What changed in this filing

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Item 1A. Risk Factors

2022-08-04 compared with 2022-05-05 · 167 added, 135 removed, 1126 unchanged (21% of the section changed)

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• Our quarterly and annual operating results and cash flows have fluctuated in the past and might continue to fluctuate, which makes our future operating results difficult to predict and could cause the market price of our securities to decline substantially;

• Our business, and that of our customers, has been adversely affected by the effects of public health crises, including the COVID-19 pandemic.

In particular, the COVID-19 pandemic has materially affected our operations globally, including at our headquarters in San Diego, California, as well as the business or operations of our research partners, customers and other third parties with whom we conduct business.

As a result, in some cases we have had to delay instrument installations or service-related visits.

• Our future capital needs are uncertain and we may require additional funding in the future to advance the commercialization of Saphyr system, NxClinical software and our other products, technologies, and services, as well as continue our research and development efforts.

If we fail to obtain additional funding, we will be forced to delay, reduce or eliminate our commercialization and development efforts;

• Our business, and that of our customers, has been adversely affected by the effects of public health crises, including the COVID-19 pandemic.

• Acquisitions, joint ventures and other strategic transactions could disrupt or otherwise harm our business and may cause dilution to our stockholders;

• If our products or technologies fail to achieve and sustain sufficient market acceptance, our revenue will be adversely affected;

• In the near term, sales of our Saphyr system, the NxClinical software, our consumables and genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies and products and adversely affect our business and operating results;

• If we do not successfully manage the development and launch of new products and technologies, our financial results could be adversely affected;

• Our future success is dependent upon our ability to further penetrate our existing customer base and attract new customers;

• We are currently limited to “research use only” with respect to many of the materials and components used in our consumable products including our assays;

• In the near term, sales of our Saphyr system, the NxClinical software, our consumables and genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies, products and adversely affect our business and operating results;

• If we do not successfully manage the development and launch of new products and technologies, our financial results could be adversely affected;

• If the FDA determines that our RUO products are medical devices or if we seek to market our RUO products for clinical diagnostic or health screening use, we will be required to obtain regulatory clearance(s) or approval(s), and may be required to cease or limit sales of our then marketed products, which could materially and adversely affect our business, financial condition and results of operations.

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• If we are unable to protect our intellectual property, it may reduce our ability to maintain any technological or competitive advantage over our competitors and potential competitors, and our business may be harmed;

• The price of our securities may be volatile or may decline regardless of our operating performance, and you could lose all or part of your investment.

• The price of our securities has been and may in the future be volatile or may decline regardless of our operating performance, and you could lose all or part of your investment.

Investing in our common stock involves a high degree of risk.

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Since our inception, we have incurred recurring net losses.

We incurred net losses of $30.0 million and $9.9 million, and used cash in operations of $32.5 million and $13.9 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $246.1 million.

We incurred net losses of $62.1 million and $28.7 million, and used cash in operations of $60.8 million and $26.3 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $278.2 million.

We cannot predict if we will be profitable in the near future or at all.

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We also expect significant increases in our stock-based compensation expense in future periods, reflecting higher stock option valuations as a public company and the issuance of additional equity awards due to increased headcount.

In addition, we incur significant legal, accounting and other expenses as a result of being a public company, especially as we no longer qualify as an emerging growth company or a smaller reporting company and are therefore required to comply with additional disclosure and compliance requirements, subject to a transition period.

In addition, we incur significant legal, accounting and other expenses as a result of being a public company, especially as we no longer qualify as an emerging growth company and are therefore required to comply with additional disclosure and compliance requirements.

These factors, among others, will make it hard for us to achieve and sustain profitability.

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You should not rely on our past results as indicative of our future performance.

Moreover, our stock price might be based on expectations of future performance that are unrealistic or that we might not meet and, if our revenue or operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially.

Moreover, our stock price might be based on

expectations of future performance that are unrealistic or that we might not meet and, if our revenue or operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially.

Our operating results have varied in the past.

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• differences in purchasing patterns across our customer base, including potential differences in consumables spending between earlier adopters of our technologies and more recent customers and variances in rates of increase of consumables spending following new technology purchases, some of which may be compounded by impacts of the COVID-19 pandemic;

• geopolitical events, such as the conflict between Ukraine and Russia and related sanctions, and macroeconomic conditions, such as inflation, increased cost of goods, supply chain issues, and global financial market conditions;

• our ability to successfully integrate new personnel, technology and other assets that we may acquire into our company;

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As additional products and technologies are commercialized, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications.

Failure to manage this growth or transition could result in turnaround time delays, higher product costs, declining product quality, deteriorating customer service, and slower responses to competitive challenges.

Failure to manage this growth or transition could result in turnaround time delays, higher product costs,

declining product quality, deteriorating customer service, and slower responses to competitive challenges.

A failure in any one of these areas could make it difficult for us to meet market expectations for our products and technologies, and could damage our reputation and the prospects for our business.

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The quality of our products, technologies and services may suffer, which could negatively affect our reputation and harm our ability to retain and attract customers.

Our future capital needs are uncertain and we will require additional funding in the future to advance the commercialization of Saphyr system, NxClinical software, and our other products, technologies and services, as well as continue our research and development efforts.

Our future capital needs are uncertain and we may require additional funding in the future to advance the commercialization of our Saphyr system, NxClinical software, and our other products, technologies and services, as well as continue our research and development efforts.

If we fail to obtain additional funding, we will be forced to delay, reduce or eliminate our commercialization and development efforts.*

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• our ability to satisfy any outstanding or future debt obligations;

• increasing interest rates;

• the success of our existing distribution and marketing arrangements and our ability to enter into additional arrangements in the future;

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If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.

However, global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide resulting from the effects of COVID-19 and otherwise.

If these conditions persist and deepen, we could experience an inability to access additional capital.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our technologies and products.

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For example, we experienced at various times during the pandemic the inability to visit certain customer sites to support installation or service our OGM systems.

As a result, in the past, we have had to delay instrument installations or service related visits.

In addition, certain members of our workforce are now performing their duties remotely and these employees have not been able to maintain the same level of productivity and efficiency due a lack of resources that would otherwise be available to them in our offices and additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members.

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The effects of these public health directives and orders and our related adjustments in our business have negatively impacted productivity, disrupted our business and delayed our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

The spread of COVID-19 has resulted in a widespread health crisis that is also adversely affecting economies and financial markets globally, which may negatively affect demand for our products, technologies and services and materially affect us financially.

The spread of COVID-19 has resulted in a widespread health crisis that is also adversely affecting economies and financial markets globally, including inflation higher than we have seen in decades, which may negatively affect demand for our products, technologies and services and materially affect us financially.

For example, customers who have committed to order minimum quantities of consumables or to purchase our Saphyr instrument have delayed these commitments.

Further, restrictions on our ability to travel, stay-at-home orders and other similar restrictions on our business have limited our ability to support our global and domestic operations, including providing installation and training and customer service, resulting in disruptions in our sales and marketing efforts and negative impacts on our commercial strategy.

In addition, while many of our employees have been vaccinated, we do not know if vaccination will remain effective against further COVID-19 variants such as the Delta and Omicron variants.

In addition, despite the increased availability of vaccines, due to the continuing and evolving nature of the COVID-19 pandemic and the potential for periods of increases in case numbers and emergence and spread of COVID-19 variants in markets and communities where we, our customers, and our suppliers are

operating our businesses, it is not possible for us to accurately predict the duration or magnitude of the adverse impacts of the pandemic and its effects on our business, results of operations, or financial condition.

The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may present strategy, operational, talent recruiting and retention, and workplace culture challenges that may adversely affect our business.

As public health directives surrounding the pandemic have relaxed, our offices have reopened and we have begun permitting travel and in-person events, taking into consideration government restrictions, employee safety and health risks.

Our approach may vary among geographies depending on appropriate health protocols, and may change at any time.

Additionally, our efforts to reopen our offices safely may not be successful, could expose our employees to health risks, and could involve additional costs or liability.

To the extent our employees are exposed to or become ill with COVID-19, our ability to conduct our operations may be impaired from time to time.

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In addition, we anticipate that ongoing disruptions in our supply chain will cause shortages in the materials required to operate our instruments, therefore limiting our ability to process customer samples and the ability of users of our system to operate our system.

As global economic conditions recover from the COVID-19 pandemic, the Ukraine-Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that COVID-19 could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

Conditions will be subject to the effectiveness of government policies, including vaccine mandates, vaccine shortages and administration rates, the emergence of new strains or variants of the virus, and other factors that are not foreseeable.

Any of the foregoing could adversely affect our business, financial condition and results of operations.

The ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change.

We do not yet know the full extent of delays or impacts on our business or the global economy as a whole, and such impacts may not be fully recoverable.

In addition, the current and potential adverse impacts of the COVID-19 pandemic on our business,

financial condition, results of operations and growth prospects, may also have the effect of heightening many of the other risks and uncertainties described in this Quarterly Report.

In addition, the current and potential adverse impacts of the COVID-19 pandemic on our business, financial condition, results of operations and growth prospects, may also have the effect of heightening many of the other risks and uncertainties described in this Quarterly Report on Form 10-Q.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.*

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For example, legislation enacted in 2017 informally titled the Tax Cuts and Jobs Act, or the Tax Act, enacted many significant changes to the U.S.

Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation.

Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain

aspects of the Tax Act could be repealed or modified in future legislation.

For example, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, modified certain provisions of the Tax Act.

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tax laws could increase our worldwide effective tax rate and harm our future financial position and results of operations.

Limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside of the U.S.

are repatriated to the U.S., as well as changes to United States tax laws that may be enacted in the future, could impact the tax treatment of future foreign earnings.

Should the scale of our international business activities expand, any changes in the United States taxation of such activities could increase our worldwide effective tax rate and harm our future financial position and results of operations.

Our ability to use net operating losses and certain other tax attributes to offset future taxable income and taxes may be subject to limitations.*

As of December 31, 2021, we have federal and state tax net operating loss carryforwards of $341.1 million and $158.4 million, respectively.

As of December 31, 2021, we had federal and state tax net operating loss carryforwards of $341.1 million and $158.4 million, respectively.

The federal tax loss carryforwards include $176.8 million that do not expire, but utilization of such tax loss carryforwards is limited to 80% of our taxable income.

The remaining federal tax loss carryforwards of $164.3 million and state tax loss carryforwards begin to expire in 2027 and 2023, respectively, unless previously utilized.

As of December 31, 2021, we also have federal and California research credit carryforwards of $6.7 million and $6.1 million, respectively.

As of December 31, 2021, we also had federal and California research credit carryforwards of $6.7 million and $6.1 million, respectively.

The federal research credit carryforwards begin to expire in 2027 unless previously utilized.

The California research credits carry forward indefinitely.

In addition, utilization of net operating losses and research and development credit carryforwards may be subject to limitations due to ownership changes that have occurred or that could occur in the future in accordance with applicable provisions of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law.

We may have experienced one or more ownership changes in the past and we may also experience additional ownership changes in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our control.

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In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

taxation of international business activities or the adoption of tax reform policies could materially impact our future financial position and results of operations.*

Limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside of the U.S.

are repatriated to the U.S., as well as changes to United States tax laws that may be enacted in the future, could impact the tax treatment of future foreign earnings.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operation could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our securities.

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We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.

If our assumptions underlying our estimates and judgements relating to our critical accounting policies change or if actual circumstances differ from our

assumptions, estimates or judgements, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our securities.

If our assumptions underlying our estimates and judgements relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgements, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our securities.

Risks related to our business operations

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We may not be able to locate or make suitable acquisitions on acceptable terms, and future acquisitions may not be effectively and profitably integrated into our business.

Our failure to successfully complete the integration of any business or assets that we acquire could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price.

Our failure to successfully complete the integration of any business or assets that we

acquire could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price.

Integration challenges may include the following:

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Accordingly, we cannot guarantee that our recent acquisitions will yield the results we have anticipated and unforeseen complexities and expenses may arise.

In addition, we may not achieve the revenues, growth prospects and synergies expected from these recent acquisitions, and any

such benefits we do achieve may not offset our increased costs, resulting in a potential impairment of goodwill or other assets that were acquired.

In addition, we may not achieve the revenues, growth prospects and synergies expected from these recent acquisitions, and any such benefits we do achieve may not offset our increased costs, resulting in a potential impairment of goodwill or other assets that were acquired.

For any future acquisitions, we may similarly be unable to achieve revenue, growth prospects and synergies in a manner consistent with our expectations.

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Market acceptance of our systems will depend on many factors, including our ability to demonstrate to potential customers that our technology is an attractive alternative to existing technologies.

Compared to some competing technologies, our technology is new and complex, and many potential customers have limited knowledge of, or experience with, our products and technologies.

Compared to some competing technologies,

our technology is new and complex, and many potential customers have limited knowledge of, or experience with, our products and technologies.

Prior to adopting our systems, some potential customers may need to devote time and effort to testing and validating our systems.

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The total number of shares of our common stock available for the grant of awards under these plans is 9.6 million, 0.3 million and 0.7 million for our 2018 Equity Incentive Plan, as amended, 2018 Employee Stock Purchase Plan and 2020 Inducement Plan, respectively, subject to adjustment, including pursuant to automatic “evergreen” increases in certain of our plans.

As of March 31, 2022, we had outstanding equity awards underlying those plans accounting for 11.2 million underlying shares.

We may also adopt one or more additional employee equity benefit plans in the

As of June 30, 2022, we had outstanding equity awards underlying those plans accounting for 5.5 million underlying shares.

We may also adopt one or more additional employee equity benefit plans in the future.

The issuance of shares under an employee equity benefit plan may result in substantial dilution to the interests of other stockholders.

For example on February 15, 2022, our Board of Directors granted our executive officers options to purchase an aggregate of 4.3 million shares of our common stock, which represented approximately 1% of our outstanding shares of common stock based on the 289.7 million shares of common stock outstanding as of April 28, 2022.

Accordingly, the issuance of shares under current or future employee equity benefit plans will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.

For example on February 15, 2022, our Board of Directors granted our executive officers options to purchase an aggregate of 4.3 million shares of our common stock, which represented approximately 1% of our outstanding shares of common stock based on the 290.1 million shares of common stock outstanding as of July 27, 2022.

Acc ordingly, the issuance of shares under current or future employee equity benefit plans will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.

If we are unable to execute our sales and marketing strategy for our Lineagen products and services, including diagnostic assays, and are unable to gain acceptance in the market, we may be unable to generate sufficient revenue to sustain our Lineagen business.

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Failure to achieve widespread market acceptance of our current products, assays and services, as well as our planned future products, assays and services, would materially harm our business, financial condition and results of operations.

In the near term, sales of our Saphyr system, the NxClinical software, our consumables and our genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies and adversely affect our business and operating results.*

In the near term, we expect that our revenue from sales of our Saphyr system, NxClinical software, consumables and OGM services will be derived primarily from sales to academic and governmental research institutions, as well as biopharmaceutical and contract research companies worldwide for research applications.

In the near term, sales of our Saphyr system, the NxClinical software, our consumables and our genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies and products and adversely affect our business and operating results.*

In the near term, we expect that our revenue from sales of our Saphyr system, NxClinical software, consumables and OGM services will be derived primarily from sales to academic and governmental research institutions, academic and commercial clinical laboratories, as well as biopharmaceutical and contract research companies worldwide for research applications.

The demand for our products and technologies will depend in part upon the research and development budgets of these customers, which are impacted by factors beyond our control, such as:

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We may be unsuccessful in achieving our desired results or in marketing such solutions to our future customers.

successfully innovate and develop new products and technologies and product and technological enhancements, we may incur substantial costs in doing so, and our profitability may suffer.

Even if we successfully innovate and develop new products and technologies and product and technological enhancements, we may incur substantial costs in doing so, and our profitability may suffer.

Our ability to develop new products and technologies based on innovation can affect our competitive position and often requires the investment of significant resources.

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If the FDA were to determine that our RUO products were intended for use in clinical investigation, diagnosis or treatment decisions, or that express or implied clinical or diagnostic claims were made for our RUO products, those products could be considered misbranded or adulterated under the Federal Food, Drug, and Cosmetic Act.

If the FDA determines that our RUO products are being marketed for clinical diagnostic use without the required PMA or 510(k) clearance, we may be required to cease marketing our products as planned, recall the products from customers, revise our marketing plans, and/or suspend or delay the commercialization of our products

until we obtain the required authorization.

We also may be subject to a range of enforcement actions by the FDA, including warning or untitled letters, injunctions, civil monetary penalties, criminal prosecution, and recall and/or seizure of products, as well as significant adverse publicity.

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Our efforts may never result in an approved PMA or 510(k) clearance for our products.

Even if we obtain a PMA or 510(k) clearance, where required, such authorization may not be for the use or uses we believe are commercially attractive and/or are critical to the commercial success of our products.

Even if we obtain

a PMA or 510(k) clearance, where required, such authorization may not be for the use or uses we believe are commercially attractive and/or are critical to the commercial success of our products.

As a result, being subject to the FDA’s premarket review and/or post-market control requirements for our products could materially and adversely affect our business, financial condition and results of operations.

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We currently rely on a single contract manufacturer to manufacture and supply all of our OGM-based instruments.

See “Business — Key Agreements” in this Quarterly Report.

In addition, we rely on a single contract manufacturer to manufacture and supply all of our chip consumables.

See “Business — Key Agreements” in this Quarterly Report on Form 10-Q.

In addition, we rely on a single contract manufacturer based in the United States to manufacture and supply all of our chip consumables.

Since our contracts with these manufacturers do not commit them to supply quantities beyond the amounts included in our purchase orders, and do not commit them to carry inventory or make available any particular quantities, these contract manufacturers may give other customers’ needs higher priority than ours, and we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms.

If either of these manufacturers were to be unable to supply instruments, our business would be harmed.

If either of these manufacturers were to be unable to supply instruments or chip consumables, our business would be harmed.

In the event it becomes necessary to utilize different contract manufacturers for our OGM-based instruments or chip consumables, we would experience additional costs, delays and difficulties in doing so as a result of identifying and entering into an agreement with a new supplier as well as preparing such new supplier to meet the logistical requirements associated with manufacturing our units, and our business would suffer.

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All of our molecular diagnostics services are processed at a single laboratory facility in Salt Lake City, Utah.

Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure, terrorism, burglary, public health crises (including restrictions that may be imposed on businesses by state and local governments under stay-at-home or similar orders and mandates, such as those implemented in response to the COVID-19 pandemic) or other events, which may make it difficult or impossible for us to

perform our testing services for some period of time or to receive and store samples.

The inability to perform tests or to reduce the backlog of sample analysis that could develop if one or both of our facilities become inoperable, for even a short period of time, may result in the loss of revenue, loss of customers or harm to our reputation, and we may be unable to regain that revenue, those customers or repair our reputation in the future.

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In addition, the marketing, sale and use of our current or future products and assays could lead to the filing of product liability claims against us if someone alleges that our products failed to perform as designed.

We may also be

subject to liability for errors in the results we provide or for a misunderstanding of, or inappropriate reliance upon, the information we provide.

We may also be subject to liability for errors in the results we provide or for a misunderstanding of, or inappropriate reliance upon, the information we provide.

A product liability claim could result in substantial damages and be costly and time consuming to defend, either of which could materially harm our business or financial condition.

We cannot assure investors that our product liability insurance would adequately protect our assets from the financial impact of defending a product liability claim.

Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing insurance coverage in the future.

Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing

insurance coverage in the future.

Additionally, any product liability lawsuit could damage our reputation, or cause current partners to terminate existing agreements and potential partners to seek other partners, any of which could impact our results of operations.

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We expect to generate a substantial portion of our revenue internationally in the future and can become further subject to various risks relating to our international activities, which could adversely affect our business, operating results and financial condition.

During 2021 approximately 54% of our product revenue was generated from customers located outside of the United States.

During 2021 and the six months ended June 30, 2022, approximately 54% and 59%, respectively, of our revenue was generated from customers located outside of the United States.

We believe that a substantial percentage of our future revenue will come from international sources as we expand our overseas operations and develop opportunities in additional areas.

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Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, and other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities.

Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, promising, offering, providing, soliciting, or accepting, directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector for the purpose of obtaining or retaining business or securing any other improper advantage.

public or private sector for the purpose of obtaining or retaining business or securing any other improper advantage.

We rely on third-party representatives, distributors, and other business partners to support sales of our products and services and our efforts to ensure regulatory compliance.

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Competition for qualified personnel is intense.

Our growth depends, in particular, on attracting and retaining highly-trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers and develop new products and technologies.

This competition has become exacerbated by the increase in employee resignations currently taking place throughout the United States as a result of the COVID-19 pandemic, which is commonly referred to as the “great resignation.” We may also experience employee turnover as a result of the ongoing “great resignation.” Our growth depends, in particular, on attracting and retaining highly-trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers and develop new products and technologies.

Because of the complex and technical nature of our products and technologies and the dynamic market in which we compete, any failure to attract, train, retain, motivate and integrate qualified personnel could materially harm our operating results and growth prospects.

In response to competition, rising inflation rates and labor shortages, we may need to adjust employee cash compensation, which would affect our operating costs and our margins, or equity compensation, which would affect our outstanding share count, causing dilution to existing shareholders and possibly souring investor sentiment, which could in turn make it difficult to achieve our goals.

If we cannot provide quality technical and applications support, we could lose customers and our business and prospects will suffer.

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If we are unable to attract, train or retain the number of highly qualified technical services personnel that our business needs, our business and prospects will suffer.

If our information systems or data or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

If our information technology systems or data or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

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We are increasingly dependent upon information technology systems, infrastructure and data to operate our business.

In the ordinary course of our business, we collect, store, use, transmit, disclose, and otherwise process sensitive, proprietary, and confidential information, including intellectual property, trade secrets, financial information, and personal data (including

protected health information).

We may rely upon third-party service providers and technologies to operate critical business systems to process confidential and personal data in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email, content delivery to customers, and other functions.

In the ordinary course of our business, we collect, store, use, transmit, disclose, and otherwise process sensitive, proprietary, and

confidential information, including intellectual property, trade secrets, financial information, and personal data (including protected health information) (collectively, “Sensitive Data”).

We may rely upon third-party service providers and technologies to operate critical business systems to process Sensitive Data in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email, content delivery to customers, and other functions.

Our ability to monitor these third parties’ cybersecurity practices is limited, and these third parties may not have adequate information security measures in place.

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Moreover, these threats are becoming increasingly difficult to detect, and they come from a variety of sources.

In addition to traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors now engage and are expected to continue to engage in attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

In addition to traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), “hacktivists,” sophisticated nation-states, and nation-state-supported actors now engage and are expected to continue to engage in attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, including as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (such as through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.

Ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.

In particular, ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of Sensitive Data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our software) or the third-party information technology systems that support us and our services.

The COVID-19 pandemic and our remote workforce also poses increased risks to our information technology systems and data, as more of our personnel work from home, utilizing network connections outside our premises.

Future business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

The COVID-19 pandemic and our remote workforce also poses increased risks to our information technology systems and Sensitive Data, as more of our personnel work from home, utilizing network connections outside our premises.

Additionally, past or future business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems and Sensitive Data could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Any of the previously identified or similar threats could cause a security incident or other interruption.

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We may expend significant resources or modify our business activities in an effort to protect against security incidents.

Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard, or reasonable security measures to protect our information technology systems and data.

Certain data privacy and security obligations may require us to implement and maintain specific security measures, or industry-standard or reasonable security measures to protect our information technology systems and Sensitive Data.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

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Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We cannot be sure that our insurance coverage, if any, will be adequate or sufficient to protect us from or to

mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

We are subject to stringent and changing obligations related to data privacy and security.

We cannot be sure that our insurance coverage, if any, will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

We are subject to stringent and changing laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

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and other adverse business consequences.*

In the ordinary course of business, we process personal data (including protected health information) and other sensitive information, including proprietary and confidential business data, trade secrets, and intellectual property.

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.

In the ordinary course of business, we collect, store, use, transmit, disclose and otherwise process personal data (including protected health information) and other sensitive information, including proprietary and confidential business data, trade secrets, and intellectual property.

Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws.

For example, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, impose specific requirements relating to the privacy, security, and transmission of individually identifiable health information.

Among other things, HITECH, through its implementing regulations, makes certain of HIPAA’s privacy and security standards directly applicable to business associates, defined as a person or organization, other than a member of a covered entity’s workforce, that creates, receives, maintains or transmits protected health information for or on behalf of a covered entity for a function or activity regulated by HIPAA as well as their covered subcontractors.

Most healthcare providers in the United States, including clinical laboratories and institutions from which we may obtain customer data, are subject to privacy and security regulations promulgated under HIPAA, as amended by HITECH.

Further, a person may be prosecuted for alleged HIPAA violations either directly or indirectly such as under aiding-and-abetting or conspiracy principles.

Further, depending on the facts and circumstances, we could face substantial civil and criminal penalties and liabilities if we fail to comply with our obligations (required by law and/or contract) under HIPAA.

In the United States, at the state level, the California Consumer Privacy Act of 2018, or the CCPA, imposes obligations on businesses to which it applies.

As another example, the California Consumer Privacy Act of 2018, or the CCPA, imposes obligations on businesses to which it applies.

These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data.

The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation).

The California Privacy Rights Act of 2020, or the CPRA, which takes effect January 1, 2023, is anticipated to expand the CCPA’s obligations on businesses.

In addition, the California Privacy Rights Act of 2020, or the CPRA, which takes effect January 1, 2023, is anticipated to expand the CCPA’s obligations on businesses.

For example, the CPRA establishes a new California Privacy Protection Agency to implement and enforce relevant laws, which could increase the risk of an enforcement action.

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For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which differ from the CPRA and take effect in 2023.

If we become subject to new state-level data privacy laws, the risk of enforcement action against us could increase because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors).

Data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which, if passed, could further complicate compliance efforts.

In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which, if passed, could further complicate compliance efforts.

Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), and the United Kingdom’s GDPR (“UK GDPR”) impose strict requirements for processing the personal data of individuals.

For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater.

Further, individuals may initiate litigation related to our processing of their personal data.

In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations.

In addition, privacy advocates and industry groups have proposed, and may propose in the future, standards with which we are legally or contractually bound to comply.

Certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws.

For example, absent appropriate safeguards or other circumstances, the EU GDPR generally restricts the transfer of personal data to countries outside of the EEA, such as the United States, which the European Commission does not consider to provide an adequate level of data privacy and security.

The European Commission released a set of “Standard Contractual Clauses” (“SCCs”) that are designed to be a valid mechanism by which entities can transfer personal data out of the EEA to jurisdictions that the European Commission has not found to provide an adequate level of protection.

Currently, these SCCs are a valid mechanism to transfer personal data outside of the EEA.

However, the SCCs require parties that rely on them to comply with additional obligations, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect personal data.

Moreover, due to potential legal challenges, there exists some uncertainty regarding whether the SCCs will remain a valid mechanism for transfers of personal data out of the EEA.

Laws in Switzerland and the UK similarly restrict

transfers of personal data outside of those jurisdictions to countries such as the United States that do not provide an adequate level of personal data protection.

In addition to European restrictions on cross-border transfers of personal data, other countries, such as China and Brazil, have enacted or are considering similar cross-border personal data transfer laws and local personal data residency laws, any of which could increase the cost and complexity of doing business.

If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from Europe or elsewhere.

The inability to import personal data to the United States could significantly and negatively impact our business operations, including by limiting our ability to collaborate with parties that are subject to European and other data privacy and security laws or by requiring us to increase our personal data processing capabilities and infrastructure in Europe and/or elsewhere at significant expense.

Our data privacy and security obligations are quickly changing, creating some uncertainty as to the effective future legal framework.

For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20 million euros or 4% of annual global revenue, whichever is greater;

or private litigation related to the processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

In addition, privacy advocates and industry groups have proposed, and may propose in the future, standards with which we may be legally or contractually bound to comply.

For example, we may also be subject to the Payment Card Industry Data Security Standard (“PCI DSS”).

The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.

Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.

We may also rely on vendors to process payment card data, and those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.

Certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws, which could make it more difficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other foreign jurisdictions).

Existing mechanisms that facilitate cross-border transfers of personal data may change or be invalidated.

The more reliant our business is on the ability to effectuate cross-border data transfers, the more impact we may experience in light of any changes in the legal landscape.

We may also be subject to contractual obligations and policies related to data privacy and security.

Publication of our privacy policies and other statements regarding data privacy and security may subject us to investigation or enforcement actions by regulators if those policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices.

We may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

Our data privacy and security obligations are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).

Preparing for and complying with these

obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).

These obligations may necessitate changes to our information technologies, systems, and practices and to those of any third parties on which we rely.

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Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.*

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.

A severe or prolonged global economic downturn could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all.

This is particularly true in Europe, which is undergoing a continued severe economic crisis.

Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and adverse macroeconomic developments, including without limitation inflation, slowing growth, rising interest rates and recession.

A severe or prolonged global economic downturn could result in a variety of risks to our business.

inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all.

In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

Risks of a prolonged global economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis.

A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

In addition, the conflict between Russia and Ukraine and the related sanctions imposed against Russia could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

government and other governments in jurisdictions in which we operate have imposed sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls.

The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners or customers.

Additionally, following the recent invasion of Ukraine by Russia, financial markets around the world experienced volatility.

In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.

The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain;

however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity, in both Europe and globally, and has introduced significant uncertainty into global markets.

In particular, the Russia-Ukraine conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies.

As the adverse effects of this conflict continue to develop and potentially spread, both in Europe and throughout the rest of the world, our customers may be negatively impacted, which in turn may cause them to delay purchasing decisions and otherwise depress the level of spend conducted by such customers for our products, technologies and services.

Further, a weak or declining economy could strain our suppliers, possibly resulting in additional supply disruption.

As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

We have operations, as well as current and potential new customers throughout Europe.

If economic conditions in Europe and other key markets for our products and technologies continue to remain uncertain or deteriorate further, including as a result of COVID-19 or otherwise, we could experience adverse effects on our business, supply chain, partners or customers.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.*

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These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

If a court were to find either exclusive-forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could adversely affect our results of operations and financial condition.

associated with resolving the dispute in other jurisdictions, all of which could adversely affect our results of operations and financial condition.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

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We generally contract with third parties for the disposal of these materials and wastes.

We cannot eliminate the risk of contamination or injury from these

We cannot eliminate the risk of contamination or injury from these materials.

We could be held liable for any resulting damages in the event of contamination or injury resulting from the use of hazardous materials by us or the third parties with whom we contract, and any liability could exceed our resources.

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Failure to comply with these requirements may subject us or a collaborator to a range of enforcement actions, such as warning letters, injunctions, civil monetary penalties, criminal prosecution, recall and/or seizure of products, and revocation of marketing authorization, as well as significant adverse publicity.

If we or our collaborators fail to obtain, or experience significant delays in obtaining, regulatory approvals for IVD products, such products may not be able to be launched or successfully commercialized in a timely manner, or at all.

If we or our collaborators fail to obtain, or experience

significant delays in obtaining, regulatory approvals for IVD products, such products may not be able to be launched or successfully commercialized in a timely manner, or at all.

Laboratory developed tests, or LDTs, are a subset of IVD tests that are designed, manufactured and used within a single laboratory.

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The number and scope of these requirements are increasing.

As in the United

States, the cost and time required to comply with regulatory requirements may be substantial, and there is no guarantee that we will obtain the necessary authorization(s) required to make our products commercially viable.

As in the United States, the cost and time required to comply with regulatory requirements may be substantial, and there is no guarantee that we will obtain the necessary authorization(s) required to make our products commercially viable.

As a result, the imposition of foreign requirements may also have a material adverse effect on the commercial viability of our operations.

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Such appeals and other processes are time-consuming and expensive, and may not result in payment.

Third-party payors may perform audits of historically paid claims and attempt to recoup funds years after the funds were initially distributed if the third-party payors believe the funds were paid in error or determine that our Lineagen products and diagnostic assays were medically unnecessary.

Lineagen products and diagnostic assays were medically unnecessary.

If a third-party payor audits our claims and issues a negative audit finding, and we are not able to overturn the audit findings through appeal, the recoupment may result in a material adverse effect on our revenue.

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In the United States, molecular testing laboratories have multiple options for reimbursement coding, but we expect that the primary codes used will be the genomic sequencing procedure codes, or GSPs.

The American Medical Association, or AMA,

added GSPs to its clinical laboratory fee schedule in 2015.

The American Medical Association, or AMA, added GSPs to its clinical laboratory fee schedule in 2015.

In addition, CMS recently issued a coverage determination providing for the reimbursement of next-generation sequencing for certain cancer diagnostics using an FDA-approved in vitro diagnostic test.

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In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

For example, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other things, significantly altered the payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS.

For example, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other

things, significantly altered the payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS.

PAMA requires certain laboratories performing clinical diagnostic laboratory tests to report to CMS the amounts paid by private payors for laboratory tests.

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CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections.

current certificate of compliance under CLIA to perform cytogenetics.

We have a current certificate of compliance under CLIA to perform cytogenetics.

To renew this certificate, we are subject to survey and inspection every two years.

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Additionally, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, the ACA codified case law that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or the FCA;

In addition, the ACA

codified case law that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or the FCA;

• the Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including laboratory and pathology services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services and prohibits that entity from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies;

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The law includes a limited number of exceptions, some of which closely align with corresponding federal Anti-Kickback Statute exceptions and safe harbors, and others that materially differ;

including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, in connection with the delivery of or payment for healthcare benefits, items or services.

• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, in connection with the delivery of or payment for healthcare benefits, items or services.

Like the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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• state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers;

• federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal data, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

• federal, state, local and foreign laws that govern the data privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal data, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

As a clinical laboratory, our business practices may face additional scrutiny from government regulatory agencies such as the Department of Justice, the U.S.

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We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.

As of April 30, 2022, we (directly or through our wholly owned subsidiaries Lineagen, Inc and BioDiscovery, LLC) were the assignee of 28 granted U.S.

As of July 30, 2022, we (directly or through our wholly owned subsidiaries Lineagen, Inc and BioDiscovery, LLC) were the assignee of 29 granted U.S.

patents or allowed U.S.

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• we apply for patents relating to our products and technologies and uses thereof, as we deem appropriate.

However, we or our representatives or their agents may fail to apply for patents on important products and technologies in a timely

fashion or at all, or we or our representatives or their agents may fail to apply for patents in potentially relevant jurisdictions.

However, we or our representatives or their agents may fail to apply for patents on important products and technologies in a timely fashion or at all, or we or our representatives or their agents may fail to apply for patents in potentially relevant jurisdictions.

To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct or indirect competition.

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Our business could suffer, for example, if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.

As we have done previously, we may need or may choose to obtain licenses and/or acquire intellectual property rights from third parties to advance our research or begin commercialization of our current or future products or services, and we cannot provide any assurances that third-party patents do not exist that might be enforced against our current or future products or services in the absence of such a license.

provide any assurances that third-party patents do not exist that might be enforced against our current or future products or services in the absence of such a license.

We may fail to obtain any of these licenses or intellectual property rights on commercially reasonable terms.

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They are, therefore, likely to be able to sustain the costs of complex patent litigation longer than we could.

In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations, continue our internal

research programs, in-license needed technology, pursue, obtain or maintain intellectual property rights, or enter into development partnerships that would help us bring our products, technologies or services to market.

In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations, continue our internal research programs, in-license needed technology, pursue, obtain or maintain intellectual property rights, or enter into development partnerships that would help us bring our products, technologies or services to market.

In addition, patent litigation can be very costly and time-consuming.

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We may similarly be subject to claims stemming from similar actions of an employee, such as one who was previously employed by another company, including a competitor or potential competitor.

We may become subject to claims that one or more current or former employees, consultants, advisors, or independent contractors of ours owns rights in our intellectual property and/or has assigned or is under an obligation to assign rights in our intellectual property to another party.

We may become subject to claims that one or more current or

former employees, consultants, advisors, or independent contractors of ours owns rights in our intellectual property and/or has assigned or is under an obligation to assign rights in our intellectual property to another party.

This may include a competitor of ours.

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Because of a lower standard for evidence in USPTO proceedings compared to the standard for evidence in U.S.

federal courts necessary to invalidate a patent claim, a third-party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim

invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a court action.

federal courts necessary to invalidate a patent claim, a third-party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a court action.

Accordingly, a third-party may try to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third-party in court.

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Our stock price has been and may continue to be volatile.

The daily closing market price for our common stock has varied significantly in the last 12 months, ranging between a high price of $8.40 on June 7, 2021 and a low price of $1.63 on April 27, 2022 and April 28, 2022.

The daily closing market price for our common stock has varied significantly in the last 12 months, ranging between a high price of $6.32 on August 6, 2021 and a low price of $1.23 on May 11, 2022.

During this time, the price per share of common stock has ranged from an intra-day low of $1.16 per share to an intra-day high of $6.37 per share.

The trading price of our securities is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume.

In addition to the risk factors discussed in this section and elsewhere in our Quarterly Report, these factors include:

In addition to the risk factors discussed in this section and elsewhere in our Quarterly Report on Form 10-Q, these factors include:

• our commercial progress in marketing and selling our genome analysis systems, including sales and revenue trends;

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• natural disasters, infectious diseases, conflict, including the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, civil unrest, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events;

• general economic conditions, including economic slowdowns, recessions, inflation, rising interest rates and tightening of credit markets;

• other events or factors, many of which are beyond our control.

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We have never declared or paid any cash dividend on our capital stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash

dividends for the foreseeable future.

Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

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If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause adverse effects on our business and may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.*

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.

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The failure to maintain appropriate segregation of duties had a pervasive impact and as such, this deficiency resulted in a risk that could have impacted all financial statement account balances and disclosures and was therefore considered a material weakness.

The material weaknesses did not result in any identified material misstatements to our financial statements, and there were no changes to previously released financial results, and as of December 31, 2021, we concluded that as of such date our controls and procedures were effective at a reasonable assurance level due to the implementation of remediation measures that we undertook.

The material weakness did not result in any identified material misstatements to our financial statements, and there were no changes to previously released financial results, and as of December 31, 2021, we concluded that as of such date our controls and procedures were effective at a reasonable assurance level due to the implementation of remediation measures that we undertook.

Although we were able to remediate our prior material weakness, we cannot assure you that we will not experience future material weaknesses or that we will be able to successfully remediate any such material weakness in a timely manner or at all.

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We believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, in connection with our Annual Report on Form 10-K for the period ended December 31, 2021, our independent registered public accounting firm was required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act.

As of December 31, 2022, we will re-qualify as a “non-accelerated filer” based on the market value of our common stock held by non-affiliates as of June 30, 2022 and revenue for the fiscal year ended December 31, 2021.

For as long as we are a non-accelerated filer, we will not be required to obtain an independent assessment of the effectiveness of our internal controls, including in connection with our Annual Report on Form 10-K for the period ending December 31, 2022.

An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not.

Consequently, if we choose not to obtain an independent assessment, there is a risk that we may not detect problems with our internal controls that otherwise might have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes.

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There are significant corporate governance and executive-compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas.

As of June 30, 2021, the market value of our common stock held by non-affiliates exceeded $700.0 million.

Consequently, we are a large accelerated filer and ceased to be an emerging growth company effective December 31, 2021.

As a result of this transition, we are subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our previous status as an emerging growth company and expect to incur additional legal and financial compliance costs as a result.

Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

We expect the rules and regulations applicable to public companies will continue to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly, especially as we no longer qualify as an emerging growth company or a smaller reporting company and are therefore required to comply with additional, costly disclosure and compliance requirements, subject to a transition period.

If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.

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For example, these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we are required to incur substantial costs to maintain the same or similar coverage.

We cannot predict or estimate

the amount or timing of additional costs we may incur to respond to these requirements.

We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.

The impact of these requirements also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

We are a smaller reporting company, and the reduced reporting requirements applicable to smaller reporting companies could make our securities less attractive to investors.*

As of June 30, 2021, the market value of our common stock held by non-affiliates exceeded $700.0 million, causing us to no longer qualify as a “smaller reporting company” beginning with our first Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

However, as of June 30, 2022, the market value of our common stock held by non-affiliates did not exceed $560.0 million and our revenue for the fiscal year ended December 31, 2021 did not exceed $100.0 million.

As a result, we once again qualify as a smaller reporting company effective as of this Quarterly Report on Form 10-Q, although we continue to be a large accelerated filer until our next Annual Report on Form 10-K.

We will qualify as a smaller reporting company and a non-accelerated filer for our 2023 reporting period, which allows us to immediately take advantage of many exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, but we still expect to incur substantial legal and financial compliance costs.

If we choose to avail ourselves of the scaled disclosure requirements applicable to smaller reporting companies, the content of our disclosures may differ from period to period.

We may no longer qualify as a smaller reporting company in the future should the market value of our common stock held by non-affiliates as of the end of the second quarter of any given year once again exceed $700.0 million or our revenue as of the end of any fiscal year exceed $100.0 million.

There may be further variance in the content of our disclosures if we avail ourselves of the scaled disclosure requirements and subsequently no longer qualify as a smaller reporting company because we would be required provide the full disclosures required of non-smaller reporting companies.

We cannot predict if investors will find our securities less attractive because we may rely on these exemptions, which could result in a less active trading market for our securities and increased volatility in the price of our securities.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future.

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Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject to the restrictions and limitations described below.

If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly.

significantly.

All of our outstanding shares of common stock are available for sale in the public market, subject only to the restrictions of Rule 144 under the Securities Act in the case of our affiliates.

In addition, as of March 31, 2022, we have filed registration statements on Form S-8 under the Securities Act registering the issuance of an aggregate of 36,796,518 shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans.

In addition, as of the date of this Quarterly Report on Form 10-Q, we have filed registration statements on Form S-8 under the Securities Act registering the issuance of an aggregate of 36,796,518 shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans.

We also intend to file future registration statements on Form S-8 under the Securities Act registering the issuance of additional shares of common stock as the number of shares that may be issued under certain employee equity benefit plans automatically increase due to “evergreen” provisions.

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Our shares of common stock began trading on The Nasdaq Capital Market on September 21, 2018.

Given the limited trading history of our common stock, there is a risk that an active trading market for our shares will not be sustained, which could put

downward pressure on the market price of our common stock and thereby affect the ability of our stockholders to sell their shares.

Given the limited trading history of our common stock, there is a risk that an active trading market for our shares will not be sustained, which could put downward pressure on the market price of our common stock and thereby affect the ability of our stockholders to sell their shares.

General Risk Factors

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As a newly public company, we have only limited research coverage on our company by equity research analysts.

If securities or industry analysts elect not to initiate or continue to provide coverage of our company, the trading price for our securities would likely be negatively impacted.

If securities or industry analysts elect not to initiate or continue to provide coverage of our company, the

trading price for our securities would likely be negatively impacted.

If one or more of the analysts who covers us downgrades our securities or publishes inaccurate or unfavorable research about our business, the price of our securities may decline.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors