What changed in this filing

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Item 1A. Risk Factors

2023-03-06 compared with 2022-03-01 · 274 added, 259 removed, 757 unchanged (41% of the section changed)

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• we are an early-stage life sciences technology company with a history of net losses, which we expect to continue, and we may not be able to generate meaningful revenues or achieve and sustain profitability in the future;

• we have a limited operating history, which may make it difficult to evaluate the prospects for our future viability and predict our future performance;

• we have a limited operating history, which may make it difficult to evaluate our current business and the prospects for our future viability, and to predict our future performance;

• our operating results may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide;

• the size of the markets for the Proteograph Product Suite 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;

• we have only recently commenced the broad commercial release of the Proteograph Product Suite, and we may not be able to successfully implement this release as planned;

• our commercial release success depends on broad scientific and market acceptance of the Proteograph, which we may fail to achieve;

• even if the Proteograph Product Suite is broadly commercialized and achieves broad scientific and market acceptance, if we fail to improve it or introduce compelling new products, our revenues and our prospects could be harmed;

• the COVID-19 pandemic and efforts to reduce its spread have adversely impacted, and are expected to continue to materially and adversely impact, our business and operations;

• we are in the early stages of our commercialization plan, and we may not be able to commercialize the Proteograph Product Suite as planned;

• our commercialization success depends on broad scientific and market acceptance of the Proteograph, which we may fail to achieve;

• even if the Proteograph Product Suite is successfully commercialized and achieves broad scientific and market acceptance, if we fail to improve it or introduce compelling new products, our revenues and our prospects could be harmed;

• The COVID-19 pandemic and efforts to reduce its spread have adversely impacted our operations, and other public health crises and other epidemics could adversely impact, our business and operations;

• if we are unable to obtain and maintain sufficient intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired;

• if we are unable to identify and recruit qualified employees, and retain or maintain our employee base, it may adversely impact our business and operations;

• we have previously identified material weaknesses in our internal control over financial reporting, and if we fail to maintain an effective system of internal controls, or otherwise fail to comply with the Sarbanes-Oxley Act of 2002 now that we are a large accelerated filer, we may not be able to accurately and timely

report our financial results, which may adversely affect our business and investor confidence in us and, as a result, the value of our Class A common stock.

• if we fail to maintain an effective system of internal controls, or otherwise fail to comply with the Sarbanes-Oxley Act of 2002, we may not be able to accurately and timely report our financial results, which may adversely affect our business and investor confidence in us and, as a result, the value of our Class A common stock.

Risks Related to Our Business and Industry

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While we have generated product revenue, we may never generate revenue sufficient to offset our expenses.

In addition, as a newly public company, we will incur significant legal, accounting, administrative, insurance and other expenses that we did not incur as a private company.

In addition, as a public company, we incur significant legal, accounting, administrative, insurance and other expenses.

Accordingly, we cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.

We have a limited operating history, which may make it difficult to evaluate the prospects for our future viability and predict our future performance.

We have only recently broadly commercialized the Proteograph Product Suite.

We have a limited operating history, which may make it difficult to evaluate our current business and the prospects for our future viability, and to predict our future performance.

We are in the early stages of commercialization of the Proteograph Product Suite.

Our operations to date have been primarily focused on developing our technology and products.

Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations.

We have not yet achieved market acceptance for our products, produced our products at scale, established a sales model, or conducted sales and marketing activities necessary for successful broad product commercialization.

Consequently, predictions about our future success or viability are highly uncertain and may not be as accurate as they could be if we had a longer operating history or a company history of successfully developing and commercializing products.

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown obstacles.

We will need to transition from a company with a focus on research and development to a company capable of supporting broad commercial activities as well, and we may not be successful in such a transition.

As we continue to transition from a company with a focus on research and development to a company capable of supporting broad commercial activities as well, we may not be successful in such a transition.

We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in emerging and rapidly changing industries.

If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations, and our business, financial condition and results of operations could be adversely affected.

Our operating results may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.

guidance we may provide, and which may cause the price of our Class A common stock to fluctuate or decline substantially.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.

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• our ability to successfully commercialize the Proteograph Product Suite on our anticipated timeline;

• our ability to offer high-quality customer service:

• the timing and cost of, and level of investment in, research and development and commercialization activities relating to the Proteograph Product Suite, including our SP100 automation instrument, proprietary engineered nanoparticle (NP) technology and Proteograph Analysis Suite software, which may change from time to time;

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• our ability to drive adoption of the Proteograph in our target markets and our ability to expand into any future target markets;

• our relationship with third-party distributorships, and their ability to promote and sell our products;

• our relationship with third-party distributorships, the quantity of our products they elect to hold in inventory, and their ability to promote and sell our products;

• the prices at which we will be able to sell the Proteograph Product Suite;

• the volume and mix of our sales between the Proteograph Product Suite and associated consumables, or changes in the manufacturing or sales costs related to our products;

• the length of time of the sales cycle for purchases of the Proteograph, including lead time needed to procure SP100 automation instruments from our third-party contract manufacturer;

• the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our facilities;

• the length of time and unpredictable nature of the sales cycle;

• the lead time needed to procure SP100 automation instruments from our third-party contract manufacturer;

• the success of our sales force, which if less than anticipated, could significantly impair our ability to generate revenue;

• the failure of customers to exercise Proteograph purchase options;

• the effective and efficient use of our financial and other resources, including the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our facilities;

• changes in governmental funding of life sciences research and development or changes that impact budgets and budget cycles;

• seasonal spending patterns of our customers;

• the timing of when we recognize any revenues;

• future accounting pronouncements or changes in our accounting policies;

• seasonal spending patterns and the ability to collect on the accounts receivable of our customers;

• the timing of when we recognize revenue;

• future accounting pronouncements, changes in accounting rules and regulations, or modifications to our accounting policies;

• the outcome of any future litigation or governmental investigations involving us, our industry or both;

• higher than anticipated service, replacement and warranty costs;

• the impact of the COVID-19 pandemic on the economy, investment in life sciences and research industries, our business operations, and resources and operations of our customers, suppliers and supply chain, and distributors;

• general industry, economic and market conditions such as inflation and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

• the impact of health epidemics such as the COVID-19 pandemic or any other pandemic on the economy, investment in life sciences and research industries, our business operations, and resources and operations of our customers, suppliers, and distributors;

• global supply chain interruptions;

• general industry, economic and market conditions such as inflation, rising interest rates, and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual operating results.

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Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.

If we are unable to commercialize products or generate revenue, or if our operating results fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below the expectations of analysts or investors, it could cause the market price of our Class A common stock to decline.

The size of the markets for our Proteograph Product Suite 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.

This variability and unpredictability could also result in our failing to meet expectations of industry or financial analysts, or investors, for any period.

If we are unable to commercialize products or generate sufficient revenue, or if our operating results fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below the expectations of analysts or investors, it could cause the market price of our Class A common stock to fluctuate or decline substantially.

The size of the markets for the Proteograph Product Suite may be smaller or different from estimated, and new market opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our products.

The market for proteomics and genomics technologies and products is evolving, making it difficult to predict with any accuracy the size of the markets for our current and future products, including the Proteograph Product Suite.

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.

In particular, our estimates are based on our expectations that researchers in the market for certain life sciences research tools and technologies will view our products as competitive

alternatives to, or better options than, existing tools and technologies.

In particular, our estimates are based on our expectations that researchers in the market for certain life sciences research tools and technologies will view our products as competitive alternatives to, or better options than, existing tools and technologies.

We also expect researchers will recognize the ability of our products to complement, enhance and enable new applications of their current tools and technologies.

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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 our business, financial condition and operational results of operations could be adversely affected.

We have only recently commenced the broad release phase of our commercialization plan, and we may not be able to continue this release as planned.

We have only recently initiated the broad commercial release phase for the Proteograph Product Suite, and we may not be able to successfully execute on this phase as planned due to:

We are in the early stages of commercialization, and we may not be able to commercialize the Proteograph Product Suite as planned.

We have only recently initiated the broad commercialization of the Proteograph Product Suite, and we may not be able to successfully execute on this phase as planned due to:

• the inability to establish the capabilities and value proposition of the Proteograph Product Suite with key opinion leaders and other customers in a timely fashion;

• delays or longer-than expected lead times to establish customer contacts, complete responsive presentations including platform evaluations tailored to specific requests, and move expeditiously from quote to order to revenue to receipt of payment due to the budgetary constraints of academic organizations, laboratories, biopharmaceutical companies and others;

• delays or longer-than expected lead times in the sales cycle to establish customer contacts, complete responsive presentations including platform evaluations tailored to specific requests, and move expeditiously from quote to order to revenue to receipt of payment due to budgetary or other constraints of academic organizations, laboratories, biopharmaceutical companies and others;

• changing industry or market conditions, customer requirements or competitor offerings during broad commercialization;

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• delays in ramping up manufacturing, either internally or through our suppliers, to meet the expected demand for broad commercialization;

• the impact of the COVID-19 pandemic on the economy and research industries, our business operations, and resources and the operations of our customers, suppliers and supply chain, and distributors.

To the extent our broad commercial release phase is delayed or unsuccessful, our financial results will be adversely impacted.

Even if we are able to execute on our broad commercial release phase as planned, our success depends on broad scientific and market acceptance of the Proteograph Product Suite, which we may fail to achieve.

• the impact of the COVID-19 or any other pandemic on the economy and research industries, our business operations, and resources and the operations of our customers, suppliers and supply chain, and distributors.

To the extent our broad commercial release phase is unsuccessful, our financial results will be adversely impacted.

Even if we are able to execute on our commercialization plan, our success depends on broad scientific and market acceptance of the Proteograph Product Suite, which we may fail to achieve.

Our ability to achieve and maintain scientific and commercial market acceptance of the Proteograph Product Suite will depend on a number of factors.

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If we are unsuccessful in achieving and maintaining market acceptance of the Proteograph, our business, financial condition and results of operations would be adversely affected.

If we are unable to establish sales and marketing capabilities, we may not be successful in commercializing our Proteograph Product Suite.

If our sales force is less successful than anticipated, we may not be successful in commercializing the Proteograph Product Suite.

We have limited experience as a company in sales and marketing and our ability to successfully commercialize depends on our being able to attract customers for the Proteograph Product Suite.

Although members of our management team have considerable industry experience, we need to expand our sales, marketing, distribution and customer service and support capabilities with the appropriate technical expertise prior to and during the broad commercial release of the Proteograph Product Suite.

Although members of our management team have considerable industry experience, we need to expand our sales, marketing, distribution and customer service and support capabilities with the appropriate technical expertise during the commercialization of the Proteograph Product Suite.

To perform sales, marketing, distribution, and customer service and support successfully, we will face a number of risks, including:

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There is no guarantee that we have attracted or will be successful in attracting desirable or experienced sales or distribution partners or that we have entered or will be able to enter into such arrangements on favorable terms.

If our sales and marketing efforts, or those of any third-party sales and distribution partners, are not successful, the Proteograph may not gain market acceptance, which could materially impact our business operations.

Even if our Proteograph Product Suite is broadly commercialized and achieves broad scientific and market acceptance, if we fail to improve it or introduce compelling new products, our revenues and our prospects could be harmed.

In addition, we rely on commercial carriers to transport our products, including consumables that are temperature controlled, to customers in a timely and cost-efficient manner, and if these services are delayed or disrupted, our business may be harmed.

If our sales and marketing efforts, and logistics capability, or those of any third-party sales and distribution partners, are not successful, the Proteograph may not gain market acceptance, which could materially impact our business operations.

Even if the Proteograph Product Suite is successfully commercialized and achieves broad scientific and market acceptance, if we fail to improve it or introduce compelling new products, our revenues and our prospects could be harmed.

Even if we are able to broadly commercialize the Proteograph Product Suite and achieve broad scientific and market acceptance, our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve the Proteograph solution and to introduce compelling new products.

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If we are unable to successfully develop new products, enhance the Proteograph Product Suite to meet customer requirements, compete with alternative products, or otherwise gain and maintain market acceptance, our business, results of operations and financial condition could be harmed.

The COVID-19 pandemic and efforts to reduce its spread have adversely impacted, and are expected to continue to materially and adversely impact, our business and operations.

The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our operations, particularly as a result of preventive and precautionary measures that we, other businesses, and governments are taking.

Governmental mandates related to COVID-19 or other infectious diseases, or public health crises, have impacted, and we expect them to continue to impact, our personnel and personnel at third-party manufacturing facilities in the United States and other countries, and the availability or cost of materials, which would disrupt or delay our receipt of instruments, components and supplies from the third parties we rely on to, among other things,

produce our SP100 automation instrument and NPs.

For instance, “stay-at-home” orders in California, and specifically San Mateo County where our headquarters is located, that require businesses to implement certain social distancing protocols and other written health and safety plans and measures and which could affect productivity and morale, could be reinstated.

We have continued to operate within the rules applicable to our business;

however, an extended implementation of these governmental mandates could further impact our ability to operate effectively and conduct ongoing research and development or other activities.

For onsite work in our Redwood City and San Diego offices, we require employees to show proof of vaccination and perform testing.

The COVID-19 pandemic and a skilled labor shortage in general have also had an effect on our ability to attract, recruit and interview candidates at the pace we would typically expect to support our rapidly expanding operations.

To the extent that any governmental authority imposes additional regulatory requirements or changes existing laws, regulations, and policies that apply to our business and operations, such as additional workplace safety measures, our product development plans and our commercial plans may be delayed, and we may incur further costs in bringing our business and operations into compliance with changing or new laws, regulations, and policies.

The COVID-19 pandemic and efforts to reduce its spread have adversely impacted our operations, and other public health crises and other epidemics could adversely impact, our business and operations.

The COVID-19 pandemic has had an adverse impact on our operations, particularly as a result of preventive and precautionary measures that we, other businesses, and governments are taking.

Governmental mandates related to COVID-19 or other infectious diseases, or public health crises, have impacted, and could impact, our personnel and personnel at third-party manufacturing facilities in the United States and other countries, and the availability or cost of materials, which would disrupt or delay our receipt of instruments, components and supplies from the third parties we rely on to, among other things, produce our SP100 automation instrument and NPs.

In the near term, we expect that substantially all of our revenue will be derived from sales of the Proteograph Product Suite, including our instruments and associated consumables, to academic, research and commercial customers.

We have moved into broad commercial release and, as a result, in the near term, our ability to drive the adoption of the Proteograph solution will depend on our ability to visit customer sites, the ability of our customers to access laboratories, and the ability to install and train on the Proteograph Product Suite and conduct research in light of the COVID-19 pandemic.

For example, due to the pandemic, we have encountered delays permitting the travel of our U.S.-based employees to China.

We have initiated commercial release and, as a result, in the near term, our ability to drive the adoption of the Proteograph solution will depend on our ability to visit customer sites, the ability of our customers to access laboratories, and the ability to install and train on the Proteograph Product Suite and conduct research in light of the COVID-19 pandemic.

For example, due to the pandemic, we have encountered delays permitting the travel of our U.S.-based employees to China, and additional restrictions could adversely affect our business.

We also may encounter delays in other countries.

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All of these considerations are impacted by factors beyond our control, such as:

• reductions in capacity or shutdowns of laboratories and other institutions as well as other impacts stemming from the COVID-19 pandemic, such as reduced or delayed spending on instruments or consumables as a result of such shutdowns and delays before re-opened laboratories and institutions resume previous levels of research activities that require new purchases of our instruments or consumables;

result of such shutdowns and delays before re-opened laboratories and institutions resume previous levels of research activities that require new purchases of our instruments or consumables;

• decreases in government funding of research and development;

• changes to programs that provide funding to research laboratories and institutions, including changes in the amount of funds allocated to different areas of research, changes that have the effect of increasing the length of the funding process or the impact of the COVID-19 pandemic on our customers and potential customers and their funding sources.

Additionally, our suppliers have also been impacted by the COVID-19 pandemic.

For example, our SP100 automation instrument manufacturer, Hamilton Company, has experienced a surge in demand for equipment and associated consumables used for COVID-19 diagnostics, and as a result, we have experienced longer lead times for our instruments.

We have also experienced supply delays for critical hardware, instrumentation, medical and testing supplies that we use for product development and certain components of our consumable kits, as these other components and supplies are otherwise diverted to COVID-19-related testing and other uses.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to sudden change.

Additionally, our suppliers have also been impacted by the COVID-19 pandemic and may be impacted by other public health crises and other epidemics.

For example, our SP100 automation instrument manufacturer, Hamilton Company, has experienced a surge in demand for equipment and associated consumables used for COVID-19 diagnostics.

A surge in demand for equipment, associated consumables, component parts, or raw materials could significantly harm our business if we cannot obtain equipment, associated consumables, component parts or raw materials in a timely manner, at an increased cost or at all.

The ultimate impact of the COVID-19 pandemic and any new epidemic is highly uncertain and subject to sudden change.

This impact could have a material, adverse impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely, and could worsen over time.

The extent to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

While we do not yet know the full extent of potential impacts on our business, any of these occurrences could significantly harm our business, results of operations and financial condition.

Recently, President Biden announced that the administration intends to end the COVID-19 national and public health emergencies on May 11, 2023.

The full impact of the termination of the public health emergencies on FDA and other regulatory policies and operations are unclear.

Any of these occurrences, and any new epidemics, could significantly harm our business, results of operations and financial condition.

Unfavorable U.S.

or global economic conditions as a result of the COVID-19 pandemic, or otherwise, could adversely affect our ability to raise capital and our business, results of operations and financial condition.

While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the COVID-19 pandemic has resulted in, and may continue to result in, extreme volatility and disruptions in the capital and credit markets, reducing our ability to raise additional capital through equity, equity-linked or debt financings, which could negatively impact our short-term and long-term liquidity and our ability to operate in accordance with our operating plan, or at all.

or global economic conditions could adversely affect our ability to raise capital and our business, results of operations and financial condition.

There has recently been extreme volatility and disruptions in the capital and credit markets, reducing our ability to raise additional capital through equity, equity-linked or debt financings, which could negatively impact our short-term and long-term liquidity and our ability to operate in accordance with our operating plan, or at all.

Additionally, our results of operations could be adversely affected by general conditions in the global economy and financial markets.

A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for the Proteograph Product Suite and our ability to raise additional capital when needed on favorable terms, if at all.

A weak or declining economy could strain our customers’ budgets or cause delays in their payments to us.

A weak or declining economy, rising inflation, or rising interest rates could strain our customers’ budgets or cause delays in their payments to us.

Any of the foregoing could harm our business, and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our ability to raise capital, business, results of operations and financial condition.

If we do not sustain or successfully manage our anticipated growth, our business and prospects will be harmed.

Our anticipated growth will place significant strains on our management, operational and manufacturing systems and processes, sales and marketing team, financial systems and internal controls and other aspects of our business.

If we do not sustain or successfully manage our growth or financial resources, our business and prospects will be harmed.

Growing our business will place significant strains on our management, operational and manufacturing systems and processes, sales and marketing team, financial resources, systems and internal controls, and other aspects of our business.

Developing and commercializing the Proteograph Product Suite will require us to hire and retain scientific, sales and marketing, software, manufacturing, customer service, distribution, quality assurance and other personnel.

In addition, we will need to hire additional accounting, finance and other personnel in connection with our efforts to comply with the requirements of being a public company.

As a newly public company, our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements and effectively manage these activities.

As a public company, our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements and effectively manage these activities.

We may face challenges integrating, developing and motivating our rapidly growing employee base.

To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel.

Our ability to successfully manage our expected growth is uncertain given the fact that we have been in operation only since 2017.

As our organization continues to grow, we will be required to implement more complex organizational management structures, and may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products.

If we do not successfully manage our anticipated growth, our business, results of operations, financial condition and prospects will be harmed.

innovative products.

If we do not successfully manage our growth or financial resources, our business, results of operations, financial condition and prospects will be harmed.

We depend on our key personnel and other highly qualified personnel, and if we are unable to recruit, train and retain our personnel, we may not achieve our goals.

Our future success depends upon our ability to recruit, train, retain and motivate key personnel.

Our senior management team, including Omid Farokhzad, one of our founders and our Chief Executive Officer;

Omead Ostadan, our President and Chief Operating Officer;

and David Horn, our Chief Financial Officer, is critical to our vision, strategic direction, product development and commercialization efforts.

On October 13, 2021, we announced that Mr.

Ostadan will be taking a leave of absence as an officer of the Company for personal reasons, beginning on November 20, 2021, and lasting approximately three months.

Ostadan returned on a part-time basis as the Company’s President beginning on February 28, 2022 and his part-time status is expected to last approximately ten months for ongoing personal reasons.

Our senior management team, including Omid Farokhzad, one of our founders and our Chief Executive Officer and President, and David Horn, our Chief Financial Officer, are critical to our vision, strategic direction, product development and commercialization efforts.

Omead Ostadan, our former President and one of our key personnel, took a leave of absence on November 20, 2021, for personal reasons lasting approximately three months.

Ostadan returned on a part-time basis as the Company’s President on February 28, 2022.

On August 25, 2022, Mr.

Ostadan resigned from his position as President of the company and the company’s Board of Directors for personal reasons each effective September 30, 2022.

Following Mr.

Ostadan’s departure, Mr.

Farokhzad is now the CEO and President.

The departure of one or more of our executive officers, senior management team members, or other key employees could be disruptive to our business until we are able to hire qualified successors.

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In addition, competition for qualified personnel is intense, particularly in the San Francisco Bay Area and San Diego.

We compete for qualified scientific and

information technology personnel with other life science and information technology companies as well as academic institutions and research institutions.

We compete for qualified scientific and information technology personnel with other life science and information technology companies as well as academic institutions and research institutions.

Some of our scientific personnel are qualified foreign nationals whose ability to live and work in the United States is contingent upon the continued availability of appropriate visas.

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We do not maintain fixed term employment contracts with any of our employees.

As a result, our employees could leave our company with little or no prior notice and would be free to work for a competitor.

As a result, our employees could leave our company with little or no prior notice and could be free to work for a competitor.

Due to the complex and technical nature of our products and technology and the dynamic market in which we compete, any failure to attract, train, retain and motivate qualified personnel could materially harm our business, results of operations, financial condition and prospects.

We expect to be dependent upon revenue generated from the sale of the Proteograph Product Suite from the time it is commercialized through the foreseeable future.

While we have recently moved into broad commercialization, if we are able to successfully broadly commercialize the Proteograph, we expect that we will generate substantially all of our revenue from the sale of the Proteograph Product Suite and associated consumables.

There can be no assurance that we will be able to successfully commercialize the Proteograph solution, design other products that will meet the expectations of our customers or that any of our future products will become commercially viable.

We expect to be dependent upon revenue generated from the sale of the Proteograph Product Suite for the foreseeable future.

We expect that we will generate substantially all of our revenue from the sale of the Proteograph Product Suite and associated consumables for the foreseeable future.

There can be no assurance that we will be able to successfully broadly commercialize the Proteograph solution, design other products that will meet the expectations of our customers or that any of our future products will become commercially viable.

As technologies change in the future for life sciences research tools, generally, and in proteomics and genomics technologies, specifically, we will be expected to upgrade or adapt the Proteograph solution to keep up with the latest technology.

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

Our business will depend significantly on research and development spending by academic and other research institutions, and other third parties, including commercial organizations, and any reduction in spending could limit demand for our products and adversely affect our business, results of operations, financial condition and prospects.

We expect that substantially all of our sales revenue in the near term will be generated from sales to commercial companies, academic institutions and other research institutions.

Certain of these customers’ funding will be, in turn, provided by various state, federal and international government agencies.

As a result, the demand for the Proteograph Product Suite will depend upon the research and development budgets of these customers, which are impacted by factors beyond our control, such as:

Our sales have been concentrated in a small number of customers.

We are in the early stages of our commercialization plan and our revenues have been concentrated in a relatively small number of customers, including a related party, PrognomiQ, Inc.

For the years ended December 31, 2022 and 2021, PrognomiQ, Inc.

accounted for 32% and 35% of our revenue, respectively.

If one or more customers, including PrognomiQ, Inc., terminate all or any portion of their agreements, delay installations or fail to order the anticipated amount of consumables or services, there could be a material adverse effect on our business, financial condition and results of operations.

See Note 5 - Revenue and Deferred Revenue and Note 11 - Related Party Transactions to our notes to financial statements included in Part I, Item 1, herein for further information regarding our relationship with PrognomiQ, Inc.

Our business depends significantly on research and development spending by academic and other research institutions, and other third parties, including commercial organizations, and any reduction in spending could limit demand for our products and adversely affect our business, results of operations, financial condition and prospects.

Substantially all of our sales revenue in the near term will be generated from sales to commercial companies, academic institutions and other research institutions.

Certain of these customers’ funding is provided by various state, federal and international government agencies.

As a result, the demand for the Proteograph Product Suite depends upon the research and development budgets of these customers, which are impacted by factors beyond our control, such as:

• decreases in government funding of research and development;

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In addition, various state, federal and international agencies that provide grants and other funding may be subject to stringent budgetary constraints that could result in spending reductions, reduced grant making, reduced allocations or budget cutbacks, which could jeopardize the ability of these customers, or the customers to whom they provide funding, to purchase our products.

For example, congressional appropriations to the National Institutes of Health (NIH) have generally increased year-over-year for the last 19 years, and reached a new high in 2020, but the NIH also experiences occasional year-over-year decreases in appropriations, including as recently as 2013.

For example, congressional appropriations to the National Institutes of Health (NIH) have generally increased year-over-year, the NIH also experiences occasional year-over-year decreases in appropriations, including as recently as 2013.

In addition, funding for life science research has increased more slowly during the past several years compared to previous years and has actually declined in some countries.

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We rely on single suppliers for some of the components of the Proteograph Product Suite, including a single contract manufacturer to manufacture and supply our instruments.

If these supplier or manufacturers should fail or not perform satisfactorily, our ability to meet demand and supply the Proteograph Product Suite would be adversely affected.

If these suppliers or manufacturers should fail or not perform satisfactorily, our ability to meet demand and supply the Proteograph Product Suite would be adversely affected.

We rely on a single contract manufacturer, Hamilton Company, a manufacturer of precision measurement devices, automated liquid handling workstations, and sample management systems located in Nevada and other locations, to manufacture and supply our instruments.

Since our contract with Hamilton does not commit them to carry inventory or make available any particular quantities, Hamilton may give other customers' needs higher priority than ours, we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms, and we may incur price increases from Hamilton Company.

For example, due to the COVID-19 pandemic and increased demand for Hamilton’s products, we have seen the lead time for our instruments increase significantly.

Further, if Hamilton is unable to obtain critical components used in the Proteograph solution or supply our instruments on the timelines we require, our business and commercialization efforts would be harmed.

In the event it becomes necessary to utilize one or more different contract manufacturers for automated liquid handling workstations, products, or product components associated with the Proteograph Product Suite, we would experience additional costs, delays and difficulties in doing so as a result of identifying and entering into new agreements with new suppliers or manufacturers as well as preparing such new suppliers or manufacturers to meet the logistical requirements associated with supplying and manufacturing the Proteograph Product Suite, and our business would suffer.

In addition, certain of the components used in our products are sourced from limited or sole suppliers.

In the event it becomes necessary to utilize one or more different contract manufacturers for automated liquid handling workstations, reagents or other product components associated with the Proteograph Product Suite, we would experience additional costs, delays and difficulties in doing so as a result of identifying and entering into new agreements with new suppliers or manufacturers.

In addition, we would have to prepare such new suppliers or manufacturers to meet the logistical requirements associated with supplying and manufacturing the Proteograph Product Suite, and our business would suffer.

In addition, certain components used in our products are sourced from limited or sole suppliers.

If we were to lose such suppliers, there can be no assurance that we will be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all.

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As such, a quality defect in a single component can compromise the performance of the entire solution.

In order to successfully generate revenue from the Proteograph Product Suite, we need to supply our customers with products that meet their expectations for quality and functionality in accordance with established specifications on a timely basis.

successfully generate revenue from the Proteograph Product Suite, we need to supply our customers with products that meet their expectations for quality and functionality in accordance with established specifications on a timely basis.

Our instruments are manufactured by Hamilton Company at their facility using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures.

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Our NPs and other consumables have a limited shelf life, after which their performance is not ensured.

While we have completed accelerated stability testing for our NPs, our real-time long-term liquid stability studies are underway, but have not been completed.

Shipment of consumables that effectively expire early or shipment of defective instruments or consumables to customers may result in recalls and warranty replacements, which would increase our costs, and depending upon current inventory levels and the availability and lead time for additional inventory, could lead to availability issues.

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In addition, as we commercialize the Proteograph Product Suite, we will also need to make corresponding improvements to other operational functions, such as our customer support, service and billing systems, compliance programs and our internal quality assurance programs.

We cannot assure you that any increases in scale, related

improvements and quality assurance will be successfully implemented or that appropriate personnel will be available.

We cannot assure you that any increases in scale, related improvements and quality assurance will be successfully implemented or that appropriate personnel will be available.

As we develop additional products, we may need to bring new equipment online, implement new systems, technology, controls and procedures and hire personnel with different qualifications.

An inability to manufacture products and components that consistently meet specifications, in necessary quantities, at commercially acceptable costs and without significant delays, may have a material adverse effect on our business, results of operations, financial condition and prospects.

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

The Proteograph Product Suite utilizes novel and complex technology and may develop or contain undetected defects or errors.

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

The Proteograph Product Suite utilizes novel and complex technology, including hardware, consumables and software, and may develop or contain defects or errors.

We cannot assure you that material performance problems, defects, or errors will not arise, and as we commercialize the Proteograph, these risks may increase.

We provide warranties that our products will meet performance expectations and will be free from material defects.

warranties that our products will meet performance expectations and will be free from material defects.

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

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

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

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

In addition, we expect that the Proteograph Product Suite will be used with our potential customers’ own mass spectrometry (MS) instruments or the MS instrument of a third-party service provider and the performance of these MS instruments is outside of our control.

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The occurrence of any one or more of the foregoing may have a material adverse effect on our business, results of operations, financial condition and prospects.

If we do not successfully develop and deploy the Proteograph Analysis Suite, our commercialization efforts and therefore business and results of operations could suffer.

The success of the Proteograph Product Suite depends, in part, on our ability to design and deploy the Proteograph Analysis Suite in a manner that enables the integration with our potential customers’ systems and accommodates our customers’ needs.

Without the Proteograph Analysis Suite, quality control of the workflow and data analysis is less accessible and robust and it may be difficult for our customers to understand and evaluate the quality of their results.

We have and will continue to spend significant amounts of effort developing the Proteograph Analysis Suite, and potential enhanced versions over time, to meet our customers’ and potential customers’ evolving needs.

There is no assurance that the development or deployment of the Proteograph Analysis Suite, or any potential enhancements, will be compelling to our customers.

In addition, we may experience delays in our release dates of the Proteograph Analysis Suite, and there can be no assurance that the Proteograph Analysis Suite will be released according to schedule.

If our software development and deployment plan, which may include participation from third party vendors and licensors, does not accurately anticipate customer demands, or if we fail to develop the Proteograph Analysis Suite in a manner that satisfies customer preferences in a timely and cost-effective manner, the Proteograph Product Suite may fail to gain market acceptance.

We face potential risks related to the use, handling, storage and transportation of biological samples, hazardous materials and substances or chemicals such as reagents in commercial products;

the collection, reuse and recycling of waste from products we manufacture and services we provide;

and compliance with environmental health and safety regulations.

At our facilities in Redwood City, including our Biohazards Safety Level 2 laboratory, we leverage unit operations to formulate and manufacture our NPs, assemble our consumables, conduct assays and perform mass spectrometer analyses.

As we increase the commercial scale, formulation and manufacture of our products using, handling, storing and transporting biological samples, hazardous materials and substances or chemicals such as reagents, or if we are unable to repeatably produce our products, in compliance with applicable healthy and safety, and environmental laws, rules and regulations, our operations, including our sales, could be negatively affected.

In addition, if we encounter issues in packaging and labelling our consumables, complying with regulations relating to laboratory safety, safety data sheets, handling human samples such as inactive COVID-19 samples, using certain hazardous substances or chemicals such as reagents in commercial products, collecting, reusing and recycling of

waste from products we manufacture, or complying with environmental health and safety regulations, our business could be adversely impacted.

If we do not successfully deploy and implement enhancements of the Instrument Control Software and Proteograph Analysis Suite, our commercialization efforts and, therefore, business and results of operations could suffer.

The success of the Proteograph Product Suite depends, in part, on our ability to design and deploy our Instrument Control Software and Proteograph Analysis Suite in a manner that enables the integration with our potential customers’ systems and accommodates our customers’ needs.

Without the Instrument Control Software, the Proteograph may become inoperable.

Without the Proteograph Analysis Suite software, quality control of the workflow and data analysis is less accessible and robust, and it may be difficult for our customers to understand and evaluate the quality of their results.

We have and will continue to spend significant amounts of effort continuing to develop our software to meet our customers’ and potential customers’ evolving needs.

There is no assurance that the development or deployment of our software will be compelling to our customers or function correctly.

In addition, we may experience delays in our release dates of our software, and there can be no assurance that our software will be released according to schedule.

If our software development and deployment plan, which may include participation from third party vendors and licensors, does not accurately anticipate customer demands, or if we fail to develop our software in a manner that satisfies customer preferences in a timely and cost-effective manner, the Proteograph Product Suite may fail to gain market acceptance or function correctly.

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

As we commercialize the Proteograph Product Suite outside of the United States, our international business could expose us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

As we commercialize the Proteograph Product Suite outside of the United States, our international business could expose us to business, regulatory, legal, 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:

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

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

federal laws and regulations, including with respect to not doing business with sanctioned parties, as prohibited by the office of Foreign Asset Control;

• export requirements and import or trade restrictions, including, without limitation, trade retaliation laws;

• laws and business practices favoring local companies;

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

• risks associated with transactions or payments denominated in foreign currency, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

• changes in social, economic, political and climate conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, investment, and climate control 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);

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The collection and transfer of personal data and human samples is subject to increasing regulatory authority around the world.

For example, Europe and China have adopted or are in the process of adopting data protections laws, regulations, and practice standards covering personal data, medical samples and data, and their potential transfer

across national borders.

In some cases, consent from individuals and the opportunity for revocation of consent, handling by local entities, and approvals from regulatory bodies may be required, and enforcement may include suspension of the ability to conduct business in the regulated jurisdiction along with civil fines and criminal penalties.

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

A portion of our international sales will be conducted through third-party distributors, and we will not control their efforts to sell our products.

A portion of our international sales is and will be conducted through third-party distributors, and we will not control their efforts to sell our products.

If our relationships with these third-party distributors cannot be established or deteriorate, or if these third-party distributors fail to sell our products, or engage in activities that harm our reputation, our results of operation and business may be negatively affected.

Our current commercial model includes direct sales in the United States, and we are building relationships with third party distributors in various countries, including China, to enable us to enter additional markets more efficiently.

Our current commercial model includes direct sales in the United States and elsewhere, and we have built and are building relationships with third party distributors in various countries, including China, to enable us to enter additional markets more efficiently.

If we are unable to enter or maintain such distribution arrangements on acceptable terms, or at all, we may not be able to successfully commercialize our products in certain countries.

Furthermore, distributors can choose the level of effort that they apply to selling our products relative to others in their portfolio.

Our distributors may not commit the necessary resources to market our products or may favor the products of other companies.

The selection, training, and compensation of distributors’ sales personnel are within their control rather than our own and may vary significantly in quality from distributor to distributor.

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These companies include Agilent Technologies, Bruker Corporation, Danaher, DiaSorin, and Thermo Fisher Scientific.

We also compete with a number of emerging growth companies that have developed, or are developing, proteomic products and solutions, such as Nautilus Biotechnology, Olink Proteomics, Quanterix, Quantum-Si and SomaLogic.

We also compete with a number of companies that have developed, or are developing, proteomic products and solutions, such as Nautilus Biotechnology, Olink Proteomics, Quanterix, Quantum-Si and SomaLogic.

Some of our current competitors are large publicly-traded companies, or are divisions of large publicly-traded companies, and may enjoy a number of competitive advantages over us, including:

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Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

We may need to raise additional capital to fund commercialization plans for the Proteograph Product Suite, including manufacturing, sales and marketing activities, expand our investments in research, and develop and commercialize new products and applications.

Based on our current plans, we believe that our current cash, cash equivalents and investments will be sufficient to meet our anticipated cash flow requirements for at least twelve months from the date of this Annual Report.

If our available cash resources and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products or the realization of other risks described in this Annual Report, we may be required to raise additional capital prior to such time through issuances of equity or convertible debt securities, entrance into a credit facility or another form of third-party funding or seek other debt financing.

We will consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including:

• increasing our sales and marketing and other commercialization efforts to drive market adoption of the Proteograph Product Suite;

• funding development and marketing efforts of the Proteograph Product Suite or any other future products;

• expanding our technologies into additional markets;

• acquiring, licensing or investing in technologies and other intellectual property rights;

• acquiring or investing in complementary businesses or assets;

• financing capital expenditures and general and administrative expenses.

Our present and future funding requirements will depend on many factors, including:

• our rate of progress in commercializing the Proteograph Product Suite and new products, and the cost of the sales and marketing activities associated with establishing adoption of our products;

• our rate of progress in, and cost of research and development activities associated with, products in research and development;

• the effect of competing technological and market developments.

The various ways we could raise additional capital carry potential risks.

If we raise funds by issuing equity securities, dilution to our stockholders could result.

If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our Class A common stock.

The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations.

If we raise funds through collaborations or licensing arrangements, we might be required to relinquish significant rights to our technologies or products or grant licenses on terms that are not favorable to us.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, if we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may acquire other companies, or their assets or technologies, enter into joint ventures, or make other strategic investments in companies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

We may in the future seek to acquire or invest in businesses, applications or technologies that we believe could complement or expand the Proteograph Product Suite or future products, enhance our technical capabilities or otherwise offer growth opportunities.

The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain the expected benefits of any acquisition or investment.

To date, the growth of our operations has been organic, and we have limited experience in acquiring or investing in other businesses or technologies.

We may not be able to successfully integrate acquired personnel, operations and technologies, or effectively manage the combined business following an acquisition.

Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of debt, which could harm our operating results.

In addition, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer.

We may not realize the benefits of PrognomiQ as a separate healthcare company in the area of disease testing.

In August 2020, we transferred certain assets to PrognomiQ, as a separate healthcare company to help enable the growth of ecosystems around new applications that leverage the Proteograph solution for unbiased, deep and large-scale proteomic information.

As of December 31, 2022, we held approximately 15% of the outstanding capital stock of PrognomiQ.

We may not realize the potential benefits of forming PrognomiQ for a variety of reasons, including:

• PrognomiQ may be unable to successfully develop viable testing products;

• PrognomiQ’s business may not help demonstrate the value of the Proteograph;

• an inability to reach agreement with PrognomiQ on future commercial arrangements;

• although PrognomiQ accounted for 32% of our revenue during the year ended December 31, 2022, it may not continue to be a meaningful customer of ours;

• PrognomiQ may need to raise additional funding in the future and be unable to do so;

• the formation of PrognomiQ and our continuing equity position in PrognomiQ may add complexities to our business from a finance, tax and accounting perspective.

Further, PrognomiQ is a separate entity, and as such, may decide over time to pursue a different business model, decide to do business with our competitors in addition to or instead of with us, be acquired by a competitor or take other actions that may not be beneficial to us.

Risks Related to Financial Reporting

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If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed and the market price of our Class A common stock may be negatively affected.

As a public company with SEC reporting obligations, we are required to document and test our internal control procedures to satisfy the requirements of Section 404(b) of the Sarbanes-Oxley Act (SOX), which requires annual assessments by management of the effectiveness of our internal control over financial reporting.

Effective December 31, 2021, we no longer qualify as an emerging growth company and the reduced compliance requirements to emerging growth companies no longer apply to us.

As such, our auditor is required to attest to the effectiveness of our internal control over financial reporting beginning with this annual report on Form 10-K.

We must implement and maintain substantial internal control systems and procedures to satisfy the reporting requirements under the Securities Exchange Act of 1934.

As a public company with SEC reporting obligations, we are required to document and test our internal control procedures to satisfy the requirements of Section 404(a) of the Sarbanes-Oxley Act (SOX), which requires annual assessments by management of the effectiveness of our internal control over financial reporting.

Because we re-qualified as a smaller reporting company, as of December 31, 2022, we are a non-accelerated filer and are no longer be required to comply with the auditor attestation requirements regarding the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act until we become an accelerated filer or large accelerated filer.

During our assessments, we may identify deficiencies that we are unable to remediate in a timely manner.

Testing and maintaining our internal control over financial reporting may also divert management’s attention from other matters that are important to the operation of our business.

We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404(b) of SOX.

We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404(a) of SOX.

If we conclude that our internal control over financial reporting is not effective, the cost and scope of remediation actions and their effect on our operations may be significant.

Moreover, any material weaknesses or other deficiencies in our internal control over financial reporting may impede our ability to file timely and accurate reports with the SEC.

Moreover, any material weaknesses or other deficiencies in our internal control over financial reporting may impede our ability to file timely and accurate reports with the SEC, and there could be a failure to meet exchange listing requirements.

Any of the above could cause investors to lose confidence in our reported financial information or our Class A common stock listing on Nasdaq to be suspended or terminated, which could have a negative effect on the trading price of our common stock.

We previously identified material weaknesses in our internal control over financial reporting, and if we fail to maintain an effective system of internal controls, or otherwise fail to comply with the Sarbanes-Oxley Act of 2002 now that we are a large accelerated filer, we may not be able to accurately and timely report our financial results, which may adversely affect our business and investor confidence in us and, as a result, the value of our Class A common stock.

We previously identified material weaknesses in our internal control over financial reporting, and if we fail to maintain an effective system of internal controls, or otherwise fail to comply with the Sarbanes-Oxley Act of 2002, we may not be able to accurately and timely report our financial results, which may adversely affect our business and investor confidence in us and, as a result, the value of our Class A common stock.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, we and our independent registered public accounting firm identified the following material weaknesses in our internal control over financial reporting:

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If we are unable to successfully maintain internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected.

In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be materially adversely affected.

In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, or if we receive SEC comment letters not resolved to the SEC’s satisfaction, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be materially adversely affected.

Moreover, we could become subject to investigations by regulatory authorities, which could require additional financial and management resources.

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We are also required to disclose material changes made in our internal controls over financing reporting and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually.

As discussed above, we have identified material weaknesses in the past which we are in the process of remedying.

However, our efforts to remediate previous material weaknesses may not be effective or prevent any future deficiency in our internal control over financial reporting.

Remediation of previous material weaknesses may not be effective or prevent any future deficiency in our internal control over financial reporting.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Class A common stock.

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Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operation could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

Changes in, or evolving interpretations of, financial accounting rules, regulations, standards or practices could result in unfavorable accounting changes, require us to, for example, change our compensation policies or restate our financial statements, or cause adverse, unexpected fluctuations in our operating results, resulting in a decline in the market price of our Class A common stock.

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

We base our estimates on historical experience and estimates and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.

For example, in connection with the implementation of the new revenue accounting standard if and when we have product sales, management makes judgments and assumptions based on our interpretation of the new standard.

We base our estimates on historical experience and estimates and on various other assumptions

that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.

However, we have a limited operating history.

For example, in connection with the implementation of the new revenue accounting standard for product sales, management makes judgments and assumptions based on our interpretation of the new standard.

The new revenue standard is principle-based and interpretation of those principles may vary from company to company based on their unique circumstances.

It is possible that interpretation, industry practice and guidance may evolve as we apply the new standard.

If our assumptions underlying our estimates and judgments relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgments, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

If our assumptions underlying our estimates and judgments relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgments, or if accounting rules, regulations, standards or practices change, our compensation practices may need to change or our financial statements may need to be restated, and our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

Risks Related to Regulatory Compliance

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It generally takes a significant amount of time to prepare a 510(k), including conducting appropriate testing on our products, and several months to years for the FDA to review a submission.

Notwithstanding the effort and expense, FDA clearance or approval could be denied for some or all of our products for which we choose to market as a medical device or a

clinical diagnostic device.

Notwithstanding the effort and expense, FDA clearance or approval could be denied for some or all of our products for which we choose to market as a medical device or a clinical diagnostic device.

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.

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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.

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.

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

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 on May 26, 2021 (postponed from 2020) and May 26, 2022 respectively.

Recently, the European Parliament voted to extend the transition timelines for MDR and IVDR.

These regulations increase the clinical requirements and will increase the difficulty of regulatory approvals in Europe.

In addition, the FDA regulates exports of medical devices.

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Regulatory requirements related to marketing, selling, and distribution of RUO products could change or be uncertain, even if clinical uses of our RUO products by our customers were done without our consent.

If the FDA or other regulatory authorities assert that any of our RUO

products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected.

The FDA has historically exercised enforcement discretion in not enforcing the medical device regulations against laboratories offering LDTs.

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.

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.

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

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

If the FDA or other regulatory authorities assert that any of our RUO products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected.

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

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We cannot predict how these various efforts will be resolved, how Congress or the FDA will regulate LDTs in the future, or how that regulatory system will impact our business.

Changes to the current regulatory framework, including the imposition of additional or new regulations, including regulation of our products, could arise at any time during the development or marketing of our products, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our products, if required.

our products, if required.

Further, sales of devices for diagnostic purposes may subject us to additional healthcare regulation and enforcement by the applicable government agencies.

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

In August 2020, 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, for an LDT may nonetheless voluntarily submit a premarket approval application, premarket notification or an Emergency Use Authorization request, respectively, but are not required to do so.

The impact of this HHS rescission policy, including whether or how this policy will be implemented under the current administration, as well as other legislative, executive, and agency actions of the current administration remains unclear.

The Biden administration has also issued a “regulatory freeze” memorandum that directs department and agency heads to review any new or pending rules of the prior administration.

Any restrictions or heightened regulatory requirements on LDTs, IVDs, or RUO products by the FDA, HHS, Congress, or state regulatory authorities may decrease the demand for our products, increase our compliance costs, and negatively impact our business and profitability.

We will continue to monitor and assess the impact of changing regulatory landscape on our business.

Capital Structure and M&A