What changed in this filing

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Item 1A. Risk Factors

2022-05-09 compared with 2021-11-09 · 163 added, 107 removed, 796 unchanged (25% of the section changed)

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• If our research and product development efforts do not result in commercially viable products within anticipated timelines, if at all, our business and results of operations will be adversely affected.

• Market opportunities may not develop as quickly as we expect, limiting our ability to successfully sell our products.

• Our future success is dependent upon our ability to expand our customer base and introduce new applications.

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

• We may not be able to develop new products or enhance the capabilities of our existing systems.

• Our business growth strategy involves the potential for significant acquisitions.

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• Our business depends on research and development spending levels of our customers.

• If one or more of our manufacturing facilities become unavailable or inoperable, we will be unable to continue manufacturing our instruments, IFCs, assays and/or reagents.

• Disruption of our manufacturing facilities or other operations, or in the operations of our customers or business partners, could result in cancellation of orders, delays in deliveries or other business activities, or loss of customers.

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• Any disruption or delay in the shipping or off-loading of our products may have an adverse effect on our financial condition and results of operations.

• We may not be able to convert our orders in backlog into revenue.

• Our business operations depend upon the continuing efforts of our management team and other key employees.

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• Our products could have defects or errors.

• Although the FDA granted Emergency Use Authorization (EUA) for our Advanta Dx SARS-CoV-2 RT-PCR Assay in August 2020 and for the AZOVA COVID-19 Test Collection Kit in February 2021, these authorizations are only valid during the COVID-19 public health emergency.

• Our contract with the National Institutes of Health (NIH) could expose us to risks and costs.

• Although the FDA granted Emergency Use Authorization (EUA) for our Advanta Dx SARS-CoV-2 RT-PCR Assay in August 2020 and an update to our EUA for use of the AZOVA COVID-19 Test Collection Kit in February 2021, among other updates, these authorizations are only valid during the COVID-19 public health emergency.

• To the extent 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 or comparable foreign regulatory authority.

• Our products could become subject to regulation as medical devices by the FDA or other regulatory agencies.

• Compliance or the failure to comply with current and future regulations affecting our products and business operations worldwide could cause us significant expense and adversely impact our business.

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• We may not realize the value of our goodwill or other intangible assets.

• If we fail to comply with the covenants and other obligations under our Credit Facility, the lenders may be able to accelerate amounts owed under the facilities and may foreclose upon the assets securing our obligations.

• If we fail to comply with the covenants and other obligations under our debt facilities, the lenders may be able to accelerate amounts owed under the facilities and, in the case of our Credit Facility (as defined herein), may foreclose upon the assets securing our obligations.

• We are subject to risks related to taxation in multiple jurisdictions.

• Changes in accounting principles, or interpretations thereof, could impact our financial position and results of operations.

• We have a significant amount of outstanding indebtedness.

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

• We will have broad discretion over the use of the proceeds to us from our ATM equity offering program.

• If securities or industry analysts publish unfavorable research about us or cease to cover our business, our stock price and/or trading volume could decline.

• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult.

• The forum selection provision in our bylaws could limit the ability of our stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or other employees.

• Any conversions of our 2014 Notes or 2019 Notes will dilute the ownership interest of our existing stockholders.

Risks Related to our Capital Structure

• The Purchasers own a significant portion of our total outstanding voting securities and may prevent other stockholders from influencing material corporate decisions.

• The market value of our Common Stock could decline if the holders of our Series B Preferred Stock sell their shares when transfer restrictions expire.

• The holders of Series B-1 Preferred Stock and Series B-2 Preferred Stock may exercise influence over us, including through their ability to each designate a member of our board of directors.

RISKS RELATED TO OUR BUSINESS, INDUSTRY, AND STRATEGY

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However, as vaccines and alternative testing options for the coronavirus have become available and the perceived threat of the pandemic has receded, the demand for our COVID-19 testing products has slowed, resulting in a corresponding decline in related revenue.

As a result of these trends, we have lowered our revenue expectations for COVID-19 testing products in 2021.

In the third quarter of 2021, factors such as supply chain constraints, China trade restrictions, and the ongoing slowdown in the Asia-Pacific region caused our overall revenues to decline more than expected.

As a result, we are considering the implementation of various cost control initiatives, and we may be required to draw on our $15.0 million revolving senior credit facility (Revolving Credit Facility) or raise additional financing to support our investment priorities.

Additional details concerning these risks are provided in the risk factors below, including under “ Our efficiency and cost-savings initiatives could be disruptive to our operations and adversely affect our results of operations and financial condition ,” and “ Our future capital needs are uncertain and we may need to raise additional funds in the future, which may cause dilution to stockholders or may be upon terms that are not favorable to us.

In 2021, factors such as supply chain constraints, China trade restrictions, and the ongoing slowdown in the Asia-Pacific region caused our overall revenues to decline more than expected.

The extent to which the COVID-19 pandemic will continue to impact our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the continued spread and resurgences of the coronavirus;

the emergence of new strains of the disease, such as the Delta variant;

the emergence of new strains of the disease, such as the Delta and Omicron variants;

the availability, efficacy, and acceptance of COVID-19 vaccines;

the scope and duration of the public health emergency;

and COVID-19 mitigation measures such as travel bans and restrictions, social distancing, quarantines, and business shutdowns and closures.

and COVID-19 mitigation measures such as travel bans and restrictions, social

distancing, quarantines, and business shutdowns and closures.

Additionally, in response to rising COVID-19 infections in 2022, China has imposed lockdowns in certain parts of the country, which have and continue to negatively impact manufacturing and/or supply chains, as well as demand for our products.

Because the severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain, we are unable to predict the impact of COVID-19 on our operations, our financial performance, and our ability to successfully execute our business strategies and initiatives.

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We may experience substantial variability in our product mix from period-to-period as revenue from sales of our instruments relative to sales of our consumables may fluctuate or deviate significantly from expectations.

Our revenue increased year-over-year in 2019 compared to 2018, and again in 2020 compared to 2019, but we may not be able to achieve similar revenue growth in future periods.

Although our revenue increased year-over-year in 2020 compared to 2019 and in 2019 compared to 2018, we experienced a year-over-year decline in revenue in 2021 compared to 2020, and we may be similarly unable to achieve revenue growth in future periods.

Variability in our quarterly or annual results of operations, mix of product revenue, including any decline in our revenue related to the COVID-19 pandemic, or variability in rates of revenue growth, if any, may lead to volatility in our stock price as research analysts and investors respond to these fluctuations.

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Other unknown or unpredictable factors also could harm our results.

In addition, inflationary pressure, including as a result of supply shortages, could adversely impact our financial results.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

We may not fully offset these cost increases by raising prices for our products and services, which could result in downward pressure on our margins.

Further, our customers may choose to reduce their business with us if we increase our pricing.

The foregoing factors, as well as other factors, could materially and adversely affect our quarterly and annual results of operations and rates of revenue growth, if any.

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We have incurred significant losses in each fiscal year since our inception, including net losses of $59.2 million, $53.0 million , and $64.8 million during the years 2021, 2020, and 2019, respectively.

As of September 30, 2021, we had an accumulated deficit of $726.6 million.

As of March 31, 2022, we had an accumulated deficit of $812.3 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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Until we are able to generate additional revenue to support our level of operating expenses, we will continue to incur operating and net losses and negative cash flow from operations.

In addition, inflationary pressure, including as a result of supply shortages, could adversely impact our financial results.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

We may not fully offset these cost increases by raising prices for our products and services, which could result in downward pressure on our margins.

Further, our customers may choose to reduce their business with us if we increase our pricing.

We believe that our continued investment in research and development, sales, and marketing is essential to our long-term competitive position and future revenue growth and, as a result, we may incur operating losses for the foreseeable future and may never achieve profitability.

Market opportunities may not develop as quickly as we expect, limiting our ability to successfully sell our products, or our product development and strategic plans may change and our entry into certain markets may be delayed, if it occurs at all.

The application of our technologies to high-throughput genomics, single-cell genomics and, particularly, mass cytometry applications are in many cases emerging market opportunities.

We believe these opportunities will take several years to develop or mature and we cannot be certain that these market opportunities will develop as we expect.

The future growth of our markets and the success of our products depend on many factors beyond our control, including recognition and acceptance by the scientific community, and the growth, prevalence, and costs of competing methods of genetic and protein analysis.

Additionally, our success depends on the ability of our sales organization to successfully sell our products into these new markets.

If we are not able to successfully market and sell our products, or to achieve the revenue or margins we expect, our operating results may be harmed and we may not recover our product development and marketing expenditures.

In addition, our product development and strategic plans may change, which could delay or impede our entry into these markets.

The life science markets are highly competitive and subject to rapid technological change, and we may not be able to successfully compete.

The markets for our products are characterized by rapidly changing technology, evolving industry standards, changes in customer needs, emerging competition, new product introductions, and strong price competition.

We compete with both established and development stage life science research companies that design, manufacture, and market instruments and consumables for gene expression analysis, single-cell targeted gene expression and protein expression analysis, SNP genotyping, quantitative polymerase chain reaction (qPCR), digital PCR, flow cytometry, cell imaging, and additional applications using well established laboratory techniques, as well as newer technologies such as bead encoded arrays, microfluidics, next-generation DNA sequencing (NGS), microdroplets, spatial protein expression, and photolithographic arrays.

We compete with both established and development stage life science research companies that design, manufacture, and market instruments and

consumables for gene expression analysis, single-cell targeted gene expression and protein expression analysis, SNP genotyping, quantitative polymerase chain reaction (qPCR), digital PCR, flow cytometry, tissue imaging, and additional applications using well established laboratory techniques, as well as newer technologies such as bead encoded arrays, microfluidics, next-generation DNA sequencing (NGS), microdroplets, spatial protein expression, and photolithographic arrays.

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.

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are our principal competitors for our Imaging Mass Cytometry™ market share.

While the aforementioned principal competitors are the largest

and most prevalent in their representative technology areas, the combined markets in which we compete have an additional 10 to 20 smaller competitors with competing approaches and technologies that we routinely face in selling situations.

While the aforementioned principal competitors are the largest and most prevalent in their representative technology areas, the combined markets in which we compete have an additional 10 to 20 smaller competitors with competing approaches and technologies that we routinely face in selling situations.

Competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements.

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Any delay or failure by us to develop and release new products or product enhancements would have a substantial adverse effect on our business and results of operations.

The application of our technologies to high-throughput genomics, single-cell genomics and, particularly, mass cytometry applications are in many cases emerging market opportunities.

We believe these opportunities will take several years to develop or mature and we cannot be certain that these market opportunities will develop as we expect.

Additionally, our success depends on the ability of our sales organization to successfully sell our products into these new markets.

In addition, our product development and strategic plans may change, which could delay or impede our entry into these markets.

Our future success is dependent upon our ability to expand our customer base and introduce new applications.

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Most of our potential customers already use expensive research systems in their laboratories and may be reluctant to replace those systems.

Market acceptance of our systems will depend on many factors, including our ability to

convince potential customers that our systems are an attractive alternative to existing technologies.

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

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

Compared to some

competing technologies, our technology is relatively new, and most potential customers have limited knowledge of, or experience with, our products.

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

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In 2020, in response to the uncertainty arising from the COVID-19 pandemic, we initiated a range of additional actions aimed at temporarily reducing our operating expenses and preserving liquidity, including 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.

Although we discontinued our hiring constraints and pandemic-related pay reductions in 2020, we are currently reviewing other possible actions to preserve liquidity and optimize our organization.

Although we discontinued our hiring constraints and pandemic-related pay reductions in 2020, we regularly review other possible actions 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.

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ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities that can continue for several years.

ERP implementations also

require transformation of business and financial processes in order to reap the benefits of the ERP system.

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.

ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system.

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.

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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.

Additionally, the imposition of tariffs and unavailability of VAT and import tax exemptions have adversely affected the sales of our products in China.

Additionally, the imposition of tariffs and delays in issuing VAT and import tax exemptions have adversely affected the sales of our products in China.

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

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In the past, we have encountered quality issues that have reduced our manufacturing yield or required the use of additional manufacturing processes.

• The electron multiplier detector included in the Hyperion/Helios systems and certain metal isotopes used with the Hyperion/Helios systems are purchased from sole source suppliers.

• The electron multiplier detector included in the Hyperion/CyTOF systems and certain metal isotopes used with the Hyperion/CyTOF systems are purchased from sole source suppliers.

• The raw materials for our Delta Gene and SNP Type assays and Access Array target-specific primers are available from a limited number of sources.

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• we may not be able to obtain adequate supply or services in a timely manner or on commercially reasonable terms.

In connection with the global supply chain disruptions following the onset of the COVID-19 pandemic, we have been experiencing problems with some of our suppliers.

In connection with the global supply chain disruptions following the onset of the COVID-19 pandemic, we have experienced and are continuing to experience problems with some of our suppliers.

In the third quarter of 2021, shortages of certain components caused a backlog and we were unable to fulfill all of the demand for our products during the quarter.

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Any continued or future interruption or delay in the supply of components or materials or assembly of our instruments, or our inability to obtain components, materials, or assembly services from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products, which would harm our business.

response to rising COVID-19 infections, China has imposed lockdowns in certain parts of the country, which may negatively impact manufacturing and/or supply chains.

We may not be able to convert our orders in backlog into revenue.

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Competition for qualified senior management and key employees in our industry is intense.

This competition has become exacerbated by the increase in employee resignations currently taking place throughout the United States as a result of the COVID-19 pandemic.

The loss of qualified employees, or an inability to attract, retain, and motivate employees could prevent us from pursuing collaborations and materially and adversely affect our support of existing products, product development and introductions, business growth prospects, results of operations and financial condition.

We have experienced increased turnover at all levels since the start of the COVID-19 pandemic and general labor shortages in various areas of our business, all of which could have a material adverse impact on our business.

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We do not maintain significant key person life insurance with any of our employees and all our employees, including our management team, may terminate employment without notice and without cause or good reason.

Additionally, to expand our research and product development efforts, we need to retain and recruit scientists skilled in areas such as molecular and cellular biology, assay development, and manufacturing.

We also need highly trained technical support personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively support potential new customers and the expanding needs of current customers.

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If our sales and marketing efforts, or those of any third-party sales representatives and distributors, are not successful, our technologies and products may not gain market acceptance, which would materially and adversely impact our business operations.

To use our products—our Biomark, EP1, Helios/CyTOF 2, and Hyperion systems in particular—customers typically need to purchase specialized reagents.

To use our products—our Biomark, EP1, CyTOF, and Hyperion systems in particular—customers typically need to purchase specialized reagents.

Any interruption in the availability of these reagents for use in our products could limit our ability to market our products.

Our products, our Biomark, EP1, Helios, and Hyperion systems in particular, must be used in conjunction with one or more reagents designed to produce or facilitate the particular biological or chemical reaction desired by the user.

Our products, our Biomark, EP1, CyTOF, and Hyperion systems in particular, must be used in conjunction with one or more reagents designed to produce or facilitate the particular biological or chemical reaction desired by the user.

Many of these reagents are highly specialized and available to the user only from a single supplier or a limited number of suppliers.

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We are dependent upon our data and information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business and third-party businesses.

Our information technology systems may be damaged, disrupted or shut down due to attacks by experienced programmers or hackers who may be able to penetrate our security controls and deploy computer viruses, cyberattacks, phishing schemes, or other malicious software programs, or due to employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and our system redundancy and other disaster recovery planning may be ineffective or inadequate in preventing or responding to any of these circumstances.

failures, catastrophes or other unforeseen events, and our system redundancy and other disaster recovery planning may be ineffective or inadequate in preventing or responding to any of these circumstances.

Any such compromise of our information technology systems could result in the unauthorized publication of our confidential business or proprietary information and unauthorized release of customer, supplier or employee data, any of which could expose us to a risk of legal claims or proceedings, liability under privacy or other laws, disruption of our operations and damage to our reputation, which could divert our management’s attention from the operation of our business and materially and adversely affect our business, revenues and competitive position.

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The occurrence of any one or more of the foregoing could negatively affect our business, financial condition, and results of operations.

Although the FDA granted Emergency Use Authorization (EUA) for our Advanta Dx SARS-CoV-2 RT-PCR Assay in August 2020 and for the AZOVA COVID-19 Test Collection Kit in February 2021, these authorizations are only valid during the COVID-19 public health emergency, and when the federally declared public health emergency ends, we will be required to stop commercial distribution of our assay and the collection kit immediately in the United States unless we comply with FDA requirements, which may include obtaining FDA clearance or approval for our assay 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 (which was updated for use with the AZOVA COVID-19 Test Collection Kit in February 2021, among other updates) and our Advanta Dx COVID-19 EASE Assay in February 2022, these authorizations are only valid during the COVID-19 public health emergency, and when the federally declared public health emergency ends, we will be required to stop commercial distribution of our assay and the collection kit immediately in the United States unless we comply with FDA requirements, which may include obtaining FDA clearance or approval for our assay 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 under an EUA.

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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 FD&C Act or the EUA is revoked under Section 564(g) of the FD&C Act, after which the product must be cleared or approved by the FDA under a traditional pathway as defined by the FDA and we must comply with the FDA quality system regulations in order to remain on the market or to continue commercialization of the product.

approved by the FDA under a traditional pathway as defined by the FDA and we must comply with the FDA quality system regulations 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, with the use of the assay limited to CLIA high complexity laboratories.

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S001 for addition of the FDA Reference Panel Results, S002 for software updates and labeling changes, S003 for addition of alternative source of targets and labeling updates, and S004 for addition of AZOVA home collection kit.

In February 2021, the FDA granted EUA for the AZOVA COVID-19 Test Collection Kit, which is authorized for self-collection of saliva specimens at home, for use with the Advanta Dx SARS-CoV-2 RT-PCR Assay.

In February 2021, the FDA updated that EUA for our Advanta Dx SARS-CoV-2 RT-PCR Assay for use with the AZOVA COVID-19 Test Collection Kit, which is authorized for self-collection of saliva specimens at home.

In February 2022, we were granted EUA for our the Advanta Dx COVID-19 EASE Assay, which is authorized for the qualitative detection of nucleic acid from SARS-CoV-2 in nasopharyngeal swab, oropharyngeal swab, mid-turbinate nasal swab, and anterior nasal swab specimens from individuals suspected of COVID-19 by their healthcare provider.

As set forth in each 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 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 recall of our products and 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 and the AZOVA COVID-19 Test Collection Kit could be adversely impacted.

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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.

The healthcare industry is highly regulated and if we fail to comply with applicable healthcare laws and regulations, we could suffer fines and penalties or be required to make significant changes to our operations which could have a significant adverse effect on the results of our business operations.

We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as healthcare fraud and abuse, data privacy and medical product laws and regulations.

The healthcare industry is subject to extensive and frequently changing international and United States federal, state and local laws and regulations.

In addition, federal and state enforcement agencies have substantial powers and remedies to pursue suspected violations under broad laws and regulations relating to healthcare fraud and abuse, interactions and financial arrangements with healthcare professionals or entities, data privacy and misconduct involving government programs or contracts.

If we, our employees, collaborators or contractors fail to comply with applicable laws and regulations, we could suffer civil and criminal damages, fines and penalties, exclusion from participation in governmental healthcare programs, and the loss of various licenses and authorizations necessary to operate our business, as well as incur liabilities from third-party claims, all of which could have a significant adverse effect on our business.

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.

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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.

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 to 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.

As of December 31, 2021, all milestones have been achieved and accepted by NIH.

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.

Factors that could materially adversely affect our funding under the NIH Contract include:

• budgetary constraints affecting U.S.

government spending generally, or NIH in particular;

• changes in U.S.

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

• changes in U.S.

government or NIH programs, requirements or priorities;

• adoption of new laws or regulations;

• technological developments;

government shutdowns, threatened shutdowns or budget delays;

• competition and consolidation in our industry;

• general economic conditions.

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, some of which are customary or legally required, that give the U.S.

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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.

government agencies routinely audit and investigate government contractors and recipients of federal grants and contracts.

government agencies routinely audit and investigate government contractors and recipients of federal grants and contracts, even after performance has been completed.

These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.

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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.

To the extent 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 or comparable foreign regulatory authority, which could take significant time and expense and could fail to result in a marketing authorization for the intended uses we believe are commercially

Obtaining marketing authorization in one jurisdiction does not mean that we will be successful in obtaining marketing authorization in other jurisdictions where we conduct business.

Except for the Advanta Dx SARS-CoV-2 RT-PCR Assay and the AZOVA COVID-19 Test Collection Kit authorized by the FDA under an EUA granted in August 2020 and February 2021, respectively, 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.

Except for the Advanta Dx SARS-CoV-2 RT-PCR Assay and the AZOVA COVID-19 Test Collection Kit authorized by the FDA under an EUA granted in August 2020 and updated in February 2021, among other updates, and our Advanta Dx COVID-19 EASE Assay authorized by the FDA under an EUA granted in February 2022, 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 are currently registered with the FDA as a medical device manufacturer, with the reagents for the Advanta Dx SARS-CoV-2 RT-PCR Assay listed as our sole medical device product.

As noted in the issued EUA for the Advanta Dx SARS-CoV-2 RT-PCR Assay and the AZOVA COVID-19 Test Collection Kit, the FDA has waived certain quality system requirements under 21 CFR Part 820 for the duration of the EUA.

As noted in the issued EUA for the Advanta Dx SARS-CoV-2 RT-PCR Assay (including the EUA update for use with the AZOVA COVID-19 Test Collection Kit, among other updates) and the issued EUA for the Advanta Dx COVID-19 EASE Assay, the FDA has waived certain quality system requirements under 21 CFR Part 820 for the duration of each 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.

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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.

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.

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In addition, the FDA regulates exports of medical devices.

Failure to comply with these regulatory requirements or obtain and maintain

required approvals, clearances and certifications could impair our ability to commercialize our products for diagnostic use outside of the United States.

Failure to comply with these regulatory requirements or obtain and maintain required approvals, clearances and certifications could impair our ability to commercialize our products for diagnostic use outside of the United States.

In February 2021, we announced a supply and distribution agreement to market our CyTOF technology, panels, and reagents to clinical labs in China.

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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 that develop LDTs, it is unclear how this action as well as legislation and executive orders by the Biden administration and state governments and FDA regulation will impact the industry, including our business and that of our customers.

In an FDA FAQ updated on January 13, 2021, FDA indicated that it is reviewing EUA requests from laboratories that offer COVID-19 diagnostic tests and appears to take a different position from the HHS

rescission policy.

HHS’s policy and the FDA’s position with respect to LDTs in the short term and in general in the long-term may change, especially as the leadership at FDA changes under the Biden administration.

Congress recently introduced an updated legislation called the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act), which, if enacted, will establish a new risk-based regulatory framework for in vitro clinical tests (IVCTs), which include IVDs, LDTs, collection devices, and instruments used with such tests, and a technology certification program, among other proposals.

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

In November 2021, HHS under the Biden administration issued a statement that withdrew the August 2020 policy announcement, stating that HHS does not have a policy on LDTs that is separate from FDA’s longstanding approach.

The FDA also issued a revised version of its COVID-19 test policy that states the FDA expects newly offered COVID-19 tests, including

LDTs, to have an EUA, or traditional marketing authorization such as a granted De Novo or cleared 510(k), prior to clinical use.

Further, in June 2021, Congress introduced an updated legislation called the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act), which, if enacted, will establish a new risk-based regulatory framework for in vitro clinical tests (IVCTs), which include IVDs, LDTs, collection devices, and instruments used with such tests, and a technology certification program, among other proposals.

The adoption of new restrictions on IVDs, LDTs, or RUOs, whether by the FDA or Congress, could adversely affect our ability to commercialize our products and the 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.

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We generate a substantial portion of our revenue internationally and our international business exposes us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

During the years 2020, 2019, and 2018, approximately 54%, 63%, and 57% respectively, of our product and service revenue was generated from sales to customers located outside of the United States.

During the years 2021, 2020, and 2019, approximately 56%, 54%, and 63% respec tively, of our product and service revenue was generated from sales to customers located outside of the United States.

We believe that a significant percentage of our future revenue will continue to come from international sources as we expand our international operations and develop opportunities in other countries.

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• longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

• changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we sell our products, including as a result of the separation of the United Kingdom from the European Union (Brexit);

• business interruptions and travel restrictions resulting from global sociopolitical events, including war and terrorism, public health crises (including the ongoing COVID-19 pandemic), and natural disasters including earthquakes, typhoons, floods and fires;

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Since the beginning of the COVID-19 pandemic, travel restrictions have caused significant slowdowns in China, Japan, and other parts of the Asia-Pacific region.

These slowdowns, in addition to shipment delays in China due to a lack of VAT and import tax exemptions for our products, have caused our financial results to suffer.

These slowdowns, in addition to shipment delays in China due to delays in obtaining VAT and import tax exemptions for our products, have caused our financial results to suffer.

If these situations continue, or if other risks occur, we could be forced to dedicate significant resources to their resolution, and if we are unsuccessful in finding a solution, our financial condition and results will suffer.

In addition, political instability, civil unrest, the deterioration of the political situation in a country in which we have significant sales or operations, or the breakdown of trade relations between the United States and a foreign country in which we have significant operations, could adversely affect our business, financial condition, and results of operations.

For example, a change in trade status between the United States and a foreign country could result in a substantial increase in the import duty of products manufactured in that foreign country and imported into the United States.

The United States has commenced certain trade actions, including imposing increased tariffs on certain goods imported into the United States from China, which has resulted in retaliatory tariffs by China.

In addition, the United States has commenced certain trade actions as a result of the Russian invasion of Ukraine, which are widely expected to result in retaliatory measures or actions, including tariffs, by Russia.

Any increased trade barriers or restrictions on global trade imposed by the United States, or further retaliatory trade measures taken by China, Russia, or other countries in response, could adversely affect our business, financial condition, and results of operations.

Our business is subject to a variety of new U.S.

and foreign export controls and economic sanctions regulations that were issued in response to Russia’s invasion of Ukraine;

our failure to comply with these laws and regulations could harm our business.

Due to recent regulations, U.S.

companies can no longer provide or receive services or conduct any business with, including selling, shipping, or otherwise transferring any U.S.-controlled products to, the Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine.

Additionally, existing U.S.

sanctions continue to extend these prohibitions to the Crimea region of Ukraine.

Our business is also subject to the expansion of previously existing sanctions imposed by the Treasury Department’s Office of Foreign Assets Controls that now cover a significant number of individuals and entities located in Russia, Belarus, and surrounding regions as well as new U.S.

export controls imposed by the U.S.

Department of Commerce’s Export Administration Regulations on exports to Russia.

These laws and regulations cover U.S.

persons as well as U.S.-controlled products, software, and technologies wherever located.

Failure to comply with U.S.

and foreign export control and economic sanctions laws and regulations can result in criminal sanctions, civil fines, debarment from government contracting, the loss of export privileges, and, in some cases, imprisonment.

We are currently implementing new measures to reduce our exposure to this liability.

The implementation of these measures may require us to expend substantial resources or to discontinue certain products or services, which would negatively affect our business, financial condition, and operating results.

In addition, the increased attention focused upon liability issues as a result of lawsuits, regulatory proceedings, and legislative proposals could damage our brand or otherwise impact the growth of our business.

Finally, our ability to receive payment from these regions has been significantly impacted.

Any costs incurred or loss of business that occurs as a result of compliance or other liabilities under these laws or regulations could harm our business and operating results.

Adverse conditions in the global economy and disruption of financial markets may significantly harm our revenue, profitability, and results of 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 adoption and expansion of trade restrictions by the United States and China, 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 Russian invasion of Ukraine, including any resulting adoption and expansion of trade restrictions by the United States, Russia, and/or China, and Brexit 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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dollar relative to foreign currencies could decrease demand for our products and adversely impact our financial performance.

example, if the value of the U.S.

For example, if the value of the U.S.

dollar increases relative to foreign currencies, our products could become more costly to the international consumer and therefore less competitive in international markets, or if the value of the U.S.

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Our future capital needs are uncertain and we may need to raise additional funds in the future, which may cause dilution to stockholders or may be upon terms that are not favorable to us.

We believe that our existing cash, cash equiv alents, and investments, along with funding available under our Revolving Credit Facility, will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

We believe our existing cash, cash equivalents, and investments, along with funding available from the Private Placement Issuance and the Revolving Credit Facility, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

However, we have continued to experience losses and, if that trend continues, we may need to seek additional sources of financing.

In addition, we may need to raise substantial additional capital for various purposes, including:

• expanding the commercialization of our products;

• funding our operations;

• expanding the commercialization of our products;

• furthering our research and development;

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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.

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 will experience dilution.

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We currently do not have an internal audit group, and we continue to evaluate our need for additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

Moreover, if we do not comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC, or other regulatory authorities, which would require additional financial and management resources.

the market price of our stock could decline and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC, or other regulatory authorities, which would require additional financial and management resources.

We may not realize the value of our goodwill or other intangible assets, which would be reflected in an impairment charge.

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We make estimates and assumptions in valuing such intangible assets that affect our condensed consolidated financial statements.

As of September 30, 2021, we had approximately $138.8 million of goodwill and net intangible assets, including approximately $106.4 million of goodwill and $32.4 million of net intangible assets.

As of March 31, 2022, we had approximately $132.3 million of goodwill and net intangible assets, including approximately $106.3 million of goodwill and $26.0 million of net intangible assets.

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

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The Credit Facility contains customary affirmative and negative covenants which, unless waived by the bank, limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, enter into affiliate transactions, undergo a change of control, or engage in merger and acquisition activity, including merging or consolidating with a third party.

Additionally, we are required to maintain a minimum Adjusted Quick Ratio (as defined) of at least 1.25 to 1.00.

If we fail to

comply with the covenants and our other obligations under the Credit Facility, the lenders would be able to accelerate the required repayment of amounts due under the Credit Facility and, if they are not repaid, could foreclose upon the assets securing our obligations under the Credit Facility.

Additionally, we are required to maintain a minimum Adjusted Quick Ratio (as defined in the amendment) of at least 1.25 to 1.00.

If we fail to comply with the covenants and our other obligations under the Credit Facility, the lenders would be able to accelerate the required repayment of amounts due under the Credit Facility and, if they are not repaid, could foreclose upon the assets securing our obligations under the Credit Facility.

Our ability to use net operating loss carryforwards to offset future taxable income for U.S.

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We have significant outstanding convertible debt.

As of September 30, 2021, we had outstanding $0.6 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 March 31, 2022, we had outstanding $0.6 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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Numerous significant intellectual property issues have been litigated, and will likely continue to be litigated, between existing and new participants in our existing and targeted markets.

For example, some of our products provide for the testing and analysis of genetic material, and patent rights relating to genetic materials remain a developing area of patent law.

For example, some of

our products provide for the testing and analysis of genetic material, and patent rights relating to genetic materials remain a developing area of patent law.

A recent U.S.

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We rely on licenses in order to be able to use various proprietary technologies that are material to our business, including our core IFC, multi-layer soft lithography, and mass cytometry technologies.

In some cases, we do not control the prosecution,

maintenance, or filing of the patents to which we hold licenses, or the enforcement of these patents against third parties.

In some cases, we do not control the prosecution, maintenance, or filing of the patents to which we hold licenses, or the enforcement of these patents against third parties.

Additionally, our business and product development plans anticipate and may substantially depend on future in-license agreements with additional third parties, some of which are currently in the early discussion phase.

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An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license.

If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license.

If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might

attempt to revoke the license.

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.

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If our lack of compliance with this provision constituted a material breach of the license agreement, the license of the relevant patents could be terminated or we could be compelled to relocate our manufacturing of microfluidic systems and IFCs to the United States to avoid or cure a material breach of the license agreement.

Any of the exercise of march-in rights, the

termination of our license of the relevant patents or the relocation of our manufacturing of microfluidic systems and IFCs to the United States could materially adversely affect our business, operations and financial condition.

Any of the exercise of march-in rights, the termination of our license of the relevant patents or the relocation of our manufacturing of microfluidic systems and IFCs to the United States could materially adversely affect our business, operations and financial condition.

We are subject to certain obligations and restrictions relating to technologies developed in cooperation with Canadian government agencies.

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In one instance, a dispute with the applicable government funded entity may require mediation, which could lead to unanticipated delays in our commercialization efforts to that project.

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.

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.

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Moreover, if there is no active trading market or if the volume of trading is limited, holders of our common stock may have difficulty selling their shares.

In addition, the concentration of ownership of our outstanding common stock (approximately 38.3% held by our top six stockholders as of December 31, 2020) means that a relatively small number of stockholders have significant control over the outcomes of stockholder voting.

In addition, the concentration of ownership of our outstanding common stock (approximately 51% held by our top seven stockholders as of December 31, 2021) means that a relatively small number of stockholders have significant control over the outcomes of stockholder voting.

The trading price of our common stock is highly volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.

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• any major change to the composition of our board of directors or management;

• general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors, including deteriorating market conditions due to investor concerns regarding inflation and hostilities between Russia and Ukraine;

• general economic conditions and slow or negative growth of our markets.

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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.

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.

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.

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As a result, any anticipated conversion of the 2014 Notes or 2019 Notes could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosures

RISKS RELATED TO OUR CAPITAL STRUCTURE

As a result of the Private Placement Issuance, the Purchasers own a significant portion of our total outstanding voting securities and may prevent other stockholders from influencing material corporate decisions, and the Purchasers’ interests may conflict with those of our other stockholders.

The Series B Preferred Stock is initially convertible into up to approximately 75,164,397 shares of our common stock (without giving effect to limitations associated with any conversion cap).

On an as-converted basis, this collectively represents approximately 49.4% of our issued and outstanding common stock (equating to approximately 24.7% per Purchaser) based on the number of shares of common stock outstanding as of April 30, 2022, but assuming full conversion of all Series B Preferred Stock (without giving effect to limitations associated with any conversion cap).

As a result, the Purchasers are our largest stockholders.

This concentration of ownership, together with the voting rights, director designation rights and consent rights granted to the Purchasers as part of the Private Placement Issuance, may be perceived negatively by other investors and, as a

result, may adversely affect the market price of our common stock.

The Purchasers, if they acted together, could significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions.

The interests of the Purchasers may not always coincide with our interests or the interests of other stockholders.

The market value of our common stock could decline if the Purchasers sell their Series B Preferred Stock or common stock after certain transfer restrictions expire or if our current stockholders sell large amounts of common stock.

Pursuant to the Registration Rights Agreement that we entered into on January 23, 2022 with the Purchasers, we agreed to certain customary registration rights with respect to shares issuable under the Bridge Loan Agreements and the Purchase Agreements, including (i) any shares of common stock acquired by any Purchaser pursuant to the conversion of the Series B Preferred Stock in accordance with the Series B Certificates of Designations, and (ii) any shares of common stock acquired by any Purchaser pursuant to preemptive rights under the Purchase Agreements, which means that such shares would become eligible for resale in the public markets following the expiration of any applicable transfer restrictions.

Any sale of such shares, or the anticipation of the possibility of such sales, could create downward pressure on the market price of our common stock.

Furthermore, our current stockholders may decide to reduce their investment in us due to the changes to our investment profile as a result of the Private Placement Issuance, and may sell large amounts of common stock.

Such sales of our common stock could have the effect of depressing the market price of our common stock.

Our Series B Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of our common stockholders, which could adversely affect our liquidity and financial condition, result in the interests of holders of our Series B Preferred Stock differing from those of our common stockholders and make an acquisition of us more difficult.

Holders of our Series B preferred stock have (i) a liquidation preference (ii) rights to dividends, which are senior to all of our other equity securities, (iii) the right to require us to repurchase any or all of their Series B Preferred Stock in connection with certain change of control events, and (iv) conversion price adjustments upon the occurrence of certain events, each subject to the terms, conditions and exceptions contained in the Certificate of Designations for the Series B-1 and Series B-2 Preferred Stock.

These dividend and other rights and obligations could impact our liquidity and reduce the amount of cash flows available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes.

The terms of our Series B Preferred Stock could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition.

The preferential rights could also result in divergent interests between the Purchasers and holders of our common stock.

Furthermore, a sale of our Company, as a change of control event, may require us to repurchase Series B Preferred Stock, which could have the effect of making an acquisition of our Company more expensive and potentially deterring proposed transactions that may otherwise be beneficial to our stockholders.

The holders of Series B Preferred Stock are entitled to vote with the holders of common stock with voting power measured in a manner related to the conversion ratio of the shares of Series B Preferred Stock and the holders of Series B Preferred Stock have rights to approve certain actions.

The holders of Series B Preferred Stock may exercise influence over us, including through the ability of each of the holders of the Series B-1 Preferred Stock and the holders of the Series B-2 Preferred Stock to designate a member of our board of directors.

The holders of Series B Preferred Stock are generally entitled to vote with the holders of the shares of common stock on all matters submitted for a vote of holders of shares of common stock (voting together with the holders of shares of common stock as one class) with voting power measured in a manner related to the conversion ratio of the shares of Series B Preferred Stock, subject to certain voting limitations as described in the Series B Certificates of Designations.

Additionally, the consent of the holders of at least 60% of the shares of Series B Preferred Stock is required for, among other things, (i) amendments to our Certificate of Incorporation or Bylaws that have an adverse effect on the rights, preferences, privileges or voting powers of the Series B Preferred Stock and (ii) issuances by us of securities that are senior to, or equal in priority with, the Series B Preferred Stock.

Additionally, pursuant to the Series B Certificates of Designations, the Purchasers each have the right to nominate and elect one member to our board of directors at each annual meeting of the stockholders of the Company or at any special meeting called for the purpose of electing directors, for so long as the Casdin Preferred Percentage or Viking Preferred Percentage, as applicable, is equal to or greater than 7.5%.

The director designated by each of the Purchasers is entitled to serve on committees of our board of directors, subject to applicable law and Nasdaq rules.

Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the directors designated by the Purchasers may differ from the interests of our security holders as a whole or of our other directors.

These significant stockholders may be able to determine or significantly influence matters requiring stockholder approval.

The interests of significant stockholders may not always coincide with our interests or the interests of other stockholders.

The Series B-1 Director and the Series B-2 Director are not subject to the classified board of directors provisions of our Charter.

The director designated by the holders of the Series B -1 Preferred Stock and Series B-2 Preferred Stock will also be entitled to serve on committees of our board of directors, subject to applicable law and stock exchange rules.

In addition, the Series B Certificates of Designations also provide that for so long as the Casdin Ownership Percentage and the Viking Ownership Percentage (each as defined in the applicable Certificate of Designations) continue to be met or exceeded for such series of Series B Preferred Stock, the Series B-1 Director and Series B-2 Director will have certain consent rights over, among other things:

(i) any increase in the number of directors on the Board beyond seven;

(ii) the hiring, promotion, demotion, or termination of the Company’s Chief Executive Officer;

(iii) entering into or modifying (including by waiver) any transaction, agreement or arrangement with any Related Person (as such term is defined in the Series B Certificates of Designations), subject to certain exceptions;

(iv) any voluntary petition under any applicable federal or state bankruptcy or insolvency law effected by the Company;

(v) any change in the principal business of the Company or entry by the Company into any material new line of business;

and (vi) for a period of three years after the Closing, (A) any acquisition (including by merger, consolidation or acquisition of stock or assets) of any assets, securities or property of any other person or (B) any sale, lease, license, transfer or other disposition of any assets of the Company or any of its subsidiaries, in each case, other than acquisitions or disposition of inventory or equipment in the ordinary course of business consistent with past practice, for consideration in excess of $50,000,000 in the aggregate in any six month period.

As a result, the holders of Series B Preferred Stock have the ability to influence the outcome of certain matters affecting our governance and capitalization.

Our obligations to the holders of Series B Preferred Stock could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition.

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