What changed in this filing

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Item 1A. Risk Factors

2021-08-06 compared with 2021-05-07 · 159 added, 329 removed, 844 unchanged (37% of the section changed)

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• Our ability to manufacture our products to the necessary specifications and quantities to meet demand;

• Our dependency on the success of our Next GEM microfluidic chip;

• Our dependency on revenue generated from the sale of our Chromium solutions;

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Risks related to litigation and our intellectual property:

• Our involvement in lawsuits which would require us to pay significant damages or prevent us from selling our products;

• Our potential involvement in lawsuits which would require us to pay significant damages or prevent us from selling our products;

• Our involvement in lawsuits to defend our intellectual property rights which are expensive and time consuming and could be unsuccessful;

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In the near term, we expect that a large portion of our revenue will continue to be derived from sales of Chromium and Visium products, including our instruments and consumables, to research institutions.

As a result, the demand for our products will depend upon the ability of customers to access labs and conduct research in light of the COVID-19 pandemic, the research and development budgets of these customers and the ability of such customers to receive funding for research, all of which are impacted by factors beyond our control, such as:

As a result, the demand for our products will depend upon purchasing patterns across our customer base, the ability of customers to access labs and conduct research in light of the COVID-19 pandemic, the research and development budgets of these customers and the ability of such customers to receive funding for research, all of which 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 due to reductions in capacity or shutdowns of laboratories and other institutions in which our instruments and solutions are used;

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• decreases in 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;

• changes in, availability of or interruptions to funding or other incentives for our customers, including VAT and import tax exemptions available or potentially available to certain of our customers in China, including administrative or other delays in funding or incentive award processes, changes in the amount of funds or other incentives allocated to different areas of research, changes that have the effect of increasing the length of the funding or incentive award process or the impact of the COVID-19 pandemic on our customers and potential customers and their sources of funding or other incentives;

• macroeconomic conditions and the political climate;

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For example, congressional appropriations to the National Institutes of Health (the “NIH”) have generally increased year-over-year in recent years, but the NIH also experiences occasional year-over-year decreases in appropriations.

In addition, funding for life sciences research has increased more slowly during the past several years compared to previous years and has actually

declined in some countries.

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

There is no guarantee that NIH appropriations will not decrease in the future.

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The impacts and potential impacts of the COVID-19 pandemic continue to create significant uncertainty for our business, financial condition and results of operations.

The extent of the impacts of the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in customer behavior in response to the pandemic, some of which may be more than just temporary.

The extent of the impacts of the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, resurgences, local, state, national and global vaccination efforts, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in customer behavior in response to the pandemic, some of which may be more than just temporary.

Our global operations expose us to risks associated with the COVID-19 pandemic, which has continued to result in challenging operating environments.

COVID-19 continues to spread across the globe to almost all of the countries and territories in which our products are developed, made, manufactured, distributed or sold.

Authorities in many of these markets have implemented numerous measures to stall the spread and reduce the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place and safer-at-home orders, business shutdowns and closures, and have also implemented multi-step polices with the goal of re-opening these markets.

COVID-19 continues to affect all of the countries and territories in which our products are developed, made, manufactured, distributed or sold.

Third parties in many of these markets have implemented numerous measures to stall the spread and reduce the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place and safer-at-home orders, business shutdowns and closures, and have also implemented multi-step polices with the goal of re-opening these markets.

These measures have impacted and continue to impact us, our employees, customers, contract manufacturers, distributors, partners, suppliers and other third parties with whom we do business.

The countries and territories in which our products are developed, made, manufactured, distributed or sold are in varying stages of restrictions, re-opening and re-closing to address the COVID-19 pandemic.

The countries and territories in which our products are developed, made, manufactured, distributed or sold are in varying stages of restrictions, re-opening and closing to address the COVID-19 pandemic.

Certain jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases.

There is considerable uncertainty regarding how the effects of the pandemic, including current and future health and safety measures implemented in response to the pandemic, will impact our business, including whether they will result in further changes in demand for our products, further increases in operating costs (whether as a result of changes to our supply chain or increases in employee costs, operating costs or otherwise), further impact our ability to perform research and development, manufacturing, and shipping of our products, how they will further impact our supply chain and whether they will result in further reduced availability of air or other commercial transport, port closures or border restrictions, each or all of which can impact our ability to make, manufacture, distribute and sell our products.

To date, we have incurred increased costs as a result of COVID-19, including increased expenses to implement additional measures to ensure the health and safety of our workforce, such as weekly COVID-19 testing.

To date, we have incurred increased costs as a result of COVID-19, including increased expenses to implement additional measures to ensure the health and safety of our workforce.

In addition, measures that impact our ability to access our facilities may continue to impact the availability of our employees, some of whom are not able to perform their job functions remotely.

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This increased demand for testing has impacted, and may continue to impact, our ability and our customers' ability to source equipment, components and materials used in our products or our customers' facilities that are also needed for COVID-19 testing.

The risk that we will not be able to source the necessary equipment, components and materials to manufacture our products has led us to carry higher inventory.

Compliance with governmental measures imposed in response to COVID-19 has caused and will continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines and other penalties, any of which can adversely affect our business.

In addition, the COVID-19 pandemic has resulted in a large percentage of our employees working remotely which has amplified certain risks to our business.

For example, the increase in remote work has, increased demand on our information technology resources and systems, increased phishing and other malicious activity as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic and led to an increase in the number of points of potential exposure, such as laptops and mobile devices, to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any security incidents, may adversely affect our business.

The risk that we will not be able to source the necessary equipment, components and materials to

manufacture our products has led us to carry higher inventory.

Additionally, the risk that our customers may not be able to source the materials they need to use our products may require that we redesign, or attempt to redesign, certain of our products in order to facilitate our customers' experiments, and such redesigns or attempts to redesign may not be successful.

Compliance with governmental or other measures imposed in response to COVID-19 has caused and will continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines and other penalties, any of which can adversely affect our business.

In addition, while some of our workforce has returned to our offices and resumed onsite work, the COVID-19 pandemic has resulted in a large percentage of our employees working remotely, which has amplified certain risks to our business and may do so again as resurgences of COVID-19 or other circumstances may result in a return to remote work for some or all of our employees.

For example, the increase in remote work has increased demand on our information technology resources and systems, increased phishing and other malicious activity as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic and led to an increase in the number of points of potential exposure, such as laptops and mobile devices, to be secured.

Any failure to effectively manage these risks, including to timely identify and appropriately respond to any security incidents, may adversely affect our business.

Public concern regarding the risk of contracting COVID-19 may impact demand from customers.

Even as governmental restrictions are lifted and economies gradually re-open, the ongoing economic impacts and health concerns associated with the pandemic may continue to affect customer behavior.

Even as governmental restrictions are lifted and economies gradually re-open, the ongoing economic impacts and health concerns associated with the pandemic may continue to affect customer behavior and resurgences of COVID-19 could amplify such impacts.

In addition, changes in customer purchasing patterns may increase demand for our products in one quarter, resulting in decreased customer demand for our products in subsequent quarters.

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We are therefore subject to the risk that these third-party suppliers will not be able or willing to continue to provide us with equipment, materials and components that meet our specifications, quality standards and delivery schedules.

Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, disruption at or affecting our suppliers’ facilities, such as work stoppages or natural disasters, infectious disease, epidemics or pandemics including COVID-19, outbreaks, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.

Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required equipment, materials and components include shortages, disruption at or affecting our suppliers’ facilities, such as work stoppages or natural disasters, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, deterioration in our relationships with these suppliers or the decision by such suppliers to introduce products that compete directly with our solutions.

In addition, we cannot be sure that we will be able to obtain equipment, materials or components on satisfactory terms.

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Some of the components and formulations are proprietary to our vendors, thereby making second sourcing and development of a replacement difficult.

Furthermore, such vendors may have intellectual property rights that could prevent us from sourcing such reagents from other vendors.

Furthermore, such vendors may have intellectual property rights that could prevent us from sourcing such

reagents from other vendors.

Some vendors could choose to use their enzymes, amplification mixes or other components to create products that directly compete with our consumables and end our current supplier-customer relationship.

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• disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects as a result of the COVID-19 pandemic;

• differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic;

• our dependence on single source and sole source suppliers for some of the equipment, components and materials used in our products;

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• the timing and amount of expenditures (including success fees) related to litigation, as well as the outcomes of and related rulings in the litigation and administrative proceedings which may vary substantially from quarter to quarter;

• our ability to successfully manufacture and transition all our customers to our Next GEM microfluidic chips;

• our ability to successfully manufacture our instruments and consumables;

• the timing and cost of, and level of investment in, research and development and commercialization activities relating to our products, which may change from time to time;

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• the success of our recently introduced products and new versions of existing products and the introduction of other new products or product enhancements by us or others in our industry;

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

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

• changes in governmental funding of life sciences research and development or changes that impact budgets, budget cycles or seasonal spending patterns of our customers;

• future accounting pronouncements or changes in our accounting policies;

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

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

• difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather or internal issues such as labor disputes;

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• higher than anticipated warranty costs;

• customers accelerating, canceling, reducing or delaying orders as a result of developments related to our litigation or to our transition to Next GEM microfluidic chips;

• the impacts of infectious disease, epidemics, pandemics and outbreaks, including the effects of the COVID-19 pandemic, on our business operations and on the business operations of our customers, manufacturers and suppliers;

• expenses related to our facilities and real estate portfolio, including our leases and owned land;

• the impacts of infectious disease, epidemics, pandemics, outbreaks and resurgences, including the effects of the COVID-19 pandemic, on our business operations and on the business operations of our customers, manufacturers and suppliers;

• the other factors described in this “ Risk Factors ” section.

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Such issues, issues with our manufacturing processes or the manufacturing processes of our third-party manufacturers, shipping issues, inaccurate demand forecasts or other production issues (including issues stemming from the COVID-19 pandemic) could result in our inability to supply our products to our customers, backorders, insufficient inventory, excess inventory, shipping delays, product deficiencies or other operational failures.

For example, the COVID-19 pandemic has disrupted air travel in the United States and globally.

For example, the COVID-19 pandemic has disrupted air and other travel in the United States and globally.

Such disruptions could reduce or eliminate our ability to receive components or supply our customers.

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Furthermore, even if we have inventory, if we do not have adequate inventory of products in the geographic regions in which they are ordered, we may not be able to deliver products to our customers in a timely manner and customers may delay or cancel their orders.

Many other factors could cause production or shipping delays or interruptions, including difficulties in transporting materials, equipment, raw material or other shortages, raw material failures, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks, disruption in utility services, terrorist activities or circumstances beyond our control.

Additionally, we and our third-party manufacturers may encounter problems in hiring and retaining the experienced specialized personnel needed to develop and operate our manufacturing processes or the manufacturing processes of our third-party manufacturers, which could result in backorders, shortages, delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

Many other factors could cause production or shipping delays or interruptions, including difficulties in transporting materials, equipment, raw material or other shortages, raw material failures, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks and resurgences, disruption in utility services, terrorist activities or circumstances beyond our control.

Additionally, we and our third-party manufacturers may encounter problems in hiring and retaining the experienced specialized personnel needed to develop and

operate our manufacturing processes or the manufacturing processes of our third-party manufacturers, which could result in backorders, shortages, delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

These issues, or any other problems with the production or timely manufacture and shipment of our instruments, consumables and related components, could materially harm our business, financial condition and results of operations.

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In many cases, the consumables we manufacture are bundled with products or components that we source from third parties and assemble, package and perform quality assurance testing at our Pleasanton facilities.

Our Chromium Controllers are manufactured by our third-party manufacturer at their facilities.

Our Chromium instruments are manufactured by our third-party manufacturers at their facilities.

In order to successfully generate revenue from our products, we need to manufacture products that meet our specifications before we allow them to be shipped and to supply our customers with products that meet their expectations for quality and functionality in accordance with established specifications.

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

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

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.

Our ability to increase our manufacturing capacity at our Pleasanton, California and Singapore locations is complicated by the use of our proprietary equipment that is not readily available from third-party manufacturers.

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The expansion of our manufacturing capabilities could increase the risk of manufacturing defects or quality control issues in the consumables we manufacture.

We cannot assure investors that we and our third-party manufacturers will be able to launch new products on time, transition manufacturing of existing products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house without manufacturing defects.

any additional consumables in-house without manufacturing defects.

Additionally, impacts stemming from the COVID-19 pandemic, including impacts on the health and safety of our manufacturing staff or on the global supply chain and transportation infrastructure, may limit our ability to manufacture products and components that meet specifications, in necessary quantities and at commercially acceptable costs and deliver them in commercially acceptable timeframes to our customers.

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We have incurred significant losses since we were formed in 2012 and expect to incur losses in the future.

We incurred net losses of $11.6 million and $21.1 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $816.6 million.

We incurred net losses of $11.1 million and $40.2 million for the three months ended June 30, 2021 and 2020, respectively.

We also incurred net losses of $22.6 million and $61.3 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, we had an accumulated deficit of $827.7 million.

We expect that our losses will continue in the near term as we continue to invest significantly in research and development and the commercialization of both new products and improved versions of existing products.

We also expect that our operating expenses will continue to increase as we grow our business.

To date, we have financed our operations principally from the sale of convertible preferred stock, the sale of Class A common stock in our IPO and our September 2020 follow-on offering, revenue from sales of our products and the incurrence of indebtedness.

To date, we have financed our operations principally from the sale of convertible preferred stock, stock option exercises and purchases under our 2019 Employee Stock Purchase Plan, the sale of Class A common stock in our IPO and our September 2020 follow-on offering, revenue from sales of our products and the incurrence of indebtedness.

There can be no assurance that our revenue and gross profit will increase sufficiently such that our net losses decline, or we attain profitability, in the future.

Further, our limited operating history and rapid revenue growth over the last several years make it difficult to effectively plan for and model future growth and operating expenses.

Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including general economic, industry and market conditions, customer closures and other impacts stemming from the COVID-19 pandemic, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.

Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including general economic, industry and market conditions, customer purchasing decisions, customer closures and other impacts stemming from the COVID-19 pandemic, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.

We may never be able to generate sufficient revenue to achieve or sustain profitability and our recent and historical growth should not be considered indicative of our future performance.

Our failure to achieve or maintain profitability could negatively impact the value of our Class A common stock.

In particular, we are subject to significant risks of losses related to current litigation matters.

See “— Risks related to litigation and our intellectual property .”

Our markets are highly competitive.

Our industry is highly competitive.

If we fail to compete effectively, our business and operating results will suffer.

We face significant competition.

We currently compete with both established and early-stage companies that design, manufacture and market instruments, consumables and software for, among other applications, genomics, single cell analysis, spatial analysis and immunology.

We believe our competitors include Becton, Dickinson and Company and Nanostring Technologies, Inc., each of which has products that compete to varying degrees with some but not all of our product solutions, as well as a number of other emerging and established companies.

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This is particularly true for the largest research centers and labs who are continually testing and trying new technologies, whether from a third-party vendor or developed internally.

We also compete for the resources our customers allocate for purchasing a wide range of products used to analyze biological systems, some of which are additive to or complementary with our own but not directly competitive.

We cannot assure investors that our products will compete favorably or that we will be successful in the face of increasing competition from products and technologies introduced by our existing competitors, companies entering our markets or developed

by our customers internally.

We also compete

for the resources our customers allocate for purchasing a wide range of products used to analyze biological systems, some of which are additive to or complementary with our own but not directly competitive.

In addition, we cannot assure investors that our competitors do not have or will not develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours or that are able to run comparable experiments at a lower total experiment cost.

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To date we have limited experience simultaneously designing, testing, manufacturing and selling non-Chromium products and there can be no assurance we will be able to do so.

Our sales expectations are based in part on the assumption that our Chromium Connect instrument will increase workflows for our future customers and their associated purchases of our consumables.

If sales of our Chromium Connect instruments fail to materialize so will the related consumable sales and associated revenue.

Our sales expectations are also based in part on the continued success of our Single Cell Gene Expression solutions.

If our new products, including our Visium Spatial Gene Expression product, which was introduced in 2019, or our Single Cell Multiome ATAC+Gene Expression and Targeted Gene Expression products, which were introduced in 2020, fail to achieve sufficient market acceptance or sales of our Single Cell Gene Expression consumables decrease, our consumables revenue could be materially and adversely impacted.

Our sales expectations are based in part on the assumption that sales of our instruments will increase workflows for our future customers and their associated purchases of our consumables.

If sales of our instruments fail to materialize so will the related consumable sales and associated revenue.

Our sales expectations are based in part on the continued success of our existing solutions and the future success of new products we launch.

If our new products fail to achieve sufficient market acceptance or sales of our existing products decrease, our consumables revenue could be materially and adversely impacted.

Our failure to effectively manage product transitions or accurately forecast customer demand could result in excess or obsolete inventory and resulting charges.

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In addition, the COVID-19 pandemic has made it more difficult to predict customer demand and effectively manage inventory levels for our instruments and consumables and the risk that we will not be able to source the necessary equipment, components and materials to manufacture our products has led us to carry higher inventory.

Further, differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic, could negatively impact our ability to accurately forecast demand.

We may strategically enter into non-cancelable commitments with vendors to purchase materials for our products in advance of demand to take advantage of favorable pricing, address concerns about the availability of future supplies or build safety stock to help ensure customer shipments are not delayed should we experience higher than anticipated demand for materials with long lead times.

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We regularly introduce new versions of existing products, and our future success will partially depend on our ability to commercialize these products.

As we continue to scale our business, we may find that certain of our products, certain customers or certain markets, including the biopharmaceutical market, may require a dedicated sales force or sales personnel with different experience than those we currently employ in our commercial organization.

As we continue to scale our business, we may find that certain of our products, certain customers or certain markets, including the biopharmaceutical market, may

require a dedicated sales force or sales personnel with different experience than those we currently employ in our commercial organization.

Identifying, recruiting and training additional qualified personnel would require significant time, expense and attention.

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Additionally, potential impacts of the COVID-19 pandemic on the health and safety of our employees and partners could decrease the effectiveness of our commercial organization and adversely affect our business and operating results.

Additionally, our commercial organization’s ability to participate in on-site or other in-person sales and marketing or customer service activities, including participation in trade shows and other in-person events, or on-site installation of our products, may be restricted or eliminated due to the impacts of the COVID-19 pandemic.

Additionally, while on-site and other in-person sales and marketing and customer service activities previously restricted or eliminated due to COVID-19 have begun to resume, our commercial organization’s ability to participate in on-site or other in-person sales and marketing or customer service activities, including participation in trade shows and other in-person events, or on-site installation of our products, have been and continue to be restricted due to the impacts of the COVID-19 pandemic and such activities may be further restricted or eliminated in the future, including due to outbreaks or resurgences.

The effectiveness of our commercial organization may be decreased and our business and operating results may be materially and adversely affected as a result.

We may not be able to develop new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business and operating results.

Our success depends on our ability to develop new products and applications for our technology in existing and new markets, while improving the performance and cost-effectiveness of our existing products, in each case in ways that address current and anticipated customer requirements.

Our success depends on our ability to develop new products and applications for our technology while improving the performance and cost-effectiveness of our existing products, in each case in ways that address current and anticipated customer requirements.

Such success is dependent upon several factors, including functionality, competitive pricing and integration with existing and emerging technologies.

New technologies, techniques or products could emerge that might offer better combinations of price and performance or better address customer requirements as compared to our current or future products.

Existing markets for our products, including the genomics, single cell analysis, spatial analysis and other relevant markets, are characterized by rapid technological change and innovation.

Current and potential customers for our current and future products, including customers interested in genomics, single cell analysis, spatial analysis or In Situ solutions, are accustomed to rapid technological change and innovation.

Competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements.

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For example, if a sequencer manufacturer was successful in vertically integrating their product to provide functionality equivalent to our instruments, they would likely be able to deliver a solution that is capable of running comparable experiments with a total experiment cost that is significantly less than the cost of running such experiments using our products together with third-party sequencers.

Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself, the utility of our products could be significantly impacted.

Conversely, if genome sequencing falls out of favor as a preferred approach for genomic research, whether through the development of alternative solutions or real or perceived problems with sequencing itself or if our products are not compatible with sequencers used by our customers or potential customers, the utility of our products could be significantly impacted.

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

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Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing solutions and to introduce compelling new solutions.

The success of any enhancement to our solutions depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies and overall market acceptance.

The success of any enhancement to our solutions depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration

with existing technologies and overall market acceptance.

Any new solution that we develop may not be introduced in a timely or cost-effective manner, may contain errors, vulnerabilities or bugs, or may not achieve the market acceptance necessary to generate significant revenue.

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If our customers believe that deploying our enhanced or new solutions would be overly time-consuming, confusing or technically challenging, or require significant training or retraining, then our ability to grow our business would be substantially harmed.

We need to create and deliver a repeatable, user-friendly, prescriptive approach to

deployment that allows users of all kinds to effectively and easily deploy our solutions, and if we fail to do so, our business and results of operations would be harmed.

We need to create and deliver a repeatable, user-friendly, prescriptive approach to deployment that allows users of all kinds to effectively and easily deploy our solutions, and if we fail to do so, our business and results of operations would be harmed.

The typical development cycle of new life sciences products can be lengthy and complicated and may require new scientific discoveries or advancements and complex technology and engineering.

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Further development and commercialization of our current and future products are key elements of our growth strategy.

Developing and launching new products and innovating and improving our existing products have required us to hire and retain additional scientific, sales and marketing, software, manufacturing, distribution and quality assurance personnel.

As a result, we have experienced rapid headcount growth from 110 employees as of December 31, 2015 to 946 employees as of March 31, 2021.

Developing and launching new products and innovating and improving our existing products

have required us to hire and retain additional scientific, sales and marketing, software, manufacturing, distribution and quality assurance personnel.

As a result, we have experienced rapid headcount growth from 110 employees as of December 31, 2015 to 1,053 employees as of June 30, 2021.

As we have grown, our employees have become more geographically dispersed.

We currently serve thousands of researchers in many countries and plan to continue to expand to new international jurisdictions as part of our growth strategy which will lead to increased dispersion of our employees.

We currently serve thousands of researchers in many countries and plan to continue to expand to new non-United States jurisdictions as part of our growth strategy which will lead to increased dispersion of our employees.

As a public company, our management and other personnel must devote a substantial amount of time towards maintaining compliance with these requirements.

We may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base, including as a result of many of our employees working from home due to the COVID-19 pandemic.

We may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base, including as a result of certain of our employees working from home.

In addition, certain members of our management have not previously worked together for an extended period of time, do not have experience managing a public company or do not have experience managing a global business, which may affect how they manage our growth.

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.

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.

As our organization continues to grow, and we are required to implement more complex organizational management structures, we 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 and growth prospects will be harmed.

Our business depends significantly on the success of our Next GEM microfluidic chip.

Since our inception through March 31, 2021, a substantial number of our Chromium instruments utilized our legacy GEM microfluidic chips and associated consumables.

In November 2018, a jury concluded that our Chromium instruments operating these chips and associated consumables infringe certain of Bio-Rad Laboratories, Inc.'s ("Bio-Rad") patents.

We dedicated significant resources to designing and manufacturing our new Next GEM microfluidic chip, which uses a microfluidic architecture with fundamentally different physics from our legacy GEM microfluidic chip.

We introduced our Next GEM microfluidic chips for our Single Cell Gene Expression, Single Cell Immune Profiling and Single Cell ATAC solutions in the second quarter of 2019.

We have been gradually phasing out our legacy GEM microfluidic chips and have substantially completed the transition of our customers to our Next GEM microfluidic chips and associated consumables.

Although our Next GEM microfluidic chips were designed to replace our legacy GEM microfluidic chips, we cannot assure you that we will be able to make our Next GEM microfluidic chip work with all of our solutions, that our Next GEM microfluidic chip will allow our customers to retain the level of performance or quality they have come to expect using our legacy GEM microfluidic chip, that our Next GEM microfluidic chip will replace the sales of our legacy GEM microfluidic chip or that we will be able to manufacture our Next GEM microfluidic chip in sufficient volumes and in sufficient quality in a timely fashion.

While we believe that our Chromium solutions, when used with our Next GEM microfluidic chip, do not infringe the asserted Bio-Rad patents, we cannot assure you that our Next GEM microfluidic chip would not be found to infringe the asserted Bio-Rad patents or other patents, which could prevent us from making, selling and importing our Next GEM microfluidic chips or substantially all of our Chromium products.

Since August 28, 2019, all Chromium instruments that we sell and have sold operate exclusively with our Next GEM solutions.

We believe that these solutions are very important to our customers’ research but the delay caused by the injunction may slow customer adoption of our products or cause customers to investigate the availability of competing products or technologies.

For additional information relating to this litigation, see the section titled “—Risks related to litigation and our intellectual property—We are involved in significant litigation which has consumed significant resources and management time and adverse resolution of these lawsuits could require us to pay significant damages, and prevent us from selling our products, which would severely adversely impact our business, financial condition or results of operations.”

Our limited operating history and rapid revenue growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter.

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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 materially and adversely affected.

The sizes of the markets for our solutions 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 solutions.

The market for genomics products is new and evolving, making it difficult to predict with any accuracy the sizes of the markets for our current and future solutions.

The sizes of the market for our solutions may be smaller than estimated and new opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our solutions.

The demand for genomics products is new and evolving, making it difficult to predict with any accuracy the total potential demand for our current and future solutions.

Our estimates of the annual total addressable market for our current and future solutions are based on a number of internal and third-party estimates and assumptions.

In particular, our estimates are based on our

expectations that:

(a) researchers in the market for certain life sciences research tools and technologies will view our solutions as competitive alternatives to, or better options than, such existing tools and technologies;

In particular, our estimates are based on our expectations that:

(a) researchers seeking life sciences research tools and technologies will view our solutions as competitive alternatives to, or better options than, such existing tools and technologies;

(b) researchers who already own such existing tools and technologies will recognize the ability of our solutions to complement, enhance and enable new applications of their current tools and technologies and find the value proposition offered by our solutions convincing enough to purchase our solutions in addition to the tools and technologies they already own;

and (c) the trends we have seen among our customers with respect to placements of our instruments are representative of the broader market.

and (c) the trends we have seen among our customers with respect to placements of our instruments are representative of the broader demand.

Underlying each of these expectations are a number of estimates and assumptions, including the assumption that government or other sources of funding will continue to be available to life sciences researchers at times and in amounts necessary to allow them to purchase our solutions.

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Because there can be a considerable delay between the launch of a new life sciences product and publication of research using such product, new life sciences products do not generally contribute a meaningful amount of revenue in the year they are introduced.

In certain situations, new life sciences technology, even if sufficiently covered in peer-reviewed publications, may not be adopted until the consistency and accuracy of such technology, method or device has been proven.

As a result, the sizes of the annual total addressable market for new markets and new products are even more difficult to predict.

In certain situations, new life sciences technology, even if sufficiently covered in peer-

reviewed publications, may not be adopted until the consistency and accuracy of such technology, method or device has been proven.

As a result, the sizes of the annual total addressable market for new products are even more difficult to predict.

While we believe our assumptions and the data underlying our estimates of the total annual addressable market for our solutions are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates, or those underlying the third-party data we have used, may change at any time, thereby reducing the accuracy of our estimates.

As a result, our estimates of the annual total addressable market for our solutions may be incorrect.

The future growth of the markets for our current and future solutions depends on many factors beyond our control, including recognition and acceptance of our solutions by the scientific community as best practice and the growth, prevalence and costs of competing products and solutions.

The future growth of our current and future solutions depends on many factors beyond our control, including recognition and acceptance of our solutions by the scientific community as best practice and the growth, prevalence and costs of competing products and solutions.

Such recognition and acceptance may not occur in the near term, or at all.

If the markets for our current and future solutions are smaller than estimated or do not develop as we expect, our growth may be limited and our business, financial condition and operational results may be adversely affected.

If demand for our current and future solutions are smaller than estimated or do not develop as we expect, our growth may be limited and our business, financial condition and operational results may be adversely affected.

Additionally, impacts stemming from the COVID-19 pandemic have and may continue to limit demand for our solutions for the foreseeable future.

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however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new products.

For example, we expect that our expansion into new markets and adoption by new customers who may not have the same financial resources to devote to consumable purchases as our existing customer base could adversely impact our pull-through figures.

These metrics also do not accurately reflect information relating to customers who purchase consumables but do not own an instrument, whom we refer to as “halo users.” Halo users and the introduction of consumables that may not use instruments, such as our Visium solution, or instruments that are expected to use a greater amount of consumables, such as our Chromium Connect instrument, could reduce the utility of our consumable pull-through per instrument metric and make it difficult to compare such figures over time.

For example, we expect that our expansion into new markets, adoption by new customers who may not have the same financial resources to devote to consumable purchases as our existing customer base and differences in purchasing patterns across our customer base, including potential differences in consumables spending between early adopters of our solutions and more recent customers and variances in rates of increase of consumables spending following new instrument purchases, some of which may be compounded by impacts of the COVID-19 pandemic, could negatively impact revenue and adversely impact our pull-through figures.

Instrument installed base and pull-through per instrument also do not accurately reflect information relating to customers who purchase consumables but do not own an instrument, whom we refer to as “halo users.” Halo users and the introduction of consumables that may not use instruments, such as our Visium solution, or instruments that are expected to use a greater amount of consumables, such as our Chromium Connect and Chromium X Series instruments, could reduce the utility of our consumable pull-through per instrument metric and make it difficult to compare such figures over time.

Moreover, we expect some of our halo users to purchase instruments of their own which would decrease the consumables sold per instrument and therefore decrease our annual consumable pull-through per instrument.

Though we expect the introduction of enhanced features and additional solutions on our Chromium instrument to increase consumable pull-through per instrument and to offset this decline, there are no assurances we will be successful in doing so.

financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.

Though we expect the introduction of enhanced features and additional solutions on our Chromium instrument to increase consumable pull-through per instrument on a long term basis and to offset any such declines, there are no assurances we will be successful in doing so and placement of new instruments without immediate corresponding increases in consumables purchases has the effect of reducing consumable pull-through in the short term.

If our management fails to review other relevant information or change or substitute the key business metrics they review as our business grows and we introduce new products, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.

The COVID-19 pandemic may impact historical trends and the comparability of certain of the key business metrics over time.

For example, the COVID-19 pandemic may (i) cause halo users to delay purchases of their own instruments, which could positively impact or prevent a decline in our consumables pull-through per instrument metrics, (ii) lead to a general reduction in consumables spending, which could negatively impact our consumables pull-through per instrument metrics, (iii) cause purchasers of new instruments to ramp up purchases of consumables more slowly than such purchasers would do otherwise, negatively impacting our consumables pull-through per instrument metrics or (iv) cause a general decrease in the rate of growth of our instrument installed base.

If our facilities or our third-party manufacturers’ facilities become unavailable or inoperable, our research and development programs could be adversely impacted and manufacturing of our instruments and consumables could be interrupted.

The manufacturing process for our Chromium Controller takes place at our third-party manufacturer’s facilities in Singapore and the manufacturing process for our Chromium Connect takes place at our third-party manufacturer’s facilities in Nevada.

The manufacturing process for our Chromium Controller and Chromium X Series instruments takes place at our third-party manufacturer’s facilities in Singapore and the manufacturing process for our Chromium Connect instrument takes place at our third-party manufacturer’s facilities in Nevada.

The majority of our consumables are manufactured at our facilities in Pleasanton, California and Singapore using proprietary equipment.

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For example, our Pleasanton facilities are located near earthquake fault zones and are vulnerable to damage from earthquakes.

Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or pandemics including COVID-19, outbreaks, power loss, conflict, civil unrest, communications failures and similar events.

Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, power loss, conflict, civil unrest, communications failures and similar events.

If any disaster or catastrophic event were to occur, our ability to operate our business would be seriously, or potentially completely, impaired.

If our facilities or any of our third-party manufacturers’ facilities become unavailable for any reason, including due to the impacts of the COVID-19 pandemic, we cannot provide assurances that we will be able to secure alternative manufacturing facilities with the necessary capabilities and equipment on acceptable terms, if at all.

Further, while we are an essential business that can continue operations under current governmental shelter-in-place measures meant to combat the COVID-19 pandemic, there is no guarantee that we will be able to continue operations at our Pleasanton facilities or other facilities while shelter-in-place or other COVID-19-related measures remain in place.

Additionally, potential impacts of the COVID-19 pandemic on the health and safety of our manufacturing staff could decrease the effectiveness of our manufacturing operations and adversely affect our business and operating results.

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Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

Costs, delays or other factors related to our facilities and real estate portfolio could adversely impact our business.

We plan to expand our facilities in Pleasanton, California and in other locations where we operate or may operate in the future.

For example, we are currently engaged in a project to construct new facilities on land we own located in Pleasanton, California.

We believe that maintaining our existing facilities and opening new facilities is necessary to maintain and expand our operations.

Our ability to maintain our existing facilities, build out new or existing facilities and open new operating facilities depends on our ability to identify attractive locations, negotiate leases or real estate purchase agreements and other agreements on acceptable terms, identify and obtain adequate utility and water sources and comply with environmental regulations, zoning laws and other similar factors.

We may not have the level of cash flow or financing necessary to support our expansion strategy.

Additionally, our proposed facilities projects may increase demands on our operational, managerial and administrative resources.

Costs, delays or other factors related to our facilities and real estate portfolio, including our project to construct new facilities on land we own

located in Pleasanton, California or any failure to adequately maintain our current facilities, may adversely impact our business results and financial condition.

Undetected errors or defects in our solutions could harm our reputation and decrease market acceptance of our solutions.

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A significant disruption in the supply of these materials, including disruptions stemming from the COVID-19 pandemic, could decrease production and shipping levels, materially increase our operating costs and materially adversely affect our profit margins.

Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics including COVID-19, outbreaks, conflict, civil unrest, acts of terrorism or other interruptions to or difficulties in the employment of labor or transportation in the markets in which we purchase materials, components and supplies for the production of our products, in each case may adversely affect our ability to maintain production of our products and sustain profitability.

Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, conflict, civil unrest, acts of terrorism or other interruptions to or difficulties in the employment of labor or transportation in the markets in which we purchase materials, components and supplies for the production of our products, in each case may adversely affect our ability to maintain production of our products and sustain profitability.

Unforeseen end-of-life or unavailability for certain components, such as enzymes, could cause backorders as we modify our product specifications to accommodate replacement components.

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Customers utilize our service teams and online content for help with a variety of topics, including how to use our products efficiently, how to integrate our products into existing workflows, how to determine which of our other products may be needed for a given experiment and how to resolve technical, analysis and operational issues if and when they arise.

As we introduce new products such as our Chromium Connect, Visium solutions, Single Cell Multiome ATAC+Gene Expression solution and Targeted Gene Expression solution and enhance existing products, we expect utilization of our customer service teams to increase.

As we introduce new products such as our Chromium X Series, Chromium Connect, Single Cell Multiome ATAC+Gene Expression solution, Targeted Gene Expression solution, Visium Spatial Proteomics solution and Visium Spatial Gene Expression for FFPE solution and enhance existing products, we expect utilization of our customer service teams to increase.

In particular, the introduction of new or improved products that utilize different workflows or variations on existing workflows may require additional customer service efforts to ensure customers use such products correctly and efficiently.

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In addition, as we continue to grow our operations and reach a global customer base, we need to be able to provide efficient customer service that meets our customers’ needs globally at scale.

In geographies where we sell through distributors, we rely on

those distributors to provide customer service.

In geographies where we sell through distributors, we rely on those distributors to provide customer service.

If these third-party distributors do not provide a high-quality customer experience, our business operations and reputation may suffer.

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Our failure to successfully integrate these key personnel into our business could adversely affect our business.

Additionally, many of our employees are temporarily working from home due to the COVID-19 pandemic and, because of the challenges of working from home during the COVID-19 pandemic, including collaborating with and managing employees, it may take significant time before our teams can achieve full productivity again, if at all, and it may take significantly longer for new hires to achieve full productivity, if at all.

Additionally, some of our employees are working from home due to the COVID-19 pandemic and additional employees may return to remote work in the future.

Because of the challenges of working from home, including collaborating with and managing employees, it may take significant time before our teams can achieve full productivity again, if at all, and it may take significantly longer for new hires to achieve full productivity, if at all.

Our continued growth depends, in part, on attracting, retaining and motivating highly trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers.

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As a result, changes to United States immigration policies could restrain the flow of technical and professional talent into the United States and may inhibit our ability to hire qualified personnel.

The typical immigration and visa procedures of the United States have been impacted by COVID-19 and our current or future employees may be negatively affected by delays, disruptions or changes in United States immigration policies.

The typical immigration and visa procedures of the United States have been impacted by COVID-19 and may be further impacted in the future, and our current or future employees may be negatively affected by delays, disruptions or changes in United States immigration policies.

Past United States administrations have made restricting immigration and reforming the work visa process a priority and these efforts may adversely affect our ability to find qualified personnel.

We do not maintain key person life insurance or 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.

We do not maintain key person life insurance for any of our employees nor have we entered into fixed term contracts with almost any of our employees.

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

Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to attract, train, retain and motivate qualified personnel could materially harm our operating results and growth prospects.

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We believe we are successfully integrating the technologies acquired from those companies into our business, but the long-term success of these acquisitions is not guaranteed.

We regularly review investment, acquisition and technology licensing opportunities, and we may invest in or acquire real estate or additional businesses and legal entities to add specialized employees, products or technologies as well as pursue technology licenses or investments in complementary businesses.

We regularly review investment, acquisition and technology licensing opportunities, and we may invest in or acquire additional real estate or additional businesses and legal entities to add specialized

employees, products or technologies as well as pursue technology licenses or investments in complementary businesses.

Our previous acquisitions and any future transactions could be material to our financial condition and operating results and expose us to many risks, including:

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• unanticipated costs of or legal exposure related to complying with existing and future laws and regulations, including land use, environmental or antitrust-related laws and regulations;

• disruption in our relationships with customers, distributors, manufacturers or suppliers as a result of such a transaction;

• disruption in our relationships with customers, distributors, manufacturers, suppliers or other third parties as a result of such a transaction;

• unanticipated liabilities related to acquired real estate or companies, including liabilities related to acquired intellectual property or litigation relating thereto;

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Seasonality may cause fluctuations in our revenue and results of operations.

We operate on a December 31st year end and believe that there are significant seasonal factors which may cause sales of our products, and particularly our Chromium Controller, to vary on a quarterly or yearly basis and increase the magnitude of quarterly or annual fluctuations in our operating results.

We operate on a December 31st year end and believe that there are significant seasonal factors which may cause sales of our products to vary on a quarterly or yearly basis and increase the magnitude of quarterly or annual fluctuations in our operating results.

We believe that this seasonality results from a number of factors, including the procurement and budgeting cycles of many of our customers, especially government- or grant-funded customers, whose cycles often coincide with government fiscal year ends.

For example, the United States government’s fiscal year end occurs in our third quarter and may result in increased sales of our products during such quarter if government-funded customers have unused funds that may be forfeited, or future budgets that may be reduced, if such funds remain unspent at such fiscal year end.

Furthermore, the academic budgetary cycle similarly requires grantees to ‘use or lose’ their grant funding, which seems to be tied disproportionately to the end of the calendar year, driving sales higher during the fourth quarter.

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

Most of our distribution relationships are non-exclusive and permit such distributors to distribute competing products.

Most of our distribution relationships are non-exclusive and permit such distributors to distribute competing

As such, our distributors may not commit the necessary resources to market our products to the level of our expectations or may choose to favor marketing the products of our competitors.

Additionally, the ability of our distributors to sell and distribute our products has been and may continue to be impacted by the COVID-19 pandemic.

If current or future distributors do

not or are unable to perform adequately or if we are unable to enter into effective arrangements with distributors in particular geographic areas, we may not realize long-term international revenue growth.

If current or future distributors do not or are unable to perform adequately or if we are unable to enter into effective arrangements with distributors in particular geographic areas, we may not realize long-term international revenue growth.

We rely exclusively on commercial carriers to transport our products, including perishable consumables, to our customers in a timely and cost-efficient manner and if these delivery services are disrupted, our business will be harmed.

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As such, we ship certain of our refrigerated consumables on dry ice and only ship such consumables on certain days of the week to reach customers on a timely basis.

Disruptions in the delivery of our products, whether due to labor disruptions, bad weather, natural disasters, infectious disease, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks, terrorist acts or threats or for other reasons could result in delivery delays or our customers receiving consumables that are not fit for usage, and if used, could result in inaccurate results or ruined experiments.

Disruptions in the delivery of our products, whether due to labor disruptions, bad weather, natural disasters, infectious disease, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks and resurgences, terrorist acts or threats or for other reasons could result in delivery delays or our customers receiving consumables that are not fit for usage, and if used, could result in inaccurate results or ruined experiments.

While we work with customers to replace any consumables that are impacted by delivery disruptions, our reputation and our business may be adversely impacted even if we replace perished consumables free of charge.

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The exercise of march-in rights or the termination of our license of the relevant technologies could materially adversely affect our business, operations and financial condition.

As of March 31, 2021, all of our products embodying licensed technology subject to march-in rights were manufactured in the United States.

As of June 30, 2021, all of our products embodying licensed technology subject to march-in rights were manufactured in the United States.

While we do not expect to move manufacturing of these products to facilities located outside of the United States, we cannot assure investors that such products will always be manufactured in the United States or that the applicable government agency would grant a waiver of such requirement.

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We currently serve thousands of researchers in many countries and plan to continue to expand to new international jurisdictions as part of our growth strategy.

For the three months ended March 31, 2021 and 2020, approximately 51% and 45%, respectively, of our revenue was generated from sales to customers located outside of North America.

For the three and six months ended June 30, 2021 and 2020, approximately 43% and 47%, and 53% and 48%, respectively, of our revenue was generated from sales to customers located outside of North America.

We believe that a significant portion of our future revenue will come from international sources.

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• tariffs imposed by the United States on goods from other countries and tariffs imposed by other countries on United States goods, or increases in existing tariffs;

• deterioration of political relations between the United States and Canada, China, the United Kingdom and the European Union, which could have a material adverse effect on our sales and operations in these countries;

• deterioration of political relations between the United States and Canada, China, the United Kingdom, the European Union or other nations or political organizations, which could have a material adverse effect on our sales and operations in these countries;

• changes in social, political and economic conditions or in laws, regulations and policies governing foreign trade, manufacturing, development and investment both domestically as well as in the other countries and jurisdictions into which we sell our products, including as a result of the United Kingdom’s exit from the European Union;

• difficulties in obtaining export licenses or in overcoming other trade barriers and restrictions resulting in delivery delays or our inability to sell our products in certain countries;

• natural disasters, infectious diseases, epidemics or pandemics including COVID-19, outbreaks or major catastrophic events;

• natural disasters, infectious diseases, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events;

• increased financial accounting and reporting burdens and complexities;

• significant taxes or other burdens of complying with a variety of foreign laws, including laws relating to privacy and data protection such as the General Data Protection Regulation (the “GDPR”).

In conducting our international operations, we are subject to United States laws relating to our international activities, such as the Foreign Corrupt Practices Act of 1977, as well as foreign laws relating to our activities in other countries, such as the United Kingdom Bribery Act of 2010.

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dollars, although we have sold our products and services in local currency outside of the United States, principally the euro.

For the three months ended March 31, 2021 and twelve months ended December 31, 2020, approximately 12% and 16%, respectively, of our sales were denominated in currencies other than U.S.

For the six months ended June 30, 2021 and twelve months ended December 31, 2020, approximately 16% and 16%, respectively, of our sales were denominated in currencies other than U.S.

Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States.

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We implemented a new company-wide enterprise resource planning (“ERP”) system in 2020 to handle the business and financial processes within our operations, manufacturing and corporate functions.

While we successfully implemented the new ERP system effective July 1, 2020, we may experience operating problems with the ERP system or the ERP system and the associated process changes may not give rise to the benefits that we expect.

While we successfully implemented the new ERP system effective July 1, 2020, we continue to add new modules to our ERP system and may experience operating problems with the ERP

system or the ERP system and the associated process changes may not give rise to the benefits that we expect.

If the system does not operate as intended or if the benefits we expect to receive from our new ERP system do not materialize, our business, results of operations and internal controls over financial reporting could be adversely affected.

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If we incur debt, a portion of our cash flows will be needed to satisfy our debt service obligations.

While we do not anticipate that

we will need to raise additional financing in the future to fund our operations, in the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.

While we do not anticipate that we will need to raise additional financing in the future to fund our operations, in the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.

As a result, we would be more vulnerable to general adverse economic, industry and capital markets conditions in addition to the risks associated with indebtedness described in this risk factor.

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While we do not make gene sequencing or gene editing products, our products are used to better understand genomic information that could further gene editing endeavors.

For example, our single cell gene expression solutions allow users to examine cells that have been genetically perturbed using clustered regularly interspaced short palindromic repeats (“CRISPR”) gene editing

Advances in genome editing or gene therapy, such as CRISPR Cas9 technology have been subject to negative publicity and increased regulatory scrutiny, in part due to the underlying ethical, legal, privacy and social concerns regarding the use or potential misuse of such technology.

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Although the United States and China signed an interim trade agreement in January 2020 (the “Phase One deal”), the parties are continuing to negotiate a trade agreement.

At this time, it is unknown whether the Phase One deal will last, whether there will be sufficient progress on Phases Two and Three to lead to a further reduction in U.S.-China trade tensions and what effect the ultimate trade agreement will have on our business.

At this time, it is unknown whether the Phase One deal will last, whether there will be sufficient progress on Phases Two and Three to

lead to a further reduction in U.S.-China trade tensions and what effect the ultimate trade agreement will have on our business.

There are also pressures on the U.S.

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Therefore, it is possible further tariffs may be imposed that could cover imports of the export or sale our instruments and/or consumables, or our business may be adversely impacted by retaliatory trade measures taken by China or other countries, which could materially harm our business, financial condition and results of operations.

The nature of the dispute between the United States and China is evolving and additional products such as ours could become subject to tariffs, which could adversely affect the marketability of

our products and our results of operations.

The nature of the dispute between the United States and China is evolving and additional products such as ours could become subject to tariffs, which could adversely affect the marketability of our products and our results of operations.

Further, the continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.

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Our effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of our operations, changes in our future levels of research and development spending, mergers and acquisitions or the result of examinations by various tax authorities.

Although we believe our tax estimates are reasonable, if the United States Internal Revenue Service or other taxing authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties.

tax liability, including interest and penalties.

If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.

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New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our domestic and foreign earnings.

Any new taxes could adversely affect our domestic and international

business operations and our business and financial performance.

Any new taxes could adversely affect our domestic and international business operations and our business and financial performance.

Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

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In April 2020, recent interpretations of a German law relating to withholding taxes on intellectual property rights emerged.

We have completed our evaluation of the overall impact of this recent interpretation of German law and our evaluation of the overall impact of TCJA on our effective tax rate and balance sheet through March 31, 2021 and have reflected the amounts in our financial statements for the quarter ended March 31, 2021.

We have completed our evaluation of the overall impact of this recent interpretation of German law and our evaluation of the overall impact of TCJA on our effective tax rate and balance sheet through June 30, 2021 and have reflected the amounts in our financial statements for the quarter ended June 30, 2021.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law.

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Moreover, we cannot assure investors that our processes for monitoring and controlling our use of open source software in our solutions will be effective.

If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our solutions on terms that are not economically feasible, to re-engineer our solutions, to discontinue the sale of our solutions if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results and financial condition.

If we are held to have breached the terms of an open source software license, we could be required to

seek licenses from third parties to continue offering our solutions on terms that are not economically feasible, to re-engineer our solutions, to discontinue the sale of our solutions if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results and financial condition.

We collect, process, store, share, disclose and use personal information and other data, which subjects us to governmental regulations and other legal obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.

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As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

In the United States, California enacted the California Consumer Privacy Act (the “CCPA”), which came into effect on January 1, 2020 and limits and imposes requirements on how we may collect and use personal information and provides for civil penalties for violations and a private right of action for data breaches.

In the United States, California enacted the CCPA, which came into effect on January 1, 2020 and limits and imposes requirements on how we may collect and use personal information and provides for civil penalties for violations and a private right of action for data breaches.

In addition, in November 2020, Californians approved Proposition 24, that was also known as the California Privacy Rights Act (the "CPRA").

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Cyberattacks and other malicious internet-based activity continue to increase and cloud-based platform providers of services have been and are expected to continue to be targeted.

In addition to traditional

computer “hackers,” malicious code (such as viruses, worms and ransomware), employee theft or misuse, denial-of-service attacks and sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions).

In addition to traditional computer “hackers,” malicious code (such as viruses, worms and ransomware), employee theft or misuse, denial-of-service attacks and sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions).

Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks.

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Our proprietary software is a crucial component of our solutions, as our software allows our end users to visualize genomic and multi-omic information provided by our instruments and reagents.

Our software is generally downloadable free of charge from our website for installation and use by end users on their computer systems.

Our software is generally downloadable free of charge from

our website for installation and use by end users on their computer systems.

Our website is hosted with various third-party service providers located in the United States.

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Risks related to litigation and our intellectual property

We are involved in significant litigation which has consumed significant resources and management time and adverse resolution of these lawsuits could require us to pay significant damages, and prevent us from selling our products, which would severely adversely impact our business, financial condition or results of operations.

We have been, and could again become, involved in significant litigation which has consumed, and could again consume, significant resources and management time and adverse resolution such litigation could require us to pay significant damages, and prevent us from selling our products, which would severely adversely impact our business, financial condition or results of operations.

Our success depends in part on our non-infringement of the patents or proprietary rights of third parties.

Third parties have asserted, are currently asserting, and may in the future assert that our products infringe patents that they have obtained and may in the future obtain.

We have incurred and could incur substantial costs and divert the attention of our management and technical personnel in defending ourselves against any of these claims.

Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have an adverse impact on our business, financial condition or results of operations.

Furthermore, parties making claims against us have obtained, are currently seeking, and may in the future be able to obtain injunctive or other relief, which effectively could block our ability to further develop, commercialize, market or sell products or services and have resulted and could in the future result in the award of substantial damages against us.

In the past, third parties have asserted, and may in the future assert, that our products infringe patents that they have obtained and may in the future obtain.

We have incurred and could again incur substantial costs and divert the attention of our management and technical personnel in defending ourselves against any such claims.

Any adverse ruling or perception of an adverse ruling in defending ourselves against such claims could have an adverse impact on our business, financial condition or results of operations.

Furthermore, parties making claims against us have obtained, are currently seeking, and may in the future be able to obtain injunctive or other relief, which effectively could block our ability to further develop, commercialize, market or sell products or services and in the past have resulted, and could in the future result, in the award of substantial damages against us.

In the event of a successful infringement claim against us, we may be required to pay damages and obtain one or more licenses from third parties or be prohibited from selling certain products or services.

In addition, we may be unable to obtain these licenses at a reasonable cost, if at all.

We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins and earnings per share.

We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins, earnings per share or other financial metrics.

In addition, we could encounter delays in product introductions while we attempt to develop alternative methods or products.

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Regardless of merit or eventual outcome, lawsuits brought against us may result in decreased demand for our products, injury to our reputation and increased insurance costs.

We have been involved in multiple patent litigation matters in the past several years and we expect that given the litigious history of our industry and the high profile of operating as a public company, other third parties, in addition to the parties identified herein, may claim that our products infringe their intellectual property rights.

We have been involved in multiple patent litigation matters in the past and we expect that given the litigious history of our industry and the high profile of operating as a public company, third parties may claim that our products infringe their intellectual property rights.

Our success depends in part on our ability to defend ourselves against such claims and maintain the validity of our patents and other proprietary rights.

In particular, we are currently involved in the following litigation matters related to substantially all of our Chromium products, the loss of any of which could have a material adverse effect on our business, operations, financial results and reputation.

Beginning in 2015, Bio-Rad has filed six separate patent infringement cases against substantially all of our Chromium products, including instruments and consumables.

These litigations are generally distinct and involve different Bio-Rad patents, however, the patents asserted by Bio-Rad in the U.S.

International Trade Commission (“ITC”) are also asserted in the district court case filed in the Northern District of California.

The details of these litigation matters are described below:

The 2015 Delaware Action

In February 2015, Raindance Technologies, Inc.

(“Raindance”) and the University of Chicago filed suit against us in the U.S.

District Court for the District of Delaware (the “Delaware Court”), accusing the Company's legacy GEM products of infringing certain U.S.

patents owned by or exclusively licensed to Raindance (the “2015 Delaware Action”).

In May 2017, Bio-Rad was substituted as the plaintiff following its acquisition of Raindance.

A jury trial was held in November 2018.

The jury found that the accused legacy GEM products infringed U.S.

8,304,193, 8,329,407 and 8,889,083.

The jury also concluded that our infringement was willful and awarded Bio-Rad approximately $24 million in damages through June 30, 2018.

We appealed the jury verdict.

Post-trial, Bio-Rad moved for a permanent injunction, treble damages for willful infringement, attorneys’ fees, supplemental damages for the period from the second quarter of 2018 through the end of the trial as well as pre- and post-judgment interest.

The Court denied Bio-Rad’s request for attorneys’ fees and enhanced damages for willful infringement.

The Court awarded supplemental damages for the period from the second quarter of 2018 through the end of trial as well as pre- and post-judgment interest.

The Court entered final judgment against us in the amount of approximately $35 million in August 2019.

In the fourth quarter of 2018, we began recording an accrual for estimated royalties as a cost of revenue.

This accrual is based on an estimated royalty rate of 15% of worldwide sales of our Chromium instruments operating our legacy GEM microfluidic chips and associated consumables.

As of March 31, 2021, we had accrued a total of $44.8 million relating to this matter which includes our estimated 15% royalty for subsequent sales through that date.

In July 2019, the Court also granted Bio-Rad a permanent injunction against our legacy GEM microfluidic chips and associated consumables that were found to infringe the Bio-Rad patents, which historically constituted a significant amount of our product sales.

However, under the injunction, we are permitted to continue to sell our legacy GEM microfluidic chips and associated consumables for use with our historical installed base of instruments provided that we pay into escrow a royalty of 15% of our net revenue related to such sales occurring after August 28, 2019.

We appealed the Court's judgment including the injunction to the Federal Circuit.

In August 2020, the Federal Circuit issued its opinion in our appeal of the 2015 Delaware Action.

The Federal Circuit (1) affirmed the judgment of the lower Court with respect to infringement of the '083 patent by our legacy GEM products and (2) vacated the judgment with respect to infringement of the '193 and '407 patents, which are remanded to the lower Court for a new trial on infringement.

The Federal Circuit affirmed the damages award including the 15% royalty with respect to our legacy GEM products.

The Federal Circuit vacated the injunction with respect to our Single Cell CNV and Linked-Read products but affirmed the injunction with respect to our other legacy GEM products.

In October 2020, we filed a petition for en banc rehearing with the Federal Circuit.

The Federal Circuit denied our petition for en banc rehearing on November 4, 2020.

We paid the $34.5 million judgment, plus approximately $0.8 million in post-judgment interest, to Bio-Rad on December 17, 2020.

The case was remanded to the Delaware Court for a determination of post-judgment royalties or other amounts, which we expect in the second half of 2021.

Neither the lower Court judgment nor the Federal Circuit opinion in the 2015 Delaware Action implicate our Next GEM products.

We have dedicated significant resources to designing and manufacturing our Next GEM microfluidic chips which use fundamentally different physics from our legacy GEM microfluidic chips.

Neither the jury verdict nor the injunction relate to our Next GEM microfluidic chips based on our new proprietary design and associated consumables which we launched in May 2019 for three of our single cell solutions – Single Cell Gene Expression, Single Cell Immune Profiling and Single Cell ATAC.

Since August 28, 2019, all Chromium instruments that we sell and have sold operate exclusively with our Next GEM solutions and we have substantially completed the transition of our customers to our Next GEM microfluidic chips and associated consumables.

Although our Next GEM microfluidic chips were designed to replace our legacy GEM microfluidic chips, we cannot assure you that we will be able to make our Next GEM microfluidic chip work with all of our solutions, that our Next GEM microfluidic chip will allow our customers to maintain the level of performance or quality of our legacy GEM microfluidic chip, that our Next GEM microfluidic chip will replace the sales of the legacy GEM microfluidic chip or that we will be able to manufacture the Next GEM microfluidic chips in sufficient volumes in a timely fashion.

Our Next GEM microfluidic chips may be subject to future claims of infringement by Bio-Rad or others and are currently the subject of the litigation described in this risk factor.

While we believe that our Chromium solutions, when used with our Next GEM microfluidic chip, would not infringe the asserted Bio-Rad patents, we cannot assure you that our Next GEM microfluidic chip would not become subject to additional patent infringement litigation, which could prevent us from making, selling and importing our Next GEM microfluidic chips.

In addition, it is possible

that Bio-Rad could, in the future, claim that our continued sale of products violates orders issued by the court and request that the court impose sanctions or other penalties on us for such violations.

In addition, we have not developed Next GEM microfluidic chips for our Single Cell CNV and Linked-Read solutions.

Although the Federal Circuit recently vacated the injunction with respect to our Single Cell CNV and Linked-Read solutions, we have not yet released a new version of our instrument that would allow our customers to use these solutions using our legacy GEM microfluidic chip.

Also in 2015, we filed multiple petitions for inter partes review (“IPR”) at the Patent Trial and Appeal Board (“PTAB”) of the U.S.

Patent and Trademark Office (“USPTO”) against Raindance and the University of Chicago relating to the patents asserted in the 2015 Delaware Action, including U.S.

7,129,091, 8,658,430, 8,304,193, 8,273,573, 8,329,407, 8,889,083 and 8,822,148.

Among these proceedings, all the claims in the ‘430 patent were determined by the PTAB to be invalid, all the claims in the ‘573 patent were canceled, and our invalidity challenges to the remaining Bio-Rad patents were unsuccessful.

Accordingly, we may be precluded from challenging the ‘091, ‘193, ‘407 and ‘148 patents at the PTAB in the future as a result of these decisions.

Further, because all the claims in the ‘083 patent survived the IPR challenge, we will be precluded from making certain invalidity challenges to this patent at the PTAB, or in a district court or ITC litigation in the future.

The ITC 1068 Action

On July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC filed a complaint against us in the ITC pursuant to Section 337 of the Tariff Act of 1930, alleging that substantially all of our Chromium products infringe U.S.

9,089,844, 9,126,160, 9,500,664, 9,636,682 and 9,649,635 (the “ITC 1068 Action”).

Bio-Rad is seeking an exclusion order preventing us from importing the accused microfluidic chips, including (1) our legacy GEM microfluidic chip, (2) our gel bead manufacturing microfluidic chip and (3) our Next GEM microfluidic chip, into the United States and a cease and desist order preventing us from selling such imported chips.

An evidentiary hearing for the ITC 1068 Action was held in May 2018 and the presiding judge issued an Initial Determination in September 2018, finding that our legacy GEM microfluidic chips infringe the ‘664, ‘682 and ‘635 patents but not the ‘160 patent.

The judge further found that our gel bead manufacturing microfluidic chip and Next GEM microfluidic chip do not infringe any claim asserted against them (the “Initial Determination”).

The judge recommended entry of an exclusion order preventing us from importing our legacy GEM microfluidic chips and a cease and desist order that would prevent us from selling such imported chips.

On December 18, 2019, the ITC issued its final determination in the ITC 1068 Action (the “Final Determination”).

The Final Determination affirmed the Initial Determination that our Next GEM microfluidic chips and gel bead manufacturing microfluidic chips do not infringe any of the claims asserted against them.

The Final Determination also affirmed the ruling that our legacy GEM microfluidic chips infringe the ‘664, ‘682 and ‘635 patents but not the ‘160 patent.

The ITC issued (1) a limited exclusion order prohibiting the unlicensed importation of the legacy GEM microfluidic chips into the United States and (2) a cease and desist order preventing us from selling such imported legacy GEM microfluidic chips in the United States.

The ITC expressly allowed the importation and sale of the legacy GEM microfluidic chips for use by researchers who were using such chips as of December 18, 2019, and who have a documented need to continue receiving such chips for a specific current ongoing research project for which that need cannot be met by any alternative product.

The Final Determination was subject to a 60-day presidential review period.

During the presidential review period, we were permitted to continue importation and sales of the legacy GEM microfluidic chips subject to payment of a bond of three (3) percent of the entered value of the accused microfluidic chips.

We and Bio-Rad have appealed the Final Determination to the Court of Appeals for the Federal Circuit.

Bio-Rad has appealed the Final Determination with respect to non-infringement of our gel bead manufacturing chips, but not with respect to non-infringement of our Next GEM microfluidic chips.

We have appealed the Final Determination with respect to infringement of our legacy GEM microfluidic chips.

Oral argument was held on April 7, 2021.

We expect a decision around the fourth quarter of 2021.

In order to allow our customers to continue their important research, we have dedicated significant resources to developing the capabilities to manufacture our microfluidic chips in the United States prior to the entry of the exclusion order or cease and desist order which took effect in February 2020.

Prior to the second quarter of 2019, all of our microfluidic chips were manufactured outside of the United States.

Our United States manufacturing facilities achieved volume production of certain of our legacy GEM microfluidic chips beginning in the third quarter of 2019.

We cannot assure investors that our U.S.

manufacturing facilities can produce our microfluidic chips to the same level of functionality, quality or quantity as our current foreign manufacturer.

Moreover, Bio-Rad has also filed other suits against us, including in the U.S.

District Court for the Northern District of California, which is discussed separately below.

If Bio-Rad succeeds in obtaining an injunction in the district court case or any of the other

cases, we could be prohibited from selling our legacy GEM microfluidic chips, regardless of where they are manufactured.

If we are prohibited from selling our legacy GEM microfluidic chips, our business, operations, financial results and reputation would be significantly adversely impacted.

In addition, it is possible that Bio-Rad could, in the future, file enforcement proceedings claiming that we have violated the exclusion order and/or cease and desist order entered in the ITC 1068 Action and requesting that the ITC impose sanctions or other penalties on us for such violations.

Our Next GEM microfluidic chips could also become subject to other patent infringement litigations.

If we are prohibited from selling our Next GEM microfluidic chips, our business, operations, financial results and reputation would be significantly adversely impacted.

The Northern District of California Action

On July 31, 2017, Bio-Rad and Lawrence Livermore National Security, LLC also filed suit against us in the U.S.

District Court for the Northern District of California, alleging that the Company’s legacy GEM products infringe U.S.

9,216,392, 9,347,059 and the five patents asserted in the ITC 1068 Action.

The complaint seeks injunctive relief, unspecified monetary damages, costs and attorneys’ fees.

This litigation has been stayed pending resolution of the Federal Circuit appeal of the ITC 1068 Action.

In July 2020, Bio-Rad moved to lift the stay with respect to the '059 patent and consolidate the '059 patent with the '115 patent transferred from the District of Massachusetts which is being asserted against our Next GEM products.

In August 2020, the Court denied Bio-Rad's motion to lift the stay with respect to both the '059 and '115 patents.

In October 2020, the Company filed two petitions for IPR challenging the validity of the ‘115 patent.

The Company expects the PTAB to issue a decision on institution of these IPR petitions in the second quarter of 2021.

The Germany Action

On February 13, 2018, Bio-Rad filed suit against us in Germany in the Munich Region Court alleging that our Chromium instruments, legacy GEM microfluidic chips and certain accessories infringe German Utility Model No.

DE 20 2011 110 979.

Bio-Rad seeks unspecified damages and an injunction prohibiting sales of these products in Germany and requiring us to recall these products sold in Germany subsequent to February 11, 2018.

An initial hearing was held on November 27, 2018, and a subsequent hearing was held on May 15, 2019.

The Court issued a ruling on November 20, 2019.

The Court ruled that our legacy GEM microfluidic chips, as well as certain Chromium instruments and accessories used with legacy GEM microfluidic chips, infringed the German Utility Model.

The Court issued an injunction with respect to such legacy GEM microfluidic chips, Chromium instruments and accessories used with such systems, prohibiting among other things the sale of these products in Germany and the importation of such products into Germany.

The Court found that we are obligated to compensate Bio-Rad for unspecified damages and required that these products be recalled from distribution channels in Germany.

The Court further found that we have to bear the statutory costs of the legal dispute in a minimum amount of at least 61,000 Euros.

The Court’s ruling did not address our Next GEM products, which were not accused in this action and which constitute substantially all of our Chromium sales in Germany.

The Company appealed the Court's ruling.

On April 6, 2020, the Munich Higher Regional Court (the “Higher Court”) issued a ruling staying enforcement of the ruling of the lower Court, including the injunction, subject to the payment of a bond by the Company.

The Higher Court found that the lower Court’s claim construction was not justifiable and that the facts did not provide a basis for a finding of infringement.

On April 16, 2020, we paid a 2.8 million Euro bond to the Higher Court to completely stay enforcement of the ruling.

The bond is refundable upon a favorable ruling on the merits by the Higher Court.

We expect the Higher Court to rule on the merits in 2021.

In August 2020, Bio-Rad filed its appeal response arguing for the first time that our Next GEM microfluidic chips and certain accessories infringe the utility model.

In its appeal response, Bio-Rad also attempted to add infringement allegations with respect to a new patent, European Patent No.

3 132 844, against our Chromium instruments and Next GEM microfluidic chips.

We believe it is procedurally improper to attempt to add these new claims at this stage, that our Next GEM products are not covered by the lower court's judgment and are not admissible in the appeal, and that the newly asserted '844 patent is not admissible in the appeal.

The Higher Court is not expected to rule on whether Next GEM products or the '844 patent are admissible in the appeal until around the fourth quarter of 2021.

The 2018 Delaware Action

On October 25, 2018, Bio-Rad filed suit against us in the U.S.

District Court for the District of Delaware, alleging that substantially all of our Chromium products, including our legacy GEM products and Next GEM products, infringe U.S.

9,562,837 and 9,896,722.

Bio-Rad seeks injunctive relief, unspecified monetary damages, costs and attorneys’ fees.

In October 2019, we filed four petitions for IPR challenging the validity of both asserted patents.

On April 27, 2020, the PTAB instituted review on all four of these petitions.

On April 26, 2021, the PTAB issued final written decisions on all four IPRs

invalidating the majority of the asserted claims of the ‘837 and ‘722 patents but maintaining the validity of claim 8 of the '837 patent and claims 15-17 of the '722 patent.

The Company expects to seek rehearing of and/or appeal the decision with respect to the claims found to be valid.

In June 2020, the Court completely stayed the District of Delaware litigation pending resolution of the IPRs before the PTAB.

If we are found to infringe these patents or if we are prohibited from selling our products, our business, operations, financial results and reputation could be significantly adversely impacted.

The Massachusetts Action

On September 11, 2019, Bio-Rad filed suit against us in the U.S.

District Court for the District of Delaware, alleging that our Next GEM products infringe certain claims of U.S.

On November 5, 2019, Bio-Rad amended the complaint to additionally allege that our Next GEM products infringe certain claims of U.S.

9,919,277 and 10,190,115.

The ‘444 and ‘277 patents are exclusively licensed by Bio-Rad from Harvard University, which subsequently joined the suit as a party plaintiff.

Bio-Rad is seeking damages and an injunction against our Next GEM products amongst other remedies.

The ‘444 and ‘277 patents are projected to expire in October 2024.

On December 18, 2019, Bio-Rad dismissed this action in the District of Delaware and refiled it in the U.S.

District Court for the District of Massachusetts.

The case was assigned to Judge William G.

On January 14, 2020, the Court consolidated this case with a separate action, Bio-Rad Laboratories Inc.

Stilla Technologies, Inc.

(“Stilla”), in which Bio-Rad is asserting the ‘444 patent (among other patents) against Stilla’s droplet digital PCR product.

On January 23, 2020, we filed a motion to dismiss the case and to transfer the ‘115 patent to the Northern District of California, where the related ‘059 patent is stayed.

On January 24, 2020, we filed antitrust counterclaims against Bio-Rad alleging violations of (a) Section 7 of the Clayton Act, (b) Section 2 of the Sherman Act and (c) California unfair competition laws, for illegally acquiring Raindance and illegally monopolizing or attempting to monopolize markets relating to droplet digital PCR products, droplet single cell products and droplet genetic analysis technology.

On February 19, 2020, Bio-Rad moved to dismiss, or alternatively to stay and sever, our antitrust claims.

On February 5, 2020, we filed additional counterclaims against Bio-Rad alleging that Bio-Rad’s single cell ATAC-seq products infringe U.S.

9,029,085 and 9,850,526 that are exclusively licensed to us from Harvard University.

On February 26, 2020, Bio-Rad moved to sever and stay the patent counterclaims.

On March 6, 2020, the Court denied the motion to stay and deferred the motion to sever until prior to trial.

On March 25, 2020, the Court held a hearing with respect to (a) our motion to dismiss Bio-Rad’s patent claims, (b) our motion to transfer the ‘115 patent and (c) Bio-Rad’s motion to dismiss our antitrust counterclaims.

On April 30, 2020, the Court denied our motion to dismiss with respect to Bio-Rad’s patent claims and granted our motion to transfer the ‘115 patent to the Northern District of California.

In August 2020, the Court granted Bio-Rad’s motion to dismiss (i) our Sherman Act and Clayton Act counterclaims with respect to droplet single cell products and (ii) our Sherman Act counterclaims with respect to droplet genetic analysis technology.

The Court denied Bio-Rad’s motion to dismiss (i) our Clayton Act counterclaims with respect to droplet genetic analysis technology;

(ii) our Sherman Act and Clayton Act counterclaims with respect to droplet digital PCR products;

and (iii) our California unfair competition counterclaims.

Discovery is ongoing.

A Markman hearing was conducted in September 2020.

In December 2020, the Court ordered the parties to be ready for trial for Bio-Rad’s patent claims and our patent counterclaims in July 2021 and for our antitrust counterclaims in September 2021.

In June 2020, we filed two petitions for IPR challenging the validity of the '444 patent.

In August 2020, we filed two petitions for IPR challenging the validity of the '277 patent.

On January 13, 2021, the PTAB denied institution of IPRs for the '444 patent.

On February 22, 2021, the PTAB denied institution of IPRs for the '277 patent.

If we are found to infringe the asserted patents or if we are prohibited from selling our products, our business, operations, financial results and reputation could be significantly adversely impacted.

We are involved in lawsuits to protect, enforce or defend our patents and other intellectual property rights, which are expensive, time consuming and could ultimately be unsuccessful.

The ITC 1100 Action

On January 11, 2018, we filed a complaint against Bio-Rad at the ITC pursuant to Section 337 of the Tariff Act of 1930 alleging that Bio-Rad infringes our U.S.

9,644,204, 9,689,024, 9,695,468 and 9,856,530 (the “ITC 1100 Action”).

The judge issued an Initial Determination on July 12, 2019 finding that Bio-Rad’s ddSEQ products infringe the ‘024, ‘468 and ‘530 patents.

The judge also found all of our asserted patents to be valid and rejected Bio-Rad’s claim of ownership in all of the asserted patents.

On February 12, 2020, the ITC issued its Final Determination affirming the judge’s findings with respect to Bio-Rad’s violation of the ‘024, ‘468 and ‘530 patents, including the judge’s findings for those patents with respect to infringement, validity and ownership.

The ITC issued an exclusion order prohibiting Bio-Rad from importing into the United States infringing microfluidic devices, components thereof and products containing same, including the ddSEQ products.

The ITC also issued a cease and desist order preventing Bio-Rad from selling such imported products in the United States.

The ITC’s remedial orders do not identify any ddSEQ assay as exempted from their potential scope.

The ITC orders do not prohibit the importation or sale of microfluidic consumables imported into the U.S.

for use by researchers who are using such consumables as of February 12, 2020, and who have a documented need to continue receiving such consumables for a specific current ongoing research project for which that need cannot be met by any alternative product.

The Final Determination is subject to a 60-day presidential review period.

On April 29, 2020, Bio-Rad appealed the Final Determination to the Court of Appeals for the Federal Circuit.

Oral argument was held on March 11, 2021.

On April 29, 2021, the Federal Circuit issued its decision completely affirming the Final Determination of the ITC, including its findings with respect to infringement, validity and ownership.

Also in January 2018, we filed a related but separate suit against Bio-Rad in the U.S.

District Court for the Northern District of California, alleging that Bio-Rad infringes the ‘204, ‘024, ‘468 and ‘530 patents.

The ‘204, ‘024, ‘468 and ‘530 patents generally relate to gel bead reagents that are used in our Chromium products, which historically have constituted a significant amount of our current sales.

This litigation has been stayed pending resolution of the ITC 1100 Action.

In January 2019, Bio-Rad also filed petitions for IPR of the ‘024, ‘468 and ‘530 patents at the PTAB seeking to invalidate these patents.

In July and August of 2019, the PTAB denied institution of all of these Bio-Rad IPR petitions.

The Nanostring Action

On May 6, 2021, we filed suit against Nanostring Technologies, Inc.

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10,472,669, 10,662,467, 10,961,566, 10,983,113, and 10,996,219.

In addition to the litigation and legal proceedings discussed above, we are currently and may in the future be a party to other litigation or legal proceedings to determine the scope and validity of our intellectual property, which, if resolved adversely to us, could invalidate or render unenforceable our intellectual property or generally preclude us from restraining, enjoining or otherwise seeking to exclude competitors from commercializing products using technology developed or used by us.

On May 19, 2021, we filed an amended complaint additionally alleging that the GeoMx products infringe U.S.

11,001,878 and 11,008,607.

On July 1, 2021, Nanostring filed a motion to dismiss.

Briefing is in progress and no hearing has been scheduled.

Discovery has not yet commenced and no case schedule has been set.

In addition to the litigation against Nanostring discussed above, we are currently and may in the future be a party to other litigation or legal proceedings protect, enforce or defend our patents or other intellectual property, which, if resolved adversely to us, could invalidate or render unenforceable our intellectual property or generally preclude us from restraining, enjoining or otherwise seeking to exclude competitors from commercializing products using technology developed or used by us.

For example, our patents and any patents which we in-license may be challenged, narrowed, invalidated or circumvented.

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We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.

Worldwide we own or exclusively license over 330 issued or allowed patents and over 660 pending patent applications as of December 31, 2020.

Worldwide we own or exclusively license 421 issued or allowed patents and 729 pending patent applications as of June 30, 2021.

We also license additional patents on a non-exclusive and/or territory restricted basis.

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If we fail to protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict the use of our intellectual property.

It is our general policy not to license our patents but to protect our sole right to own and practice our patents.

Our success depends in part on obtaining patent protection for our products and processes, preserving trade secrets, patents, copyrights and trademarks, operating without infringing the proprietary rights of third parties and acquiring licenses for technology or products.

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Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements and we may not be able to prevent such unauthorized disclosure.

Monitoring unauthorized disclosure is difficult

and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate.

Monitoring unauthorized disclosure is difficult and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate.

If we were to enforce a claim that a third-party had illegally obtained and was using our trade secrets, it would be expensive and time consuming and the outcome would be unpredictable.

We also seek trademark registration to protect key trademarks such as our 10X, CHROMIUM and VISIUM marks, however, we have not yet registered all of our trademarks in all of our current and potential markets.

We also seek trademark registration to protect key trademarks such as our 10X, 10X GENOMICS, CHROMIUM and VISIUM marks, however, we have not yet registered all of our trademarks in all of our current and potential markets.

If we apply to register these trademarks, our applications may not be allowed for registration and our registered trademarks may not be maintained or enforced.

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We are aware of incidents where such entities have stolen the intellectual property of domestic companies in order to create competing products and we believe we may face such circumstances ourselves in the future.

In the Office of the United States Trade Representative (“USTR”) annual “Special 301” Report released in 2019, the adequacy and effectiveness of intellectual property protection in a number of foreign countries were analyzed.

In the Office of the United States Trade Representative (“USTR”) annual

“Special 301” Report released in 2019, the adequacy and effectiveness of intellectual property protection in a number of foreign countries were analyzed.

A number of countries in which both we and our distributors operate are identified in the report as being on the Priority Watch List.

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• the outcomes of and related rulings in the litigation and administrative proceedings in which we are currently or may in the future become involved;

• the timing and rate of market acceptance of our Next GEM microfluidic chips, the successful transition of our customers to our Next GEM microfluidic chips and our ability to make our Next GEM microfluidic chip work with all of our solutions;

• the failure or discontinuation of any of our product development and research programs;

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• general economic, industry and market conditions;

• natural disasters, infectious diseases, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks or major catastrophic events;

• natural disasters, infectious diseases, conflict, civil unrest, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events;

• the other factors described in this “ Risk Factors ” section.

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Broad market and industry factors may seriously affect the market price of our Class A common stock, regardless of our actual operating performance.

In the past, when the market price of a stock has been volatile, securities class action litigation has often been brought against that company.

In the past, when the market price of a stock has been volatile, securities litigation has often been brought against that company.

Because of the potential volatility of our stock price, we may become the target of securities litigation in the future.

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4.1 Amended and Restated Investors’ Rights Agreement, dated as of October 18, 2018, by and among the Registrant and the other parties thereto.

S-1 333-233361

4.1 8/19/2019

1 unchanged sentence

4.2 8/19/2019

10.1 Amended and Restated Non-Employee Director Compensation Policy.

10.1 6/1/2021

10.2 Third Amendment to Lease Agreement, dated June 10, 2021, between the Registrant and 6200 Stoneridge Mall Road Investors LLC.

10.1 6/15/2021

10.3 Settlement and Patent Cross License Agreement, dated July 26, 2021, by and between the Registrant and Bio-Rad Laboratories, Inc.

10.1 7/27/2021

31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

12 unchanged sentences

10x Genomics, Inc.

May 7, 2021 By:

August 6, 2021 By:

/s/ Serge Saxonov

2 unchanged sentences

(Principal Executive Officer)

May 7, 2021 By:

August 6, 2021 By:

/s/ Justin J.

2 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