−Removed: You should consider carefully the risks and uncertainties described below, together with all of the other information in our public filings with the Securities and Exchange Commission, which could materially affect our business, financial condition, results of operations and prospects.
+Added: You should carefully consider the risks and uncertainties described below, together with all of the other information in our public filings with the SEC, which could materially affect our business, financial condition, results of operations and prospects.
The risks described below are not the only risks facing us.
Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition, results of operations and prospects.
−Removed: In addition, the impact of the COVID-19 pandemic and any worsening of the economic environment may exacerbate the risks described below, any of which could have a material impact on us.
+Added: In addition, any worsening of the economic environment and the ongoing COVID-19 pandemic may exacerbate the risks described below, any of which could have a material impact on us.
This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.
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Such risks are discussed more fully below and include, but are not limited to, risks related to:
−Removed: The potential adverse impact of health epidemics, including the ongoing COVID-19 pandemic;
our ability to successfully market, commercialize, and sell current and future products and related maintenance services;
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the complexity of our products giving rise to defects or errors;
−Removed: Our unpredictable and lengthy sales cycle;
−Removed: Our business, financial condition and results of operations could be adversely affected by the political and economic tensions between the United States and other countries, including China;
+Added: our unpredictable and lengthy sales cycles;
+Added: our business, financial condition and results of operations could be adversely affected by political and economic tensions between the United States and other countries, including China and Russia;
securing and maintaining patent or other intellectual property protection for our products and related improvements;
current and future legal proceedings filed against us claiming intellectual property infringement;
+Added: the potential adverse impact of health epidemics, including the ongoing COVID-19 pandemic;
governmental regulations that burden operations or narrow the market for our products;
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volatility of the price of our common stock;
−Removed: Our stock price falling as a result of future offerings or sales.
+Added: our stock price falling as a result of future offerings or sales of securities.
+Added: Our risk factors are not guarantees that no such conditions exist as of the date hereof and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.
Risks Related to Our Business
−Removed: Our business may be adversely affected by health epidemics, including the ongoing COVID-19 pandemic.
−Removed: Our business could be adversely impacted by the effects of COVID-19 or other epidemics or pandemics.
−Removed: As a result of the ongoing COVID-19 pandemic, our financial results continue to be impacted negatively as our customers in multiple regions around the world suspended or curtailed their normal operations in efforts to curb the spread of COVID-19.
−Removed: While a significant number of our customer sites that shut down due to COVID-19 have re-opened, a significant number of our customers had delayed purchases of capital assets due to the negative impact of the pandemic on their businesses.
−Removed: This dynamic continues to negatively impact the recognition of revenue related to the sale of our Sequel and Sequel II/IIe instruments and the associated consumables and software.
−Removed: The inability to receive or accept shipments of orders for our products on a timely basis, or at all, the delay or possible cancellation of orders for our products or related maintenance and support services, and the reduced utilization of our products has negatively affected and may negatively affect in the future our operations and revenues.
−Removed: In response to local stay-at-home orders and in alignment with CDC recommendations, we limited our manufacturing and commercial operations based in Menlo Park, California.
−Removed: We will, however, continue to provide consumables and support to scientists at government, academic, and commercial labs that remain open.
−Removed: To aid in containing the spread of COVID-19, we have implemented remote-work options and are limiting employee travel.
−Removed: We are continuing to monitor this evolving situation.
−Removed: Our manufacturing partners and suppliers have been and could continue to be disrupted by conditions related to COVID-19 or other epidemics or pandemics, possibly resulting in disruption to the production of our products.
−Removed: If our manufacturing partners or suppliers are unable or fail to fulfill their obligations to us for any reason, we may not be able to manufacture our products and satisfy customer demand or our obligations under sales agreements in a timely manner, and our business could be harmed as a result.
−Removed: There is significant uncertainty relating to the long-term effect of COVID-19 on our business.
−Removed: Infections may resurge or become more widespread and the limitation on our ability to travel and timely sell and distribute our products, as well as any closures or supply disruptions, may be extended for longer periods of time, which could have a negative impact on our business, financial condition and operating results.
−Removed: For example, because our semiconductor manufacturers are located in a region where immunization rates in certain communities may be low, the Omicron variant of COVID-19, as well as any future variants that evolve, could impact workforce availability at those locations and disrupt supply.
−Removed: Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
−Removed: Specifically, difficult macroeconomic conditions, such as decreases in discretionary capital expenditure spending, changes to the government funding environment, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as limited or significantly reduced points of access of our products, could have a continuing adverse effect on the demand for some of our products and, consequently, related maintenance and support services.
−Removed: The degree of impact of COVID-19 on our business will depend on several factors, such as the duration and the extent of the pandemic, as well as actions taken by governments, businesses and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time.
The commercialization and sales of our current or future products may be unsuccessful or less successful than anticipated.
While we plan to continue pursuing new products and expand into adjacent markets, we have limited experience in managing and selling multiple products and, as a result, may face challenges selling in new markets and fail to successfully carry out these initiatives, which may adversely impact our business, financial condition or results of operation.
−Removed: In September 2015, we launched the PacBio Sequel ® System, and concurrently began phasing out production of PacBio RS II instruments, and, in April 2019 we announced the commercial launch of the Sequel II System .
−Removed: In October 2020, we
−Removed: launched the Sequel IIe System, which has increased computational capacity, and is designed to enable customers to generate PacBio HiFi reads more efficiently.
−Removed: In April 2021, we released a new HiFi sequencing workflow allowing for more accurate HiFi reads with limited sample quantities.
−Removed: We placed 374 Sequel II/IIe systems during the year ended December 31, 2021, and we expect the number of Sequel II/IIe placements to continue to grow during 2022.
We have made and expect to continue making substantial investments to develop new products and enhance our existing products through our acquisitions and research and development efforts.
−Removed: For example, we are developing a SBB short read sequencing platform.
+Added: For example, we recently announced our new Revio TM long-read sequencing system in the fourth quarter of 2022, and expect to commence commercial Revio shipments in March 2023, and we are also progressing development of Onso TM , our SBB short-read platform, and remain on track for commercial shipment in the second quarter of 2023.
+Added: Our future success is substantially dependent on our ability to successfully develop and commercialize our products, including Revio and Onso, which are anticipated to be used in demanding scientific research that requires substantial levels of accuracy and precision.
+Added: In addition, we may not be successful in transitioning our Revio and Onso products from our prior generation products, and could incur related obsolete inventory charges.
+Added: Customers may also be slower that we anticipate in making new capital equipment acquisitions, especially in the current economic environment.
However, due to challenges we may experience in developing and marketing our existing products and launching new products, we may not be able to effectively:
manage the timeliness of our new product introductions and the rate at which sales of our new products may cannibalize sales of our older products or manage sales and marketing of multiple sequencing platforms;
−Removed: drive adoption of our current and future products, including the Sequel II/IIe Systems and products under development related to our emerging SBB technology;
+Added: drive adoption of our current and future products, including the Sequel II/IIe Systems, the Revio system and products under development related to our emerging SBB technology, including the Onso system;
maintain our competitive position by continuing to attract and retain customers for our products;
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accommodate customer expectations and demands with respect to our products, increase product adoption by our existing customers or develop new customer relationships;
+Added: deliver our beta systems to our external beta testing sites or complete our external beta testing program on our currently expected timelines;
+Added: overcome unexpected challenges discovered during beta testing;
+Added: complete the scientific and technical validation of new products, such as Onso, on our currently expected timeline or at all;
deliver our future products in a timely manner to our customers;
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protect our proprietary technology;
−Removed: attract, retain and motivate qualified personn el.
−Removed: The risks noted above, especially with respect to the marketing, sales, and commercialization of our products, may be heightened by the impact of the COVID-19 pandemic.
+Added: attract, retain, and motivate qualified personnel.
+Added: The risks noted above, especially with respect to the marketing, sales, and commercialization of our products, may be heightened by the impact of current uncertain market and other conditions.
In addition, a high percentage of our expenses is and will continue to be fixed.
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We have incurred losses to date, and we expect to continue to incur significant losses as we develop our business and may never achieve profitability.
−Removed: Except for the quarters ended September 30, 2015 (as a result of a one-time gain on lease amendments), March 31, 2020 (as a result of the recognition of a gain relating to the Continuation Advances), December 31, 2020 (as a result of recognition of gain relating to the Reverse Termination Fee), September 30, 2021 (as a result of the recognition of a one-time income tax benefit from business acquisitions), and the year ended December 31, 2020 (as a result of recognition of gain relating to the Reverse Termination Fee and gain relating to the Continuation Advances), we have incurred net losses since inception and we cannot be certain if or when we will produce sufficient revenue from our operations to support our costs.
+Added: We have generally incurred net losses each quarter since inception, and we cannot be certain if or when we will produce sufficient revenue from our operations to support our costs.
Even if profitability is achieved in the future, we may not be able to sustain profitability on a consistent basis.
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limit our ability to borrow additional funds.
+Added: In addition, inflationary pressure, including as a result of supply shortages, has adversely impacted and could continue to adversely impact our financial results, and our operating costs may increase.
+Added: We may not fully offset these cost increases by raising prices for our products and services, which could result in downward pressure on our margins.
+Added: Further, our customers may choose to reduce their business with us if we increase our pricing.
Any or all of the foregoing may have a material adverse effect on our business, operations, financial condition, and prospects.
+Added: An impairment in value of our tangible or intangible assets could also be recorded as a result of weaker economic conditions.
We are not cash flow positive and may not have sufficient cash to make required payments under the terms of our debt or fund our long-term planned operations.
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The shares may also be sold at a time when the market price for our common stock is low because we are in need of the funds, which will further dilute existing holders more than if the market price for our common stock was higher.
−Removed: We believe that our growth will depend, in part, on our ability to fund our commercialization efforts and our efforts to develop new products, including any improvements to the SMRT Cell 8M and Sequel II/IIe Systems and our planned development of a SBB short read sequencing platform.
+Added: We believe that our growth will depend, in part, on our ability to fund our commercialization efforts and our efforts to develop new products, including any improvements to our existing products and the continued development and anticipated launch of the Revio HiFi long-read system and the Onso SBB short-read system.
To the extent our existing resources are not sufficient, it may require us to delay, or even not allow us to conduct any or all of these activities that we believe would be beneficial for our future growth.
We may need to raise additional funds through public or private debt or equity financing or alternative financing arrangements, which may include collaborations or licensing arrangements.
−Removed: If we are unable to raise funds on favorable terms, or at all, we may have to reduce our cash burn rate and may not be able to support our commercialization efforts and launching of new products, operations or to increase or maintain the level of our research and development activities.
+Added: If we are unable to raise funds on favorable terms, or at all, we may have to reduce our cash burn rate and may not be able to support our commercialization efforts, launching of new products, or operations, or to increase or maintain the level of our research and development activities.
If we are unable to generate sufficient cash flows or to raise adequate funds to finance our forecasted expenditures, we may have to make significant changes to our operations, including delaying or reducing the scope of, or eliminating some or all of, our development programs.
We also may have to reduce sales, marketing, engineering, customer support or other resources devoted to our existing or new products, or we may need to cease operations.
−Removed: Any of these actions could materially impede our ability to achieve our business objectives and could materially harm our operating results.
+Added: Any of these actions could materially
+Added: impede our ability to achieve our business objectives and could materially harm our operating results.
If our cash, cash equivalents and investments are insufficient to fund our projected operating requirements and we are unable to raise capital, it could have a material adverse effect on our business, financial condition and results of operations and prospects.
−Removed: We have made acquisitions and, in the future, may continue to acquire businesses, technologies or assets, form joint ventures or make other strategic investments with companies that could harm our operating results, dilute our stockholders’ ownership, or cause us to incur debt or significant expense.
+Added: We have made acquisitions and, in the future, may continue to acquire businesses, technologies or assets, form joint ventures or make other strategic investments with companies that could adversely affect our operating results, dilute our stockholders’ ownership, or cause us to incur debt or significant expense.
As part of our business strategy, we have acquired and expect to continue to pursue acquisitions of complementary businesses, technologies, or assets.
We may also pursue technology license arrangements, strategic alliances or investments that complement our business.
−Removed: For example, we entered into a multi-year Development and Commercialization Agreement with Invitae, whereby Invitae provides us with funding to develop certain products relating to production-scale high-throughput sequencing.
In July 2021, we acquired Circulomics, and in September 2021, we acquired Omniome.
−Removed: Acquisitions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations, including:
−Removed: i ntense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;
+Added: As of December 31, 2022, we recorded goodwill of $410.0 million and intangible assets of $410.2 million.
+Added: Business Acquisitions , in Part II, Item 8 of this Annual Report on Form 10-K.
+Added: Acquisitions and strategic transactions involve numerous risks, any of which could harm our business and negatively affect our financial condition and results of operations, including:
+Added: intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;
failure or material delay in closing a transaction;
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risks that regulatory bodies do not approve our acquisitions or business combinations or delay such approvals;
−Removed: theft of our trade secrets or confidential information that we share with potential acquisition candidates;
+Added: theft of our trade secrets or confidential information that we share with potential acquisition candidates or other potential strategic partners;
risk that an acquired company or investment in new services cannibalizes a portion of our existing business;
−Removed: adverse m arket reaction to an acquisition.
+Added: adverse market reaction to an acquisition or other strategic transaction.
To finance any acquisitions or other strategic investments, we may raise additional funds, which could adversely affect our existing stockholders and our business.
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In addition, our stockholders may experience substantial dilution as a result of additional securities we may issue for acquisitions.
−Removed: Open market sales of substantial amounts of our common stock issued to
−Removed: stockholders of companies we acquire could also depress our stock price.
+Added: Open market sales of substantial amounts of our common stock issued to stockholders of companies we acquire could also depress our stock price.
Additional funds may not be available on terms that are favorable to us, or at all.
−Removed: If we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, new technologies, services, and other assets and strategic investments, or if we fail to successfully integrate such acquisitions or investments, our business, financial condition, and results of operations could be adversely affected.
−Removed: If we are unable to successfully develop and timely manufacture our current and future products, including with respect to SMRT Cell Sequel II/IIe Systems, the SBB products under development, and related products, our business may be adversely affected.
+Added: If we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, new technologies, services, and other assets and strategic investments, or if we fail to successfully integrate such acquisitions or investments, our business, financial condition, and results of operations could be adversely affected, including potential impairments of goodwill and intangible assets.
+Added: If we are unable to successfully develop and timely manufacture our current and future products, including with respect to SMRT Cells, Sequel II/IIe Systems, Revio, Onso, and other SMRT Cell, HiFi, and SBB products under development, and related products, our business may be adversely affected.
In light of the highly complex technologies involved in our products, there can be no assurance that we will be able to manufacture and commercialize our current and future products on a timely basis or continue providing adequate support for our existing products.
−Removed: The commercial success of our products, including the Sequel and Sequel II/IIe Systems, depends on a number of factors, including performance and reliability of the system, our anticipating and effectively addressing customer preferences and demands, the success of our sales and marketing efforts, effective forecasting and management of product demand, purchase commitments and inventory levels, effective management of manufacturing and supply costs, and the quality of our products, including consumables such as SMRT Cells and reagents.
−Removed: Should we face delays in or discover unexpected defects during the further development or manufacturing process of instruments or consumables related to our products, including with respect to SMRT Cells, reagents, Sequel II/IIe Systems, SBB products under development, and including any delays or defects in software development or product functionality, the timing and success of the continued rollout and scaling of our products may be significantly impacted, which may materially and negatively impact our revenue and gross margin.
−Removed: The ability of our customers to successfully utilize our products will also depend on our ability to deliver high quality SMRT Cells and reagents, including with respect to the SMRT Cell 8M.
−Removed: We have designed SMRT Cells and other consumables specifically for the Sequel and Sequel II/IIe Systems, and may need to develop in the future, other customized SMRT Cells and consumables for our future products.
−Removed: Our production of the SMRT Cells for the Sequel and Sequel II/IIe Systems has been and may in the future be below desired levels and yields, and we have experienced and may experience in the future manufacturing delays, product or quality defects, SMRT Cell variability, and other issues.
+Added: The commercial success of our products, including the Sequel and Sequel II/IIe Systems, and the Revio and Onso products under development, depends on a number of factors, including performance and reliability of the systems, our anticipating and effectively addressing customer preferences and demands, the success of our sales and marketing efforts, effective forecasting and management of product demand, purchase commitments and inventory levels, effective management of manufacturing and supply costs, and the quality of our products, including consumables such as SMRT Cells and reagents.
+Added: Should we face delays in or discover unexpected defects during the further development or manufacturing process of instruments or consumables related to our products, including with respect to SMRT Cells, reagents, Sequel II/IIe Systems, Revio, Onso, and other SMRT Cell, HiFi, and SBB products under development, and including any delays or defects in software development or product functionality, the timing and success of the continued rollout and scaling of our products may be significantly impacted, which may materially and negatively impact our revenue and gross margin.
+Added: The ability of our customers to successfully utilize our products will also depend on our ability to deliver high quality SMRT Cells and reagents.
+Added: We have designed SMRT Cells and other consumables specifically for the Sequel, Sequel II/IIe, and Revio Systems, and may need to develop in the future, other customized SMRT Cells and consumables for our future products.
+Added: Our production of the SMRT Cells for the Sequel and Sequel II/IIe Systems has been and may in the future, including with respect to the Revio system, be below desired levels and yields, and we have experienced and may experience in the future manufacturing delays, product or quality defects, SMRT Cell variability, and other issues.
For example, the COVID–19 pandemic outbreak has impacted and could result in more pronounced impacts to our manufacturing and our ability to supply products.
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Unanticipated problems with our products could divert substantial resources, which may impair our ability to support our new and existing products and could substantially increase our costs.
−Removed: If we encounter development challenges or discover errors in our products late in our development cycle, we may be forced to delay product shipments or the scaling of manufacturing or supply.
−Removed: In particular, if the continued rollout of our current and future products, including with respect to the SMRT Cell 8M and Sequel II/IIe Systems, is delayed or is not successful or less successful than anticipated, then we may not be able to achieve an acceptable return, if any, on our substantial research and development efforts, and our business may be materially and adversely affected.
−Removed: The expenses or losses associated with delayed or unsuccessful product development or lack of market acceptance of our existing and new products, including the SMRT Cell 8M and Sequel II/IIe Systems, could materially and adversely affect our business, operations, financial condition, and prospects.
+Added: If we encounter development challenges or discover errors in our products late in our development cycle, including during external beta testing, we may be forced to undertake design and/or production changes, delay product shipments or the scaling of manufacturing or supply.
+Added: The completion of the production and external testing of our beta systems may also take longer than currently planned, cost more than currently expected and the scientific and technical validation may not be completed on our currently expected timelines or at all.
+Added: Such testing may also expose fundamental flaws in our products that may cause us to abandon the further development of such products.
+Added: If the continued rollout of our current and future products, including with respect to the SMRT Cell, the Sequel II/IIe, Revio, and Onso Systems, is delayed or is not successful or less successful than anticipated, then we may not be able to achieve an acceptable return, if any, on our substantial research and development efforts, and our business may be materially and adversely affected.
+Added: The expenses or losses associated with delayed or unsuccessful product development or lack of market acceptance of our existing and new products, including the SMRT Cell, Sequel II/IIe Systems, Revio, and Onso, could materially and adversely affect our business, operations, financial condition, and prospects.
Our research and development efforts may not result in the benefits that we anticipate, and our failure to successfully market, sell, and commercialize our current and future products could have a material adverse effect on our business, financial condition and results of operations.
We have dedicated significant resources to developing our current products, including sequencing systems and consumables based on our proprietary SMRT sequencing technology and our Sequel and Sequel II/IIe Systems.
−Removed: We are also engaged in substantial and complex research and development efforts, which, if successful, may result in the introduction of new products in the future, including in connection with the SMRT Cell 8M and the Sequel II/IIe Systems.
+Added: We are also engaged in substantial and complex research and development efforts, which, if successful, may result in the introduction of new products in the future, including in connection with the SMRT Cell, the Sequel II/IIe Systems and Revio, in addition to Onso and other SBB products currently under development.
Our research and development efforts are complex and require us to incur substantial expenses.
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If we are unable to successfully manage such joint research and development efforts, our future results may be adversely impacted.
−Removed: In January 2021, we entered into a multi-year collaboration with Invitae to begin development of a production-scale high-throughput sequencing platform;
−Removed: in certain termination circumstances of this collaboration, we may be obligated to refund all or a portion of the development funds advanced by Invitae and/or we may owe Invitae a share of the revenue generated from the sale of the program products.
−Removed: Furthermore, we need to continue to expand our internal capabilities or seek new partnerships or collaborations, or both, in order to successfully develop, market, sell and commercialize our products for and in the markets we seek to reach.
+Added: For example, in January 2021, we entered into a
+Added: development agreement with Invitae, which was amended and restated on June 24, 2022 (the “Invitae Development Agreement”), regarding a multi-year collaboration for the development of a production-scale high-throughput sequencing platform.
+Added: While we anticipate that in connection with the Invitae Development Agreement, we will continue to receive feedback, input and insight from Invitae in connection with our intended development of new high-throughput sequencing systems, such feedback is not contractually required and Invitae has no contractual right to participate in decisions regarding the development program for such new sequencing systems.
+Added: Invitae is not contractually obligated to reimburse us for development costs under the Invitae Development Agreement.
+Added: We do not expect to receive any additional revenue under the Invitae Development Agreement apart from potential purchases by Invitae of our instruments and consumables.
+Added: In consideration of non-refundable Development Costs (as defined in the Invitae Development Agreement) paid by Invitae to us pursuant to the Invitae Development Agreement, we have provided Invitae with credits in connection with Invitae’s anticipated purchase of currently available and in-development sequencing systems (instruments and consumables).
+Added: In addition, subject to certain conditions, Invitae will be entitled to most favored pricing for our Sequel IIe systems and certain in-development systems, including the Revio system and we may be required to sell instruments to Invitae at below-market prices.
+Added: Furthermore, we will need to continue to expand our internal capabilities or seek new partnerships or collaborations, or both, in order to successfully develop, market, sell and commercialize our products for and in the markets we seek to reach.
If we are unable to do so or are delayed, then this could materially and adversely affect our business, operations, financial condition, and prospects.
−Removed: We must successfully manage new product introductions and transitions, including with respect to the SMRT Cell 8M and Sequel II/IIe Systems , and the development of our proposed SBB short read sequencing platform, and we may incur significant costs during these transitions and development, and these efforts may not result in the benefits we anticipate.
+Added: We must successfully manage new product introductions and transitions, including with respect to the SMRT Cell, the Sequel II/IIe Systems, and the development of the Revio HiFi long-read sequencing system and the Onso SBB short-read sequencing system, and we may incur significant costs during these transitions and development, and these efforts may not result in the benefits we anticipate.
If our products and services fail to deliver the performance, scalability or results expected by our current and future customers, or are not delivered on a timely basis, our reputation and credibility may suffer, our current and future sales and revenue may be materially harmed and our business may not succeed.
−Removed: For instance, if we are not able to realize the benefits we anticipate from the development and commercialization of the SMRT Cell 8M and Sequel II/IIe Systems, our proposed SBB short read sequencing platform, and any future products that may be developed for medical and clinical uses, it could have a material adverse effect on our business, financial condition and results of operations.
+Added: For instance, if we are not able to realize the benefits we anticipate from the development and commercialization of the SMRT Cell, Sequel II/IIe Systems, the Revio HiFi long-read sequencing system, and the Onso SBB short-read sequencing system, and any future products that may be developed for research, medical and clinical uses, it could have a material adverse effect on our business, financial condition and results of operations.
In addition, the introduction of future products, including with respect to future long-read and short-read products, and related consumables, has and may in the future lead to our limiting or ceasing development of further enhancements to our existing products as we focus our resources on new products, and has resulted and could in the future result in reduced marketplace acceptance and loss of sales of our existing products, materially adversely affecting our revenue and operating results.
−Removed: The introduction of new products has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.
−Removed: Further, we have experienced, and may in the future experience, difficulty in managing or forecasting customer reactions, purchasing decisions or transition requirements with respect to newly launched products.
+Added: The introduction of new products, including the recent announcement of our Revio system, has had and may in the future also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in the future delay or cancel orders of existing products in anticipation of new products and we may also be pressured to decrease prices for our existing products.
+Added: Our experience in managing product transitions is limited, and we have experienced, and may in the future experience, difficulty in managing or forecasting customer reactions, purchasing decisions or transition requirements with respect to newly launched products.
We have incurred and may continue to incur significant costs in completing these transitions, including costs of write-downs of our products, as current or future customers transition to new products.
−Removed: If we do not successfully manage these product transitions, including with respect to the SMRT Cell 8M and Sequel II/IIe System, our business, operations, financial condition, and prospects may be materially and adversely affected.
+Added: If we do not successfully manage these product transitions, including with respect to the SMRT Cell, Sequel II/IIe Systems, the Revio and Onso Systems, and any future long-read and short-read products, our business, operations, financial condition, and prospects may be materially and adversely affected.
+Added: Our business may be adversely affected by health epidemics, including the ongoing COVID-19 pandemic.
+Added: Our business has been and could be further adversely impacted by the effects of COVID-19 or other epidemics or pandemics.
+Added: Although it is not possible at this time to estimate the impact that health epidemics, including the ongoing COVID-19 pandemic, could have on our business, the continued spread of pandemics and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture of our products.
+Added: Our manufacturing partners and suppliers have been and could continue to be disrupted by conditions related to COVID-19 or other epidemics or pandemics, possibly resulting in disruption to the production of our products.
+Added: If our manufacturing partners or suppliers are unable or fail to fulfill their obligations to us for any reason, we may not be able to manufacture our products and satisfy customer demand or our obligations under sales agreements in a timely manner, and our business could be harmed as a result.
+Added: There is significant uncertainty relating to the long-term effect of COVID-19 on our business.
+Added: Infections may resurge or become more widespread and any ensuing disruptions to business activities or supply chains could have a negative impact on our business, financial condition, and operating results.
+Added: Because our semiconductor manufacturers are located in a region where immunization rates in certain communities may be low, new and emerging variants of COVID-19 could impact workforce availability at those locations and disrupt supply.
+Added: For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of COVID-19 and such measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, as well as customer demand for our products and demand through certain distributors.
+Added: The COVID-19 pandemic has caused us to modify our business practices, including limiting certain of our commercial operations and limiting certain employees from working in the office.
+Added: We have offered, and may plan to continue to offer, a significant percentage of our employees flexibility in the amount of time they work in an office, which could adversely impact the productivity of certain employees and harm our business, including our future operating results.
+Added: This may also present risks for our strategy and may present operational, cybersecurity, and workplace culture challenges that may adversely affect our business.
+Added: Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including recessionary effects and inflationary pressures.
+Added: Specifically, difficult macroeconomic conditions, such as decreases in discretionary capital expenditure spending, changes to the government funding environment, a reduction in or the lapsing of COVID-19-related governmental stimulus measures, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as limited or significantly reduced points of access of our products, could have a continuing adverse effect on the demand for some of our products and, consequently, related maintenance and support services.
+Added: The degree of impact of COVID-19 on our business will depend on several factors, such as the duration and the extent of the pandemic, the risk of waning immunity among persons already vaccinated and an increase in fatigue or skepticism with respect to initial or booster vaccinations, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time.
Significant changes to our leadership team and the resulting management transitions might harm our future operating results.
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Barnes who retired on August 7, 2020.
−Removed: Our Chief Operating Officer, Mark Van Oene, and our Chief Commercial Officer, Peter Fromen, were each appointed effective January 8, 2021.
−Removed: Also, our Vice President and Chief Accounting Officer Michele Farmer was appointed effective May 17, 2021, and our Chairman of the Board Dr.
+Added: Our Chief Operating Officer Mark Van Oene was appointed effective January 8, 2021.
+Added: Jeff Eidel was appointed Chief Commercial Officer effective August 16, 2022, succeeding Peter Fromen who resigned effective May 20, 2022.
+Added: Also, our Vice President and Chief Accounting Officer Michele Farmer was appointed effective May 17, 2021, and our Chair of the Board Dr.
Milligan was appointed effective September 14, 2020.
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In particular, our scientists and engineers are critical to our technological and product innovations, and we will need to hire additional qualified personnel.
−Removed: Our industry, particularly in the San Francisco Bay Area, is characterized by high demand and intense competition for talent, and the turnover rate can be high.
+Added: Our industry, particularly in the San Francisco Bay Area, is characterized by high demand and intense competition for talent, and the turnover rate has been and may continue to be high.
We compete for qualified management and scientific personnel with other life science companies, academic institutions and research institutions, particularly those focusing on genomics.
−Removed: In addition, we will need to continue to recruit, hire and retain sales personnel to support the commercialization of our products.
+Added: This competition has become exacerbated by the increase in employee resignations in 2021 and continued high rates of employee turnover continuing through 2022 that have been experienced by us and reported by employers nationwide.
+Added: In addition, we have experienced significant turnover in our senior management team in recent periods.
+Added: To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have issued stock options and restricted stock units that vest over time.
+Added: The value to employees of stock options and restricted stock units that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.
+Added: We may face challenges in retaining and recruiting such individuals due to sustained declines in our stock price that could reduce the retention value of equity awards.
+Added: 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 launches, business growth prospects, results of operations and financial condition.
+Added: In addition, we will need to continue to recruit, hire and retain sales personnel to support the commercialization of our existing and new products.
Our employees could leave our company with little or no prior notice and would be free to work for a competitor.
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To accomplish this, we must successfully commercialize, and continue development of, our proprietary SMRT Sequencing technology for use in a variety of life science and other research applications, including uses by academic, government and clinical laboratories, as well as pharmaceutical, diagnostic, biotechnology, and agriculture companies, among others.
−Removed: However, we may be unsuccessful in these efforts and the sale and commercialization of the SMRT Cell 8M and Sequel II/IIe Systems, and related products may not grow sufficiently to cover our costs.
−Removed: There can be no assurance that we will be successful in adding new products or securing additional customers for our current and future products, including with respect to the SMRT Cell 8M and Sequel II/IIe Systems and products related to our recent Circulomics and Omniome acquisitions.
−Removed: If we are unable to develop SBB technology and sell acquired technology product, we may fail to achieve our strategic commercial initiatives in connection with the planned release of new products and anticipated entry into new markets.
+Added: However, we may be unsuccessful in these efforts and the sale and commercialization of the SMRT Cell, Sequel II/IIe Systems, and anticipated sale and commercialization of Revio and Onso, and related products may not grow sufficiently to cover our costs.
+Added: There can be no assurance that we will be successful in adding new products or securing additional customers for our current and future products, including with respect to the SMRT Cell, Sequel II/IIe Systems, Revio and Onso.
+Added: If we are unable to successfully develop SBB technology and sell acquired technology products, we may fail to achieve our strategic commercial initiatives in connection with the planned release of new products and anticipated entry into new markets.
Our ability to further penetrate existing applications and any new applications depends on a number of factors, including the cost, performance and perceived value associated with our products, as well as customers’ willingness to adopt a different approach to nucleic acid sequencing.
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Furthermore, we cannot guarantee that our products will be satisfactory to potential customers or that our products will perform in accordance with customer expectations.
−Removed: Nucleic acid sequencing applications are new and dynamic, and there can be no assurance that they will develop as quickly as we anticipate, that they will reach their full potential or that our products will be appropriate competitive for these applications.
+Added: Nucleic acid sequencing applications are new and dynamic, and there can be no assurance that they will develop as quickly as we anticipate, that they will reach their full potential or that our products will be appropriate or competitive for these applications.
As a result, we may be required to refocus our marketing efforts, and we may have to make changes to the specifications of our products to enhance our ability to enter particular applications more quickly.
We may also need to delay full-scale commercial deployment of new products as we develop them in order to perform quality control and early access user testing.
+Added: We also need to maintain reliable supply chains for the various components in our new products and consumables to support large-scale commercial production.
Even if we are able to implement our technology successfully, we and/or our sales and distribution partners may fail to achieve or sustain market acceptance of our current or future products across the full range of our intended life science and other applications.
We need to continue to expand and update our internal capabilities or to collaborate with other partners, or both, in order to successfully expand sales of our products in the applications that we seek to reach, which we may be unable to do at the scale required to support our business.
−Removed: If the demand for our products grows more slowly than anticipated, if we are unable to successfully scale or otherwise ensure sufficient manufacturing capacity for new products to meet demand, if we are not able to successfully market and sell our products, if competitors develop better or more cost-effective products, if our product launches and commercialization are not successful, or if we are unable to further grow our customer base or do not realize the growth with existing customers that we are expecting, our current and future sales and revenue may be materially and adversely harmed and our business may not succeed.
+Added: If the demand for our products grows more slowly than anticipated, if we are unable to successfully scale or otherwise ensure sufficient manufacturing capacity for new products to meet demand, if we are not able to successfully market and sell our products, if competitors develop better or more cost-effective products, if our product launches and commercialization are not successful, or if we are unable to further grow our customer base or do not realize the growth with existing customers that we are expecting, our current and future sales and revenue may be materially and adversely harmed, or we may recognize an impairment loss, and our business may not succeed.
We rely on other companies for the manufacture of certain components and sub-assemblies and intend to outsource additional sub-assemblies in the future, some of which are sole sources.
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If we are required to purchase these components from alternative sources, it could take several months or longer to qualify the alternative sources.
−Removed: If we are unable to secure a sufficient supply of these product components on a timely basis, or if these components do not meet our expectations or specifications for quality and functionality, our operations and manufacturing would be materially and adversely affected, we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.
+Added: If we are unable to source these product components from sole-source third-party manufacturing and supply collaborators for any reason, including in connection with acts of terrorism, hostilities, military conflict and acts of war, including between China and Taiwan, or secure a sufficient supply of these product components on a timely basis, or if these components do not meet our expectations or specifications for quality and functionality, our operations and manufacturing would be materially and adversely affected, we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.
The operations of our third-party manufacturing partners and suppliers have been and could continue to be disrupted by conditions unrelated to our business or operations or that are beyond our control, including but not limited to international trade restrictions, inflation, supply chain disruptions, and conditions related to COVID-19 or other epidemics.
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During these periods of shortages or delays, the price of components may increase, or the components may not be available at all.
+Added: Our suppliers have raised their prices and may continue to raise prices that we may not be able to pass on to our customers, which could adversely affect our business, including our competitive position, market share, revenues, and profit margins in material ways.
We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed.
−Removed: Accordingly, our revenue and gross margins could suffer until other sources can be developed.
+Added: For example, the Chinese government may re-impose lockdowns or similar measures to combat the spread of COVID-19 and these measures have had, and may continue to have in the future, a negative impact on manufacturing and/or supply chains, in addition to customer demand for our products and demand through certain distributors.
+Added: If as a result of global economic or political instability, such as the political uncertainty associated with an escalation of the war in Ukraine, potential uncertainty related to Taiwan and its relationship with China, other disease outbreaks, or supply issues, we or our contractors could experience shortages, business disruptions or delays for materials sourced or manufactured in the affected countries, and their ability to supply us with instruments or product components may be affected.
+Added: From time to time, certain
+Added: components of our systems and reagents may reach the end of their life cycles or become obsoleted by our suppliers, and we would have to procure alternative sources for these end-of-life products.
+Added: If we encounter delays or difficulties in securing the quality and quantity of materials we require for our products, our supply chain would be interrupted, which would adversely affect sales.
+Added: If any of these events occur, our business and operating results could be harmed.
+Added: Accordingly, if any of the foregoing occurs, our ability to commercialize our products, revenue and gross margins could suffer until lockdowns from COVID-19 infections are reduced, supply issues or business disruptions are resolved and/or other sources can be developed.
In addition, because our semiconductor suppliers are in regions that may have communities with low vaccination rates, the Omicron variant of COVID-19, or any variants that evolve in the future, could lead to increased infections among workers that could further disrupt the supply chain.
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If we do not accurately anticipate our needs or if we receive insufficient components to manufacture our products on a timely basis to meet customer demand, our sales and our gross margin may be adversely affected, and our business could be materially harmed.
−Removed: If we are unable to reduce our manufacturing costs and establish and maintain reliable, high-volume manufacturing suppliers as we scale our operations, our business, operations, financial condition, and prospects could be materially and adversely harmed.
+Added: If we are unable to reduce our manufacturing costs and establish and maintain reliable, high-volume manufacturing suppliers as we scale our operations and expand our product offerings, our business, operations, financial condition, and prospects could be materially and adversely harmed.
We may be unable to consistently manufacture our instruments and consumables, including SMRT Cells and reagents, to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level.
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If we were to lose our ISO certifications, then our customers might choose not to purchase products from us.
−Removed: There is also no assurance that we will be able to increase manufacturing yields and decrease costs, or that we will be successful in forecasting customer demand or manufacturing and supply costs, or that product supplies, including reagents or integrated chips, will not be limited or interrupted, or will be of satisfactory quality or continue to be available at acceptable prices.
+Added: There is also no assurance that we will be able to increase manufacturing yields and decrease costs, particularly if high rates of inflation continue, or that we will be successful in forecasting customer demand or manufacturing and supply costs, or that product supplies, including reagents or integrated chips, will not be limited or interrupted, or will be of satisfactory quality or continue to be available at acceptable prices.
Furthermore, while we are undertaking efforts to increase our manufacturing scale and capability, we may not be able to increase manufacturing to meet anticipated demand or may experience downtime in our manufacturing facilities, including, for example, if we experience increased cases of COVID-19 among our employees, or if our suppliers are unable to meet our increased demand at a time when the supply chain is under duress due to potential dislocations and disruptions in product and employee availability due to COVID-19.
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Our industry is characterized by rapid and significant technological changes, frequent new product introductions and enhancements and evolving industry standards.
−Removed: Our future success depends on our ability to continually improve our products, to develop and introduce new products that address the evolving needs of our customers on a timely and cost-
−Removed: effective basis and to pursue new opportunities.
+Added: Our future success depends on our ability to continually improve our products, to develop and introduce new products that address the evolving needs of our customers on a timely and cost-effective basis and to pursue new opportunities.
These new opportunities may be outside the scope of our proven expertise or in areas where demand is unproven, and new products and services developed by us may not gain market acceptance or may not adequately perform in order to capture market share.
Our inability to develop and introduce new products and to gain market acceptance of our existing and new products could harm our future operating results.
−Removed: Unanticipated difficulties or delays in replacing existing products with new products or in commercializing our existing or new products in sufficient quantities and of acceptable quality to meet customer demand, including with respect to the SMRT Cell 8M and Sequel II/IIe Systems, could diminish future demand for our products and may materially and adversely harm our future operating results.
+Added: Unanticipated difficulties or delays in replacing existing products with new products or in commercializing our existing or new products in sufficient quantities and of acceptable quality to meet customer demand, including with respect to the SMRT Cell, Sequel II/IIe Systems, Revio and Onso, could diminish future demand for our products and may materially and adversely harm our future operating results.
+Added: The size of the markets for our products, including our Revio and Onso instruments, may be smaller than estimated, and new market opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our products.
+Added: The market for sequencing systems and consumables products is evolving, making it difficult to accurately predict the size of the markets for our current and future products, including our Revio and Onso instruments.
+Added: Our estimates of the total addressable market for our current and future products are based on a number of internal and third-party estimates and assumptions that may be incorrect, including the assumptions that academic, governmental, corporate, or other sources of funding will continue to be available to life sciences researchers at times and in amounts necessary to allow them to purchase our products.
+Added: In addition, sales of new products may take time to develop and mature and we cannot be certain that these market opportunities will develop as we expect.
+Added: While we believe our assumptions and the data underlying our estimates of the total addressable market for our products are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates, or those underlying the third-party data we have used, may change at any time, thereby reducing the accuracy of our estimates.
+Added: As a result, our estimates of the total addressable market and growth opportunities for our products may be incorrect.
+Added: The future growth of the market for our current and future products depends on many factors beyond our control, including recognition and acceptance of our products by the research and scientific communities, the growth, prevalence and costs of competing products and solutions and the development of robust ecosystems supporting our products and their methodologies.
+Added: For example, our long-read sequencers, such as Revio, require tools for effective, high quality sample collection and preparation as well as advanced bioinformatic tools to process results;
+Added: if these tools are unavailable to our customers, whether at a reasonable cost or at all, the market acceptance and growth of our long-read sequencers, like Revio, may be negatively impaired.
+Added: There can be no assurance that our current or future products will gain traction in the market.
+Added: If the markets for our current and future products are smaller than estimated or do not develop as we expect, our growth may be limited, and it could materially and adversely affect our business, operations, financial condition and prospects.
Increased market adoption of our products by customers may depend on the availability of sample preparation and informatics tools, some of which may be developed by third parties.
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We operate in a highly competitive industry and if we are not able to compete effectively, our business and operating results will likely be harmed.
−Removed: There are a significant number of companies offering nucleic acid sequencing products and/or services, including Illumina, BGI Genomics, Thermo, Oxford Nanopore Technologies Ltd.
−Removed: (“ ONT Ltd.”), Roche, and Qiagen.
+Added: There are a significant number of companies offering nucleic acid sequencing products and/or services, including Illumina, BGI Genomics, Thermo, ONT Ltd., Roche, Bionano, and Qiagen.
+Added: Other companies recently entering the market include Ultima Genomics, Element Biosciences and Singular Genomics.
Many of these companies currently have greater name recognition, more substantial intellectual property portfolios, longer operating histories, significantly greater financial, technical, research and/or other resources, more experience in new product development, larger and more established manufacturing capabilities and marketing, sales, and support functions, and/or more established distribution channels to deliver products to customers than we do.
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We may be unable to successfully increase sales of our current products or market and sell our future products.
−Removed: Our ability to achieve profitability depends on our ability to attract customers for our current and future products, and we may be unable to effectively market or sell our products, or find appropriate partners to do so.
+Added: Our ability to achieve profitability depends, in part, on our ability to attract customers for our current and future products including Revio and Onso, and we may be unable to effectively market or sell our products or find appropriate partners to do so.
To perform sales, marketing, distribution, and customer support functions successfully, we face a number of risks, including:
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We receive a significant portion of our revenue from a limited number of customers.
−Removed: For example, for the fiscal years ended December 31, 2021, 2020 and 2019, one of our customers, Gene Company Limited, accounted for approximately 13%, 14% and 17% of our total revenue, respectively.
−Removed: Gene Company Limited is our primary distributor in China.
+Added: For example, for the years ended December 31, 2022, 2021, and 2020, one of our customers, who is our primary distributor in China, accounted for approximately 12%, 13%, and 14% of our total revenue, respectively.
Many of these customers make large purchases on a purchase-order basis rather than pursuant to long-term contracts.
1 unchanged sentence
For example, the cancellation of orders or acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers has materially affected, and in the future could materially affect, our revenue and results of operations in any quarterly period.
−Removed: We have been, and may be in the future be, unable to sustain or increase our revenue from our larger customers, or offset any discontinuation or decrease of purchases by our larger customers with purchases by new or other existing customers.
+Added: We have been, and may in the future be, unable to sustain or increase our revenue from our larger customers, or offset any discontinuation or decrease of purchases by our larger customers with purchases by new or other existing customers.
To the extent one or more of our larger customers experience significant financial difficulty, bankruptcy or insolvency, this could have a material adverse effect on our sales and our ability to collect on receivables, which could materially and adversely harm our financial condition and results of operations.
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Products using our SMRT sequencing technology are highly complex and may develop or contain undetected defects or errors.
−Removed: Our customers have experienced and may continue to experience reliability issues with our existing and future products, including the Sequel System and the Sequel II/IIe Systems.
−Removed: Despite testing, defects or errors may arise in our products, which could result in a failure to obtain, maintain or increase market acceptance of our products, diversion of development resources, injury to our reputation and increased warranty, service and maintenance costs.
−Removed: New products, including the SMRT Cell 8M and Sequel II/IIe Systems, or enhancements to our existing products in particular may contain undetected errors or performance problems that are discovered only after delivery to customers.
−Removed: If our products have
−Removed: reliability or other quality issues or require unexpected levels of support in the future, the market acceptance and utilization of our products may not grow to levels sufficient to support our costs and our reputation and business could be harmed.
+Added: Our customers have previously experienced reliability issues with our existing products, including the Sequel System and the Sequel II/IIe Systems.
+Added: In addition, it is possible our customers could experience reliability issues with current or future products, including the Sequel II/IIe, Onso, and Revio Systems.
+Added: Despite internal and external testing, defects, or errors may arise in our products, which could result in a failure to obtain, maintain, or increase market acceptance of our products,
+Added: diversion of development resources, injury to our reputation and increased warranty, service, and maintenance costs.
+Added: New products, including Revio and Onso, or enhancements to our existing products, including the SMRT Cell and Sequel II/IIe Systems, in particular may contain undetected errors or performance problems that are discovered only after delivery to customers.
+Added: If our products have reliability or other quality issues or require unexpected levels of support in the future, the market acceptance and utilization of our products may not grow to levels sufficient to support our costs and our reputation and business could be harmed.
Low utilization rates of our products could cause our revenue and gross margins to be adversely affected.
−Removed: We generally ship our sequencing instruments with one year of service included in the purchase price with an option to purchase one or more additional years of service.
−Removed: We also provide a warranty for our consumables, which is generally limited to replacing, or at our option, giving credit for any consumable with defects in material or workmanship.
+Added: We provide a warranty for our sequencing instruments and consumables, which is generally limited to replacing, repairing, or at our option, giving credit for any sequencing instrument or consumable with defects in material or workmanship.
+Added: Service contracts for our sequencing instruments may be separately purchased.
Defects or errors in our products may also discourage customers from purchasing our products.
1 unchanged sentence
If our service and support costs increase, our business and operations may be materially and adversely affected.
−Removed: In addition, such defects or errors could lead to the filing of product liability claims against us or against third parties who we may have an obligation to indemnify against such claims, which could be costly and time-consuming to defend and result in substantial damages.
+Added: In addition, such defects or errors could lead to the filing of product liability claims against us or against third parties whom we may have an obligation to indemnify against such claims, which could be costly and time-consuming to defend and result in substantial damages.
Although we have product liability insurance, any product liability insurance that we have or procure in the future may not protect our business from the financial impact of a product liability claim.
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If our orders in backlog do not result in sales, our operating results may suffer.
−Removed: Our sales cycle is unpredictable and lengthy, which makes it difficult to forecast revenue and may increase the magnitude of quarterly or annual fluctuations in our operating results.
−Removed: The sales cycle for our sequencing instruments is lengthy because they represent a major capital expenditure and generally require the approval of our customers’ senior management.
−Removed: This may contribute to substantial fluctuations in our quarterly or annual operating results, particularly during the periods in which our sales volume is low.
−Removed: Factors that may cause fluctuations in our quarterly or operating results include, without limitation, market acceptance for our products;
−Removed: our ability to attract new customers;
−Removed: publications of studies by us, competitors or third parties;
−Removed: the timing and success of new product introductions by us or our competitors or other changes in the competitive dynamics of our industry, such as consolidation;
−Removed: the amount and timing of our costs and expenses;
−Removed: changes in our pricing policies or those of our competitors;
−Removed: general economic, industry and market conditions;
−Removed: the effects of seasonality;
−Removed: the regulatory environment;
−Removed: expenses associated
−Removed: with warranty costs or unforeseen product quality issues;
−Removed: the hiring, training and retention of key employees, including our ability to grow our sales organization;
−Removed: litigation or other claims against us for intellectual property infringement or otherwise;
−Removed: our ability to obtain additional financing as necessary;
−Removed: changes or trends in new technologies and industry standards;
−Removed: and the impact of COVID-19.
+Added: Our sales cycles are unpredictable and lengthy, which makes it difficult to forecast revenue and may increase the magnitude of quarterly or annual fluctuations in our operating results.
+Added: The sales cycles for our sequencing instruments are lengthy because they represent a major capital expenditure and generally require the approval of our customers’ senior management.
+Added: This may contribute to substantial fluctuations in our quarterly or annual operating results, particularly during periods in which our sales volume is low.
Because of these fluctuations, it is likely that in some future quarters our operating results will fall below the expectations of securities analysts or investors.
3 unchanged sentences
Sales to existing customers and the establishment of a business relationship with other potential customers is a lengthy process, generally taking several months and sometimes longer.
−Removed: Following the establishment of the relationship, the negotiation of purchase terms can be time-consuming, and a potential customer may require an extended evaluation and testing period.
+Added: Following the establishment of the relationship, the negotiation of purchase terms can be time-consuming, including as a result of seasonal factors, as discussed below, and a potential customer may require an extended evaluation and testing period.
+Added: Our sales cycles may also lengthen as we introduce our Revio and Onso instruments and their associated consumables to the market, as our customers may have additional administrative, technical or other requirements associated with transitioning to new products and technologies.
In anticipation of product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer payments.
−Removed: As a result, in the event that a sale is not completed or is canceled or delayed, we may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results.
−Removed: Furthermore, because of our lengthy sales cycle, the realization of revenue from our selling efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate significantly from quarter to quarter.
+Added: As a result, if a sale is not completed
+Added: or is canceled or delayed, we may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results.
+Added: Even if our selling efforts are successful, the realization of revenue may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate significantly from quarter to quarter and year over year.
+Added: For more information on the impact of these fluctuations on our results and stock price, see “— Our operating results fluctuate from quarter to quarter and year over year, which makes our future results difficult to predict and could negatively impact the market price of our common stock ,” below.
Because some of our customers and suppliers are based in China, our business, financial condition and results of operations could be adversely affected by the political and economic tensions between the United States and China.
1 unchanged sentence
A significant portion of our revenue is generated from China.
−Removed: For example, for the fiscal years ended December 31, 2021, 2020 and 2019, Gene Company Limited, our primary distributor in China, accounted for approximately 13%, 14% and 17% of our total revenue, respectively.
+Added: For example, for the years ended December 31, 2022, 2021, and 2020, one of our customers, who is our primary distributor in China, accounted for approximately 12%, 13%, and 14% of our total revenue, respectively.
In addition, certain c omponents, some of which are critical components, of our products are manufactured in China.
These components are either sourced directly from companies in China or indirectly from third parties that source from companies in China.
−Removed: The imposition of tariffs or other trade barriers between the U.S.
−Removed: and China, including the tariffs previously implemented and additional tariffs that have been proposed by the U.S.
−Removed: government on various imports from China and by the Chinese government on certain U.S.
−Removed: goods, the scope and duration of which, if implemented, remain uncertain.
−Removed: Beginning in September 2018, the U.S.
−Removed: Trade Representative (the “USTR”) enacted various tariffs of 7.5%, 10%, 15% and 25% on the import of Chinese products, including non-U.S.
−Removed: components and materials that may be used in our products.
−Removed: These tariffs could raise our costs.
−Removed: Additionally, in November 2018, the U.S.
−Removed: Commerce Department’s Bureau of Industry and Security (“BIS”) released an advance notice of proposed rulemaking to control the export of emerging technologies.
−Removed: This notice included “[b]iotechnology, including nanobiology;
−Removed: synthetic biology;
−Removed: genomic and genetic engineering;
−Removed: or neurotech” as possible areas of increased export controls.
−Removed: Therefore, it is possible that our ability to export our products to China may be restricted in the future.
−Removed: China also has imposed tariffs on imports into China from the United States.
+Added: Consequently, we are subject to significant risks associated with the trading relationship between the U.S.
+Added: and China, which is currently characterized by significant uncertainty.
+Added: Tariffs imposed by the U.S.
+Added: and China have increased, and may continue to increase, our costs.
+Added: Additionally, export restrictions imposed by the U.S.
+Added: may impact our ability to export certain products to customers or distributors in China and restrict our ability to use certain integrated circuits in our products, and it is possible that additional restrictions will be put in place that could impact our ability to provide our products to customers or distributors in China or source components from China.
+Added: Moreover, the Chinese government may retaliate against U.S.
+Added: trade restrictions in ways that could impact our business.
Given the relatively fluid regulatory environment in China and the United States and uncertainty how the U.S.
−Removed: or foreign governments will act with respect to tariffs, international trade agreements and policies, there could be additional tax or other regulatory changes in the future.
+Added: or foreign governments will act with respect to export controls, tariffs, international trade agreements and policies, there could be additional import, export, tax, or other regulatory changes in the future.
Any such changes could directly and adversely impact our financial results and results of operations.
+Added: For more information, see “— Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business .
Other risks could include:
1 unchanged sentence
product supply disruptions and increased costs as a result of heightened exposure to changes in the policies of the Chinese government, political unrest or unstable economic conditions in China;
−Removed: the nationalization or other expropriation of private enterprises or intellectual property by the Chinese governm ent.
+Added: the nationalization or other expropriation of private enterprises or intellectual property by the Chinese government.
Difficulties in this relationship may require us to take actions adverse to our business to comply with governmental restrictions on business and trade with China.
In addition, our consumable chips are partly manufactured by a company based in Taiwan.
−Removed: Accordingly, there is a risk that current political tensions between China and Taiwan may lead to circumstances that negatively affect the availability of such consumable chips to us, which could lead to an increase in our supply costs if we cannot find a similar cost alternative supplier, resulting in an adverse impact to our financial results and results of operations.
−Removed: Seasonality may cause fluctuations in our revenue and results of operations.
−Removed: We operate on a December 31st year-end and believe that there are significant seasonal factors which may cause sales of our products, and particularly our sequencing instruments, to vary on a quarterly or yearly basis, contribute to the lengthy sales cycle for our sequencing instruments, and increase the magnitude of quarterly or annual fluctuations in our operating results.
+Added: Our supply of consumables chips and other critical components may be materially and adversely affected by diplomatic, geopolitical, and other developments affecting the relationship between China and Taiwan.
+Added: Accordingly, there is a risk that current political tensions between China and Taiwan may lead to circumstances that negatively affect the availability of such consumable chips and other critical components to us, which could limit or prohibit our ability to manufacture consumable chips and other critical components or lead to an increase in our supply costs if we cannot find a similar cost alternative supplier, which could materially and adversely impact our business, operations, prospects, financial condition and results, and results of operations.
+Added: Our o perating results fluctuate from quarter to quarter and year over year, which makes our future results difficult to predict and could negatively impact the market price of our common stock.
+Added: We operate on a December 31st year-end and believe that there are significant seasonal factors which may cause sales of our products, and particularly our sequencing instruments, to vary on a quarterly or yearly basis, contribute to lengthy sales cycles for our sequencing instruments, and increase the magnitude of quarterly or annual fluctuations in our operating results.
We believe that this seasonality results from a number of factors, including the procurement and budgeting cycles of many of our customers, especially government-funded customers, which often coincide with government fiscal year ends.
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Furthermore, Lunar New Year celebrations, which occur during our first quarter, and may last for a week or longer, resulting in closure of many of our customers’ offices in China and across the Asia-Pacific region have caused, and may in the future cause, decreased sales of our consumables during our first quarter.
−Removed: These factors have contributed, and may contribute in the future, to substantial fluctuations in our quarterly operating results.
−Removed: Because of these fluctuations, it is possible that in some quarters our operating results will fall below the expectations of securities analysts or investors.
−Removed: If that happens, the market price of our stock would likely decrease.
+Added: These factors have contributed, and in the future may contribute, to substantial fluctuations in our quarterly operating results.
+Added: Our operating results during any given period can also be impacted by numerous other factors, including the following:
+Added: market acceptance for our products;
+Added: our ability to attract new customers;
+Added: the length of our sales cycles, as discussed above;
+Added: our ability to achieve economies of scale and other manufacturing efficiencies at the rate we anticipate;
+Added: publications of studies by us, our competitors or third parties;
+Added: the timing and success of new product introductions by us or our competitors or other changes in the competitive dynamics of our industry, such as consolidation;
+Added: the amount and timing of our costs and expenses;
+Added: changes in our pricing policies or those of our competitors;
+Added: general economic, industry and market conditions;
+Added: the regulatory environment in which we operate;
+Added: expenses associated with warranty obligations or unforeseen product quality issues;
+Added: the hiring, training, and retention of key employees, including our ability to grow our sales organization;
+Added: litigation or other claims against us for intellectual property infringement or otherwise;
+Added: our ability to obtain additional financing as necessary;
+Added: changes or trends in new technologies and industry standards;
+Added: and the impact of COVID-19.
+Added: Consequently, it is possible that in some quarters our operating results will fall below the expectations of securities analysts or investors.
+Added: If that happens, the market price of our common stock would likely decrease.
These fluctuations, among other factors, also mean that our operating results in any particular period may not be relied upon as an indication of future performance.
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We believe that we have had one or more ownership changes, as a result of which our existing NOLs are currently subject to limitation.
−Removed: Future changes in our stock ownership could result in additional ownership changes under Section 382.
−Removed: We may not be able to utilize a material portion of our NOLs even if we attain profitability.
−Removed: Furthermore, the changes to deductions, credits and expense recognition resulting from the Tax Cuts and Jobs Act of 2018 enacted on December 22, 2017, have materially impacted the value of our deferred tax assets and liabilities, and could adversely affect our future taxable income and effective tax rate.
+Added: Future changes in our stock ownership could result in additional ownership changes, including potentially material changes, under Section 382.
+Added: Consequently, we may not be able to utilize some or all of our NOLs even if we attain profitability.
Our facilities in California are located near earthquake faults, and the occurrence of an earthquake or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.
−Removed: Our facilities in the San Francisco Bay Area are located near earthquake fault zones and are vulnerable to damage from earthquakes.
+Added: Our facilities in California are located near earthquake fault zones and are vulnerable to damage from earthquakes.
We are also vulnerable to damage from other types of disasters, including fire, floods, power loss, communications failures and similar events.
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If the third parties who license intellectual property to us fail to maintain the intellectual property that we have licensed, or lose rights to that intellectual property, the rights we have licensed may be reduced or eliminated, which would eliminate barriers against our competition.
−Removed: Termination of these licenses or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, or could subject us to claims of intellectual property
−Removed: infringement or contract breach in litigation or other administrative proceedings that could result in damage awards against us and injunctions that could prohibit us from selling our products.
−Removed: In addition, some of our licenses from third parties limit the field in which we can use the licensed technology.
+Added: Termination of these licenses or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, or could subject us to claims of intellectual property infringement or contract breach in litigation or other administrative proceedings that could result in damage awards against us and injunctions that could prohibit us from selling our products.
+Added: In addition, some of our licenses from third parties limit
+Added: the field in which we can use the licensed technology.
Therefore, in order for us to use such licensed technology in potential future applications that are outside the licensed field of use, we may be required to negotiate new licenses with our licensors or expand our rights under our existing licenses.
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In addition, we attempt to protect our intellectual property and proprietary information by requiring our employees and consultants to enter into confidentiality and assignment of inventions agreements, and by entering into confidentiality agreements with our third-party development, manufacturing, sales, and distribution partners, who may also acquire, develop and/or commercialize alternative or competing products or provide services to our competitors.
−Removed: For example, Roche had certain access to our trade secrets and other proprietary information pursuant to our agreement with them, subject to the confidentiality provisions thereof (certain of which provisions survive the termination of the agreement);
+Added: For example, Roche had certain access to our trade secrets and other proprietary information pursuant to an agreement we had entered into with Roche, subject to the confidentiality provisions thereof (certain of which provisions survive the termination of the agreement);
however, Roche is developing potentially competing sequencing products.
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While none of the inter partes reviews requested by ONT were instituted by the U.S.
−Removed: Patent and Trademark Office, challenges of this nature in the future could result in determinations that our patents or pending patent applications are unpatentable to us, or are invalidated or unenforceable in whole or in part and could require us to expend significant time, funds, and other resources in litigating such challenges.
−Removed: Accordingly, adverse rulings
−Removed: in such proceedings could negatively impact the scope of our intellectual property protection for our products and technology, and could materially and adversely affect our business.
+Added: Patent and Trademark Office, challenges of this nature before the Patent Trial and Appeal Board (“PTAB”) in the future could result in determinations that our patents or pending patent applications are unpatentable to us, or are invalidated or unenforceable in whole or in part and could require us to expend significant time, funds, and other resources in litigating such challenges.
+Added: Accordingly, adverse rulings in such proceedings could negatively impact the scope of our intellectual property protection for our products and technology and could materially and adversely affect our business.
+Added: Similar mechanisms for challenging the validity and enforceability of a patent exist in foreign patent offices and courts and may result in the revocation, cancellation, or amendment of any foreign patents we hold now or in the future.
+Added: The outcome following legal assertions of invalidity and unenforceability is unpredictable, and prior art could render our patents invalid.
+Added: If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on such products.
+Added: Such a loss of patent protection would have a material adverse impact on our business.
Some of our technology is subject to “march-in” rights by the U.S.
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Even though we may believe that we have a valid patent on a particular technology, other companies have from time to time taken, and may in the future take, actions that we believe violate our patent rights.
−Removed: For example, we are involved in legal proceedings for patent infringement and related matters in the United States with PGI, and we were previously involved in other legal proceedings with ONT and Harvard University in several United States and European jurisdictions.
+Added: For example, we were previously involved in legal proceedings with ONT and Harvard University in several United States and European jurisdictions.
We have in the past received adverse rulings against us with respect to our complaint with the United States International Trade Commission for one of these proceedings.
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As a result, third parties have claimed, and may in the future claim, that we infringe their patent rights and have filed, and may in the future file lawsuits or engage in other proceedings against us to enforce their patent rights.
−Removed: For example, ONT Ltd.
−Removed: and Harvard University have, in the past, filed claims against us in the High Court of England and Wales and the District Court of Mannheim, Germany for patent infringement, and Personal Genomics of Taiwan, Inc.
−Removed: (“PGI”) has filed claims against us in the U.S.
+Added: For example, we are involved in legal proceedings for alleged patent infringement and related matters in the United States with Personal Genomics of Taiwan, Inc.
+Added: (“PGI”), Take2 Technologies, Ltd., and the Chinese University of Hong Kong.
+Added: In addition, ONT Ltd.
+Added: and Harvard University have, in the past, filed claims against us in the High Court of England and Wales and the District Court of Mannheim, Germany for patent infringement, and PGI has filed claims against us in the U.S.
District Court for the District of Delaware and in the Wuhan People’s Court in China.
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Even if we have an agreement that indemnifies us against such costs, the indemnifying party may be unable to uphold its contractual obligations.
−Removed: To avoid or settle legal claims, it may be necessary or desirable in the future to obtain licenses relating to one or more products or relating to current or future technologies, which could negatively affect our gross margins.
+Added: To avoid or settle legal claims, it may be necessary or desirable in the future to obtain licenses relating to one or more products or relating to current or future
+Added: technologies, which could negatively affect our gross margins.
We may not be able to obtain these licenses on commercially reasonable terms, or at all.
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A portion of the products or technologies developed and/or distributed by us incorporate “open source” software, and we may incorporate open source software into other products or technologies in the future.
−Removed: Some open source software
−Removed: licenses require that we disclose the source code for any modifications to such open source software that we make and distribute to one or more third parties, and that we license the source code for such modifications to third parties, including our competitors, at no cost.
+Added: Some open source software licenses require that we disclose the source code for any modifications to such open source software that we make and distribute to one or more third parties, and that we license the source code for such modifications to third parties, including our competitors, at no cost.
We monitor the use of open source software in our products to avoid uses in a manner that would require us to disclose or grant licenses under our source code that we wish to maintain as proprietary;
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For example, export of our instruments may be subject to strict regulatory control in a number of jurisdictions.
−Removed: We have expanded and are continuing to expand the international jurisdictions into which we supply products, which increase the risks surrounding governmental regulations relating to our business.
−Removed: The failure to satisfy export control criteria or to obtain necessary clearances could delay or prevent shipment of products, which could materially and adversely affect our revenue and profitability.
+Added: Following Russia’s invasion of Ukraine in February 2022, the United States and other countries imposed certain economic sanctions and severe export control restrictions against Russia and Belarus as well as certain Russian nationals and individuals and entities with ties to Russia, Belarus, and this conflict.
+Added: These sanctions and restrictions have continued to increase as the conflict has further escalated and now cover the export of our products to Russia, and the United States and other countries could impose even wider sanctions and export restrictions and take other actions in the future that could further limit our ability to provide products in certain locations.
+Added: Additionally, new restrictions on the ability to send certain products and technology related to semiconductors, semiconductor manufacturing, and supercomputing to China without an export license discussed above impact our ability to provide products to customers or distributors in China.
+Added: We have expanded and are continuing to expand the international jurisdictions into which we supply products, which increases the risks surrounding governmental regulations relating to our business.
+Added: The need to or failure to satisfy export control criteria or to obtain necessary clearances could delay or prevent shipment of products, which could materially and adversely affect our revenue and profitability.
Moreover, the life sciences industry, which is expected to continue to be one of the primary markets for our technology, has historically been heavily regulated.
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Given the evolving nature of this industry, legislative bodies or regulatory authorities may adopt additional regulations that may adversely affect our market opportunities.
−Removed: Additionally, if ethical and other concerns surrounding the use of genetic information, diagnostics or therapies become widespread, there may be less demand for our products.
+Added: Additionally, if
+Added: ethical and other concerns surrounding the use of genetic information, diagnostics or therapies become widespread, there may be less demand for our products.
Our business is also directly affected by a wide variety of government regulations applicable to business enterprises generally and to companies operating in the life science industry in particular.
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Our products are currently labeled and promoted as research use only (“RUO”) products, and are not currently designed, or intended to be used, for clinical diagnostic tests or as medical devices.
−Removed: However, in the future, certain of our products or related applications, such as those that may be developed for clinical uses, could be subject regulation by the U.S.
+Added: However, in the future, certain of our products or related applications, such as those that may be developed for clinical uses, could be subject to regulation by the U.S.
Food and Drug Administration (“FDA”), or the FDA’s regulatory jurisdiction could be expanded to include our products.
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The FDA has historically exercised enforcement discretion in not enforcing the medical device regulations against laboratories developing and offering LDTs.
−Removed: However, on October 3, 2014, the FDA issued two draft guidance documents that set forth the FDA’s proposed risk-based framework for regulating LDTs, which are designed, manufactured, and used within a single laboratory.
−Removed: The draft guidance documents provide the anticipated details through which the FDA would propose to establish an LDT oversight framework, including premarket review for higher-risk LDTs, such as those that have the same intended use as FDA-approved or cleared companion diagnostic tests currently on the market.
−Removed: In January 2017, the FDA announced that it would not issue final guidance on the oversight of LDTs and manufacturers of products used for LDTs, but would seek further public discussion on an appropriate oversight approach, and give Congress an opportunity to develop a legislative solution.
+Added: However, in 2014, the FDA issued two draft guidance documents that set forth the FDA’s proposed risk-based framework for regulating LDTs, which are designed, manufactured, and used within a single laboratory.
+Added: The draft guidance documents provide the anticipated details through which the FDA would propose to establish an LDT oversight framework, including pre-market review for higher-risk LDTs, such as those that have the same intended use as FDA-approved or cleared companion diagnostic tests currently on the market.
+Added: In 2017, the FDA announced that it would not issue final guidance on the oversight of LDTs, and manufacturers of products used for LDTs, but would seek further public discussion on an appropriate oversight approach, and give Congress an opportunity to develop a legislative solution.
More recently, the FDA has issued warning letters to certain genomics labs for illegally marketing genetic tests that claim to predict patients’ responses to specific medications, noting that the FDA has not created a legal “carve-out” for LDTs and retains discretion to take action when appropriate, such as when certain genomic tests raise significant public health concerns.
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Further, sales of devices for diagnostic purposes may subject us to additional healthcare regulation and enforcement by the applicable government agencies.
−Removed: Such laws include, without limitation, state and federal anti-kickback or anti-referral laws, healthcare fraud and abuse laws, false claims laws, privacy and security laws, Physician Payments Sunshine Act and related transparency and manufacturer reporting laws, and other laws and regulations applicable to medical device manufacturers.
−Removed: Additionally, on November 25, 2013, the FDA issued Final Guidance “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only.” The guidance emphasizes that the FDA will review the totality of the circumstances when it comes to evaluating whether equipment and testing components are properly labeled as RUO.
+Added: Such laws include, without limitation, state and federal anti-kickback or anti-referral laws, healthcare fraud and abuse laws, false claims laws, privacy
+Added: and security laws, Physician Payments Sunshine Act and related transparency and manufacturer reporting laws, and other laws and regulations applicable to medical device manufacturers.
+Added: Additionally, in 2013, the FDA issued Final Guidance “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only.” The guidance emphasizes that the FDA will review the totality of the circumstances when it comes to evaluating whether equipment and testing components are properly labeled as RUO.
The final guidance states that merely including a labeling statement that the product is for research purposes only will not necessarily render the device exempt from the FDA’s clearance, approval, and other regulatory requirements if the circumstances surrounding the distribution, marketing and promotional practices indicate that the manufacturer knows its products are, or intends for its products to be, used for clinical diagnostic purposes.
These circumstances may include written or verbal sales and marketing claims or links to articles regarding a product’s performance in clinical applications and a manufacturer’s provision of technical support for clinical applications.
−Removed: As part of the Trump Administration’s efforts to combat COVID-19 and consistent with Executive Orders 13771 and 13924, the Department of Health and Human Services (“HHS”) announced rescission of guidance and other informal issuances of the FDA regarding premarket review of LDT absent notice-and-comment rulemaking, stating that, absent notice-and-comment rulemaking, those seeking approval or clearance of, or an emergency use authorization (“EUA”), for an LDT may nonetheless voluntarily submit a premarket approval application (“PMA”), premarket notification or an Emergency Use Authorization request, respectively, but are not required to do so.
−Removed: However, laboratories opting to use LDTs without FDA premarket review or authorization would not be eligible for liability protection under the Public Readiness and Emergency Preparedness Act.
−Removed: In November 2021, HHS under the Biden Administration issued a statement that withdrew the 2020 policy announcement issued under the Trump Administration, stating that HHS does not have a policy on LDTs that is separate from FDA’s longstanding approach.
−Removed: 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.
−Removed: 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.
−Removed: The adoption of new restrictions on IVDs, LDTs, or RUOs, whether by the FDA or Congress, could adversely affect our ability to commercialize our products and the demand for our specialized reagents
−Removed: and instruments.
−Removed: Further, we could be required to obtain premarket clearance or approval from the FDA before we can sell our products to certain customers.
+Added: In August 2020, the Department of Health and Human Services ("HHS") announced rescission of guidance and other informal issuances of FDA regarding pre-market review of LDT absent notice-and-comment rulemaking, stating that, absent notice-and-comment rulemaking LDTs are not required to obtain FDA pre-market authorization.
+Added: 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.
+Added: Legislative and administrative proposals to amend the FDA's oversight of LDTs have been introduced in recent years, including the Verifying Accurate Leading-edge IVCT Development Act of 2021 (the "VALID Act"), which aims to create a new category of medical products separate from medical devices called “in vitro clinical tests,” or IVCTs, and bring all such products within the scope of the FDA’s oversight.
+Added: To date, Congress has not passed the VALID Act, but may revisit the VALID Act or similar policy riders and enact other FDA programmatic reforms in the future.
+Added: It is unclear how future legislation by federal and state governments and FDA regulation will impact the industry, including our business and that of our customers.
If the FDA determines our products or related applications should be subject to additional regulation as in vitro diagnostic devices based upon customers’ use of our products for clinical diagnostic or therapeutic decision-making purposes, our ability to market and sell our products could be impeded and our business, prospects, results of operations and financial condition may be adversely affected.
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Obtaining marketing authorization in one jurisdiction does not mean that we will be successful in obtaining marketing authorization in other jurisdictions where we conduct business.
−Removed: If we elect to label and market our products for use as, or in the performance of, clinical diagnostics in the United States, thereby subjecting them to FDA regulation as medical devices, we would be required to obtain premarket 510(k) clearance or premarket approval from the FDA, unless an exception applies.
−Removed: 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 PMA or a de novo application is required for some of our products.
+Added: If we elect to label and market our products for use as, or in the performance of, clinical diagnostics in the United States, thereby subjecting them to FDA regulation as medical devices, we would be required to obtain pre-market 510(k) clearance or pre-market approval from the FDA, unless an exception applies.
+Added: 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 pre-market application, such as a PMA 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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Even if we were to seek and obtain regulatory approval or clearance, it may not be for the intended uses we request or that we believe are important or commercially attractive.
−Removed: There can be no assurance that future products for which we may seek premarket clearance or approval will be approved or cleared by FDA or a comparable foreign regulatory authority on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our anticipated claims or adequate to support continued adoption of such products.
+Added: There can be no assurance that future products for which we may seek pre-market clearance or approval will be approved or cleared by FDA or a comparable foreign regulatory authority on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our anticipated claims or adequate to support continued adoption of such products.
Compliance with FDA or comparable foreign regulatory authority regulations will require substantial costs, and subject us to heightened scrutiny by regulators and substantial penalties for failure to comply with such requirements or the inability to market our products.
−Removed: The lengthy and unpredictable premarket clearance or approval process, as well as the unpredictability of the results of any required clinical studies, may result in our failing to obtain regulatory clearance or approval to market such products, which would significantly harm our business, results of operations, reputation, and prospects.
+Added: The lengthy and unpredictable pre-market clearance or approval process, as well as the unpredictability of the results of any required clinical studies, may result in our failing to obtain regulatory clearance or approval to market such products, which would significantly harm our business, results of operations, reputation, and prospects.
If we sought and received regulatory clearance or approval for certain of our products, we would be subject to ongoing FDA obligations and continued regulatory oversight and review, including the general controls listed above and the FDA’s QSRs for our development and manufacturing operations.
In addition, we would be required to obtain a new 510(k) clearance before we could introduce subsequent material modifications or improvements to such products.
−Removed: We could also be subject to additional FDA post-marketing obligations for such products, any or all of which would increase our costs and divert resources away from other projects.
+Added: We could also be subject to
+Added: additional FDA post-marketing obligations for such products, any or all of which would increase our costs and divert resources away from other projects.
If we sought and received regulatory clearance or approval and are not able to maintain regulatory compliance with applicable laws, we could be prohibited from marketing our products for use as, or in the performance of, clinical diagnostics and/or could be subject to enforcement actions, including warning letters and adverse publicity, fines, injunctions, and civil penalties;
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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.
−Removed: In Europe, we would need to comply with the new Medical Device Regulation 2017/745 and In Vitro Diagnostic Regulation 2017/746, which became effective May 26, 2017, with application dates of May 26, 2021 (postponed from 2020) and May 26, 2022, respectively.
+Added: In Europe, we would need to comply with the Medical Device Regulation 2017/745 and In Vitro Diagnostic Regulation 2017/746, which became effective May 26, 2017, with application dates of May 26, 2021 (postponed from 2020) and May 26, 2022, respectively.
This will increase the difficulty of regulatory approvals in Europe in the future.
−Removed: In addition, the FDA
−Removed: regulates exports of medical devices.
+Added: In addition, the FDA regulates exports of medical devices.
The number and scope of these requirements are increasing.
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Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
−Removed: Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
−Removed: We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States, especially the Asia-Pacific region.
+Added: Enhan ced trade tariffs, import restrictions, export restrictions, Chinese regulations, or other trade barriers may materially harm our business.
+Added: We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States, especially the Asia-Pacific region, as discussed above.
There is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, government regulations and tariffs.
3 unchanged sentences
Additionally, China also has imposed tariffs on imports into China from the United States.
−Removed: These tariffs could raise our costs.
+Added: These tariffs have and could continue to raise our costs.
Furthermore, tariffs, trade restrictions, or trade barriers that have been, and may in the future be, placed on products such as ours by foreign governments, especially China, have raised, and could further raise, amounts paid for some or all of our products, which may result in the loss of customers and our business, and our financial condition and results of operations may be harmed.
−Removed: F urther tariffs may be imposed that could cover imports of components and materials used in our products, or our business may be adversely impacted by retaliatory trade measures taken by China or other countries, including restricted access to components or materials used in our products or increased amounts that must be paid for our products, which could materially harm our business, financial condition and results of operations.
−Removed: Further, the continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.
−Removed: Given the relatively fluid regulatory environment in China and the United States and uncertainty how the U.S.
−Removed: or foreign governments will act with respect to tariffs, international trade agreements and policies, there could be additional tax or other regulatory changes in the future.
−Removed: Any such changes could directly and adversely impact our financial results and results of operations.
−Removed: Additionally, in November 2018, the U.S.
+Added: Further tariffs may be imposed that could cover imports of components and materials used in our products, or our business may be adversely impacted by retaliatory trade measures taken by China or other countries, including restricted access to components or materials used in our products or increased amounts that must be paid for our products, which could materially harm our business, financial condition, and results of operations.
+Added: Additionally, the U.S.
+Added: government recently announced new controls restricting the ability to send certain products and technology related to semiconductors, semiconductor manufacturing, and supercomputing to China without an export license.
+Added: These new controls also apply to certain hardware containing these specified integrated circuits.
+Added: In many cases, these licenses are subject to a policy of denial and will not be issued.
+Added: These controls may impact our ability to export certain products to customers or distributors in China and restrict our ability to use certain integrated circuits in our products.
+Added: government also recently added additional entities in China to restricted party lists impacting the ability of U.S.
+Added: companies to provide items to these entities.
+Added: Moreover, in November 2018, the U.S.
Commerce Department’s Bureau of Industry and Security (“BIS”) released an advance notice of proposed rulemaking to control the export of emerging technologies.
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or neurotech” as possible areas of increased export controls.
−Removed: BIS has implemented export controls on some items described in this notice, and we understand that BIS plans to continue to issue controls on additional emerging technologies.
−Removed: Therefore, it is possible that our ability to export our products may be restricted in the future, most notably China.
+Added: The Biden Administration has continued to provide updated lists of emerging technologies subject to national security consents, and it continues to include biotechnologies including “[g]enome and protein engineering including design tools” and “[b]iomanufacturing and bioprocessing technologies.” Therefore, it is possible that our ability to export our products to customers or distributors in China may be further restricted in the future.
+Added: It is possible that the Chinese government will retaliate in response to existing or future U.S.
+Added: export controls or trade restrictions in ways that could impact our business.
+Added: It also is possible that additional restrictions will be put in place that could impact our ability to provide our products to customers or distributors in China or source components from China.
+Added: The continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global
+Added: economy and, therefore, negatively impact our sales.
+Added: Given the relatively fluid regulatory environment in China and the United States and uncertainty how the U.S.
+Added: or foreign governments will act with respect to export controls, tariffs, international trade agreements and policies, there could be additional tax or other regulatory changes in the future.
+Added: Any such changes could directly and adversely impact our financial results and results of operations.
Our international business could expose us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.
Engaging in international business inherently involves a number of difficulties and risks, including:
−Removed: r equired 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 (“GDPR”) and other data privacy requirements, labor and employment regulations, anti-competition regulations, the U.K.
+Added: 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 (“GDPR”) and other data privacy requirements, labor and employment regulations, anti-competition regulations, the U.K.
Bribery Act of 2010 and other anti-corruption laws, regulations relating to the use of certain hazardous substances or chemicals in commercial products, and require the collection, reuse, and recycling of waste from products we manufacture;
1 unchanged sentence
laws such as the Foreign Corrupt Practices Act, and other U.S.
−Removed: federal laws and regulations established by the Office of Foreign Asset Control;
+Added: federal laws and trade and economic sanctions and other regulations established by the Office of Foreign Asset Control;
export requirements and import or trade restrictions;
laws and business practices favoring local companies;
+Added: restrictions on both inbound and outbound cross-border investment;
foreign currency exchange, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
−Removed: changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of the separation of the United Kingdom from the European Union (“Brexit”);
+Added: changes in social, economic, and political conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, and investment both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products including as a result of the separation of the United Kingdom from the European Union (“Brexit”) and ongoing geopolitical tensions related to the political uncertainty and military actions associated with the war in Ukraine, resulting sanctions imposed by the U.S.
+Added: and other countries, and retaliatory actions taken by Russia in response to such sanctions;
potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers;
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Governmental authorities could, for safety, social or other purposes, call for limits on or regulation of the use of genetic testing, and may consider or adopt such regulations or other restrictions.
−Removed: Such concerns or governmental restrictions could limit the use of our products or be costly and burdensome to comply with, and actual or perceived violations of any such restrictions may lead to the imposition of substantial fines and penalties, remediation costs, claims and litigation, regulatory investigations and proceedings, and other liability, and of which could have a material adverse effect on our business, financial condition and results of operations.
+Added: Such concerns or governmental restrictions could limit the use of our products or be costly and burdensome to comply with, and actual or perceived violations of any such restrictions may lead to the imposition of substantial fines and penalties, remediation costs, claims and litigation, regulatory investigations and proceedings, and other liability, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Regulations related to conflict minerals has caused us to incur, and will continue to cause us to incur, additional expenses and could limit the supply and increase the costs of certain materials used in the manufacture of our products.
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operating results below the expectations of securities analysts or investors;
−Removed: general economic and market conditions, which could be impacted by various events including COVID-19 or interest rate fluctuations.
+Added: general economic and market conditions, which could be impacted by various events including COVID-19 or interest rate fluctuations, increases in fuel prices, foreign currency fluctuations, international tariffs, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further political uncertainty and military actions associated with the war in Ukraine and the related response, including sanctions or other restrictive actions, by the United States and/or other countries.
If any of the forgoing occurs, it would cause our stock price or trading volume to decline.
−Removed: Stock markets in general and the market for companies in our industry in particular have experienced price and volume fluctuations, which have been exacerbated by the COVID-19 pandemic, that have affected and continue to affect the market prices of equity securities of many companies.
+Added: Stock markets in general and the market for companies in our industry in particular have experienced price and volume fluctuations, which have been exacerbated by the COVID-19 pandemic, and current macroeconomic trends and geopolitical events, and have affected and continue to affect the market prices of equity securities of many companies.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.
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Any such issuances would result in dilution to our existing stockholders and the market price of our common stock may be adversely affected.
−Removed: On September 20, 2021, in connection with the closing of the Omniome Merger, we completed a Private Placement for the sale of an aggregate of 11,214,953 shares of our common stock, at a price of $26.75 per share, for aggregate gross proceeds of approximately $300 million.
−Removed: In connection with the Private Placement, we entered into a Registration Rights Agreement with the Private Placement investors, providing them, among other things, certain registration rights, including our obligation to register the Private Placement shares for resale within 30 days following the closing of the Private Placement.
+Added: In September 2021, in connection with the closing of the Omniome Merger, we completed a private placement of an aggregate of 11,214,953 shares of our common stock, at a price of $26.75 per share, for aggregate gross proceeds of approximately $300 million (the “Private Placement”) and registered the Private Placement shares for resale on a registration statement on Form S-3.
+Added: The Private Placement Investors may sell any or all of their shares pursuant to the registration statement from time to time.
+Added: On January 27, 2023, we issued and sold an aggregate of 20,125,000 shares of our common stock at a purchase price of $10.00 per share pursuant to an automatic shelf registration statement filed on Form S-3 (File No.
+Added: 333-249999) with the Securities and Exchange Commission, resulting in aggregate gross proceeds of approximately $201.3 million.
+Added: The investors may sell any or all of their shares from time to time.
Concentration of ownership by our principal stockholders may result in control by such stockholders of the composition of our board of directors.
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In addition, such parties may acquire additional control by purchasing stock that we issue in connection with our future fundraising efforts.
−Removed: Also, SB Northstar LP, a subsidiary of SoftBank Group Corp., purchased $900 million in aggregate principal amount of our 1.50% Convertible Senior Notes due 2028, convertible at the option of the holders at any time into shares of our common stock based on an initial conversion rate of 22.9885 shares of common stock per $1,000 principal amount of the Notes (which is equal to an initial conversion price of $43.50 per share).
−Removed: In addition, on September 20, 2021 in connection with the closing of the Omniome Merger, we completed a Private Placement for the sale of an aggregate of 11,214,953 shares of our common stock, at a price of $26.75 per share, for aggregate gross proceeds of approximately $300 million with certain qualified institutional buyers and institutional accredited investors, including approximately $60 million to SB Northstar LP.
−Removed: As a result, these current and future stockholders may now and in the future be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors.
+Added: These parties may now and in the future be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors.
This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
−Removed: Provisions in our certificate of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control or changes in our management.
−Removed: Our amended and restated certificate of incorporation and bylaws include provisions that:
+Added: Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management.
+Added: Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
authorize our board of directors to issue, without further action by the stockholders, up to 50,000,000 shares of undesignated preferred stock and up to approximately 1,000,000,000 shares of authorized but unissued shares of common stock;
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
−Removed: specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of the Board, the Chief Executive Officer or the President;
−Removed: establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
+Added: specify that special meetings of our stockholders can be called only by our board of directors, the Chair of the Board, the Chief Executive Officer or the President;
+Added: establish advance notice procedures for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms;
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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.
−Removed: Furthermore, our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:
−Removed: (i) any derivative action or proceeding brought on our behalf ; (ii) any action asserting a breach of fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders ; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law;
−Removed: (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws ; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine, subject to the court having personal jurisdiction over the indispensable parties named as defendants therein.
−Removed: This provision is not intended to apply to actions arising under the Securities Act or the Exchange Act, or any claim for which the federal courts have exclusive jurisdiction.
−Removed: Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to this provision.
−Removed: This exclusive-forum provision may discourage lawsuits against us or our directors, officers, and employees.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.
+Added: Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for certain stockholder litigation matters, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, stockholders, or employees.
+Added: Our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for:
+Added: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law;
+Added: (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; or (v) any action asserting a claim governed by the internal affairs doctrine, except as to each of (i) through (v) above, for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court.
+Added: Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
+Added: Accordingly, both state and federal courts have jurisdiction to entertain such claims.
+Added: To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act including, without limitation and for the avoidance of doubt, any auditor, underwriter, expert, control person or other defendant.
+Added: Any person or entity purchasing, holding or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the foregoing bylaw provisions.
+Added: Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, stockholders, officers or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, stockholders, officers or other employees.
+Added: In addition, a stockholder that is unable to bring a claim in the judicial forum of its choosing may be required to incur additional costs in the pursuit of actions which are subject to the exclusive forum provisions described above.
+Added: Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions.
+Added: Further, in the event a court finds either exclusive forum provision contained in our bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations.
Our large number of authorized but unissued shares of common stock may potentially dilute existing stockholders’ stockholdings.
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We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
−Removed: In February 2021, we issued $900.0 million in aggregate principal amount of 1.50% Convertible Senior Notes due 2028, which we refer to as the Notes, The Notes will mature on February 15, 2028, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.
+Added: In February 2021, we issued $900.0 million in aggregate principal amount of 1.50% Convertible Senior Notes due 2028, which we refer to as the Notes.
+Added: The Notes will mature on February 15, 2028, subject to earlier conversion, redemption or repurchase, including upon a fundamental change.
Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change before the maturity date at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus unpaid interest to, but excluding, the maturity date.
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Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.
−Removed: General conditions in the global economy and in the global financial markets could adversely affect our results of operations, including the potential effects from the COVID-19 pandemic as discussed above, and the overall demand for nucleic acid sequencing products may be particularly vulnerable to unfavorable economic conditions.
−Removed: A global financial crisis, inflation or a global or regional political disruption could cause extreme volatility in the capital and credit markets.
+Added: General conditions in the global economy and in the global financial markets could adversely affect our results of operations, including the potential effects from the ongoing COVID-19 pandemic as discussed above, and the overall demand for nucleic acid sequencing products may be particularly vulnerable to unfavorable economic conditions.
+Added: A global financial crisis, inflation or a global or regional political disruption, as well as acts of terrorism, hostilities, military conflict and acts of war, including any further political uncertainty and military actions associated with the war in Ukraine and the related response, could cause extreme volatility in the capital and credit markets.
A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including weakened demand for our products and our ability to raise additional capital when needed on acceptable terms, if at all.
A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our product and services.
+Added: An impairment in value of our tangible or intangible assets could also be recorded as a result of weaker economic conditions.
Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could adversely impact our business.
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Any failure to deliver products to our customers in a safe and timely manner may damage our reputation and brand and could cause us to lose customers.
−Removed: If our relationship with any of these third-party carriers is terminated or impaired or if any of these carriers are unable to deliver our products, the delivery and acceptance of our products by our customers may be delayed, which could harm our business and financial results.
+Added: If our relationship with any of these third-party carriers is terminated or impaired or if any of these carriers are unable to deliver our products, the delivery of our products by our customers may be delayed, which could harm our business and financial results.
The failure to deliver our products in a safe and timely manner may harm our relationship with our customers, increase our costs and otherwise disrupt our operations.
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International operations entail a variety of other risks, including, without limitation:
−Removed: limits to travel as a result of the COVID-19 pandemic;
+Added: limits to travel as a result of the COVID-19 pandemic or other epidemics;
challenges in staffing and managing foreign operations;
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defending against intellectual property claims in other countries;
−Removed: restriction on cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States (“CFIUS”) and substantial restrictions on investment from China;
+Added: restrictions on both inbound and outbound cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States (“CFIUS”) and substantial restrictions on investment from China;
and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons;
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goods, including the tariffs by the U.S.
−Removed: government on various imports from China, Canada, Mexico and the EU and by the governments of these jurisdictions on certain U.S.
+Added: government on various imports from China, Canada, Mexico, and the European Union (“E.U.”) and by the governments of these jurisdictions on certain U.S.
goods, and any other possible tariffs that may be imposed on products such as ours, the scope and duration of which, if implemented, remains uncertain;
deterioration of political relations between the U.S.
−Removed: and China, Canada, Russia, the United Kingdom (“U.K.”) and the European Union (“EU”), which could have a material adverse effect on our sales and operations in these countries;
+Added: and Russia, China, Japan, Korea, Canada, the United Kingdom (“U.K.”), and the E.U., which could have a material adverse effect on our sales and operations in these countries;
changes in social, political, and economic 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 into which we sell our products, including as a result of the withdrawal of the U.K.
+Added: from the E.U.;
difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays;
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potential increases on tariffs or restrictions on trade generally;
−Removed: significant taxes or other burdens of complying with a variety of foreign laws and regulations, including laws and regulations relating to privacy and data protection such as the EU General Data Protection Regulation which took effect in the EU in 2018.
+Added: significant taxes or other burdens of complying with a variety of foreign laws and regulations, including laws and regulations relating to privacy and data protection such as the E.U.
+Added: General Data Protection Regulation which took effect in the E.U.
In conducting our international operations, we are subject to U.S.
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Moreover, changes in the value of the relevant currencies may affect the cost of certain items required in our operations.
−Removed: Changes in currency exchange rates may also affect the relative prices at which we are able sell products in the same market.
+Added: Changes in currency exchange rates may also affect the relative prices at which we are able to sell products in the same market.
Our revenue from international customers may be negatively impacted as increases in the U.S.
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Our success depends, in part, on the continued and uninterrupted performance of our IT systems.
−Removed: IT systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, power loss, natural disasters, human acts, computer viruses, ransomware, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems.
+Added: Our IT systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, power loss, natural disasters, human acts, computer viruses, ransomware, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems.
+Added: Furthermore, there may be a heightened risk of potential cybersecurity incidents and security breaches to which we could be vulnerable by state-sponsored or affiliated actors or others in connection with the political uncertainty and military actions associated with the war in Ukraine.
Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality.
−Removed: any precautions we may take, such problems could result in, among other consequences, disruption of our operations, which could harm our reputation and financial results.
−Removed: If we do not allocate and effectively manage the resources necessary to build and sustain the proper IT infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property through security breach.
+Added: Despite any precautions we may take, such problems could result in, among other consequences, disruption of our operations, which could harm our reputation and financial results.
+Added: If we do not allocate and effectively manage the resources necessary to build and sustain the proper IT infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property.
If our data management systems do not effectively collect, store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies or human error, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.
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Third parties may attempt to fraudulently induce employees or other persons into disclosing usernames, passwords or other sensitive information, which may in turn be used to access our IT systems, commit identity theft or carry out other unauthorized or illegal activities.
−Removed: Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
+Added: Any such breach or incident could compromise our systems and networks and the information stored or otherwise processed there could be accessed, publicly disclosed, lost, stolen or otherwise processed in an unauthorized manner.
We engage third-party vendors and service providers to store and otherwise process some of our data, including sensitive and personal information.
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Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our data, including sensitive and personal information, and disruption of our or third-party service providers’ systems.
−Removed: We and our third-party service providers may face difficulties in identifying, or promptly responding to, potential security breaches and other instances of unauthorized access to, or disclosure or other loss of, information.
+Added: We and our third-party service providers may face difficulties in identifying, or promptly responding to, potential security breaches and other instances of unauthorized access to, or disclosure or other loss or unavailability of, information.
Any hacking or other attack on our or our third-party service providers’ or vendors’ systems, and any unauthorized access to, or disclosure or other loss of, information suffered by us or our third-party service providers or vendors, or the perception that any of these have occurred, could result in legal claims or proceedings, loss of intellectual property, liability under laws that protect the privacy of personal information, negative publicity, 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.
−Removed: Moreover, we may need to increase our efforts to train our personnel to detect and defend against cyber- or phishing-attacks, which are becoming more sophisticated and frequent, and we may need to implement additional protective measures to reduce the risk of potential security breaches, which could cause us to incur significant additional expenses.
+Added: Moreover, we may need to increase our efforts to train our personnel to detect and defend against cyber- or phishing-attacks, which are becoming more sophisticated and frequent, and we may need to implement additional
+Added: protective measures to reduce the risk of potential security breaches and security incidents, which could cause us to incur significant additional expenses.
+Added: Retaliatory acts by Russia in response to Western sanctions or otherwise in connection with the war in Ukraine could include cyber attacks that could disrupt the economy generally or that may either directly or indirectly impact our operations specifically.
In addition, our insurance may be insufficient to cover our losses resulting from cyber-attacks, breaches, or other interruptions, and any incidents may result in loss of, or increased costs of, such insurance.
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This private right of action may increase the likelihood of, and risks associated with, data breach litigation.
−Removed: In November 2020, California also passed the California Privacy Rights Act, or (“CPRA”), which significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations and granting additional rights to consumers, among others.
+Added: In November 2020, California also passed the California Privacy Rights Act, or (“CPRA”), which significantly expands the CCPA as of January 1, 2023, including by introducing additional obligations such as data minimization and storage limitations and granting additional rights to consumers, among others.
+Added: The enactment of the CCPA has prompted similar legislative developments in other states, such as Virginia, which in March 2021 enacted a Consumer Data Protection Act that is effective as of January 1, 2023, and Colorado, which in June 2021 enacted a Colorado Privacy Act that is effective as of July 1, 2023, Utah, which in March 2022 enacted a Utah Consumer Privacy Act that is effective as of July 1, 2023, and Connecticut, which in May 2022 enacted a similar law, An Act Concerning Personal Data Privacy and Online Monitoring, that is effective as of July 1, 2023.
+Added: Similar laws are being considered by other state legislatures.
In addition, laws in all 50 U.S.
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Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, manipulated, publicly disclosed, lost or stolen.
−Removed: Any such access, breach or other loss of information could result in legal claims or proceedings, and liability under federal or state laws that protect the privacy of personal information, such as the HIPAA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and regulatory penalties.
+Added: Any such access, breach or other loss of information could result in legal claims or
+Added: proceedings, and liability under federal or state laws that protect the privacy of personal information, such as the HIPAA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and regulatory penalties.
Notice of breaches must be made to affected individuals, the Secretary of the Department of Health and Human Services, and for extensive breaches, notice may need to be made to the media or State Attorneys General.
Such a notice could harm our reputation and our ability to compete.
−Removed: We are in the process of evaluating compliance needs, but do not currently have in place formal policies and procedures related to the storage, collection and processing of information, and have not conducted any internal or external data privacy audits, to ensure our compliance with all applicable data protection laws and regulations.
−Removed: Additionally, we do not currently have policies and procedures in place for assessing our third-party vendors’ compliance with applicable data
−Removed: protection laws and regulations.
+Added: While we have in place formal policies and procedures related to the storage, collection, and processing of information, and have conducted data privacy audits, we continue to evaluate our compliance needs, including the need to conduct additional internal and external data privacy audits or adopt additional policies and procedures, to ensure our compliance with all applicable data protection laws and regulations.
+Added: Additionally, we do not currently have policies and procedures in place for assessing our third-party vendors’ compliance with applicable data protection laws and regulations.
All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants, which are likely to increase over time.
In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
−Removed: Any failure or perceived failure by us or our third-party vendors, collaborators, contractors and consultants to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security, or could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
+Added: Any failure or perceived failure by us or our third-party vendors, collaborators, contractors and consultants to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security, could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Increased scrutiny of our environmental, social or governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.