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Item 1A. Risk Factors

2022-08-09 compared with 2022-05-09 · 84 added, 139 removed, 820 unchanged (21% of the section changed)

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

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

• Our efficiency and cost-savings initiatives could be disruptive to our operations.

• If we fail to achieve the expected financial and operational benefits of our recently announced restructuring plan and reduction in force, our business and financial results may be harmed.

• Implementation of a company-wide enterprise resource planning (ERP) system could adversely affect our business.

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

Risks Related to Operations and Reliance on Third Parties

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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.

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

• Our business operations depend upon the continuing efforts of our management team and other skilled and experienced personnel.

• Our distribution capabilities and direct sales, field support, and marketing forces must be sufficient to meet our customers’ needs.

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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 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.

• To the extent 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 or comparable foreign regulatory authority.

• 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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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 holders of our Series B Preferred Stock 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.

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RISKS RELATED TO OUR BUSINESS, INDUSTRY, AND STRATEGY

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

The COVID-19 pandemic has significantly affected our business operations and could continue to 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 adversely affected all the countries in which we and our customers, suppliers, and other business partners operate, disrupting supply chains, causing significant volatility in global financial markets, and raising the prospect of an extended global recession.

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

• the negative impact of ongoing travel restrictions and social distancing policies on our sales operations, marketing efforts, and customer field support;

• the negative impact of ongoing travel restrictions on our sales operations, marketing efforts, and customer field support;

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

• increased voluntary turnover, together with impaired ability to hire and effectively train new personnel due to labor shortages, travel restrictions, and physical distancing protocols;

• increased voluntary turnover, together with impaired ability to hire and effectively train new personnel due to labor shortages and travel restrictions;

• increased susceptibility to the risk of information technology security breaches and other disruptions due to increased volumes of remote access to our information systems from our employees working at home;

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• increased volatility in our stock price due to financial market instability.

In addition to its negative impact on some aspects of our business, the COVID-19 pandemic has been a source of opportunity for our diagnostics business, opening up external funding sources to support innovation and product development and resulting in increased revenues due to sales of our Advanta Dx SARS-CoV-2 RT-PCR test and related sales of our microfluidics instruments.

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.

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.

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

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.

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.

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

Additionally, in response to a surge in COVID-19 infections in the first half of 2022, the Chinese government imposed lockdowns in certain parts of the country that have negatively impacted 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.

The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to:

The ultimate impact of the COVID-19 pandemic on our operations and financial

performance depends on many factors that are not within our control, including, but not limited, to:

governmental, business, and individual actions that have been and continue to be taken in response to the pandemic (including restrictions on travel, transport and workforce pressures);

the risk of waning immunity among persons already vaccinated and an increase in fatigue or skepticism with respect to initial or booster vaccinations;

the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity;

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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.

Variability in our quarterly or annual results of operations, mix of product revenue, or rates of revenue growth, if any, may lead to volatility in our stock price as research analysts and investors respond to these fluctuations.

These fluctuations are due to numerous factors that are difficult to forecast, including:

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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.

In addition, inflationary pressure, including as a result of supply shortages, has adversely impacted and could continue to adversely impact our financial results.

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

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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 March 31, 2022, we had an accumulated deficit of $812.3 million .

As of June 30, 2022, we had an accumulated deficit of $875.8 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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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, 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.

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.

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

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

(NanoString), and Agena Bioscience, Inc.

(Thermo), Bio-Rad Laboratories, Inc., and Agena Bioscience, Inc.

to be our principal competitors in the microfluidics space.

We believe that Cytek Biosciences, Inc.

and Becton, Dickinson and Company are currently our principal competitors for our mass cytometry market share, and that IonPath Inc., Akoya Biosciences, Inc., NanoString, and 10x Genomics, Inc.

and Becton, Dickinson and Company are currently our principal competitors for our mass cytometry market share, and that IonPath Inc., Akoya Biosciences, Inc., NanoString Technologies, Inc., and 10x Genomics, Inc.

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

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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.

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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Even if we successfully implement some or all of these planned improvements, we cannot guarantee that our current and potential customers will find our enhanced systems to be an attractive alternative to existing technologies, including our current products.

Our efficiency and cost-savings initiatives could be disruptive to our operations and adversely affect our results of operations and financial condition.

If we fail to achieve the expected financial and operational benefits of our recently announced restructuring plan and reduction in force, our business and financial results may be harmed.

From time to time, we have implemented efficiency and cost-savings initiatives intended to stabilize our business operations.

These efficiency initiatives have included targeted workforce reductions, optimizing our facilities, and reducing excess space.

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 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.

The implementation of these and other 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.

If we seek to implement a company-wide enterprise resource planning (ERP) system, such implementation could adversely affect our business and results of operations or the effectiveness of internal control over financial reporting.

We are considering implementing a company-wide ERP system to handle the business and financial processes within our operations and corporate functions.

In August 2022, we announced a restructuring plan including a reduction in force.

In addition to the reduction in force, we will also seek to reduce leased office space and other operating expenses.

The purpose of the restructuring plan is to improve operational efficiency and operating costs and better align our workforce with the current needs of our business.

There is no guarantee that the restructuring plan will achieve its intended benefits and cost savings or that our post-restructuring focus will be sufficient for us to achieve success.

For example, our cost restructuring efforts may not result in the anticipated savings or other economic benefits, or could result in total costs and expenses that are greater than expected, which would require us to seek potentially dilutive financing alternatives, disrupt or restrain the scope of our business activities, and would make it more difficult to attract and retain qualified personnel, each of which could have a material adverse effect on our business, financial condition and prospects.

Risks associated with implementing a company-wide enterprise resource planning (ERP) system could adversely affect our business and results of operations or the effectiveness of internal control over financial reporting.

We are preparing to implement a company-wide ERP system to handle the business and financial processes within our operations and corporate functions.

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.

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.

Our business and results of operations may 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.

Additionally, 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.

Our business growth strategy involves the potential for significant acquisitions, and our operating results and prospects could be harmed if we are unable to integrate future acquisitions successfully.

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Furthermore, developing an IFC for a new application may require developing a specific production process for that type of IFC.

While all of our IFCs are produced using the same basic processes, significant variations may be required to ensure

adequate yield of any particular type of IFC.

While all of our IFCs are produced using the same basic processes, significant variations may be required to ensure adequate yield of any particular type of IFC.

Developing such a process can be time consuming, and any unexpected difficulty in doing so can delay the introduction of a product.

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Our facilities and the equipment we use to manufacture our instruments, IFCs, assays, and reagents would be costly to replace and could require substantial lead times to repair or replace.

Our facilities may be harmed or rendered inoperable by

natural or man-made disasters, which may render it difficult or impossible for us to manufacture our products for some period of time.

Our facilities may be harmed or rendered inoperable by natural or man-made disasters, which may render it difficult or impossible for us to manufacture our products for some period of time.

If any of our facilities become unavailable to us, we cannot provide assurances that we will be able to secure a new manufacturing facility on acceptable terms, if at all.

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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/CyTOF systems and certain metal isotopes used with the Hyperion/CyTOF systems are purchased from sole source suppliers.

• The electron multiplier detector included in the Hyperion/Hyperion+/CyTOF/CyTOF XT systems and certain metal isotopes used with the Hyperion/Hyperion+/CyTOF/CyTOF XT 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.

If, as a result of global economic or political instability or health pandemics, such as the ongoing escalation of the situation in Ukraine or the COVID-19 pandemic, our suppliers experience shortages or delays for materials sourced or manufactured in the affected countries, their ability to supply us with instruments or product components may be affected.

If any of these events occur, our business and operating results could be harmed.

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.

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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.

In response to surges in COVID-19 infections, the Chinese government 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.

This competition has become exacerbated by the increase in employee resignations reported by employers nationwide in 2021 and continued high rates of employee turnover continuing into 2022.

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.

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We may need to increase employee wages and benefits in order to attract and retain the personnel necessary to achieve our goals, and our business, operations, and financial results may suffer if we are unable to do so.

Attrition and workforce reductions, such as the August 2022 restructuring plan, including the related reduction in force, could adversely affect our reputation among job seekers, and our existing employees may experience distractions or decreases in employee morale, and result in a loss of institutional know-how, reduced productivity, slower customer service response, reduced effectiveness of internal compliance and risk-mitigation programs, and cancellations of or delays in completing new product developments and other strategic projects.

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.

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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.

Furthermore, there may be a heightened risk of potential cyberattacks by state actors or others since the escalation of the war in Ukraine.

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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In the event that these third parties do not adequately safeguard our data, security breaches could result and negatively impact our business, operations, and financial results.

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

Since the beginning of the COVID-19 pandemic, a significant percentage of our employees has been 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.

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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.

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.

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.

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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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.

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.

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.

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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.

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 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.

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.

The NIH Contract includes certain provisions from the Federal Acquisition Regulations, 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 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.

government terminates a contract for convenience, the government contractor may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination.

government terminates a contract for default, the government contractor is entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items from another source.

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 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 U.S.

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 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 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;

• control or prohibit the export of products.

Furthermore, we may be required to enter into agreements and subcontracts with third parties, including suppliers, consultants and other third-party contractors in order to satisfy our contractual obligations pursuant to our agreements with the U.S.

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 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.

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.

The audit may also include review of the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s accounting, purchasing, property, estimating, compensation and management information systems.

If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions.

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 attractive.

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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.

It is possible, in the event we elect to submit 510(k) applications for certain of our products, that the FDA would take the position that a more burdensome premarket application, such as a premarket approval application or a de novo application is required for some of our products.

It is possible, in the event we elect to submit 510(k) applications for certain of our products,

that the FDA would take the position that a more burdensome premarket application, such as a premarket approval application or a de novo application is required for some of our products.

If such applications were required, greater time and investment would be required to obtain FDA approval.

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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 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.

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 addition, the FDA regulates exports of medical devices.

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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.

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.

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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.

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.

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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.

We have implemented new measures to reduce our exposure to this liability.

Any additional changes in export control laws, sanctions requirements, or our operations in the affected regions may require us to expend additional 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.

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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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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 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.

We believe our existing cash, cash equivalents, and short-term investments, along with funding available under 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.

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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 entered into 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 million, from time to time, through an at-the-market (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 will experience dilution.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution.

Debt financing in addition to the Credit Facility, if available, may involve covenants restricting our operations or our ability to incur additional debt.

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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.

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.

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.

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 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.

As of June 30, 2022, we had approximately $125.3 million of goodwill and net intangible assets, including approximately $106.2 million of goodwill and $19.1 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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We have significant outstanding convertible debt.

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).

As of June 30, 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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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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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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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.

For example, Fluidigm Canada Inc.

(Fluidigm Canada), an Ontario corporation and wholly owned subsidiary of Fluidigm Sciences, was party to an interim license agreement, now expired, with Nodality, Inc., or Nodality, under which Nodality granted Fluidigm Canada a worldwide, non-exclusive, research use only, royalty bearing license to certain cytometric reagents, instruments, and other products.

While we were able to secure a license under a new license agreement with Nodality, we cannot provide assurances that we will always be able to obtain suitable license rights to technologies or intellectual property of other third parties on acceptable terms, if at all.

For example, our Canadian subsidiary (SB Canada) was party to an interim license agreement, now expired, under which the licensor granted SB Canada a worldwide, non-exclusive, research use only, royalty bearing license to certain cytometric reagents, instruments, and other products.

While we were able to secure a license under a new license agreement with the licensor, we cannot provide assurances that we will always be able to obtain suitable license rights to technologies or intellectual property of other third parties on acceptable terms, if at all.

In-licensed intellectual property rights that are fundamental to our business being operated present numerous risks and limitations.

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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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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.

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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• 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.

• general economic conditions, including current macroeconomic trends and geopolitical events, and slow or negative growth of our markets.

The stock market in general, and market prices for the securities of technology-based companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies.

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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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In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise.

Any such future issuance, including any issuances pursuant to our ATM equity offering program under our Sale Agreement with Jefferies, could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

We will have broad discretion over the use of the proceeds to us from our ATM equity offering program and may apply the proceeds to uses that do not improve our operating results or the value of your securities.

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.

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

Our use of the proceeds may not improve our operating results or increase the value of the securities offered pursuant to the ATM equity offering program.

Any such future issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

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.

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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 (DGCL), 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 (DGCL), which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

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.

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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).

On an as-converted basis, this collectively represents approximately 48.8% of our issued and outstanding common stock (equating to approximately 24.4% per Purchaser) based on the number of shares of common stock outstanding as of June 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 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.

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.

Pursuant to the Registration Rights Agreement that we entered into on January 23, 2022 with the Purchasers, we registered the resale of the shares of common stock issuable upon conversion of the Series B Preferred Stock with the SEC, 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.

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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:

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;

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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.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ending June 30, 2022, the registrant did not make any sales of unregistered equity securities that were not previously reported in a Current Report on Form 8-K.

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