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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2023

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 001-39747

SEER, INC.

(Exact name of Registrant as specified in its charter)

Delaware						82-1153150
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

3800 Bridge Parkway, Suite 102

Redwood City, California 94065

650-453-0000

(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to section 12(b) of the Act:

Copies to:

Title of each class

Trading Symbol(s)

Name of Exchange on which registered

Common Stock, par value $0.00001

SEER

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.

Large accelerated filer

☐

Accelerated filer

☐

Smaller reporting company

☒

Non-accelerated filer

☒

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 ☒

As of August 4, 2023, the registrant had 59,895,002 shares of Class A common stock, $0.00001 par value per share, and 4,044,969 shares of Class B common stock, $0.00001 par value per share, outstanding.

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TABLE OF CONTENTS

PART I.			FINANCIAL INFORMATION			1
Item 1.			Financial Statements (Unaudited)			1
			Condensed Consolidated Balance Sheets			1
			Condensed Consolidated Statements of Operations and Comprehensive Loss			2
			Condensed Consolidated Statements of Changes in Stockholders’ Equity			3
			Condensed Consolidated Statements of Cash Flows			5
			Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			28
Item 4.			Controls and Procedures			28
PART II.			OTHER INFORMATION			30
Item 1.			Legal Proceedings			30
Item 1A.			Risk Factors			30
Item 2.			Unregistered Sales of Equity Securities			72
Item 3.			Defaults Upon Senior Securities			73
Item 4.			Mine Safety Disclosure			73
Item 5.			Other Information			73
Item 6.			Exhibits			74
Signatures

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•estimates of our addressable market, market growth, key performance indicators, capital requirements and our needs for additional financing;

•our expectations regarding our financial performance, including among others, revenue, cost of revenue, gross profit, operating expenses, loss from operations and net losses;

•our ability to successfully implement our commercialization strategy and attract customers, including our plans for international expansion;

•the implementation of our business model, strategic plans and expected pricing for the Proteograph™ Product Suite;

•our expectations regarding the rate and degree of market acceptance of the Proteograph Product Suite;

•the impact of the Proteograph Product Suite on the field of proteomics and the size and growth of the addressable proteomics market;

•competitive companies and technologies and our industry;

•our ability to manage and grow our business;

•our ability to develop and commercialize new products;

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

•the performance of third-party manufacturers and suppliers;

•the potential effects of government regulation;

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

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

•the benefits of the PrognomiQ, Inc. transaction;

•the impact of local, regional, and national and international economic conditions and events;

•the impact of macroeconomic factors, such as pandemics, inflation, supply chain interruptions and foreign hostilities, on our business; and

•our expectations about market trends.

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

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

SEER, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

			June 30,						December 31,
			2023						2022
ASSETS
Current assets:
Cash and cash equivalents			$	56,404					$	53,208
Short-term investments			263,805						368,031
Accounts receivable, net			4,490						4,315
Related party receivables			638						1,804
Other receivables			1,171						899
Inventory			5,263						4,627
Prepaid expenses and other current assets			3,610						2,098
Total current assets			335,381						434,982
Long-term investments			75,806						5,157
Operating lease right-of-use assets			26,363						27,003
Property and equipment, net			22,124						19,408
Restricted cash			524						524
Other assets			997						855
Total assets			$	461,195					$	487,929
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	5,250					$	2,104
Accrued expenses			7,929						8,298
Deferred revenue			255						133
Operating lease liabilities, current			2,249						1,842
Other current liabilities			122						207
Total current liabilities			15,805						12,584
Operating lease liabilities, net of current portion			27,096						28,032
Other noncurrent liabilities			174						320
Total liabilities			43,075						40,936
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized as of June 30, 2023 and December 31, 2022; zero shares issued and outstanding as of June 30, 2023 and December 31, 2022			—						—
Class A common stock, $0.00001 par value; 94,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 59,884,629 and 59,366,077 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			1						1
Class B common stock, $0.00001 par value; 6,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 4,044,969 shares issued and outstanding as of June 30, 2023 and December 31, 2022			—						—
Additional paid-in capital			686,537						667,739
Accumulated other comprehensive loss			(1,532)						(1,251)
Accumulated deficit			(266,886)						(219,496)
Total stockholders’ equity			418,120						446,993
Total liabilities and stockholders’ equity			$	461,195					$	487,929

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

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SEER, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

			Three Months Ended June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
Revenue:
Product			$	1,645					$	2,406					$	3,988					$	4,555
Service			467						57						536						137
Related party			1,358						1,108						2,664						2,178
Grant and other			538						50						873						64
Total revenue			4,008						3,621						8,061						6,934
Cost of revenue:
Product			1,118						1,643						2,554						3,303
Service			193						15						200						29
Related party			352						354						830						748
Grant and other			64						—						128						—
Total cost of revenue			1,727						2,012						3,712						4,080
Gross profit			2,281						1,609						4,349						2,854
Operating expenses:
Research and development			14,148						10,871						28,622						21,607
Selling, general and administrative			16,074						14,172						31,113						28,466
Total operating expenses			30,222						25,043						59,735						50,073
Loss from operations			(27,941)						(23,434)						(55,386)						(47,219)
Other income (expense):
Interest income			4,560						676						8,277						819
Other expense			(50)						(57)						(281)						(61)
Total other income			4,510						619						7,996						758
Net loss			$	(23,431)					$	(22,815)					$	(47,390)					$	(46,461)
Other comprehensive loss:
Unrealized loss on available-for-sale securities			(1,439)						(886)						(281)						(2,577)
Comprehensive loss			$	(24,870)					$	(23,701)					$	(47,671)					$	(49,038)
Net loss per share attributable to common stockholders, basic and diluted			$	(0.37)					$	(0.37)					$	(0.74)					$	(0.75)
Weighted-average common shares outstanding, basic and diluted			63,762,625						62,376,571						63,654,348						62,191,068

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

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SEER, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

			Class A and Class B Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income (Loss)						Total
			Shares						Amount
Balance at December 31, 2022			63,411,046						$	1					$	667,739					$	(219,496)					$	(1,251)					$	446,993
Issuance of Class A common stock from exercise of options and release of restricted stock units			328,273						—						30						—						—						30
Vesting of early exercised stock options and restricted Class A     common stock			—						—						43						—						—						43
Stock-based compensation			—						—						8,724						—						—						8,724
Other comprehensive gain			—						—						—						—						1,158						1,158
Net loss			—						—						—						(23,959)						—						(23,959)
Balance at March 31, 2023			63,739,319						$	1					$	676,536					$	(243,455)					$	(93)					$	432,989
Issuance of Class A common stock from exercise of     options and release of restricted stock units			121,784						—						20						—						—						20
Issuance of Class A common stock in connection with     employee stock purchase plan			68,495						—						192						—						—						192
Vesting of early exercised stock options and restricted Class A     common stock			—						—						37						—						—						37
Stock-based compensation			—						—						9,752						—						—						9,752
Other comprehensive loss			—						—						—						—						(1,439)						(1,439)
Net loss			—						—						—						(23,431)						—						(23,431)
Balance at June 30, 2023			63,929,598						$	1					$	686,537					$	(266,886)					$	(1,532)					$	418,120

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

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SEER, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

			Class A and Class B Common Stock												Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total
			Shares						Amount
Balance at December 31, 2021			62,015,483						$	1					$	629,981					$	(126,530)					$	(536)					$	502,916
Issuance of Class A common stock from exercise of options and release of restricted stock units			283,251						—						773						—						—						773
Repurchase of Class A common stock			(5,841)						—						—						—						—						—
Vesting of early exercised stock options and restricted Class A common stock			—						—						44						—						—						44
Stock-based compensation			—						—						8,062						—						—						8,062
Other comprehensive loss			—						—						—						—						(1,691)						(1,691)
Net loss			—						—						—						(23,646)						—						(23,646)
Balance at March 31, 2022			62,292,893						$	1					$	638,860					$	(150,176)					$	(2,227)					$	486,458
Issuance of Class A common stock from exercise of options and release of restricted stock units			260,533						—						445						—						—						445
Issuance of Class A common stock in connection with employee stock purchase plan			56,753						—						420						—						—						420
Vesting of early exercised stock options and restricted Class A common stock			—						—						43						—						—						43
Stock-based compensation			—						—						8,378						—						—						8,378
Other comprehensive loss			—						—						—						—						(886)						(886)
Net loss			—						—						—						(22,815)						—						(22,815)
Balance at June 30, 2022			62,610,179						$	1					$	648,146					$	(172,991)					$	(3,113)					$	472,043

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

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SEER, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

			Six Months Ended June 30,
			2023						2022
OPERATING ACTIVITIES
Net loss			$	(47,390)					$	(46,461)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation			18,476						16,440
Depreciation and amortization			2,553						1,776
Loss on disposal of property and equipment			255						—
Net amortization (accretion) of premium on available-for-sale securities			(5,391)						439
Provision for inventory excess and obsolescence			300						—
Non-cash operating lease expense			111						1,004
Changes in operating assets and liabilities:
Accounts receivable, net			719						(1,038)
Prepaid expenses and other assets			(1,654)						(2,471)
Inventory			(2,147)						(3,002)
Accounts payable			(101)						530
Deferred revenue			122						53
Accrued liabilities and other liabilities			(317)						(421)
Net cash used in operating activities			(34,464)						(33,151)
INVESTING ACTIVITIES
Purchases of property and equipment			(1,269)						(2,606)
Purchase of available-for-sale securities			(269,870)						(143,651)
Proceeds from sale of available-for-sale securities			2,990						—
Proceeds from maturities of available-for-sale securities			305,567						24,000
Net cash provided by (used in) investing activities			37,418						(122,257)
FINANCING ACTIVITIES
Repurchase of Class A common stock			—						(20)
Proceeds from exercise of Class A common stock options			50						1,218
Proceeds from issuance of Class A common stock in connection with employee stock purchase plan			192						420
Net cash provided by financing activities			242						1,618
Net increase (decrease) in cash, cash equivalents and restricted cash			3,196						(153,790)
Cash, cash equivalents and restricted cash, beginning of period			53,732						233,337
Cash, cash equivalents and restricted cash, end of period			$	56,928					$	79,547
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Property and equipment purchases included in accounts payable and accrued expenses			$	3,398					$	1,578
Inventory transferred to property and equipment			$	1,211					$	—
Lease liability obtained in exchange for right-of-use assets			$	514					$	6,855

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

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.ORGANIZATION AND DESCRIPTION OF THE BUSINESS

Seer, Inc. (the Company) was incorporated in Delaware on March 16, 2017, and is headquartered in Redwood City, California, with wholly-owned subsidiaries in Massachusetts and the United Kingdom. The Company is a life sciences company focused on capturing deep molecular insights from the proteome to enable novel insights and breakthroughs in the understanding of biology and disease. Since inception, the Company has devoted substantially all of its resources to research and development activities, including with respect to the Proteograph Product Suite, building its commercial infrastructure including manufacturing, operations, sales and marketing and service and support functions, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, becoming a publicly-traded company, and providing general and administrative support for these activities.

The Company is subject to a number of risks, similar to other early-stage life science companies, including, but not limited to, development and commercialization of its products, market acceptance of its products, development by its competitors of new technological innovations, protection of its intellectual property, and raising additional capital.

Liquidity

As of June 30, 2023, the Company has incurred significant losses and has had negative cash flows from operations. As of June 30, 2023, the Company had cash and cash equivalents and short-term investments of $320.2 million and an accumulated deficit of $266.9 million. Management expects to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while the Company makes investments to support its anticipated growth. The Company believes that its cash and cash equivalents and investments as of June 30, 2023 provide sufficient capital resources to continue its operations for at least 12 months from the issuance date of the accompanying unaudited condensed consolidated financial statements.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The unaudited condensed consolidated financial statements include the accounts of Seer, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 6, 2023.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including, but not limited to, those related to the determination of stand-alone selling price for revenue recognition, the fair value of common stock, stock-based compensation, accrued research and development expenses, allowance for credit losses, inventory valuation, useful lives and valuation of property and equipment, income tax uncertainties, and tax valuation allowances.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and investments. The Company maintains bank deposits in federally insured financial institutions, and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents and issuers of investments to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC). On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVB’s deposits and loans. In light of the foregoing, the Company does not believe that it has exposure to loss as a result of SVB’s receivership. As of June 30, 2023, the Company held $0.9 million in SVB and has not experienced any losses on its deposits of cash and cash equivalents.

For the three and six months ended June 30, 2023, the Company recognized revenue from a related party that represented 34% and 33%, respectively, of the Company’s total revenue. For each of the three and six months ended June 30, 2022, the Company recognized revenue from a related party that represented 31% of the Company’s total revenue.

For the three and six months ended June 30, 2023, 17% and 20%, respectively, of the total revenue was generated outside of the United States, primarily from countries in Asia and Europe. For the three and six months ended June 30, 2022, 33% and 29%, respectively, of the total revenue was generated outside of the United States, primarily from countries in Asia and Europe.

As of June 30, 2023 and December 31, 2022, there was one related party customer which represented 12% and 25%, respectively, of the total accounts receivable balance. As of June 30, 2023, there were two additional customers which represented 14% and 12% of the total accounts receivable balance. As of December 31, 2022, there were two additional customers which represented 10% and 12% of the total accounts receivable balance.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. As of June 30, 2023 and December 31, 2022, all amounts recorded as cash and cash equivalents consist of cash and money market funds and are stated at fair value.

Restricted cash as of June 30, 2023 and December 31, 2022 represents cash held by a financial institution as security for a letter of credit issued to the lessor for one of the Company’s operating leases and is classified as noncurrent.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands):

			June 30,						December 31,
			2023						2022
Cash and cash equivalents			$	56,404					$	53,208
Restricted cash			524						524
Total cash and cash equivalents and restricted cash			$	56,928					$	53,732

Accounts Receivable, Net

Accounts receivable consist of amounts due from customers for the sales of products and services, net of any allowance for credit losses. The Company’s expected loss allowance methodology for receivables is developed using its historical collection experience, current and future economic market conditions and a review of the current aging status and financial condition of its customers. Balances are written off when they are ultimately determined to

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

be uncollectible. There were $4,000 and $30,000 allowances for credit losses related to accounts receivable as of June 30, 2023 and December 31, 2022, respectively.

Revenue Recognition

The Company generates revenue from sales of products and services. The Company’s product, the Proteograph Product Suite, consists of an instrument with embedded software essential to the instrument’s functionality, and consumables as well as platform evaluation agreements. The Company began recognizing revenue from shipments of its Proteograph Product Suite during the second quarter of 2021. The service revenue primarily consists of revenue received from the generation and analysis of proteomic data on behalf of the customer and revenue is recognized upon delivery of the reports.

The Company recognizes revenue when control of the products and services is transferred to its customers in an amount that reflects the consideration it expects to be entitled to receive from its customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when 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 distinct within the context of the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to direct the use and obtain substantially all the economic benefits from the good or service.

Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 30 or 60 days. Cash received from customers in advance of product shipment or providing services is recorded as a contract liability. The Company’s contracts with its customers generally do not include rights of return.

At times, the Company may enter into arrangements with payment terms which exceed one year from the transfer of control of the product or service. In such cases, the Company assesses whether the arrangement contains a significant financing component. If a significant financing component exists, the transaction price is adjusted for the financing portion of the arrangement, which is recorded as interest income over the payment term using the effective interest method. The Company does not assess whether a significant financing component exists when, at contract inception, the period between the transfer of control to a customer and final payment is one year or less.

The Company elected the practical expedient to account for shipping and handling activities that occur after the customer has obtained control as a fulfillment activity and not a separate performance obligation. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period is one year or less or the amount is immaterial. The Company excludes from the transaction price all taxes assessed by a governmental authority on revenue-producing transactions that are collected by the Company from a customer.

The Company regularly enters into contracts that include various combinations of products and services, which are generally distinct and accounted for as separate performance obligations. The transaction price is allocated to each performance obligation in proportion to its standalone selling price. The Company determines the standalone selling price using average selling prices with consideration of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by management, adjusted for applicable discounts.

Grant and Other Revenue

Grant revenue represents funding under cost reimbursement programs from federal foundation sources for qualified research and development activities performed by the Company and are not based on estimates that are subject to change. Grants received are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Such amounts are recorded as revenue as grant-

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

funded activities are performed up to the amount of expenses incurred. Any advance funding payments are recorded as deferred revenue until the activities are performed.

The Company recognizes revenue for research and development services contracts when control is transferred, which is upon completion of the services and when results of the services have been transferred to the customer. Upfront payments and fees received are recorded as deferred revenue until the Company performs its obligations under its arrangements. Amounts payable to the Company are recorded as other receivables when its right to consideration is unconditional.

A portion of the Company’s revenue relates to lease arrangements. Standalone lease arrangements are outside the scope of Accounting Standards Codification (ASC) 606, Revenue From Contracts With Customers, and are therefore accounted for in accordance with ASC 842, Leases. Each of these contracts is evaluated as a lease arrangement, either as an operating lease or a sales-type lease using the lease classification guidance.

The total consideration in a lease arrangement is allocated between lease and non-lease components on their relative standalone selling prices. The standalone selling price is based on the price the Company would sell that promised good or service separately to a customer. If a standalone price is not available for a component, it is estimated using the best information available.

3.FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables set forth the fair value of the Company’s financial assets that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands).

			June 30, 2023
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents:
Money market funds			$	53,185					$	—					$	—					$	53,185
Total cash equivalents			53,185						—						—						53,185
Investments:
U.S. Treasury securities			—						228,282						—						228,282
U.S. Non-Treasury securities			—						22,592						—						22,592
Commercial paper			—						48,300						—						48,300
Corporate debt securities			—						40,437						—						40,437
Total investments			—						339,611						—						339,611
Total assets measured at fair value			$	53,185					$	339,611					$	—					$	392,796

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			December 31, 2022
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents:
Money market funds			$	53,208					$	—					$	—					$	53,208
Total cash equivalents			53,208						—						—						53,208
Investments:
U.S. Treasury securities			—						227,692						—						227,692
U.S. Non-Treasury securities			—						10,702						—						10,702
Commercial paper			—						55,433						—						55,433
Corporate debt securities			—						79,361						—						79,361
Total investments			—						373,188						—						373,188
Total assets measured at fair value			$	53,208					$	373,188					$	—					$	426,396

There were no financial liabilities measured at fair value. The Company classifies money market funds within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company classifies its investments in U.S. Treasury securities (Treasury bills, Treasury notes, and Treasury bonds) as Level 2 instruments and obtains fair value from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or inputs corroborated by observable market data.

The carrying amount of the Company’s accounts receivable, other receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value due to their short maturities.

The following is a summary of the Company’s cash equivalents and investments and the gross unrealized holding gains and losses (in thousands):

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			June 30, 2023
			Amortized Cost Basis						Unrealized Gains						Unrealized Losses						Fair Value
Assets:
Cash equivalents:
Money market funds			$	53,185					$	—					$	—					$	53,185
Total cash equivalents			53,185						—						—						53,185
Investments:
U.S. Treasury securities			229,551						6						(1,275)						228,282
U.S. Non-Treasury securities			22,654						—						(62)						22,592
Commercial paper			48,356						—						(56)						48,300
Corporate debt securities			40,582						3						(148)						40,437
Total investments			341,143						9						(1,541)						339,611
Total assets measured at fair value			$	394,328					$	9					$	(1,541)					$	392,796

			December 31, 2022
			Amortized Cost Basis						Unrealized Gains						Unrealized Losses						Fair Value
Assets:
Cash equivalents:
Money market funds			$	53,208					$	—					$	—					$	53,208
Total cash equivalents			53,208						—						—						53,208
Investments:
U.S. Treasury securities			228,563						25						(896)						227,692
U.S. Non-Treasury securities			10,699						6						(3)						10,702
Commercial paper			55,561						3						(131)						55,433
Corporate debt securities			79,616						6						(261)						79,361
Total investments			374,439						40						(1,291)						373,188
Total assets measured at fair value			$	427,647					$	40					$	(1,291)					$	426,396

As of June 30, 2023 and December 31, 2022, unrealized losses on available-for-sale investments are not attributable to credit risk and are considered to be temporary. Approximately $8,000 of the Company’s investments have been in a continuous unrealized loss position for 12 months or longer. The Company believes it is more likely than not that investments in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. As of June 30, 2023, $75.8 million of available-for-sale investments had remaining maturities between one and two years. The remainder of the available-for-sale investments have a remaining maturity of one year or less. As of June 30, 2023 and December 31, 2022, the Company recorded $1.1 million and $0.6 million of accrued interest, respectively, related to its available-for-sale investments as a component of other receivables on the condensed consolidated balance sheets.

4.OTHER FINANCIAL STATEMENT INFORMATION

Inventory

Inventory consists of the following (in thousands):

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			June 30,						December 31,
			2023						2022
Raw materials			$	1,472					$	2,129
Work-in-progress			126						271
Finished goods			3,665						2,227
Total inventory			$	5,263					$	4,627

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

			June 30,						December 31,
			2023						2022
Laboratory equipment			$	26,550					$	21,122
Computer equipment and software			881						876
Furniture and fixtures			684						575
Leasehold improvements			3,380						3,375
Construction-in-progress			278						1,281
Property and equipment			31,773						27,229
Less: accumulated depreciation and amortization			(9,649)						(7,821)
Total property and equipment, net			$	22,124					$	19,408

Depreciation and amortization expense related to property and equipment was $1.3 million and $0.9 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation and amortization expense related to property and equipment was $2.6 million and $1.8 million for the six months ended June 30, 2023 and 2022, respectively.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

			June 30,						December 31,
			2023						2022
Accrued compensation			$	5,101					$	6,139
Accrued taxes			644						335
Accrued inventory			683						156
Accrued research and development			379						235
Accrued professional services			300						322
Other			822						1,111
Total accrued expenses			$	7,929					$	8,298

5.REVENUE AND DEFERRED REVENUE

Product revenue consists of an instrument with embedded software essential to the instrument’s functionality, consumables and platform evaluation agreements. Service revenue primarily consists of revenue received from the generation and analysis of proteomic data on behalf of the customer. Related party revenue is comprised of both the sale of products and services performed for related parties, as further discussed in Note 10. Grant and other revenue consists of grant revenue from services performed specifically for the reimbursement of research-related expense and other revenue which relates to lease arrangements, as further discussed in Note 8.

Deferred revenue activity for the period ended June 30, 2023 and December 31, 2022 are as follows (in thousands):

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			June 30,						December 31,
			2023						2022
Balance, beginning of period			$	133					$	376
Additions			648						233
Revenue recognized			(495)						(476)
Balance, end of period			$	286					$	133

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. As of June 30, 2023, $1.6 million of revenue is expected to be recognized from the remaining performance obligations, of which 56% is expected to be recognized within 12 months and the remainder thereafter.

Grant and Other Revenue

In August 2019, the Company received a notice of a Small Business Innovation Research (SBIR) grant award from the National Institutes of Health, which provides funding of approximately $1.1 million to the Company for its development of research applications. For the three and six months ended June 30, 2023, the Company recognized $0.5 million and $0.8 million of grant revenue, respectively, with respect to the award. For the three and six months ended June 30, 2022, the Company recognized $50,000 and $64,000 of grant revenue, respectively.

6.CAPITAL STOCK AND STOCKHOLDERS’ EQUITY

As of June 30, 2023, the Company is authorized to issue 105,000,000 shares of capital stock consisting of 94,000,000 shares of Class A common stock, 6,000,000 shares of Class B common stock, and 5,000,000 shares of preferred stock.

Common Stock

Common stock issued and outstanding is as follows:

			June 30,						December 31,
			2023						2022
Class A common stock			59,884,629						59,366,077
Class B common stock			4,044,969						4,044,969
Total common stock issued and outstanding			63,929,598						63,411,046

Class A and Class B common stock have a par value of $0.00001 per share. Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to 10 votes per share. Class B common shares are convertible to Class A common shares at any time at the option of the holder on a one-for-one basis. Holders of common stock are entitled to dividends as declared by the Board of Directors, subject to rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date.

Common stock issued and outstanding on the condensed consolidated balance sheets and condensed consolidated statements of changes in stockholders’ equity includes shares related to early exercised options and restricted stock that are subject to repurchase.

7.EQUITY INCENTIVE PLANS

As of June 30, 2023, there are 14,570,948 shares of Class A common stock reserved for issuance under the 2020 Equity Incentive Plan, 3,290,184 of which shares are available for issuance in connection with grants of future awards.

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock Options

Stock option activity for the six months ended June 30, 2023 is as follows:

			Options Outstanding						Weighted-Average Exercise Price
Balance at December 31, 2022			10,214,430						$	13.90
Options granted			3,259,009						4.38
Options exercised			(23,161)						2.20
Options forfeited			(159,766)						11.69
Balance at June 30, 2023			13,290,512						$	11.61
Vested and exercisable, June 30, 2023			6,109,830						$	8.80

Market Condition Options

In February 2023, the Company granted options to purchase an aggregate of 1,794,000 shares of the Company’s Class A common stock to certain Company executives, with vesting subject to market conditions (Market Condition Options). The Market Condition Options become eligible to vest if the average of the closing sales prices of a share of Class A common stock over a trailing twenty trading day period within seven years from the date of grant reaches a stock price of $6.885 per share (the Market Price Milestone). If the Market Price Milestone is achieved, 25% of each Market Condition Option will vest upon certification of such achievement, subject to the recipient’s continued service through the Market Price Milestone achievement date, and an additional 25% of each Market Condition Option will then vest on each of the one-, two- or three-year anniversaries of the Market Price Milestone achievement date, respectively, subject to the recipient’s continued service through the applicable anniversary date. In the event of the Company’s change in control during the seven-year performance period, the performance period will be shortened, achievement of the Market Price Milestone will be assessed based on the per share value of consideration that stockholders receive in the transaction (the change in control price), and if the Market Price Milestone is achieved on that basis, each Market Condition Option will vest in full as of immediately prior to the change in control, subject to the recipient’s continued service as of immediately prior to the change in control.

The Market Condition Option has a grant date fair value of approximately $5.2 million determined using a lattice-binomial option-pricing model based on a Monte Carlo simulation. The following assumptions were used to determine the grant date fair value of $2.80 - $3.02: (i) risk-free interest rate: 3.94%; (ii) expected volatility: 83.1%; and (iii) expected dividend yield: 0.0%. Compensation expense is recognized using an accelerated attribution method based on the derived service periods for each of the tranches. Failure to meet the market condition for an award does not result in reversal of previously recognized expense, so long as the service is provided for the duration of the respective derived service period.

The Company recognized compensation expense of $1.0 million and $1.4 million related to the Market Condition Options for the three and six months ended June 30, 2023, respectively. As of June 30, 2023, there was $3.8 million in unrecognized compensation related to unvested Market Condition Options, which the Company expects to recognize over a remaining weighted-average period of 2.03 years.

Restricted Stock Awards

Certain stock options granted provide stock option holders the right to exercise unvested stock options in exchange for restricted shares of Class A common stock. The Company has also issued restricted shares of Class A common stock to employees and directors. There were 52,182 shares and 60,787 shares of restricted stock that were unvested and subject to repurchase as of June 30, 2023 and December 31, 2022, respectively.

Restricted Stock Units

Restricted Stock Unit activity for the six months ended June 30, 2023 is as follows:

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			Restricted Stock Units						Weighted-Average Grant Date Fair Value
Balance at December 31, 2022			1,650,976						$	18.23
Granted			2,514,844						4.50
Vested			(426,896)						19.35
Forfeited			(83,885)						8.96
Balance at June 30, 2023			3,655,039						$	8.87

Employee Stock Purchase Plan

A total of 1,829,437 shares of Class A common stock are reserved for issuance under the 2020 Employee Stock Purchase Plan (ESPP) as of June 30, 2023. During the six months ended June 30, 2023, 68,495 shares of Class A common stock were issued under the ESPP.

Stock-Based Compensation

The following table summarizes the components of stock-based compensation recognized in the Company’s condensed consolidated statements of operations and comprehensive loss (in thousands):

			Three Months Ended June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
Cost of revenue			$	406					$	278					$	735					$	485
Research and development			2,733						2,392						5,281						4,393
Selling, general and administrative			6,613						5,708						12,460						11,562
Total stock-based compensation			$	9,752					$	8,378					$	18,476					$	16,440

In February 2022, in connection with a leave of absence taken by one of our executives, a total of 1,330,892 share-based awards were modified to extend the overall term and change the timing of the vesting of the awards. The total incremental stock-based compensation associated with the modification is $0.9 million, which will be recognized over the next eight years. Effective on September 30, 2022, the executive resigned from his position as President of the Company and the Company’s Board of Directors.

On June 21, 2022, the Board of Directors approved an option repricing to reduce the exercise price of certain vested, outstanding, and unexercised stock options with an exercise price greater than $19.00 per share that were held by employees who were not members of the Board or Director or officers for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (“Non-Section 16 employees”) to $19.00 per share, which was the Company’s initial public offering price. The Board of Directors also approved the repricing of certain unvested, outstanding, and unexercised stock options with an exercise price greater than $19.00 per share that were held by Non-Section 16 employees to $7.40 per share, which was the closing price of the Company’s Class A common stock on the Nasdaq Global Select Market on the date of the approval of the repricing. Except for the exercise price, the amended stock options have the same terms and conditions (including vesting schedule, number of shares, and expiration date) and will continue to be governed by the terms of the 2020 Equity Incentive Plan.

As a result of the option repricing, the Company recorded $0.2 million and $0.4 million of incremental stock-based compensation expense for the three and six months ended June 30, 2023, respectively. The total unrecognized incremental stock-based compensation associated with the option repricing is $1.4 million, which will be recognized over the next three years.

8.    LEASES

As a lessee, the Company leases approximately 51,000 square feet of office and laboratory space in Redwood City, California with a lease term that is set to end on September 30, 2032. The Company has an option to renew all

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

leased space for an additional five-year term at then-current market rates. In connection with the lease, the Company maintains a letter of credit issued to the lessor in the amount of $0.5 million as of June 30, 2023 and December 31, 2022, which is secured by restricted cash and is presented as noncurrent at each date based on the term of the underlying lease. In addition, the Company leases approximately 6,000 square feet of office space in San Diego, California pursuant to a lease that runs through September 2024.

As of June 30, 2023, the remaining weighted-average lease term was 9.1 years and the weighted-average incremental borrowing rate used to determine the operating lease liabilities was 6.2%.

The components of lease costs related to the Company’s operating leases were as follows (in thousands):

			Three Months Ended June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
Operating lease costs			$	1,038					$	958					$	2,076					$	1,771
Variable lease costs			(138)						84						23						278
Short-term lease costs			10						69						20						138
Total lease costs			$	910					$	1,111					$	2,119					$	2,187

Variable lease costs are primarily comprised of common area maintenance.

As of June 30, 2023, future minimum commitments under the Company’s non-cancelable facility operating leases are as follows:

Years ending December 31,						(in thousands)
2023 (remaining six months)						$	1,976
2024						3,969
2025						3,846
2026						3,957
2027						4,072
Thereafter						21,065
Total undiscounted future minimum lease payments						38,885
Present value adjustment for minimum lease commitments						(9,540)
Total operating lease liabilities						$	29,345

As a lessor, the Company has contracts for equipment leased to customers. The Company accounts for the non-lease component under the revenue recognition ASC 606 guidance and the lease component under ASC 842 guidance. For an arrangement that has been classified as a sales-type lease, revenue is recognized when the transfer of control of the underlying leased asset has occurred and the net investment lease recorded, which is calculated at the present value of the remaining lease payments due from the lessee.

The Company recognized $48,000 and $88,000 of revenue related to lease components from operating leases for the three and six months ended June 30, 2023, respectively, which is presented as grant and other revenue. The Company recognized no revenue related to lease components from operating leases for each of the three and six months ended June 30, 2022.

9.    COMMITMENTS AND CONTINGENCIES

Purchase Commitments and Obligations

The Company has certain purchase commitments related to its inventory management with certain manufacturing suppliers wherein the Company is required to purchase the amounts forecasted in a blanket purchase order within a certain time period. The contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude orders for goods and services entered into in the normal course of business that are not

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

enforceable or subject to change. These outstanding commitments amounted to $1.7 million and $5.7 million as of June 30, 2023 and December 31, 2022, respectively.

Guarantees and Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. The Company has entered into indemnification agreements with certain directors and officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of the status or service as directors or officers. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of June 30, 2023 and December 31, 2022, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

Contingencies

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is not currently a party to any material legal proceedings.

10.    RELATED PARTY TRANSACTIONS

In August 2020, the Company formed a new entity, PrognomiQ, Inc. (PrognomiQ), and entered into a stock purchase agreement with PrognomiQ, pursuant to which the Company transferred to PrognomiQ certain assets that comprised the Company’s human diagnostics activities in exchange for all the outstanding equity interests of PrognomiQ. The Company subsequently completed a pro-rata distribution to its stockholders of most of the shares of capital stock of PrognomiQ.

The Company has concluded that PrognomiQ is a VIE due to its reliance on future financing and insufficient equity investment at risk. However, the Company is not the primary beneficiary of the VIE as it does not have the power to direct the activities that most significantly impact the economic performance of PrognomiQ and does not have control over the PrognomiQ board of directors. The Company has determined that it has the ability to exercise significant influence over PrognomiQ and therefore has accounted for its investment in PrognomiQ using the equity method. As of the year ended December 31, 2022, the carrying value of the Company’s investment in PrognomiQ is nil due to recognized net losses based on its percentage of ownership in PrognomiQ.

PrognomiQ constitutes a related party and, as of June 30, 2023 and December 31, 2022, the Company held $0.6 million and $1.5 million in related party receivables, respectively, on the condensed consolidated balance sheets representing amounts due from product sales. For the three and six months ended June 30, 2023, the Company recognized revenue of $1.4 million and $2.7 million, respectively, which is presented as related party revenue on the condensed consolidated statements of operations and comprehensive loss and is comprised of the sale of instruments and consumables. For the three and six months ended June 30, 2022, the Company recognized revenue of $1.1 million and $2.2 million, respectively, which is presented as related party revenue on the condensed consolidated statements of operations and comprehensive loss and is comprised of the sale of instruments and consumables, and services performed.

During 2022, a member of the Company’s Board of Directors served as a board member and an executive officer at a company that is a customer of the Company. As of June 30, 2023 and December 31, 2022, the Company recorded nil and $0.3 million in related party receivables, respectively, on the condensed consolidated balance sheets, representing revenue from product sales. There was no revenue recognized for the three and six months ended June 30, 2023 and 2022. The Company has a contract for equipment leased to this customer that has been classified as a sales-type lease. As of each of June 30, 2023 and December 31, 2022, the lease receivables related to the sales-type lease are $0.2 million. The lease receivables are presented as prepaid expenses and other current assets on the condensed consolidated balance sheets.

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SEER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

11.    NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following table shows the computation of basic and diluted net loss per share (in thousands, except share and per share data):

			Three Months Ended June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
Numerator:
Net loss attributable to common stockholders			$	(23,431)					$	(22,815)					$	(47,390)					$	(46,461)
Denominator:
Weighted-average common shares used in computing net loss per share attributable to common stockholders, basic and diluted			63,762,625						62,376,571						63,654,348						62,191,068
Net loss per share attributable to common stockholders, basic and diluted			$	(0.37)					$	(0.37)					$	(0.74)					$	(0.75)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis):

			June 30,
			2023						2022
Class A common stock options issued and outstanding			13,290,512						11,741,948
Restricted common stock subject to future vesting			52,182						108,534
Restricted stock units			3,655,039						1,845,172
Total			16,997,733						13,695,654

12.    SUBSEQUENT EVENTS

On August 8, 2023, the Company implemented a reduction in force of approximately 12% of its workforce. The Company estimates that it will incur approximately $0.6 million of costs, consisting primarily of cash severance payments, which it expects to recognize in the third quarter of 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors.”

Overview

Our mission is to imagine and pioneer new ways to decode the secrets of the proteome to improve human health. Our first product, the ProteographTM Product Suite (Proteograph), leverages our proprietary engineered nanoparticle (NP) technology to provide unbiased, deep, rapid and large-scale access to the proteome. The Proteograph Product Suite is an integrated solution that includes consumables, an automation instrument and software.

We believe that broader access to the proteome is essential, not only to understanding its complexity and accelerating biological insights, but also to expanding end-markets. These markets may include basic research and discovery, translational research, diagnostics and applied applications. To comprehend the complexity and dynamic nature of the proteome, researchers must perform population-scale, deep, unbiased interrogation of biological samples over time. We believe that this level of interrogation was not previously feasible and that the Proteograph can enable researchers to perform these types of proteomics studies.

Since we were incorporated in 2017, we have devoted substantially all of our resources to research and development activities, including with respect to the Proteograph Product Suite, building our commercial infrastructure including manufacturing, operations, sales and marketing and service and support functions, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, becoming a publicly-traded company, and providing general and administrative support for these activities.

Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful commercialization of the Proteograph Product Suite. We are commercializing the Proteograph Product Suite as an integrated solution comprised of consumables, our SP100 automation instrument and software. Our commercial strategy is focused on growing adoption by the research community of the Proteograph, expanding the installed base and increasing utilization to generate revenue from the purchase of Proteograph consumables. We expect a highly efficient sales model because our workflow integrates with most existing proteomics laboratories’ workflows and also complements large-scale genomics research.

We are broadly commercializing the Proteograph Product Suite through a direct sales channel in the United States, and through both direct and distributor sales channels in regions outside the United States. Since we are in the early stages of commercialization, we have built, and will continue to build, our sales, marketing, support and product distribution capabilities. In addition, we will continue to build the necessary infrastructure for these activities in the United States, European Union, the United Kingdom, and other countries and regions, including Asia-Pacific, as we execute on our commercialization strategy for the Proteograph.

We leverage well-established unit operations to formulate and manufacture our NPs at our facilities in Redwood City, California. We procure certain components of our consumables from third-party manufacturers, which includes the commonly-available raw materials needed for manufacturing our proprietary engineered NPs. We are currently manufacturing using our production-scale and pilot lines and continue to build out our manufacturing capabilities to support broad commercial availability of our products. We obtain some of the reagents and components used in the Proteograph workflow from third-party suppliers. While some of these reagents and components are currently sourced from a single supplier, these products are readily available from numerous suppliers. While we currently perform some filling and packaging of the Proteograph assay and the related consumables, we may eventually have

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our filling and packaging outsourced to a third party. We conduct vendor and component qualification for components provided by third-party suppliers and quality control tests on our NPs.

We designed the SP100 automation instrument and have outsourced its manufacturing to Hamilton Company, a leading manufacturer of automated liquid handling workstations. We have entered into a non-exclusive agreement with Hamilton that covers the manufacturing of the SP100 automation instrument and its continued supply on a purchase order basis. The agreement has an initial term that runs three years following our commercial launch. We have the option to extend the term of the agreement with Hamilton upon written notice at the end of the initial term; provided that prices are only fixed during the initial term of the agreement. Hamilton has represented to us that it maintains ISO 9001 and ISO 13485 certification.

During the six months ended June 30, 2023 and 2022, we incurred a net loss of $47.4 million and $46.5 million, respectively, and used $34.5 million and $33.2 million of cash in operations, respectively. As of June 30, 2023, we had an accumulated deficit of $266.9 million and cash and cash equivalents and investments of $396.0 million. We expect to continue to incur significant and increasing losses and do not expect positive cash flows from operations for the foreseeable future.

We expect our expenses to increase significantly in connection with our ongoing activities, as we:

•broadly commercialize the Proteograph Product Suite;

•attract, hire and retain qualified personnel;

•continue to build our sales, marketing, service, support and distribution infrastructure as part of our commercialization efforts;

•build-out and expand our in-house NP manufacturing capabilities;

•continue to engage in research and development of other products and enhancements to the Proteograph Product Suite;

•implement operational, financial and management information systems;

•obtain, maintain, expand, and protect our intellectual property portfolio; and

•build the infrastructure to operate and scale as a public company.

Components of Results of Operations

Revenue

We generate revenue from product sales, including sales of the Proteograph Product Suite, which consists of an instrument with embedded software essential to the instrument’s functionality and associated consumables as well as our platform evaluation agreements. In addition, we may at times generate revenue from performing services, the receipt of grant revenue for the reimbursement of research-related expenses, and lease arrangements. Our revenue is primarily generated domestically. We intend to focus our commercial efforts in the United States and expect to grow our international presence. A portion of our revenue is generated by sales to related parties and we anticipate a portion of our revenue to continue to be generated by sales to such related parties.

Cost of Revenue

We utilize third-party manufacturers for production of our SP100 instrument and we manufacture our NPs and assemble our assay kits internally. Cost of revenue consists primarily of costs of the components of the Proteograph Product Suite, including the SP100 instrument with embedded software essential to the instrument’s functionality, and consumables, and distribution-related expenses such as logistics and shipping costs. In addition, cost of revenue includes stock-based compensation and related employee benefits, allocated overhead and write-downs or write-off of obsolete inventory.

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Research and Development Expenses

Research and development, or R&D, expenses include costs associated with performing services under research and development service contracts and research and development of our technology and product candidates. R&D expenses consist primarily of employee compensation, including stock-based compensation and employee benefits, laboratory supplies used for in-house research, consulting costs, costs related to clinical studies for the collection of biological samples for research use, and allocated costs, including rent, depreciation, information technology and utilities.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of employee compensation, including stock-based compensation, and related benefits for executive management, sales and marketing, service and support, finance, administration and human resources, legal, allocated overhead, professional service fees and other general overhead costs to support our operations.

Interest Income

Interest income consists of interest earned on cash and cash equivalents and investments.

Results of Operations

Comparisons of the Three Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the periods presented:

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			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Revenue:
Product			$	1,645					$	2,406					$	(761)					(32)		%
Service			467						57						410						719		%
Related party			1,358						1,108						250						23		%
Grant and other			538						50						488						976		%
Total revenue			4,008						3,621						387						11		%
Cost of revenue:
Product			1,118						1,643						(525)						(32)		%
Service			193						15						178						1187		%
Related party			352						354						(2)						(1)		%
Grant and other			64						—						64						100%
Total cost of revenue			1,727						2,012						(285)						(14)		%
Gross profit			2,281						1,609						672						42		%
Operating expenses:
Research and development			14,148						10,871						3,277						30		%
Selling, general and administrative			16,074						14,172						1,902						13		%
Total operating expenses			30,222						25,043						5,179						21		%
Loss from operations			(27,941)						(23,434)						(4,507)						19		%
Other income (expense):
Interest income			4,560						676						3,884						575		%
Other expense			(50)						(57)						7						(11)		%
Total other income			4,510						619						3,891						629		%
Net loss			$	(23,431)					$	(22,815)					$	(616)					3		%

Revenue

			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Revenue			$	4,008					$	3,621					$	387					11		%

Revenue increased by $0.4 million, or 11%, from $3.6 million during the three months ended June 30, 2022 to $4.0 million during the three months ended June 30, 2023, primarily due to increased consumable kit sales, service, and grant and other revenue, offset by fewer instrument sales. Revenue recognized primarily consisted of sales of the Proteograph SP100 instrument, consumable kits, platform evaluations, and service revenue, of which $1.4 million was attributed to related party. Also, revenue from our grant-funded activities related to our Small Business Innovation Research (SBIR) grant from the National Institutes of Health Grant (NIH) which increased between the two periods by $0.4 million and lease revenue presented as part of grant and other revenue increased between the two periods by $48,000.

22

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Cost of Revenue

			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Cost of revenue			$	1,727					$	2,012					$	(285)					(14)		%

Cost of revenue decreased by $0.3 million, or 14%, from $2.0 million during the three months ended June 30, 2022 to $1.7 million during the three months ended June 30, 2023, primarily due to increased consumable kit sales, which carry a lower cost of revenue, and lower product revenue from fewer instrument sales, which have a higher cost of revenue, offset by increased overhead expenses, warranty and inventory reserves and other costs of revenue. Cost of revenue related to the Proteograph Product Suite consists of costs of the SP100 instrument, consumable kits and other related costs, including labor and overhead.

Research and Development

			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Research and development			$	14,148					$	10,871					$	3,277					30		%

R&D expenses increased by $3.3 million, or 30%, from $10.9 million during the three months ended June 30, 2022 to $14.1 million during the three months ended June 30, 2023. The increase was primarily due to an increase in product development efforts related to the Proteograph Product Suite, including $1.4 million in employee compensation costs and other related expenses, including $0.3 million in stock-based compensation, due to an increase in research and development personnel and a $0.9 million increase in overhead related to the allocation of facility expense associated with the build-out of our expansion facilities to support our R&D efforts. Other increases are attributable to professional expenses of $0.4 million due to SBIR activities and $0.3 million in depreciation of laboratory equipment.

Selling, General and Administrative

			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Selling, general and administrative			$	16,074					$	14,172					$	1,902					13		%

Selling, general and administrative expenses increased by $1.9 million, or 13%, from $14.2 million during the three months ended June 30, 2022 to $16.1 million during the three months ended June 30, 2023, primarily due to a $1.5 million increase in employee compensation costs and a $0.9 million increase in stock-based compensation. The increase was offset by a $0.5 million decrease in professional services.

Total Other Income

			Three Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Total other income			$	4,510					$	619					$	3,891					629		%

23

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Total other income increased by $3.9 million, or 629%, from $0.6 million during the three months ended June 30, 2022 to $4.5 million during the three months ended June 30, 2023. The increase was due to higher rates of interest earned on cash invested in money market funds, U.S. Treasury, commercial paper and corporate securities during the three months ended June 30, 2023.

Results of Operations

Comparisons of the Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the periods presented:

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Revenue:
Product			$	3,988					$	4,555					$	(567)					(12)		%
Service			536						137						399						291		%
Related party			2,664						2,178						486						22		%
Grant and other			873						64						809						1264		%
Total revenue			8,061						6,934						1,127						16		%
Cost of revenue:
Product			2,554						3,303						(749)						(23)		%
Service			200						29						171						590		%
Related party			830						748						82						11		%
Grant and other			128						—						128						100%
Total cost of revenue			3,712						4,080						(368)						(9)		%
Gross profit			4,349						2,854						1,495						52		%
Operating expenses:
Research and development			28,622						21,607						7,015						32		%
Selling, general and administrative			31,113						28,466						2,647						9		%
Total operating expenses			59,735						50,073						9,662						19		%
Loss from operations			(55,386)						(47,219)						(8,167)						17		%
Other income (expense):
Interest income			8,277						819						7,458						911		%
Other expense			(281)						(61)						(220)						361		%
Total other income			7,996						758						7,238						955		%
Net loss			$	(47,390)					$	(46,461)					$	(929)					2		%

Revenue

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Revenue			$	8,061					$	6,934					$	1,127					16		%

24

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Revenue increased by $1.1 million, or 16%, from $6.9 million during the six months ended June 30, 2022 to $8.1 million during the six months ended June 30, 2023, primarily due to increased consumable kit sales, service, and grant and other revenue, offset by fewer instrument sales. Revenue recognized primarily consisted of sales of the Proteograph SP100 instrument, consumable kits, platform evaluations, and service revenue, of which $2.7 million was attributed to related party. Also, revenue from our grant-funded activities related to our SBIR grant from NIH increased between the two periods by $0.7 million and lease revenue presented as part of grant and other revenue increased between the two periods by $88,000.

Cost of Revenue

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Cost of revenue			$	3,712					$	4,080					$	(368)					(9)		%

Cost of revenue decreased by $0.4 million, or 9%, from $4.1 million during the six months ended June 30, 2022 to $3.7 million during the six months ended June 30, 2023, primarily due to increased consumable kit sales, which carry a lower cost of revenue, and lower product revenue from fewer instrument sales, which have a higher cost of revenue, offset by increased overhead expenses, warranty and inventory reserves and other costs of revenue. Cost of revenue related to the Proteograph Product Suite consists of costs of the SP100 instrument, consumable kits and other related costs, including labor and overhead.

Research and Development

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Research and development			$	28,622					$	21,607					$	7,015					32		%

R&D expenses increased by $7.0 million, or 32%, from $21.6 million during the six months ended June 30, 2022 to $28.6 million during the six months ended June 30, 2023. The increase was primarily due to an increase in product development efforts related to the Proteograph Product Suite, including $2.7 million in employee compensation costs and other related expenses, including $0.9 million in stock-based compensation, due to an increase in research and development personnel and a $1.7 million increase in overhead related to the allocation of facility expense associated with the build-out of our expansion facilities to support our R&D efforts. Other increases are attributable to professional expenses of $0.5 million due to SBIR activities, business and laboratory expenses of $0.7 million, and $0.5 million in depreciation of laboratory equipment.

Selling, General and Administrative

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Selling, general and administrative			$	31,113					$	28,466					$	2,647					9		%

Selling, general and administrative expenses increased by $2.6 million, or 9%, from $28.5 million during the six months ended June 30, 2022 to $31.1 million during the six months ended June 30, 2023, primarily due to a $2.8 million increase in employee compensation costs and a $0.9 million increase in stock-based compensation. Other increases are attributable to a $0.1 million increase in depreciation and $0.1 million increase in travel expenses. The increase was offset by a $1.3 million decrease in professional services.

25

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Total Other Income

			Six Months Ended June 30,												Change
			2023						2022						Amount						%
			(dollars in thousands)
Total other income			$