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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2022
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 001-36189
_____________________________________________________________________________________________
Tandem Diabetes Care, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________________
Delaware20-4327508
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
11075 Roselle Street92121
San Diego, California
(Zip Code)
(Address of principal executive offices)
(858) 366-6900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Exchange on Which Registered
Common Stock, par value $0.001 per shareTNDMNasdaq Global 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  x    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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated 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   ☒
As of April 29, 2022, there were 63,962,732 shares of the registrant’s Common Stock outstanding.
1

TABLE OF CONTENTS
Part IFinancial Information
Item 1Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3Quantitative and Qualitative Disclosures About Market Risk
Item 4Controls and Procedures
Part IIOther Information
Item 1Legal Proceedings
Item 1ARisk Factors
Item 6Exhibits

1


PART I. FINANCIAL INFORMATION
Item 1.      Financial Statements

TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
March 31,December 31,
20222021
Assets(Unaudited)(Note 1)
Current assets:
Cash and cash equivalents$93,681 $71,181 
Short-term investments541,710 552,630 
Accounts receivable, net94,133 110,725 
Inventories79,987 68,551 
Prepaid and other current assets8,953 8,433 
Total current assets818,464 811,520 
Property and equipment, net49,987 50,386 
Operating lease right-of-use assets131,058 27,503 
Other long-term assets15,768 15,728 
Total assets$1,015,277 $905,137 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$45,341 $28,032 
Accrued expenses6,362 9,419 
Employee-related liabilities38,258 51,556 
Operating lease liabilities8,080 9,279 
Deferred revenue10,881 10,182 
Other current liabilities22,893 23,388 
Total current liabilities131,815 131,856 
Convertible senior notes, net - long-term281,905 281,467 
Operating lease liabilities - long-term129,195 23,922 
Deferred revenue - long-term17,531 16,940 
Other long-term liabilities17,449 17,840 
Total liabilities577,895 472,025 
Commitments and contingencies (Note 12)— — 
Stockholders’ equity:
Common stock, $0.001 par value; 200,000 shares authorized, 63,941 and 63,833 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.
64 64 
Additional paid-in capital1,089,689 1,068,259 
Accumulated other comprehensive loss(3,061)(616)
Accumulated deficit(649,310)(634,595)
Total stockholders’ equity437,382 433,112 
Total liabilities and stockholders’ equity$1,015,277 $905,137 
See accompanying notes to unaudited condensed consolidated financial statements.
2

TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands, except per share data)
Three Months Ended March 31,
20222021
Sales$175,907 $141,037 
Cost of sales84,814 67,750 
Gross profit91,093 73,287 
Operating expenses:
Selling, general and administrative73,271 58,563 
Research and development33,160 17,961 
Total operating expenses106,431 76,524 
Operating loss(15,338)(3,237)
Other income (expense), net:
Interest income and other, net381 272 
Interest expense(1,516)(1,506)
Change in fair value of common stock warrants34 (690)
Total other expense, net(1,101)(1,924)
Loss before income taxes(16,439)(5,161)
Income tax benefit(1,724)(117)
Net loss$(14,715)$(5,044)
Other comprehensive loss:
Unrealized loss on short-term investments$(2,517)$(38)
Foreign currency translation gain (loss)72 (76)
Comprehensive loss$(17,160)$(5,158)
Net loss per share, basic and diluted$(0.23)$(0.08)
Weighted average shares used to compute basic and diluted net loss per share63,880 62,448 
See accompanying notes to unaudited condensed consolidated financial statements.
3


TANDEM DIABETES CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands)

Three Months Ended March 31, 2022
Common StockAdditional
Paid-in
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202163,833 $64 $1,068,259 $(616)$(634,595)$433,112 
Exercise of stock options101 — 3,782 — — 3,782 
Vesting of restricted stock units, net of shares withheld for taxes5 — (299)— — (299)
Exercise of common stock warrants2 — 16 — — 16 
Stock-based compensation expense— — 17,931 — — 17,931 
Unrealized loss on short-term investments— — — (2,517)— (2,517)
Foreign currency translation adjustments— — — 72 — 72 
Net loss— — — — (14,715)(14,715)
Balance at March 31, 2022
63,941 $64 $1,089,689 $(3,061)$(649,310)$437,382 

Three Months Ended March 31, 2021
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202062,335 $62 $1,025,233 $220 $(659,210)$366,305 
Effect of change in accounting for convertible senior notes (1)
— — (85,803)— 9,049 (76,754)
Exercise of stock options111 1 3,135 — — 3,136 
Exercise of common stock warrants125 — 437 — — 437 
Fair value of common stock warrants at time of exercise— — 12,434 — — 12,434 
Stock-based compensation expense— — 13,014 — — 13,014 
Unrealized loss on short-term investments— — — (38)— (38)
Foreign currency translation adjustments— — — (76)— (76)
Net loss— — — — (5,044)(5,044)
Balance at March 31, 2021
62,571 $63 $968,450 $106 $(655,205)$313,414 
(1) The Company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity effective January 1, 2021 (see Note 2, “Summary of Significant Accounting Policies”).
See accompanying notes to unaudited condensed consolidated financial statements.
4

TANDEM DIABETES CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended March 31,
20222021
Operating Activities
Net loss$(14,715)$(5,044)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense3,628 3,485 
Amortization of debt issuance costs438 428 
Provision for expected credit losses846 143 
Provision for inventory obsolescence346 64 
Change in fair value of common stock warrants(34)690 
Amortization of premium on short-term investments562 209 
Stock-based compensation expense18,110 12,947 
Other468 (73)
Changes in operating assets and liabilities:
Accounts receivable, net15,729 8,389 
Inventories(11,963)(3,084)
Prepaid and other current assets741 (1,412)
Other long-term assets(582)(17)
Accounts payable & accrued expenses13,732 10,815 
Employee-related liabilities(13,299)(1,448)
Deferred revenue1,290 1,871 
Operating leases and other current liabilities(1,106)1,094 
Other long-term liabilities(391)(372)
Net cash provided by operating activities13,800 28,685 
Investing Activities
Purchases of short-term investments(110,719)(154,300)
Proceeds from maturities of short-term investments111,559 140,200 
Proceeds from sales of short-term investments7,000 11,530 
Purchases of property and equipment(2,643)(3,524)
Net cash provided by (used in) investing activities5,197 (6,094)
Financing Activities
Proceeds from issuance of common stock under Company stock plans, net3,484 3,135 
Proceeds from exercise of common stock warrants16 438 
Net cash provided by financing activities3,500 3,573 
Effect of foreign exchange rate changes on cash3 14 
Net increase in cash and cash equivalents22,500 26,178 
Cash and cash equivalents at beginning of period71,181 94,613 
Cash and cash equivalents at end of period$93,681 $120,791 
Supplemental disclosures of cash flow information
Income taxes paid$170 $197 
Supplemental schedule of non-cash investing and financing activities
Right-of-use assets obtained in exchange for operating lease obligations$107,478 $15,087 
Purchase of property and equipment included in accounts payable $1,553 $924 
Intangible costs in accounts payable and other long-term liabilities$1,029 $2,244 
See accompanying notes to unaudited condensed consolidated financial statements.

5

TANDEM DIABETES CARE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
The Company
Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of technology solutions for people living with diabetes. Tandem Diabetes Care, Inc. is incorporated in the state of Delaware. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc., together with its wholly-owned subsidiaries in the U.S., Canada and the Netherlands.
The Company manufactures, sells and supports insulin pump products that are designed to address the evolving needs and preferences of differentiated segments of the insulin-dependent diabetes market. The Company’s manufacturing, sales and support activities principally focus on the t:slim X2 Insulin Delivery System (t:slim X2), the Company’s flagship pump platform which is capable of remote software updates and is designed to display continuous glucose monitoring (CGM) sensor information directly on the pump home screen. The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the t:connect cloud-based diabetes management application (t:connect) and the Tandem Device Updater, a Mac and PC-compatible tool which offers and supports updates of the Company’s insulin pump software from a personal computer. The Company’s insulin pump products are generally considered durable medical equipment and have an expected lifespan of at least four years. In addition to insulin pumps, the Company sells disposable products that are used together with the pumps and are replaced every few days, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to a user’s body, as well as other accessories for enhanced usability.
Basis of Presentation and Principles of Consolidation
The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.
Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (Annual Report), from which the balance sheet information herein was derived. The condensed consolidated financial statements include the accounts of Tandem Diabetes Care, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The functional currency of the Company’s foreign subsidiary is the local currency. The Company translates the financial statements of its foreign subsidiary into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses. Translation related adjustments are included in other comprehensive loss, and in accumulated other comprehensive income in the stockholders’ equity section of the Company’s condensed consolidated balance sheets. Foreign exchange gains or losses resulting from balances denominated in a currency other than the functional currency are recognized in interest income and other, net in the Company’s condensed consolidated statements of operations.
Reclassifications
Starting with the first quarter of 2022, the Company included the liability related to common stock warrants (see Note 5, “Fair Value Measurements”) as a component of other current liabilities on the Company’s condensed consolidated balance sheet. In addition, deferred revenue long-term, which was previously reported as a component of other long-term liabilities, is now separately reported on the condensed consolidated balance sheet. The corresponding balances at December 31, 2021, have been reclassified to conform to the current year presentation.


6

2. Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2022, as compared to those disclosed in the Company’s 2021 Annual Report.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes as of the date of the consolidated financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.
Accounts Receivable
The Company grants credit to various customers in the ordinary course of business and is paid directly by customers who use its products, distributors and third-party insurance payors. The Company maintains an allowance for its current estimate of expected credit losses. Provisions for expected credit losses are estimated based on historical experience, assessment of specific risk, review of outstanding invoices, forecasts about the future, and various assumptions and estimates that are believed to be reasonable under the circumstances, which included the Company’s estimates of credit risks as a result of the coronavirus pandemic (COVID-19 global pandemic). Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. The carrying value and estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of March 31, 2022 and December 31, 2021 (see Note 5, “Fair Value Measurements”).
The Company’s convertible senior notes are carried at amortized cost on the condensed consolidated balance sheets (see Note 7, “Debt”). The Company determined the fair value of its convertible senior notes to be $363.3 million and $430.0 million at March 31, 2022 and December 31, 2021, respectively, based on Level 2 quoted market prices as of those dates.
Operating Lease Right-of-Use Assets and Liabilities
Lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized when the Company takes possession of the leased property (the Commencement Date) based on the present value of lease payments over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842 Leases, the Company combines lease and non-lease components. Rent expense on noncancelable leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the respective leases beginning on the Commencement Date. The difference between rent expense and rent paid is accounted for as a component of operating lease right-of-use assets on the Company’s consolidated balance sheets. Landlord improvement allowances and other similar lease incentives are recorded as a reduction of the right-of-use leased assets, and are amortized on a straight-line basis as a reduction to operating lease costs.
Cost Basis Equity Investment

The Company made an $8.1 million equity investment in a private company in 2021, which represented less than 5% of the outstanding equity of that company. The investment is recorded using the cost minus impairment adjusted for changes in observable prices and is included as a component of other long-term assets on the consolidated balance sheets. The Company monitors this investment to evaluate whether any increase or decline in its value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions.
7

Intangible Assets Subject to Amortization
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is recognized over their estimated useful lives on a straight-line basis. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not recognize any impairment losses during the three months ended March 31, 2022 and 2021.
In 2020, the Company acquired Sugarmate, Inc. (Sugarmate), the developer of a mobile app designed to help people visualize diabetes therapy data in innovative ways. The Sugarmate acquisition was accounted for as an acquisition of assets. Substantially all of the fair value was concentrated in a single identifiable asset, a technology-based intangible asset. The purchased intangible asset is amortized on a straight-line basis over an estimated useful life of five years.
Revenue Recognition
Revenue is generated primarily from sales of insulin pumps, disposable insulin cartridges and infusion sets to individual customers with third-party insurance coverage and through a network of distributors that resell the products to insulin-dependent diabetes customers. The Company recognizes revenue when it transfers control of the promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, net of estimated returns.
Revenue Recognition for Arrangements with Multiple Performance Obligations
The Company considers the individual deliverables in its product offering as separate performance obligations. The transaction price is determined based on the consideration expected to be received, based either on the stated value in contractual arrangements or the estimated cash to be collected in non-contracted arrangements. The Company allocates the consideration to the individual performance obligations and recognizes the consideration based on when the performance obligation is satisfied, considering whether or not this occurs at a point in time or over time. Generally, insulin pumps, cartridges, infusion sets and accessories are deemed performance obligations that are satisfied at a point in time when the customer obtains control of the promised good, which typically is upon shipment for our distributor arrangements and upon receipt for sales directly to individual customers. Complementary products, such as t:connect and the Tandem Device Updater, are considered distinct performance obligations that are satisfied over time, as access and support for these products is provided throughout the typical four-year warranty period of the insulin pumps. Accordingly, revenue related to the complementary products is deferred and recognized over a four-year period. Where there is no standalone value for the complementary product, the Company determines its value by applying the expected cost plus a margin approach and then allocates the residual to the insulin pumps.
Warranty Reserve
The Company generally provides a four-year warranty on its insulin pumps to end user customers and may replace any pumps that do not function as intended in accordance with the product specifications within the warranty period. Additionally, the Company offers a six-month warranty on disposable insulin cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment, and the Company reevaluates the estimate of the warranty reserve obligation at each reporting period. Warranty costs are estimated primarily based on the current expected product replacement cost and expected replacement rates utilizing historical experience. Insulin pumps returned to the Company may be refurbished and redeployed. Experience has shown that initial data for any given pump version may be insufficient; therefore, the Company’s process relies on long-term historical averages until sufficient data are available. As actual experience becomes available, the Company uses the data to update the historical averages. The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to the length of time each pump version has been in the field and revised future expectations of performance based on new features and capabilities that may become available through Tandem Device Updater.
8

The following table provides a reconciliation of the changes in product warranty liabilities for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Balance at beginning of the period$30,401 $22,075 
Provision for warranties issued during the period7,201 5,896 
Settlements made during the period(6,021)(4,256)
Decrease in warranty estimates(1,137)(546)
Balance at end of the period$30,444 $23,169 
As of March 31, 2022 and December 31, 2021, total product warranty reserves were included in the following consolidated balance sheet accounts (in thousands):
March 31, 2022December 31, 2021
Other current liabilities$13,509 $13,076 
Other long-term liabilities16,935 17,325 
Total warranty reserve$30,444 $30,401 

Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the requisite service period on a straight-line basis. The Company estimates the fair value of stock options issued under the Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan) and the fair value of the employees’ purchase rights under the Company’s 2013 Employee Stock Purchase Plan (ESPP) using the Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of assumptions about a number of variables, including stock price volatility, expected term, dividend yield and risk-free interest rate (see Note 8, “Stockholders’ Equity”). The fair value of restricted stock unit (RSU) awards issued under the Company’s 2013 Plan that vest solely based on service is estimated based on the fair market value of the underlying stock on the date of grant. The fair value of RSU awards issued under the 2013 Plan that vest based upon the Company’s actual performance relative to predefined performance metrics is estimated based on the fair market value of the underlying stock on the date of grant and the probability that the specified performance criteria will be met, subject to the awardee’s continuing service through the measurement date. At each reporting period, the Company reassesses the probability of the achievement of such performance metrics. Any expense change resulting from an adjustment in the estimated shares to be released is recorded in the period of adjustment.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share reflects the potential dilution that would occur if securities exercisable for or convertible into common stock were exercised for or converted into common stock. Dilutive common share equivalents are comprised of stock options and unvested RSUs outstanding under the Company’s stock plans, potential awards to be granted pursuant to the ESPP, and common stock warrants, each calculated using the treasury stock method; and shares issuable upon conversion of the convertible senior notes calculated using the if-converted method. For common stock warrants that are recorded as a liability in the accompanying condensed consolidated balance sheets, the calculation of diluted loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of the warrants is dilutive to loss per share for the period, an adjustment is made to net loss used in the calculation to remove the change in fair value of the warrants from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method.
For the three months ended March 31, 2022 and 2021, there was no difference in the weighted average number of shares used to calculate basic and diluted net loss per share due to the Company’s net loss position.

9

Potentially dilutive securities outstanding and not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in thousands, in common stock equivalent shares):
Three Months Ended
March 31,
20222021
Options to purchase common stock4,424 5,068 
Unvested restricted stock units630 133 
Warrants to purchase common stock211 379 
Awards granted under the ESPP78 78 
Convertible senior notes (if-converted)2,554 2,554 
7,897 8,212 
Recent Accounting Pronouncements

In June 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in
an Entity’s Own Equity, which is intended to simplify the accounting for convertible instruments. This new guidance eliminated certain models that require separate accounting for embedded conversion features, and eliminated certain of the conditions for equity classification for contracts in an entity’s own equity. Accordingly, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance could be adopted through either a modified retrospective method of transition or a fully retrospective method of transition. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company elected to early adopt the new standard on January 1, 2021 using the modified retrospective method and, accordingly, recorded a net reduction to accumulated deficit of $9.0 million, a decrease to additional paid-in capital of $85.8 million, and an increase to convertible senior notes, net - long-term of $76.8 million to reflect the impact of the accounting change (see Note 7, “Debt”).
3. Short-Term Investments
The Company invests in marketable securities primarily consisting of debt instruments of the U.S. Government, U.S. Government-sponsored enterprises, and financial institutions and corporations with strong credit ratings. The following represents a summary of the estimated fair value of short-term investments at March 31, 2022 and December 31, 2021 (in thousands):
At March 31, 2022Amortized
Cost		Gross Unrealized
Gain		Gross Unrealized
Loss		Estimated
Fair Value
Available-for-sale securities:
U.S. Treasury securities$296,072 $1 $(2,388)$293,685 
Commercial paper156,913 — (202)156,711 
Corporate debt securities51,649 6 (196)51,459 
U.S. Government-sponsored enterprises37,217 — (362)36,855 
Supranational bonds3,000 — — 3,000 
Total$544,851 $7 $(3,148)$541,710 

10

At December 31, 2021Amortized
Cost		Gross Unrealized
Gain		Gross Unrealized
Loss		Estimated
Fair Value
Available-for-sale securities:
U.S. Treasury securities$222,206 $— $(482)$221,724 
Commercial paper218,391 14 (24)218,381 
Corporate debt securities58,881 — (45)58,836 
U.S. Government-sponsored enterprises50,773 1 (88)50,686 
Supranational bonds3,003 — — 3,003 
Total$553,254 $15 $(639)$552,630 

The contractual maturities of available-for-sale debt securities as of March 31, 2022, were as follows (in thousands):
Years to Maturity
At March 31, 2022Within One YearOne to Two YearsEstimated Fair Value
U.S. Treasury securities$223,643 $70,042 $293,685 
Commercial paper156,711 — 156,711 
Corporate debt securities43,906 7,553 51,459 
U.S. Government-sponsored enterprises23,612 13,243 36,855 
Supranational bonds3,000 — 3,000 
Total$450,872 $90,838 $541,710 

The Company has classified all marketable securities, regardless of maturity, as short-term investments based upon the Company’s ability and intent to use any of those marketable securities to satisfy the Company’s liquidity requirements.

The Company reviews the portfolio of available-for-sale debt securities quarterly to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns. Unrealized losses on available-for-sale debt securities at March 31, 2022 were primarily due to the recent increase in market interest rates. The Company does not intend to sell the available-for-sale debt securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity. Based on the credit quality of the available-for-sale debt securities in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, the Company did not recognize any impairment losses related to its available-for-sale debt securities at March 31, 2022.
4. Composition of Certain Financial Statement Items
Accounts Receivable
Accounts receivable, net consisted of the following at (in thousands):
March 31, 2022December 31, 2021
Accounts receivable$98,477 $114,974 
Less: allowance for credit losses(4,344)(4,249)
Accounts receivable, net$94,133 $110,725 

11

Allowance for Credit Losses
The following table provides a reconciliation of the changes in the allowance for estimated accounts receivable credit losses for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Balance at beginning of the period$4,249 $3,857 
Provision for expected credit losses846 143 
Write-offs and adjustments, net of recoveries(751)(441)
Balance at end of the period$4,344 $3,559 

Inventories
Inventories consisted of the following at (in thousands):
March 31, 2022December 31, 2021
Raw materials$28,223 $26,911 
Work-in-process18,520 16,612 
Finished goods33,244 25,028 
Total inventories$79,987 $68,551 

5. Fair Value Measurements
Authoritative guidance on fair value measurements defines fair value, and provides a consistent framework for measuring fair value and for disclosures of each major asset and liability category measured at fair value on either a recurring or a nonrecurring basis. Fair value is intended to reflect an assumed exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1:Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:Inputs, other than quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3:Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own valuation techniques that require input assumptions.
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):
12

Fair Value Measurements at
March 31, 2022
TotalLevel 1Level 2Level 3
Assets
Cash equivalents(1)
$44,905 $44,905 $— $— 
U.S. Treasury securities293,685 293,685 — — 
Commercial paper156,711 — 156,711 — 
Corporate debt securities51,459 — 51,459 — 
U.S. Government-sponsored enterprises36,855 — 36,855 — 
Supranational bonds3,000 — 3,000 — 
Total assets$586,615 $338,590 $248,025 $— 
Liabilities
Common stock warrants(2)
$113 $— $— $113 
Total liabilities$113 $— $— $113 

Fair Value Measurements at
December 31, 2021
TotalLevel 1Level 2Level 3
Assets
Cash equivalents(1)
$48,286 $48,286 $— $— 
U.S. Treasury securities221,724 221,724 — — 
Commercial paper218,381 — 218,381 — 
Corporate debt securities58,836 — 58,836 — 
U.S. Government-sponsored enterprises50,686 — 50,686 — 
Supranational bonds3,003 — 3,003 — 
Total assets$600,916 $270,010 $330,906 $— 
Liabilities
Common stock warrants(2)
$147 $— $— $147 
Total liabilities$147 $— $— $147 
(1)Generally, cash equivalents include money market funds and investments with a maturity of three months or less from the date of purchase.
(2)Included in other current liabilities on the Company’s condensed consolidated balance sheets.
The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers.
The Company's Level 3 liabilities at March 31, 2022 and December 31, 2021 included the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017. The Series A warrants, which expire in October 2022, provide holders the right to purchase shares of the Company’s common stock at an exercise price of $3.50 per share. As of March 31, 2022 and December 31, 2021, there were Series A warrants outstanding to purchase 1,000 shares of the Company’s common stock (see Note 8, “Stockholders’ Equity”).
13

The Company reassesses the fair value of the outstanding Series A warrants at each reporting date utilizing a Black-Scholes pricing model. Variables used in the pricing model include the closing market price of the Company’s common stock at the balance sheet date, as well as estimated stock price volatility, dividend yield, remaining warrant term and risk-free interest rate. A significant increase (decrease) in any of these inputs in isolation, particularly the market price of the Company’s common stock, would have resulted in a significantly higher (lower) fair value measurement. The assumptions used to estimate the fair values of the outstanding Series A warrants at March 31, 2022 and December 31, 2021 are presented below:
Series A Warrants
March 31, 2022December 31, 2021
Risk-free interest rate1.1 %0.3 %
Expected dividend yield0.0%0.0%
Expected volatility44.4 %39.1 %
Expected term (in years)0.60.8
The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Balance at beginning of period$147 $14,261 
(Gain) loss recognized from the change in fair value of common stock warrants(34)690 
Common stock warrants exercised during the period— (12,434)
Balance at end of period$113 $2,517 
6. Leases
The Company's leases consist of operating leases for general office space, research and development, manufacturing and warehouse facilities, and equipment. These noncancellable operating leases have initial lease terms from two years to thirteen years. Leases with an initial term of 12 months or less (Short-term Lease) are expensed as incurred and are not recorded as right-of-use assets on the Company’s condensed consolidated balance sheets. The Company is required to recognize operating lease right-of-use assets and liabilities, and begin recording lease expense when the Company takes possession of the leased property (the Commencement Date). The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Because the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease Commencement Date to determine the operating lease right-of-use assets and liabilities based on the present value of future lease payments over the lease term. The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.
Certain leases include an option to renew, with renewal terms that can extend the lease term for additional periods. The exercise of lease renewal options is at the Company’s sole discretion. For renewal options that are reasonably certain at the lease Commencement Date of being exercised, the Company includes the renewal option period in the lease term.
Vista Sorrento Lease
In March 2021, the Company entered into a second amendment (Second Amendment) to its lease agreement for office space located on Vista Sorrento Parkway in San Diego, California (Vista Sorrento Lease) covering 59,013 square feet of general administrative office space (Existing Premises). The Second Amendment expanded the Existing Premises by adding 14,916 square feet of general administrative office space (Expansion Space), and extended the lease term for the Existing Premises through January 2028. The Expansion Space lease Commencement Date occurred in March 2021, and the lease term expires in January 2028. The Company has two options to extend the term of the Vista Sorrento Lease, covering both the Existing Premises and the Expansion Space, with each option providing for an additional period of five years. The Vista Sorrento Lease term was determined assuming the renewal options would not be exercised. The Company recognized right-of-use leased assets and corresponding operating lease liabilities of $15.1 million on the consolidated balance sheet in the first quarter of 2021 related to the Second Amendment.
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Tech Center Lease
In September 2021, the Company entered into a lease agreement for 181,949 square feet of additional general administrative, laboratory, and research and development office space (the Premises) located on High Bluff Drive in San Diego, California (Tech Center Lease). Possession of the Premises is expected to be tendered to the Company by the landlord in two phases, with Phase I consisting of 143,850 rentable square feet, and Phase II consisting of 38,099 rentable square feet. The Company intends to use Phase I of the Tech Center Lease for operations currently occupying 77,458 square feet of leased space, located on Roselle Street in San Diego, California, that is scheduled to expire in May 2023.
The initial lease term Phase I Commencement Date occurred in March 2022 when the Company was tendered possession of the Phase I portion of the Premises, and rent payments commence in September 2022 (the Phase I Rent Commencement Date). The Phase II Commencement Date is expected to occur upon the earlier of (i) the date upon which the Company first commences business in the Phase II portion of the Premises, and (ii) May 1, 2025 (the Phase II Rent Commencement Date). The Tech Center Lease term expires in April 2035. The Company has two options to extend the term of the lease, with each option providing for an additional period of five years. The Tech Center Lease term was determined assuming the renewal options would not be exercised.
The Tech Center Lease also includes a first right of offer with respect to an additional 34,569 rentable square feet of general office space should the space become available. The lease term and associated base rent for the additional space will not be known until the Company is notified that the additional space has become available, and the Company elects to lease the space on terms mutually satisfactory to the Company and the landlord.
The initial base rent for the Tech Center Lease is approximately $906,000 per month beginning on the Phase I Rent Commencement Date, and the base rent increases by approximately $255,000 per month on the Phase II Rent Commencement Date. The monthly base rent will increase by 3.0% on each annual anniversary of the respective Rent Commencement Date. In addition to the monthly base rent, the Company is required to pay its proportionate share of certain ongoing operating expenses throughout the duration of the lease. No base rent, other than the proportionate share of operating expenses, will be due for the Phase I portion of the Premises for months two through nine following the Phase I Rent Commencement Date, and for the Phase II portion of the Premises for months two through five following the Phase II Rent Commencement Date. The Company recognized right-of-use leased assets and corresponding operating lease liabilities of $107.5 million on the consolidated balance sheet on the Phase I Commencement Date in the first quarter of 2022.
Supplemental Lease Disclosure Information
The Company’s lease costs recorded in the condensed consolidated statements of operations were as follows (in thousands):

Three Months Ended March 31,
20222021
Operating lease cost$3,018 $2,006 
Short-term lease cost34 22 
Total lease cost$3,052 $2,028 

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Maturities of operating lease liabilities at March 31, 2022 were as follows (in thousands):
Years Ending December 31,
2022 (remaining)$6,387 
202312,805 
202417,057 
202517,475 
202617,528 
Thereafter120,235 
Total undiscounted lease payments191,487 
Less: amount representing interest(54,212)
Present value of operating lease liabilities137,275 
Less: current portion of operating lease liabilities(8,080)
Operating lease liabilities - long-term$129,195 
The weighted-average remaining lease term and weighted-average discount rate for operating leases were as follows:
March 31, 2022December 31, 2021
Weighted-average remaining lease term (in years)11.25.0
Weighted-average discount rate used to determine operating lease liabilities5.4 %5.6 %

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows from operating leases, was $3.4 million and $2.3 million for the three months ended March 31, 2022 and 2021, respectively.
Leases For Which Accounting Has Not Yet Commenced
As of March 31, 2022, the Commencement Date for the High Bluff Lease described below, and Phase II of the Tech Center Lease, had not yet occurred. Accordingly, the condensed consolidated balance sheet at March 31, 2022 does not include operating lease right-of-use assets and operating lease liabilities, and the condensed consolidated statement of operations for the three months ended March 31, 2022 does not include any lease costs, related to the High Bluff Lease and Phase II of the Tech Center Lease. In addition, the above disclosures of the Company’s lease costs, maturities of operating lease liabilities, and the weighted-average remaining lease term and weighted-average discount rate, do not include any amounts related to the High Bluff Lease and Phase II of the Tech Center Lease.
High Bluff Lease
In May 2021, the Company entered into a lease agreement for approximately 31,372 square feet of general office space located on High Bluff Drive, in San Diego, California (High Bluff Lease). The High Bluff Lease is a direct lease agreement for the same property subject to the High Bluff sublease. The lease term begins in April 2022 following the termination of the High Bluff sublease in March 2022, and is scheduled to expire in March 2024. The Company expects to recognize right-of-use leased assets and corresponding operating lease liabilities of approximately $3.0 million on the consolidated balance sheet on the Commencement Date in the second quarter of 2022.
Tech Center Lease - Phase II
The Company currently estimates that Phase II Commencement Date will occur in the first quarter of 2025, at which time the Phase II operating lease right-of-use assets and liabilities will be recorded. Future minimum payments for monthly base rent due under Phase II of the Tech Center Lease, are currently estimated to total $34.7 million from 2025 through 2035, subject to a number of factors, including the actual Commencement Date of Phase II. Because the incremental borrowing rate will not be available until the Phase II Commencement Date, we are not yet able to determine the Phase II operating lease right-of-use assets and liabilities.


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7. Debt

Convertible Senior Notes
In May 2020, the Company entered into a purchase agreement with certain counterparties for the sale of an aggregate of $287.5 million principal amount of 1.50% Convertible Senior Notes due 2025 (Notes) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The proceeds from the issuance of the Notes were $244.6 million, net of debt issuance costs and cash used to pay the cost of the capped call transactions (Capped Call Transactions) discussed below.

The Notes are the Company’s senior unsecured obligations. Interest is payable in cash semi-annually in arrears beginning on November 1, 2020 at a rate of 1.50% per year. The Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms prior to the maturity date.

The Notes are convertible into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 8.8836 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of $112.57 (Conversion Price) per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture. The Company expects to settle conversions through a combination settlement, which involves payment in cash equal to the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion.

The Company may not redeem the Notes prior to May 6, 2023. The Company has the option to redeem for cash all or any portion of the Notes on or after May 6, 2023 if the last reported sale price of the Company’s common stock has been at least 130% of the Conversion Price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest. No sinking fund is provided for the Notes.

Holders of the Notes may convert all or a portion of their Notes at their option prior to November 1, 2024, in multiples of $1,000 principal amounts, only under the following circumstances:

•if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the Notes on each such trading day;

•during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate of the Notes on such trading day;

•if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•on the occurrence of specified corporate events.

On or after November 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.

Holders of the Notes who convert in connection with a make-whole fundamental change or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the Notes may require us to repurchase all or a portion of the Notes at a price equal to 100% of the principal amount of the Notes, plus any accrued and unpaid interest.
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The net carrying amount of the Notes on the condensed consolidated balance sheets consisted of the following (in thousands):
 March 31, 2022December 31, 2021
Principal amount$287,500 $287,500 
Unamortized debt issuance costs(5,595)(6,033)
Net carrying amount$281,905 $281,467 

As of March 31, 2022, the unamortized debt issuance costs of $5.6 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2% over the remaining period of approximately three years.

The following table details interest expense recognized related to the Notes for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31, 2022March 31, 2021
Contractual interest expense$1,078 $1,078 
Amortization of debt issuance costs438 428 
Total interest expense$1,516 $1,506 

The Notes will have a dilutive effect to the extent the average market price per share of common stock for a given reporting period exceeds the conversion price of $112.57. As of March 31, 2022, the if-converted value of the Notes exceeded the principal amount by $9.5 million. As of December 31, 2021, the if-converted value of the Notes exceeded the principal amount by $96.9 million.

Capped Call Transactions

In connection with the issuance of the Notes, the Company entered into Capped Call Transactions in May 2020 with certain counterparties at a net cost of $34.1 million. The Capped Call Transactions are intended to reduce potential dilution to holders of the Company’s common stock beyond the conversion price of $112.57, up to a conversion price of $173.18 on any conversion of the Notes, or to offset any cash payments the Company is required to make in excess of the principal amount of such converted Notes, as the case may be, with such reduction or offset subject to a cap. The cap price of the Capped Call Transactions is initially $173.18 per share of the Company’s common stock, representing a premium of 100% above the last reported sale price of $86.59 per share of the Company’s common stock on May 12, 2020, and is subject to certain adjustments under the terms of the Capped Call Transactions. Conditions that cause adjustments to the initial strike price of the Capped Call Transactions mirror conditions that result in corresponding adjustments for the Notes.

For accounting purposes, the Capped Call Transactions are separate transactions, and not part of the terms of the Notes, while they are integrated for federal tax purposes. As these transactions met certain criteria under the applicable accounting guidance, the Capped Call Transactions were recorded in stockholders' equity and were not accounted for as derivatives. The cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the Company’s consolidated balance sheet and will not be remeasured.

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8. Stockholders’ Equity
Shares Reserved for Future Issuance
The following shares of the Company's common stock were reserved for future issuance at March 31, 2022 (in thousands):
Shares reserved for issuance upon conversion of Convertible Senior Notes2,554 
Shares underlying outstanding warrants211 
Shares underlying outstanding stock options4,671 
Shares underlying unvested restricted stock units772 
Shares authorized for issuance pursuant to awards granted under the ESPP1,216 
Shares authorized for future equity award grants1,258 
Total10,682 
Common Stock Warrants

Warrants outstanding to purchase shares of the Company's common stock as of March 31, 2022 were as follows:
Issue DateExercise Price Per ShareWarrants OutstandingExpiration Date of Warrants Outstanding
October 2017$3.501,000 October 2022
March 2017$23.50193,788 March 2027
August 2011 - August 2012$73.7316,212 May 2022 - August 2022
211,000 
Each warrant allows the holder to purchase one share of the Company's common stock at the exercise price per share of the respective warrant. The Company issued 1,835 and 125,000 shares of its common stock upon the exercise of warrants during the three months ended March 31, 2022 and 2021, respectively.
Stock Plans
The Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan) was originally approved by the Company’s board of directors in October 2013. Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units to individuals who are then employees, officers, directors or consultants of the Company.
The ESPP enables eligible employees to purchase shares of the Company’s common stock using their after-tax payroll deductions, subject to certain conditions. Generally, offerings under the ESPP consist of a two-year offering period with four six-month purchase periods which begin in May and November of each year. There were no shares of common stock purchased under the ESPP during the three months ended March 31, 2022 and 2021.
Stock-Based Compensation
Common Stock Options
Common stock options have an exercise price equal to the closing price of the Company's common stock on the applicable award date, and have a maximum term of ten years. Stock options granted generally vest over a four year period as to 25% of the underlying shares on the first anniversary of the award, with the balance of the options vesting monthly over the following three years.
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The Company estimates the fair value of stock options using the Black-Scholes option-pricing model on the grant date. The number of common stock options granted and the respective assumptions used in the Black-Scholes option-pricing model were as follows:
Three Months Ended March 31,
20222021
Stock options granted—115,400 
Weighted average grant date fair value (per share)N/A$60.98 
Risk-free interest rateN/A0.9 %
Expected dividend yieldN/A0.0 %
Expected volatilityN/A75.6 %
Expected term (in years)N/A6.1
Restricted Stock Units
Restricted stock units (RSUs) have a grant price equal to the closing price of the Company’s common stock on the award date. RSUs granted prior to March 2022, generally vest over a four year period based only on service as to 25% of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following three years. RSUs granted in March 2022 vest over a three year period based only on service as to 33% of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following two years.
The number of RSUs granted and the respective weighted average grant date fair value were as follows:
Three Months Ended
March 31,
20222021
RSUs granted187,076 3,208 
Weighted average grant date fair value (per share)$109.97 $93.49 

The following table summarizes the allocation of stock-based compensation expense included in the consolidated statements of operations for all stock-based compensation arrangements (in thousands):
Three Months Ended March 31,
20222021
Cost of sales$1,846 $1,476 
Selling, general & administrative11,854 9,409 
Research and development4,410 2,062 
Total stock-based compensation expense$18,110 $12,947 
The total stock-based compensation capitalized as part of the cost of the Company’s inventories was $0.8 million and $1.0 million at March 31, 2022 and December 31, 2021, respectively.

9. Employee Benefits
Employee 401(k) Plan
The Company has a defined contribution 401(k) plan for employees in the United States who are at least 18 years of age. Employees are eligible to