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Accounting Policies, by Policy (Policies)
 9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Use of Estimates

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include, but are not limited to stock-based compensation expense, research and development accruals, fair value of common stock and warrants and loss on extinguishment of notes. Actual results could differ from those estimates and changes in estimates may occur.

 
Inventory

Inventory

 

Inventory consists of finished goods, work-in-process and raw materials and is valued at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”) method. As the Company manufactures the finished goods and work-in-process materials, overhead costs are included in inventory. The Company evaluates the carrying cost of finished goods, work-in-process and raw materials items. To the extent that such costs exceed future demand estimates and/or exhibit historical turnover at rates less than current inventory levels, the Company reduces the carrying value of the applicable inventories. Inventory consisted of the following:

 

   September 30,
2021		   December 31,
2020		 
Raw materials  $65,053   $59,416 
Work in process   143,662    143,595 
Total inventory  $208,715   $203,011 

 
Revenue Recognition

Revenue Recognition

 

The Company’s revenue is generated primarily from the sale of products and research services. Product revenue primarily consists of sales of genetic sequencing equipment and sequencing reagent kits. Research service revenue primarily consists of revenue generated from gene sequencing services and grants.

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs a five-step process. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when (or as) the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company only applies the five-step process to contracts when it is probable that the entity will collect consideration it expects to be entitled to in exchange for the goods or services it transfers to the customer.

 

The Company evaluates contingent payments to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Future payments that are not within the Company’s control are not considered probable of being achieved until the contingencies are resolved.

 

Revenue from product sales, including customized sequencing instruments, sequencing reagent kits and off-the-shelf consumables, is recognized generally upon delivery, which is when control of the product is deemed to be transferred.

 

Revenue from gene sequencing services, using the tSMS platform, is recognized generally as the services are provided to the customer. The components of the sequencing process, including reagent kits and off-the-shelf consumables, sample loader and sequencer, are not distinct within the context of the gene sequencing service contract. This is because in a gene sequencing service contract the reagent kits and other components, such as off-the-shelf consumables, used in the sequencing process, become required inputs to achieve the specified gene sequencing analysis, and the components in the sequencing process are sequential in nature and highly-interrelated as they work together to generate sample-specific data.

 

The Company has elected to exclude sales tax from revenue. The Company generally has no obligations for returns, refunds and other similar obligations and does not provide separate equipment warranties. For the three months ended September 30, 2021 and 2020, the Company did not recognize any revenue from gene sequencing services. The Company recognized $15,937 and $0 in revenue from product sales for the three months ended September 30, 2021 and 2020, respectively. The Company recognized $16,484 and $41,838 in revenue from gene sequencing services for the nine months ended September 30, 2021 and 2020, respectively. The Company recognized $31,537, and $0 in revenue from product sales for the nine months ended September 30, 2021 and 2020, respectively.

 
Grant Revenue

Grant Revenue

 

The Company’s grant revenues are derived from research programs by various departments of the National Institute of Health (NIH Grants).

 

The Company recognizes NIH Grants revenue as reimbursable grant costs are incurred up to pre-approved award limits within the budget period. The costs associated with these reimbursements are reflected as a component of research and development expense in the accompanying consolidated statements of operations. In the three months ended September 30, 2021, the Company earned grant revenue of $34,964 and $85,577, respectively. In the nine months ended September 30, 2021 and 2020, the Company earned grant revenue of $127,009 and $170,092, respectively.

 
Research and Development Expenses

Research and Development Expenses

 

The Company expenses all research and development costs as incurred. Included in research and development costs are wages, stock-based compensation and benefits of employees and other operational costs related to the Company’s research and development activities, including facility-related expenses and external costs of outside contractors engaged by the Company.

 
Segments

Segments

 

The Company operates in a single business segment that includes the design, development and manufacturing of genetic analysis technologies.

 
Derivative Instruments

Derivative Instruments

 

The Company issued warrants to its investors and accounts for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 718 and ASC 815-40, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification.

 

At the IPO Date, the Warrants and Underwriter Warrants (see Note 9) were accounted for as equity as these instruments meet all of the requirements for equity classification under ASC 815-40 and ASC 718.

 
Net Loss per Share

Net Loss per Share

 

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of convertible preferred stock, convertible promissory notes, stock options outstanding under the Company’s stock option plan and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.

 

The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been antidilutive:

 

  

Nine Months Ended

September 30,

 
   2021   2020 
Convertible preferred stock   
-
    5,791,665 
Convertible promissory notes   
-
    408,291 
Stock options for common stock   818,915    832,428 
Warrants for common stock   4,393,396    596,396