What changed in this filing

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Item 1A. Risk Factors

2021-05-10 compared with 2020-11-09 · 122 added, 143 removed, 1038 unchanged (20% of the section changed)

6 unchanged sentences

• Our method of recognizing revenue may not reflect our underlying business.

• We have incurred significant losses since inception, and we may never achieve sustained profitability.

• We have incurred significant losses since inception, and we may never achieve profitability.

• We are an early, commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

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• If our internal control over financial reporting is ineffective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner.

• The terms of our credit facility place restrictions on our operating and financial flexibility.

• We may need to raise additional capital to commercialize new products, to expand operations or to fund existing operations.

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• We conduct business in a heavily regulated industry and failure to comply with regulatory requirements, including those established by the U.S.

Food and Drug Administration, or changes in enforcement discretion for laboratory developed tests could harm our business.

Food and Drug Administration or any other regulatory authority, or changes in enforcement discretion for laboratory developed tests could harm our business.

• Data from our clinical studies may change materially, which could harm our business.

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• Our employees and any current or potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

• We may engage in strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.

• Our business may be negatively impacted by cyber security threats, natural disasters and public health crises.

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

• We have broad direction in the use of working capital and may not use it effectively or in ways that increase our share price.

• We have broad discretion in the use of working capital and may not use it effectively or in ways that increase our share price.

• The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

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Our reliance upon a small number of third-party payors for a significant portion of our revenue may materially adversely affect our financial condition and results of operations.

We receive a substantial portion of our revenue from a small number of third-party payors, primarily Medicare and United Healthcare.

Our revenue for our test reports provided for patients covered by Medicare and United Healthcare as a percentage of total revenue, was 49% and 6%, respectively, for the year ended December 31, 2019, and 36% and 12%, respectively, for the year ended December 31, 2018.

In addition, our current accounts receivable balances for Medicare and United Healthcare, as a percentage of our total current accounts receivable, were 7% and 9%, respectively, as of December 31, 2019, and 54% and 7%, respectively, as of December 31, 2018.

There were no long-term accounts receivable balances for Medicare and United Healthcare as of December 31, 2019, but long-term accounts receivable for Medicare and United Healthcare as a percentage of total long-term accounts receivable were and 0% and 15%, respectively, as of December 31, 2018.

We receive a substantial portion of our revenue from a small number of third-party payors, primarily Medicare.

Our revenue for our test reports provided for patients covered by Medicare as a percentage of total revenue, was 58% for the year ended December 31, 2020 and 49% for the year ended December 31, 2019.

If our largest current payors were to significantly reduce, or cease to pay, the amount they reimburse for our products, or if they do not reach favorable coverage and reimbursement decisions for our products, or attempt to recover amounts they had already paid, it could have a material adverse effect on our business, financial condition and results of operations and cause significant fluctuations in our results of operations.

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If our revenue or operating results fall below expectations, the price of our common stock would likely decline.

We have incurred significant losses since inception, and we may never achieve sustained profitability.*

We have incurred significant losses since inception, and we may never achieve profitability.*

Since our inception, we have had a history of net losses.

As of September 30, 2020, we had an accumulated deficit of $57.6 million.

We cannot predict if we will achieve sustained profitability in the near future or at all.

For the three months ended March 31, 2021, we had a net loss of $4.3 million.

As of March 31, 2021, we had an accumulated deficit of $66.8 million.

We cannot predict if we will achieve profitability in the near future or at all.

We expect to incur losses in the future as we plan to invest significant additional funds toward the expansion of our commercial organization, the conduct of clinical utility and validity studies to support adoption of our products and the development or acquisition of additional products.

Additionally, our performance could be impacted by the ongoing impacts of COVID-19.

As a public company, we expect to continue to incur additional legal, accounting and other expenses that we did not incur as a private company.

These increased expenses will make it harder for us to achieve sustained future profitability.

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

Additionally, our performance could be affected by the ongoing impacts of COVID-19.

As a public company, we expect to continue to incur significant additional legal, accounting and other expenses that we did not incur as a private company.

These increased expenses will make it harder for us to achieve future profitability.

We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in this Quarterly Report on Form 10‑Q, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities.

Our failure to achieve sustained profitability in the future could cause the market price of our common stock to decline.

Our failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

We are an early, commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

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Our limited operating history may make it difficult to evaluate our current business and this makes predictions about our future success or viability subject to significant uncertainty.

In particular, we intend to use a portion of our working capital to increase our headcount, including through the

expansion of our sales and marketing and research and development teams, which will increase our operating costs in a manner not historically reflected in our financial statements.

In combination with our other anticipated increased operating expenses in connection with being a public company, these anticipated changes in our operating expenses may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.

In particular, we intend to use a portion of our working capital to increase our headcount, including through the expansion of our sales and marketing and research and development teams, which will increase our operating costs in a manner not historically reflected in our financial statements.

In combination with our other anticipated increased operating expenses in connection with the ongoing demands of a public company, these anticipated changes in our operating expenses may make it

difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.

We will continue to encounter risks and difficulties frequently experienced by early commercial-stage companies, including those associated with increasing the size of our organization and the prioritization of our commercial, research and business development activities.

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Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner.

In connection with the audits of our financial statements for the years ended December 31, 2018 and 2017, we concluded that there were material weaknesses in our internal control over financial reporting.

However, as of December 31, 2019, we concluded that these material weaknesses have been remediated.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

These material weaknesses related to a lack of (i) appropriately designed and implemented controls over the review and approval of manual journal entries and the related supporting journal entry calculations, (ii) personnel with appropriate knowledge, experience and training commensurate with accounting and reporting requirements and (iii) appropriately designed

and implemented controls to evaluate variable consideration and the related constraint in accordance with ASC 606, and resulted in certain material corrections to the financial statements.

To remediate these weaknesses, we hired a full-time director of SEC reporting and technical accounting and another full-time accounting resource, both certified public accountants with active licenses, to augment our accounting staff and to provide more resources for complex accounting matters and financial reporting.

However, in connection with audit of our financial statements for the year ended December 31, 2019, we concluded these material weaknesses had been remediated.

These prior material weaknesses related to a lack of (i) appropriately designed and implemented controls over the review and approval of manual journal entries and the related supporting journal entry calculations, (ii) personnel with appropriate knowledge, experience and training commensurate with accounting and reporting requirements and (iii) appropriately designed and implemented controls to evaluate variable consideration and the related constraint in accordance with ASC 606, and resulted in certain material corrections to the financial statements.

To remediate these weaknesses, during 2019 we hired a full-time director of SEC reporting and technical accounting and another full-time accounting resource, both certified public accountants with active licenses, to augment our accounting staff and to provide more resources for complex accounting matters and financial reporting.

We also commenced development of a new information technology tool designed to improve the efficiency of our processes with respect to revenue recognition under ASC 606 and hired personnel to support our revenue accounting and related activities under ASC 606.

Further, we selected a third party to assist us with formalizing our internal control documentation and implementation of enhancements to our internal control over financial reporting.

If we identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, a material misstatement in our financial statements could occur, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, which may adversely affect our business and our stock price may decline as a result.

Nevertheless, we will be required to expend significant time and resources to further improve our internal controls over financial reporting, including by further expanding our finance and accounting staff to meet the demands that are placed upon us as a public company, including the requirements of Sarbanes-Oxley.

If we fail to adequately staff our accounting and finance function, or fail to maintain adequate internal control over financial reporting, any new or recurring material weaknesses could prevent our management from concluding our internal control over financial reporting is effective and impair our ability to prevent material misstatements in our financial statements, which could cause our business to suffer.

The terms of our credit facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the credit facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our securities to decline.*

The 2018 LSA, which we amended in June 2019, February 2020, March 2020 and May 2020, with Oxford and SVB, is secured by a lien covering substantially all of our assets, excluding intellectual property.

The 2018 LSA provides for a five-year $25.0 million term-loan facility, all of which has been disbursed to us.

Following the Fourth Amendment to the 2018 LSA in May 2020, the 2018 LSA requires us to comply with either (i) a trailing three-month revenue target or (ii) a liquidity ratio, in both cases measured quarterly.

The liquidity ratio requires that the ratio of (i) unrestricted cash and cash equivalents (as defined in the 2018 LSA) held at SVB or its affiliates to (ii) the principal outstanding on the Term Loan be at least 2.00 to 1.00.

As of September 30, 2020, we were in compliance with this covenant.

Our liquidity ratio was 7.76 to 1.00 as of September 30, 2020.

However, there can be no assurance of our ability to maintain compliance with this covenant as of any future date.

For example, prior to the amendment of the 2018 LSA in June 2019, our projections indicated that we were at risk of noncompliance with the financial covenant existing under the 2018 LSA prior to such amendment.

Among other things, the June 2019 amendment revised our financial covenant to be more aligned with our revenue projections after taking into account the impact of ASC 606 on our revenue recognition following our early adoption of ASC 606.

We requested the Fourth Amendment from the Lenders so that our liquidity position would also be considered when determining compliance, due to the impacts of COVID-19 on our revenues.

Our ability to further amend the terms of the 2018 LSA is subject to the approval of Oxford and SVB.

Accordingly, should we seek to amend the 2018 LSA, there can be no assurance that an amendment would be available on terms acceptable to us or at all .

In the event we are unable to comply with either the trailing three-month revenue requirement or the liquidity ratio covenant and we are unable to obtain an amendment of the 2018 LSA or a waiver, the Lenders could accelerate our payment obligations under the 2018 LSA.

If an acceleration were to occur, we expect we would seek financing from other sources and/or utilize a portion of our existing cash and cash equivalents on hand, which totaled $183.1 million as of September 30, 2020 , to satisfy our obligations.

The 2018 LSA also requires us to comply with a number of other covenants (affirmative and negative), including restrictive covenants that limit our ability to:

incur additional indebtedness;

encumber the collateral securing the loan;

acquire, own or make investments;

repurchase or redeem any class of stock or other equity interest;

declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest;

transfer a material portion of our assets;

maintain certain levels of cash balances in third-party deposit accounts, acquire other businesses;

and merge or consolidate with or into any other organization or otherwise suffer a change in control, in each case subject to exceptions.

In February 2020, in connection with an amendment to the 2018 LSA, our lenders agreed to provide a waiver of an event of default by us that resulted from us maintaining a cash balance in a third-party deposit account beyond the maximum level permitted.

Such amendment also

provided a modification to increase the maximum balance permitted for this deposit account.

While we were able to obtain a waiver and amendment in this instance, there can be no assurance that the lenders would agree to provide any future waivers or amendments if another event of default were to occur as result of noncompliance with this or any other covenant under the 2018 LSA.

In addition to other specified events of default, and subject to limited exceptions, the lenders could declare an event of default upon the occurrence of any event that they interpret as having a material impairment in their lien on the collateral under the agreement, a material adverse change in our business, operations or condition (financial or otherwise) or a material impairment in the prospect of repayment of our obligations under the agreement.

If we default under the credit facility, the lenders may accelerate all of our repayment obligations, which may require us to seek additional or alternate financing and/or modify our operational plans.

If we were to seek additional or alternative financing, there can be no assurance that any such financing would be available to us on commercially reasonable terms or at all.

If we are unable to access funds to meet those obligations or to renegotiate our agreement, the lenders could take control of our pledged assets and we would have to immediately cease operations.

During the continuance of an event of default, the then-applicable interest rate on the then-outstanding principal balance will increase by 5.0%.

Upon an event of default, the lenders could also require us to repay the loan immediately, together with a prepayment charge of up to 1.5% of the then-outstanding principal balance, together with other fees.

If we were to renegotiate the agreement under such circumstances, the terms may be significantly less favorable to us.

If we were liquidated, the lenders’ right to repayment would be senior to the rights of our stockholders to receive any proceeds from the liquidation.

Any declaration by the lenders of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our securities to decline.

We may incur additional indebtedness in the future.

The debt instruments governing such indebtedness may contain provisions that are as, or more, restrictive than the provisions governing our existing indebtedness.

If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral or force us into bankruptcy or liquidation.

Further, we engaged a third party to assist us with formalizing our internal control documentation and implementation of enhancements to our internal control over financial reporting.

During 2020, we added additional full-time accounting personnel, including an additional certified public accountant with an active license, to further support the demands placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley.

We expect to continue expending significant time and resources related to our internal control over financial reporting, including by further expanding our finance and accounting staff, but there can be no assurance our efforts will be effective.

If we identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, our ability to prevent material misstatements in our financial statements could be impaired, a material misstatement in our financial statements could occur and we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, which could cause our business to suffer and our stock price to decline.

We may need to raise additional capital to fund our existing operations, commercialize new products or expand our operations.

We believe our existing cash and cash equivalents and anticipated cash generated from sales of our products will be sufficient to fund our operations for the foreseeable future.

If our available cash balances and anticipated cash generated from sales of our products are insufficient to satisfy our liquidity requirements including because of lower demand for our products, lower than currently expected rates of reimbursement from third-party payors or other risks described in this Quarterly Report on Form 10‑Q, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

If our available cash and cash equivalents and anticipated cash generated from sales of our products are insufficient to satisfy our liquidity requirements including because of lower demand for our products, lower than currently expected rates of reimbursement from third-party payors or other risks described in this Quarterly Report on Form 10‑Q, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

We do not currently have any committed external source of funds.

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• delayed or postponed interactions with regulators and other important agencies and contractors, due to limitations in employee resources, travel restrictions or forced furlough of government employees.

We experienced declines in orders and test report volume primarily in the second quarter of 2020, which we believe were linked to delays and/or cancellations in patient visits, resulting in reduced diagnostic biopsies and thus reduced diagnoses of cutaneous melanoma in response to COVID-19.

For the second quarter of 2020, test reports delivered for our lead product, DecisionDx-Melanoma, decreased 18.5% compared to the second quarter of 2019.

Following the onset of the COVID-19 pandemic, we began experiencing declines in orders and test report volume.

For example, in the second quarter of 2020, test reports delivered for our lead product, DecisionDx-Melanoma, decreased 18.5% compared to the second quarter of 2019.

For the year ended December 31, 2020, our growth in DecisionDx-Melanoma test report volume was 4.5%, compared to year-over-year growth of 29.1% for the year ended December 31, 2019.

In the first quarter of 2021, test reports delivered for DecisionDx-Melanoma decreased by 11.2% compared to the first quarter of 2020.

We believe the adverse impacts to our test report volume growth are linked to delays in the diagnoses as well as the cumulative impact on promotional responsiveness as a result of reduced sales calls per day and in-person sales calls during the COVID-19 pandemic.

Our future results will be dependent upon the extent and duration of the COVID-19 crisis as well as the impact of ongoing state and local government restrictions, which are beyond our control, and which may be eased and/or reinstated from time to time depending on the circumstances, potentially impacting the flow of future patient visits and diagnosis of cutaneous melanoma.

1 unchanged sentence

As conditions are continuously evolving, we are unable to predict how our future test report volume will be impacted or the extent to which our results of operations, financial condition or cash flows will be impacted by the COVID-19 pandemic, or other future public health crises.

Accordingly, the test report data presented above and elsewhere in this Quarterly Report on Form 10-Q is not necessarily indicative of our results of operations that can be expected for the year ending December 31, 2020 or any other future period.

Under legislation enacted (or that may be enacted) by the United States federal government to respond to COVID-19, we have received and may receive in the future, cash payments or other forms of assistance allocated to healthcare and other companies.

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In the event we fail to comply with any of the terms or conditions associated with a payment we receive or if the terms and conditions or related interpretations change, we may be required to return it.

For example, in September 2020, HHS modified the methodology for calculating lost revenues with respect to the relief funds distributed to healthcare providers pursuant to the CARES Act.

As a result of this change in requirements, during the three months ended September 30, 2020, we reversed $1.9 million in previously recognized income associated with these funds.

HHS again revised the methodology for calculating lost revenues in October 2020.

The receipt of government payments or other assistance during the COVID-19 crisis has generated negative publicity for some companies and may continue to generate negative publicity for companies in the future.

If we receive any negative publicity as a result of receiving or accepting a government payment or other assistance, it could harm our reputation, trigger a review or audit by applicable government agencies and/or adversely impact our stock price.

The effects of COVID-19 on our business could affect our ability to comply with the covenants or other requirements under the 2018 LSA.

For more information on risks associated with the 2018 LSA, see above under “—Risks Related to Our Financial Condition— The terms of our credit facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the credit facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our securities to decline.

The COVID-19 crisis continues to rapidly evolve.

The extent to which COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the crisis, resurgences of the virus, the availability and effectiveness of potential vaccinations or therapeutic treatments, the use of telemedicine, travel restrictions, stay-at-home or other similar orders and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus.

The extent to which COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the crisis, resurgences of the virus, the availability and effectiveness of vaccinations or therapeutic treatments, the use of telemedicine, travel restrictions, stay-at-home or other similar orders and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus.

Any of these factors, individually or in combination, could materially and adversely affect our business, results of operations, financial condition or cash flows.

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Without positive coverage policies, our products may not be reimbursed and we may not be able to recognize revenue.

If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve sustained profitability would be impaired, and the market price of our stock could decline substantially.

If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve profitability would be impaired, and the market price of our stock could decline substantially.

Billing for our products is complex and requires substantial time and resources to collect payment.

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Failure to identify and return such overpayments exposes the provider or supplier to liability under federal false claims laws.

These billing complexities, and the related uncertainty in obtaining payment for our products, could negatively affect our revenue and cash flow, our ability to achieve sustained profitability, and the consistency and comparability of our results of operations.

These billing complexities, and the related uncertainty in obtaining payment for our products, could negatively affect our revenue and cash flow, our ability to achieve profitability, and the consistency and comparability of our results of operations.

In addition to the complexities noted above, we rely upon third-party service providers and third-party software applications in the administration of our billing and collecting process.

We are currently planning to transition from a third-party billing service provider and implement a new in-house billing process using a third-party software application effective January 1, 2021.

Any significant disruption or deficiency in the design and/or implementation of the new billing process could adversely impact our ability to generate and send invoices, calculate revenues, track payments and collect our accounts receivable.

We are transitioning from a third-party billing service provider and

have added additional headcount to move our billing process in-house using a third-party software application starting January 1, 2021.

Any significant disruption or deficiency in the design or implementation of the new billing process could adversely impact our ability to generate and send invoices, calculate revenues, track payments and collect our accounts receivable.

Additionally, any failure in the design or operation of our internal controls related to our billing and collection processes could adversely impact our ability to conclude on the effectiveness of our internal control over financial reporting.

We rely on third parties for tumor sample collection, preparation and delivery.

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In addition, the loss of our tumor samples due to such events could limit or prevent our ability to conduct research and development analysis on existing tests as well as tests in active pipeline development.

While we have a business continuity plan in place, and have substantially completed the build out of an additional laboratory facility in close proximity to our primary facility to provide certain operational redundancy, our facilities and the equipment we use to perform our testing and research and development could be unavailable or costly and time-consuming to repair or replace.

While we have a business continuity plan in place, and have completed the build out of an additional laboratory facility in close proximity to our primary facility to support our growth and provide certain operational redundancy, our facilities and the equipment we use to perform our testing and research and development could be unavailable or costly and time-consuming to repair or replace.

It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify a new facility, replace certain pieces of equipment or license or transfer our proprietary technology to a third-party, particularly in light of licensure and accreditation requirements.

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• our ability to obtain and maintain positive coverage decisions for our products from government and commercial payors;

• our ability to obtain and maintain adequate reimbursement from third-party payors, including Medicare, Medicare Advantage plans, United Healthcare and BlueCross BlueShield plans, which accounted for an aggregate of approximately 90% and 83% of our total revenue for the years ended December 31, 2019 and 2018, respectively;

• our ability to obtain and maintain adequate reimbursement from third-party payors, including Medicare, Medicare Advantage plans and BlueCross BlueShield plans, which accounted for an aggregate of approximately 93% and 84% of our total revenue for the years ended December 31, 2020 and 2019, respectively;

• the impact of our investments in research and development and commercial growth;

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Typically, few research and development projects result in a commercialized product, and there can be no assurance that we will be able to successfully develop new products that can be commercialized.

point, we may abandon development of a product or we may be required to expend considerable resources conducting research, which would adversely affect the timing for generating potential revenue from a new product and our ability to invest in other products in our pipeline.

At any point, we may abandon development of a product or we may be required to expend considerable resources conducting research, which would adversely affect the timing for generating potential revenue from a new product and our ability to invest in other products in our pipeline.

If a clinical validation study fails to demonstrate the prospectively defined endpoints of the study or if we fail to sufficiently demonstrate analytical validity or clinical utility, we might choose to abandon the development of the product, which could harm our business.

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Physicians and other healthcare providers may be unwilling to adopt our products due to their reliance on existing traditional clinical and pathology staging criteria and our ability to generate revenue from our products would be significantly impaired if we were unable to educate physicians, healthcare providers, patients and third-party payors about the benefits and advantages of our products.

Recently, the COVID-19 crisis has impacted our in-person healthcare interactions, such as field-based sales and medical affairs, and we have had to convert visits, programs and projects to be performed online and by telephone.

Due to the uncertainties surrounding the duration and extent of the COVID-19 outbreak, our in-person healthcare interactions may continue to be limited and this may impact the effectiveness of our efforts.

The COVID-19 crisis has impacted our in-person healthcare interactions, such as field-based sales and medical affairs, and we have had to convert visits, programs and projects to be performed online and by telephone.

Due to the uncertainties surrounding the duration, extent and lingering impacts of the COVID-19 crisis, our in-person healthcare interactions may continue to be limited and this may impact the effectiveness of our efforts.

We will need to continue to educate physicians and pathologists about the benefits and cost-effectiveness of our products through published papers, presentations at scientific conferences, one-on-one marketing efforts by our sales force and one-on-one education by our medical affairs team.

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As a result, the failure of our products to perform as expected could significantly impair our operating results and our reputation, including if we become subject to legal claims arising from any defects or errors in our products or reports.

If we are unable to compete successfully, our business will suffer and we may be unable to increase or sustain our revenue or achieve sustained profitability.*

If we are unable to compete successfully, our business will suffer and we may be unable to increase or sustain our revenue or achieve profitability.

We face competition from companies and academic institutions that have either developed or may seek to develop products intended to compete with our products.

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In addition, companies or governments that control access to testing through umbrella contracts or regional preferences could promote our competitors or prevent us from performing certain services.

If we are unable to compete successfully against current and future competitors, our business will suffer and we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or achieving sustained profitability and could cause our stock price to decline.

If we are unable to compete successfully against current and future competitors, our business will suffer and we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or achieving profitability and could cause our stock price to decline.

As we add new tests and services, we will face many of these same competitive risks for these new tests.

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Our estimates of the total addressable markets for DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC and DecisionDx DiffDx-Melanoma are based on a number of internal and third-party estimates, including, without limitation, the annual rate of patients with the applicable form of skin cancer, the list price of our products relative to the reimbursement we expect to receive from third-party payors and the assumed prices at which we can sell our products in markets that have not been established.

For example, we estimate that the total addressable market for DecisionDx-Melanoma is approximately $540 million, which is based, in part, on our review of multiple recent publications which show that diagnosis of melanoma is underreported by 30% to 72%.

For example, we estimate that the total addressable market for DecisionDx-Melanoma is approximately $540 million, which is based, in part, on our review of multiple publications which show that diagnosis of melanoma is underreported by 30% to 72%.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

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Risks Related to Reimbursement and Government Regulation

We currently have limited reimbursement coverage for our lead product, DecisionDx-Melanoma, and if third-party payors, including government and commercial payors, do not provide sufficient coverage of, or adequate reimbursement for, our products, our commercial success will be negatively affected.*

Our revenue depends on achieving broad coverage and adequate reimbursement for our products from third-party payors, including both government and commercial third-party payors.

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Variable consideration for Medicare claims that are not covered by an LCD, including those claims subject to approval by an ALJ at an appeal hearing, is deemed to be fully constrained due to factors outside our influence (i.e., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time.

For these fully constrained claims, we generally recognize revenue upon receipt of a favorable appeal decision.

For these fully constrained claims, we generally recognize revenue in the period the uncertainties are resolved, if favorable.

In June 2017 we submitted to the Office of Medicare Hearings and Appeals, or OMHA, a request to participate in an appeal program developed with the intent of providing appellants a means to have large volumes of claim disputes adjudicated at an accelerated rate.

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Palmetto, the MAC responsible for administering MolDX, the program that assesses molecular diagnostic technologies, issued a final LCD for DecisionDx-Melanoma, which became effective on December 3, 2018 and issued a final expanded LCD effective November 22, 2020.

This LCD provides for coverage of DecisionDx-Melanoma for certain SLNB-eligible patients with cutaneous melanoma tumors with clinically negative sentinel node basins who are being considered for SLNB to determine eligibility for adjuvant therapy.

This LCD provides for coverage of DecisionDx-Melanoma for certain SLNB-eligible patients

with cutaneous melanoma tumors with clinically negative sentinel node basins who are being considered for SLNB to determine eligibility for adjuvant therapy.

The final expanded LCD also covers use of DecisionDx-Melanoma by physicians for assessment of appropriate treatment plans, regardless of the decision to undergo or avoid the SLNB surgery.

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In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services are paid under Medicare.

Under PAMA, certain laboratories were required to report to CMS, beginning in 2017 and every three years thereafter (or annually for advanced diagnostic laboratory tests, or ADLTs), commercial third-party payor payment rates and volumes for each test they perform.

Under PAMA, certain laboratories are required to report to CMS commercial third-party payor payment rates and volumes for each test they perform.

CMS uses this data to calculate a weighted median payment rate for each test, which will be used to establish revised Medicare CLFS reimbursement rates for the test.

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On May 17, 2019, CMS determined that DecisionDx-UM meets the criteria for “existing ADLT” status.

Accordingly, in 2021 the DecisionDx-UM Medicare rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Note that our rate for 2020 is set by Noridian, our local MAC.

This means that beginning in 2021, the DecisionDx-UM Medicare rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Note that our rate for 2020 was set by Noridian, our local MAC, but our rate for 2021 for DecisionDx-UM will be $7,776 based on the median private payor rate.

Also, on May 17, 2019, CMS determined that DecisionDx-Melanoma meets the criteria for ‘‘new ADLT’’ status.

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From April 1, 2020 through December 31, 2021, CMS notified us that the rate will also be $7,193, which was calculated based upon the median private payor rate for DecisionDx-Melanoma from July 1, 2019 to November 30, 2019.

Beginning in 2022, the rate for both DecisionDx-UM and DecisionDx-Melanoma will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Beginning in 2022, the rate for both DecisionDx-Melanoma and DecisionDx-UM will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2022 will be set using median private payor rate data from January 1, 2020 to June 30, 2020.

In the second quarter of 2020, we submitted our technical assessment dossier for DecisionDx-SCC to Palmetto and Noridian.

In early 2021, we submitted our technical assessment dossier for DecisionDx DiffDx-Melanoma.

We expect that draft LCDs for each of these tests will be posted in 2021.

However, there is no assurance that the timing of any draft LCD or final LCD will match our expectations or our historical experience with LCDs for our other tests.

If we are unable to obtain and maintain adequate reimbursement rates from commercial third-party payors, this may adversely affect our Medicare rate.

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In addition, some third-party payors have implemented, or are in the process of implementing, laboratory benefit management programs, often using third-party benefit managers to manage these programs.

The stated goals of these programs are to help

improve the quality of outpatient laboratory services, support evidence-based guidelines for patient care and lower costs.

The stated goals of these programs are to help improve the quality of outpatient laboratory services, support evidence-based guidelines for patient care and lower costs.

The impact on laboratories, such as ours, of active laboratory benefit management by third parties is unclear, and we expect that it could have a negative impact on our revenue in the short term.

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If premarket review is required for some or all of our products, the FDA may require that we stop selling our products pending clearance or approval, which would negatively impact our business.

Even if our products are allowed to remain on the market prior to clearance or approval, demand or reimbursement for our products may decline if there is uncertainty about our products, if we are required to label our products as investigational by the FDA, or if the FDA limits the labeling claims we are

permitted to make for our products.

As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other products now in development.

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Our laboratory director must also be separately qualified to be a laboratory director in New York.

DecisionDx-UM, DecisionDx-PRAME and DecisionDx-Melanoma have each been approved and our laboratory director has been qualified by NYSDOH.

DecisionDx-Melanoma, DecisionDx-UM and DecisionDx-PRAME have each been formally approved and we have been granted conditional permission by NYSDOH to offer our DecisionDx-SCC and DecisionDx DiffDx-Melanoma tests in New York while our applications under review.

Our laboratory director has been qualified by NYSDOH.

We are subject to periodic inspection by the NYSDOH and are required to demonstrate ongoing compliance with NYSDOH regulations and standards.

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Among other things, the ACA required medical device manufacturers to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices, and began to apply to sales of taxable medical devices after December 31, 2012, but was suspended in 2016.

Further, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the medical device tax and “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminates the health insurer tax.

Since 2016 there have been efforts to repeal all or part of the ACA, and the current administration and the U.S.

Since 2016 there have been efforts to repeal all or part of the ACA, and the previous administration and the U.S.

Congress have taken action to roll back certain provisions of the ACA.

The current administration and the U.S.

Congress may take further action regarding the ACA, including, but not limited to, repeal or replacement.

It is unknown what actions, if any, the current administration and the U.S.

Congress may take regarding the ACA.

Additionally, on December 14, 2018, a Texas U.S.

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Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case.

Court of Appeals for the 5th Circuit ruled that the individual mandate

was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

The United States Supreme Court is currently reviewing this case.

It is unclear when a decision in this case will be made.

It is also unclear how such litigation and other efforts to repeal and replace the ACA will impact the ACA and our business.

It is also unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the ACA and our business.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, unless additional Congressional action is taken.

The CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and business affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

The Coronavirus Aid, Relief and Economic Security Act enacted on March 27, 2020, also known as the CARES Act, which is designed to provide financial support and resources to individuals and business affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, extended the suspension of the 2% Medicare sequester through March 31, 2021 and An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, which was signed into law on April 14, 2021, extended the sequester through December 31, 2021.

We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial third-party payors to reduce costs while expanding individual healthcare benefits.

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Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the FCA;

• federal civil and criminal false claims laws, such as the FCA, which can be enforced by private citizens through civil qui tam action, and civil monetary penalty laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented through distribution of template medical necessity language or other coverage and reimbursement information, false, fictitious or fraudulent claims for payment or approval by the federal government, including federal health care programs, such as Medicare and Medicaid, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or knowingly making a

false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government.

In addition, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA.

addition, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA.

Private individuals can bring False Claims Act ‘‘qui tam’’ actions, on behalf of the government and such individuals, commonly known as ‘‘whistleblowers,’’ may share in amounts paid by the entity to the government in fines or settlement.

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• the federal transparency requirements under the Physician Payments Sunshine Act, created under the ACA, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value provided to physicians, certain other healthcare professionals, and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding their relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year.

Failure to submit required information may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission, and may result in liability under other federal laws or regulations.

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In addition, we may obtain health information from third parties that are also subject to privacy and security requirements under HIPAA, as amended by HITECH.

Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.

These laws and regulations are not necessarily preempted by HIPAA, particularly if a state affords greater protection to individuals than HIPAA.

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Our patent portfolio includes five issued U.S.

patents and three pending U.S.

patents and six pending U.S.

patent applications, with foreign counterparts.

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Changes in either the patent laws or interpretation of the patent laws in the United States or the United States Patent and Trademark Office, or the USPTO, rules and regulations could increase these uncertainties and costs.

Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the AIA, signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the AIA, signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

The AIA includes a number of significant changes to U.S.

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For example, we license certain intellectual property from WUSTL that is incorporated into DecisionDx-UM.

In 2019, we provided more than 1,500 test reports for DecisionDx-UM.

In 2020, we provided nearly 1,400 test reports for DecisionDx-UM.

If this license agreement were terminated, we would be unable to continue to issue test reports and thus sales of DecisionDx-UM.

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Maetzold, our President and Chief Executive Officer.

Although we have entered into agreements with them regarding their employment, they are not for a specific term and each of may terminate their employment with us at any time though we are not aware of any present intention of any of these

individuals to leave us.

As previously disclosed, our former Chief Medical Officer, Federico A.

resigned effective May 31, 2020.

Although we have entered into agreements with them regarding their employment, they are not for a specific term and

each of may terminate their employment with us at any time though we are not aware of any present intention of any of these individuals to leave us.

Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians.

We may not be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life science businesses, particularly near our primary laboratory facility located in Phoenix, Arizona.

We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel.

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

Our ability to use net operating losses to offset future taxable income may be subject to limitations.

On March 27, 2020, President Trump signed into law the CARES Act, which provides temporary relief from certain aspects of the Tax Cuts and Jobs Act that had imposed limitations on the utilization of certain losses, interest expense deductions, and minimum tax credits.

We are currently in the process of assessing the tax-related provisions of the CARES Act and its potential impact on us.

At December 31, 2019, we had federal net operating loss carryforwards of approximately $57.4 million, of which $43.5 million will begin to expire in 2028 if not utilized to offset taxable income, and $13.9 million may be carried forward indefinitely.

Under the TCJA and CARES Act, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited.

It is uncertain if and to what extent various states will conform to the TCJA.

In addition, under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an ‘‘ownership change’’ (which is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

We may engage in strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.*

From time to time, we may consider strategic opportunities and engage in transactions such as acquisitions of businesses, assets, products or technologies, as well as technology licenses or investments in complementary businesses.

For example, in April 2021, we signed a definitive agreement to acquire Myriad myPath Laboratory.

Any such transactions may entail numerous operational and financial risks, including:

• delays, difficulties and higher than expected costs associated with integration activities, such as those involving operational processes, regulatory and licensure compliance, personnel and information technology systems;

• disruption of our existing business operations and diversion of management’s time, focus and attention;

• decreases in our liquidity and operating cash flows, increases in our overall operating costs, substantial amounts of amortization expense, increased capital expenditure requirements and non-recurring charges, including possible impairments of acquired assets;

• incurrence of substantial debt or dilutive issuances of equity securities, the assumption of additional liabilities and exposure to unknown liabilities;

• inability to retain key personnel of any acquired businesses;

• failure to realize all or any of the anticipated revenues, synergies, efficiencies or other benefits of a transaction within our estimated time frame or at all.

Additionally, with regard to the Myriad myPath Laboratory transaction, there can be no assurances regarding the timing of the consummation of the transaction, our ability to successfully integrate myPath Melanoma into our commercial offerings or whether myPath Melanoma will complement our existing offerings and enable us to provide a comprehensive molecular testing solution for difficult-to-diagnose melanocytic lesions.

We are unable to predict the timing, size or nature of any future transactions, whether they will be completed or financed on favorable terms, if at all, or what the impact of those transactions might be on our financial results, including if such transactions are not effectively and profitably integrated into our business.

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

Additionally, since we have not historically completed any such transactions to date, our ability to successfully integrate, manage and derive benefits from any acquired business, asset, product or technology is unproven.

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

At December 31, 2020, we had federal net operating loss, NOL, carryforwards of approximately $55.9 million, of which $42.0 million will begin to expire in 2033 if not utilized to offset taxable income, and $13.9 million may be carried forward indefinitely.

Under the TCJA, as modified by the CARES Act, federal NOL carryforwards generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2020 is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the TCJA or the CARES Act.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an ‘‘ownership change’’ (which is generally defined as a greater than 50% change (by

value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

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

If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

If an ownership change occurs and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

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

Our business could be negatively impacted by cyber security threats.

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If we were to lose this database, our ability to further validate, improve and therefore maintain and grow sales of DecisionDx-Melanoma could be significant impaired.

(including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

Furthermore, significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information related to our patient samples or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

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We are subject to the reporting requirements of the Exchange Act or the other rules and regulations of the SEC and any securities exchange relating to public companies.

Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and Nasdaq, to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory ‘‘say on pay’’ voting requirements that will apply to us when we cease to be an emerging growth company.

Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and The Nasdaq Stock Market LLC, or Nasdaq, to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,

the SEC has adopted additional rules and regulations in these areas, such as mandatory ‘‘say on pay’’ voting requirements that will apply to us when we cease to be an emerging growth company.

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.

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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.

The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products.

The increased costs will increase our net loss or decrease our net income, and may require us to reduce costs in other areas of our business or increase the prices of our products.

In addition, as a public company, it may be more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

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Our business could be adversely affected by natural disasters, public health epidemics and other events beyond our control.

Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and catastrophic events beyond our control, including, but not limited to, earthquakes, floods, fires, tornadoes and public health issues and epidemics.

Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and other events and catastrophes beyond our control, including, but not limited to, earthquakes, floods, fires, tornadoes hurricanes, power or other utility outages, telecommunications failures and public health crises.

Further, outbreaks of epidemic diseases, such as the COVID-19 pandemic discussed above, or the fear of such events, could provoke responses, including government-imposed travel restrictions that could impede the mobility and effectiveness of our sales force, disrupt our operations or those of our suppliers and service providers.

The ultimate impact of any health epidemic or pandemic is highly uncertain and could have a material impact on our operations.

The ultimate impact of any of these or similar events is highly uncertain and could have a material adverse impact on our operations.

Risks Related to Ownership of Our Common Stock

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The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, or if there is a large number of shares of our common stock available for sale and the market perceives that sales will occur.

As of October 30, 2020, we had 19,911,225 shares of common stock outstanding.

Shares held by directors, executive officers and other affiliates are subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act.

Shares held by directors, executive officers and other affiliates are subject to volume limitations under Rule 144 under the Securities Act.

Certain of our stockholders have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders.

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We may continue to be a smaller reporting company even after we are no longer an emerging growth company.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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

If the market value of our common stock held by non-affiliates exceeds $700.0 million as of June 30, 2021, we will cease to be an emerging growth company effective December 31, 2021.

Additionally, in such case, we expect to no longer qualify as a smaller reporting company beginning with our first Quarterly Report on Form 10-Q for the fiscal year ending December 31, 2022.

We do not intend to pay dividends for the foreseeable future.

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We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.

In addition, the terms of the 2018 LSA precludes us from paying dividends without prior consent.

Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.*

Based upon shares outstanding as of September 30, 2020, our executive officers, directors and the known holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 25% of our common stock.

Based upon shares outstanding as of March 31, 2021, our executive officers, directors and the known holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 33% of our common stock.

As a result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.

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(v) any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware;

and (vi) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants;

provided these provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.

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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