sterility test were obtained from testing of an expanded panel of stressed microorganisms most commonly found in biomanufacturing environments, inclusive of the U.S. Pharmacopeia (USP) microorganisms.
This represents a significant improvement over widely used traditional test methods and provides compelling differentiation when compared to current rapid sterility products. The program to develop our new rapid sterility test was historically supported by contract funding from U.S.
Moreover, the LIMS connection eliminates the need to use paper in the lab and delivers information to stakeholders in a secure manner, designed to enable compliance with data integrity regulations. 12 Table of Contents Our service team works directly with customers’ IT teams to help integrate Growth Direct software into their LIMS for seamless connectivity.
This eliminates the risk of human error that could arise from manually entering the results, while improving efficiency. Moreover, the LIMS connection eliminates the need to use paper in the lab and delivers information to stakeholders in a secure manner, designed to enable compliance with data integrity regulations.
For example, our Women’s ERG was established in 2021 and focuses on the engagement, empowerment, and elevation of women within the company. Membership is open and encouraged for all employees, of which membership grew by five times in 2023.
Membership is open and encouraged for all employees, of which membership grew by approximately 48% in 2024.
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We believe the total addressable market for MQC testing is large and growing, with a projected compound annual growth rate, or CAGR, from 2021 to 2026 of 8% and a CAGR for MQC testing in the field of biologics and cell and gene therapies of over 13%.
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We made the Growth Direct rapid sterility application available for commercial sale and placed the first rapid sterility system at one of our existing customers in the second quarter of 2024. We are continuing our efforts to scale our manufacturing capabilities for the rapid sterility application.
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Our test has been designed to meet a limit of detection of one colony forming unit (CFU) as directed by USP . The program to develop our new rapid sterility test was historically supported by contract funding from U.S.
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Integration with MODA® Platform In the fourth quarter of 2024, Lonza, a Swiss multinational manufacturing company for the pharmaceutical, biotechnology and nutrition sectors, published a white paper discussing a recent collaboration involving our Growth Direct technology. Lonza sought to achieve paperless quality control laboratories using automated digital systems.
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This eliminates the risk of human error that could arise from manually entering the results, while improving efficiency.
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As part of this ambition, Lonza sought an end-to-end automated solution to optimize EM at four of its cell and gene therapy manufacturing sites across North America, Europe, and Asia. Our Growth Direct system was successfully integrated with Lonza's MODA-EM Module to combine paperless processes with automated microbial enumeration for pharmaceutical quality control.
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Support begins prior to system purchase when our sales representative brings in one of our validation experts for consultation about specific application requirements.
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The MODA-EM is a software module used by many pharmaceutical companies that enables paperless data collection and management for quality control microbiology. We believe this integration showcased the compatibility of our Growth Direct platform with commonly-used technologies at our customers and potential customers and may further promote its adoption.
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We intend to expand our sales, support, and marketing efforts in the future by expanding our direct footprint in North America and Europe as well as developing a comprehensive distribution and support network in the Asia-Pacific region and other markets where new opportunities exist.
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According to Lonza, the project provided a valuable blueprint for the industry to emulate. Distribution and Collaboration Agreement On February 21, 2025, we entered into a Distribution and Collaboration Agreement (the “Distribution Agreement”) with Millipore S.A.S., a subsidiary of the Life Science business of Merck KGaA, Darmstadt, Germany, which operates in the U.S. as MilliporeSigma ("MilliporeSigma”).
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License agreement License agreement with Thermo Fisher In May 2013, we entered into a patent license agreement, or the Thermo Fisher license agreement, with Thermo CRS, Ltd., or Thermo Fisher, pursuant to which we obtained a non-exclusive, worldwide, royalty-bearing, non-sublicensable license under Thermo Fisher’s patent rights relating to robotic devices.
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Pursuant to the Distribution Agreement, we granted MilliporeSigma a global, co-exclusive right to sell our products, initially consisting of our Growth Direct systems and related consumables, into all fields related to industrial quality control applications in the pharmaceutical, medical device, personal care, cosmetics and food and beverage spaces in all regions of the world.
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Pursuant to the Thermo Fisher license agreement, we paid Thermo Fisher one-time fees in the aggregate of $125,000 and are also obligated to pay royalties at a fixed dollar amount ranging from the low to mid four figures for our sale of each system containing the licensed products, subject to increase or decrease upon certain events.
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During the term of the Distribution Agreement, MilliporeSigma will receive tier-based transfer pricing on such products. We will continue to directly market, sell, manufacture and distribute our products and provide all services to customers, including in respect of system installation, validation, maintenance and support.
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The Thermo Fisher license agreement will remain in effect until the last to expire of the licensed patent rights in April 2024.
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Over the first two years of the Distribution Agreement, MilliporeSigma has committed to purchase a minimum number of Growth Direct systems. Thereafter, we and MilliporeSigma will evaluate and mutually agree on additional purchase commitments, if any.
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Human capital resources Our key human capital objectives in managing our business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices into our core values.
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Pursuant to the Distribution Agreement, we are permitted to continue to sell our products independently and through our existing distributors, but we may not grant the right to sell the products covered by the Distribution Agreement to other third parties so long as a purchase commitment by MilliporeSigma is in place.
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Diversity and Inclusion We value diversity at all levels and continue to focus on expanding our diversity and inclusion initiatives from candidate attraction, employee onboarding and employee experience.
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The initial term of the Distribution Agreement is five years, unless earlier terminated by us or MilliporeSigma in accordance with its terms. 13 Table of Contents The Distribution Agreement also contemplates future collaboration by the parties, including with respect to sourcing materials and service delivery.
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In that regard, within six months, the parties intend to negotiate in good faith towards a supply agreement, pursuant to which the parties will explore cost-saving measures within our supply chain focused on accelerating gross margin improvement, particularly with respect to consumables.
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The focus of such supply agreement may include raw materials and components as well as manufacturing and supply chain services. The parties intend to share in any cost savings achieved in the supply of the products through this supply agreement.
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Additionally, within one year, the parties intend to negotiate in good faith towards a services agreement to permit us and MilliporeSigma to provide certain services to each other’s customers.
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The parties also intend to explore additional opportunities for collaboration, such as joint development efforts for the enhancement of our products or introducing new products to be covered by the distribution arrangement.
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For every drug product manufactured or in development, our customers are required to establish a validated QC process that they can execute consistently and reliably.
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Maintaining these positive gross margins in future periods will depend on our ability to execute on our business objectives, including generating sufficient 17 Table of Contents revenues to cover the costs of producing and delivering our products and services.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

135 edited+89 added−26 removed301 unchanged
Biggest changeWe have previously received notifications from Nasdaq that we were not in compliance with its minimum bid price requirements. Most recently, on February 2, 2024, we received a letter from Nasdaq notifying us that the closing bid price of our Class A common stock was below $1.00 per share for the preceding 30 consecutive trading days.
Biggest changeMost recently, on February 2, 2024, we received a letter from Nasdaq notifying us that the closing bid price of our Class A common stock was below $1.00 per share for the preceding 30 consecutive trading days and that, as a result, the company was not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).
Due to the specialized knowledge each of our officers and key employees possesses with respect to our products and services and our operations, the loss of service of any of our officers or directors could delay or prevent the successful sales and expansion of our platform.
Due to the specialized knowledge each of our officers and key employees possesses with respect to our products and services and our operations, the loss of service of any of our officers or directors could delay or prevent successful sales and the expansion of our platform.
Among other things, these provisions include those establishing: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of our board of directors to alter our bylaws without obtaining stockholder approval; • the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors; 47 Table of Contents • the required approval of the holders of at least two-thirds of the shares entitled to vote thereon to (i) effect a reorganization, recapitalization, share exchange, share classification, consolidation, conversion or merger, (ii) sell, lease, exchange, transfer or otherwise dispose of all or substantially all of our assets, or (iii) dissolve our company or revoke a dissolution of our company; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Among other things, these provisions include those establishing: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of our board of directors to alter our bylaws without obtaining stockholder approval; • the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors; • the required approval of the holders of at least two-thirds of the shares entitled to vote thereon to (i) effect a reorganization, recapitalization, share exchange, share classification, consolidation, conversion or merger, (ii) sell, lease, exchange, transfer or otherwise dispose of all or substantially all of our assets, or (iii) dissolve our company or revoke a dissolution of our company; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Our ability to achieve and maintain commercial market acceptance of our Growth Direct platform will depend on a number of factors, including: • significant acceptance by drug manufacturers of automated microbial quality control, or MQC, testing; • our ability to increase awareness of the capabilities of automated MQC testing and our technology and solutions; • our customers’ willingness to adopt new technologies and workflows; 21 Table of Contents • our ability to integrate our platform with our customers’ existing workflows, including related to regulatory validation processes; • whether our platform reliably provides advantages over the conventional, manual method of MQC testing and other automated technologies and is perceived by customers to be cost effective; • the continued growth of the pharmaceutical and biopharmaceutical industry, in particular biologics and cell and gene therapies; • our ability to execute on our business strategy, including continuing to expand in the market for cell and gene therapies; • the rate of adoption of our platform and solutions by drug manufacturers; • prices we charge for our systems and consumables; • the relative reliability and robustness of our platform as a whole and the components of our platform; • our ability to develop new products for existing customers and to expand our capabilities within the MQC testing workflow; • our ability to expand the use of our platform with existing customers; • other competitive automated MQC testing platforms; and • the impact of our investments in product innovation and commercial growth.
Our ability to achieve and maintain commercial market acceptance of our Growth Direct platform will depend on a number of factors, including: • significant acceptance by drug manufacturers of automated microbial quality control, or MQC, testing; 22 Table of Contents • our ability to increase awareness of the capabilities of automated MQC testing and our technology and solutions; • our customers’ willingness to adopt new technologies and workflows; • our ability to integrate our platform with our customers’ existing workflows, including related to regulatory validation processes; • whether our platform reliably provides advantages over the conventional, manual method of MQC testing and other automated technologies and is perceived by customers to be cost effective; • the continued growth of the pharmaceutical and biopharmaceutical industry, in particular biologics and cell and gene therapies; • our ability to execute on our business strategy, including continuing to expand in the market for cell and gene therapies; • the rate of adoption of our platform and solutions by drug manufacturers; • prices we charge for our systems and consumables; • the relative reliability and robustness of our platform as a whole and the components of our platform; • our ability to develop new products for existing customers and to expand our capabilities within the MQC testing workflow; • our ability to expand the use of our platform with existing customers; • other competitive automated MQC testing platforms; and • the impact of our investments in product innovation and commercial growth.
If we are unable to sell our Growth Direct system to new customers, if our existing customers do not expand their use of our system, or if our existing customers decide to purchase fewer of our consumables and service contracts or terminate their relationships with us, our revenue could significantly decrease, which would have an adverse effect on our financial condition and results of operations and could adversely impact our ability to execute on our growth strategy.
If we are unable to sell our Growth Direct system to new customers, if our existing customers do not expand their use of our systems, or if our existing customers decide to purchase fewer of our consumables and service contracts or terminate their relationships with us, our revenue could significantly decrease, which would have an adverse effect on our financial condition and results of operations and could adversely impact our ability to execute on our growth strategy.
The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017 limits a taxpayer’s ability to utilize NOL deduction in a year to 80% taxable income for federal NOL arising in tax years beginning after 2017. In addition, we had federal and state research and development tax credits of $2.2 million and $3.2 million, respectively.
The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017 limits a taxpayer’s ability to utilize NOL deduction in a year to 80% taxable income for federal NOL arising in tax years beginning after 2017. In addition, we had federal and state research and development tax credits of $2.8 million and $3.2 million, respectively.
Our competitors and potential competitors may enjoy a number of competitive advantages over us, including: • longer operating histories; • larger customer bases; • greater brand recognition and market penetration; • greater financial resources; • greater technological and research and development resources; • better system reliability and robustness; • greater selling and marketing capabilities; and • better established, larger scale and lower cost manufacturing capabilities.
Our competitors and potential competitors may enjoy a number of competitive advantages over us, including: • longer operating histories; • larger customer bases; • greater brand recognition and market penetration; • greater financial resources; • greater technological and research and development resources; • better system reliability, robustness and features; • greater selling and marketing capabilities; and • better established, larger scale and lower cost manufacturing capabilities.
Our reliance on these suppliers subjects us to a number of risks that could harm our business, including: • interruption of supply resulting from modifications to or discontinuation of a supplier’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component; • a lack of long-term supply arrangements for key components with our suppliers; • inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms; • difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner; • a modification or change in a manufacturing process or part that unknowingly or unintentionally negatively impacts the operation of our products; • production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications; • delay in delivery due to our suppliers prioritizing other customer orders over ours; 37 Table of Contents • damage to our brand reputation caused by defective components produced by our suppliers; • increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and • fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
Our reliance on these suppliers subjects us to a number of risks that could harm our business, including: • interruption of supply resulting from modifications to or discontinuation of a supplier’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component; • a lack of long-term supply arrangements for key components with our suppliers; • inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms; • difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner; • a modification or change in a manufacturing process or part that unknowingly or unintentionally negatively impacts the operation of our products; • production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications; • delay in delivery due to our suppliers prioritizing other customer orders over ours; • damage to our brand reputation caused by defective components produced by our suppliers; • increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and • fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
The Growth Direct platform may contain undetected errors or defects and may not meet the expectations of our customers, which means our business, financial condition, results of operations and prospects could suffer. Our Growth Direct platform includes the Growth Direct system, proprietary consumables and our LIMS connection software.
The Growth Direct platform may contain undetected errors or defects or may not otherwise meet the expectations of our customers, which means our business, financial condition, results of operations and prospects could suffer. Our Growth Direct platform includes the Growth Direct system, proprietary consumables and our LIMS connection software.
The inability to manufacture our systems and consumables could develop if our facility is inoperable or suffers a loss of utilization for even a short period of time and may result in the loss of customers or harm to our reputation.
The inability to manufacture our systems and consumables could develop if our Lowell facility is inoperable or suffers a loss of utilization for even a short period of time and may result in the loss of customers or harm to our reputation.
Our facility and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters, the severity and frequency of which may be amplified by global climate change, or other circumstances beyond our control, including fire, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our customers and develop products.
Our facilities and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters, the severity and frequency of which may be amplified by global climate change, or other circumstances beyond our control, including fire, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our customers and develop products.
Doing business internationally involves a number of risks, including: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us or our distributors to obtain approvals to conduct our business in various countries; • differing intellectual property rights; • complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third-party intellectual property claims; • difficulties in staffing and managing foreign operations; • logistics and regulations associated with shipping systems and parts and components for systems and consumables, as well as transportation delays; 34 Table of Contents • travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service customers; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; • international trade disputes that could result in tariffs and other protective measures; • natural disasters, the severity and frequency of which may be amplified by global climate change, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • regulatory and compliance risks, including severe penalties such as criminal and civil penalties, disgorgement and other remedial measures, that relate to the U.S.
Doing business internationally involves a number of risks, including: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us or our distributors to obtain approvals to conduct our business in various countries; • differing intellectual property rights; • complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third-party intellectual property claims; • difficulties in staffing and managing foreign operations; • logistics and regulations associated with shipping systems and parts and components for systems and consumables, as well as transportation delays; • travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service customers; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations; • international trade disputes that have resulted or could in the future result in tariffs and other protective measures taken by the U.S. or other countries; • natural disasters, the severity and frequency of which may be amplified by global climate change, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • regulatory and compliance risks, including severe penalties such as criminal and civil penalties, disgorgement and other remedial measures, that relate to the U.S.
Our success depends on, among other things, the market’s confidence that the Growth Direct platform is capable of substantially enhancing quality control in the conduct of manufacturing activities as compared to the traditional method of MQC testing and will enable more efficient or improved drug manufacturing.
Our success depends on, among other things, the market’s confidence that the Growth Direct platform is capable of substantially enhancing quality control in the conduct of manufacturing activities as compared to the traditional method of MQC testing or that of competitive products, and will enable more efficient or improved drug manufacturing.
Until such time, if ever, as we can generate sufficient cashflow, we may finance our cash needs through a combination of equity offerings and debt financings or other sources. We do not currently have any committed external source of funds.
Until such time, if ever, as we can generate sufficient cash flow, we may finance our cash needs through a combination of equity offerings and debt financings or other sources. We do not currently have any committed external source of funds.
See “ Risk Factors—We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful .” Any successful challenge to our patents could result in the unenforceability or invalidity of such patents, which could harm our business.
See “ —We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful .” Any successful challenge to our patents could result in the unenforceability or invalidity of such patents, which could harm our business.
Additionally, even if we conclude our internal controls are effective for a given period, we may in the future identify one or more material weaknesses in our internal controls, in which case our management will be unable to conclude that our internal control over financial reporting is effective.
Additionally, even if we conclude our internal control over financial reporting is effective for a given period, we may in the future identify one or more material weaknesses, in which case our management will be unable to conclude that our internal control over financial reporting is effective.
If we see additional pressure on our labor, materials and freight costs, we could see negative effects on our results of operations (including product costs), cash flows and overall financial condition. Global economic and political instability and geopolitical conflicts could adversely affect our business, financial condition or results of operations.
If we see additional pressure on our labor, materials and freight costs, we could see negative effects on our results of operations (including product costs), cash flows and overall financial condition. Global economic and political instability and geopolitical events could adversely affect our business, financial condition or results of operations.
We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. We have devoted significant efforts to streamline our business operations and refocus our personnel strategy, with the goal of achieving resumed growth in our business operations.
We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. We have devoted significant efforts to streamline our business operations and refocus our personnel strategy, with the goal of achieving sustained growth in our business operations.
Based on the number of shares of Class A common stock outstanding as of December 31, 2023, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock and their respective affiliates hold, in the aggregate, a majority of our outstanding voting stock.
Based on the number of shares of Class A common stock outstanding as of December 31, 2024, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock and their respective affiliates hold, in the aggregate, a majority of our outstanding voting stock.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • impairment of our business reputation and significant negative media attention; 30 Table of Contents • withdrawal of customers; • significant costs to defend the litigation; • distraction of management’s attention from our primary business; • substantial monetary awards to claimants; • inability to commercialize a product; • product recalls or withdrawals; • decreased market demand for any product; and • loss of revenue.
In addition, regardless of merit or eventual outcome, product liability claims may result in: • impairment of our business reputation and significant negative media attention; • withdrawal of customers; • significant costs to defend the litigation; • distraction of management’s attention from our primary business; • substantial monetary awards to claimants; • inability to commercialize a product; • product recalls or withdrawals; • decreased market demand for any product; and • loss of revenue.
While we monitor our use of open-source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous.
While we monitor our use of open-source 46 Table of Contents software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous.
Further, an inactive market may also impair our ability to raise capital by selling shares of our Class A common stock and may impair our ability to enter into strategic collaborations or acquire companies or products by using our shares of Class A common stock as consideration.
Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our Class A common stock and may impair our ability to enter into strategic collaborations or acquire companies or products by using our shares of Class A common stock as consideration.
If a court were to find the choice of forum 48 Table of Contents provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial 53 Table of Contents services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
Any failure to successfully implement our business strategy or the occurrence of any of the events or circumstances set forth in this Risk Factors section in this Annual Report on Form 23 Table of Contents 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
Any failure to successfully implement our business strategy or the occurrence of any of the events or circumstances set forth in this Risk Factors section in this Annual Report on Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of such disclosure.
Although we take measures to protect sensitive data from unauthorized access, use or disclosure, our information technology and infrastructure may still be vulnerable to, and we have in the past experienced, attacks by hackers or viruses or breaches due to employee error, malfeasance or other malicious or inadvertent disruptions.
Although we take measures to protect sensitive data from unauthorized access, use or disclosure, our information technology and infrastructure may still be vulnerable to, and we have in the past experienced and may continue to experience in the future, attacks by hackers or viruses or data breaches due to employee error, malfeasance or other malicious or inadvertent disruptions.
In the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. 38 Table of Contents Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent.
In the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent.
For additional information on our use of NOLs, see the section entitled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of results of operations—Income tax (benefit) expense ” and Note 11— Income taxes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
For additional information on our use of NOLs, see the section entitled 52 Table of Contents “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of results of operations—Income tax (benefit) expense ” and Note 11— Income taxes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our customers’ tendency to purchase our Growth Direct system, including multiple systems, in a single transaction, resulting in significant variations in sales of our systems over time; • the level of demand for our platform and solutions, which may vary significantly; • the length of time of the sales cycle for purchases of our systems; • seasonality in our business due to our customers’ budgetary cycles and time off during the summer vacation; • lead time needed for validation prior to our customers’ using and purchasing our consumables; • changes in demand for our consumables; • the timing and cost of, and level of investment in, technology development and commercialization activities, which may change from time to time; • the start, completion, and output of manufacturing runs; 22 Table of Contents • the costs of manufacturing and shipping our products or of providing services to our customers, which may impact our operating gross margin in any given period; • system repairs or replacements that may impact our customers’ confidence in us and our products and our reputation in the market; • the relative reliability and robustness of our platform; • the introduction of new products or product enhancements by us or others in our industry; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; • expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; • future accounting pronouncements or changes in our accounting policies; • the ability of our sales organization to design and execute effective sales processes; and • general market conditions and other factors, including factors, such as inflation, unrelated to our operating performance or the operating performance of our competitors.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our customers’ tendency to purchase our Growth Direct system, including multiple systems, in a single transaction, resulting in significant variations in sales of our systems over time; • the level of demand for our platform and solutions, which may vary significantly; • the length of time of the sales cycle for purchases of our systems; • seasonality in our business due to our customers’ budgetary cycles and time off during summer vacation and end-of-year periods; • lead time needed for validation prior to our customers’ using and purchasing our consumables; 23 Table of Contents • changes in demand for our consumables; • the timing and cost of, and level of investment in, technology development and commercialization activities, which may change from time to time; • the start, completion, and output of manufacturing runs; • the costs of manufacturing and shipping our products or of providing services to our customers, which may impact our operating gross margin in any given period; • system repairs or replacements that may impact our customers’ confidence in us and our products and our reputation in the market; • the relative reliability and robustness of our platform; • the introduction of new products or product enhancements by us or others in our industry; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; • expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; • future accounting pronouncements or changes in our accounting policies; • the ability of our sales organization to design and execute effective sales processes; • our implementation of cost reduction efforts, and the resulting costs and savings related to these actions; and • general market conditions and other factors, including factors, such as inflation, unrelated to our operating performance or the operating performance of our competitors.
Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, we may experience adverse effects on our business and reputation and the price of our common stock could decline.
Furthermore, if we make 24 Table of Contents downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, we may experience adverse effects on our business and reputation and the price of our common stock could decline.
This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
This 33 Table of Contents risk extends to the third-party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
The volatility in our growth has required significant time and attention from our management, and placed strains on our operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business. We expect to continue to increase headcount and to hire more specialized personnel in the future as we grow our business.
The volatility in our growth has required significant time and attention from our management, and placed strains on our operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business. As needed, we expect to selectively increase headcount and to hire more specialized personnel in the future as we grow our business.
While we have experience providing automated MQC testing for customers that manufacture a number of these approved therapies, we may encounter 25 Table of Contents challenges or unexpected issues as we apply our Growth Direct platform to testing a greater number of therapies as they are approved in future.
While we have experience providing automated MQC testing for customers that manufacture a number of these approved therapies, we may encounter challenges or unexpected issues as we apply our Growth Direct platform to testing a greater number of therapies as they are approved in future.
We believe our platform has potential applications across a wide range of markets and we have targeted certain markets in which we believe our technology has significant advantages or a higher probability of success or greater revenue 29 Table of Contents opportunity, such as the manufacture of cell and gene therapies.
We believe our platform has potential applications across a wide range of markets and we have targeted certain markets in which we believe our technology has significant advantages or a higher probability of success or greater revenue opportunity, such as the manufacture of cell and gene therapies.
Any of the foregoing could harm our business, financial condition, results of operations and prospects. 41 Table of Contents We may be involved in litigation claiming that we have infringed on a third party’s intellectual property, which could be time consuming and costly and may adversely affect our business, financial condition, results of operations and prospects.
Any of the foregoing could harm our business, financial condition, results of operations and prospects. We may be involved in litigation claiming that we have infringed on a third party’s intellectual property, which could be time consuming and costly and may adversely affect our business, financial condition, results of operations and prospects.
We may not be able to protect our rights in these trademarks or trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. We have not yet registered certain of our trademarks in all of our potential markets.
We may not be able to protect our rights in these trademarks or trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of 44 Table of Contents interest. We have not yet registered certain of our trademarks in all of our potential markets.
Furthermore, sales practices utilized by any such distributors that are locally acceptable may not comply with sales practices standards required under U.S. laws that apply to us, which could create additional compliance risk. Any of these issues could impair our ability to successfully place our Growth Direct systems and meet our revenue expectations.
Furthermore, with respect to distributors in non-U.S. jurisdictions, sales practices utilized by any such distributors that are locally acceptable may not comply with sales practices standards required under U.S. laws that apply to us, which could create additional compliance risk. Any of these issues could impair our ability to successfully place our Growth Direct systems and meet our revenue expectations.
Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products and services. 42 Table of Contents Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others.
Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products and services. Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others.
Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.
Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a victim entity, we may be unable to anticipate these techniques or implement adequate preventative measures.
Notice of breaches may be required to affected individuals, customers, or other state, federal or foreign regulators, and for extensive breaches, notice may need to be made to the media or State Attorneys General. Such a notice could harm our reputation and our ability to compete.
Notice of cybersecurity incidents and data breaches may be required to affected individuals, customers, or other state, federal or foreign regulators, and for extensive breaches, notice may need to be made to the media or State Attorneys General. Such a notice could harm our reputation and our ability to compete.
We do not have supply agreements with most of our suppliers beyond purchase orders and, although we maintain an inventory of components, forecasted amounts may be inaccurate and we may experience shortages as a result of serious supply problems with these suppliers.
We do not have supply agreements with most of our suppliers beyond purchase orders and, although we maintain an inventory of components, forecasted amounts may be inaccurate and we may experience shortages as a result of serious supply 40 Table of Contents problems with these suppliers.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts 50 Table of Contents by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
In addition, delisting 44 Table of Contents could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors and employees and fewer business development opportunities.
In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors and employees and fewer business development opportunities.
General risk factors Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, would be stockholders’ sole source of gain. We have never declared or paid any cash dividends on our common stock.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, would be stockholders’ sole source of gain. We have never declared or paid any cash dividends on our common stock.
We have recently expanded our sales organization and implemented measures designed to improve the effectiveness of our salesforce, but there can be no assurance that those efforts will translate into improved commercial outcomes. Competition for employees capable of selling expensive instruments within the drug manufacturing industry is intense.
We have recently expanded our sales organization and implemented measures designed to improve the effectiveness of our salesforce, but there can be no assurance that those efforts will translate into improved commercial outcomes. Competition for employees capable of selling expensive instruments into the pharmaceutical industry is intense.
We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in consumer spending or a negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.
We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in spending by our customers or they have a negative reaction to our pricing. A reduction in our revenue would be detrimental to our profitability and financial condition and could also have an adverse impact on our future growth.
We may not be able to attract and retain personnel or be able to build an efficient and effective sales organization, which could negatively impact sales and market acceptance of our products and limit our revenue growth and potential profitability.
We may not be able to attract and retain personnel or be able to build an efficient and effective sales organization, which could 28 Table of Contents negatively impact sales and market acceptance of our products and limit our revenue growth and potential profitability.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or products or grant licenses on terms that may not be favorable to us.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or 25 Table of Contents licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or products or grant licenses on terms that may not be favorable to us.
Social and cultural norms in certain countries may not support compliance with our corporate policies, including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we may operate are a risk to our financial performance and future growth.
Social and cultural norms in 38 Table of Contents certain countries may not support compliance with our corporate policies, including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we may operate are a risk to our financial performance and future growth.
Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may in the future conclude that there are material 46 Table of Contents weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may in the future conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
In addition, changes in global shipping 35 Table of Contents capacity and demand as well as the cost of raw materials and commodities such as oil (including derivative products including fuel and plastics) could negatively impact our freight and materials costs.
In addition, changes in global shipping capacity and demand as well as the cost of raw materials and commodities such as oil (including derivative products including fuel and plastics) could negatively impact our freight and materials costs.
We will need to continue to hire, train and manage additional qualified engineers, client and account services personnel, sales and marketing staff, software, manufacturing, distribution and quality assurance personnel in order to develop and launch new products, innovate and improve our existing products and successfully commercialize our platform and solutions.
We will need to continue to hire, train and manage additional qualified engineers, client and account services personnel, sales and marketing staff, software, manufacturing, distribution and quality assurance personnel in order to develop and launch new products, innovate and 29 Table of Contents improve our existing products and successfully commercialize our platform and solutions.
Further, competition in the automated MQC testing market, while currently limited, may increase in future, and we may not be able to maintain our leading position in the industry as a result.
Further, competition in the automated MQC testing market, while currently limited, is growing and may continue to increase in future, and we may not be able to maintain our leading position in the industry as a result.
The market price for our Class A common stock may be influenced by many factors, including: • actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; • the introduction of new products or product enhancements by us or others in our industry; • variances in product and system reliability; 43 Table of Contents • overall conditions in our industry and the markets in which we operate; • disputes or other developments with respect to our or others’ intellectual property rights; • actual or anticipated changes in our operating results or growth rate as a result of our competitors’ operating results; • our ability to develop and market new and enhanced products and expand into new markets on a timely basis; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • product liability claims or other litigation; • announcement or expectation of additional financing effort; • sales of our common stock by us or our stockholders; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • media exposure of our products or of those of others in our industry; • changes in earnings estimates or recommendations by securities analysts; • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; and • the other factors described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K.
The market price for our Class A common stock may be influenced by many factors, including: • actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; • the introduction of new products or product enhancements by us or others in our industry; • variances in product and system reliability; • overall conditions in our industry and the markets in which we operate; • disputes or other developments with respect to our or others’ intellectual property rights; • actual or anticipated changes in our operating results or growth rate as a result of our competitors’ operating results; • our ability to develop and market new and enhanced products and expand into new markets on a timely basis; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • product liability claims or other litigation; • announcement or expectation of additional financing effort; • sales of our common stock by us or our stockholders; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • media exposure of our products or of those of others in our industry; • changes in earnings estimates or recommendations by securities analysts; • general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors; and • the other factors described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. 47 Table of Contents If our Class A common stock is delisted from the Nasdaq Stock Market, the liquidity of our Class A common stock would be adversely affected and the market price of our common stock could decrease.
Additionally, we may be subject to legal claims arising from any defects or errors in our platform, and in the systems, consumables and software that comprise our platform. In the past, we have repaired, and in exceptional cases, replaced or reacquired Growth Direct systems under warranty.
Additionally, we may be subject to legal claims arising from any defects or errors in our platform, and in the systems, consumables and software that comprise our platform. In the past, we have repaired, and in exceptional cases, replaced or reacquired Growth 31 Table of Contents Direct systems under warranty.
If we cannot maintain the level of sales of our Growth Direct systems or the sales of our consumables and service contracts to existing customers declines, our future operating results would be adversely affected.
If we cannot maintain the level of sales of our Growth Direct systems or the sales of our consumables and services to existing customers declines, our future operating results would be adversely affected.
Any such incident could result in legal claims or proceedings, including for breaches of confidential information obligations with contractual counterparties, and liability under federal or state laws that protect the privacy of personal information, and regulatory penalties.
Any such incident could result in legal notifications and/or disclosures, as well as legal claims or proceedings, including for breaches of confidential information obligations with contractual counterparties, and liability under federal or state laws that protect the privacy of personal information, and regulatory penalties.
We may not be able to compete effectively against these organizations. In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies.
We may not be able to compete effectively against these organizations. 30 Table of Contents In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies.
These NOLs may be available to offset future taxable income, if any, that begin to expire in 2038 and 2032, respectively. Additionally, we had federal NOLs of $216.5 million generated since 2018, which do not expire.
These NOLs may be available to offset future taxable income, if any, that begin to expire in 2038 and 2032, respectively. Additionally, we had federal NOLs of $255.6 million generated since 2018, which do not expire.
These tax credits may be available to offset future tax liabilities and begin to expire in 2038 and 2024, respectively.
These tax credits may be available to offset future tax liabilities and begin to expire in 2038 and 2025, respectively.
Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Any disruption or loss of information technology or 31 Table of Contents telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business and our reputation.
Moreover, despite network security and back-up measures, our servers remain potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business and our reputation.
However, if competitors develop and commercialize an automated MQC testing platform that is comparable to ours and are able to obtain traction with customers, we may not be able to maintain our lead position and execute our business strategy.
However, if competitors develop and commercialize an automated MQC testing platform and are able to obtain traction with customers, we may not be able to maintain our lead position and execute our business strategy.
The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.
The regulatory environment in the U.S. and abroad related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future.
We intend to utilize the extended transition period and, as a result, we will not be required to comply with new or revised accounting standards on the same timeline as other public companies.
We intend to utilize the extended transition period and, as 49 Table of Contents a result, we will not be required to comply with new or revised accounting standards on the same timeline as other public companies.
The Nasdaq Stock Market LLC, or Nasdaq, has minimum requirements that a company must meet in order to remain listed on Nasdaq markets, including that we maintain a minimum closing bid price of $1.00 per share for our Class A common stock.
The Nasdaq Stock Market LLC ("Nasdaq"), on which our Class A common stock is currently listed has minimum requirements that a company must meet in order to remain listed, including that we maintain a minimum closing bid price of $1.00 per share for our Class A common stock.
In 27 Table of Contents addition, the time and cost of establishing a specialized sales, marketing and service force for a particular product or service may be difficult to justify in light of the revenue generated or projected. We may engage distributors or other strategic partners for the sale of our products, such as in jurisdictions outside of the U.S.
In addition, the time and cost of establishing a specialized sales, marketing and service force for a particular product or service may be difficult to justify in light of the revenue generated or projected. We may engage distributors or other strategic partners for the sale of our products, including in jurisdictions outside of the U.S.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
Cybersecurity incidents and data breaches, data loss and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in the previous three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
However, if certain events occur prior to such date, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in the previous three-year period, we will cease to be an emerging growth company prior to December 31, 2026.
In addition, our 28 Table of Contents customers may also elect to continue to use the traditional MQC testing method rather than our platform and may decide to stop using our platform.
In addition, our customers may also elect to continue to use the traditional MQC testing method rather than our platform and may decide to stop using our platform.
From time to time, we release earnings guidance in our quarterly and annual earnings conference calls, quarterly and annual earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance includes forward-looking statements based on projections prepared by our management.
From time to time, we announce earnings guidance and other expectations regarding the future performance of our business in our quarterly and annual earnings conference calls, quarterly and annual earnings releases, or otherwise, that represents our management’s estimates as of the date of such disclosure. This guidance includes forward-looking statements based on projections prepared by our management.
Risks Related to Our Financial Position and Need for Capital We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability. We have incurred significant losses since our inception.
Risks Related to Our Financial Position and Need for Capital We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to achieve and maintain positive cash flow and profitability. We have incurred significant losses since our inception.
Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.
In the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.
While we believe that we could, if necessary, transfer our manufacturing capabilities to our back-up 36 Table of Contents facility, there can be no assurance that we would achieve such transfer in a timely manner or at all and mitigate disruption to our overall business.
While we believe that we could, if necessary, transfer our manufacturing capabilities to the Lexington facility, there can be no assurance that we would achieve such transfer in a timely manner or at all and mitigate disruption to our overall business.
Risks Related to Our Intellectual Property If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including the Growth Direct platform, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
We cannot predict the impact of such changes and cannot be certain of our future compliance. 42 Table of Contents Risks Related to Our Intellectual Property If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including the Growth Direct platform, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
Our ability to use our net operating losses and research and development tax credits to offset future taxable income or income tax liabilities are subject to certain limitations. As of December 31, 2023, we had U.S. federal and state net operating loss, or NOL, carryforwards of $229.3 million and $100.4 million, respectively.
Our ability to use our net operating losses and research and development tax credits to offset future taxable income or income tax liabilities is subject to certain limitations. As of December 31, 2024, we had U.S. federal and state net operating loss, or NOL, carryforwards of $268.4 million and $114.8 million, respectively.
Our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting following the date we are no longer an emerging growth company.
Our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting following the date we are no longer an emerging growth company and do not qualify as a non-accelerated filer.
Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions. Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition, results of operations and prospects.
Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions. Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition, results of operations and prospects. In addition, certain international markets are subject to significant political and economic uncertainty.
Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or effectively incentivize these additional key personnel on acceptable terms given the competition among numerous technology companies for similar personnel. We depend on our information technology systems, and any failure of these systems could harm our business.
Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or effectively incentivize these additional key personnel on acceptable terms given the competition among numerous technology companies for similar personnel.
We have limited experience in marketing and sales, and if we are unable to improve the effectiveness of our marketing and sales organization with new and existing customers and address our customers’ needs or to expand our customer base, our business may be adversely affected.
We have limited experience in marketing and sales, and if we are unable to successfully market our products to new and existing customers, address our customers’ needs or to expand our customer base, our business may be adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have also established incident response policies and procedures, overseen by our Information Technology, or IT, Director, to review and classify cybersecurity incidents and to define roles and responsibilities for response and 50 Table of Contents remediation in the event of a cyber incident.
Biggest changeWe have also established incident response policies and procedures, overseen by our Information Technology, or IT, Director, to review and classify cybersecurity incidents and to define roles and responsibilities for response and remediation in the event of a cyber incident.
In addition, we have assembled an IT Steering Committee, or ITSC, which is comprised of the Executive Leadership Team as well as IT management, to support management and to maintain visibility of the status and ongoing strategy of our cybersecurity program.
In addition, we have assembled an IT Steering Committee, or ITSC, which is comprised of the 54 Table of Contents Executive Leadership Team as well as IT management, to support management and to maintain visibility of the status and ongoing strategy of our cybersecurity program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn June 2021, we entered into a sublease agreement for 33,339 square feet of office, back-up manufacturing, sales demonstration lab and research and development innovation space in Lexington, Massachusetts, which expires in June 2029. Further, we maintain inventory at storage a warehouse in Noord-Brabant, Netherlands as well as various offsite warehouses in the United States and Europe.
Biggest changeWe lease this space under a lease agreement, as amended, which expires in July 2029. Further, we maintain inventory at storage a warehouse in Noord-Brabant, Netherlands as well as various offsite warehouses in the United States and Europe. We believe that our facilities are sufficient to meet our current needs.
Item 2. Properties. Our principal office is located in Lowell, Massachusetts, where we lease 67,663 square feet of office, laboratory, manufacturing and inventory-storage space. We lease this space under a lease agreement, as amended, which expires in July 2029.
Item 2. Properties. Our principal office is located in Lexington, Massachusetts, where we sublease 33,339 square feet of office, back-up manufacturing, sales demonstration lab and research and development innovation space, which expires in June 2029. We also lease 67,663 square feet of office, laboratory, manufacturing and inventory-storage space in Lowell, Massachusetts.
Removed
We believe that our facilities are sufficient to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures. Not Applicable. 51 Table of Contents PART II
Biggest changeRegardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures. Not Applicable. 55 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere is no established public trading market for our Class B common stock. Holders As of February 28, 2024, there were 35 holders of record of our Class A common stock and 1 holder of record of our Class B common stock. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
Biggest changeOn August 5, 2024, our Class A common stock was transferred to the Nasdaq Capital Market. There is no established public trading market for our Class B common stock. Holders As of February 24, 2025, there were 35 holders of record of our Class A common stock and 1 holder of record of our Class B common stock.
There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act and other periodic reports previously filed with the SEC. Item 6. Reserved 52 Table of Contents
There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act and other periodic reports previously filed with the SEC. Item 6. Reserved. 56 Table of Contents
Use of Proceeds On July 14, 2021, the registration statement on Form S-1 (File No. 333-257431) relating to our IPO was declared effective by the SEC.
Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser None. Use of Proceeds On July 14, 2021, the registration statement on Form S-1 (File No. 333-257431) relating to our IPO was declared effective by the SEC.
We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser None.
Dividend Policy We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+38 added−27 removed65 unchanged
Biggest changeResults of operations Comparison of the years ended December 31, 2023 and 2022 Year Ended December 31, 2023 December 31, 2022 Change Amount % (dollars in thousands) Revenue: Product revenue $ 14,805 $ 11,056 $ 3,749 33.9 % Service revenue 7,714 6,077 1,637 26.9 % Total revenue $ 22,519 $ 17,133 $ 5,386 31.4 % Revenue Product revenue increased by $3.7 million, or 33.9%, with the increase primarily attributable to 16 Growth Direct system placements in 2023, compared to 9 in the prior year, as well as higher consumable shipment volumes due to an increase in cumulative validated Growth Direct systems.
Biggest changeWe have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date because of uncertainty about future taxable income to permit use of the assets. 64 Table of Contents Results of operations Comparison of the years ended December 31, 2024 and 2023 Year Ended December 31, 2024 December 31, 2023 Change Amount % (dollars in thousands) Revenue: Product revenue $ 18,728 $ 14,805 $ 3,923 26.5 % Service revenue 9,323 7,714 1,609 20.9 % Total revenue $ 28,051 $ 22,519 $ 5,532 24.6 % Revenue Product revenue increased by $3.9 million, or 26.5%, with the increase primarily attributable to an increase in Growth Direct system placements in 2024 as well as higher consumable shipment volumes due to an increase in cumulative validated Growth Direct systems.
Both proprietary consumables support the growth-based compendial method for MQC testing mandated by global regulators and provide results that are comparable to traditional consumables. Our consumables are designed with features that enable automation on the Growth Direct system, with bar coding for tracking and data integrity, and physical characteristics for robotic handling, to support vision detection, and to prevent counterfeiting.
Our proprietary consumables support the growth-based compendial method for MQC testing mandated by global regulators and provide results that are comparable to traditional consumables. Our consumables are designed with features that enable automation on the Growth Direct system, with bar coding for tracking and data integrity, and physical characteristics for robotic handling, to support vision detection, and to prevent counterfeiting.
We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of the IPO, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of the IPO, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.
We measure all restricted common stock and restricted stock units granted to employees based on the common stock value on the date of grant. The purchase price of the restricted common stock was the common stock value on the date of grant. Valuation of inventory We value inventory at the lower of cost or net realizable value.
We measure all restricted common stock and restricted stock granted to employees based on the common stock value on the date of grant. The purchase price of the restricted common stock was the common stock value on the date of grant. Valuation of inventory We value inventory at the lower of cost or net realizable value.
To date, we have funded our operations primarily through proceeds from sales of redeemable convertible preferred stock, borrowings under loan agreements, revenue from sales of our products, services and contracts and proceeds from our IPO.
To date, we have funded our operations primarily through proceeds from sales of redeemable convertible preferred stock, borrowings under loan agreements, revenue from sales of our products and services, and proceeds from our IPO.
Research and development Research and development expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering and consultant services and other costs associated with our technology Growth Direct platform and products, which include: • employee-related expenses, including costs for salaries, bonuses and other personnel costs including stock-based compensation expense, for employees engaged in research and development functions; • the cost of developing, maintaining and improving new and existing product designs; • the cost of hardware and software engineering; • research materials and supplies; 58 Table of Contents • external costs of outside consultants engaged to conduct research and development associated with our technology and products; and • allocated information technology and facility-related costs, which include headcount-related costs for those functions as well as expenses for information technology systems and services, software, rent, facilities maintenance, and insurance as well as related depreciation and amortization.
Research and development Research and development expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering and consultant services and other costs associated with our technology Growth Direct platform and products, which include: • employee-related expenses, including costs for salaries, bonuses and other personnel costs including stock-based compensation expense, for employees engaged in research and development functions; • the cost of developing, maintaining and improving new and existing product designs; • the cost of hardware and software engineering; • research materials and supplies; • external costs of outside consultants engaged to conduct research and development associated with our technology and products; and • allocated information technology and facility-related costs, which include headcount-related costs for those functions as well as expenses for information technology systems and services, software, rent, facilities maintenance, and insurance as well as related depreciation and amortization.
We believe that our cash, cash equivalents and investments as of December 31, 2023 will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date these consolidated financial statements were issued.
We believe that our cash, cash equivalents and investments as of December 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date these consolidated financial statements were issued.
We may experience inflationary pressures on significant cost categories including labor, materials and freight. We continue to monitor the impact of inflation on these costs in order to minimize its effects through productivity improvements and cost reductions. There can be no assurance, however, that our operating results will not be affected by inflation in the future.
We may experience inflationary pressures on significant cost 58 Table of Contents categories including labor, materials and freight. We continue to monitor the impact of inflation on these costs in order to minimize its effects through productivity improvements and cost reductions. There can be no assurance, however, that our operating results will not be affected by inflation in the future.
The terms of the amendment include options for a one-time, five-year extension of the lease and early termination of the lease in July 2026 (subject to an early termination fee). Monthly rent payments are fixed and future minimum lease payments under the lease (as amended) are $3.7 million as of December 31, 2023, including $0.6 million in short-term obligations.
The terms of the amendment include options for a one-time, five-year extension of the lease and early termination of the lease in July 2026 (subject to an early termination fee). Monthly rent payments are fixed and future minimum lease payments under the lease (as amended) are $3.0 million as of December 31, 2024, including $0.6 million in short-term obligations.
Other (expense) income, net Other (expense) income , net primarily consists of other miscellaneous income and expense unrelated to our core operations. Income tax expense (benefit) We generated significant taxable losses during the years ended December 31, 2023 and 2022, and, therefore, have not recorded any U.S. federal or state income tax expense during those periods.
Other (expense) income, net Other (expense) income, net primarily consists of other miscellaneous income and expense unrelated to our core operations. Income tax expense We generated significant taxable losses during the years ended December 31, 2024 and 2023, and, therefore, have not recorded any U.S. federal or state income tax expense during those periods.
Nasdaq notice of failure to satisfy a continued listing rule On February 2, 2024, we received a notification letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC, or Nasdaq, notifying us that the bid price for our Class A common stock, par value $0.01 per share, had closed below $1.00 per share for thirty (30) consecutive business days and that, as a result, we were not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market under Nasdaq Listing Rule 5550(a)(2), or the Bid Price Requirement.
Nasdaq notice of failure to satisfy a continued listing rule On February 2, 2024, we received a notification letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC ("Nasdaq") notifying us that the bid price for our Class A common stock, par value $0.01 per share, had closed below $1.00 per share for the preceding thirty consecutive business days and that, as a result, we were not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).
We expect consumable revenue to increase in future periods as our base of cumulative validated Growth Direct systems grows and those systems enter routine use and utilize our consumables on a recurring, ongoing basis. 57 Table of Contents LIMS Connection Software Our LIMS connection software is a non-recurring product revenue stream.
We expect consumable revenue to increase in future periods as our base of cumulative validated Growth Direct systems grows and those systems enter routine use and utilize our consumables on a recurring, ongoing basis. LIMS Connection Software Our LIMS connection software is a non-recurring product revenue stream.
As of December 31, 2023, we also had U.S. federal and state research and development tax credit carryforwards of $2.2 million and $3.2 million, respectively. These tax credits may be available to offset future tax liabilities and begin to expire in 2038 and 2024, respectively.
As of December 31, 2024, we also had U.S. federal and state research and development tax credit carryforwards of $2.8 million and $3.2 million, respectively. These tax credits may be available to offset future tax liabilities and begin to expire in 2038 and 2025, respectively.
Concurrent with entering into the sublease agreement, we executed an option agreement with the property owner which provides us the 62 Table of Contents option to enter into a new direct lease for the Lexington facility for an additional five years following expiration of the sublease.
Concurrent with entering into the sublease agreement, we executed an option agreement with the property owner which provides us the option to enter into a new direct lease for the Lexington facility for an additional five years following expiration of the sublease.
We expect this volatility to continue for the foreseeable future, which may cause fluctuations in our operating results and financial metrics. 63 Table of Contents Critical accounting policies and significant judgments and estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
We expect this volatility to continue for the foreseeable future, which may cause fluctuations in our operating results and financial metrics. Critical accounting policies and significant judgments and estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
We believe that the following 55 Table of Contents metrics are representative of our current business; however, we anticipate these may change or be substituted for additional or different metrics as our business grows and evolves.
We believe that the following metrics are representative of our current business; however, we anticipate these may change or be substituted for additional or different metrics as our business grows and evolves.
In order to meet the expectations of our customers, we have made significant investments to build infrastructure and develop capabilities in areas such as procurement, manufacturing, distribution, quality and after sales service. Given our current business scale, our revenues are not yet sufficient to fully cover these costs, impacting our current gross margin profile.
In order to meet the expectations of our customers, we have made significant investments to build infrastructure and develop capabilities in areas such as procurement, manufacturing, distribution, quality and after-sales service. Given our current business scale, our revenues are not yet sufficient to fully cover these costs, impacting our current gross margin profile. For additional information, see Item 1.
If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue our expansion plans including the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations.
If we are unable to raise capital or enter into such agreements as, if and when, needed, we may have to significantly delay, scale back or discontinue our expansion plans including the further development and commercialization efforts of one or more of our products.
Consumables Our consumable revenue is a recurring product revenue stream composed of two proprietary consumables to capture test samples for analysis on the Growth Direct system, an Environmental Monitoring, or EM, consumable, and a Water/Bioburden consumable, or W/BB, consumable.
Consumables Our consumable revenue is a recurring product revenue stream composed of three proprietary consumables to capture test samples for analysis on the Growth Direct system, an Environmental Monitoring ("EM") consumable, a Water/Bioburden ("W/BB") consumable, and a Sterility ("ST") consumable.
Monthly rent payments are fixed and future minimum lease payments over the term of the sublease are $4.2 million as of December 31, 2023, including $0.7 million in short-term obligations.
Monthly rent payments are fixed and future minimum lease payments over the term of the sublease are $3.4 million as of December 31, 2024, including $0.7 million in short-term obligations.
These additional systems will allow our existing customers to convert more of their test volume at existing locations, to support multiple locations, to meet redundancy requirements, or to increase capacity. As of December 31, 2023, approximately 40% of our customers have purchased Growth Direct systems for multiple sites, and approximately 55% of our customers have purchased multiple Growth Direct systems.
These additional systems will allow our existing customers to convert more of their test volume at existing locations, to support multiple locations, to meet redundancy requirements, or to increase capacity. As of December 31, 2024, approximately 41% of our customers have purchased Growth Direct systems for multiple sites, and approximately 57% of our customers have purchased multiple Growth Direct systems.
During the year ended December 31, 2023 through the filing date of this Annual Report, we did not issue or sell any shares of our Class A common stock under this facility.
During the year ended December 31, 2024 through the filing date of this Annual Report on Form 10-K, we did not issue or sell any shares of our Class A common stock under this facility.
Financing activities During the year ended December 31, 2023, net cash provided by financing activities was $0.1 million, a decrease of $0.5 million compared to the year ended December 31, 2022. In both periods, substantially all of the net cash provided by financing activities related to proceeds from stock option exercises and purchases from our ESPP.
Financing activities During the year ended December 31, 2024, net cash provided by financing activities was $0.2 million, an increase of $0.1 million compared to the year ended December 31, 2023. In both periods, substantially all of the net cash provided by financing activities related to proceeds from stock option exercises and purchases from our ESPP.
Recently issued accounting pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Any write-down of inventory to net realizable value creates a new cost basis. 69 Table of Contents Recently issued accounting pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
While our significant accounting policies are described in more detail in Note 2 — Summary of Significant Accounting Policies — to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are those most important to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 2 — Summary of Significant Accounting Policies — to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are those most important to the judgments and estimates used in the preparation of our consolidated financial statements. 68 Table of Contents Revenue recognition Product revenue We derive product revenue primarily from the sale of Growth Direct systems and related consumables.
The straight-line method of expense recognition is applied to all awards with service-only conditions. 64 Table of Contents The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model, which uses inputs such as the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model, which uses inputs such as the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
As of December 31, 2023, we had the following cash and investment-related assets on our consolidated balance sheet (in thousands): December 31, 2023 Cash and cash equivalents $ 24,285 Short-term investments 67,768 Long-term investments 2,911 Restricted cash 284 Total $ 95,248 Contractual obligations and commitments In October 2013, we entered into an operating lease for office and manufacturing space in Lowell, Massachusetts.
As of December 31, 2024, we had the following cash and investment-related assets on our consolidated balance sheet (in thousands): December 31, 2024 Cash and cash equivalents $ 16,911 Short-term investments 33,821 Restricted cash 365 Total $ 51,097 Contractual obligations and commitments In October 2013, we entered into an operating lease for office and manufacturing space in Lowell, Massachusetts.
These NOLs may be available to offset future taxable income and begin to expire in 2038 and 2032, respectively. Additionally, we had a U.S. federal NOL carryforward of $216.5 million generated since 2018, which do not expire.
As of December 31, 2024, we had U.S. federal and state NOL carryforwards of $268.4 million and $114.8 million, respectively. These NOLs may be available to offset future taxable income and begin to expire in 2038 and 2032, respectively. Additionally, we had a U.S. federal NOL carryforward of $255.6 million generated since 2018, which do not expire.
By expanding and continuously enhancing the Growth Direct platform, we believe we can drive incremental revenue from existing clients as well as broaden the appeal of our solutions to potential new customers. Revenue mix Our revenue is derived from sales of our Growth Direct systems, our LIMS connection and other software, proprietary consumables, and services.
By expanding and continuously enhancing the Growth Direct platform, we believe we can drive incremental revenue from existing clients as well as broaden the appeal of our solutions to potential new customers.
We generated revenue of $22.5 million and $17.1 million for the years ended December 31, 2023 and 2022, respectively, and incurred net losses of $52.5 million and $60.8 million for those same years. As of December 31, 2023, we had an accumulated deficit of $428.4 million.
We generated revenue of $28.1 million and $22.5 million for the years ended December 31, 2024 and 2023, respectively, and incurred net losses of $46.9 million and $52.5 million for those same years. As of December 31, 2024, we had an accumulated deficit of $475.3 million.
Revenue recognition Product revenue We derive product revenue primarily from the sale of Growth Direct systems and related consumables. Product revenue is recognized when control of the promised systems and consumables is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or consumables (the transaction price).
Product revenue is recognized when control of the promised systems and consumables is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or consumables (the transaction price). For Growth Direct systems and consumables sold by us, control transfers to the customer at a point in time.
Cash flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2023 2022 Net cash used in operating activities $ (45,081) $ (58,547) Net cash provided by (used in) investing activities 42,153 (93,469) Net cash provided by financing activities 149 693 Net decrease in cash and cash equivalents and restricted cash $ (2,779) $ (151,323) Operating activities During the year ended December 31, 2023, net cash used in operating activities was $45.1 million, a decrease of $13.5 million compared to the prior year.
Cash flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2024 2023 Net cash used in operating activities $ (44,153) $ (45,081) Net cash provided by investing activities 36,657 42,153 Net cash provided by financing activities 203 149 Net decrease in cash and cash equivalents and restricted cash $ (7,293) $ (2,779) Operating activities During the year ended December 31, 2024, net cash used in operating activities was $44.2 million, a decrease of $0.9 million compared to the prior year.
Year Ended December 31, 2023 Percentage of total revenue Year Ended December 31, 2022 Percentage of total revenue (in thousands) (in thousands) Product revenue $ 14,805 65.7 % $ 11,056 64.5 % Service revenue 7,714 34.3 % 6,077 35.5 % Total revenue $ 22,519 100.0 % $ 17,133 100.0 % Product revenue We derive product revenue primarily from the sale of our Growth Direct systems and related consumables as well as our LIMS connection software, which the majority of our customers purchase.
Year Ended December 31, 2024 Percentage of total revenue Year Ended December 31, 2023 Percentage of total revenue (in thousands) (in thousands) Product revenue $ 18,728 66.8 % $ 14,805 65.7 % Service revenue 9,323 33.2 % 7,714 34.3 % Total revenue $ 28,051 100.0 % $ 22,519 100.0 % Product revenue We derive product revenue primarily from the sale of our Growth Direct systems and related consumables as well as our LIMS connection software, which the majority of our customers purchase.
Revenue is recognized when services are provided to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services (the transaction price).
Service revenue We derive service revenue primarily from the sale of validation services, service contracts and field service (including installation). Revenue is recognized when services are provided to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services (the transaction price).
On December 15, 2023, we entered into a sales agreement, or the ATM Agreement, to establish an "at-the-market" facility with Cowen and Company, LLC, or Cowen, pursuant to which we may issue and sell shares of our Class A common stock having aggregate sales proceeds of up to $50,000,000 from time to time through Cowen, acting as sales agent and/or principal.
For example, on December 15, 2023, we entered into a sales agreement, or the ATM Agreement, to establish an "at-the-market" facility with Cowen and Company, LLC, or Cowen, pursuant to which we may issue and sell shares of their Class A common stock.
Year Ended December 31, Change Amount % 2023 2022 (dollars in thousands) Systems placed: Systems placed in period 16 9 7 77.8 % Cumulative systems placed 141 125 16 12.8 % Systems validated: Systems validated in period 18 19 (1) (5.3 %) Cumulative systems validated 121 103 18 17.5 % Product and service revenue — total $ 22,519 $ 17,133 $ 5,386 31.4 % Product and service revenue — recurring $ 13,546 $ 10,983 $ 2,563 23.3 % Growth Direct system placements We consider a Growth Direct system to be “placed” upon transfer of control of the system to the customer, at which point the revenue for that system is recognized.
Year Ended December 31, Change Amount % 2024 2023 (dollars in thousands) Systems placed: Systems placed in period 21 16 5 31.3 % Cumulative systems placed 162 141 21 14.9 % Systems validated: Systems validated in period 16 18 (2) (11.1 %) Cumulative systems validated 137 121 16 13.2 % Product and service revenue — total $ 28,051 $ 22,519 $ 5,532 24.6 % Product and service revenue — recurring $ 15,451 $ 13,546 $ 1,905 14.1 % Growth Direct system placements We consider a Growth Direct system to be “placed” upon transfer of control of the system to the customer, at which point the revenue for that system is recognized.
General and administrative General and administrative expenses consist primarily of salaries, bonuses and other personnel costs including stock-based compensation expense for our executive, finance, legal, human resources and general management employees, as well as director and officer insurance costs and professional fees for legal, patent, accounting, audit, investor relations, recruiting, consulting, regulatory, compliance, board of directors' fees and other services.
For future periods, we expect sales and marketing expenses to increase in future periods as the number of sales and marketing personnel grows and we continue to expand our geographic reach and capabilities, broaden our customer base and introduce new products. 63 Table of Contents General and administrative General and administrative expenses consist primarily of salaries, bonuses and other personnel costs including stock-based compensation expense for our executive, finance, legal, human resources and general management employees, as well as director and officer insurance costs and professional fees for legal, patent, accounting, audit, investor relations, recruiting, consulting, regulatory, compliance, board of directors' fees and other services.
Utilization of the U.S. federal and state NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation due to ownership changes that have occurred previously or that could occur in the future. 59 Table of Contents We completed a Section 382 study through July 31, 2020 to assess whether a change of control has occurred or whether there have been multiple changes of control.
Utilization of the U.S. federal and state NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation due to ownership changes that have occurred previously or that could occur in the future.
Costs of revenue Year Ended December 31, 2023 December 31, 2022 Change Amount % (dollars in thousands) Cost of product revenue $ 20,060 $ 18,477 $ 1,583 8.6 % Cost of service revenue $ 7,944 $ 7,196 $ 748 10.4 % Cost of product revenue increased by $1.6 million, or 8.6%.
Costs of revenue Year Ended December 31, 2024 December 31, 2023 Change Amount % (dollars in thousands) Cost of product revenue $ 21,041 $ 20,060 $ 981 4.9 % Cost of service revenue $ 7,119 $ 7,944 $ (825) (10.4) % Cost of product revenue increased by $1.0 million, or 4.9%.
Costs and operating expenses Costs of revenue Cost of product revenue primarily consists of costs for raw material parts and associated freight, shipping and handling costs, salaries and other personnel costs including stock-based compensation expense, contract manufacturer costs, scrap, warranty cost, inventory reserves, royalties, depreciation and amortization expense, allocated information technology and facility-related costs, overhead and other costs related to those sales recognized as product revenue in the period.
We expect service revenue to increase in future periods as the number of placed and validated Growth Direct systems grows and we are able to generate increasing non-recurring revenue from validation services and field service for newly placed systems and increasing recurring revenue from service contracts for validated systems. 62 Table of Contents Costs and operating expenses Costs of revenue Cost of product revenue primarily consists of costs for raw material parts and associated freight, shipping and handling costs, salaries and other personnel costs including stock-based compensation expense, contract manufacturer costs, scrap, warranty cost, inventory reserves, depreciation and amortization expense, allocated information technology and facility-related costs, overhead and other costs related to those sales recognized as product revenue in the period.
After a Growth Direct system is placed with a customer and installed, we work with the customer to validate the system, which typically takes anywhere from three to nine months.
We expect our validated Growth Direct systems to continue to grow over time as we increase our base of cumulative systems placed and then validate those systems. After a Growth Direct system is placed with a customer and installed, we work with the customer to validate the system, which typically takes anywhere from three to nine months.
We believe that our cash, cash equivalents and short and long-term investments will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date the consolidated financial statements contained in this Annual Report on Form 10-K for the year ended December 31, 2023 were issued.
If we are unable to raise capital as, if and when, needed, we may have to significantly delay, scale back or discontinue our expansion plans including further development and commercialization efforts of one or more of our products. 66 Table of Contents We believe that our cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date the consolidated financial statements contained in this Annual Report on Form 10-K for the year ended December 31, 2024 were issued.
As of December 31, 2023, we had placed 141 Growth Direct systems to forty customers globally, including 70% of the top twenty pharmaceutical companies as measured by revenue and the manufacturers of approximately 24% of globally approved cell and gene therapies, including manufacturers of 100% of approved gene-modified autologous CAR-T cell therapies..
As of December 31, 2024, we had placed 162 Growth Direct systems to forty-six customers globally, including 70% of the top twenty largest pharmaceutical companies as measured by revenue and the manufacturers of approximately 17% of U.S.
We have not recorded any U.S. federal or state income tax benefits for the net operating losses, or NOLs, we have incurred in each year or for the research and development tax credits we have generated in the United States. As of December 31, 2023, we had U.S. federal and state NOL carryforwards of $229.3 million and $100.4 million, respectively.
However, we did record an immaterial amount of foreign income tax expense during each of those periods. We have not recorded any U.S. federal or state income tax benefits for the net operating losses, or NOLs, we have incurred in each year or for the research and development tax credits we have generated in the United States.
Management focuses on validated Growth Direct systems as a leading indicator of likely future recurring revenue as well as a reflection of our success supporting our customers’ validating placed systems. We expect our validated Growth Direct systems to continue to grow over time as we increase our base of cumulative systems placed and then validate those systems.
Validated systems We regularly review the number of Growth Direct systems validated and cumulative Growth Direct systems validated in each period as indicators of our business performance. Management focuses on validated Growth Direct systems as a leading indicator of likely future recurring revenue as well as a reflection of our success supporting our customers’ validating placed systems.
Growth Direct systems Growth Direct system revenue is a non-recurring product revenue stream that we recognize as revenue upon transfer of control of the system to the customer.
Food and Drug Administration 61 Table of Contents ("FDA") approved cell and gene therapies, including manufacturers of 86% of approved gene-modified autologous CAR-T cell therapies. Growth Direct systems Growth Direct system revenue is a non-recurring product revenue stream that we recognize as revenue upon transfer of control of the system to the customer.
We have experienced positive trends in gross margin, improving from (49.8)% to (24.4)% for the years ended December 31, 2022 and 2023, respectively. Key business metrics We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Key business metrics We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
General and administrative Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) General and administrative $ 24,936 $ 26,819 $ (1,883) (7.0) % Percentage of total revenue 110.7 % 156.5 % General and administrative expenses decreased by $1.9 million, or 7.0%.
General and administrative Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) General and administrative $ 21,947 $ 24,936 $ (2,989) (12.0) % Percentage of total revenue 78.2 % 110.7 % General and administrative expenses decreased by $3.0 million, or 12.0%. This decrease was primarily driven by a reduction in headcount.
Examples of these investments include new tools and training for our sales organization, targeted marketing, expanding lead generation capabilities and hosting customer-related Growth Direct demonstrations and other customer-focused events. 54 Table of Contents Expansion within our existing customer base There is an opportunity to increase broader adoption and utilization of our Growth Direct platform throughout our existing customers’ organizations by existing customers purchasing more systems.
Expansion within our existing customer base There is an opportunity to increase broader adoption and utilization of our Growth Direct platform throughout our existing customers’ organizations by existing customers purchasing more systems.
Such charges are classified as cost of product revenue in the statements of operations. Any write-down of inventory to net realizable value creates a new cost basis.
Such charges are classified as cost of product revenue in the statements of operations.
Our research and development costs are expensed as incurred. We believe that our continued investment in research and development is essential to our long-term competitive position, and we expect these expenses to increase in future periods.
Our research and development costs are expensed as incurred. As part of our Operational Efficiency Program, we have implemented actions to reduce research and development employee-related expenses associated with reduced headcount and certain other non-employee-related costs. We believe that our continued investment in research and development is essential to our long-term competitive position.
The increase of $2.4 million, or 136.8%, was the result of higher interest income due to higher interest rates earned on our investments. 61 Table of Contents Other (expense) income Other (expense) income, which is comprised of miscellaneous expenses unrelated to our core business, remained relatively flat for the year ended December 31, 2023.
The decrease of $1.0 million, or 24.8%, was due to lower investment balances during the year. Other expense, net Other (expense) income, which is comprised of miscellaneous expenses and income unrelated to our core business, remained relatively flat between the years ended December 31, 2024 and 2023.
As a result, we expect to experience continued fluctuations in our period-to-period number of Growth Direct systems validated due to the aforementioned factors.
As a result, we expect to experience continued fluctuations in our period-to-period number of Growth Direct systems validated due to the aforementioned factors. Recurring revenue We regularly assess trends relating to recurring revenue, which is the revenue from consumables and service contracts, based on our product offerings, our customer base and our understanding of how our customers use our products.
Income tax expense (benefit) Income tax expense (benefit) was an expense of $0.1 million and a benefit of $0.6 million for the years ended December 31, 2023 and 2022, respectively. Both the expense and the benefit recorded related to our German subsidiary.
Income tax expense Income tax expense was less than $0.1 million for each of the years ended December 31, 2024 and 2023. The expense recorded related to our German and Swiss subsidiaries. Liquidity and capital resources Since our inception, we have incurred operating losses.
The increase was driven by costs related to higher volume of both Growth Direct system placements and consumable shipments. This increase was partially offset by a net 60 Table of Contents improvement in production costs driven in part by higher production volumes in systems and the benefit of cost reduction activities in consumables.
The increase was driven by costs related to higher volume of both Growth Direct system placements and consumable shipments. This increase was partially offset by a favorable mix impact of product sold as well as a reduction in our costs to manufacture our products. Cost of service revenue decreased by $0.8 million, or 10.4%.
Research and development Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Research and development $ 12,820 $ 12,866 $ (46) (0.4) % Percentage of total revenue 56.9 % 75.1 % Research and development expenses remained relatively flat year over year.
This decrease was primarily due to lower employee-related costs due to lower headcount. Research and development Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Research and development $ 14,597 $ 12,820 $ 1,777 13.9 % Percentage of total revenue 52.0 % 56.9 % Research and development expenses increased by $1.8 million, or 13.9%.
General and administrative expenses also include direct and allocated information technology and facility-related costs. General and administrative expenses are expected to increase in future periods as the number of administrative personnel grows to support increasing business size and complexity. Other income (expense) Interest income, net Interest income, net is comprised of interest income from investments.
For future periods, we expect these expenses to increase or decrease, as applicable, as the size, scope and complexity of our general and administrative functions increase or decrease. Other income (expense) Interest income, net Interest income, net is comprised primarily of interest income from investments.
Other income (expense) Interest income Interest income for the years ended December 31, 2023 and 2022 was $4.2 million and $1.8 million, respectively.
Recurring revenue was 55.1% and 60.2% of our total revenue for the years ended December 31, 2024 and 2023, respectively.
The lower use of net cash was primarily a result of working capital and inventory management activities resulting in significantly lower inventory purchases throughout 2023. The timing of payments to vendors and the timing of employee bonus payments also had a positive impact on net cash used in operating activities.
The decreased use of net cash was primarily a result of working capital and reduced headcount resulting in less employee related costs, such as travel, business insurance, etc. The timing of payments to vendors and cash collections from customers contributed to the reduction in net cash used in operating activities.
The mix of consumable products sold also had a positive impact on revenue partially offset by lower net system pricing. Service revenue increased by $1.6 million, or 26.9%. The increase was largely attributable to increased recurring service maintenance contracts due to our growing number of validated Growth Direct systems at customer sites.
The increase was largely due to increased recurring revenue from service contracts due to our growing number of validated Growth Direct systems at customer sites as well as increases in validation service revenue.
Investing activities During the year ended December 31, 2023, net cash provided by investing activities was $42.2 million, compared to net cash used in investing activities of $93.5 million during the year ended December 31, 2022. The change was largely attributable to an increase in investment maturities as well as fewer purchases of both investments and property and equipment.
Investing activities During the year ended December 31, 2024, net cash provided by investing activities was $36.7 million, a decrease of $5.5 million compared to the year ended December 31, 2023.
As a result, we expect to experience continued variability in our period-to-period number of Growth Direct system placements due to the aforementioned factors. Validated systems We regularly review the number of Growth Direct systems validated and cumulative Growth Direct systems validated in each period as indicators of our business performance.
As a result, we expect to experience continued variability in our period-to-period number of Growth Direct system placements due to the aforementioned factors. 60 Table of Contents In July 2024, we placed our 150th Growth Direct system with an existing global biopharma customer, which we believe represents a significant milestone demonstrating the strong continued interest in and adoption of our technology by customers.
We are making targeted investments in these organizations and expect to continue to do so in the future.
We are making targeted investments in these organizations and expect to continue to do so in the future. Examples of these investments include new tools and training for our sales organization, targeted marketing, expanding lead generation capabilities and hosting customer-related Growth Direct demonstrations and other customer-focused events.
The slight decrease in expense was attributable to a decrease in spending on third-party contractors, which was largely offset by an increase in compensation and benefit costs as a result of higher headcount.
The slight decrease was primarily attributable to a reduction in consulting fees partially offset by an increase in headcount-related costs.
Removed
On August 11, 2022, our board of directors approved an organizational restructuring plan, or the Restructuring Plan, to right-size our cost structure based on our lowered 2022 outlook. The Restructuring Plan involved an approximately 20% reduction in our workforce, including employees, contractors and temporary employees, which was focused on non-commercial functions.
Added
In July 2024, we completed an enterprise-wide review of opportunities to realize operational efficiencies. Based on the results of this review, we are implementing certain actions to reduce costs including a reduction in our workforce, the closure of open and planned positions and reductions in other non-headcount-related expenses across the business (the “Operational Efficiency Program”).
Removed
We recorded a restructuring charge of $1.1 million in the third quarter of 2022 primarily related to severance, employee benefits, outplacement and related costs under the Restructuring Plan. We had no remaining payments under the Restructuring Plan as of December 31, 2023.
Added
These actions are expected to result in approximately $6 million to $7 million in annual cash savings and enable us to achieve our goal of positive cash flow by the end of 2027 without additional financing.
Removed
On August 12, 2022, we announced our board of directors' decision to reject an unsolicited, non-binding proposal we received from a shareholder to acquire all of our outstanding common stock for $5.00 per share in cash and to commence a process to review our strategic alternatives. On December 1, 2022, we announced the conclusion of our strategic alternative review process.
Added
We plan to continue to invest in key initiatives that are expected to drive future revenue growth and gross margin improvement, including product development and cost reduction programs. We recorded a charge of $0.6 million in the third quarter of 2024 related to the Operational Efficiency Program.
Removed
As a result of the process, our board of directors determined that the best path to deliver shareholder value is for us to continue executing our strategy to improve our commercial execution to drive system placement growth, advance our new product development programs and expand the market for our Growth Direct system. 53 Table of Contents Since our inception, we have incurred net losses in each year.
Added
On February 21, 2025, we entered into a Distribution and Collaboration Agreement (the “Distribution Agreement”) with Millipore S.A.S., a subsidiary of the Life Science business of Merck KGaA, Darmstadt, Germany, which operates in the U.S. as MilliporeSigma ("MilliporeSigma”).
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Until such time as we can generate revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings and debt financings.
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Pursuant to the Distribution Agreement, we granted MilliporeSigma a global, co-exclusive right to sell our products, initially consisting of our Growth Direct systems and related consumables, into all fields related to industrial quality control applications in the pharmaceutical, medical device, personal care, cosmetics and food and beverage spaces in all regions of the world.
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In order to improve our gross margins, we are actively targeting numerous areas including: • Reducing instrument and consumable product costs (materials and labor) through activities including strategic sourcing and product redesign; • Increasing product manufacturing efficiency through activities including increased throughput on our automated consumables manufacturing line and manufacturing process optimization; and • Increasing productivity and efficiency in our service organization.
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During the term of the Distribution Agreement, MilliporeSigma will receive tier-based transfer pricing on such products. We will continue to directly market, sell, 57 Table of Contents manufacture and distribute our products and provide all services to customers, including in respect of system installation, validation, maintenance and support.
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At the same time, we also expect future revenues from both products and services to grow at rates significantly higher than the costs related to provide and support those products and services. As a result, we also expect increasing revenues from both products and services to contribute significantly to future gross margin expansion.
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Over the first two years of the Distribution Agreement, MilliporeSigma has committed to purchase a minimum number of Growth Direct systems. Thereafter, we and MilliporeSigma will evaluate and mutually agree on additional purchase commitments, if any.
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Recurring revenue We regularly assess trends relating to recurring revenue, which is the revenue from consumables and service contracts, based on our product offerings, our customer base and our understanding of how our customers use our products. 56 Table of Contents Recurring revenue was 60.2% and 64.1% of our total revenue for the years ended December 31, 2023 and 2022, respectively.
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Pursuant to the Distribution Agreement, we are permitted to continue to sell our products independently and through our existing distributors, but we may not grant the right to sell the products covered by the Distribution Agreement to other third parties so long as a purchase commitment by MilliporeSigma is in place.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur operations may be subject to fluctuations in foreign currency exchange rates in the future. Inflation risk While we have experienced some impact from inflation related mainly to our materials, labor and freight costs, we have been able to mitigate further impacts through the maintenance of increased inventory levels and long-term contracts and commitments with key suppliers.
Biggest changeInflation risk While we have experienced some impact from inflation related mainly to our materials, labor and freight costs, we have been able to mitigate further impacts, including through long-term contracts and commitments with key suppliers. As a result, we do not believe that inflation has had a material effect on our business, financial condition or results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest rate risk As of December 31, 2023, we had cash, cash equivalents and short- and long-term investments of $95.0 million, which consisted of cash, money market funds, U.S. treasury bills, certificates of deposit, and U.S. treasury notes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest rate risk As of December 31, 2024, we had cash, cash equivalents and short-term investments of $50.7 million, which consisted of cash, money market funds, U.S. treasury bills, and U.S. treasury notes.
Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. 65 Table of Contents Foreign currency exchange risk We are not currently exposed to significant market risk related to changes in foreign currency exchange rates.
Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.
As a result, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant incremental inflationary pressures, we may not be able to meaningfully offset such higher costs through price increases.
If our costs were to become subject to significant incremental inflationary pressures, we may not be able to meaningfully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.
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Our inability or failure to do so could harm our business, financial condition or results of operations.
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Foreign currency exchange risk We are not currently exposed to significant market risk related to changes in foreign currency exchange rates. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

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