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Item 1A. Risk Factors

2021-05-07 compared with 2020-11-09 · 366 added, 298 removed, 515 unchanged (56% of the section changed)

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The following risks and uncertainties may have a material and adverse effect on our business, financial condition, or results of operations.

You should consider these risks and uncertainties carefully, together with all of the other information included or incorporated by reference in this Form 10-Q.

You should consider these risks and uncertainties carefully, together with all of the other information included or incorporated by reference in this quarterly report on Form 10-Q.

The risks described below are not the only ones we face.

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If any of these risks occur, our business, results of operations, or financial condition could suffer, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Related to Fluidigm’s Business and Strategy

Summary of Risk Factors

Risks Related to our Business, Industry, and Strategy

• The COVID-19 pandemic has significantly affected our business operations.

• Our financial results and revenue growth rates have varied significantly from quarter-to-quarter and year-to-year, and may not be consistent with market expectations.

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

• The life science markets are highly competitive and subject to rapid technological change.

• 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.

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

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

Risks Related to Operations and Reliance on Third Parties

• We may experience development or manufacturing problems or delays.

• 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.

• 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 rely on single and sole source suppliers for some of the components and materials used in our products.

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

• Security breaches, loss of data, cyberattacks, and other IT failures could adversely affect our business.

• To use our analytical systems, customers typically need to purchase specialized reagents.

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

Risks Related to Quality and the Regulatory Environment

• 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.

• 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.

Risks Related to Economic Conditions and Operating a Global Business

• We generate a substantial portion of our revenue internationally.

• Adverse conditions in the global economy may significantly harm our revenue, profitability, and results of operations.

• We are subject to fluctuations in the exchange rate of the U.S.

dollar and foreign currencies.

Financial, Tax, and Accounting Risks

• Our future capital needs are uncertain and we may need to raise additional funds in the future.

• Any failure to maintain effective internal control over financial reporting could adversely affect our business.

• 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 Revolving Credit Facility, the lenders may be able to accelerate amounts owed under the facilities and 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.

Risks Related to Intellectual Property

• Our ability to protect our intellectual property and proprietary technology is uncertain.

• We may be involved in lawsuits to protect or enforce our patents and proprietary rights.

• We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets.

• We depend on certain technologies that are licensed to us.

• We are subject to certain manufacturing restrictions related to licensed technologies that were developed with the financial assistance of U.S.

governmental grants.

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

Risks Related to Our Common Stock

• Our stock price is volatile.

• 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 BUSINESS, INDUSTRY, AND STRATEGY

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

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

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

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

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

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• disruption of the operations of our contract manufacturers, suppliers, and other business partners;

• shortages or delays in the supply of components and materials used in our products;

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

The extent to which the COVID-19 pandemic will continue to adversely 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 of the disease, the duration of the public health emergency, and actions taken in the United States and elsewhere to contain the virus and prevent new outbreaks, such as social distancing and quarantines, business closures or business disruptions.

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 for the coronavirus have become available and the perceived threat of the pandemic recedes, the demand for our COVID-19 testing products has slowed, resulting in a corresponding decline in COVID-19 revenue.

As a result of these trends, we have lowered our revenue expectations for 2021.

If our revenues decline more than expected, we may be required implement cost control initiatives as the year progresses, and may be required to 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.

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 of the disease, the duration of the public health emergency, and actions taken in the United States and elsewhere to contain the virus and prevent new outbreaks, such as social distancing and quarantines, business closures or business disruptions.

Because the severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain and rapidly changing, 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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and the pace of recovery when the COVID-19 pandemic subsides.

As the COVID-19 crisis continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in our other risk factors below.

As the COVID-19 pandemic continues to affect our operating and financial results, it may also have the effect of heightening many of the other risks described in our other risk factors below.

COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results, particularly if the pandemic and its associated impacts reoccur in the coming months.

Our financial results and revenue growth rates have varied significantly from quarter-to-quarter and year-to-year due to a number of factors, and a significant variance in our operating results or rates of growth, if any, could lead to substantial volatility in our stock price.

Our financial results and revenue growth rates have varied significantly from quarter-to-quarter and year-to-year due to a number of factors, and a significant variance in our operating results or rates of growth from market expectations, if any, could lead to substantial volatility in our stock price.

Our revenue, results of operations, and revenue growth rates have varied in the past and may continue to vary significantly from quarter-to-quarter or year-to-year.

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.

For example, our revenue declined year-over-year in 2017 compared to 2016, but increased year-over-year in 2018 compared to 2017.

Our revenue continued to increase year-over-year in 2019 compared to 2018, but we may not be able to achieve similar revenue growth in future periods.

We are also increasingly dependent on our mass cytometry business, which is very capital intensive.

Variability in our quarterly or annual results of operations, mix of product revenue, including any decline in our mass cytometry revenue, 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.

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.

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.

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

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• global economic conditions;

and fluctuations in foreign currency exchange rates.

• fluctuations in foreign currency exchange rates.

Additionally, we have certain customers who have historically placed large orders in multiple quarters during a calendar year.

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

Any failure to adjust

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

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

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

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We have incurred significant losses in each fiscal year since our inception, including net losses of $53.0 million, $64.8 million and $59.0 million during the years 2020, 2019, and 2018, respectively.

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

As of March 31, 2021, we had an accumulated deficit of $695.6 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, 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, 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, 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.

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

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.

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.

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Increased competition is likely to result in pricing pressures, which could reduce our profit margins and increase our sales and marketing expenses.

In addition, mergers, consolidations, or other strategic transactions between two or more of our competitors, or between our competitor and one of our key customers, could change the competitive landscape and weaken our competitive position, adversely affecting our business.

In addition, mergers, consolidations, or other strategic transactions between two or more of

our competitors, or between our competitor and one of our key customers, could change the competitive landscape and weaken our competitive position, adversely affecting our business.

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.

Our business is dependent on the improvement of our existing products, our development of new products to serve existing markets, and our development of new products to create new markets and applications that were previously not practical with existing systems.

We intend to devote significant personnel and financial resources to research and development activities designed to advance the capabilities of our technology.

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

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

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

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

In the past, product development projects have been significantly delayed when we encountered unanticipated difficulties in implementing a process on our systems.

We may have similar delays in the future, and we may not obtain any benefits from our research and development activities.

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.

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.

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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.

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.

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

Our customer base is primarily composed of academic research institutions, translational research and medicine centers, cancer centers, clinical research laboratories, biopharmaceutical, biotechnology, and plant and animal research companies, and contract research organizations that perform analyses for research and commercial purposes.

Our success will depend, in part, upon our ability to increase our market share among these customers, attract additional customers outside of these markets, and market new applications to existing and new customers as we develop such applications.

Attracting new customers and introducing new applications require substantial time and expense.

For example, it may be difficult to identify, engage, and market to customers who are unfamiliar with the current applications of our systems.

Any failure to expand our existing customer base or launch new applications would adversely affect our ability to increase our revenue.

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

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In addition, it is important that our systems be perceived as accurate and reliable by the scientific and medical research community as a whole.

Historically, a significant part of our sales and marketing efforts has been directed at convincing industry leaders of the advantages of our systems and encouraging such leaders to publish or present the results of their evaluation of our system.

evaluation of our system.

If we are unable to continue to induce leading researchers to use our systems, or if such researchers are unable to achieve and publish or present significant experimental results using our systems, acceptance and adoption of our systems will be slowed and our ability to increase our revenue would be adversely affected.

We may not be able to develop new products or enhance the capabilities of our existing systems to keep pace with rapidly changing technology and customer requirements, which could have a material adverse effect on our business, revenue, financial condition, and operating results.

Our success depends on our ability to develop new products and applications for our technology in existing and new markets, while improving the performance and cost-effectiveness of our systems.

New technologies, techniques, or products could emerge that might offer better combinations of price and performance than our current or future product lines and systems.

Existing markets for our products, including high-throughput genomics, single-cell genomics and mass cytometry, as well as potential markets for our products such as high-throughput NGS and molecular applications, are characterized by rapid technological change and innovation.

It is critical to our success for us to anticipate changes in technology and customer requirements and to successfully introduce new, enhanced, and competitive technology to meet our customers’ and prospective customers’ needs on a timely and cost-effective basis.

Developing and implementing new technologies will require us to incur substantial development costs and we may not have adequate resources available to be able to successfully introduce new applications of, or enhancements to, our systems.

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

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

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

In addition, if we introduce enhanced systems but fail to manage product transitions effectively, customers may delay or forgo purchases of our systems and our operating results may be adversely affected by product obsolescence and excess inventory.

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 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.

We may acquire other businesses to improve our product offerings or expand into new markets.

Our future acquisition strategy will depend on our ability to identify, negotiate, complete, and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions.

Mergers and acquisitions are inherently risky, and any transaction we complete may not be successful.

Any merger or acquisition we may pursue would involve numerous risks, including but not limited to the following:

• difficulties in integrating and managing the operations, technologies, and products of the companies we acquire;

• diversion of our management’s attention from normal daily operation of our business;

• our inability to maintain the key business relationships and the reputations of the businesses we acquire;

• our inability to retain key personnel of the acquired company;

• uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions;

• our dependence on unfamiliar affiliates and customers of the companies we acquire;

• insufficient revenue to offset our increased expenses associated with acquisitions;

• our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate;

• the possibility that we may not realize the value of acquired assets recorded as goodwill or intangible assets, and would be required to incur material charges relating to the impairment of those assets;

• our inability to maintain internal standards, controls, procedures, and policies.

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

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

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

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.

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

Although we have discontinued our hiring constraints and pandemic-related pay reductions, actions such as these may be required in the future 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 further efficiency and cost-savings initiatives could impair our ability to invest in developing, marketing and selling new and existing products, be disruptive to our operations, make it difficult to attract or retain employees, result in higher than anticipated charges, divert the attention of management, result in a loss of accumulated knowledge, impact our customer and supplier relationships, and otherwise adversely affect our results of operations and financial condition.

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 have considered implementing 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.

RISKS RELATED TO OPERATIONS AND RELIANCE ON THIRD PARTIES

We may experience development or manufacturing problems or delays that could limit the potential growth of our revenue or increase our losses.

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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 very time consuming, and any unexpected difficulty in doing so can delay the introduction of a product.

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

If our manufacturing activities are adversely impacted, or if we are otherwise unable to keep up with demand for our products by successfully manufacturing, assembling, testing, and shipping our products in a timely manner, our revenue could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’ products.

We intend to devote significant personnel and financial resources to research and development activities designed to advance the capabilities of our technology.

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

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

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

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

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

In the past, product development projects have been significantly delayed when we encountered unanticipated difficulties in implementing a process on our systems.

We may have similar delays in the future, and we may not obtain any benefits from our research and development activities.

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.

Our products could have defects or errors, which may give rise to claims against us, adversely affect market adoption of our systems, and adversely affect our business, financial condition, and results of operations.

Our systems utilize novel and complex technology and such systems may develop or contain undetected defects or errors.

We cannot assure you that material performance problems, defects, or errors will not arise, and as we increase the density and integration of our systems, these risks may increase.

We generally provide warranties that our systems will meet performance expectations and will be free from defects.

The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins.

For example, we have experienced a performance issue with respect to certain IFCs used in our C1 systems due to the presence of more than one cell in an IFC chamber.

Although we have redesigned such C1 IFCs, we may experience additional unexpected product defects or errors that could affect our ability to adequately address these performance issues.

In manufacturing our products, including our systems, IFCs, and assays, we depend upon third parties for the supply of various components, many of which require a significant degree of technical expertise to produce.

In addition, we purchase certain products from third-party suppliers for resale.

If our suppliers fail to produce components to specification or provide defective products to us for resale and our quality control tests and procedures fail to detect such errors or defects, or if we or our suppliers use defective materials or workmanship in the manufacturing process, the reliability and performance of our products will be compromised.

If our products contain defects, we may experience:

• a failure to achieve market acceptance or expansion of our product sales;

• loss of customer orders and delay in order fulfillment;

• damage to our brand reputation;

• increased cost of our warranty program due to product repair or replacement;

• product recalls or replacements;

• inability to attract new customers;

• diversion of resources from our manufacturing and research and development departments into our service department;

• legal claims against us, including product liability claims, which could be costly and time consuming to defend and result in substantial damages.

In addition, certain of our products are marketed for use with products sold by third parties.

For example, certain of our systems are marketed as compatible with major next-generation DNA sequencing instruments.

If such third-party products are not produced to specification, are produced in accordance with modified specifications, or are defective, they may not be compatible with our products.

In such case, the reliability and performance of our products may be compromised.

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

Our business depends on research and development spending levels of our customers, a reduction in which could limit our ability to sell our products and adversely affect our business.

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

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

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

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

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

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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 and, as a result, our business will be harmed until we are able to secure a new facility.

We manufacture our genomics analytical and preparatory instruments and IFCs for commercial sale at our facility in Singapore and our mass cytometry instruments, assays, and reagents for commercial sale at our facility in Canada.

We manufacture our microfluidics analytical and preparatory instruments and IFCs for commercial sale at our facility in Singapore and our mass cytometry instruments, assays, and reagents for commercial sale at our facility in Canada.

No other manufacturing facilities are currently available to us, particularly facilities of the size and scope of our Singapore and Canada operations.

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We have significant manufacturing operations in Singapore and Canada and operations in the United States.

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

In addition, our business is international in nature, with our sales, service and administrative personnel and our customers located in

numerous countries throughout the world.

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

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We cannot provide any assurance that alternate means of conducting our operations (whether through alternate production capacity or service providers or otherwise) would be available if a major disruption were to occur or that, if such alternate means were available, they could be obtained on favorable terms.

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 2019, 2018, and 2017, approximately 63%, 57%, and 55%, respectively, 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.

Engaging in international business inherently involves a number of difficulties and risks, including:

• required compliance with existing and changing foreign regulatory requirements and laws that are or may be applicable to our business in the future, such as the European Union’s General Data Protection Regulation and other data privacy requirements, labor and employment regulations, anticompetition regulations, the U.K.

Bribery Act of 2010 and other anticorruption laws, and the RoHS and WEEE directives, which regulate the use of certain hazardous substances in, and require the collection, reuse, and recycling of waste from, products we manufacture;

• required compliance with U.S.

laws such as the Foreign Corrupt Practices Act, and other U.S.

federal laws and regulations established by the office of Foreign Asset Control;

• export requirements and import or trade restrictions;

• laws and business practices favoring local companies;

• 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 resulting from global sociopolitical events, including war and terrorism, public health crises such as the COVID-19 pandemic, and natural disasters including earthquakes, typhoons, floods and fires;

• potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers;

• difficulties and costs of staffing and managing foreign operations;

• difficulties protecting or procuring intellectual property rights.

If one or more of these risks occurs, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results will suffer.

We are subject to fluctuations in the exchange rate of the U.S.

dollar and foreign currencies.

A majority of our product sales are currently denominated in U.S.

dollars and fluctuations in the value of the U.S.

dollar relative to foreign currencies could decrease demand for our products and adversely impact our financial performance.

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.

dollar decreases relative to the Singapore dollar or the Canadian dollar, it would become more costly in U.S.

dollars for us to manufacture our products in Singapore and/or in Canada.

Additionally, our expenses are generally denominated in the currencies of the countries in which our operations are located, which is primarily in the United States, with a portion of expenses incurred in Singapore and Canada where a significant portion of our manufacturing operations are located.

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.

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.

Fluctuations in currency exchange rates could have an adverse impact on our financial results in the future.

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

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

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

Labor, tariff, or World Trade Organization-related disputes, piracy, physical damage to shipping facilities or equipment caused by severe weather or terrorist incidents, congestion at shipping facilities, complications related to public health crises (including the ongoing COVID-19 pandemic), inadequate equipment to load, dock, and offload our products, energy-related tie-ups, or other factors could disrupt or delay shipping or off-loading of our products domestically and internationally.

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

We are dependent on single and sole source suppliers for some of the components and materials used in our products, and the loss of any of these suppliers could harm our business.

We rely on single and sole source suppliers for certain components and materials used in our products.

We rely on a limited number of third-party suppliers for some of the components and materials used in our products, and the loss of any of these suppliers, or delays or problems in the supply of components and materials could harm our business.

We rely on a limited number of third-party suppliers for certain components and materials used in our products, including single and sole source suppliers.

Additionally, several of our instruments are assembled at the facilities of contract manufacturers in Singapore.

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Any 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.

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

Attracting new customers and introducing new applications require substantial time and expense.

For example, it may be difficult to identify, engage, and market to customers who are unfamiliar with the current applications of our systems.

Any failure to expand our existing customer base or launch new applications would adversely affect our ability to increase our revenue.

Our success depends on our ability to develop new products and applications for our technology in existing and new markets, while improving the performance and cost-effectiveness of our systems.

New technologies, techniques, or products could emerge that might offer better combinations of price and performance than our current or future product lines and systems.

Existing markets for our products, including high-throughput genomics, single-cell genomics and mass cytometry, as well as potential markets for our products such as high-throughput DNA sequencing and molecular applications, are characterized by rapid technological change and innovation.

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

While we typically plan improvements to our

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

Our business operations depend upon the continuing efforts of our management team and other skilled and experienced personnel, and if we are unable to retain them or to recruit and train new key executives, scientists, and technical support personnel, we may be unable to achieve our goals.

Our success depends largely on the skills, experience, and performance of our management team and scientific and technical support personnel.

The loss of the services of any key member of our management team or our scientific or technical support staff might significantly delay or prevent the development of our products or achievement of other business objectives by diverting management’s attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business.

material adverse effect on our business.

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

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Because of the complex and technical nature of our systems and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our technology.