What changed in this filing

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Item 1A. Risk Factors

2020-11-09 compared with 2020-08-07 · 118 added, 104 removed, 695 unchanged (24% of the section changed)

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Risks Related to Fluidigm’s Business and Strategy

The global COVID-19 pandemic has significantly and adversely affected our business operations, financial position, and cash flows, and we expect it will continue to do so.

The global COVID-19 pandemic has significantly affected our business operations and could adversely impact our financial position and cash flows to an extent that is unknown and difficult to predict.

The pandemic and international public health emergency caused by SARS-CoV-2, the novel strain of coronavirus that causes the disease commonly known as COVID-19, has spread throughout all the countries in which we and our customers, suppliers, and other business partners operate, causing significant disruption and volatility in global financial markets and raising the prospect of an extended global recession.

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The COVID-19 pandemic and related governmental reactions have had, and may continue to have, a negative impact on our business, liquidity, results of operations, and stock price due to the occurrence of some or all of the following events or circumstances among others:

• reduced demand for our products and services due to the impact of COVID-19 on our customers, particularly in the global academic research community;

• reduced demand for some of our products and services due to the impact of COVID-19 on our customers, particularly in the global academic research community;

• diminished business productivity due to inefficiencies in employees working from home or increasing physical distancing and other pandemic response protocols in our production facilities;

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In addition, a significant amount of our operating expenses are relatively fixed due to our manufacturing, research and development, and sales and general administrative efforts.

Any failure to adjust spending quickly enough to compensate for a shortfall relative to our anticipated revenue could magnify the adverse impact of such shortfalls on our results of operations.

We expect that our sales will continue to fluctuate on an annual and quarterly basis

and that our financial results for some periods may be below those projected by securities analysts, which could significantly decrease the price of our common stock.

Any failure to adjust

spending quickly enough to compensate for a shortfall relative to our anticipated revenue could magnify the adverse impact of such shortfalls on our results of operations.

We expect that our sales will continue to fluctuate on an annual and quarterly basis and that our financial results for some periods may be below those projected by securities analysts, which could significantly decrease the price of our common stock.

We have incurred losses since inception, and we may continue to incur substantial losses for the foreseeable future.

We have incurred significant losses in each fiscal year since our inception, including net losses of $64.8 million, $59.0 million, and $60.5 million during the years 2019, 2018, and 2017, respectively.

As of June 30, 2020, we had an accumulated deficit of $652.7 million.

As of September 30, 2020, we had an accumulated deficit of $658.7 million.

These losses have resulted principally from costs incurred in our research and development programs, and from our manufacturing costs and selling, general, and administrative expenses.

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Most of our current competitors have significantly greater name recognition, greater financial and human resources, broader product lines and product packages, larger sales forces, larger existing installed bases, larger intellectual property portfolios, and greater experience and scale in research and development, manufacturing, and marketing than we do.

We consider Illumina, Inc., Agilent Technologies, Inc., Thermo Fisher Scientific Inc.

We consider Agilent Technologies, Inc., Thermo Fisher Scientific Inc.

(Thermo), Bio-Rad Laboratories, Inc., NanoString Technologies, Inc.

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We have developed design rules for the implementation of our technology that are frequently revised to reflect new insights we have gained about the technology.

In addition, we have discovered that biological or chemical reactions sometimes behave differently when implemented on our systems rather than in

a standard laboratory environment.

Furthermore, many such reactions take place within the confines of single cells, which have also demonstrated unexpected behavior when grown and manipulated within microfluidic environments.

In addition, we have discovered that biological or chemical reactions sometimes behave differently when implemented on our systems rather than in a standard laboratory environment.

Furthermore, many such reactions take place within the confines of single cells, which have

also demonstrated unexpected behavior when grown and manipulated within microfluidic environments.

As a result, research and development efforts may be required to transfer certain reactions and cell handling techniques to our systems.

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Our success will depend upon their demand for and use of our products.

Accordingly, the spending

policies and practices of these customers—which may additionally be impacted by factors such as the COVID-19 pandemic—could have a significant effect on the demand for our technology.

These policies may be based on a wide variety of factors, including concerns regarding any future federal government budget sequestrations, the availability of resources to make purchases, the spending priorities among various types of equipment, policies regarding spending during recessionary periods, and changes in the political climate.

Accordingly, the spending policies and practices of these customers—which have been impacted by the COVID-19 pandemic and may additionally be impacted by other factors—could have a significant effect on the demand for our technology.

These policies may be based on a wide variety of factors, including concerns regarding any future federal government budget sequestrations, the availability of

resources to make purchases, the spending priorities among various types of equipment, policies regarding spending during recessionary periods, and changes in the political climate.

In addition, academic, governmental, and other research institutions that fund research and development activities may be subject to stringent budgetary constraints that could result in spending reductions, reduced allocations, or budget cutbacks, which could jeopardize the ability of these customers to purchase our products.

Our operating results may fluctuate substantially due to reductions and delays in research and development expenditures by our customers.

For example, reductions in operating expenditures by global academic research facilities, approximately 30% to 40% of which are either closed or working at reduced capacity as of the end of June 2020 because of the COVID-19 pandemic, have resulted in lower than expected sales of our systems, IFCs, assays, and reagents.

For example, reductions in operating expenditures by global academic research facilities because of the COVID-19 pandemic have resulted in lower than expected sales of our mass cytometry instruments.

Similar reductions and delays in customer spending may result from other factors that are not within our control, such as:

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In addition, our business is international in nature, with our sales, service and administrative personnel and our customers located in numerous countries throughout the world.

Operations at our manufacturing facilities and our subcontractors, as well as our other operations and those of our customers, are subject to disruption for a variety of reasons, including work stoppages, acts of war, terrorism, public health crises (including the ongoing COVID-19 pandemic), fire, earthquake, volcanic eruptions, energy

shortages, flooding, or other natural disasters.

Such disruption could cause delays in, among other things, shipments of products to our customers, our ability to perform services requested by our customers, or the installation of our products at customer sites.

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Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.

The volatility of exchange rates

depends on many factors that we cannot forecast with reliable accuracy.

The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

We have experienced and will continue to experience fluctuations in our net income or loss as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.

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We rely on shipping providers to deliver products to our customers globally.

Labor, tariff, or World Trade Organization-related disputes, piracy, physical damage to shipping facilities or equipment caused by severe weather or terrorist incidents, congestion at shipping facilities, complications related to public health crises, inadequate equipment to load, dock, and offload our products, energy-related tie-ups, or other factors could disrupt or delay shipping or off-loading of our products domestically and internationally.

our products, energy-related tie-ups, or other factors could disrupt or delay shipping or off-loading of our products domestically and internationally.

Such disruptions or delays may have an adverse effect on our financial condition and results of operations.

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We cannot guarantee that we will be able to maintain technological advantages over emerging technologies in the future.

While we typically plan improvements to our systems, we may not be able to successfully implement these improvements.

While we typically plan improvements to our

systems, we may not be able to successfully implement these improvements.

If we fail to keep pace with emerging technologies, demand for our systems will not grow and may decline, and our business, revenue, financial condition, and operating results could suffer materially.

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Our research and product development efforts could also be delayed or curtailed if we are unable to attract, train, and retain highly skilled employees, particularly, senior scientists and engineers.

In April 2020, we implemented a temporary, enterprise-wide reduction in salaries as part of our efforts to reduce our operating expenses in response to the COVID-19 pandemic.

As of the date of this filing, all salaries have been restored to prior levels but 2020 merit-based salary increases are on hold pending a clearer view of our projected revenue for 2020.

We cannot predict our employees’ willingness to remain with us if raises are delayed indefinitely or if further salary reductions become necessary.

For example, as part of our cost reduction program to manage the impact of the COVID-19 pandemic, we implemented temporary enterprise-wide salary reductions and delayed implementation of 2020 merit-based salary increases.

Although all salaries have been restored as of the date of this filing, any reinstatement of salary reductions or any other failure to maintain competitive levels of compensation may negatively impact our ability to retain the personnel necessary to achieve our goals.

We do not maintain fixed term employment contracts or significant key person life insurance with any of our employees.

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We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us.

If we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders will likely experience dilution, and if we finance future acquisitions with debt funding, we will incur interest expense and may have to comply with financial covenants and secure that debt obligation with our assets.

If we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders will likely experience

dilution, and if we finance future acquisitions with debt funding, we will incur interest expense and may have to comply with financial covenants and secure that debt obligation with our assets.

Security breaches, loss of data, cyberattacks, and other information technology failures could disrupt our operations, damage our reputation, and adversely affect our business, operations, and financial results.

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Due to the COVID-19 pandemic, we have an increased number of employees working remotely.

As a result, we may have increased cyber security and data security risks, due to increased use of home wi-fi networks and virtual private networks,

as well as increased disbursement of physical machines.

While we implement security controls to reduce the risk of cyberattacks and security breaches, there is no guarantee that these measures will be adequate to safeguard all systems with the increased number of employees working remotely.

As a result, we may have increased cyber security and data security risks, due to increased use of home wi-fi networks and virtual private networks, as well as increased disbursement of physical machines.

While we have implemented security controls to reduce the risk of cyberattacks and security breaches, there is no guarantee that these measures will be adequate to safeguard all systems with the increased number of employees working remotely.

Our efficiency and cost-savings initiatives could be disruptive to our operations and adversely affect our results of operations and financial condition, and we may not realize some or all of the anticipated benefits of these initiatives in the time frame anticipated or at all.

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These actions included implementing temporary enterprise-wide salary reductions of 20% for employees at or above the ‘director’ level and 10% for all others, temporarily reducing our board members’ cash retainers by 20%, and constraining hiring.

As of the date of this filing, we have restored all salaries and board member retainers to prior levels, but 2020 merit-based salary increases have been delayed pending a clearer view of our projected revenue for 2020.

Further actions such as these may be required on an ongoing basis to preserve liquidity and optimize our organization.

For example, we may need to decrease or defer capital expenditures and development activities or implement further operating expense reduction measures.

The implementation of these further efficiency and cost-savings initiatives could impair our ability to invest in developing, marketing and selling new and existing products, be disruptive to our operations, make it difficult to attract or retain employees, result in higher than anticipated charges, divert the attention of management, result in a loss of accumulated knowledge, impact our customer and supplier relationships, and otherwise adversely affect our results of operations and financial condition.

charges, divert the attention of management, result in a loss of accumulated knowledge, impact our customer and supplier relationships, and otherwise adversely affect our results of operations and financial condition.

In addition, our ability to complete our efficiency and cost-savings initiatives and achieve the anticipated benefits within the expected time frame is subject to estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.

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We do not have any contractual supply agreements for these real-time qPCR reagents, and we cannot assure you that these reagents will continue to be available to our customers for use with our systems, or that these patent holders will not seek to enforce their patents against us, our customers, or suppliers.

There can be no assurance that the test we have developed to detect the SARS-CoV-2 virus will be granted Emergency Use Authorization (EUA) by the FDA.

If the FDA does not grant the EUA for our test or if the FDA revokes or terminates the EUA after issuance, such as when the federally -declared public health emergency ends, we will be required to stop commercial distribution of our test immediately unless we can obtain FDA clearance for our test under a traditional regulatory pathway for in vitro diagnostics, which is lengthy and expensive.

Although the FDA granted Emergency Use Authorization (EUA) for our Advanta Dx SARS-CoV-2 RT-PCR Assay in August 2020, this approval is only valid during the COVID-19 pandemic, and when the federally declared public health emergency ends, we will be required to stop commercial distribution of our test immediately unless we can obtain FDA clearance or approval for our test under a traditional regulatory pathway for in vitro diagnostics, which is lengthy and expensive.

Under section 564 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), the FDA has authority to allow certain unapproved medical products or unapproved uses of approved medical products to be used during a public health emergency.

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EUAs issued by the FDA will specify the scope of authorization and conditions of authorization, including limitations on distribution and conditions related to product advertising and promotion.

Once granted, an EUA is effective until the declaration that circumstances exist justifying the authorization of the emergency use is terminated under Section 564(b)(2) of the Act or the EUA is revoked under Section 564(g) of the Act, after which the product must be approved by the FDA under a traditional pathway in order to remain on the market or to continue commercialization of the product.

On June 12, 2020, we announced our submission of an application for an EUA from the FDA for our Advanta™ Dx SARS-CoV-2 RT-PCR assay, an extraction-free saliva-based test to detect the SARS-CoV-2 virus.

We have not yet received an EUA.

The FDA may require additional data, including additional validation data and clinical performance data, and may not ultimately issue an authorization.

Changes in FDA policies, guidance, and requirements for EUA submission may delay FDA authorization of our product.

Further, given the high volume of EUA requests received by the FDA and other factors due to the COVID-19 pandemic, including any disruptions in the FDA’s normal operations, FDA review of our EUA application may be delayed.

We can make no assurance that the FDA will grant an EUA for our product on a timely basis or at all.

If an EUA is granted for our Advanta™ Dx SARS-CoV-2 RT-PCR assay, the distribution and advertising conditions set forth in the EUA may limit our market opportunities or restrict how we can commercialize our product.

If the FDA’s policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of Advanta™ Dx could be adversely impacted.

In addition, the FDA will revoke an EUA where it is determined that the underlying public health emergency no longer exists or warrants such authorization, or if new evidence becomes available that indicates the test is not as safe, effective, or reliable as the data provided in the EUA application.

If granted, we cannot predict how long an EUA f will remain effective.

The termination or revocation of an EUA for our product, if granted, and changing policies and regulatory requirements could adversely impact our business, financial condition and results of operations.

Our letter contract with the National Institutes of Health (NIH) could expose us to unique risks and costs as an entity contracting with the federal government.

Once granted, an EUA is effective until the declaration that circumstances exist justifying the authorization of the emergency use is terminated under Section 564(b)(2) of the Act or the EUA is revoked under Section 564(g) of the Act, after which the product must be cleared or approved by the FDA under a traditional pathway in order to remain on the market or to continue commercialization of the product.

In August 2020, the FDA granted EUA for our Advanta Dx SARS-CoV-2 RT-PCR Assay for qualitative detection of nucleic acid from SARS-CoV-2 in saliva specimens from individuals suspected by their healthcare providers of having COVID-19.

As set forth in the EUA, we are required to comply with the conditions of authorization, including certain requirements pertaining to FDA notification, distribution, printed materials, advertising and promotion.

If we, our distributors, or authorized laboratories do not comply with the EUA requirements, our business, financial condition and results of operations may be adversely impacted, and we may be subject to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, penalties, or fines, among other adverse actions.

If the FDA’s policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of Advanta Dx SARS-CoV-2 RT-PCR could be adversely impacted.

In addition, the FDA will revoke an EUA where it is

determined that the underlying public health emergency no longer exists or warrants such authorization, or if new evidence becomes available that indicates the test does not meet the conditions of authorization or perform as provided in the EUA application.

We cannot predict how long this EUA will remain effective.

The termination or revocation of the EUA and changing policies and regulatory requirements could adversely impact our business, financial condition and results of operations.

Given the uncertain nature of the COVID-19 pandemic and future legislation and regulation in this space, we can provide no assurance with respect to our ability to achieve or sustain profitability on a quarterly or annual basis.

Our contract with the National Institutes of Health (NIH) could expose us to unique risks and costs as an entity contracting with the federal government.

The NIH launched the Rapid Acceleration of Diagnostics (RADx) program to expedite development, commercialization, and implementation of technologies for COVID-19 testing to help increase testing in the United States.

In July 2020, we entered into a letter contract with the NIH for a project under the RADx program.

The letter contract provides access to up to $12.2 million of the total proposed funding for the project prior to execution of a further definitive contract for the project.

Release of the up to $12.2 million of initial funding under the letter contract will be based on the achievement of milestones, including an initial validation assessment followed by deliverables related to the development of our microfluidics technology and expansion of our manufacturing capacity.

The letter contract provided access to approximately $12.2 million of the total proposed funding for the project prior to execution of a further definitive contract for the project.

In September 2020, we executed a definitive contract with the NIH as an amendment to the letter contract (collectively, the NIH Contract) to expand production capacity and throughput capabilities for COVID-19 testing with our microfluidics technology.

Pursuant to the terms of the NIH Contract, the funding for the project was increased by approximately $22.0 million, for a total contract value of up to approximately $34.0 million.

Release of funding under the NIH Contract is based on the achievement of milestones, including expansion of our manufacturing facilities, addition of production lines, and achieving full production capacity.

There is significant competition among RADx projects, which are evaluated by experts on a rolling basis.

Projects with the most potential for success are advanced to the next stage.

There is no assurance that we can meet all the milestones in our letter contract with NIH on a timely basis, if at all.

If we do not meet all the milestones, we will not be able access all $12 million in funding under the letter contract, and may not be able to execute a further definitive contract.

There is no certainty that we can meet all the milestones in our NIH Contract on a timely basis, if at all.

If we do not meet all the milestones, we will not be able access all $34.0 million in funding under the NIH Contract.

We cannot guarantee that we will be able to access all the available funding under the NIH Contract in a timely manner, or at all.

We must prioritize among many different opportunities, and we may expend our limited resources on programs that do not yield a successful or profitable product candidate and may forego other more profitable opportunities.

Further, the Bayh-Dole Act applies to all NIH research and development funding granted to for-profit organizations, which requires the government to be provided a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention throughout the world.

We cannot guarantee that we will be able to access all the available funding under the letter contract in a timely manner, or at all, or execute a further definitive contract with NIH.

Factors that could materially adversely affect our revenue stemming from this letter contract and, if awarded, the further definitive contract include:

Factors that could materially adversely affect our revenue stemming from the NIH Contract include:

• budgetary constraints affecting U.S.

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• changes in U.S.

government or NIH fiscal policies or available funding, including due to Congressional appropriations;

government or NIH fiscal policies or available funding, including due to changes in Congressional appropriations;

• changes in U.S.

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• general economic conditions.

These or other factors could cause NIH to reduce its funding or future activities under this letter contract and, if awarded, the further definitive contract, or to exercise its right to terminate either contract for convenience, either of which could have a material adverse effect on the revenue generated by this contract.

During the contract definitization process, the government may include certain provisions from the Federal Acquisition Regulations (FAR), some of which are customary or legally required, that give the U.S.

These or other factors could cause NIH to reduce its funding or future activities under the NIH Contract, or to exercise its right to terminate the NIH Contract for convenience, either of which could have a material adverse effect on the revenue generated by the NIH Contract.

The NIH Contract includes certain provisions from the Federal Acquisition Regulations (FAR), some of which are customary or legally required, that give the U.S.

government substantial rights and remedies, many of which are not typically found in commercial contracts.

For example, the contracts with NIH will contain provisions permitting unilateral termination or modification, in whole or in part, at the U.S.

government’s convenience.

For example, the NIH Contract contains provisions permitting unilateral termination or modification, in whole or in part, at the convenience of the U.S.

Under general principles of government contracting law, if the U.S.

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In addition, government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions.

These requirements include, for example, mandatory internal control systems and policies, mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements and public disclosures of certain contract information, which may enable competitors to gain insights into our research program.

If we fail to maintain compliance with these requirements, we may be subject to potential contract or False Claims Act liability and to termination of our contracts:

Other examples of rights and remedies likely to be provided to the government under this contract include provisions that allow NIH to:

• terminate the contract, in whole or in part, for any reason or no reason;

• unilaterally reduce or modify the government’s obligations under the contract, without the Company’s consent, including by imposing price adjustments;

• claim rights, including intellectual property rights, in products and data developed under contract;

These requirements

include, for example, mandatory internal control systems and policies, mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements and public disclosures of certain contract information, which may enable competitors to gain insights into our research program.

If we fail to maintain compliance with these requirements, we may be subject to potential contract or False Claims Act liability and to termination of our NIH Contract:

Other examples of rights and remedies under the NIH Contract include provisions that allow NIH to:

• terminate the NIH Contract, in whole or in part, for any reason or no reason;

• unilaterally reduce or modify the government’s obligations under the NIH Contract, without our consent, including by imposing price adjustments;

• claim rights, including intellectual property rights, in or to (i) products, (ii) data, and (iii) facilities, in each case developed under the NIH Contract;

• under certain circumstances involving public health and safety, license inventions made under such agreements to third parties;

• suspend the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

• suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

• impose U.S.

manufacturing requirements for products that embody inventions conceived or first reduced to practice under such contracts;

• suspend or debar the contractor from doing future business with the government;

• claim rights to facilities or to products, including intellectual property, developed under the contract;

• change the course of a development program in a manner that differs from the contract’s original terms or from our desired development plan, including decisions regarding our partners in the program;

manufacturing requirements for products that embody inventions conceived or first reduced to practice under the NIH Contract;

• suspend or debar us from doing future business with the government;

• change the course of a development program in a manner that differs from the NIH Contract’s original terms or from our desired development plan, including decisions regarding our partners in the program;

• pursue civil or criminal remedies under the False Claims Act and False Statements Act;

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Negotiating and entering into such arrangements can be time-consuming and we may not be able to reach agreement with such third parties.

Any such agreement must also be compliant with the terms of our government contract.

Any such agreement must also be compliant with the terms of the NIH Contract.

Any delay or inability to enter into such arrangements or entering into such arrangements in a manner that is non-compliant with the terms of our contract, may result in violations of our contract.

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In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease.

If we elect to label and promote any of our products as medical devices, we would be required to obtain prior approval or clearance by the FDA, which would take significant time and expense and could fail to result in FDA clearance or approval for the intended uses we believe are commercially attractive.

Our products are currently labeled, promoted and sold to academic research institutions, translational research and medicine centers, cancer centers, clinical research laboratories, contract research organizations, and biopharmaceutical, biotechnology, and plant and animal research companies as “research use only” (RUO), and are not designed, or intended to be used, for clinical diagnostic tests or as medical devices as currently marketed.

If we elect to label and promote any of our non-EUA products as medical devices, we would be required to obtain prior approval or clearance by the FDA, which would take significant time and expense and could fail to result in FDA clearance or approval for the intended uses we believe are commercially attractive.

Except for the Advanta Dx SARS-CoV-2 Assay authorized by the FDA under an EUA granted in August 2020, our other products are currently labeled, promoted and sold to academic research institutions, translational research and medicine centers, cancer centers, clinical research laboratories, contract research organizations, and biopharmaceutical, biotechnology, and plant and animal research companies as “research use only” (RUO), and are not designed, or intended to be used, for clinical diagnostic tests or as medical devices as currently marketed.

If we elect to label and market our products for use as, or in the performance of, clinical diagnostics in the United States, thereby subjecting them to FDA regulation as medical devices, we would be required to obtain premarket 510(k) clearance or premarket approval from the FDA, unless an exception applies.

We may in the future register with the FDA as a medical device manufacturer and list some of our products with the FDA pursuant to an FDA Class I listing for general purpose laboratory equipment.

While this regulatory classification is exempt from certain FDA requirements, such as the need to submit a premarket notification commonly known as a 510(k), and some of the requirements of the FDA’s Quality System Regulations (QSRs), we would be subject to ongoing FDA “general controls,” which include compliance with FDA regulations for labeling, inspections by the FDA, complaint evaluation, corrections and removals reporting, promotional restrictions, reporting adverse events or malfunctions for our products, and general prohibitions against misbranding and adulteration.

We are currently registered with the FDA as a medical device manufacturer, with the reagents for the Advanta Dx SARS-CoV-2 Assay listed as our sole medical device product.

As noted in the issued EUA for the Advanta Dx SARS-CoV-2 Assay, the FDA has waived certain quality system requirements under 21 CFR Part 820 for the duration of the EUA.

We may in the future list some of our other products with the FDA pursuant to an FDA Class I listing for general purpose laboratory equipment if we pursue clinical applications for such equipment.

While this regulatory classification is generally exempt from

certain FDA requirements, such as the need to submit a premarket notification commonly known as a 510(k), and some of the requirements of the FDA’s Quality System Regulations (QSRs), we would be subject to ongoing FDA “general controls,” which include compliance with FDA regulations for labeling, inspections by the FDA, complaint evaluation, corrections and removals reporting, promotional restrictions, reporting adverse events or malfunctions for our products, and general prohibitions against misbranding and adulteration.

If we do not comply with all the requirements of the EUA or the normal regulatory requirements for any of our medical device products, including additional regulatory requirements that would apply to the Advanta Dx SARS-CoV-2 Assay after the expiration or termination of the EUA, we may be subject to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, penalties, or fines, among other adverse actions, any of which may adversely impact our business, financial condition and results of operations.

Compliance with additional or changing regulatory requirements can be time-consuming and costly.

In addition, we may in the future submit 510(k) premarket notifications to the FDA to obtain FDA clearance of certain of our products on a selected basis.

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Sales of such products outside the United States will likely be subject to foreign regulatory requirements, which can vary greatly from country to country.

As a result, the time required to obtain clearances or approvals outside the United States may differ from that required to obtain FDA clearance or approval and we may not be able to obtain foreign

regulatory approvals on a timely basis or at all.

In Europe, we would need to comply with the new Medical Device Regulation 2017/745 and In Vitro Diagnostic Regulation 2017/746, which became effective May 26, 2017, with application dates of May 26, 2021 (postponed from 2020) and May 26, 2022 respectively.

As a result, the time required to obtain clearances or approvals outside the United States may differ from that required to obtain FDA clearance or approval and we may not be able to obtain foreign regulatory approvals on a timely basis or at all.

In Europe, we need to comply with the In Vitro Diagnostic Directive 98/79/EC and transition to the In Vitro Diagnostic Regulation 2017/746, which became effective May 26, 2017, with an application date of May 26, 2022.

This will increase the difficulty of regulatory approvals in Europe in the future.

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In January 2017, the FDA announced that it would not issue final guidance on the oversight of LDTs and manufacturers of products used for LDTs, but would seek further public discussion on an appropriate oversight approach, and give Congress an opportunity to develop a legislative solution.

More recently, the FDA has issued warning letters to certain genomics labs for illegally marketing genetic tests that claim to predict patients’ responses to specific medications, noting that the FDA has not created a legal “carve-out” for LDTs and retains discretion to take action when appropriate, such as when certain genomic tests raise significant public health concerns.

More recently, the FDA has issued warning letters to certain genomics labs for illegally marketing genetic

tests that claim to predict patients’ responses to specific medications, noting that the FDA has not created a legal “carve-out” for LDTs and retains discretion to take action when appropriate, such as when certain genomic tests raise significant public health concerns.

As manufacturers develop more complex genetic tests and diagnostic software, the FDA may increase its regulation of LDTs.

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These circumstances may include written or verbal sales and marketing claims or links to articles regarding a product’s performance in clinical applications and a manufacturer’s provision of technical support for clinical applications.

Recently, as part of the Trump Administration’s efforts to combat COVID-19 and consistent with the President’s direction in Executive Orders 13771 and 13924, the Department of Health and Human Services (HHS) announced rescission of guidances and other informal issuances of the FDA regarding premarket review of LDTs absent notice-and-comment rulemaking, stating that, absent notice-and-comment rulemaking, those seeking approval or clearance of, or an emergency use authorization, for an LDT may nonetheless voluntarily submit a premarket approval application, premarket notification or an EUA request, respectively, but are not required to do so.

However, laboratories opting to use LDTs without FDA premarket review or authorization would not be eligible for liability protection under the Public Readiness and Emergency Preparedness Act, or the PREP Act.

Following this HHS announcement, the FDA announced in October 2020 that it will no longer review EUA requests for COVID-19 LDTs at this time and will continue to prioritize review of EUA requests for point-of-care tests, home collection tests, at-home tests, tests that reduce reliance on test supplies, and high-throughput tests that are widely distributed.

While these actions by HHS and the FDA are expected to reduce the regulatory burden on clinical laboratories certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) that develop LDTs, it is unclear how this action as well as future legislation by federal and state governments and FDA regulation will impact the industry, including our business and that of our customers.

Such measures may compel the FDA to formalize earlier enforcement discretionary policies and informal guidances through notice-and-comment rulemaking.

HHS’s rescission policy and the FDA’s position with respect to EUAs in the short-term or LDTs in general in the long-term may also change over time.

Congress could also enact legislation restricting LDTs.

Any restrictions on LDTs by the FDA, HHS, Congress, or state regulatory authorities may decrease the demand for our products.

The adoption of new restrictions on RUOs, whether by the FDA or Congress, could adversely affect demand for our specialized reagents and instruments.

Further, we could be required to obtain premarket clearance or approval from the FDA before we can sell our products to certain customers.

If the FDA determines our products or related applications should be subject to additional regulation as in vitro diagnostic devices based upon customers’ use of our products for clinical diagnostic or therapeutic purposes, our ability to market and sell our products could be impeded and our business, prospects, results of operations and financial condition may be adversely affected.

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To comply with applicable regulations, we have and will continue to incur significant expense and allocate valuable internal resources to manage compliance-related issues.

In addition, such regulations could restrict our ability to expand or equip our facilities, or could require us to acquire costly equipment or to incur

other significant expenses to comply with the regulations.

In addition, such regulations could restrict our ability to expand or equip our facilities, or could require us to acquire costly equipment or to incur other significant expenses to comply with the regulations.

For example, the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (RoHS) and the Waste Electrical and Electronic Equipment Directive (WEEE), both enacted in the European Union, regulate the use of certain hazardous substances in, and require the collection, reuse, and recycling of waste from, products we manufacture.

Certain of our products sold in these countries are subject to WEEE and RoHS.

These and similar regulations that have been or are in the process of being enacted in other countries may require us to redesign our products, use different types of materials in certain components, or source alternative components to ensure compliance with applicable standards, and may reduce the availability of parts and components used in our products by negatively impacting our suppliers’ ability to source parts and components in a timely and cost-effective manner.

These and similar regulations that have been or are in the process of being enacted in other countries may

require us to redesign our products, use different types of materials in certain components, or source alternative components to ensure compliance with applicable standards, and may reduce the availability of parts and components used in our products by negatively impacting our suppliers’ ability to source parts and components in a timely and cost-effective manner.

The Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation (EC) No.

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Impairment of our goodwill or other intangible assets could materially and adversely affect our business, operating results, and financial condition.

As of June 30, 2020, we had approximately $154.4 million of goodwill and net intangible assets, including approximately $106.3 million of goodwill and $48.1 million of net intangible assets.

As of September 30, 2020, we had approximately $151.5 million of goodwill and net intangible assets, including approximately $106.5 million of goodwill and $45.2 million of net intangible assets.

These assets represent a significant portion of the assets recorded on our consolidated balance sheet and relate primarily to our acquisition of DVS Sciences, Inc.

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Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge include declines in our stock price or market capitalization, declines in our market share or revenues, an increase in our losses, rapid changes in technology, failure to achieve the benefits of capacity increases and utilization, significant litigation arising out of an acquisition, or other matters.

In particular, these or other adverse events or changes in circumstances may affect the estimated

undiscounted future operating cash flows expected to be derived from our goodwill and intangible assets.

In particular, these or other adverse events or changes in circumstances may affect the estimated undiscounted future operating cash flows expected to be derived from our goodwill and intangible assets.

Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.

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The ongoing COVID-19 pandemic has led to significant disruption and volatility in the global capital markets, increasing the cost of—and adversely impacting access to—capital.

We have an Open Market Sale Agreement (Sale Agreement) with Jefferies LLC (Jefferies) to sell shares of our common stock having aggregate sales proceeds of up to $50,000,000, from time to time, through an “at the market” (ATM) equity offering program under which Jefferies will act as sales agent.

As of the date of this report, there had been no shares of common stock sold under the Sale Agreement.

We have a Sale Agreement with Jefferies to sell shares of our common stock having aggregate sales proceeds of up to $50,000,000, from time to time, through an ATM equity offering program under which Jefferies acts as sales agent.

During the third quarter of 2020, we sold approximately 2.5 million shares of our common stock pursuant to the Sale Agreement, for aggregate gross proceeds of $20.9 million.

Our net proceeds were approximately $20.1 million, after deducting related expenses, including commissions of approximately $0.6 million and issuance costs of approximately $0.2 million.

If we raise additional funds by issuing equity securities, either under the ATM program or otherwise, our stockholders may experience dilution.

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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.

have or are unable to raise adequate funds, we may have to liquidate some or all of our assets, delay development or commercialization of our products, or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize.

If we do not have or are unable to raise adequate funds, we may have to liquidate some or all of our assets, delay development or commercialization of our products, or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize.

We also may have to reduce marketing, customer support, research and development, or other resources devoted to our products, or cease operations.

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debt and exposure risks on other sovereign debts, decreased consumer confidence, lower economic growth, volatile energy costs, increased unemployment rates, and uncertainty about economic stability.

Geopolitical events including the COVID-19 pandemic, the United States government’s adoption and expansion of trade restrictions, and the United Kingdom’s withdrawal from the European Union have caused significant economic, market, political and regulatory uncertainty in some of our markets.

Geopolitical events including

the COVID-19 pandemic, the United States government’s adoption and expansion of trade restrictions, and the United Kingdom’s withdrawal from the European Union have caused significant economic, market, political and regulatory uncertainty in some of our markets.

Volatility and disruption of financial markets could limit our customers’ ability to obtain adequate financing or credit to purchase and pay for our products in a timely manner or to maintain operations, which could result in a decrease in sales volume that could harm our results of operations.

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In addition, as part of our cost reduction program to manage the impact of the COVID-19 pandemic, we implemented temporary enterprise-wide salary reductions, including with respect to our sales and marketing employees.

Although all salaries have been restored to prior levels as of the date of this filing, 2020 merit-based salary increases have been delayed pending a clearer view of our projected revenue for 2020.

Any reinstatement of salary reductions or failure to implement salary increases may negatively impact our ability to maintain the skilled sales and marketing force necessary to support our business activities.

Although all salaries have been restored to prior levels as of the date of this filing, any reinstatement of salary reductions or any other failure to maintain competitive levels of compensation may negatively impact our ability to maintain the skilled sales and marketing force necessary to support our business activities.

As a result, our future success will depend largely on our ability to retain and motivate such personnel.

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If we decide to implement a company-wide ERP system, our business and results of operations could be adversely affected if we experience operating problems and/or cost overruns during the ERP implementation process, or if the ERP system and the associated process changes do not give rise to the benefits that we expect.

If we do not effectively implement the ERP system as planned

or if the system does not operate as intended, our business, results of operations, and internal controls over financial reporting could be adversely affected.

If we do not effectively implement the ERP system as planned or if the system does not operate as intended, our business, results of operations, and internal controls over financial reporting could be adversely affected.

Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position and results of operations.

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We have significant outstanding convertible debt.

As of June 30, 2020, we had outstanding $1.1 million aggregate principal amount of our 2.75% Senior Convertible Notes due 2034 (2014 Notes) and $55.0 million aggregate principal amount of our 5.25% convertible senior notes due 2024 (2019 Notes).

As of September 30, 2020, we had outstanding $1.1 million aggregate principal amount of our 2.75% Senior Convertible Notes due 2034 (2014 Notes) and $55.0 million aggregate principal amount of our 5.25% convertible senior notes due 2024 (2019 Notes).

The 2014 Notes will mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2014 Notes.

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We may be involved in lawsuits to protect or enforce our patents and proprietary rights, to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party claims of intellectual property infringement, any of which could be time-intensive and costly and may adversely impact our business or stock price.

Litigation may be necessary for us to enforce our patent and proprietary rights, determine the scope, coverage, and validity of others’ proprietary rights, and/or defend against third-party claims of intellectual property infringement against us as well as against our suppliers, distributors, customers, and other entities with whom we do business.

Litigation could result in substantial legal fees and could adversely affect the scope of our patent protection.

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Even if such licenses are obtainable, they may not be available at a reasonable cost.

We could therefore incur

substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our product margins or financial position.

We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our product margins or financial position.

Further, we could encounter delays in product introductions, or interruptions in product sales, as we develop alternative methods or products.

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We expect the ruling will result in additional litigation in our industry.

In addition, third parties may assert that we are employing their proprietary technology without authorization, and if they are successful in making such claims, we may be forced to enter into license agreements, pay additional royalties or license fees, or enter into settlements that include monetary obligations or restrictions on our business.

In addition, third parties may assert that we are employing their proprietary technology without authorization, and if they are successful in making such claims, we may be forced to enter into

license agreements, pay additional royalties or license fees, or enter into settlements that include monetary obligations or restrictions on our business.

Our customers have been sued for various claims of intellectual property infringement in the past, and we expect that our customers will be involved in additional litigation in the future.

In particular, our customers may become subject to lawsuits claiming that their use of our products infringes third-party patent rights, and we could become subject to claims that we contributed to or induced our customer’s infringement.

In addition, our agreements with some of our suppliers, distributors, customers, and other entities with whom we do business may require us to defend or indemnify these parties to the extent they become involved in infringement claims against us, including the claims described above.

In addition, our agreements with some of our suppliers, distributors, customers, and other entities with which we do business may require us to defend or indemnify these parties to the extent they become involved in infringement claims against us, including the claims described above.

We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships.

If we are required or agree to defend or indemnify any of these third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, operating results, or financial condition.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers or other institutions or third parties with whom such employees may have been previously affiliated.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers or other institutions or third parties with which such employees may have been previously affiliated.

Many of our employees were previously employed at universities or other life science or plant and animal research companies, including our competitors or potential competitors.

In the future, we may become subject to claims that our employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or other third parties or institutions with whom our employees may have been previously affiliated.

In the future, we may become subject to claims that our employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or other third parties or institutions with which our employees may have been previously affiliated.

Litigation may be necessary to defend against these claims.

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If such an attempt were successful and the license is terminated, we might be barred from marketing, producing, and selling some or all of our products, which would have an adverse effect on our business.

Potential disputes between us and one of our existing licensors concerning the terms or conditions of the applicable license agreement could result, among other risks, in substantial management distraction;

disputes between us and one of our existing licensors concerning the terms or conditions of the applicable license agreement could result, among other risks, in substantial management distraction;

increased expenses associated with litigation or efforts to resolve disputes;

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The intellectual property developed through these projects is subject to rights and restrictions in favor of government agencies and Canadians generally.

In most cases the government agency retains the right to use intellectual property developed

through the project for non-commercial purposes and to publish the results of research conducted in connection with the project.

In most cases the government agency retains the right to use intellectual property developed through the project for non-commercial purposes and to publish the results of research conducted in connection with the project.

This may increase the risk of public disclosure of information relating to our intellectual property, including confidential information, and may reduce its competitive advantage in commercializing intellectual property developed through these projects.

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One of our Canadian government funded projects is also subject to certain limited “march-in” rights in favor of the government of the Province of Ontario, under which we may be required to grant a license to our intellectual property, including background intellectual property developed outside the scope of the project, to a responsible applicant on reasonable terms in circumstances where the government determines that such a license is necessary in order to alleviate emergency or extraordinary health or safety needs or for public use.

In addition, we must provide reasonable assistance to the government in obtaining similar licenses from third parties required in connection with the use of its intellectual property.

In addition, we must provide reasonable assistance to the government in obtaining similar licenses from third

parties required in connection with the use of its intellectual property.

Instances in which the government of the Province of Ontario has exercised similar “march-in” rights are rare;

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In several recent situations where the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock.

If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.

As discussed in the “Legal Proceedings” section of this Quarterly Report on Form 10-Q, a class action securities lawsuit against us is currently pending.

While we are continuing to defend such action vigorously, the defense of this action and any additional actions can be costly, divert the time and attention of our management, and harm our operating results, and any judgment against us or any future stockholder litigation could result in substantial costs.

Future sales of our common stock in the public market could cause our stock price to fall.

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We will have broad discretion to use the net proceeds to us from our ATM equity offering program, and investors will be relying solely on the judgment of our board of directors and management regarding the application of these proceeds.

Although we expect to use the net proceeds from our ATM equity offering program for general corporate purposes, we have not allocated these net proceeds for specific purposes.

Investors will not have the opportunity, as part of their investment decision, to assess whether the proceeds are being used appropriately.

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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

In addition, because we are incorporated in Delaware, we are governed by the provisions of

Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

We have never paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

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Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosures

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