Company: PACB
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001299130-25-000156
Chunk: 17

Company: PACIFIC BIOSCIENCES OF CALIFORNIA, INC.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 17
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 of the acquisition. The number of shares, if any, to be issued in connection with the achievement of the specified milestone is not known and will be calculated based on the daily volume-weighted average price of our common stock for the twenty trading days ending on and including the fifth trading day immediately prior to the occurrence of the specified milestone. Upon achievement of the milestone, we may pay cash in lieu of our common stock to ensure that the issuance of our common stock does not exceed 19.9% of our outstanding shares of common stock then outstanding.The contingent consideration is accounted for as a liability at fair value, with changes during each reporting period recognized in our condensed consolidated statements of operations and comprehensive loss. The fair value of the contingent consideration liability was calculated using a Monte Carlo Simulation to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate.We classify contingent consideration within Level 3, as factors used to develop the estimate of fair value include unobservable inputs that are not supported by market activity and are significant to the fair value. Estimates and assumptions used in the Monte Carlo simulation include risk-adjusted forecasted revenues for products and services leveraging Apton's technology and an estimated credit spread.We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the five-year anniversary of the closing date of the acquisition. The key input used in the determination of the fair value included projected revenues of the high-throughput short-read products and services leveraging Apton's technology. Primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event must occur prior to the five-year anniversary of the closing date of the acquisition, the estimated fair value of the contingent consideration liability was $0. An increase in the fair value of the liability may result from an acceleration in the timing of or increase in projected revenues and from a 

Q2 Fiscal 2025 Form 10-Q10

decrease in discount rates, including the risk-free rate and estimated subordinated credit spread for a CCC credit rating.Changes in the estimated fair value of the contingent consideration liability during the six months ended June 30, 2025 were as follows:(In thousands)Level 3Beginning balance as of December 31, 2024$18,700 Change in estimated fair value(18,700)Ending balance as of June