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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from                      to                  

Commission File Number: 001-38720

Graphic

Twist Bioscience Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware

46-2058888

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

681 Gateway Blvd, South San Francisco, CA 94080

(Address of principal executive offices and zip code)

(800) 719-0671

(Registrant’s telephone number, including area code)

Title of each class 

    

Trading Symbol(s) 

    

Name of each exchange on which registered 

Common Stock

TWST

The Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).   Yes      No  

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the Registrant’s common stock outstanding as of August 5, 2021, was 49,292,036.

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TWIST BIOSCIENCE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS

Forward-looking statements

PART I. Financial information

Item 1.

Financial statements

3

Condensed Consolidated Balance Sheets (unaudited)

3

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

5

Condensed Consolidated Statements of Cash Flows (unaudited)

7

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s discussion and analysis of financial condition and results of operations

22

Item 3.

Quantitative and qualitative disclosures about market risk

33

Item 4.

Controls and procedures

34

PART II. Other information

Item 1.

Legal proceedings

36

Item 1A.

Risk factors

36

Item 2.

Unregistered sales of equity securities and use of proceeds

70

Item 3.

Defaults upon senior securities

70

Item 4.

Mine safety disclosures

70

Item 5.

Other information

70

Item 6.

Exhibits

71

Signatures

72

i

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Forward-looking statements

This Quarterly Report on Form 10-Q for the Quarter ended June 30, 2021, or Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to, among other matters, plans for product development and licensing to third parties, plans and timeframe for commercial development of DNA data storage capabilities, expectations regarding market penetration, anticipated customer conversion to our products, plans to expand in international markets, identification and development of potential antibody candidates for treatment of COVID-19. Forward-looking statements are also identified by the words “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” and variations of such words and similar expressions. You should not rely upon forward-looking statements as predictions of future events. Such statement are based on management’s expectations as of the date of this filing and involve risks and uncertainties that could cause actual results, events or circumstances to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include:

our ability to increase our revenue and our revenue growth rate;
our ability to accurately estimate capital requirements and our needs for additional financing; our estimates of the size of our market opportunities;
our ability to increase DNA production, reduce turnaround times and drive cost reductions for our customers;
our ability to effectively manage our growth;
our ability to successfully enter new markets and manage our international expansion;
our ability to protect our intellectual property, including our proprietary DNA synthesis platform;
costs associated with defending intellectual property infringement and other claims;
the effects of increased competition in our business;
our ability to keep pace with changes in technology and our competitors;
our ability to successfully identify, evaluate and manage any future acquisitions of businesses, solutions or technologies;
the success of our marketing efforts;
a significant disruption in, or breach in security of our information technology systems and resultant interruptions in service and any related impact on our reputation;
our ability to attract and retain qualified employees and key personnel;
the effects of natural or man-made catastrophic events including those resulting from the novel strain of coronavirus that causes coronavirus disease 2019, or COVID-19, that was first identified in Wuhan, China;
the effectiveness of our internal controls;
changes in government regulation affecting our business;

1

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uncertainty as to economic and market conditions and the impact of adverse economic conditions; and
other risk factors included under the section titled “Risk Factors.”

Readers are urged to carefully review and consider all of the information in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or SEC. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this filing or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

When we use the terms “Twist,” “Twist Bioscience,” the “Company,” “we,” “us” or “our” in this report, we are referring to Twist Bioscience Corporation and its consolidated subsidiaries unless the context requires otherwise. Sequence space and the Twist logo are trademarks of Twist Bioscience Corporation. All other company and product names may be trademarks of the respective companies with which they are associated.

2

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PART I. Financial information

Item 1.Financial statements

Twist Bioscience Corporation

Condensed Consolidated Balance Sheets (unaudited)

    

June 30, 

    

September 30, 

(In thousands)

2021

2020

Assets

 

  

 

  

Current assets

 

  

Cash and cash equivalents

$

475,279

$

93,667

Short-term investments

44,129

 

196,335

Accounts receivable, net

28,116

 

26,376

Inventories

21,224

 

12,289

Prepaid expenses and other current assets

7,859

 

6,203

Total current assets

$

576,607

$

334,870

Property and equipment, net

37,864

 

25,466

Operating lease right-of-use assets

62,803

 

33,699

Goodwill

22,676

 

1,138

Intangible assets, net

18,562

 

307

Restricted cash, non-current

1,530

 

579

Other non-current assets

5,256

2,823

Total assets

$

725,298

$

398,882

Liabilities and stockholders’ equity

 

  

Current liabilities

 

Accounts payable

$

11,268

$

4,830

Accrued expenses

4,867

 

3,901

Accrued compensation

19,523

 

14,945

Current portion of operating lease liabilities

7,545

 

6,409

Current portion of long-term debt

2,365

 

3,333

Other current liabilities

9,265

2,611

Total current liabilities

$

54,833

$

36,029

Operating lease liabilities, net of current portion

53,849

 

24,837

Long-term debt, net of current portion

 

1,403

Other non-current liabilities

6,168

351

Total liabilities

$

114,850

$

62,620

Commitments and contingencies (Note 6)

 

  

Stockholders’ equity

 

Common stock, $0.00001 par value 100,000 and 100,000 shares authorized at June 30, 2021 and September 30, 2020, respectively; 49,263 and 45,083 shares issued and outstanding as of June 30, 2021 and September 30, 2020, respectively

$

$

Additional paid-in capital

1,179,331

794,630

Accumulated other comprehensive income

428

87

Accumulated deficit

(569,311)

(458,455)

Total stockholders’ equity

$

610,448

$

336,262

Total liabilities and stockholders’ equity

$

725,298

$

398,882

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

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Twist Bioscience Corporation

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

Three months ended 

Nine months ended 

June 30, 

June 30, 

(In thousands, except per share data)

    

2021

    

2020

    

2021

    

2020

Revenues

$

35,018

$

21,207

 

$

94,382

$

57,668

Operating expenses:

 

  

 

 

  

Cost of revenues

$

20,933

$

16,472

 

$

58,123

$

43,829

Research and development

19,838

 

10,444

 

49,629

 

31,369

Selling, general and administrative

34,478

 

22,487

 

97,658

 

76,082

Change in fair value of acquisition consideration

1,887

1,887

Litigation settlement

 

 

 

22,500

Total operating expenses

$

77,136

$

49,403

 

$

207,297

$

173,780

Loss from operations

$

(42,118)

$

(28,196)

 

$

(112,915)

$

(116,112)

Interest income

86

 

247

 

377

 

1,388

Interest expense

(70)

 

(181)

 

(284)

 

(644)

Other income (expense), net

(312)

 

(56)

 

 

(305)

 

(125)

Loss before income taxes

$

(42,414)

$

(28,186)

 

$

(113,127)

$

(115,493)

Benefit from (provision for) income taxes

2,377

(21)

2,271

(120)

Net loss attributable to common stockholders

$

(40,037)

$

(28,207)

 

$

(110,856)

$

(115,613)

Other comprehensive loss:

 

  

 

 

  

Change in unrealized gain on investments

(12)

 

(74)

 

(10)

 

(47)

Foreign currency translation adjustment

250

 

(5)

 

351

 

Comprehensive loss

$

(39,799)

$

(28,286)

 

$

(110,515)

$

(115,660)

Net loss per share attributable to common stockholders—basic and diluted

$

(0.82)

$

(0.67)

 

$

(2.32)

$

(3.09)

Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted

48,963

 

41,838

 

47,881

 

37,463

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

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Twist Bioscience Corporation

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

    

Common stock

    

    

    

    

Additional 

Other 

Total 

paid-in 

comprehensive 

Accumulated 

stockholders’ 

(In thousands)

    

Shares

    

Amount

capital

income

deficit

 

equity 

Balances as of March 31, 2021

 

48,860

$

$

1,143,265

$

190

$

(529,274)

$

614,181

Public offering expense adjustment

(26)

(26)

Vesting of restricted stock units

 

57

 

 

 

 

 

Exercise of stock options

 

132

 

 

2,619

 

 

 

2,619

Business acquisition

237

26,773

26,773

Repurchases of common stock for income tax withholding

 

(23)

 

 

(2,476)

 

 

 

(2,476)

Stock-based compensation

 

 

 

9,176

 

 

 

9,176

Other comprehensive income

 

 

 

 

238

 

 

238

Net loss

 

 

 

 

 

(40,037)

 

(40,037)

Balances as of June 30, 2021

 

49,263

$

$

1,179,331

$

428

$

(569,311)

$

610,448

    

Common stock

    

    

    

    

Additional 

Other 

Total 

paid-in 

comprehensive 

Accumulated 

stockholders’

(In thousands)

    

Shares

    

Amount

capital

income

deficit

 equity 

Balances as of March 31, 2020

 

40,970

$

$

669,919

$

213

$

(405,930)

$

264,202

Issuance of common stock in public offerings, net of underwriting discounts and commissions and offering expenses of $7,487

 

3,486

 

 

107,507

 

 

 

107,507

Vesting of restricted stock units

 

29

 

 

 

 

 

Exercise of stock options

 

151

 

 

1,901

 

 

 

1,901

Repurchases of early exercised stock options

 

(1)

 

 

 

 

 

Repurchases of common stock for income tax withholding

 

(12)

 

 

(450)

 

 

 

(450)

Stock-based compensation

 

 

 

4,072

 

 

 

4,072

Other comprehensive income (loss)

 

 

 

 

(79)

 

 

(79)

Net loss

 

 

 

 

 

(28,207)

 

(28,207)

Balances as of June 30, 2020

 

44,623

$

$

782,949

$

134

$

(434,137)

$

348,946

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Common stock

    

    

    

    

Additional 

Other 

Total 

paid-in 

comprehensive 

Accumulated 

stockholders’ 

(In thousands)

    

Shares

    

Amount

capital

income

deficit

 

equity

Balances as of September 30, 2020

 

45,083

$

$

794,630

$

87

$

(458,455)

$

336,262

Issuance of common stock in public offering, net of underwriting discounts and commissions and offering expenses of $21,139

 

3,136

 

 

323,861

 

 

 

323,861

Net exercise of stock warrants

22

Vesting of restricted stock units

 

178

 

 

 

 

 

Exercise of stock options

 

629

 

 

11,756

 

 

 

11,756

Issuance of shares under the employee stock purchase plan

 

49

 

 

2,787

 

 

 

2,787

Repurchases of early exercised stock options

 

(2)

 

 

 

 

 

Business acquisition

237

26,773

26,773

Repurchases of common stock for income tax withholding

 

(69)

 

 

(8,227)

 

 

 

(8,227)

Stock-based compensation

 

 

 

27,751

 

 

 

27,751

Other comprehensive income

 

 

 

 

341

 

 

341

Net loss

 

 

 

 

 

(110,856)

 

(110,856)

Balances as of June 30, 2021

 

49,263

$

$

1,179,331

$

428

$

(569,311)

$

610,448

    

Common stock

    

    

    

    

Additional 

Other

Total 

paid-in

 comprehensive 

Accumulated 

stockholders’ 

(In thousands)

    

Shares

    

Amount

    

 capital

    

income

    

deficit

    

equity 

Balances as of September 30, 2019

 

32,873

$

$

470,425

$

181

$

(318,524)

$

152,082

Issuance of common stock in public offerings, net of underwriting discounts and commissions and offering expenses of $18,798

 

11,064

 

 

295,680

 

 

 

295,680

Vesting of restricted stock units

 

149

 

 

 

 

 

Exercise of stock options

 

540

 

 

5,005

 

 

 

5,005

Issuance of shares under the employee stock purchase plan

 

58

 

 

1,522

 

 

 

1,522

Repurchases of early exercised stock options

 

(2)

 

 

 

 

 

Repurchases of common stock for income tax withholding

 

(59)

 

 

(1,648)

 

 

 

(1,648)

Stock-based compensation

 

 

 

11,965

 

 

 

11,965

Other comprehensive income (loss)

 

 

 

 

(47)

 

 

(47)

Net loss

 

 

 

 

 

(115,613)

 

(115,613)

Balances as of June 30, 2020

 

44,623

$

$

782,949

$

134

$

(434,137)

$

348,946

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

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Twist Bioscience Corporation

Condensed Consolidated Statements of Cash Flows (unaudited)

Nine months ended 

June 30, 

(in thousands)

    

2021

    

2020

Cash flows from operating activities

 

Net loss

$

(110,856)

$

(115,613)

Adjustments to reconcile net loss to net cash used in operating activities

 

Depreciation and amortization

7,319

 

4,788

Loss on disposal of property and equipment

2

 

Non-cash lease expense

1,044

 

(1,239)

Stock-based compensation

27,751

 

11,965

Discount (premium) accretion on investment securities

501

 

(243)

Realized gain on investments

(5)

Change in fair value of acquisition consideration

1,887

Non-cash interest expense

58

 

122

Bad debts expense

183

Amortization of debt discount

70

 

148

Changes in assets and liabilities, net of acquisition:

 

Accounts receivable, net

(1,912)

 

(1,243)

Inventories

(8,914)

 

(5,831)

Prepaid expenses and other current assets

(1,617)

 

(3,714)

Other non-current assets

(2,333)

 

(424)

Accounts payable

5,194

 

(3,815)

Accrued expenses

1,546

 

(3,362)

Accrued compensation

4,588

 

832

Other liabilities

(1,947)

 

576

Net cash used in operating activities

(77,441)

 

(117,053)

Cash flows from investing activities

 

Purchases of property and equipment

(18,972)

 

(7,643)

Business acquisition, net of cash acquired

(483)

Purchases of investments

(58,795)

 

(110,438)

Proceeds from maturity of investments

210,494

 

98,100

Net cash provided by (used in) investing activities

132,244

 

(19,981)

Cash flows from financing activities

 

Proceeds from exercise of stock options

11,686

 

4,977

Proceeds from public offerings, net of underwriting discounts and commissions and offering expenses

323,861

 

295,807

Proceeds from issuance of common stock under employee stock purchase plan

2,787

 

1,522

Repayments of debt

(2,500)

 

(2,500)

Repurchases of common stock for income tax withholding

(8,227)

 

(1,648)

Net cash provided by financing activities

327,607

 

298,158

Effect of exchange rates on cash, cash equivalents and restricted cash

153

 

(6)

Net increase in cash, cash equivalents, and restricted cash

382,563

 

161,118

Cash, cash equivalents, and restricted cash at beginning of period

94,246

 

47,398

Cash, cash equivalents, and restricted cash at end of period

476,809

 

208,516

Supplemental disclosure of cash flow information

 

Interest paid

145

 

363

Income taxes paid, net of refunds

47

 

120

Non-cash investing and financing activities

 

Property and equipment additions included in accounts payable and accrued expenses

1,777

 

22

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

33,617

 

3,718

Offering expenses included in accounts payable and accrued expenses

 

127

Issuance of common stock in connection with the iGenomX acquisition

26,773

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

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Twist Bioscience Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

1. The Company

Twist Bioscience Corporation (the Company) was incorporated in the state of Delaware on February 4, 2013. The Company is a synthetic biology and genomics company that has developed a disruptive DNA synthesis platform. DNA is used in many applications across different industries: industrial chemicals, academic, healthcare and agriculture. The Company’s fiscal year ends on September 30.

The Company has generated net losses in all periods since its inception. As of June 30, 2021, the Company had an accumulated deficit of $569.3 million and has not generated positive cash flows from operations since inception. Losses are expected to continue as the Company continues to invest in product development, manufacturing, and sales and marketing.

Since its inception, the Company has received an aggregate of $1,063.9 million in net proceeds from the issuance of equity securities and an aggregate of $13.8 million from debt. Management believes that these proceeds combined with existing cash balances on hand will be sufficient to fund operations for at least one year from the issuance of these consolidated financial statements. However, if the Company needs to obtain additional financing to fund operations beyond this period, there can be no assurance that it will be successful in raising additional financing on terms which are acceptable to the Company.

If the Company requires but is unable to obtain additional funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

During the three and nine months ended June 30, 2021, financial results of the Company were not significantly affected by the COVID-19 pandemic, which continues to have global impact. The Company has considered all information available as of the date of issuance of these financial statements and the Company is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. The extent to which the COVID-19 outbreak affects the Company’s future financial results and operations will depend on future developments which continue to evolve and are difficult to predict, including new information concerning mutations in the SARS-CoV-2 virus, which may make it more contagious, and current or future domestic and international actions to contain it and treat it.

2. Summary of significant accounting policies

Basis of presentation and use of estimates

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the Annual Report on Form 10-K) dated November 27, 2020. The condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements. The condensed consolidated balance sheet at September 30, 2020 is derived from audited consolidated financial statements but does not include all disclosures required by GAAP. The operating results for the three and nine months ended June 30, 2021 are not necessarily indicative of the results expected for the full year ending September 30, 2021 or any interim period.

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The presentation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company’s unaudited condensed consolidated financial statements include its wholly owned subsidiaries. All intercompany balances and accounts are eliminated in consolidation.

The following table provides a reconciliation of the Company’s cash and cash equivalents, current portion of restricted cash and non-current portion of restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash shown in the Company’s condensed consolidated statements of cash flows:

    

June 30, 

    

September 30, 

(in thousands)

2021

2020

Cash and cash equivalents

 

$

475,279

$

93,667

Restricted cash, non-current

 

1,530

 

579

Total cash, cash equivalents and restricted cash

 

$

476,809

$

94,246

Significant accounting policies

There have been no material changes in the accounting policies from those disclosed in the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K.

Recent accounting pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considered the applicability and impact of all recent ASUs. ASUs not listed below were assessed and determined to be not applicable to the Company’s consolidated financial position and results of operations.

Recently issued accounting pronouncements not yet adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires entities to use the new “expected credit loss” impairment model for most financial assets measured at amortized cost, including trade and other receivables and held-to-maturity debt securities, and modifies the impairment model for available-for-sale debt securities. The standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the subsequent measurement of goodwill. The ASU eliminates step 2 from the goodwill impairment test, including for reporting units with a zero or negative carrying amount that fail a qualitative test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU should be applied on a prospective basis. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. The Company is currently assessing the impact of adoption on its disclosures.

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In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity; the methodology for calculating income taxes in an interim period; and the recognition of deferred tax liabilities for outside basis differences. The ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of adoption on its disclosures.

3. Fair value measurement

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company short-term investments primarily utilize broker quotes in a non-active market for valuation of its short-term investments.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and September 30, 2020 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.

June 30, 2021

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair value

Assets

  

  

  

  

Cash

$

37,007

$

$

$

37,007

Money market funds

438,272

438,272

Commercial paper

7,998

7,998

U.S. government treasury bills

36,131

36,131

Total financial assets

$

511,410

$

7,998

$

$

519,408

Liabilities

Contingent consideration and indemnity holdback

$

$

12,278

$

$

12,278

Total financial liabilities

$

$

12,278

$

$

12,278

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September 30, 2020

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair value

Assets

  

  

  

  

Cash

$

20,254

$

$

$

20,254

Money market funds

 

73,413

 

 

 

73,413

Commercial paper

 

 

94,840

 

 

94,840

U.S. government treasury bills

 

101,495

 

 

 

101,495

Total financial assets

$

195,162

$

94,840

$

$

290,002

As of June 30, 2021 and September 30, 2020, gross unrealized gains and unrealized losses for cash equivalents and short-term investments were not material, and the contractual maturities of all marketable securities were less than one year.

4. Balance sheet components

The Company’s accounts receivable, net balance consists of the following:

    

June 30, 

    

September 30, 

(in thousands)

2021

2020

Trade Receivables

 

$

23,558

$

25,790

Other Receivables

 

 

5,039

 

951

Allowance for Doubtful Accounts

 

 

(481)

 

(365)

Accounts Receivable, net

 

$

28,116

$

26,376

Inventory amounts consist of the following:

    

June 30, 

    

September 30, 

(in thousands)

2021

2020

Raw Materials

 

$

15,742

$

9,237

Work-in-process

 

 

2,537

 

2,021

Finished Goods

 

 

2,945

 

1,031

$

21,224

$

12,289

5. Goodwill and intangible assets

During the three months ended June 30, 2021, the goodwill balance and intangible assets were increased by $21.5 million and $18.4 million as a result of a business acquisition. See Note 14, “Business Acquisition”. Total amortization expense related to intangible assets was less than $0.1 million for the three months ended June 30, 2021 and 2020.

The intangible assets balances are presented below:

June 30, 2021

Useful

Gross

life in

carrying

Accumulated

Net book

(in thousands, except for years)

years

amount

amortization

value

Developed Technology

    

1.5 - 17

    

$

19,120

    

$

(1,068)

    

$

18,052

Tradenames & Trademarks

 

2

 

20

 

 

(20)

 

 

Customer relationships

1.5

510

510

Total intangible assets

 

  

$

19,650

 

$

(1,088)

 

$

18,562

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September 30, 2020

    

Useful

    

Gross

    

    

life in

carrying

Accumulated

Net book

(in thousands, except for years)

    

years

    

amount

    

amortization

    

value

Developed Technology

    

6

    

$

1,220

    

$

(913)

    

$

307

Tradenames & Trademarks

 

2

 

20

 

(20)

 

Total intangible assets

 

  

$

1,240

$

(933)

$

307

6. Commitments and contingencies

We may be subject to litigation, claims and disputes in the ordinary course of business. There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend the indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require it to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by corporate law. The Company also has directors’ and officers’ insurance.

Leases

The Company leases certain of its facilities under non-cancellable operating leases expiring at various dates through 2026. The Company is also responsible for utilities, maintenance, insurance, and property taxes under these leases.

Certain leases include options to renew or terminate at the Company’s discretion. The lease terms include periods covered by these options if it is reasonably certain the Company will renew or not terminate. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

Supplemental balance sheet information related