BALANCE SHEET COMPONENTS

6 Months Ended

Jun. 30, 2023

Inventory, net

Our inventory, net, consisted of the following components (in thousands):


	June 30, 2023		December 31, 2022
Purchased materials	$	25,225	$	24,139
Work in process	22,598		14,062
Finished goods	19,785		12,180
Inventory, net	$	67,608	$	50,381

Intangible Assets and Goodwill

Intangible assets include acquired in-process research and development ("IPR&D") of $400 million as a result of the Omniome acquisition in September 2021. The IPR&D will remain on our Consolidated Balance Sheet as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development activities. During the development period following the acquisition, IPR&D will not be amortized, but instead will be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Upon completion of the development, we will begin to amortize the asset over the life of the product or record an impairment charge if the asset is determined to be impaired.

In addition to IPR&D, definite-lived intangible assets included the following (in thousands, except years):


		As of June 30, 2023						As of December 31, 2022
	Estimated Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	15	$	11,179	$	(1,415)	$	9,764	$	11,179	$	(1,039)	$	10,140
Customer relationships	2	360		(345)		15		360		(255)		105
Total		$	11,539	$	(1,760)	$	9,779	$	11,539	$	(1,294)	$	10,245

The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands):


Remainder of 2023	$	387
2024	745
2025	745
2026	745
2027	746
2028 and thereafter	6,411
Total	$	9,779

We review definite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets.

Goodwill is reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment for goodwill impairment in the second quarter of 2023, noting no impairment.

Deferred Revenue

As of June 30, 2023, we had a total of $30.0 million of deferred revenue, $25.0 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae Corporation ("Invitae") and deferred service contract revenues. The deferred revenue, non-current balance of $5.0 million primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae and deferred service contract revenues and is scheduled to be recognized in the next 6 years. The deferred revenue, non-current balance includes $3.0 million that was reclassified from deferred revenue, current to deferred revenue, non-current following receipt of a non-cancellable order from Invitae during the three months ended June 30, 2023 for partial utilization of the available credits, which is expected to be recognized in revenue after 12 months from June 30, 2023. Revenue recorded in the three and six months ended June 30, 2023 includes $4.5 million and $8.0 million, respectively, that was included in deferred revenue as of December 31, 2022, of which $2.1 million was product revenue recognized from the partial utilization of available credits by Invitae during the three and six months ended June 30, 2023. Refer to Note 3 – Invitae Collaboration, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information.

Product Warranties

We generally provide a one-year warranty on instruments. In addition, we provide a limited warranty on consumables. At the time revenue is recognized, an accrual is established for estimated warranty costs based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. There were no material changes in estimates for the periods presented below.

Changes in the reserve for product warranties were as follows for the periods indicated (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Balance at beginning of period	$	1,624	$	1,174	$	1,651	$	594
Additions charged to cost of product revenue	2,247		912		2,851		1,865
Repairs and replacements	(1,009)		(477)		(1,640)		(850)
Balance at end of period	$	2,862	$	1,609	$	2,862	$	1,609

Term loans

In connection with the acquisition of Omniome, we acquired $1.3 million in short-term debt and $3.0 million in long-term debt relating to a term loan facility that Omniome obtained in April 2020. Borrowings on the term loan facility were used to fund Omniome’s purchases of equipment, which serves as collateral. Each term loan has a term of 43 months and bears a fixed interest rate of approximately 17% annually. The fee for the elective option to prepay all, but not less than all, of the borrowed amounts at any time after the 24th month and before the 43rd month after the commencement date, is 4% of the outstanding loan balance. Payments are made in equal monthly installments including principal and interest.

As of June 30, 2023, the carrying value of term loans outstanding was $1.4 million, recorded as part of other liabilities, current on the Condensed Consolidated Balance Sheet. The interest expense was $0.1 million and $0.2 million for the three and six months ended June 30, 2023, which was included as part of interest expense in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The following table presents the future principal payments on the term loans (in thousands):


Remainder of 2023	$	930
2024	490
Total	$	1,420