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Item 1A. Risk Factors

2022-02-18 compared with 2021-02-26 · 740 added, 546 removed, 592 unchanged (68% of the section changed)

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• Our dependency on research and development spending by research institutions;

• The COVID-19 pandemic and its impact on our customers and suppliers as well as on our operations

• The COVID-19 pandemic and its impact on our customers and suppliers as well as on our operations, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• Our ability to generate sufficient revenue to achieve and maintain profitability;

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• Our products are specialized, complex and difficult to manufacture and we could experience production problems;

• 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 ability and the ability of our partners to ship and manufacture products to the necessary specifications and quantities, and within necessary timeframes, to meet demand;

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

• Our ability to effectively manage product transitions and forecast customer demand;

• Our ability to effectively manage product transitions and forecast customer demand, including for our Chromium X Series;

• Our ability to increase penetration into our existing markets;

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Risks related to our regulatory environment and taxation:

• Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multi-omic information and gene editing could reduce demand for our products;

• Our products could become subject to government regulation and the regulatory approval and maintenance process for such products may be expensive, time-consuming and uncertain both in timing and in outcome;

• Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

• Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multi-omic information and gene editing;

• Our products could become subject to more onerous government regulation;

• Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers.

Risks related to our intellectual property, information technology and data security:

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

We do not control these technologies and any loss of our rights to them could prevent us from selling our products;

• Our solutions contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.

• Our success will depend on our ability to obtain, maintain and protect our intellectual property rights;

• Our solutions contain third-party open source software components.

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

• Our ability to effectively protect our intellectual property.

• Our potential involvement in lawsuits in connection with intellectual property rights;

• Our ability to effectively protect and enforce our intellectual property rights.

Risks related to ownership of our Class A common stock:

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• The requirement of our bylaws that the State of Delaware is the exclusive forum for disputes between us and our shareholders.

For a more complete discussion of the risks affecting our business, see below.

The summary risk factors described above should be read together with the text of the full risk factors below in this section entitled “ Risk Factors ” and the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.

The risks summarized above or described in full below are not the only risks that we face.

Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

Risks related to our business and industry

Our business currently depends significantly on research and development spending by research institutions and the ability of researchers to access labs and conduct research, a reduction in which could limit demand for our products and materially and adversely affect our business and operating results.

Our business currently depends significantly on research and development spending by research institutions and the ability of researchers to access and fully utilize labs and conduct research, a reduction in which could limit demand for our products and materially and adversely affect our business and operating results.

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:

• 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;

• our inability or the inability of our customers to source necessary equipment, components and materials used in our products or used by our customers because of issues with suppliers stemming from the COVID-19 pandemic;

As a result, the demand for our products will depend upon purchasing patterns of these customers, the ability of such customers to adequately staff, access and utilize 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 or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or 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 or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our instruments and solutions are used;

• our inability or the inability of our customers to source products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers or distribution networks stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• changes in our customers' research priorities, including those caused by the COVID-19 pandemic;

• 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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Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of their capital or operating expenditures, including impacts stemming from the COVID-19 pandemic, could materially and adversely affect our business, operating results and financial condition.

Our customers may encounter problems in hiring and retaining the personnel needed to utilize our products or train others to use our products, which could result in decreased demand for our products and could materially and adversely affect our business, operating results and financial condition.

Additionally, the research of our customers often requires long uninterrupted studies performed on a consistent basis over time.

Reductions in capacity, lab shutdowns or interruptions in the ability of our customers to complete research projects, including

reductions in capacity, shutdowns or interruptions stemming from the COVID-19 pandemic, could be particularly damaging to these studies, our customers and our business.

Reductions in or other difficulties relating to staffing, capacity, lab slowdowns or shutdowns or interruptions in the ability of our customers to complete research projects, including reductions in staffing, capacity, slowdowns or shutdowns or interruptions stemming from the COVID-19 pandemic, could be particularly damaging to these studies, our customers and our business.

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, supply chain disruptions, logistics, shipping and other distribution disruptions, operations disruptions, labor shortages, 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 behaviors 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.

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.

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

COVID-19 mitigation measures, including travel bans and restrictions, quarantines, curfews, shelter in place and safer-at-home orders, business shutdowns, slowdowns and closures, 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 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.

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.

If a significant percentage of our or our business partners’ workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions, social distancing requirements or other governmental restrictions or voluntarily adopted practices, our operations will be negatively impacted.

Any sustained interruption in our or our business partners’ operations, research and development, distribution network or supply chain or any significant continuous shortage of raw materials or other supplies as a result of these measures, restrictions or disruptions, including as a result of increased demand for certain products, can materially impair our ability to develop, make, manufacture, distribute or sell our products.

If the operations of our suppliers or our customers' suppliers are impacted by the COVID-19 pandemic, we may not be able to source the necessary equipment, components and materials to build our products in sufficient quantities to meet demand or our customers may not be able to source the materials they need to use our products.

Further, the COVID-19 pandemic has increased the demand for testing globally.

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.

There remains considerable uncertainty regarding how the effects of the pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and 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 labor shortages, changes or disruptions to supply chains or logistics, shipping and other distribution operations or increases in employee costs, operating costs or otherwise), further impact our ability to perform research and development, manufacturing, and shipping

of our products and other necessary equipment, components and materials, how they will further impact our supply chain and the availability of our products or equipment, components and materials used in conjunction with our products and whether they will result in further reduced availability of air or other commercial transport, port closures or border restrictions or cause other disruptions to logistics, shipping or other distribution operations, 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 related to supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and implementation of additional measures to ensure the health and safety of our workforce.

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

If a significant percentage of our or our partners’ workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions, social distancing requirements or other governmental restrictions or voluntarily adopted practices, our operations will be negatively impacted.

Any sustained interruption in our, our partners’ or other third parties' operations, research and development, labor force, distribution network or supply chain or any significant continuous shortage of products, equipment, components or materials or other supplies as a result of the COVID-19 pandemic or otherwise, including as a result of increased demand for certain products, could materially impair our ability to develop, make, manufacture, distribute or sell our products.

If the operations of our suppliers or our customers' suppliers are impacted by supply chain disruptions, logistics, shipping and other distribution disruptions or labor shortages, we may not be able to source the necessary equipment, components and materials to build or distribute our products in sufficient quantities to meet demand or our customers may not be able to source the equipment, components and materials they need to use our products.

• demand for COVID-19 testing and research has impacted, and may continue to impact, our ability and our customers' ability to utilize facilities and source equipment, components and materials used in our products or in conjunction with our products that are also needed for COVID-19 testing and research;

• shortages of non-10x sequencing consumables has impacted, and may continue to impact, the workflows of our customers and their ability to complete their experiments;

• the storage and distribution of COVID-19 vaccines has impacted, and may continue to impact, the availability of cold storage for our consumables and other components and materials used by us and our customers in connection with our products;

• plastic component shortages, including of pipette tips utilized by our customers to complete their experiments, have impacted, and may continue to impact, the availability of plastic components used by us and our customers in connection with our products;

• competition for shipping and air transport has impacted, and may continue to impact, our ability to timely deliver products to our customers;

• shortages of certain chemicals, oils and beads utilized in our microfluidic chips has impacted, and may continue to impact, our ability to carry a buffer of inventory to safeguard against continuous significant shortages of such materials;

• semiconductor chip shortages have impacted, and may continue to impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products;

• energy shortages and other issues have impacted, and may continue to impact, factory production of upstream components utilized by us or our suppliers;

• natural gas shortages have impacted, and may continue to impact, the availability of dry ice utilized in the storage and distribution of our products.

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.

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.

Additionally, the risk that we, our suppliers, our customers or other third parties may not be able to source the equipment, components and materials needed to manufacture or use our products may require that we redesign and/or requalify, or attempt to redesign and/or requalify, certain of our products in order to facilitate our customers' experiments, and such attempts to redesign and/or requalify 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 much of our workforce had returned to our offices and resumed onsite work, resurgences of COVID-19 resulted in a return to remote work for our employees.

Having our employees working remotely amplified certain risks to our business and may do so again.

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 has and may impact demand from customers.

The ongoing economic impacts and health concerns associated with the pandemic may continue to affect customer behaviors 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.

In addition, some

researchers who would be running experiments using our platforms have instead shifted their resources to COVID-19 experimentation.

Spikes in customer demand for our products may make it harder for us to distribute our products in a timely manner.

In addition, some researchers who would be running experiments using our platforms have instead shifted their resources to COVID-19 experimentation.

Furthermore, our growth strategies include capital intensive initiatives, such as significant investments in research and development and the acquisition or licensing of core technologies and associated intellectual property.

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While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to try to mitigate the negative impact of COVID-19 on our employees and our business, there can be no assurance that we will be successful in our efforts or that such efforts may not have detrimental unintended consequences, and as a result, our business, financial condition and results of operations and the price of our Class A common stock may be materially and adversely affected.

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

The ability of our suppliers to meet our needs and the needs of our customers could be reduced or eliminated by the impacts of the COVID-19 pandemic.

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

The ability of suppliers to meet our needs and the needs of our customers could be reduced or eliminated by the impacts of the COVID-19 pandemic or other factors.

We do not have long-term contracts with our suppliers for the significant majority of the services, equipment, materials and components we use for the manufacture and delivery of our products.

In certain cases, we also rely on single suppliers for all of our requirements for some of our equipment, materials or components.

In most cases we do not have long term contracts with these suppliers, and even in the cases where we do the contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, equipment, materials or components should they choose not to do so.

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.

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

We also rely on single suppliers for all of our requirements for certain equipment, materials or components.

In many cases we do not have long term contracts with these suppliers, and even in the cases where we do, the contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, equipment, materials or components should they choose not to do so.

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 needs, 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, alternative priorities, logistics, shipping or other distribution difficulties, disruption at or affecting our suppliers’ facilities, such as difficulties hiring and retaining adequate staffing, 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.

If we are not able to obtain equipment, materials and components that meet our needs, specifications, quality standards and delivery schedule on satisfactory terms, our business will be harmed.

Any increase in equipment, material and component costs or decrease in availability could reduce our sales and harm our gross margins.

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In some cases, these manufacturers are the sole source of certain types of enzymes and reagents.

We do not have long-term contracts with any of these sole source suppliers.

Lead times for some of these components can be several months or more and could be exacerbated due to the COVID-19 pandemic.

We do not have long-term contracts with most of these sole source suppliers.

Lead times for some of these components can be several months or more and in the past have been, and in the future could be again, exacerbated due to the COVID-19 pandemic, supply chain disruptions, labor shortages or other factors.

In the event that demand increases, a manufacturing ‘lot’ does not meet our specifications or we fail to forecast and place purchase orders sufficiently in advance, this could result in a material shortage.

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If enzymes and reagents become unavailable from our current suppliers and we are unable to find acceptable substitutes for these suppliers, we may be required to produce them internally or change our product designs.

We have not qualified secondary sources for all equipment, materials or components that we source through a single supplier and we cannot assure investors that the qualification of a secondary supplier will prevent future supply issues.

Disruption in the supply of equipment, materials or components would impair our ability to sell our products and meet customer demand, and also could delay the launch of new products, any of which could harm our business and results of operations.

We have not qualified secondary sources for all equipment, materials or components that we source through a single supplier and qualification of a secondary supplier may not prevent future supply issues.

Labor shortages, logistics, shipping or other

distribution operations difficulties or disruption in the supply of equipment, materials or components could impair our ability to sell our products and meet customer demand, and also could delay the launch of new products, any of which could harm our business and results of operations.

If we were to have to change suppliers, the new supplier may not be able to provide us equipment, materials or components in a timely manner and in adequate quantities that are consistent with our quality standards and on satisfactory pricing terms.

In addition, alternative sources of supply may not be available for equipment or materials that are scarce or components for which there are a limited number of suppliers.

While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues which may result from the COVID-19 pandemic, the impacts of the COVID-19 pandemic may exacerbate the risks described in this risk factor and could cause certain of our suppliers to be unable to operate temporarily or go out of business permanently.

The realization of any of these risks could prevent us from producing, selling or delivering our products, reduce our sales and harm our gross margins or permanently cause a change in one or more of our products that may not be accepted by our customers or cause us to eliminate

that product altogether.

In addition, our customers may face difficulties in procuring, or in some cases may be unable to procure, the equipment, materials or components from their own suppliers necessary to conduct experiments using our solutions.

In addition, alternative sources of supply may not be available for equipment or materials.

While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues which may result from the COVID-19 pandemic, the impacts of the COVID-19 pandemic, supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages or other factors may exacerbate the risks described in this risk factor and could cause certain of our suppliers to reduce their ability to meet our or our customers' needs, be unable to operate temporarily or even go out of business permanently.

In addition, our suppliers or customers may face difficulties in procuring or delivering, or in some cases may be unable to procure or deliver, the equipment, materials or components from their own suppliers necessary to supply us with products, equipment, components or materials or conduct experiments using our solutions.

• demand for COVID-19 testing and research has impacted, and may continue to impact, our ability and our customers' ability to source equipment, components and materials used in our products or in conjunction with our products that are also needed for COVID-19 testing and research;

• shortages of non-10x sequencing consumables has impacted, and may continue to impact, the workflows of our customers and their ability to complete their experiments;

• the storage and distribution of COVID-19 vaccinations has impacted, and may continue to impact, the availability of cold storage for components and materials used by us and our customers in connection with our products;

• competition for shipping and air transport has impacted, and may continue to impact, our ability to timely deliver products to our customers;

• semiconductor chip shortages have impacted, and may continue to impact, the availability of semiconductor chips utilized in our instruments and in the manufacture of certain of our products;

• energy shortages and other issues have impacted, and may continue to impact, factory production of upstream components utilized by us or our suppliers.

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.

Our business depends on our ability to quickly and reliably deliver our products and in particular, our consumables, to our customers.

The majority of our consumables are perishable and must be kept below certain temperatures.

As such, we ship 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 hiring difficulties or labor disruptions, fuel shortages, dry ice shortages, bad weather, natural disasters, infectious disease, conflict, war, 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.

In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be adversely affected.

In addition, both shipping and air transport has recently been negatively impacted in terms of speed and capacity.

Should our commercial carriers encounter difficulties in delivering our instruments or consumables to customers, including due to impacts stemming from the COVID-19 pandemic, it could adversely impact our ability to deliver our products to our customers, or to recognize revenue for those products and accordingly adversely affect our financial results for that period and such impact could be particularly acute at the end of any financial quarter.

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

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These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

• reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions as well as other impacts stemming from the COVID-19 pandemic or other factors, such as reduced or delayed spending on instruments or consumables due to reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in which our instruments and solutions are used;

• our inability or the inability of our customers to source our products or necessary equipment, components and materials used in our products or in conjunction with our products because of issues with suppliers stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• 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;

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

• shortages, delays, production problems and quality issues with the materials we purchase for manufacturing, which could impact our ability to manufacture and ship our instruments, consumables and related components;

• the level of demand for our products, which may vary significantly and result in excess capacity expenses, and our ability to increase penetration in our existing markets and expand into new markets;

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

• shortages, delays, production problems, distribution and quality issues with the materials we purchase for manufacturing, which could impact our ability to manufacture and ship our instruments, consumables and related components;

• the level of demand for our products, which may vary significantly and result in excess capacity expenses, our ability to accurately forecast such demand and our ability to increase penetration in our existing markets and expand into new markets;

• the effects of inflation on us or our customers, manufacturers and suppliers, including increases in the cost of labor and materials;

• our ability to successfully integrate new personnel, technology and other assets that we acquire into our company;

• 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 and the ability of our partners to successfully manufacture our instruments and consumables in necessary quantities at necessary quality, including due to the impacts of supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• 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;

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

• 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 other changes that impact budgets, budget cycles or seasonal or other 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;

• 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;

• the outcome of any current or future litigation or governmental investigations involving us or other third parties;

• difficulties encountered by our commercial carriers in delivering our instruments or consumables, whether as a result of external factors such as weather, customs or import processes, transportation bottlenecks, port lockdowns or slowdowns or fuel shortages or internal issues such as labor disputes or difficulties hiring and retaining adequate staffing;

• general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors;

• 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 construction projects;

• 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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The manufacturing processes we and our third-party manufacturers use to produce our instruments, consumables and related components are specialized and highly complex and require high-quality components.

We may have quality variations, supply issues, backorders, delays, shortages or production difficulties of needed components and may require components that are difficult to obtain or manufacture at the necessary quantities and necessary quality, in a timely manner or in accordance with regulatory requirements.

We may have quality variations, supply issues, backorders, delays, shortages or production difficulties of needed components and may require components that are difficult to obtain or manufacture in necessary quantities and at necessary quality, in a timely manner or in accordance with regulatory requirements.

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, sea 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.

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, war, 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.

Certain disruptions in supply of, and changes in the competitive environment for, raw materials integral to the manufacturing of our products may adversely affect our profitability.

We use a broad range of materials and supplies, including metals, chemicals and electronic components, in our products.

A significant disruption in the supply of 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 production and transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics including COVID-19, outbreaks and resurgences, conflict, war, civil unrest, acts of terrorism or other interruptions to or difficulties in the employment of labor or transportation that adversely impact equipment, materials and components we require for the production of our products, may adversely affect our ability to maintain production of our products and generate revenue.

In addition, a significant prolonged increase in inflation could negatively impact the cost of materials and components.

Unforeseen end-of-life or unavailability of certain components, such as enzymes, could force us to purchase materials on the spot market at higher cost or require us to modify our product specifications to accommodate replacement components which could be costly or delay product shipments.

If we were to experience a significant disruption in the supply of, or prolonged shortage of, critical components from any of our suppliers and could not procure the components from other sources, we would be unable to manufacture our products and to ship such products to our customers in a timely fashion, which would adversely affect our sales, margins and customer relations.

We may be unable to consistently manufacture our instruments and consumables to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level.

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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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While customer complaints regarding defects in our products and consumables have historically been low, our customers have experienced quality control and manufacturing defects in the past.

For example, a manufacturing defect in certain of our Chromium Controllers resulted in an unacceptable level of LCD screen failures and we launched a free replacement program in 2018 to allow customers to replace

affected LCD screens as a result.

As we continue to grow and introduce new products, and as our products incorporate increasingly sophisticated technology, it will be increasingly difficult to ensure our products are produced in the necessary quantities without sacrificing quality.

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Certain of our consumables are subjected to a shelf life, after which their performance is not ensured.

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

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

Any future design issues, unforeseen manufacturing problems, such as contamination of our or their facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, financial condition and operating results and could result in us or our third-party manufacturers losing ISO quality management certifications.

If we or our third-party manufacturers fail to maintain ISO quality management certifications, our customers might choose not to purchase products from us.

If we or our third-party manufacturers fail to manufacture products without defects that meet our specifications or maintain ISO quality management certifications, our customers might choose not to purchase products from us.

Furthermore, we or our third-party manufacturers may not be able to increase manufacturing to meet anticipated demand or may experience downtime.

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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.

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.

We and our third-party manufacturers may not 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.

Additionally, impacts stemming from the COVID-19 pandemic, including supply chain disruptions, logistics, shipping and other distribution disruptions, labor shortages and issues relating to 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.

An inability to manufacture products and components that consistently meet specifications, in necessary quantities and at commercially acceptable costs will have a negative impact and may have a material adverse effect on our business, financial condition and results of operations.

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

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

We incurred net losses of $542.7 million and $31.3 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, we had an accumulated deficit of $805.1 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.

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.

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.

Many of these companies have announced plans to introduce products that compete with our single cell, spatial and future In Situ platforms.

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

Many of these companies have introduced products or announced plans to introduce products that compete with our single cell, spatial and future in situ platforms.

Some of our current competitors may enjoy a number of competitive advantages over us, including:

• greater name and brand recognition;

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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.

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.

Our products may not compete favorably or 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.

In addition, our competitors may have or will in the future 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.

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

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We currently generate substantially all of our revenue from the sale of our Chromium instruments, which we refer to as “instruments,” and our proprietary microfluidic chips, slides, reagents and other consumables for both our Visium and Chromium solutions, which we refer to as “consumables.” In particular, we are dependent upon revenue generated from sales of our Single Cell Gene Expression consumables.

There can be no assurance that we will be able to design future products, particularly non-Chromium product lines, that will meet the expectations of our customers or that our future products will become commercially viable.

As technologies change in the future for research equipment in general and in genomics solutions specifically, we will be expected to upgrade or adapt our products in order to keep up with the latest technology.

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.

Because the market for our products is characterized by rapid technological advances, we frequently introduce new products with improved ease-of-use, improved performance or additional features and functionality.

We pre-announce products and services, in some cases before such products and services have been fully developed or tested, and risk failing to meet expectations when such products and services become available.

At times, we pre-announce products and services, in some cases before such products and services have been fully developed or tested, and risk failing to meet expectations when and if such products and services become available.

The risks associated with the introduction of new products include the difficulties of predicting customer demand and effectively managing inventory levels to ensure adequate supply of the new product and avoiding excess supply of the legacy product.

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.

In addition, the COVID-19 pandemic, supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages have 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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Identifying, recruiting and training additional qualified personnel would require significant time, expense and attention.

We cannot assure investors that we will be able to further penetrate our existing market or that the market will be able to sustain our current and future product offerings.

We may not be able to further penetrate our existing market.

The market may not be able to sustain our current and future product offerings.

Any failure to increase penetration in our existing markets would adversely affect our ability to improve our operating results.

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

Additionally, while some on-site and other in-person sales and marketing and customer service activities previously restricted or eliminated due to COVID-19 have resumed, 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, has been and continues 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.

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

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 feasibility, competition among potential new products for Company resources, functionality, competitive pricing and integration with existing and emerging technologies.

The development timelines of certain new products may be delayed due to prioritization of other new products, including our forthcoming Xenium platform.

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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Because our solutions are used with other products, such as sequencers, to conduct an experiment, we also expect to face competition from these complementary products, either directly or indirectly, as researchers and labs look to reduce the total cost of any given experiment.

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.

For example, if a sequencer manufacturer were 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 would be 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 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 also depends on our ability to deliver any enhanced or new solutions to our customers in a format where they can be easily and consistently deployed by most or all users without significant customer service or training.

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.

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.

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The life sciences scientific community is comprised of a small number of early adopters and key opinion leaders who significantly influence the rest of the community.

The success of life sciences products is due, in large part, to acceptance by the scientific

community and their adoption of certain products as best practice in the applicable field of research.

The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products as best practice in the applicable field of research.

The current system of academic and scientific research views publishing in a peer-reviewed journal as a measure of success.

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During this time, our revenue has also increased significantly.

We cannot assure investors that our products will continue to be mentioned in peer-reviewed articles with any frequency or that any new products that we introduce in the future will be mentioned in peer-reviewed articles.

Our products may not continue to be mentioned in peer-reviewed articles with any frequency.

Any new products that we introduce in the future may not be mentioned in peer-reviewed articles.

If too few researchers describe the use of our products, too many researchers shift to a competing product and publish research outlining their use of that product or too many researchers negatively describe the use or usability of our products in publications, it may drive existing and potential customers away from our products, which could harm our operating results.

Additionally, the ability of researchers to conduct research or publish in peer-reviewed journal publications has been and will continue to be impacted by the COVID-19 pandemic.

For example, we believe COVID-19 has limited and may continue to limit the ability of the research community to connect, collaborate, attend conferences and share best practices.

Further, even though many of our customers are using our instruments and consumables to research and understand COVID-19 and such efforts may result in peer-reviewed journal publications which describe the use of our products, the COVID-19 pandemic may result in life sciences journals prioritizing research related to COVID-19 in lieu of research relating to other fields, such as oncology, where our instruments and consumables have regularly been mentioned.

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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.

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.

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.

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 December 31, 2020, 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 size 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;

(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.

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

Our future success depends on our ability to recruit, train, retain and motivate key personnel, including our senior management, research and development, manufacturing and sales, customer service and marketing personnel.

In particular, Dr.

Saxonov, our Chief Executive Officer and one of our co-founders, and Dr.

Hindson, our Chief Scientific Officer, President and one of our co-founders, are critical to our vision, strategic direction, culture and products.

Competition for qualified personnel is intense, particularly in the San Francisco Bay Area.

As we grow, we may continue to make changes to our management team, which could make it difficult to execute on our business plans and strategies.

New hires also require significant training and, in most cases, take significant time before they achieve full productivity.

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

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.

In addition, the continued development of complementary software tools, such as our analysis tools and visualization software, requires us to compete for highly trained software engineers in the San Francisco Bay Area and for highly trained customer service personnel globally.

We also compete for computational biologists and qualified scientific personnel with other life sciences companies, academic institutions and research institutions.

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

Due to the competition for qualified personnel in the San Francisco Bay Area, we expect to continue to rely on foreign nationals to fill part of our recruiting needs.

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 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 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.

Additionally, while we are committed to maintaining a safe workplace and to support our personnel through the COVID-19 pandemic, the health and safety of our personnel may be impacted by COVID-19 and our operating results and growth prospects could be materially harmed as a result.

Further, we may face civil liability if any of our employees contracts COVID-19 while performing his or her job or is otherwise negatively impacted by the COVID-19 pandemic.

Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.

In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics, including our instrument installed base and consumable pull-through per instrument, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We define the instrument installed base as the cumulative number of instruments sold since inception and define consumable pull-through per instrument as the total consumables revenue in the relevant period divided by the average instrument installed base during that period.

In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We believe that these metrics are representative of our current business;

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.

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.

With the emerging complexity of our product offerings, we believe pull-through per instrument is less relevant today than in past periods given the expanding breadth of our portfolio, and as such, is not representative of trends in our business.

For example, some of our customers are purchasing Chromium X Series instruments to replace previously purchased Chromium Controllers.

Additionally, certain of our solutions do

not require a Chromium instrument, such as our Visium solution, and forthcoming solutions, such as our Xenium platform which is expected to utilize a separate family of 10x Genomics' instruments and not rely on a Chromium instrument for its workflow.

Our consumables pull-through is also impacted by additional factors including expanding utilization by our existing customers, the rate of new customer acquisition, the ramp of utilization by new customers and the overall mix of “halo” users and their ordering patterns.

As our business, product lines and customer composition have become more complex since adopting this key business metric, we believe that this metric represents an oversimplification of these different drivers and can obscure underlying trends in the business.

Cumulative instruments sold and pull-through per instrument do not accurately reflect information relating to customers who purchase consumables but do not own an instrument.

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 or (iii) cause a general decrease in the rate of growth of our instrument installed base.

For example, the COVID-19 pandemic may cause a general decrease in the rate of growth of our instrument sales.

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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We periodically review the manufacturing capacity of our consumables and we expect to manufacture an increasing amount of consumables in-house.

Our Pleasanton facilities also house the majority of our research and development and quality assurance

Our Pleasanton facilities also house the majority of our research and development and quality assurance teams.

Our Chromium Connect is manufactured by our partner at their facility.

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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, war, 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.

If our facilities or any of our third-party manufacturers’ facilities become unavailable or understaffed 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.

Additionally, potential impacts of the COVID-19 pandemic on hiring or 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.

We may encounter particular difficulties in replacing or counterbalancing any unavailability of our Pleasanton staff or facilities given the specialized skills of our team and the specialized equipment housed within our facilities.

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If our products become unavailable during the planning process, researchers may use alternative products.

If our research and development programs were disrupted by a disaster or catastrophe, including the COVID-19 pandemic, the launch of new products and the timing of improvements to existing products could be significantly delayed and could adversely impact our ability to compete with other available products and solutions.

impact our ability to compete with other available products and solutions.

If our or our third-party manufacturers’ capabilities are impaired, we may not be able to manufacture and ship our products in a timely manner, which would adversely impact our business.

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, financial, 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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We may also be subject to warranty claims or breach of contract for damages related to errors or defects in our solutions.

Certain disruptions in supply of, and changes in the competitive environment for, raw materials integral to the manufacturing of our products may adversely affect our profitability.

We use a broad range of materials and supplies, including metals, chemicals and other electronic components, in our products.

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.

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.

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

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

We incurred net losses of $58.2 million and $542.7 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had an accumulated deficit of $863.3 million.

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, 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 purchasing decisions, 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.

Additionally, inflationary pressure could adversely impact our financial results.

Our operating costs have increased, and may continue to increase, due to the recent growth in inflation.

We may not fully offset these cost increases by raising prices for our instruments and consumables, which could result in downward pressure on our margins.

Further, our clients may choose to reduce their business with us if we increase our pricing.

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 growth or profitability could negatively impact the value of our Class A common stock.

If we fail to offer high-quality customer service, our business and reputation could suffer.

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Additionally, we believe our customer service team has a positive influence on recurring consumables revenue.

Providing an exceptional customer experience requires significant time and resources from our customer service team.

Potential impacts of the COVID-19 pandemic on the health and safety of our customer service organization could reduce or eliminate the organization’s ability to provide an exceptional customer experience.

Additionally, the organization’s ability to provide on-site, in-person customer service (including on-site installation of our instruments) has and may continue to be restricted or eliminated due to the impacts of the COVID-19 pandemic.

Therefore, failure to scale our customer service organization adequately or impacts on our organization’s ability to provide an exceptional customer experience may adversely impact our business results and financial condition.

exceptional customer experience requires significant time and resources from our customer service team.

Potential impacts of the COVID-19 pandemic on the health and safety of our customer service organization could reduce or eliminate our ability to provide an exceptional customer experience.

Additionally, our ability to provide on-site, in-person customer service (including on-site installation of our instruments) has and may continue to be restricted or eliminated due to the impacts of the COVID-19 pandemic.

Therefore, failure to scale our customer service organization adequately or impacts on our ability to provide an exceptional customer experience may adversely impact our business results and financial condition.

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, Visium Spatial Gene Expression for FFPE solution and forthcoming Xenium platform 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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If these third-party distributors do not provide a high-quality customer experience, our business operations and reputation may suffer.

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

In particular, Dr.

Saxonov, our Chief Executive Officer and one of our co-founders, and Dr.

Hindson, our Chief Scientific Officer, President and one of our co-founders, are critical to our vision, strategic direction, culture and products.

Competition for qualified personnel is intense, particularly in the San Francisco Bay Area.

As we grow, we may continue to make changes to our management team, which could make it difficult to execute on our business plans and strategies.

New hires also require significant training and, in most cases, take significant time before they achieve full productivity.

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.

We also compete for computational biologists and qualified scientific personnel with other life sciences companies, academic institutions and research institutions.

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

Due to the competition for qualified personnel in the San Francisco Bay Area, we expect to continue to rely on foreign nationals to fill part of our recruiting needs.

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.

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.

Further, while our Pleasanton facilities have been designated an essential business that can continue operations under current governmental shelter-in-place measures meant to combat the COVID-19 pandemic, we may face civil liability if any of our employees contracts COVID-19 while performing his or her job on site or is otherwise negatively impacted by the COVID-19 pandemic.

Investments and acquisitions could disrupt our business, cause dilution to our stockholders and otherwise harm our business.

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In 2020, we acquired CartaNA, an in situ company based in Sweden and ReadCoor, an in situ company based in Massachusetts.

In January 2021, we acquired Tetramer Shop ApS, a reagent company based in Denmark.

In January 2021, we acquired Tetramer Shop, a reagent company based in Denmark.

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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• potential higher taxes if our tax positions relating to certain acquisitions were challenged.

Foreign acquisitions, such as our acquisitions of Spatial Transcriptomics Holdings AB, CartaNA AB and Tetramer Shop ApS involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

Foreign acquisitions, such as our acquisitions of Spatial Transcriptomics Holdings AB, CartaNA AB and Tetramer Shop involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

Even if we identify a strategic transaction that we wish to pursue, we may be prohibited from consummating such transaction due to the terms of future indebtedness we may incur.

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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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Seasonal or cyclical variations in our sales have in the past, and may in the future, become more or less pronounced over time, and have in the past materially affected, and may in the future materially affect, our business, financial condition, results of operations and prospects.

Other fluctuations, including spikes in customer demand for our products in demand for our products, may make it harder for us to distribute our products in a timely manner.

Additionally, impacts of the COVID-19 pandemic could cause unpredictable temporary or permanent fluctuations in seasonal or cyclical variations as in the second quarter of 2020 in which widespread shutdowns caused a significant decrease in our revenue.

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We intend to continue to grow our business internationally and to do so we must attract additional distributors and retain existing distributors to maximize the commercial opportunity for our products.

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.

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

Our distribution relationships are non-exclusive.

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.

Our business depends on our ability to quickly and reliably deliver our products and in particular, our consumables, to our customers.

Certain of our consumables are perishable and must be kept below certain temperatures.

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.

In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be adversely affected.

In addition, should our commercial carriers encounter difficulties in delivering our instruments or consumables to customers, including due to impacts stemming from the COVID-19 pandemic, particularly at the end of any financial quarter, it could

adversely impact our ability to recognize revenue for those products in that period and accordingly adversely affect our financial results for that period.

We are subject to certain manufacturing restrictions related to licensed technologies that were developed with the financial assistance of United States government grants.

We are subject to certain United States government regulations because we have licensed technologies that were developed with United States government grants.

Such licensed technologies are used, for example, in a substantial majority of our consumables.

In accordance with these regulations, these licenses provide that products embodying the technologies are subject to domestic manufacturing requirements.

If this domestic manufacturing requirement is not met, the government agency that funded the relevant grant is entitled to exercise specified rights (“march-in rights”) which if exercised would allow the government agency to require the licensors or us to grant a non-exclusive, partially exclusive or exclusive license in any field of use to a third-party designated by such agency.

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 December 31, 2020, 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.

These restrictions may limit our ability to manufacture our products in geographies where it may be more economically favorable to do so which could limit our ability to respond to competitive developments or otherwise adversely affect our results of operations.

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

Additionally, our business, financial condition and results of operations could be materially and adversely affected if we are unsuccessful in selling directly to customers who previously purchased our products from third-party distributors.

Doing business internationally creates operational and financial risks for our business.

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Conducting operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones.

If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be materially and adversely affected and failure to comply with laws and regulations applicable to business operations in foreign jurisdictions may also subject us to significant liabilities and other penalties.

If we fail to coordinate and manage these activities

effectively, our business, financial condition or results of operations could be materially and adversely affected and failure to comply with laws and regulations applicable to business operations in foreign jurisdictions may also subject us to significant liabilities and other penalties.

International operations entail a variety of other risks, including, without limitation:

• United States and foreign government trade restrictions, including those which may impose restrictions on the importation, exportation, re-exportation, sale, shipment or other transfer of programming, technology, components and/or services to foreign persons or entities;

• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;

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

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

• challenges in staffing and managing foreign operations;

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• complexities associated with managing a third-party contract manufacturer located outside of the United States;

• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers;

• 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;

• 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, conflict, war, civil unrest, 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”).

• significant taxes or other burdens of complying with a variety of foreign laws, including laws relating to privacy and data protection such as the GDPR and the California Consumer Privacy Act (the “CCPA”).

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.

Additionally, we are subject to laws that prohibit the conduct of business with persons that are subject to “sanctions,” including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List.

Failure to comply with these laws and other applicable laws may subject us to claims or financial and/or other penalties in the United States and/or foreign countries that could materially and adversely impact our operations or financial condition.

These risks have become increasingly prevalent as we have expanded our sales into countries that are generally recognized as having a higher risk of corruption.

Additionally, our business must be conducted in compliance with applicable economic and trade sanctions laws and regulations, such as those administered and enforced by the U.S.

Department of Treasury’s Office of Foreign Assets Control, the U.S.

Department of State, the U.S.

Department of Commerce, the United Nations Security Council and other relevant sanctions authorities.

These laws generally prohibit, unless authorized by the relevant authority or otherwise exempt from the regulations, the conduct of business with persons, countries, regions, and governments that are targeted by “sanctions,” including but not limited to persons listed on the United States Department of Commerce’s List of Denied Persons and the United States Department of Treasury’s Specially Designated Nationals and Blocked Persons List, and the areas subject to trade embargoes by the United States (currently, Cuba, Iran, Syria, North Korea, and the Crimea region of Ukraine).

Our global operations expose us to the risk of violating, or being accused of violating, these laws and regulations.

Failure to comply may subject us to reputational harm, claims or significant financial and/or other penalties in the United States and/or foreign countries that could materially and adversely impact our operations or financial condition, including criminal fines, imprisonment, civil fines, disgorgement of profits, injunctions and debarment from government contracts, as well as other remedial measures.

Investigations of alleged violations can be expensive and disruptive.

These risks have become increasingly prevalent as we have expanded our sales into countries that are generally recognized as having a higher risk of corruption and sanctions risks.

For instance, we conduct significant sales in Russia annually.

In response to escalating tensions along the Russia-Ukraine border, the U.S.

government has stated it is considering imposing enhanced export controls on certain products and sanctions on certain industry sectors and parties in Russia.

The governments of other jurisdictions

in which we operate, such as the European Union, may also implement sanctions or other restrictive measures against Russia.

These potential sanctions and export controls, as well as any responses from Russia, could adversely impact our operations and negatively impact our business in the region.

Historically, most of our revenue has been denominated in U.S.

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For the years ended December 31, 2021 and 2020, approximately 17% 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.

Our expenses are generally denominated in the currencies in which our operations are located.

As our operations in countries outside of the United States grow, our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future.

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Even if we implement policies or procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our distribution partners, our employees, contractors or agents will not violate our policies and subject us to potential claims or penalties.

Significant U.K.

or European developments stemming from the U.K.’s withdrawal from the European Union could have a material adverse effect on us.

In January 2020, the United Kingdom exited from the European Union (“Brexit”) under the terms of a withdrawal agreement, entering into a “transition period” ending December 31, 2020 during which the existing regulatory regime was essentially the same.

The United Kingdom's withdrawal from the European Union occurred on January 31, 2020.

On December 24, 2020, the United Kingdom and the European Union entered into a trade and cooperation agreement (the "Trade and Cooperation Agreement"), which was applied on a provisional basis from January 1, 2021.

While the economic integration does not reach the level that existed during the time the United Kingdom was a member state of the European Union, the Trade and Cooperation Agreement sets out preferential arrangements in areas such as trade in goods and in services, digital trade and intellectual property.

Negotiations between the United Kingdom and the European Union are expected to continue in relation to the relationship between the United Kingdom and the European Union in certain other areas which are not covered by the Trade and Cooperation Agreement.

The long term effects of Brexit on our business in the United Kingdom, the European Union and worldwide will depend on the effects of the implementation and application of the Trade and Cooperation Agreement and any other relevant agreements between the United Kingdom and the European Union.

The events that could occur in the future as a consequence of the United Kingdom’s withdrawal may cause significant volatility in global financial markets, including in global currency and debt markets.

This volatility could cause a slowdown in economic

activity in the United Kingdom, Europe or globally, which could adversely affect our operating results and growth prospects.

In addition, our business could be negatively affected by new trade agreements or data transfer agreements between the United Kingdom and other countries, including the United States, and by the possible imposition of trade or other regulatory and immigration barriers in the United Kingdom.

In addition, access to European Union research funding by research scientists based in the United Kingdom may be reduced or cut off altogether.

It also is unclear whether Brexit may limit the ability or willingness of the United Kingdom’s Medical Research Council or other funding sources to continue funding genomic or single cell research by local research centers and labs.

The impact of the United Kingdom’s withdrawal from the European Union could negatively impact our revenue as a result of currency fluctuations, a slowdown in research funding or restricted budgets.

In addition, the growth of sales in the United Kingdom may be slowed or those sales may even decline as a result of this withdrawal.

Additionally, distribution costs for products sold in the United Kingdom may be increased due to trade agreements and incremental importation expenses and it may become more difficult or time-consuming to ship our products into the United Kingdom.

These possible negative impacts, and others resulting from the United Kingdom’s withdrawal from the European Union, the implementation of the Trade and Cooperation Agreement, the outcome of further negotiations and the policies, rules and regulations that are adopted as a result, may increase our cost of doing business in Europe, disrupt our European operations and adversely affect our operating results and growth prospects.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

Following the United Kingdom’s departure from the European Union ("EU") on January 31, 2020, and the end of the “transition period” on December 31, 2020, the EU and the United Kingdom have entered into a trade and cooperation agreement ("TCA") which governs certain aspects of their future relationship, including ensuring tariff-free trade for certain goods and services.

The TCA provides details on how some aspects of the United Kingdom’s and EU’s relationship will operate going forward, however there are still many uncertainties.

The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the EU since Brexit may be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).

These developments have had, and may continue to have, a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products could have a negative impact on our reputation and business.

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In addition, inventory that is stolen from warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact our customers’ experiments, our reputation and our business.

Effective as of July 1, 2020, we implemented a new company-wide enterprise resource planning system.

Such implementation could adversely affect our business and results of operations or the effectiveness of internal control over financial reporting.

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.

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.

The investment of marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.

From time to time, we have and may invest portions of excess cash and cash equivalents in marketable securities.

We have and may invest in liquid, investment-grade marketable securities such as corporate bonds, commercial paper, asset-backed securities, U.S.

treasury securities, money market funds, and other cash equivalents.

We currently, and expect to continue, to follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to liquidity and credit risks which set forth credit quality standards and limit our exposure to any one issuer as well as our maximum exposure to various asset classes.

However, these investments are subject to general credit, liquidity, market and interest rate risks.

We may realize losses in

the fair value of these investments, which could include a complete loss of these investments, which would have a negative effect on our consolidated financial statements.

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decrease.

Indebtedness may impair our financial and operating flexibility.

We may incur indebtedness in the future.

We may incur indebtedness in the future including, for example, in connection with the expansion of our headquarters in Pleasanton.

The debt instruments governing such indebtedness could contain restrictive provisions.

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.

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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SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is accurately recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

We are also continuing to improve our internal control over financial reporting.

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Any failure to develop or maintain effective controls or any difficulties encountered in our implementation of our internal controls over financial reporting could result in material misstatements that are not prevented or detected on a timely basis, which could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.

Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting.

We are required to have an audit of the effectiveness of our internal control over financial reporting.

Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

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Any such restrictions or any reduction in usage of our products as a result of concerns regarding the usage of genome editing technology could have a material adverse effect on our business, financial condition and results of operations.

Our products could become subject to government regulation and the regulatory approval and maintenance process for such products may be expensive, time-consuming and uncertain both in timing and in outcome.

Our products are not subject to the clearance or approval of the U.S.

Food and Drug Administration (the “FDA”), as they are not intended to be used for the diagnosis, treatment or prevention of disease.

However, as we continue to expand our product line and the applications and uses of our existing products into new fields, certain of our current or future products could become subject to regulation by the FDA, or comparable international agencies, including requirements for regulatory clearance or approval of

such products before they can be marketed.

Such regulatory approval processes or clearances may be expensive, time-consuming and uncertain, and our failure to obtain or comply with such approvals and clearances could have an adverse effect on our business, financial condition and operating results.

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

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

Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician sunshine laws and regulations.

Diagnostic products are regulated as medical devices by the FDA and comparable international agencies and may require either clearance from the FDA following the 510(k) pre-market notification process or pre-market approval from the FDA, in each case prior to marketing.

Obtaining the requisite regulatory approvals can be expensive and may involve considerable delay.

None of our products are currently regulated as medical devices, however, if our products labeled as “For Research Use Only.

Not for use in diagnostic procedures” are used, or could be used, for the diagnosis of disease, the regulatory requirements related to marketing, selling and supporting such products could change or be uncertain, even if such use by our customers is without our consent.

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

Our products could become subject to more onerous regulation by the U.S.

Food and Drug Administration (“FDA”) or other regulatory agencies in the future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business, financial condition, results of operations and prospects.

We make certain of our products available to customers as research-use-only (“RUO”) products.

RUO products are regulated by the FDA as medical devices, and include in vitro diagnostic products in the laboratory research phase of development that are being shipped or delivered for an investigation that is not subject to the FDA’s investigational device exemption requirements.

Although medical devices are subject to stringent FDA oversight, products that are intended for RUO and are labeled as RUO are exempt from compliance with most FDA requirements, including premarket clearance or approval, manufacturing requirements, and others.

A product labeled RUO but which is actually intended for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the Federal Food, Drug, and Cosmetic Act (“FDC Act”), and subject to FDA enforcement action.

In the European Union (“EU”), under Directive 98/79/EC (“EU IVDD”), RUO products which are intended to be used for research purposes, without any medical objective, are not regarded as devices for performance evaluation used in diagnostic procedures.

More importantly, Regulation (EU) 2017/746 (“EU IVDR”) expressly provides that products intended for RUO are excluded from the scope of the regulation.

A material intended for RUO, without any medical purpose or objective, is therefore not considered as an in vitro diagnostic medical device (“IVD”) and is not subject to compliance with IVD requirements.

However, depending on the type of RUO products in question, requirements to market some products may be tighten under the EU IVDR such as for laboratory developed tests.

Depending on the product in question, other regulations may be applicable to the RUO products.

The FDA has indicated that when determining the intended use of a product labeled RUO, the FDA will consider the totality of the circumstances surrounding distribution and use of the product, including how the product is marketed and to whom.

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

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

We may also in the future decide to develop products that are intended for clinical or diagnostic uses.

In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDC Act, or approval of a premarket approval application from the FDA, unless an exemption applies.

In the EU, there is currently no premarket government review of medical devices (including IVDs).

However, the EU requires that all IVDs placed on the market in the EU must meet the essential requirements of the EU IVDD including the requirement that an IVD must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.

Compliance with the essential requirements of the IVDD is a prerequisite for European conformity marking (“CE mark”) without which IVDs cannot be marketed or sold in the EU.

The EU regulatory landscape concerning IVDs is evolving.

On April 5, 2017 the EU IVDR was adopted to establish a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety.

Unlike the EU IVDD, the EU IVDR is directly applicable in all EU member states without the need for member states to implement into national law.

This aims at reducing the risk of discrepancies in interpretation across the different European markets.

The EU IVDR will fully apply on May 26, 2022 but there will be a tiered system extending the grace period for many devices (depending

on their risk classification) before they have to be fully compliant with the regulation.

Once applicable, the EU IVDR may impose increased compliance obligations for us if we decide to market products for clinical or diagnostic uses and impact our development plans.

In addition, the process of obtaining approval or clearance from the FDA or certification from notified bodies in the EU or approved bodies in the United Kingdom for new products, or with respect to enhancements or modifications to existing products, could take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-clinical and clinical testing, require changes to products or result in limitations on the indicated uses of products.

There can be no assurance that we will receive the required approvals, clearances or certifications for any new products or for modifications to our existing products on a timely basis or that any approval, clearance or certification will not be subsequently withdrawn or conditioned upon extensive post-market study requirements.

Moreover, even if we receive FDA clearance or approval or certification from foreign bodies of new products or modifications to existing products, we will be required to comply with extensive regulations relating to the development, research, clearance, approval, certification, distribution, marketing, advertising and promotion, manufacture, adverse event reporting, recordkeeping, import and export of such products, which may substantially increase our operating costs and have a material impact on our business, profits and results of operations.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

warning letters, fines, injunctions, civil penalties, termination of distribution, recalls or seizures of products, delays in the introduction of products into the market, total or partial suspension of production, refusal to grant future clearances, approvals or certifications, withdrawals or suspensions of existing clearances, approvals or certifications, resulting in prohibitions on sales of our products, and in the most serious cases, criminal penalties.

Occurrence of any of the foregoing could harm our reputation, business, financial condition, results of operations and prospects.

Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

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and Chinese markets.

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.

Therefore, it is possible further tariffs may be imposed that could cover imports of the export or sale of 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.

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As of December 31, 2021, we had federal net operating loss carryforwards (“NOLs”) of $818.0 million and federal tax credit carryforwards of $45.8 million.

Our federal NOLs generated after January 1, 2018, which total $258.8 million are carried forward

indefinitely, while all of our other federal NOLs and tax credit carryforwards expire beginning in 2032.

Our federal NOLs generated after January 1, 2018, which total $703.1 million are carried forward indefinitely, while all of our other federal NOLs and tax credit carryforwards expire beginning in 2033.

As of December 31, 2021, we had state NOLs of $372.5 million, which expire beginning in 2033.

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Similar rules may apply under state tax laws.

We completed a study through December 31, 2020 to determine whether an ownership change had occurred under Section 382 or 383 of the Code, and we determined that an ownership change occurred in 2013.

We completed a study through October 31, 2021 to determine whether an ownership change had occurred under Section 382 or 383 of the Code, and we determined that an ownership change occurred in 2013.

As a result, our net operating losses generated through November 1, 2013 may be subject to limitation under Section 382 of the Code.

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Significant judgments based on interpretations of existing tax laws or regulations are required in determining our provision for income taxes.

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.

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, changes in tax benefits from share based compensation, 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.

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Risks related to our intellectual property, information technology, and data security

We depend on certain technologies that are licensed to us.

We do not control these technologies and any loss of our rights to them could prevent us from selling our products.

We rely on licenses in order to be able to use various proprietary technologies that are used in a substantial majority of our consumables.

We do not own the patents that are the subject matter of these licenses.

Our rights to use these patented technologies in our business are subject to the continuation of and compliance with the terms of those licenses.

We may need to license other technologies to commercialize future products.

We may also need to negotiate licenses to patents after launching new products.

Our business may suffer if the technologies or patents are unavailable for license or if we are unable to enter into necessary licenses on acceptable terms.

Our success will depend on our ability to obtain, maintain and protect our intellectual property rights.

Our success and ability to compete depends in part on our ability to obtain, maintain and enforce issued patents, trademarks and other intellectual property rights and proprietary technology in the United States and elsewhere.

If we cannot adequately obtain, maintain and enforce our intellectual property rights and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have and our ability to compete, which could harm our business and ability to achieve profitability and/or cause us to incur significant expenses.

We rely on a combination of contractual provisions, confidentiality procedures and patent, trademark, copyright, trade secret and other intellectual property laws to protect the proprietary aspects of our products, brands, technologies, trade secrets, know-how and data.

These legal measures afford only limited protection, and competitors or others may gain access to or use our intellectual property rights and proprietary information.

Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining, maintaining and enforcing other intellectual property rights.

We may not be able to obtain, maintain and/or enforce our intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.

Failure to obtain, maintain and/or enforce intellectual property rights necessary to our business and failure to protect, monitor and control the use of our intellectual property rights could negatively impact our ability to compete and cause us to incur significant expenses.

The intellectual property laws and other statutory and contractual arrangements in the United States and other jurisdictions we depend upon may not provide sufficient protection in the future to prevent the infringement, use, violation or misappropriation of our patents, trademarks, data, technology and other intellectual property rights by others, and may not provide an adequate remedy if our intellectual property rights are infringed, misappropriated or otherwise violated by others.

We rely in part on our portfolio of issued and pending patent applications in the United States and other countries to protect our intellectual property and competitive position.

However, it is also possible that we may fail to identify patentable aspects of inventions made in the course of our development, manufacture and commercialization activities before it is too late to obtain patent protection on them.

If we fail to timely file for patent protection in any jurisdiction, we may be precluded from doing so at a later date.

Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.

Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

Moreover, should we become a licensee of a third party’s patents or patent applications, depending on the terms of any future in-licenses to which we may become a party, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain or enforce the patents, covering technology in-licensed from third parties.

Therefore, these patents and patent applications may not be prosecuted, maintained and/or enforced in a manner consistent with the best interests of our business.

While we generally apply for patents in those countries where we intend to make, have made, use, import, offer to sell or sell patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable.

Furthermore, the issuance of a patent does not give us the right to practice the patented invention.

Third parties may have blocking patents that could prevent us from manufacturing and/or commercializing our own products or services, or otherwise practicing our own technology.

Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

The patent positions of companies, including our patent position, may involve complex legal and factual questions that have been the subject of much litigation in recent years, and, therefore, the scope of any patent claims that we have or may obtain cannot be predicted with certainty.

Accordingly, we cannot provide any assurances about which of our patent applications will issue, the breadth of any resulting patent, whether any of the issued patents will be found to be infringed, invalid or unenforceable or will be threatened or challenged by third parties, that any of our issued patents have, or that any of our currently pending or future patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products and services.

Our pending and future patent applications may not result in the issuance of patents or, if issued, may not issue in a form that will be advantageous to us.

The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.

We cannot offer any assurances that the breadth of our granted patents will be sufficient to stop a competitor from developing, manufacturing and commercializing a product or technologies in a non-infringing manner that would be competitive with one or more of our products or technologies, or otherwise provide us with any competitive advantage.

Furthermore, any successful challenge to these patents or any other patents owned by or licensed to us after patent

issuance could deprive us of rights necessary for our commercial success.

Further, there can be no assurance that we will have adequate resources to enforce our patents.

Patents have a limited lifespan.

In the United States, the natural expiration of a utility patent is generally 20 years from the earliest effective non-provisional filing date.

Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products or services.

Patents, if issued, may be challenged, deemed unenforceable, invalidated, narrowed or circumvented.

Proceedings challenging our patents or patent applications could result in either loss of the patent, or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application.

Any successful challenge to our patents and patent applications could deprive us of exclusive rights necessary for our commercial success.

In addition, defending such challenges in such proceedings may be costly.

Thus, any patents that we may own may not provide the anticipated level of, or any, protection against competitors.

Furthermore, an adverse decision may result in a third party receiving a patent right sought by us, which in turn could affect our ability to develop, manufacture or commercialize our products or technologies.

Some of our patents and patent applications may in the future be co-owned with third parties.

If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products, services and technology.

In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

• any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products or services;

• any of our pending patent applications will issue as patents;

• we will be able to successfully manufacture and commercialize our products on a substantial scale before relevant patents we may have expire;

• we were the first to make the inventions covered by each of our patents and pending patent applications;

• we were the first to file patent applications for these inventions;

• others will not develop, manufacture and/or commercialize similar or alternative products or technologies that do not infringe our patents;

• any of our challenged patents will be found to ultimately be valid and enforceable;

• any patents issued to us will provide a basis for an exclusive market for our commercially viable products or technologies will provide us with any competitive advantages or will not be challenged by third parties;

• we will develop additional proprietary technologies or products that are separately patentable;

• our commercial activities or products will not infringe upon the patents of others.

We are subject to certain manufacturing restrictions related to licensed intellectual property rights that were developed with the financial assistance of United States government grants.

Under the Bayh-Dole Act, the federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” in inventions produced with its financial assistance (“Government Funded Inventions”) for its own benefit.

The Bayh-Dole Act provides federal agencies with march-in rights (“March-In Rights”), which allows a government agency, in specified circumstances, to require the patent owner or successors in title to the patent directed to such Government Funded Inventions (“Patent Owner”) to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants,” which if exercised, would allow such government agency to require such Patent Owner to grant a non-exclusive, partially exclusive or exclusive license in any field of use to a third-party designated by such agency.

The Bayh-Dole Act also provides that the Patent Owner manufacture products embodying the respective Government Funded Inventions domestically in accordance with certain requirements.

If this domestic manufacturing requirement is not met, the government agency that funded the relevant grant is entitled to exercise March-In Rights.

We are subject to the Bayh-Dole Act with respect to certain licensed technologies that were developed with United States government grants.

Such licensed technologies are used, for example, in a substantial majority of our consumables.

Further, we cannot be sure that if we acquired intellectual property rights in the future it will be free from government rights or regulations pursuant to the Bayh-Dole Act.

If we own, co-own or license in technology that is critical to our business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, our ability to enforce or otherwise exploit patents covering such technology may be adversely affected.

Further, the exercise of March-In rights, the requirement that we grant additional licenses to third parties, or the termination of our license of the relevant technologies could materially adversely affect our business, operations and financial condition.

The restrictions of the Bayh-Dole Act may also limit our ability to manufacture our products in geographies where it may be more economically favorable to do so which could limit our ability to respond to competitive developments or otherwise adversely affect our results of operations.

Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.

In addition, periodic maintenance fees, renewal fees, annuity fees and various other government fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent and/or applications and any patent rights we may obtain in the future.

While an unintentional lapse of a patent or patent application can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

If we fail to maintain the patents and patent applications covering our products or services, we may not be able to stop a competitor from marketing products or services that are the same as or similar to our products or services, which would have a material adverse effect on our business, financial condition and results of operations.

If we cannot successfully enforce our intellectual property rights, the commercial value of our products and technologies will be adversely affected and our competitive position may be harmed.

Third parties, including our competitors, may currently, or in the future, infringe, misappropriate or otherwise violate our issued patents or other intellectual property rights, and we may file lawsuits or initiate other proceedings to protect or enforce our patents or other intellectual property rights, which could be expensive, time-consuming and unsuccessful.

We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze whether to seek enforce our rights against potential infringement, misappropriation or violation of our intellectual property rights.

however, the steps we have taken, and are taking, to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation or violation of our intellectual property rights.

In certain circumstances it may not be practicable or cost-effective for us to enforce our intellectual property rights fully, particularly in certain developing countries or where the initiation of a claim might harm our business relationships.

We may also be hindered or prevented from enforcing our rights with respect to a government entity or instrumentality because of the doctrine of sovereign immunity.

Our ability to enforce our patent or other intellectual property rights depends on our ability to detect infringement.

It may be difficult to detect infringers who do not advertise the components or methods that are used in connection with their products or technologies.

Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product or technologies.

Thus, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.

Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products and technologies.

We have in the past and may in the future become, involved in lawsuits to protect or enforce our intellectual property rights.

An adverse result in any litigation proceeding could harm our business.

In any lawsuit we bring to enforce our intellectual property rights, a court may refuse to stop the other party from using the technology at issue on grounds that our intellectual property rights do not cover the technology in question.

Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property rights.

If we initiate legal proceedings against a third party to enforce a patent covering a product or technology, the defendant could counterclaim that such patent is invalid or unenforceable.

In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are common, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.

Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of patentable subject matter, novelty, obviousness, or non-enablement.

Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from USPTO, or made a misleading statement, during prosecution.

Mechanisms for such challenges include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).

In a patent or other intellectual property infringement proceeding, a court

may decide that a patent or other intellectual property right of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims or other intellectual property narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents or other intellectual property do not cover the technology in question.

Furthermore, even if our patents or other intellectual property rights are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages and/or ongoing royalties.

Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market.

An adverse result in any litigation or administrative proceeding could put one or more of our patents or other intellectual property rights at risk of being invalidated or interpreted narrowly, which could adversely affect our competitive business position, financial condition and results of operations.

Moreover, even if we are successful in any litigation, we may incur significant expense in connection with such proceedings, and the amount of any monetary damages may be inadequate to compensate us for damage as a result of the infringement and the proceedings.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed.

Our trademarks could be challenged, invalidated, infringed, and circumvented by third parties, and our trademarks could also be diluted, declared generic or found to be infringing on other marks.

If any of the foregoing occurs, we could be forced to re-brand our products or technologies, resulting in loss of brand recognition and requiring us to devote resources to advertising and marketing new brands, and suffer other competitive harm.

Third parties may also adopt trademarks similar to ours, which could harm our brand identity and lead to market confusion.

Further, there can be no assurance that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.

At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion.

Certain of our current or future trademarks may become so well known by the public that their use becomes generic and they lose trademark protection.

Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively.

Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, operating results and prospects.

We rely on our trademarks, trade names and brand names, such as our 10X, 10X GENOMICS, CHROMIUM, VISIUM and XENIUM marks, to distinguish our products and technologies from the products and technologies of our competitors, and have registered or applied to register many of these trademarks in the United States and certain countries outside the United States, however, we have not yet registered all of our trademarks in all of our current and potential markets.

There can be no assurance that our trademark applications will be approved for registration.

During trademark registration proceedings, we may receive rejections.

Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections.

In addition, in proceedings before the USPTO and comparable agencies in many foreign jurisdictions, third parties may also oppose our trademark applications and may seek to cancel trademark registrations or otherwise challenge our use of the trademarks.

Opposition or cancellation proceedings may be filed against our trademark filings in these agencies, and such filings may not survive such proceedings.

While we may be able to continue the use of our trademarks in the event registration is not available, particularly in the United States, where trademark rights are acquired based on use and not registration, third parties may be able to enjoin the continued use of our trademarks if such parties are able to successfully claim infringement in court.

In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations and our trademarks may not survive such proceedings.

If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.

Our trademarks or trade names may be infringed, circumvented, declared generic or determined to be violating or infringing on other marks.

Changes in patent law could diminish the value of our patents in general, thereby impairing our ability to protect our current and future products or technologies, and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our current or future patents.

Our ability to obtain patents and the breadth of any patents obtained is uncertain in part because, to date, some legal principles remain unresolved, and there has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and other countries.

Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property rights or narrow the scope of our patent protection, which in turn could diminish the commercial value of our products and services.

Patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our patents and applications.

Furthermore, the U.S.

Supreme Court and the U.S.

Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States

are interpreted.

The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.

In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

Depending on actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we own or that we might obtain or license in the future.

An inability to obtain, enforce, and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition.

For example, various courts, including the U.S.

Supreme Court, have rendered decisions that impact the scope of patentability of certain inventions or discoveries relating to the life sciences.

Specifically, these decisions stand for the proposition that patent claims that recite laws of nature (for example, the relationships between gene expression levels and the likelihood of risk of recurrence of cancer) are not themselves patentable unless those patent claims have sufficient additional features that provide practical assurance that the processes are genuine inventive applications of those laws rather than patent drafting efforts designed to monopolize the law of nature itself.

What constitutes a “sufficient” additional feature is uncertain.

Furthermore, in view of these decisions, in December 2014 the USPTO, published revised guidelines for patent examiners to apply when examining process claims for patent eligibility.

This guidance was updated by the USPTO in July 2015 and additional illustrative examples provided in May 2016.

The USPTO provided additional guidance on examination procedures pertaining to subject matter eligibility in April 2018 and June 2018.

The guidance indicates that claims directed to a law of nature, a natural phenomenon or an abstract idea that do not meet the eligibility requirements should be rejected as non-statutory, patent ineligible subject matter;

however, method of treatment claims that practically apply natural relationships should be considered patent eligible.

We cannot assure you that our patent portfolio will not be negatively impacted by the current uncertain state of the law, new court rulings or changes in guidance or procedures issued by the USPTO.

From time to time, the U.S.

Supreme Court, other federal courts, the U.S.

Congress or the USPTO may change the standards of patentability and validity of patents within the life sciences and any such changes could have a negative impact on our business.

Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted.

Changes in patent laws and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them, or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or may obtain in the future.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

In addition, any protection afforded by foreign patents may be more limited than that provided under U.S.

patent and intellectual property laws.

We may encounter significant problems in enforcing and defending our intellectual property both in the United States and abroad.

For example, if the issuance in a given country of a patent covering an invention is not followed by the issuance in other countries of patents covering the same invention, or if any judicial interpretation of the validity, enforceability or scope of the claims or the written description or enablement in a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in other countries, our ability to protect our intellectual property rights in those countries may be limited.

Changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual property rights or narrow the scope of our patent protection.

We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S.

and foreign legislative bodies.

Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.

Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

The legal systems in certain countries may also favor state-sponsored or companies headquartered in particular jurisdictions over our first-in-time patents and other intellectual property protection.

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.

For example, through its “Annual Special 301 Report on Intellectual Property,” the Office of the United States Trade Representative (“USTR”) has been reporting on the adequacy and effectiveness of intellectual property protection in a number of foreign countries that are U.S.

trading partners and their protection and enforcement of intellectual property rights.

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

Placement of a country on the Priority Watch List indicates that particular problems exist in that country with respect to intellectual property protection, enforcement, or market access for persons relying on intellectual property rights.

Countries placed on the Priority Watch List are the focus of increased bilateral attention concerning the specific problem areas.

It is possible that we will not be able to enforce our intellectual property rights against third parties that misappropriate our proprietary technology in those countries.

We depend on certain intellectual property rights that are licensed to us.

We may be unsuccessful in licensing or acquiring intellectual property rights from third parties that may be necessary to develop, manufacture and/or commercialize our current and/or future products or technologies.

Various proprietary technologies that are used in a substantial majority of our consumables are protected by intellectual property rights that we in-license from third parties.

Our rights to use such intellectual property rights in our business are subject to the continuation of and our compliance with the terms of the license agreements between us and each of our licensors.

A third party may hold intellectual property rights, including patent rights, that are important or necessary to the development, manufacture and/or commercialization of our current and/or future products or technologies, in which case we would be need to acquire or obtain a license to such intellectual property rights from such third party.

A third party that perceives us to be a competitor may be unwilling to assign or license its intellectual property rights to us.

In addition, the licensing or acquisition of third-party intellectual property rights is a competitive area, and other companies may also pursue similar strategies to license or acquire such third party’s intellectual property rights.

Some of these companies may be established and may have a competitive advantage over us due to their size, capital resources and greater development, manufacturing and commercialization capabilities.

We also may be unable to license or acquire third party intellectual property rights on commercially reasonable terms that would allow us to make an appropriate return on our investment, or we may be unable to obtain any such license or acquisition at all.

If we are unable to successfully obtain rights to necessary third-party intellectual property rights, we may not be able to develop, manufacture or commercialize our current and/or future products or technologies, which could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to claims that we or our employees have misappropriated the intellectual property rights of a third party, including trade secrets or know-how, or are in breach of non-competition or non-solicitation agreements with our competitors.

We may be subject to claims that our employees or consultants have wrongfully used for our benefit or disclosed to us confidential information of third parties.

Many of our employees and consultants were previously employed at or engaged by other medical device companies, including our competitors or potential competitors.

Some of these employees and consultants may have executed confidential information non-disclosure and inventions assignment agreements and non-competition agreements in connection with such previous employment or engagements.

Although we try to ensure that our employees and consultants do not use the intellectual property rights, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property rights or disclosed the alleged trade secrets or other proprietary information, of these former employers or customers.

To the extent that our employees or consultants use intellectual property rights or proprietary information owned by others in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions.

Litigation may be necessary to defend against these claims.

There is no guarantee of success in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property rights.

We may also be subject to claims that our former employees, contractors or collaborators, or other third parties have an ownership interest in our current or future patents, patent applications, or other intellectual property rights, including as an inventor or co-inventor.

We may be subject to ownership or inventorship disputes in the future arising, for example, from conflicting obligations of employees, consultants or others who were or are involved in developing our products or services.

Although it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property rights to execute agreements assigning such intellectual property rights to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property rights that we regard as our own, and we cannot be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we may not have an adequate remedy.

The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and litigation may be necessary to defend against these and other claims challenging inventorship or ownership.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property rights, and other owners may be able to license their rights to other third parties, including our competitors.

Such an outcome could have a material adverse effect on our business.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Additionally, we may be subject to claims from third parties challenging ownership interest in or inventorship of intellectual property rights we regard as our own, based on claims that our agreements with employees or consultants obligating them to assign their intellectual property rights to us are ineffective or in conflict with prior or competing contractual obligations to assign inventions and intellectual property rights to another employer, to a former employer, or to another person or entity.

may be necessary to defend against such claims, and it may be necessary or we may desire to obtain a license to such third party’s intellectual property rights to settle any such claim;

however, there can be no assurance that we would be able to obtain such license on commercially reasonable terms, if at all.

If our defense to those claims fails, in addition to paying monetary damages or a settlement payment, a court could prohibit us from using technologies, features or other intellectual property rights that are essential to our products or technologies, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of another person or entity, including another or former employers.

An inability to incorporate technologies, features or other intellectual property rights that are important or essential to our products or services could have a material adverse effect on our business, financial condition, results of operations, and competitive position, and may prevent us from developing, manufacturing and/or commercializing our products or technologies.

In addition, we may lose valuable intellectual property rights or personnel.

Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management and our employees.

Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent sales representatives.

A loss of key personnel or their work product could hamper or prevent our ability to develop, manufacture and/or commercialize our products or services, which could materially and adversely affect our business, financial condition and results of operations.

If we fail to execute invention assignment agreements with our employees and contractors involved in the development of intellectual property rights or are unable to protect the confidentiality of our trade secrets, the value of our products and technologies and our business and competitive position could be harmed.

In addition to patent protection, we also rely on other intellectual property rights, including protection of copyright, trade secrets, know-how and/or other proprietary information that is not patentable or that we elect not to patent.

However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect trade secrets.

To maintain the confidentiality of our trade secrets and proprietary information, we rely heavily on confidentiality provisions that we have in contracts with our employees, consultants, collaborators and other third parties.

We generally enter into confidentiality and invention assignment agreements with our employees, consultants and third parties upon their commencement of a relationship with us.

However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes and we may not enter into such agreements with all employees, consultants and third parties who have been involved in the development of our intellectual property rights.

Although we generally require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed.

In addition, despite the protections we do place on our intellectual property or other proprietary rights, monitoring unauthorized use and disclosure of our intellectual property rights by employees, consultants and other third parties who have access to such intellectual property or other proprietary rights is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate.

Therefore, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such employees, consultants, advisors or third parties, despite the existence generally of these confidentiality restrictions.

These agreements may not provide meaningful protection against the unauthorized use or disclosure of our trade secrets, know-how or other proprietary information in the event the unwanted use is outside the scope of the provisions of the contracts or in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information.

There can be no assurances that such employees, consultants, advisors or third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by third parties, including our competitors.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

The exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse effect on our business, financial condition and results of operations.

In particular, a failure to protect our proprietary rights may allow competitors to copy our technology, which could adversely affect our pricing and market share.

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions.

Further, it is possible that others will independently develop the same or similar technology, products or services or otherwise obtain access to our unpatented technology, and in such cases, we could not assert any trade secret rights against such parties.

If we fail to obtain or maintain trade secret protection, or if our competitors obtain our trade secrets or independently develop technology or products similar to ours, our competitive market position could be materially and adversely affected.

In addition, some courts are less willing or unwilling to protect trade secrets and agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not be enforceable in certain cases.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information by maintaining physical security of our premises and electronic security of our information technology systems.

Such security measures may not, for example, in the case of misappropriation of a trade secret by an employee, consultant or other third party with authorized access, provide adequate protection for our proprietary information.

Our security measures may not prevent an employee, consultant or other third party from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully.

Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products or services that we consider proprietary.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable.

Further, we may not be able to obtain adequate remedies for any breach.

While we use commonly accepted security measures, trade secret violations are often a matter of state law in the United States, and the criteria for protection of trade secrets can vary among different jurisdictions.

If the steps we have taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our intellectual property rights or confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.

• we, or current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future;

• we, or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

• others may independently develop, manufacture and commercialize technologies or products that are similar to, or are alternatives or duplicates of any of our technologies or products without infringing, misappropriating or otherwise violating our intellectual property rights;

• it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents;

• issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;

• our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop, manufacture and commercialize competitive products or technologies for sale in our major commercial markets;

• we may not develop additional proprietary technologies that are patentable;

• the patents of others may harm our business;

• we may choose not to seek patent protection for some of our proprietary technology to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such trade secrets or know-how.

Our solutions contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.

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Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source software licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code.

Some open source software licenses contain requirements that the licensee make its source code publicly available if the licensee creates modifications or derivative works using the open source software, depending on the type of open source software the licensee uses and how the licensee uses it.

If we combine our proprietary software with open source software in a certain manner, we could, under certain open source software licenses, be required to release the source code of our proprietary software to the public for free.

This would allow our competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales and revenue.

Some open source software licenses contain requirements that the licensee make its source code publicly available if the licensee creates modifications or derivative works using such open source software, depending on the type of open source software the licensee uses and how the licensee uses it.

If we combine our proprietary software with open source software in a certain manner, we could, under certain open source software licenses, be required to make available the source code of certain of our proprietary software to the public for free.

This could allow our competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales and revenue.

In addition, some companies that use third-party open source software have faced claims challenging their use of such open source software and their compliance with the terms of the applicable open source license.

We may be subject to suits by third parties claiming ownership of what we believe to be open source software, or claiming non-compliance with the applicable open source licensing terms.

Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to compromise or attempt to compromise our technology platform and systems.

Although we review our use of open source software to avoid subjecting our solutions to conditions we do not intend, the terms of many open source software licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions.

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.

Use of open source software may

also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to compromise or attempt to compromise our technology platform and systems.

Although we typically review our use of open source software to avoid subjecting our solutions to conditions we do not intend, the terms of many open source software licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions.

Moreover, our processes for monitoring and controlling our use of open source software in our solutions may not 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, to pay statutory or other damages to the license holder 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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The global data protection landscape is rapidly evolving and new laws and regulations are likely to be enacted and violations of existing and new laws and regulations may subject companies to significant penalties and fines, government investigations and/or enforcement actions, private litigation and other claims.

For example, the European Union’s adoption of the GDPR introduced stringent requirements for processing personal data.

The GDPR is likely to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we

collect, use, disclose, retain and leverage information about them or how we obtain consent from them.

For example, the GDPR imposes stringent requirements for processing personal data of individuals within the European Economic Area ("EEA").

The GDPR is likely to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and leverage information about them or how we obtain consent from them.

The processing of sensitive personal data, such as physical health condition, may impose heightened compliance burdens under the GDPR and is a topic of active interest among foreign regulators.

In addition, the GDPR provides for breach reporting requirements, more robust regulatory enforcement and greater penalties for noncompliance than previous data protection laws, including fines of up to €20 million or 4% of a noncompliant company’s global annual revenue for the preceding financial year, whichever is greater.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States;

in July 2020, the Court of Justice of the European Union (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”).

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

The revised SCCs must be used for relevant new data transfers from September 27, 2021;

existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

The new SCCs apply only to the transfer of personal data outside of the EEA and not the United Kingdom;

the UK’s Information Commissioner’s Office launched a public consultation on its draft revised data transfers mechanisms in August 2021 and laid its proposal before the UK Parliament, with the UK SCCs expected to come into force in March 2022, with a two-year grace period.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Since the beginning of 2021, after the end of the transition period following the UK’s departure from the EU, we are also subject to the UK data protection regime, which imposes separate but similar obligations to those under the GDPR and comparable penalties, including fines of up to £17.5 million or 4% of a noncompliant company’s global annual revenue for the preceding financial year, whichever is greater.

Other foreign jurisdictions, such as China and Russia, are increasingly implementing or

developing their own privacy regimes with complex and onerous compliance obligations and robust regulatory enforcement powers.

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

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, the California Privacy Rights Act (the "CPRA") passed in California.

The CPRA modifies and expands the CCPA and established a new California Privacy Protection Agency.

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Similar privacy and data protection laws have also been proposed in other states and at the federal level.

Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Any failure or perceived failure by us or our vendors or partners to comply with these laws and regulations, our privacy and notice policies, our privacy-related obligations to employees, customers or other third parties or privacy or security-related legal obligations, or any actual or perceived compromise of security that results in the unauthorized access to or disclosure, alteration, theft, loss, transfer or use of personal or other information, including personally identifiable information or other sensitive data, may result in governmental enforcement actions, fines and penalties, litigation or public statements critical of us by consumer advocacy groups or others and could cause our customers, partners or others to lose trust in us, which could have an adverse effect on our business.

If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

If we or our critical third-party providers experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

We rely on information technology systems to keep financial records, facilitate our research and development initiatives, manage our manufacturing operations, maintain quality control, fulfill customer orders, maintain corporate records, communicate with staff and external parties and operate other critical functions.

Our information technology systems are potentially vulnerable to disruption due to breakdown, malicious intrusion, computer viruses, worms, ransomware or other disruptive events including but not limited to natural disasters and catastrophes.

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).

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

We operate some of these systems but we also rely on third-party providers for a range of software, products and services that are critical to our operations and business.

Both our and our third-party providers’ information technology systems are vulnerable to disruption due to breakdown, malicious intrusion, computer viruses, worms, ransomware or other disruptive events including but not limited to natural disasters and catastrophes.

In addition, malicious code (such as viruses, worms and ransomware), bugs or vulnerabilities in our code, employee theft or misuse, human error, social engineering and phishing scams, denial-of-service attacks and sophisticated nation-state and nation-state supported attacks (including advanced persistent threat intrusions), are all increasingly common threats to companies like us.

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

If our security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability.

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If operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring functionality on an acceptable timeframe.

In addition, our information technology systems (and those of our vendors and partners) are potentially vulnerable to data security breaches, whether by internal bad actors (e.g., employees) or external bad actors (attacks of which are becoming increasingly sophisticated, including social engineering and phishing scams), which could lead to the exposure of personal data, sensitive data and confidential information to unauthorized persons.

Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the exposure of personal information (including sensitive personal information) of our employees, customers and others, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.

We have not always been able in the past and may be unable in the future to anticipate or prevent techniques used to obtain unauthorized access or to compromise our systems because the techniques used change frequently and are generally not detected until after an incident has occurred.

In addition, in the ordinary course of business, we and certain of our third-party providers collect, store, and process sensitive and confidential information including personal data.

An attack or security incident that exposes personal data, or sensitive or confidential information to unauthorized persons could lead to the loss of trade

secrets or other intellectual property, or could lead to the exposure of personal data of our employees, customers and others, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.

Concerns regarding data privacy and security may cause some of our customers to stop using our solutions.

This discontinuance in use could substantially harm our business, operating results and growth prospects.

In addition, any such access, disclosure or other loss or unauthorized use of information or data could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant penalties and fines.

In addition, any access, disclosure, loss or unauthorized use of information or data could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant penalties and fines.

In addition, although we seek to detect and investigate all data security incidents, security breaches and other incidents of unauthorized access to our information technology systems and data can be difficult to detect and any delay in identifying such breaches or incidents may lead to increased harm and legal exposure of the type described above.

In March 2020, we experienced an attempted ransomware attack in which cybercriminals were able to access our information technology systems.

While we isolated the source of the attack and restored normal operations with no material day-to-day impact to us or our ability to access our data, we have reason to believe confidential information was stolen.

We believe the attempted ransomware attack could lead to the disclosure of our trade secrets or other intellectual property, or could lead to the exposure of personal information of our employees.

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 and threat actors are increasingly utilizing tools and techniques designed to evade controls, to avoid detection and even to obfuscate or remove forensic evidence

We have experienced cyberattacks and other security incidents and expect to continue to experience such events.

For example, in March 2020, we experienced a ransomware attack in which cybercriminals were able to access our information technology systems.

While we isolated the source of the attack and restored normal operations with no material day-to-day impact to us or our ability to access our data, we believe confidential information was stolen.

We believe the ransomware attack could lead to the disclosure of our trade secrets or other intellectual property, or could lead to the exposure of personal information of our employees.

The release of any of this information could have a material adverse effect on our business, reputation, financial condition and results of operations.

In addition, the March 2020 attempted ransomware attack could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant judgements against us, penalties and fines.

The cost of investigating, mitigating and responding to potential data security breaches and complying with applicable breach notification obligations to individuals, regulators, partners and others, including the March 2020 attempted ransomware attack, could be significant.

Our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from such disruptions, failures, attempted attacks or security breaches.

In addition, the March 2020 ransomware attack could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant judgements against us, penalties and fines.

The cost of investigating, mitigating, responding to and remediating potential data security breaches and complying with applicable breach notification obligations to individuals, regulators, partners and others, including the March 2020 ransomware attack, could be significant.

Our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from cybersecurity-related disruptions, failures, attacks or breaches.

In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.

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The visualization of such data can also be computationally intensive.

As we iterate and improve our products and as the related technologies advance, our continued growth may require an ability to provide our customers with direct access to a high-performance computing system and/or alternative means of obtaining our software.

As we iterate and improve our products and as the related technologies advance, our continued growth may require an ability to provide our

customers with direct access to a high-performance computing system and/or alternative means of obtaining our software.

As a result, we expect our reliance on internal and third-party data centers to increase in the future.

Further, as we rely on third-party and public-cloud infrastructure, we will depend in part on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of customer data.

In addition, failures to meet customers’

expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers and grow our business.

In addition, failures to meet customers’ expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers and grow our business.

In addition, a cybersecurity event could result in significant increases in costs, including costs for remediating the effects of such an event, lost revenue due to a decrease in customer trust and network downtime;

increases in insurance coverage due to cybersecurity incidents;

increases in insurance coverage costs due to cybersecurity incidents;

and damages to our reputation because of any such incident

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 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 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.

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

Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products and the prohibition of sale of any of our products or services could adversely affect our ability to grow or achieve or maintain profitability.

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.

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 December 31, 2020, we had accrued a total of $44.2 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 to be made around 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 is scheduled 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.

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 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.

We may become a party to intellectual property litigation or administrative proceedings that could be expensive, time-consuming, unsuccessful, and could interfere with our ability to develop, manufacture and commercialize our products or technologies.

Our commercial success depends, in part, on our ability to develop, manufacture or commercialize our products and technologies without infringing, misappropriating or otherwise violating the proprietary rights and intellectual property of third parties.

Our industry has been characterized by extensive litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage.

While we take steps to ensure that we do not infringe upon, misappropriate or otherwise violate the intellectual property rights of others, there may be other more pertinent rights of which we are presently unaware.

Third parties may initiate, and have in the past initiated, legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights.

The outcome of such proceedings are uncertain and could have a negative impact on the success of our business.

It is possible that U.S.

and foreign patents and pending patent applications controlled by third parties may be alleged to cover our products and technologies, or that we may be accused of misappropriating third parties’ trade secrets or infringing third parties’ trademarks.

We have in the past, and may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our products or technologies, including interference proceedings, post grant review and inter partes review before the USPTO or equivalent foreign regulatory authority.

Furthermore, we may also become involved in other proceedings, such as reexamination, derivation or opposition proceedings before the USPTO or other jurisdictional body relating to our intellectual property rights or the intellectual property rights of others.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit.

Because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware and which may result in issued patents, which our current or future products or services infringe.

Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications that may ultimately issue with claims that we infringe.

There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us.

Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid and enforceable, and infringed by the use of our products and/or technologies, which could have a negative impact on the commercial success of our current and any future products or technologies.

If we were to challenge the validity of any such third-party U.S.

patent in federal court, we would need to overcome a presumption of validity.

As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S.

patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S.

We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement.

Our defense of any litigation or interference proceedings may fail and, even if successful, defending such claims brought against us would cause us to incur substantial expenses.

If such claims are successfully asserted against us, they may result in substantial costs and distract our management and other employees and could cause us to pay substantial damages.

Further, if a patent infringement or other intellectual property rights-related lawsuit were brought against us, we could be forced, including by court order, to cease developing, manufacturing and/or commercializing the infringing product or technologies.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right.

Although patent, trademark, trade secret, and other intellectual property disputes have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties.

We may not be able to obtain licenses on commercially reasonable terms, or at all, in which event our business would be materially and adversely affected.

Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors and other third parties gaining access to the same intellectual property.

Ultimately, if we are unable to obtain such licenses or make any necessary changes to our products or services, we could be forced to cease some aspect of our business operations, which could harm our business significantly.

A finding of infringement, or an unfavorable interference or derivation proceedings outcome could prevent us from developing, manufacturing and/or commercializing our products or technologies, or force us to cease some or all of our business operations, which could materially harm our business.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.

Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources and more mature and developed intellectual property portfolios.

We could encounter delays in product introductions while we attempt to develop alternative products or technologies.

If third parties assert infringement, misappropriation or other claims against our customers, these claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims.

If any of these claims succeed or settle, we may be forced to pay damages or settlement payments on behalf of our customers or may be required to obtain licenses for the products they use.

If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products or technologies.

Additionally, our products include components that we purchase from suppliers and may include design components that are outside of our direct control.

Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell and/or export our products or to use our technologies or product names.

As the number of competitors in our market grows and the number of patents issued in this area increases, the possibility of patent infringement claims against us may increase.

Moreover, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” purchase patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements.

From time to time, we may receive threatening letters, notices or “invitations to license,” or may be the subject of claims that our products and business operations infringe, misappropriate or otherwise violate the intellectual property rights of others.

The defense of these matters can be time-consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses or make substantial payments.

In addition, suppliers from whom we purchase hardware or software may not indemnify us in the event that such hardware or software is accused of infringing a third party’s patent or trademark or of misappropriating a third party’s trade secret.

Any lawsuits relating to intellectual property rights could subject us to significant liability for damages and invalidate our intellectual property.

Any potential intellectual property litigation also could force us to do one or more of the following:

• stop developing, making, selling or using products or technologies that allegedly infringe, misappropriate or otherwise violate the asserted intellectual property right;

• lose the opportunity to license our intellectual property rights to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others;

• incur significant legal expenses;

• pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing, misappropriating or otherwise violating;

• pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing, misappropriating or otherwise violating;

• redesign those products, services or technologies that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible;

and attempt to obtain a license to the relevant intellectual property rights from third parties, which may not be available on commercially reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.

Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation.

Such mechanisms include re-examination, post grant review, inter partes review and equivalent proceedings in foreign jurisdictions (for example, opposition proceedings).

Such proceedings could result in revocation of or amendment to our patents in such a way that they no longer cover our products or technologies.

With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel, and the patent examiner were unaware during prosecution.

If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we may lose at least

part, and perhaps all, of the patent protection on our products or technologies.

Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.

Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

There could also be public announcements of the results of hearing, motions, or other interim developments.

If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock.

Even if we ultimately prevail, a court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may not be an adequate remedy.

Furthermore, the monetary cost of such litigation and the diversion of the attention of our management could outweigh any benefit we receive as a result of the proceedings.

Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our business.

Any of the foregoing may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.

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.

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

("Nanostring") in the U.S.

District Court for the District of Delaware alleging that Nanostring's GeoMx Digital Spatial Profiler and associated instruments and reagents infringe U.S.

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

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.

A final written decision is expected from the PTAB in April 2021.

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.

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.

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.

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.

We expect appeals to be completed in late-2021, and we cannot guarantee investors that the Final Determination will not be reversed on appeal.

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.

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

On November 17, 2021, the Court held a hearing and dismissed without prejudice our claims for pre-suit indirect infringement and willful infringement.

Discovery is in progress.

A Markman hearing is scheduled for October 2022 and trial is scheduled for June 2023.

In addition to the litigation against Nanostring discussed above, we may in the future be a party to other litigation or legal proceedings to 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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Furthermore, many of our employees were previously employed at universities or other life sciences companies, including our competitors or potential competitors.

We or our employees may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.

We or our employees may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers without consent.

Although no such claims are currently pending, litigation may be necessary to defend against such claims if they arise in the future.

If we fail to successfully defend such claims, in addition to paying monetary damages, we may be subject to injunctive relief and lose valuable intellectual property rights.

A loss of key research personnel work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business.

A loss of key research personnel work product could hamper or prevent our

ability to commercialize certain potential products, which could severely harm our business.

Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

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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 465 issued or allowed patents and 837 pending patent applications as of December 31, 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 out-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.

We may exercise our business judgment and choose to relinquish rights in trade secrets by filing applications that disclose and describe our inventions and certain trade secrets when we seek patent protection for certain of our products and technology.

We cannot assure investors that any of our currently pending or future patent applications will result in issued patents and we cannot predict how long it will take for such patents to be issued.

Further, in some cases, we have only filed

provisional patent applications on certain aspects of our products and technologies and each of these provisional patent applications is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application.

Our currently pending or future patent applications may not result in issued patents and we cannot predict how long it will take for such patents to be issued.

Further, in some cases, we have only filed provisional patent applications on certain aspects of our products and technologies and each of these provisional patent applications is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application.

Such provisional patents may not become issued patents for a variety of reasons, including our failure to file a non-provisional patent application within the permitted timeframe or a decision that doing so no longer makes business or financial sense.

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As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain, despite the importance of seeking patent protection in our industry.

Further, we cannot assure investors that other parties will not challenge any patents issued to us or that courts or regulatory agencies will hold our patents to be valid or enforceable.

We cannot guarantee investors that we will be successful in defending challenges made against our patents and patent applications, even if we spend significant resources defending such challenges.

Further, other parties may challenge patents issued to us and courts or regulatory agencies may not hold our patents to be valid or enforceable.

We may not be successful in defending challenges made against our patents and patent applications, even if we spend significant resources defending such challenges.

Any successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents and could deprive us of the ability to prevent others from using the technologies claimed in such issued patents.

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

In China, for instance, the USTR noted a range of IP-related concerns, including a need to “strengthen IP protection and enforcement, including as to trade secret theft, online piracy and counterfeiting, the high-volume manufacture and export of counterfeit goods, and impediments to pharmaceutical innovation.” The absence of harmonized intellectual property protection laws and effective enforcement makes it difficult to ensure consistent respect for patent, trade secret, and other

intellectual property rights on a worldwide basis.

As a result, it is possible that we will not be able to enforce our rights against third parties that misappropriate our proprietary technology in those countries.

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Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time.

Moreover, certain holders of our common stock have rights, subject to conditions, to require us to file registration statements with the SEC covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

We have also registered all shares of Class A common stock that we may issue under our equity compensation and employee stock purchase plans.

We have registered all shares of Class A common stock that we may issue under our equity compensation and employee stock purchase plans.

These shares can be freely sold in the public market upon issuance and, if applicable, vesting, subject to our insider trading policy, where applicable, and applicable securities laws including volume limitations applicable to affiliates under Rule 144 and Rule 701.

Sales of Class A common stock in the public market or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Sales of Class A common stock in the public market may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

These sales also could cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.

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Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval.

This concentrated control is expected to limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval.

In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.

This concentrated control is expected to limit or preclude Class A stockholders' ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction requiring stockholder approval.

In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that an investor may feel is in her or his best interest as one of our stockholders.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes where sole dispositive power and exclusive voting control with respect to the shares of Class B common stock is retained by the transferring holder and transfers between our co-founders.

In addition, each outstanding share of Class B common stock held by a stockholder who is a natural person, or held by the permitted entities of such stockholder (as described in our amended and restated certificate of incorporation), will convert automatically into one share of Class A common stock upon the death of such natural person.

event of the death or permanent and total disability of a co-founder, shares of Class B common stock held by such co-founder or his permitted entities will convert to Class A common stock, provided that the conversion will be deferred for nine months, or up to 18 months if approved by a majority of our independent directors, following his death or permanent and total disability.

In the event of the death or permanent and total disability of a co-founder, shares of Class B common stock held by such co-founder or his permitted entities will convert to Class A common stock, provided that the conversion will be deferred for nine months, or up to 18 months if approved by a majority of our independent directors, following his death or permanent and total disability.

Transfers between our co-founders are permitted transfers and will not result in conversion of the shares of Class B common stock that are transferred.

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We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices, including maintaining an effective system of internal controls over financial reporting.

We ceased to be an "emerging growth company" as of January 1, 2021 and are now required to comply with certain provisions of SOX and are no longer permitted to take advantage of reduced disclosure requirements applicable to emerging growth companies.

We ceased to be an "emerging growth company" and are now required to comply with certain provisions of SOX and are no longer permitted to take advantage of reduced disclosure requirements applicable to emerging growth companies.

We have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company and we expect these expenses to increase because we are no longer eligible to take advantage of the reduced disclosure requirements and other benefits available to emerging growth companies.

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These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

Moreover, since we ceased to be an “emerging growth company” on January 1, 2021, we may no longer take advantage of certain exemptions from various reporting requirements that are applicable to public companies.

This increase in reporting requirements will further increase our compliance burden.

Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.

We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.

The impact of these requirements also could make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Moreover, these rules and regulations often are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

The rules and regulations applicable to us as a public company and recent trends in the insurance market have made it more expensive for us to obtain director and officer liability insurance.

We have currently obtained only director and officer liability coverage (commonly referred to as “Side A” coverage).

This means that while our directors and officers have direct insurance coverage for acts which the company is not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other things, stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits or amounts it must pay to indemnify our directors or officers.

This means that while our directors and officers have direct insurance

coverage for acts which the company is not legally required or permitted to indemnify them, the company itself does not have coverage for amounts incurred in defending, among other things, stockholder derivative or securities class action lawsuits or in the event of certain investigative actions, for amounts it must pay as a result of such suits or amounts it must pay to indemnify our directors or officers.

We are in essence self-insuring for these costs.

Any costs incurred in connection with such litigation could have a material adverse effect on our business, financial condition and results of operations.

In September 2018, California enacted a law that requires publicly held companies headquartered in California to have at least one female director by the end of 2019 and at least three by the end of 2021, depending on the size of the board.

In September 2020, California enacted a law that requires publicly held companies headquartered in California to have at least one director from an underrepresented community, as defined in the law, by the end of 2021 and at least three by the end of 2022, depending on the size of the board.

The laws impose financial penalties for failure to comply.

We are currently in compliance with the requirements of both laws but we may incur costs associated with complying with the law in future years, including costs associated with expanding our board of directors or identifying qualified candidates for appointment to our board of directors, or financial penalties or harm to our brand and reputation if we fail to comply.

We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

In September 2018, California enacted a law ("Senate Bill 826") that requires publicly held companies headquartered in California to have at least one female director by the end of 2019 and at least three by the end of 2021, depending on the size of the board.

In September 2020, California enacted a law ("Assembly Bill 979") that requires publicly held companies headquartered in California to have at least one director from an underrepresented community, as defined in the law, by the end of 2021 and at least three by the end of 2022, depending on the size of the board.

A director from an “underrepresented community” means a director who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual or transgender.

In addition, in August 2021, the SEC announced that it had approved Nasdaq’s proposed rule change to advance board diversity and enhance transparency of board diversity statistics through new listing requirements.

Under these new listing rules, Nasdaq-listed companies are required, subject to certain exceptions, to annually disclose diversity statistics regarding their directors’ voluntary self-identified characteristics and include on their boards of directors at least two “Diverse” directors or publicly disclose why their boards do not include such “Diverse” directors.

Under the phase-in period for these new listing rules, for companies listed on the Nasdaq Global Select Market, this disclosure requirement regarding the existence of at least one “Diverse” director applies starting on the later of August 7, 2023, or the date that the company files its proxy statement for its annual shareholder meeting during 2023, and regarding the existence of at least two “Diverse” directors applies starting on the later of August 6, 2025, or the date that the company files its proxy statement for its annual shareholder meeting during 2025.

Under the proposed rule, a “Diverse” director is someone who self-identifies either as (i) female, (ii) Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or two or more races or ethnicities, or (iii) lesbian, gay, bisexual, transgender or a member of the queer community.

Our board of directors currently includes two female directors, and three directors from an “underrepresented community.” We are currently in compliance with Assembly Bill 979 but, while we are actively seeking a new director, we are not currently in compliance with Senate Bill 826.

An initial violation of either law can result in a fine from the California Secretary of State in the amount of $100,000, with each subsequent violation resulting in a fine of $300,000.

In addition, if our current or future female or other “Diverse” directors no longer serve on our board of directors prior to the applicable dates under the phase-in period for the new Nasdaq listing rules, we could be out of compliance with the new Nasdaq listing rules.

We cannot assure that we can recruit, attract and/or retain qualified members of the board and meet gender and diversity requirements under California law or Nasdaq listing rules, which may expose us to financial penalties and adversely affect our reputation.

Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our Class A common stock.

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Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to the foregoing forum selection provisions.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of such stockholder’s choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

If a court were to find the exclusive-forum provisions in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

General risks

General risk factors

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.

The trading market of our common stock is influenced to some extent by the research and reports that industry or financial analysts publish about us and our business.

We do not control these analysts.

We may be slow to attract research coverage and the analysts who publish information about our common stock may have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.

If any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline.

If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

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

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

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

If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

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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;

• changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to purchase our instruments or consumables;

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• the announcement or expectation of additional financing efforts;

• stock-based compensation expense under applicable accounting standards;

• stock-based compensation expense;

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

• sales of our Class A common stock or Class B common stock by us, our insiders or other stockholders;

• 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, war, civil unrest, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events;

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

In recent years, stock markets in general, and the market for life sciences technology companies in particular (including companies in the genomics, biotechnology, diagnostics and related sectors), have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose

stock is experiencing those price and volume fluctuations.

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.

Volatility in our stock price also impacts the value of our equity compensation, which affects our ability to recruit and retain employees.

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.

Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

We have currently obtained only director and officer liability coverage (commonly referred to as “Side A” coverage).

We are in essence self-insuring for these costs.

Any costs incurred in connection with such litigation could have a material adverse effect on our business, financial condition and results of operations.

Unresolved Staff Comments.

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-K

Item 1A. Risk Factors