What changed in this filing

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Item 1A. Risk Factors

2022-11-14 compared with 2022-08-11 · 82 added, 80 removed, 1077 unchanged (13% of the section changed)

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Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

The risks relating to our business as set forth in the 2021 Annual Report on Form 10-K are set forth below and are unchanged substantively as of June 30, 2022, except for those risks designated by an asterisk (*).

The risks relating to our business as set forth in the 2021 Annual Report on Form 10-K are set forth below and are unchanged substantively as of September 30, 2022, except for those risks designated by an asterisk (*).

Risks Related to Our Business and Strategy

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and although we had net income of approximately $3.6 million for the year ended December 31, 2020, we also incurred net losses prior to such time, including $1.3 million for the period from January 14, 2019 through December 31, 2019, and approximately $0.1 million for the period from January 1, 2019 through January 13, 2019.

In addition, during the three and six months ended June 30, 2022, we incurred net losses of $6.2 million and $11.7 million, respectively, and during the three and six months ended June 30, 2021, we incurred net losses of $2.3 million and $2.9 million.

In addition, during the three and nine months ended September 30, 2022, we incurred net losses of $22.5 million and $34.2 million, respectively, and during the three and nine months ended September 30, 2021, we incurred net losses of $3.3 million and $6.2 million.

We expect that our operating expenses will continue to increase as we grow our business and we anticipate additional costs in connection with legal, accounting and other administrative expenses related to operating as a public company.

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We continue to extend our production capabilities by investing in automation and infrastructure to substantially increase the manufacturing capacity at our facilities, improve operating efficiency through the use of automation, and reduce delivery time for our custom Research Use Only (RUO) products and our products manufactured subject to Good Manufacturing Practice (GMP) requirements.

We have recently expanded our footprint from 137,000 square feet to approximately 259,800 square feet and expect to expand our total production capacity by five-fold over the course of the next two years.

We have recently expanded our footprint from 137,000 square feet to approximately 259,800 square feet, inclusive of the new manufacturing facility presently under construction, and we expect to expand our total production capacity by five-fold over the course of the next two years.

The expansion and automation of our existing manufacturing facilities, as well as the creation of new or expanded manufacturing operations, could be disruptive to our operations, divert the attention of management and require significant investments.

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If we cannot maintain our current relationships with customers, if we fail to sustain recurring sources of revenue with our existing customers, or if we fail to enter into new relationships, our future operating results will be adversely affected.

For the three months ended June 30, 2022 and 2021, customers making up more than 10% of our total revenue accounted for 14% and 29% of our total revenue, both of which are distributors.

For the six months ended June 30, 2022 and 2021, customers making up more than 10% of our total revenue accounted for 13% and 17% of our total revenue, both of which are distributors.

For the three months ended September 30, 2022 and 2021, customers making up more than 10% of our total revenue accounted for 42% and 32% of our total revenue.

One of our largest customers is a distributor which made up 14% and 21% of total revenue for the three months ended September 30, 2022 and 2021.

For the nine months ended September 30, 2022 and 2021, customers making up more than 10% of our total revenue accounted for 14% and 29% of our total revenue, all of which are distributors.

Our customers that are distributors, as opposed to direct customers, represent highly diversified customer bases.

All customers buy from us on a purchase order basis.

The revenue attributable to our top customers has fluctuated in the past and may fluctuate in the future,

which could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.

A substantial majority of our customers buy from us on a purchase order basis.

The revenue attributable to our top customers has

fluctuated in the past and may fluctuate in the future, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.

In addition, the termination of these relationships could result in a temporary or permanent loss of revenue.

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Certain of our raw materials are sourced from a limited number of suppliers.

For the three months ended June 30, 2022 and 2021, purchases from suppliers making up 10% or more of our total inventory purchases represented 55% and 58% of total inventory purchases, respectively.

For the six months ended June 30, 2022 and 2021, purchases from suppliers making up 10% or more of our total inventory purchases represented 61% and 50% of total inventory purchases, respectively.

For the three months ended September 30, 2022 and 2021, purchases from suppliers making up 10% or more of our total inventory purchases represented 61% and 50% of total inventory purchases, respectively.

For the nine months ended September 30, 2022 and 2021, purchases from suppliers making up 10% or more of our total inventory purchases represented 54% and 49% of total inventory purchases, respectively.

However, we note that one of these suppliers is a distributor that sells products on behalf of a diversified supply chain.

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*We are subject to financial, operating, legal and compliance risk associated with global operations.

We engage in limited business globally, with approximately 3.5% and 3.0% of our revenue for the three months ended June 30, 2022 and 2021, respectively, and 3.2% and 3.5% of our revenue for the six months ended June 30, 2022 and 2021, respectively, coming from outside the U.S.

We engage in limited business globally, with approximately 2.9% and 3.0% of our revenue for the three months ended September 30, 2022 and 2021, respectively, and 3.1% and 3.3% of our revenue for the nine months ended September 30, 2022 and 2021, respectively, coming from outside the U.S.

However, one of our strategies is to expand geographically, both through distribution and through direct sales.

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Regulatory agencies may in the future take action against us or our customers for failure to comply with applicable regulations governing clinical trials and the development and testing of diagnostic and therapeutic products, as well as requirements to fall within certain regulatory categories to qualify for exemption from marketing authorization, or where applicable to obtain clearance, authorization, or approval prior to marketing of regulated products.

Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

In addition, such a failure could expose us to contractual or product

liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.

Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction

of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.

We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of substances that could be classified as hazardous, and our business practices in the U.S.

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Our products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business, financial condition, results of operations, cash flows and prospects.

We make certain of our products available to customers as RUO products.

RUO products belong to a separate regulatory classification under a long-standing FDA regulation.

From an FDA perspective, products that are intended for research use only and are labeled as RUO are not regulated by the FDA as in vitro diagnostic devices for clinical use, and are therefore not subject to those specific regulatory requirements.

RUO products may be used or distributed for research use without first obtaining FDA clearance, authorization or approval.

The products must bear the statement:

“For Research Use Only.

Not for Use in Diagnostic Procedures.”

RUO products cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended for human clinical diagnostic use.

Accordingly, a product labeled RUO but intended or promoted for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the FDCA and subject to FDA enforcement action.

The FDA will consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed and to whom, when determining its intended use.

The FDA could disagree with our assessment that our products are properly marketed as RUO, or could conclude that products labeled as RUO are actually intended for clinical diagnostic use, and could take enforcement action against us, including requiring us to stop distribution of our products until we are in compliance with applicable regulations, which would adversely affect our business, financial condition, results of operations, cash flows and prospects.

In the event that the FDA requires us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA will grant any clearance or approval requested by us in a timely manner, or at all.

Our raw material products are manufactured following the voluntary quality standards of ISO 13485:2016.

Additionally, products we offer as “GMP-grade”

raw material products that we voluntarily manufacture consistent with GMP requirements also follow ISO 13485:2016 standards.

We believe these raw material products, including our raw material products offered as “GMP-grade,”

are exempt from compliance with FDA regulatory requirements, given that we do not believe they are finished devices as our raw material products are further processed by our customers.

Our products are provided to customers under contracts and purchase orders that outline quality standards and product specifications.

As products advance through the clinical phases, requirements become more stringent and we work with customers to define and agree on requirements and risks associated with their product.

The FDA could disagree with our assessment that our products are exempt from current GMP regulations.

In addition, the FDA could conclude that the raw material and biologics components products we provide to our customers are actually subject to the pharmaceutical or drug quality-related regulations for manufacturing, processing, packing or holding of drugs or finished pharmaceuticals, and could take enforcement action against us, including requiring us to stop distribution of our products until we are in compliance with applicable regulations, which would adversely affect our business, financial condition, results of operations, cash flows and prospects.

In the future, we may receive a customer request that an RUO product be available for manufacturing and not research use only, or receive notification from the FDA requiring us to comply with certain FDA regulations for our raw material and biologics components products.

As a result, there can be no assurance that the FDA will find our operations are in compliance in a timely manner, or at all, and our results of operations may suffer.

We make certain of our products available to customers as Research Use Only (“RUO”) products.

Products that are intended for research use only and are labeled as RUO are not regulated by the FDA.

RUO products may therefore be sold for research use without first obtaining FDA clearance, authorization, or approval.

Those products must bear the statement:

“For Research Use Only.”

The makers of RUO products cannot make any claims relating to the products’

safety, effectiveness, or diagnostic utility, and they cannot be marketed or intended for use in humans or animals.

The FDA could disagree with our assessment that our RUO products are properly marketed as RUO or could conclude that our products labeled as RUO are actually intended for diagnostic or clinical use.

The FDA could take enforcement action against us under the FDCA, including requiring us to stop the sale of our RUO products until we are in compliance with applicable regulations, which would adversely affect our business, financial condition, results of operations, cash flows, and prospects.

If the FDA required us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA would grant any such authorization to us in a timely manner, or at all.

We voluntarily follow the quality standards of ISO 13485:2016 for the manufacture of our products, including those products we offer as “GMP-grade.”

We believe our GMP-grade products are exempt from FDA regulations applicable to medical devices and pharmaceutical drug products, because our products are intended for further processing by our customers.

The FDA could disagree and conclude that our products are in fact subject to those regulations and decide to take enforcement action against us, including requiring us to stop the sale of our products until we comply, which would adversely affect our business, financial condition, results of operations, cash flows, and prospects.

There can be no assurance that the FDA would find our operations to be in compliance in a timely manner, or at all, and our results of operations may suffer.

We rely on assumptions, estimates and data to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

In addition to our financial results, our management regularly reviews a number of operating and financial metrics, including a breakdown of product revenue into Lab Essentials revenue, Clinical Solutions revenue and Sample Transport revenue, revenue by customer market (pharmaceutical/biotechnology, and academia, government, distributors and healthcare providers), average sale price by product, orders per day, quotes per day, delivery times, order type, new customer metrics, and status of pipeline opportunities that represent potential customers, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

As both the industry in which we operate and our businesses continue to evolve, so

too might the metrics by which we evaluate our businesses and the Company.

As both the industry in which we operate and our businesses continue to evolve, so too might the metrics by which we evaluate our businesses and the Company.

In addition, while the calculation of the metrics we use is based on what we believe to be reasonable estimates, our internal tools are not independently verified by a third party and have a number of limitations and, furthermore, our methodologies for tracking these metrics may change over time, for example, the industry breakdown of our customer revenue by government, pharma/bio and academia sales.

Accordingly, investors should not place undue reliance on these metrics.

We may be required to record a significant charge to earnings if our goodwill and other intangible assets, or other investments become impaired.

We are required under GAAP to test goodwill and indefinite lived intangibles for impairment at least annually and to review our goodwill, intangible assets and other assets acquired through merger and acquisition activity for impairment when events or changes in circumstance indicate the carrying value may not be recoverable.

*We have recorded, and may be required to record in the future, a significant charge to earnings if our goodwill and other intangible assets, or other investments become impaired.

changes in circumstance indicate the carrying value may not be recoverable.

Factors that could lead to impairment of goodwill, intangible assets and other assets acquired via acquisitions include significant adverse changes in the business climate and actual or projected operating results (affecting our company as a whole or affecting any particular segment) and declines in the financial condition of our business.

As of June 30, 2022, goodwill and intangible assets represented approximately 19% of our total assets.

If we determine that there has been impairment, our financial results for the relevant period would be reduced by the amount of the impairment, net of tax effects, if any.

We may be required in the future to record charges to earnings if our goodwill, intangible assets or other investments become impaired.

Any such charge would adversely impact our financial results.

During the three months ended September 30, 2022, the market price of our common stock and market capitalization declined significantly.

Given the significance of this decline, we performed interim goodwill impairment testing.

As a result of that testing, we determined goodwill was fully impaired and recorded an impairment charge of $16.6 million during the three months ended September 30, 2022, adversely impacting our financial results.

After recording the impairment charge, as of September 30, 2022, intangible assets represented approximately 11% of our total assets.

In addition, in the future we may acquire other businesses, products or technologies as well as pursue strategic alliances, joint ventures, technology licenses or investments in complementary businesses, resulting in goodwill and other intangible assets.

Such goodwill and intangible assets must be tested and reviewed as described above.

If in the future we again determine that there has been impairment, we may be required to record charges to earnings, and our financial results for the relevant period would be reduced by the amount of the impairment, net of tax effects, if any.

*Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.

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federal and $11.7 million of state net operating loss (NOL) carryforwards available to reduce taxable income in future years.

Our ability to utilize those NOLs may be limited based on our operating performance and tax laws in effect.

Under the Tax Cuts and Jobs Act (the Tax Act), as modified by the Coronavirus Aid,

Relief, and Economic Security Act (the CARES Act), federal NOLs incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs in taxable years beginning after December 31, 2020 is limited to 80% of taxable income.

Our ability to utilize those NOLs may be limited based on our operating performance and tax laws in effect at the time of the proposed use.

Under the Tax Cuts and Jobs Act (the Tax Act), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), federal NOLs incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs in taxable years

beginning after December 31, 2020 is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

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Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our current or future products or the use of our current or future products.

After issuance, the scope of patent claims remains subject to construction based on interpretation of the law, the written disclosure in a patent and the patent’s

prosecution history.

After issuance, the scope of patent claims remains subject to construction based on interpretation of the law, the written disclosure in a patent and the patent’s prosecution history.

Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect.

In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.

These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages.

These third parties

could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages.

The life sciences industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use.

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*Our existing indebtedness could adversely affect our business and growth prospects.

In May 2022, we entered into the Amended Credit Agreement which provides for loan commitments in an aggregate amount of up to $57.135 million.

In May 2022, we entered into the Credit Agreement and in November 2022 we entered into Amendment No.

The Amended Credit Agreement provides for loan commitments in an aggregate amount of up to $57.135 million.

Our indebtedness, including the indebtedness we have incurred, and may in the future incur, under the Amended Credit Agreement or otherwise, could require us to divert funds identified for other purposes for debt service and impair our liquidity position.

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If new debt is added to our current indebtedness levels, the related risks that we face could intensify.

The phase-out of the LIBOR, or the replacement of the LIBOR with a different reference rate, may adversely affect interest rates.

Borrowings under our Amended Credit Agreement bear interest at rates determined using the LIBOR as the reference rate.

*The phase-out of the LIBOR, or the replacement of the LIBOR with SOFR or a different reference rate, may adversely affect interest rates.

Prior to Amendment No.

1, borrowings under our Credit Agreement bore interest at rates determined using the LIBOR as the reference rate.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates the LIBOR) announced that it would phase out the LIBOR by the end of 2021.

It is unclear whether new methods of calculating the LIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted, and currently it appears highly likely that the LIBOR will be discontinued or substantially modified in future years.

On November 30, 2020, ICE Benchmark Administration (the administrator of the LIBOR) with the support of the United States Federal Reserve and the Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021, for only the one week and two month USD LIBOR tenors, and on June 30, 2023, for all other USD LIBOR tenors.

While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.

We believe that the administrative agent under our

Amended Credit Agreement, MidCap Financial Trust, will continue to use the one month USD LIBOR tenor in the ordinary course.

However, our Amended Credit Agreement permits the agent in certain circumstances, including upon a determination that the LIBOR will no longer be provided or published on a date certain or that no reasonable means will exist for ascertaining such rate, to make adjustments that the agent determines necessary to preserve the current all-in rate of interest.

Changes in the method of calculating the LIBOR, or the replacement of the LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs.

Significant recommendations as to alternative rates and as to protocols have been advanced, and continue to be advanced, by various regulators and market participants, including the Alternative Reference Rates Committee of the United States Federal Reserve (ARRC), a group

of market participants convened by the U.S.

Federal Reserve Board and the Federal Reserve Bank of New York.

AARC has recommended the Secured Overnight Financing Rate (SOFR), a rate calculated based on repurchase agreements backed by treasury securities, as its recommended alternative benchmark rate to replace USD LIBOR.

In addition, recent New York state legislation effectively codified the use of SOFR as the alternative to USD LIBOR in the absence of another chosen replacement rate, which may affect contracts governed by New York state law, including our Amended Credit Agreement.

Amendment No.

1 modified the Credit Agreement in several ways, including by replacing the LIBOR with the forward-looking one-month term SOFR adjusted upward by 0.10% (or Term SOFR, as defined in Amendment No.

1), with a Term SOFR floor of 1.00%, as the reference rate for determination of interest rates under the Amended Credit Agreement.

The replacement of LIBOR with Term SOFR may adversely affect interest rates and result in higher borrowing costs.

This could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.

We cannot predict the effect of the potential changes to the LIBOR or the establishment and use of alternative rates or benchmarks.

Furthermore, we may need to renegotiate our Amended Credit Agreement or incur other indebtedness, and changes in the method of calculating the LIBOR, or the use of an alternative rate or benchmark, may negatively impact the terms of such indebtedness.

We cannot predict the effect of the potential changes to the LIBOR or SOFR, or the establishment and use of alternative rates or benchmarks, on global financial markets or the Amended Credit Agreement.

*The terms of the Amended Credit Agreement may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

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THP and its affiliates engage in a broad spectrum of activities, including investments in our industry generally.

In the ordinary course of their business activities, THP and its affiliates may engage in activities where their interests conflict with our

interests or those of our other stockholders, such as investing in or advising businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours.

In the ordinary course of their business activities, THP and its affiliates may engage in activities where their interests conflict with our interests or those of our other stockholders, such as investing in or advising businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours.

Our amended and restated certificate of incorporation provides that none of THP and its affiliates and any person or entity who, while a stockholder, director, officer or agent of the Company or any of its affiliates, is a director, officer, principal, partner, member, manager, employee, agent and/or other representative of THP and its affiliates (each, an Identified Person) has any duty to refrain from (i) engaging in a corporate opportunity in the same or similar business activities or lines of business in which we or our affiliates are engaged or that are deemed to be competing with us or any of our affiliates or (ii) otherwise investing in or providing services to any person that competes with us or our affiliates engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.

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SB 826 generally requires public companies with principal executive offices in California to have a minimum number of females on its board of directors.

December 31, 2021, each public company was required to have at least two females on its board of directors if the company had at least five directors, and at least three females on its board of directors if the company had at least six directors as of December 31, 2021.

As of December 31, 2021, each public company was required to have at least two females on its board of directors if the company had at least five directors, and at least three females on its board of directors if the company had at least six directors as of December 31, 2021.

On May 13, 2022, the Superior Court of California for the County of Los Angeles entered an order striking down SB 826, holding that the statute violates the Equal Protection Clause of the California Constitution.

As of May 17, 2022, the California Secretary of State indicated that she has directed counsel to file an appeal of the verdict with respect to SB 826.

As of the date of this Current Report on Form 10-Q, no appeal has been filed.

Therefore, ultimate enforceability of SB 826 remains uncertain.

The California Secretary of State has appealed the order and such appeal is currently pending.

On September 16, 2022, the appellate court ruled to temporarily stay enforcement of the trial court’s order, which prevented the California Secretary of State from collecting diversity data on corporate disclosure forms pursuant to SB 826, pending a further order of the appellate court.

To the extent that this ruling of the appellate court permits the California Secretary of State to collect and report diversity data, we may be required to comply with additional disclosure requirements.

However, ultimate enforceability of SB 826 remains uncertain.

Additionally, on September 30, 2020, Assembly Bill 979 (AB 979) was signed into law.

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On April 1, 2022, the Superior Court of California for the County of Los Angeles entered an order striking down AB 979, holding that the statute violates the Equal Protection Clause of the California Constitution.

On June 2, 2022, a notice of appeal was filed and thus litigation regarding AB 979 will continue.

On June 2, 2022, a notice of appeal was filed.

On September 16, 2022, the appellate court ruled to temporarily stay enforcement of the trial court’s order, which prevented the California Secretary of State from collecting diversity data on corporate disclosure forms pursuant to AB 979, pending a further order of the appellate court.

Litigation regarding AB 979 will continue.

Our board of directors currently includes two female directors, and no directors from “underrepresented communities.”

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(ii) the date we qualify as a “large accelerated filer,”

with at least $700.0 million of equity securities held by non-affiliates;

with at least $700.0 million of

equity securities held by non-affiliates;

(iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities;

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Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company for so long as either (i) the market value of our common shares held by non-affiliates is less than $250.0 million as of the end of our second fiscal quarter or (ii) we have annual revenues of less than $100.0 million and the market value of our common shares held by non-affiliates is less than $700.0 million as of the end of our

second fiscal quarter.

To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

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If the enforceability of our forum selection provisions were to be challenged, we may incur additional costs associated with resolving such challenge.

business, financial condition, results of operations, cash flows and prospects and result in a diversion of the time and resources of our employees, management and board of directors.

While we currently have no basis to expect any such challenge would be successful, if a court were to find our forum selection provisions to be inapplicable or unenforceable with respect to one or more of these specified types of actions or proceedings, we may incur additional costs associated with having to litigate in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, cash flows and prospects and result in a diversion of the time and resources of our employees, management and board of directors.

An active, liquid trading market for our common stock may not be sustained, which may limit your ability to sell your shares.

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All shares sold in our IPO were freely tradable upon such sale without restriction or further registration under the Securities Act, except for any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act (Rule 144), including our directors, executive officers and other affiliates (including THP), which may be sold only in compliance with certain limitations.

As of June 30, 2022, we have 28,080,484 shares of common stock outstanding, substantially all of which are held by directors, executive officers and other affiliates and will be subject to volume, manner of sale and other limitations under Rule 144.

As of September 30, 2022, we have 28,130,484 shares of common stock outstanding, substantially all of which are held by directors, executive officers and other affiliates and will be subject to volume, manner of sale and other limitations under Rule 144.

Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement.

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In addition, shares of our common stock that are issued pursuant to our equity incentive plans and our Employee Stock Purchase Plan (ESPP) will become eligible for sale in the public market, subject to provisions relating to various vesting agreements, lock-up agreements and Rule 144, as applicable.

As of June 30, 2022, there were 322,174, 1,890,908 and 1,302,979 shares of common stock reserved for issuance pursuant to outstanding stock option awards under the 2016 Stock Plan, as amended (2016 Plan), the 2020 Equity Incentive Plan, as amended (2020 Plan) and the 2021 Equity Incentive Plan (2021 Plan), respectively.

As of September 30, 2022, there were 312,174, 1,841,144 and 1,331,438 shares of common stock reserved for issuance pursuant to outstanding stock option awards under the 2016 Stock Plan, as amended (2016 Plan), the 2020 Equity Incentive Plan, as amended (2020 Plan) and the 2021 Equity Incentive Plan (2021 Plan), respectively.

In addition, the 2021 Plan and the ESPP provide for annual automatic increases in the number of shares reserved thereunder.

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We do not anticipate paying any regular cash dividends on our common stock.

Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant.

Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations,

financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant.

In addition, the terms of the Amended Credit Agreement prohibit us from paying dividends, other than dividends payable in our stock, without the prior written consent of the lender.

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

We believe that our existing cash and cash equivalents as of June 30, 2022 together with our credit facility under the Amended Credit Agreement will enable us to fund our operating expenses and capital expenditure requirements for at least the next 24 months.

We believe that our existing cash and cash equivalents as of September 30, 2022, together with our credit facility under the Amended Credit Agreement will enable us to fund our operating expenses and capital expenditure requirements for at least the next 24 months.

However, we may need to raise substantial additional capital to:

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Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Claims for indemnification by our directors and officers may reduce our funds available to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide for indemnification of our directors and officers, in each case to the fullest extent permitted by Delaware law.

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we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law.

Delaware law provides that a corporation may

indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

94 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors