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Item 1A. Risk Factors

2024-02-15 compared with 2023-02-16 · 530 added, 521 removed, 858 unchanged (55% of the section changed)

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Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our Class A common stock.

In addition, you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously.

In addition, you should consider the interrelationship and compounding effects of multiple risks occurring simultaneously.

Summary Risk Factors

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• Fluctuations in our operating results due to a variety of factors;

• Our ability to generate sufficient revenue, to become free cash flow positive and to achieve and maintain profitability;

• Our ability to generate revenue from recently introduced products;

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

• Our ability to generate sufficient revenue, to attain cash flows from operating activities in excess of our capital investment requirements and to achieve and maintain profitability;

• Our ability to compete effectively;

• Our ability to increase penetration into our existing customer segments and to maintain and increase the effectiveness of our commercial organization;

• The size of the market for our solutions;

• Our ability to generate revenue from recently introduced or recently announced products;

• The timing of our introduction of new products or new product capabilities, including any delays related to such introductions;

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

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

• Doing business internationally, including in China and elsewhere in the Asia-Pacific region;

• 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;

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• Our products are specialized, complex and difficult to manufacture and we could experience production problems, including in sourcing raw materials and undetected errors and defects in our solutions;

• Our ability to increase penetration into our existing markets;

• Our ability to develop new products and enhance the capabilities of our existing products;

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

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

• The success of our products in achieving and sustaining scientific acceptance;

• Doing business internationally, including in China;

• 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 effectively manage product transitions and forecast customer demand, including for both existing and newly introduced products;

• The success of our products in achieving and sustaining scientific acceptances.

Risks related to our regulatory environment and taxation:

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

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

• Compliance with existing or enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers;

• Changes in tax laws or regulations that are applied adversely to us or our customers;

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

• Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multiomic information and gene editing.

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

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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:

• 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;

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

• the success of our recently introduced products and new versions of existing products, and our ability to generate revenue for such products, and the introduction of other new products or product enhancements by us or others in our industry;

• risks related to our business in China, including potential impacts of COVID-19, competition or other factors;

• fluctuations in demand for our products, which may vary significantly, our ability to accurately forecast demand, and our ability to increase penetration with our existing customers and to expand to new customers;

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

• the success of our recently introduced and recently announced products and new versions of existing products, and our ability to generate revenue for such products, and the introduction of new products or product enhancements by us or others in our industry including the timing of such introductions;

• risks related to our business and demand for our products in China and elsewhere in the Asia-Pacific region, including competition or other factors;

• the timing and magnitude of our price changes;

• changes in volume and product mix, particularly from products with lower gross margins than other products that we sell, or changes in costs related to our instruments and consumables, including products which incur royalty payment obligations at higher rates than other products we sell;

• 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;

• changes in product mix, particularly from newly introduced products with lower gross margins;

• the volume and mix of our instrument and consumable sales or changes in the manufacturing or sales costs related to our instruments and consumables;

• 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;

• the timing of our price increases;

• changes in the competitive environment, including new product introductions, new versions of existing products with additional capabilities and features or pricing changes;

• investment decisions we make with respect to the allocation of our resources, including regarding product development or to support our commercial organization;

• differences in purchasing patterns across our customer base or across our three platforms and variances in consumables spending for each of our platforms;

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

• 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;

• 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, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

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

• excess capacity expenses and higher inventory write-downs;

• 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;

• 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 personnel, technology and other assets that we acquire into our company;

• 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;

• higher than anticipated warranty costs;

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• changes in customer payment timing trends including potential increases in the days sales outstanding (DSO);

• future accounting pronouncements or changes in our accounting policies;

• expenses related to our facilities and real estate portfolio, including construction projects;

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

• expenses related to our facilities and real estate;

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

• disruptions in customers’ on-going experiments or interruptions in the ability of our customers to complete research projects;

• reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions, 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;

• the impacts of geopolitical issues, infectious disease, epidemics or pandemics such as COVID-19 outbreaks and resurgences on our business operations and on the business operations of our customers, manufacturers and suppliers;

• our reputation or public perception of us;

• the impacts of geopolitical issues, infectious disease, epidemics or pandemics 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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Investors should not rely on our past results as an indication of our future performance.

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

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

If our revenue or operating results fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below the expectations of analysts or investors, the price of our Class A common stock could decline substantially.

Such a stock price decline could occur even when we have met or exceeded any previously publicly stated guidance we may provide.

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 have introduced products for, among other things, genomics analysis, single cell analysis, spatial analysis and in situ analysis.

We also compete with companies that offer existing tools and technologies for life science research, such as bulk sequencing, flow cytometry, PCR, immunofluorescence, immunohistochemistry and other imaging and cell-based assays, that are replaced by our products.

There are additional companies, including both early stage and established, that have indicated that they are designing, manufacturing and marketing products to compete with us or that they intend to do so in the future.

Some of these companies may have substantially greater financial and other resources than we do, including larger research and development staff or larger, more established marketing, distribution, service and sales organizations.

In addition, they may have greater name recognition than we do.

Other competitors are in the process of developing novel technologies which may lead to products that rival or replace our products.

We expect new competitors to continue to emerge and the intensity of competition with both new and existing competitors to continue to increase.

We also face competition from researchers developing their own solutions.

The area in which we compete involves rapid innovation and some of our customers have in the past, and more may in the future, elect to create their own platform or assays rather than rely on a third-party supplier such as ourselves.

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

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

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 segments 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 lower costs.

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

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 researchers seeking life sciences research tools and technologies will view our solutions as competitive alternatives to, or better options than, existing tools and technologies, 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 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.

In addition, our growth strategy involves launching new solutions and expanding sales of existing solutions into new areas in which we have limited or no experience.

We also expect to pursue additional opportunities that will further expand our opportunity, including new potential applications of our single cell, spatial and in situ technologies in the future.

Sales of new or existing solutions into new opportunities may take several years to develop and mature and we cannot be certain that these opportunities will develop as we expect.

For example, new life sciences technology is often not adopted until a sufficient amount of research conducted using such technology has been published in peer-reviewed publications.

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

In certain situations, new life sciences products or applications, 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 and applications 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 our current and future solutions depends on many factors beyond our control including, among other factors, 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 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.

Our future success is dependent upon our ab ility to increase penetration in our existing customer segments and to maintain and increase the effectiveness of our commercial organization.

Our customer base includes academic, government, biopharmaceutical, biotechnology and other institutions.

Our success will depend upon our ability to increase our penetration among these customers, to expand to new customers and to expand our opportunities by developing and marketing new products as well as new applications for existing products.

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

We may not be able to further penetrate our existing customers or expand to new customers.

Any failure to increase penetration with existing customers and expand to new customers could adversely impact our operating results.

Certain of our products, certain customers or certain segments, including biopharmaceutical or translational segments, may require commercial team or other personnel with different skills or experience than those we currently employ in our commercial organization.

We may also need to identify, adopt and adhere to new or modified commercial processes to maintain and increase the effectiveness of our commercial organization.

If we are unsuccessful in adopting and adhering to such commercial processes, or in identifying, recruiting, training and retaining qualified personnel to staff and manage our commercial organization including personnel holding organizational, regional or other leadership positions, our business, results of operations and growth prospects may be harmed.

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 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 our products for Company resources and in customer purchasing decisions, functionality, competitive pricing and integration with existing and emerging technologies.

The development timelines of certain potential new products may be delayed or precluded due to prioritization of other new products.

New technologies, techniques or products offered by others could emerge that might offer better combinations of price and performance or better address customer requirements as compared to our current or future products or in some cases our own new products or new versions of existing products could erode sales or supplant the demand for other products we sell.

In addition, while we have invested, and expect to continue to invest, significantly in research and development and the commercialization of both new products and improved versions of existing products, investment decisions we make or have made with respect to the allocation of our substantial but finite resources, including regarding product development or to support our commercial organization, may not be successful or realize their anticipated benefits.

The timing of our price changes or introduction of new products or new product capabilities could negatively impact our business.

Our customers may pull in purchasing decisions in advance of announced future price increases or push out purchases to future periods in anticipation of future price reductions, which could cause fluctuations in our operating results.

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.

Due to the significant lead time involved in bringing a new product to market, we are required to make a number of assumptions and estimates regarding the technical or commercial feasibility of a new product, including assumptions and estimates regarding our or our partners’ ability to design and manufacture potential solutions, the biological analytes that researchers will want to measure, the appropriate method of measuring such analytes, how researchers intend to use the resulting data and the scope and type of data that will be most useful to researchers.

As a result, it is possible that we may fail to introduce certain products which we intended (and in some cases may have publicly announced our intention) to bring to market or we may introduce a new product or a new version of an existing product that fails to meet the performance or price expectations of our customers, uses technologies or methods of analysis that have been displaced by the time of launch, competes with one or more of our other products in a way which harms our business, addresses an opportunity that no longer exists or is smaller than anticipated, targets biological analytes or produces data that provides less utility to researchers than anticipated or otherwise is not competitive at the time of launch.

Additionally, even if we are successful in introducing new products or new versions of existing products which are embraced by our customers and the research community, such introductions may result in decreased demand for our existing products which are not offset by increases in demand for our new products or versions, at least temporarily.

Our revenues may suffer while customers transition their research to utilize our new products or new versions of existing products, as such transitions can be lengthy and require significant time to reach purchasing levels equivalent to those of our existing products.

We face significant competition from both established and early-stage companies, including on price, and the timing and magnitude of our price changes could adversely affect our business, financial condition or results of operations.

Our ability to mitigate downward pressure on our selling prices will be dependent upon our ability to maintain or increase the value we offer to researchers.

If we decrease prices, we may not see corresponding increases in demand.

By contrast, if we increase prices, such increases in our prices could result in volume losses as customers purchase fewer units.

If such losses are greater than expected, if we lose existing or potential customers due to price increases, if we decrease prices and demand does not increase in line with our expectations, if we incur substantial expenses or losses associated with unsuccessful product development or launch activities, if the costs to develop, manufacture or sell a new product or new version of an existing product compare unfavorably to other products we sell (including due to incurring royalty payment obligations at higher rates than other products we sell) or if we experience a lack of market acceptance of our new products or new versions of existing products, such events could adversely affect our business, financial condition or results of operations.

Because our solutions are used with other products, including third-party sequencers in the case of our Chromium and Visium solutions, 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 third-party sequencer manufacturer were successful in vertically integrating their product to provide functionality equivalent to our instruments, they potentially could be able to deliver a solution that is capable of running comparable experiments with a total experiment cost that would be 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 third-party sequencers used by our customers or potential customers, the utility of our products which are used in conjunction with third-

party sequencers 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.

If we do not successfully innovate and introduce new technology into our product lines, our business and operating results will be adversely impacted.

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

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

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

If we are unable to successfully develop new solutions, enhance our existing solutions to meet customer requirements or expectations, or otherwise gain market acceptance, our business, results of operations and financial condition could be harmed.

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.

We aim to create and deliver repeatable, user-friendly, prescriptive approaches to deployment that allow users of all kinds to effectively and easily deploy our solutions, and if we fail to do so, our business and results of operations could be harmed.

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

Such developments may involve external suppliers and service providers, making the management of development projects complex and subject to risks and uncertainties regarding timing, timely delivery of required components or services and satisfactory technical performance of such components or assembled products.

Our business currently depends significantly on research and development spending by research institutions, 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, Visium and Xenium products, including our instruments and consumables, to research institutions.

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, 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:

• decreases in funding of research and development;

As a result, the demand for our products will depend upon research priorities and purchasing patterns of these customers, the ability of such customers to adequately staff, access and utilize labs and conduct research, 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:

• changes in our customers' research priorities;

• decreases in funding of research and development;

• macroeconomic conditions;

• scientists’ and customers’ opinions of the utility of recently introduced products or services;

• risks related to our business in China and elsewhere in the Asia-Pacific region, including macroeconomic conditions, local competition or other factors:

• scientists’ and customers’ opinions of the utility of our products or services;

• competitor product offerings or pricing;

• risks related to our business in China, including potential impacts from COVID-19, local competitors or other factors:

• 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 or a resurgence of COVID-19 on our customers and potential customers and their sources of funding or other incentives;

• 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, including those that may arise from a resurgence of COVID-19, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• 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, including supply chain disruptions, logistics, shipping and other distribution disruptions and labor shortages;

• citation of new products or services in published research;

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• market-driven pressures to consolidate operations and reduce costs;

• reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our solutions are used, including those that may arise from a resurgence of COVID-19, including 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 solutions are used;

• reductions in or other difficulties relating to staffing, capacity, slowdowns or shutdowns of laboratories or other institutions in which our solutions are used, including 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 solutions are used;

• market acceptance of relatively new technologies, such as ours.

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

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

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

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Our operating results may fluctuate substantially due to any such reductions and delays.

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.

Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of their capital or operating expenditures 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 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 interrupt ions stemming from a resurgence of COVID-19, could be particularly damaging to these studies, our customers and our business.

Our industry is highly competitive.

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

We face significant competition.

In addition, they may have greater name recognition than we do.

Other competitors are in the process of developing novel technologies for the life sciences market which may lead to products that rival or replace our products.

We expect new competitors to emerge and the intensity of competition to increase.

We also face competition from researchers developing their own solutions.

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

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

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 could be particularly damaging to these studies, our customers and our business.

We are significantly dependent upon revenue generated from the sale of our Chromium solutions, and in particular our Single Cell Gene Expression solutions.

We currently generate the majority of our revenue from the sale of our instruments and consumables for our Chromium platform.

There can be no assurance that we will be able to sustain or increase the success we have achieved with our Chromium solutions.

In addition, we may not be able to design future Chromium products that will meet the needs of our customers or become and remain commercially successful.

Our expectations are based on the continued success of our existing solutions and the future success of new products and new versions of existing products that we launch.

If our Chromium solutions decrease or do not increase in line with our expectations, our revenue and financial results could be materially and adversely impacted.

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

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

For the years ended December 31, 2023 and 2022, approximately 40% and 45%, respectively, of our revenue was generated from sales to customers located outside of North America.

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

We sell directly in North America and certain regions of Europe and have a significant portion of our sales and customer service personnel in the United States.

We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, Central America, South America, the Middle East and Africa.

As a result, we or our distribution partners may be subject to additional regulations.

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.

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

• variances in demand for our products across regions, including in China and elsewhere in the Asia-Pacific region;

• challenges in staffing and managing foreign operations, including executing our commercial goals and our dependence on our distributors in certain regions;

• currency fluctuations ;

• potentially longer sales cycles and more time required to engage and educate customers on the benefits of our products outside of the United States;

• complexities associated with managing third-party contract manufacturers and suppliers located outside of the United States;

• 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;

• reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property or other legal rights abroad;

• 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, the United States and Russia or other nations or political organizations, which could have a material adverse effect on our sales and operations in these countries;

• the potential need for localized software, documentation and post-sales support;

• 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 manufacture or sell our products in certain countries;

• natural disasters, infectious diseases, conflict, geopolitical turmoil, war, civil unrest, epidemics, pandemics or major catastrophic events;

• increased financial accounting and reporting burdens and complexities;

• higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain international customers;

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

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

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.

As a result of the crisis in Ukraine both the United States and the European Union have implemented sanctions against certain Russian individuals and entities.

While at this time we no longer do business in Russia, our previous business there could expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities, including tariffs, economic sanctions and import-export restrictions.

Violations of complex foreign and United States laws and regulations could result in fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international growth efforts, our ability to attract and retain employees, our business and our operating results.

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.

Our business in China subjects us to unique commercial, operational, competitive and regulatory risks.

Weakening economic conditions in China, our dependence on local distributors and other third parties to commercialize our products in China, local competition and trade tensions between the United States and China, among other factors, have in the past resulted, and may again result, in difficulty generating revenue for sales of our products in China.

For example, we believe that in the past certain of our distributors in China held excess inventory of certain of our products, in part due to fluctuations in customer purchasing patterns in China due to COVID-19, which we believe resulted in lower than anticipated sales of our products to our distributors in China in 2023 as such distributors sold off such excess inventory.

Excess inventory held by our distributors, in China or elsewhere, may negatively impact our revenues in the future.

Our ability to sell our products in China may be negatively impacted by evolving laws and regulations in the U.S.

Certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates the scope of our investments and business conducted within China.

The Chinese government may adopt new regulations that may impact entities operating in China, potentially with little advance notice.

In order to maintain access to the Chinese market, we may be required to comply with significant technical and other regulatory requirements, at times with short notice.

These actions may increase the cost of doing business in China or limit how we may do business in China, which could materially and adversely affect our business.

In addition, we have suppliers and manufacturing in Taiwan.

As a result, our business could be materially and negatively impacted by adverse changes in China-Taiwan relations.

Accordingly, further deterioration in military, political and economic relations between China and Taiwan, as well as the ongoing geopolitical and economic uncertainty between the U.S.

and China and other geopolitical risks with respect to China and Taiwan, may cause disruptions in our ability to source products from China Taiwan, including which may, directly or indirectly, harm our business.

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

Certain of our consumables are manufactured at our

Pleasanton, California and Singapore facilities using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures.

Certain of our consumables are manufactured at our Pleasanton, California, Singapore, Taiwan and other facilities using complex processes, sophisticated equipment and strict adherence to specifications and quality systems procedures.

Our Chromium and Visium CytAssist 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.

In order to ensure we are able to meet these expectations, our Pleasanton, California manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures.

In order to ensure we are able to meet these expectations, our Pleasanton, California and Singapore manufacturing facilities, as well as the facilities of our third-party manufacturers, have obtained International Organization for Standardization (“ISO”) quality management certifications and employ other quality control measures.

On occasion, our customers have experienced quality control and manufacturing defects and may again in the future.

For example, a manufacturing defect in certain of our legacy 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.

In addition, in the first half of 2023 we plan to move certain of our operations currently located in leased facilities in Pleasanton to a newly constructed facility located in Pleasanton which we own.

We may experience operational delays or difficulties as a result of transitioning operations to our new facility, including if our equipment and materials are harmed or rendered inoperable as a result of the move, which could adversely affect our business, financial condition and results of operations.

Additionally, 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 and in the necessary timeframes.

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Any future design issues, unforeseen manufacturing problems, such as contamination of our third-party manufacturer's 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 manufacture products without defects that meet our specifications or maintain ISO quality management certifications, our customers might choose not to purchase products from us.

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.

In addition, as we increase manufacturing capacity, we will also need to make corresponding improvements to other operational functions, such as our customer service and billing systems, compliance programs and our internal quality assurance programs.

We will also need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products.

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.

In addition, as we have increased, and expect in the future we will increase, manufacturing capacity, we have needed, and in the future may need, also to make corresponding improvements to other operational functions, such as our customer service and billing systems, compliance programs and our internal quality assurance programs.

We have needed and expect in the future also to need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products.

We cannot assure you that such 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 or that they will realize their intended benefits.

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.

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

The risk of manufacturing defects or quality control issues is generally higher for new products, whether produced by us or a third-party manufacturer, products that are transitioned from one manufacturer to another, particularly if manufacturing is transitioned or initiated with a manufacturer we have not worked with in the past, and products that are transferred from one manufacturing facility to another.

Our current product roadmap calls for the introduction of new instruments and consumables, which may require that we utilize manufacturers with which we have little or no prior manufacturing experience and the risk of manufacturing defects or quality control issues could increase as a result.

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

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 def ects.

Our current product roadmap calls for the introduction of new products and new versions of existing products, which may require that we utilize manufacturers with which we have little or no prior manufacturing experience and the risk of manufacturing defects or quality control issues could increase as a result.

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

We and our third-party manufacturers may not be able to launch new products or new versions of existing 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 def ects or other issues.

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

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.

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.

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

We also rely on single suppliers for certain equipment, materials and 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.

In many cases we do not have long term contracts with these suppliers, and even in the cases where we do, some such 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 such as 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.

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, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, disagreements, disputes or 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.

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

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, extended due to a resurgence of 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.

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

We do not have long-term contracts with many 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, extended due to supply chain disruptions, labor shortages or other factors.

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

Some of the components

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

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

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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 qualification of a secondary supplier may not prevent future supply issues.

While we make the majority of our equipment in-house, 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.

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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, including those which may result from a resurgence of COVID-19, the impact of 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.

While we have taken steps to mitigate potential supply chain and transportation infrastructure system issues, the impact of 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.

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.

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

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

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

• the storage and distribution of vaccines in the past impacted, and in the future may impact, the availability of cold storage for components and materials used by us and our customers in connection with our products.

Our instruments, consumables and related components are specialized, complex and difficult to manufacture.

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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 could result in our inability to produce our products in sufficient volumes to meet demand, supply our products to our customers, backorders, insufficient inventory, excess inventory, shipping delays, product deficiencies or other operational failures.

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 could result in our inability to produce our products in sufficient volumes and at sufficient quality to meet demand, supply our products to our customers and for our research and development

needs, backorders, insufficient inventory, excess inventory, shipping delays, product deficiencies or other operational failures.

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

Similar disruptions in the future could reduce or eliminate our ability to receive components or supply our customers.

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, spoilage, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandem ics such as COVID-19 o utbreaks and resurgences, 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, spoilage, equipment malfunctions, facility contamination, labor problems, natural disasters, infectious disease, conflict, war, civil unrest, epidemics or pandem ics , 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.

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A significant disruption in the supply of materials 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 such as COVID-19 outbreaks and resurgences, geopolitical issues, 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.

Shortages of materials or interruptions in production and transportation systems, labor strikes, work stoppages, infectious disease, epidemics or pandemics, geopolitical issues, 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.

Even if in some cases we are able to pass some or all such cost increases to customers by increasing the selling prices of our products, higher product prices may also result in a reduction in sales volumes.

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 rely exclusively on commercial carriers to transport our products, including perishable consumables, to our customers in a timely and cost-efficient manner and if delivery of our products is 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 such as 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.

For example, certain of our customers were negatively impacted by a process breakdown in our logistics cold-chain that resulted in product spoilage which delayed purchases by affected customers, negatively impacting our revenue in 2022.

While we work with customers to replace any consumables impacted by delivery disruptions, our reputation and our business may be adversely impacted if customers receive consumables that are not fit for usage.

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

In addition, in the past both shipping and air transport have been negatively impacted in terms of speed and capacity.

If we cannot supply our products to our customers in a timely manner, our customers may delay or cancel their orders.

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.

Should we or 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 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 future success is dependent upon our ab ility to increase penetration in our existing customer segments and to maintain and increase the effectiveness of our commercial organization.

Our customer base includes academic, government, biopharmaceutical, biotechnology and other institutions.

Our success will depend upon our ability to increase our penetration among these customers and to expand our opportunity by developing and marketing new products and new applications for existing products.

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

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

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

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.

Such success is dependent upon several factors, including feasibility, competition among our 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.

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.

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

Due to the significant lead time involved in bringing a new product to market, we are required to make a number of assumptions and estimates regarding the commercial feasibility of a new product, including assumptions and estimates regarding the biological analytes that researchers will want to measure, the appropriate method of measuring such analytes, how researchers intend to use the resulting data and the scope and type of data that will be most useful to researchers.

As a result, it is possible that we may introduce a new product that uses technologies or methods of analysis that

have been displaced by the time of launch, competes with one or more of our other products, addresses an opportunity that no longer exists or is smaller than anticipated, targets biological analytes or produces data that provides less utility to researchers than anticipated or otherwise is not competitive at the time of launch.

We face significant competition from both established and early-stage companies.

Our ability to mitigate downward pressure on our selling prices will be dependent upon our ability to maintain or increase the value we offer to researchers.

The expenses or losses associated with unsuccessful product development or launch activities, or a lack of market acceptance of our new products, could adversely affect our business, financial condition or results of operations.

If we do not successfully innovate and introduce new technology into our product lines, our business and operating results will be adversely impacted.

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

If we are unable to successfully develop new solutions, enhance our existing solutions to meet customer requirements, or otherwise gain market acceptance, our business, results of operations and financial condition would be harmed.

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

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

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.

We are significantly dependent upon revenue generated from the sale of our Chromium solutions, and in particular our Single Cell Gene Expression solutions.

We currently generate our revenue from the sale of our instruments and our proprietary microfluidic chips, slides, reagents and other consumables for our Chromium, Visium and Xenium platforms, which we refer to as “consumables.” Historically we have

been dependent upon revenue generated from sales of our Chromium solutions, particularly our Single Cell Gene Expression consumables.

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

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.

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.

At times, we preannounce 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, including legacy versions of our instruments which are supplanted by new versions.

In addition, in the past 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 at times the risk that we will not be able to source the necessary equipment, components and materials to manufacture our products led us, and may again lead 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, could negatively impact our ability to accurately forecast demand.

Further, differences in purchasing patterns across our customer base 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 dela yed should we experience higher than anticipated demand for materials with long lead times.

During periods of decreased demand, which in the past have occurred and which may occur again, these non-cancelable commitments could prevent our related costs from decreasing in proportion to decreases in demand.

During periods of decreased demand, which in the past have occurred and which may occur again, these non-cancelable commitments could result in additional inventory-related charges which may adversely impact our financial results and condition.

If our existing and new products fail to achieve and sustain sufficient scientific acceptance, we will not generate expected revenue and our prospects may be harmed.

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 life sciences scientific community is comprised in part 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.

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Mentions in peer-reviewed journal publications is a good barometer for the general acceptance of our products as best practices.

Ensuring that early adopters and key opinion leaders publish research involving the use of our products is critical to ensuring our products gain widespread acceptance and market growth.

Ensuring that early adopters and key opinion leaders publish research involving the use of our products is important to ensuring our products gain widespread acceptance and market growth.

Continuing to maintain good relationships with such key opinion leaders is vital to growing our market.

The number of times our products were mentioned in peer-reviewed publications has increased significantly in recent years.

The number of times our products were mentioned in peer-reviewed publications has increased significantly since launching our first product in 2015.

During this time, our revenue has also increased significantly.

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.

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

Any new products or new versions of existing 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.

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

We have historically experienced rapid growth and future growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.

For example, we consummated two acquisitions each in 2018 and 2020 and one more in January 2021, and we intend to continue to make investments that meet management’s criteria to expand or add key technologies that we believe will facilitate the commercialization of new products in the future.

In addition, we intend to launch additional new products and new versions of existing products in the near future.

We have historically experienced rapid growth and we expect that future growth will place significant strains on our management, operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business.

For example, we consummated two acquisitions in each of 2018 and 2020, one in 2021 and another in 2023, and we intend to continue to make investments that meet management’s criteria to expand or add key technologies that we believe will facilitate the commercialization of new products or new versions of existing products in the future.

We intend to launch additional new products and new versions of existing products in the near future.

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

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

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

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

As a result, we have experienced rapid headcount growth from 110 employees as of December 31, 2015 to 1,259 employees as of December 31, 2023.

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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 financ ial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel.

To effectively manage our growth, we must continue to improve our systems and processes 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.

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 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 demand.

In addition, our growth strategy involves launching new solutions and expanding sales of existing solutions into new areas in which we have limited or no experience, such as the sale of our solutions to biopharmaceutical customers.

We also expect to pursue additional opportunities that will further expand our opportunity, including new potential applications of our single cell, spatial and in situ technologies in the future.

Sales of new or existing solutions into new opportunities may take several years to develop and mature and we cannot be certain that these opportunities will develop as we expect.

For example, new life sciences technology is often not adopted until a sufficient amount of research conducted using such technology has been published in peer-reviewed publications.

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 products are even more difficult to predict.

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

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.

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

We launched our first product in mid-2015 and have historically experienced rapid revenue growth.

In addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve over time to remain competitive.

Our limited operating history, evolving business and rapid growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter and may increase the risk that we will not continue to grow at or near historical rates.

If we fail to address the risks and difficulties that we face, including those described elsewhere in this “ Risk Factors ” section, our business, financial condition and results of operations could be adversely affected.

We have encountered in the past, and will

encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries.

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

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 cash flows from operating activities in excess of our capital investment requirements or 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 $255.1 million and $166.0 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $1.3 billion.

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, stock option exercises and purchases under our 2019 Employee Stock Purchase Plan, the sale of Class A common stock in our initial public offering ("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 cash flows from operating activities in excess of our capital investment requirements on a sustained basis or 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, the impact of market acceptance of our products, future product development, our market penetration and margins and current and future litigation.

Additionally, inflationary pressures 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 customers may choose to reduce their business with us if we increase our pricing.

Additionally, changes in our product mix may negatively affect our gross margins.

We may never be able to generate sufficient revenue to achieve or sustain cash flows from operating activities in excess of our capital investment requirements or profitability and our recent and historical growth should not be considered indicative of our future performance.

Our failure to achieve or maintain growth, cash flows from operating activities in excess of our capital investment requirements or profitability could negatively impact the value of our Class A common stock.

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.

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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.

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.

New hires, including executive hires such as a future new Chief Commercial Officer, often require significant training and, in most cases, take significant time before they achieve full productivity.

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

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Additionally, we have not entered into fixed term contracts with almost any of our employees and as a result, almost any of our employees could leave our company with little or no prior notice which could harm our business.

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.

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

W e 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.

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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.

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.

Our continued growth depends, in part, on attracting, retaining and motivating highly trained sales personnel, including individuals 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 elsewhere 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.

This competition affects both our ability to retain key employees and hire new ones.

In August 2022 we conducted a reduction in force in order to decrease costs and maintain a streamlined organization to support the business.

In August 2022 we conducted a reduction in force in order to decrease costs and maintain a streamlined organization to support the business and in December 2023, we committed to a restructuring plan related to the closure of one of our research and development facilities.

In order to be successful and build our framework for future growth, we must continue to execute and deliver on our initiatives with fewer employees and losses of intellectual capital.

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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 instruments takes place at our third-party manufacturers' facilities.

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

Much, and in some cases all, of the manufacturing process for our instruments takes place at our third-party manufacturers' facilities.

Many of our consumables are manufactured at our facilities in Pleasanton, California, Singapore, Taiwan or other of our facilities using proprietary equipment.

Certain raw materials, such as oligonucleotides and enzymes, are custom manufactured by outside partners.

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

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

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

Our Chromium and Visium CytAssist instruments are manufactured by our partners at their facilities.

Our Chromium, Visium CytAssist and Xenium instruments are manufactured by our partners at their facilities, while we perform optical and final assembly, instrument integration and testing of our Xenium instrument in-house.

The facilities and the equipment we and our third-party manufacturers use to manufacture our instruments and consumables and that we use in our research and development programs would be costly to replace and could require substantial lead times to repair or replace.

Our facilities in Pleasanton and Singapore are vulnerable to natural disasters and catastrophic events.

Our facilities are vulnerable to natural disasters and catastrophic events.

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

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

Our facilities are vulnerable to other types of disasters, including fires, floods, infectious disease, epidemics or pandemics, 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 or understaffed for any reason, including due to the resurgence of COVID-19, 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 continued operations under previously required 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 if new shelter-in-place or other restrictive measures are implemented in the future.

Additionally, potential issues with our ability to hire staff or the health and safety of our manufacturing staff, including as a result of a resurgence of COVID-19, 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.

If our facilities or any of our third-party manufacturers’ facilities become unavailable or understaffed for any reason, 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 issues with our ability to hire staff or the health and safety of our manufacturing staff could decrease the effectiveness of our manufacturing operations and adversely affect our business and operating results.

The inability to manufacture our instruments and/or consumables, combined with potential limited inventory of manufactured instruments and consumables, may result in the loss of customers or harm our reputation, and we may be un able to reestablish relationships with those customers in the future.

Because certain of our consumables and the raw materials we use to manufacture consumables at our Pleasanton facilities are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.

A substantial percentage of our direct sales revenue comes from sales to academic institutions, whose research often requires long uninterrupted studies performed on a consistent basis over time;

Because certain of our consumables and the raw materials we use to manufacture consumables are perishable and must be kept in temperature controlled storage, the loss of power to our facilities, mechanical or other issues with our storage facilities or other events that impact our temperature controlled storage could result in the loss of some or all of such consumables and raw materials and we may not be able to replace them without disruption to our customers or at all.

A substantial percentage of our revenue comes from sales to academic institutions, whose research often requires long uninterrupted studies performed on a consistent basis over time;

thus interruptions in our ability to supply consumables could be particularly damaging to these studies and our reputation.

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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.

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

We launched our first product in mid-2015 and have historically experienced rapid revenue growth.

In addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve over time to remain competitive.

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

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

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

For example, we are currently completing construction of a new facility 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, subleases, real estate purchase agreements or 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 maintain the level of cash flow or access financing opportunities necessary to support our real estate strategy.

Our facilities projects may increase demands on our operational, financial, managerial and administrative resources.

We may also decide to reduce our real estate portfolio but be unable to do so.

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, may not cover every potential type of loss event (including earthquakes as we do not carry earthquake insurance coverage) and may not continue to be available to us on acceptable terms, or at all.

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, 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 delivery services on commercially reasonable terms, our operating results may be adversely affected.

In addition, in the past both shipping and air transport have been negatively impacted in terms of speed and capacity.

If we cannot supply our products to our customers in a timely manner, our customers may delay or cancel their orders.

Should we or our commercial carriers encounter difficulties in delivering our instruments or consumables to customers , it could adversely impact our ability 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.

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

We may decide to reduce our real estate commitments but be unable to do so.

For example, in 2023 we vacated some of our leased office space located in Pleasanton, California comprising of approximately 43,000 square feet for the remaining lease term through 2026 and entered into agreements to sublease some of the vacated office space.

Our real estate leases, which generally obligate us for long periods, subject us to potential financial risk.

For example, our real estate strategy may commit us to leases or other agreements or arrangements requiring us to incur costs for facilities we later determine are unnecessary for our business.

While we have the right to terminate or sublease some of our leases under specified conditions, we may not be able to terminate or sublease certain of our leases if or when we would like to do so.

Our real estate strategy may have committed, and may in the future commit, us to leases or other agreements or arrangements requiring us to incur costs for facilities we later determine are unnecessary for our business.

While we have the right to terminate or sublease some of our leases under specified conditions, we may not be able to terminate or sublease certain of our leases if or when we would like to do so or we may incur substantial costs to terminate or sublease such leases.

In some cases, we have been unsuccessful, and in the future again may be unsuccessful, in terminating or subleasing certain of our leases even if we have determined the facilities subject to these leases are unnecessary for our business and we have incurred, and may in the future incur, costs for such facilities despite not fully utilizing them.

If we decide or are required to permanently vacate facilities we lease, we are typically required to continue to perform obligations under the applicable leases, which generally include, among other obligations, paying rent and certain expenses for the balance of the lease term, and the performance of any of these obligations may be significant.

When we assign leases or sublease to third parties, or if we vacate facilities we lease, we can

remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform their obligations to us or third parties.

When we assign leases or sublease to third parties, or if we vacate facilities we lease, we can remain liable on the lease obligations for the balance of the term and we could be contingently liable if the assignee does not perform their obligations to us or third parties.

Additionally, if we may decide to sublease certain of our facilities to third parties, we may be unable to find suitable sublease arrangements for leased facilities that we do not wish to occupy ourselves.

Costs, delays or other factors related to our facilities and real estate portfolio ensuing from these and other risks related to our real estate portfolio may adversely impact our business results and financial condition.

In the past we have expanded, and in the future we may expand, our facilities in the locations where we operate or may operate in the future.

For example, in 2023 we completed construction of a new facility on land we own located in Pleasanton, California.

We believe that maintaining our existing facilities is necessary to maintain our operations and that, in the future, new facilities may be necessary to support our business.

We may not maintain the level of cash flow or access financing opportunities necessary to support our real estate strategy.

Our facilities projects may increase demands on our operational, financial, managerial and administrative resources.

Costs or other factors related to our facilities and real estate ensuing from these and other risks related to our facilities and real estate may adversely impact our business results and financial condition.

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

We differentiate ourselves from our competition through our commitment to an exceptional customer experience.

We differentiate ourselves from our competition in part through our commitment to an exceptional customer experience.

Accordingly, high-quality customer service is important for the growth of our business and any failure to maintain such standards of customer service, or a related market perception, could affect our ability to sell products to existing and prospective customers.

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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.

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 positive free cash flow or 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 $166.0 million and $58.2 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we

had an accumulated deficit of $1.0 billion.

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

There can be no assurance that our revenue and gross profit will increase sufficiently such that our net losses decline, or we become free cash flow positive or 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.

Additionally, inflationary pressures 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.

Additionally, changes in our product mix may negatively affect our gross margins.

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

Our failure to achieve or maintain growth, positive free cash flow or profitability could negatively impact the value of our Class A common stock.

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

In 2018, we acquired Epinomics, Inc., an epigenetics company based in California, and Spatial Transcriptomics Holdings AB, a spatial analysis company based in Sweden.

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, 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.

Over the years, we have acquired technologies and associated intellectual property rights across a broad range of emerging areas within biology and life sciences.

We believe we are successfully integrating the technologies we have acquired 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 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.

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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 or due to circumstances outside our control.

Future investments, acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.

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Our reliance on distributors for sales of our products in certain geographies outside of the United States could limit or prevent us from selling our products and impact our revenue.

We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, South America, the Middle East and Africa.

We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, Central America, South America, the Middle East and Africa.

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, 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.

Additionally, excess inventory held by our distributors may reduce or delay purchases by such distributors.

For example, we believe that in the past certain of our distributors in China held excess inventory of certain of our products, in part due to fluctuations in customer

purchasing patterns in China due to COVID-19, which we believe resulted in lower than anticipated sales of our products to our distributors in China in 2023 as such distributors sold off such excess inventory.

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.

Further, the ability of our distributors to sell and distribute our products in the past has been, and in the future may 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, our revenues could be significantly impacted.

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 or if our efforts in certain regions to sell directly to certain customers previously served by our distributors negatively impacts our relationships with and the performance of our distributors in such regions or elsewhere.

Uncertain economic or social conditions may adversely impact demand for our products or cause our customers, vendors and suppliers to suffer financial hardship, which could adversely impact our business.

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Higher government deficits and debt, tighter monetary policy and potentially higher interest rates may drive a higher cost of capital for our business.

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

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

For the years ended December 31, 2022 and 2021, approximately 45% and 46%, respectively, of our revenue was generated from sales to customers located outside of North America.

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

We sell directly in North America and certain regions of Europe and have a significant portion of our sales and customer service personnel in the United States.

We sell our products through third-party distributors in Asia, certain regions of Europe, Oceania, South America, the Middle East and Africa.

As a result, we or our distribution partners may be subject to additional regulations.

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

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

• currency fluctuations ;

• potentially longer sales cycles and more time required to engage and educate customers on the benefits of our products outside of the United States;

• reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property or other legal rights abroad;

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

• challenges in staffing and managing foreign operations;

• the potential need for localized software, documentation and post-sales support;

• complexities associated with managing third-party contract manufacturers and suppliers located outside of the United States;

• natural disasters, infectious diseases, conflict, geopolitical turmoil, war, civil unrest, epidemics or pandemics such as COVID-19 outbreaks or resurgences or major catastrophic events;

• increased financial accounting and reporting burdens and complexities;

• higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain international customers;

• 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.

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.

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.

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 continue to sell our products through a distributor to research institutions in Russia.

As a result of the crisis in Ukraine both the United States and the European Union have implemented sanctions against certain Russian individuals and entities.

Our business in Russia could expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities, including tariffs, economic sanctions and import-export restrictions.

Current geopolitical instability in Russia and Ukraine and related sanctions, including by the U.S.

government, against certain companies and individuals may hinder our ability to conduct business with potential or existing distributors, end-users and vendors in these countries.

While we believe that existing sanctions currently do not preclude us from conducting business with our current end-users, distributors or vendors in Russia, the sanctions may be expanded in the future to restrict us from engaging with them or our supplier agreements or purchase orders, due to the Ukraine crisis, may include terms and conditions that require that we limit or refrain from conducting business in Russia.

Our business in China subjects us to unique operational, competitive and regulatory risks.

Our ability to sell our products in China may be impacted by evolving laws and regulations in the U.S.

In addition, increased local competition, trade tensions between the United States and China or weakening economic conditions in China, among other factors, may result in reduced sales, decreased market share, or lower margins for our products in China.

In addition, impacts stemming from COVID-19, including the public health and policy response to COVID-19 in China, may continue to present risks to our business in China.

The Chinese government may adopt new regulations that may impact entities operating in China, potentially with little advance notice.

In order to maintain access to the Chinese market, we may be required to comply with significant technical and other regulatory requirements, at times with short notice.

These actions may increase the cost of doing business in China or limit how we may do business in China, which could materially and adversely affect our business.

We are subject to risks associated with COVID-19.

Our global sales and operations expose us to risks associated wi th the COVID-19 pandemic.

Impacts from COVID-19 may adversely affect our operations, supply chains, distribution systems and customer demand, including as a result of impacts associated with preventative and precautionary measures that we, other businesses and governments have taken and may take in the future.

Some of the risks we have experienced and/or may experience in the future as a result of impacts from COVID-19 include:

• a decline in sales activities and customer orders or cancellations of existing orders, depending on the severity and duration of any future COVID-19 outbreaks and the extent of mitigation and containment measures that may be undertaken by governments and businesses;

• supply chain disruptions may result in the lack of raw materials or component shortages, delay in the release of new products or deliveries of products or compressed margins due to an increase in material costs.

Due to these impacts and measures, we may experience significant and unpredictable reductions in demand for our products and our customers may

postpone or cancel their orders.

In addition, our customers' suppliers may not be able to supply products that meet our or our customers' needs due to supply chain disruptions;

• the effectiveness of our sales teams may be negatively impacted by the lack of or reduction in travel resulting in their reduced ability to engage with decision-makers;

• the unanticipated loss or unavailability of key employees due to the COVID-19 outbreaks could harm our ability to operate or execute our business strategy.

We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability;

• remote working, which we, similar to many other companies, implemented in response to the initial outbreak of COVID-19, and which continues to some extent even as COVID-19 outbreaks generally subside, could cause challenges for the effective operation of our internal controls, increase the risk of a security breach of our information technology systems, create data accessibility issues, challenge our ability to innovate and develop new products and improve existing solutions and increase the risk for communication disruptions;

• in addition to travel restrictions, though countries in general have re-opened their borders to U.S.

travelers, in the future, countries may again impose or expand travel restrictions and impose or resume prolonged quarantines if there is a resurgence of COVID-19 cases, which would significantly impact our ability to support our business operations and customers in those locations and the ability of our employees to access their places of work to produce products, or significantly hamper our products from moving through the supply chain.

As a result, given the uncertainty of the evolving nature of the virus, COVID-19 outbreaks may continue and may negatively affect our revenue growth, and it is uncertain how materially COVID-19 will affect our global operations if we experience any one or a combination of these impacts over an extended period of time.

Any of these impacts could have an adverse effect on our business, financial condition and results of operations.

In addition, our ability to raise capital in the future may also be negatively affected.

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

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 could increase demand for our products in one quarter, resulting in decreased customer demand for our products in subsequent quarters.

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

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.

The current economic environment has resulted in volatility in the global capital and credit markets which could impair our ability to access these markets on terms commercially acceptable to us, or at all, and execute our growth strategies and resurgences of COVID-19 could compound this risk.

Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

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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.

During periods of economic crises, such as fallout from the COVID-19 pandemic, foreign currencies may be devalued significantly against the U.S.

During periods of economic crises, foreign currencies may be devalued significantly against the U.S.

dollar, reducing our margins.

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dollars, we also face remeasurement exposure to fluctuations in currency exchange rates, which could hinder our ability to predict our future results and earnings and could materially impact revenue and our results of operations.

We do not currently maintain a program to hedge foreign currency exposures.

We do not currently maintain a program to hedge foreign currency exposures and even if in the future we do implement a program to hedge such exposures, we may not be successful in mitigating the effects of fluctuations in foreign currency exchange rates.

Due to our exposure to currencies other than U.S.

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The continuing impact of "Brexit" may have a negative effect on our business.

Following a national referendum and subsequent legislation, the United Kingdom formally withdrew from the European Union, commonly referred to as “Brexit,” and ratified a trade and cooperation agreement governing its future relationship with the European Union.

Following a national referendum and subsequent legislation, the United Kingdom formally withdrew from the European Union, commonly referred to as “Brexit” and ratified a trade and cooperation agreement governing its future relationship with the European Union (“EU”).

Among other things, the agreement, which became effective in 2021, addresses trade, economic arrangements, law enforcement, judicial cooperation and governance.

Because the agreement merely sets forth a framework in many respects that requires complex additional bilateral negotiations between the United Kingdom and the European Union, significant uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal.

Because the agreement merely sets forth a framework in many respects that requires complex additional bilateral negotiations between the United Kingdom and the European Union, and does not for example provide for the wholesale mutual recognition of product certification, significant uncertainty remains about the practical impacts of the new relationship.

Brexit has 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.

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Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution and quality standards.

As we expand our business internationally, we expect to encounter counterfeit versions of our products, particularly our consumables.

As we expand our business internationally, we expect to encounter counterfeit versions of our products, including our consumables.

A researcher who receives and uses counterfeit consumables could obtain erroneous results, experience failed experiments or potentially damage his or her instrument.

Our reputation and business could suffer harm as a result of counterfeit products sold under our brand name.

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.

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.

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

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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.

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

In the event that additional financing is required, we may not be able to raise it on terms acceptable to us or at all.

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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 Regulation (EU) No 2017/746 (“EU IVDR”), 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.

In the EU, under Regulation (EU) No 2017/746 (“EU IVDR”), 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, the EU IVDR expressly provides that products intended for RUO are excluded from the scope of the Regulation.

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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 general and safety requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.

However, the EU requires that all IVDs placed on the market in the EU must meet general, safety and performance requirements of the EU IVDR including the requirement that an IVD must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.

IVDs must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art.

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

Compliance with general, safety and performance requirements laid down in Annex I to the EU IVDR 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 recently evolved.

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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.

The EU IVDR does not apply in Great Britain (England, Scotland and Wales) since it came into effect after the United Kingdom’s departure from the EU, and consequently, the regulatory framework for IVDs in Great Britain continues to be largely based on the requirements of the EU IVDD as implemented by national law.

However under the terms of the Northern Ireland Protocol the EU IVDR does apply in Northern Ireland.

The Medicines and Healthcare products Regulatory Agency (“MHRA”) has confirmed that it will introduce changes to the legislation applicable in Great Britain, and has stated that it expects the core elements of the new regime to apply from July 2025.

Until the final legislation and accompanying guidance has been published there will remain uncertainty as to the future IVD regulatory requirements in Great Britain.

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.

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

We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States, especially in the Asia-Pacific region.

For the years ended December 31, 2023 and 2022, sales outside of North America constituted approximately 40% and 45%, respectively, of our sales revenue and our largest markets outside of North America were China and Germany.

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

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

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

There are also pressures on the U.S.

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and Chinese markets.

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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The imposition of new, or changes in existing, tariffs, trade restrictions, trade barriers, export controls or retaliatory trade measures taken by other countries could adversely impact our business, financial condition and results of operations.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

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

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

We are subject to risks related to taxation in multiple jurisdictions and changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

We are subject to income taxes in both the United States and foreign jurisdictions.

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 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 any other taxing authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties.

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

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our domestic and international business operations and our business and financial performance.

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

For example, the Tax Cuts and Jobs Act of 2017 (the "TCJA") requires U.S.

For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) requires U.S.

research and experimental expenditures to be capitalized and amortized ratably over a five-year period.

Any such expenditures attributable to research conducted outside the United States must be capitalized and amortized over a 15-year period.

The TCJA also imposes limitations on the deductibility of interest and the use of NOL carryforwards, among other significant changes to corporate taxation of business activities outside the United States.

In addition, the Inflation Reduction Act of 2022 recently became law and imposes a minimum tax on certain corporations with book income of at least $1 billion, subject to certain adjustments, and a 1% excise tax on certain stock buybacks and similar corporate actions.

Finally, the Organization for Economic Co-Operation and Development has released guidance and blueprints covering various topics, including a global minimum effective tax rate on certain corporate groups known as “Pillar Two," and rules governing transfer pricing, country-by-country reporting, and definitional changes to permanent establishment that could ultimately impact our tax liabilities as those guidance and blueprints are potentially implemented in various jurisdictions.

While certain other draft legislation has been proposed in the U.S., the likelihood of any proposed changes to the tax law being enacted or implemented is unclear, and we are currently unable to predict whether such changes will occur.

If any such changes are implemented, we are currently unable to predict the ultimate impact on our business and therefore there can be no assurance our business will not be adversely affected.

In addition, the Organization for Economic Co-Operation and Development has released guidance and blueprints covering various topics, including a global minimum effective tax rate of 15% on certain corporate groups known as “Pillar Two," and rules governing transfer pricing, country-by-country reporting and definitional changes to permanent establishment that could ultimately impact our tax liabilities as those guidance and blueprints are potentially implemented in various jurisdictions.

For example, on December 12, 2022, the European Union member states agreed to implement the “Pillar Two” global corporate minimum tax rate as of January 1, 2024.

In addition, various other countries where we do business have implemented or plan to implement the “Pillar Two” global corporate minimum tax rate in 2024 and are also actively considering changes to their tax laws

to adopt certain parts of the OECD’s proposals.

The enactment of this and similar legislation could significantly increase our tax obligations in many countries where we do business.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2022, we had federal net operating loss carryforwards (“NOLs”) of $717.0 million and federal tax credit carryforwards of $59.0 million.

Our federal NOLs generated after January 1, 2018, which total $708.5 million are carried forward indefinitely, while all of our other federal NOLs and tax credit carryforwards expire beginning in 2033.

As of December 31, 2022, we had state NOLs of $375.7 million, which expire beginning in 2033.

In addition, we had state tax credit carryforwards of $46.6 million, which carry forward indefinitely.

Our ability to utilize such carryforwards for income tax savings is subject to certain conditions and may be subject to certain limitations in the future due to ownership changes as described below.

Our ability to utilize our net operating loss carryforwards and research and development credit carryforwards for income tax savings is subject to certain conditions and may be subject to certain limitations in the future due to ownership changes as described below.

As such, there can be no assurance that we will be able to utilize such carryforwards.

We have experienced a history of losses and a lack of future taxable income would adversely affect our ability to utilize these NOLs and research and development credit carryforwards.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited.

In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period.

We have experienced a history of losses and a lack of future taxable income would adversely affect our ability to utilize our net operating loss carryforwards and research and development credit carryforwards.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited.

In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain significant shareholders that exceeds 50 percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

We completed a study through October 31, 2022 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.

In addition, certain attributes attributable to ReadCoor are subject to annual limitations as a result of our acquisition of ReadCoor, which constituted an ownership change of ReadCoor.

Such limitations may result in expiration of a portion of our net operating loss carryforwards or other tax attributes before utilization.

A portion of our net operating loss carryforwards and other tax attributes may be subject to limitation under Section 382 of the Code as a result of previous ownership changes and such limitations may result in expiration of a portion of our net operating loss carryforwards or other tax attributes before utilization.

Our ability to use net operating loss carryforwards, research and development credit carryforwards and other tax attributes to reduce future taxable income and liabilities may be further limited as a result of future changes in stock ownership.

As a result, if we earn net taxable income, our

ability to use our pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income may still be subject to limitations, which could potentially result in increased future tax liability to us.

We are subject to risks related to taxation in multiple jurisdictions.

We are subject to income taxes in both the United States and foreign jurisdictions.

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, 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.

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

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.

As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

Ethical, legal, privacy and social concerns or governmental restrictions surrounding the use of the genomic and multiomic information and gene editing could reduce demand for our products.

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

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

In addition, patents have a limited lifespan.

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

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.

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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.

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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.

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.

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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.

We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze whether to seek to 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.

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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.

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.

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.

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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 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.

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.

Some of these companies 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 license or acquire 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.

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.

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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.

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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.

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, and outcomes are unpredictable.

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.

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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.

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.

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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.

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.

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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.

We may be subject to claims that our employees or consultants have wrongfully used for our benefit or disclosed to us confidential information, including trade secrets or know-how, 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.

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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.

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.

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

Changes in patent law could diminish the value of our patents in general, thereby impairing our ability to protect our current and future products, services 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.

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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.

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.

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

In June 2023, the European Unitary Patent system and the European Unified Patent Court (“UPC”) were launched.

European patent applications now have the option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the UPC.

In addition, conventional European patents, both already granted at the time the new system began and granted thereafter, are subject to the jurisdiction of the UPC, unless actively opted out.

This was a significant change in European patent practice, and deciding whether to opt-in or opt-out of Unitary Patent practice entail strategic and cost considerations.

The UPC provides third parties with a new forum to centrally revoke our European patents and makes it possible for a third party to obtain pan-European injunctions against us.

It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies that will be provided by the UPC.

While we have the right to opt our patents out of the UPC over the first seven years of the court’s existence, doing so may preclude us from realizing the benefits of the UPC.

Moreover, the decision whether to opt-in or opt-out of Unitary Patent status will require coordinating with co-applicants, if any, adding complexity to any such decision.

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.

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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.

• 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;

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

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

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

• 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, 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;

• it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents or even when they issue, the scope of the claims may be narrowed;

• 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, services or technologies for sale in our major commercial markets;

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

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

• the patents of others may harm our business;

• the intellectual property rights 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.

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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.

If any of the foregoing occurs, we could be forced to re-brand our products, services 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.

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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.

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, services and technologies from the products, services 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.

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Our business, including our ability to operate and expand internationally, could be adversely affected if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices.

The global data protection landscape is rapidly evolving and new laws and regulations are constantly being enacted such as China's "Personal Information Protection Law" and Singapore's "Personal Data Protection Act," 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.

The global data protection landscape is rapidly evolving and new laws and regulations are constantly being enacted such as China's "Personal Information Protection Law" and Singapore's "Personal Data Protection Act." 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.

Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities.

For example, in Europe, the European Union General Data Protection Regulation (“GDPR”) went into effect in May 2018 and imposes stringent requirements for processing personal data of individuals within the European Economic Area ("EEA").

For example, in Europe, the GDPR went into effect in May 2018 and imposes stringent requirements for processing personal data of individuals within the European Economic Area ("EEA").

The processing of sensitive personal data, such as physical health conditions, 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.

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 EU/U.S.

Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”).

In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October

7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.

European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries outside the EEA that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain.

Case law from, the Court of Justice of the EU (“CJEU”) states that reliance on the standard contractual clauses, or SCCs - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.

On July 10, 2023, the European Commission adopted its Adequacy Decision in relation to the new EU-US Data Privacy Framework (“DPF”), rendering the DPF effective as a GDPR transfer mechanism to U.S.

entities self-certified under the DPF.

We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue.

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, we have also been 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.

On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a data transfer mechanism from the UK to U.S.

entities self-certified under the DPF.

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 of 2018, as amended (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.

Further, the California Privacy Rights Act (the "CPRA"), generally went into effect in January 2023 and, modifies and expands the CCPA and established a new California Privacy Protection Agency.

In the United States, California enacted the California Consumer Privacy Act of 2018 (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.

Further, the California Privacy Rights Act (the "CPRA"), generally went into effect in January 2023.

It expands the CCPA and established a new California Privacy Protection Agency authorized to issue substantive regulations, which could result in increased privacy and information security enforcement.

In addition to applying to businesses that buy and sell personal information, the CPRA applies to businesses that buy, sell or share personal information and sets forth a new category of "sensitive personal information" that includes genetic data;

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There is still a significant amount of uncertainty with respect to the CPRA's three-year compliance roll-out and the impact it will have on us and others in our industry, however, we expect to incur increased compliance costs and may be subject to increased potential liability in the event we fail to comply.

Similar laws have passed in Virginia, Colorado, Connecticut and Utah, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

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.

Furthermore, the Federal Trade Commission (“FTC”) has authority to initiate enforcement actions against entities that mislead customers about HIPAA compliance, make deceptive statements about privacy and data sharing in privacy policies, fail to limit third-party use of personal health information, fail to implement policies to protect personal health information or engage in other unfair practices that harm customers or that may violate Section 5(a) of the FTC Act.

The FTC and many state Attorneys General also 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.

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 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 collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business.

In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information, preclinical and clinical trial data, health-related information and personal information of our customers, employees and other related third parties (collectively, “Confidential Information”).

It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such Confidential Information.

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.

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 attack, damage or disruption due to breakdown, malicious intrusion, computer viruses, worms, malware (e.g.

Both our and our third-party providers’ information technology systems are vulnerable to attack, damage or disruption due to breakdown, malicious intrusion, computer viruses, malware (e.g.

ransomware) or other disruptive events, including but not limited to, natural disasters and catastrophes.

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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, 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.

An attack or security incident that exposes 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 platform for Cloud Services or other product solutions.

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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 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 release of any of this information could, but is not reasonably likely to, have a material adverse effect on our business, operations, business strategy, results of operations or financial condition.

In addition, the March 2020 ransomware attack has not, but it is possible that it 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, but is not reasonably likely to, 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.

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We rely on on-premise, co-located and third-party data centers and platforms to host our website and other online services, as well as for research and development purposes and any interruptions of service or failures may impair and harm our business.

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

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

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

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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.

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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.

If we own, co-own or in-license Government Funded Inventions that are critical to our business, 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 locations where it may be otherwise more favorable for us 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.

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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.

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.

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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.

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 and distract our management and other employees.

If such claims are successfully asserted against us, we could be forced 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.

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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.

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.

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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.

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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.

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.

Additionally, we purchase product components, including hardware and software, from suppliers, and the design of these components may be outside of our direct control.

These suppliers may not indemnify us in the event that a third party alleges the use of such components infringes its intellectual property rights.

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

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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.

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.

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On May 4, 2022, we filed an amended complaint in the GeoMx Action additionally alleging that the GeoMx products infringe U.S.

11,293,917 and withdrawing our claim of infringement of U.S.

11,293,917 and withdrawing our claims of infringement of U.S.

We are seeking, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to NanoString’s making, using, selling, offering to sell, exporting and/or importing in the United States the GeoMx Digital Spatial Profiler and associated instruments and reagents.

NanoString filed its answer to the GeoMx Action on May 18, 2022.

Discovery is in progress.

A Markman hearing is scheduled for February 2023 and trial is scheduled for November 2023.

A Markman hearing was held on February 17, 2023 and the Court issued its claim construction order on February 28, 2023.

On September 7, 2023, the Court issued an order granting our motion for summary judgment that the asserted patents are not invalid for indefiniteness and denying NanoString’s motion for summary judgment that the asserted patents are invalid for indefiniteness and lack of written description.

On November 17, 2023, a jury found that NanoString willfully infringed the asserted patents and that the asserted patents are valid.

The jury awarded us more than $31 million in damages, consisting of approximately $25 million in lost profits and approximately $6 million in

Post-trial motions, including our motions for a permanent injunction, ongoing royalties, enhanced damages, attorneys’ fees and pre- and post-judgment interest, are pending.

NanoString filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the U.S.

bankruptcy court in Delaware on February 4, 2024, and the Court’s consideration of these post-trial motions is currently stayed due to the bankruptcy filing.

On February 28, 2022, we filed a second suit against NanoString in the U.S.

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10,227,639 and 11,021,737 (the “CosMx Action”).

On May 12, 2022, we filed an amended complaint in the CosMx Action additionally alleging that the CosMx products infringe U.S.

On May 12, 2022, we filed an amended complaint in the CosMx Action additionally alleging that the CosMx products additionally infringe U.S.

11,293,051, 11,293,052 and 11,293,054.

NanoString filed its answer to the CosMx Action on May 26, 2022.

On March 1, 2023, we filed a second amended complaint additionally alleging that the CosMx products infringe U.S.

We are seeking, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to NanoString’s making, using, selling, offering to sell, exporting and/or importing in the United States the CosMx Spatial Molecular Imager and associated instruments, reagents and services.

NanoString filed its answer to the second amended complaint on March 22, 2023.

Discovery is in progress.

A Markman hearing is scheduled for July 2023 and trial is scheduled for June 2024.

A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.

Trial is scheduled for September 2024.

This litigation is currently stayed due to NanoString’s bankruptcy filing.

On August 16, 2022, NanoString filed a counterclaim in the CosMx Action alleging that our Visium products infringe U.S.

11,377,689 (the “689 patent”).

We filed our answer to NanoString's counterclaim in the CosMx Action on August 30, 2022.

On November 23, 2022, we moved to sever claims relating to NanoString’s assertion of U.S.

11,377,689 and consolidate those claims with the patent case NanoString filed against us on October 20, 2022 (discussed below).

On November 23, 2022, we moved to sever claims relating to NanoString’s assertion of the 689 patent and consolidate those claims with the patent case NanoString filed against us on October 20, 2022 (discussed below).

On January 24, 2023, the Court granted our motion.

On May 1, 2023, NanoString filed a motion in the CosMx Action to add antitrust, unfair competition, tort, and contract counterclaims.

NanoString seeks, among other relief, injunction relief (including that we grant NanoString a license to the patents that we asserted against NanoString in the CosMx Action) and unspecified damages (including attorneys’ fees).

On July 10, 2023, the Court denied NanoString’s motion for leave to add a contract counterclaim but otherwise granted the motion for leave to amend.

On May 24, 2023, NanoString filed a motion to bifurcate its amended counterclaims and a motion for expedited discovery.

On June 6, 2023, the Court denied NanoString’s motion to bifurcate and granted its motion for expedited discovery.

We believe NanoString’s claims are meritless and intend to vigorously defend ourselves.

On October 20, 2022, NanoString filed suit against us in the U.S.

District Court for the District of Delaware alleging that our Visium products infringe U.S.

11,473,142, a continuation of U.S.

11,377,689 (the "Nanostring Action").

On January 24, 2023, the Court severed Nanostring’s claims with respect to U.S.

11,377,689 from the CosMx Action and consolidated those claims with this action.

11,473,142 (“the 142 patent”), a continuation of the 689 patent (the “NanoString Action”).

NanoString seeks, among other relief, injunctive relief and unspecified damages (including attorneys’ fees) in relation to NanoString’s making, using, selling, offering to sell, exporting and/or importing in the United States Visium products and associated instruments, reagents and services.

On January 24, 2023, the Court severed NanoString’s claims with respect to the 689 patent from the CosMx Action and consolidated those claims with this action.

NanoString filed an amended complaint on January 27, 2023.

We filed an answer to the NanoString Action on February 10, 2023.

Discovery is in progress.

no case schedule has been set.

We believe Nanostring's claim in the Nanostring Action is meritless and we intend to vigorously defend ourselves.

A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.

Trial is scheduled for December 2024.

We believe NanoString’s claims in the NanoString Action are meritless and intend to vigorously defend ourselves.

On August 16 and September 25, 2023, we filed petitions for inter partes review (“IPR”) of the 689 patent and the 142 patent, respectively.

On February 1, 2024, IPR was instituted for the 689 patent.

An institution decision for the IPR against the 142 patent is expected in April 2024.

On March 9, 2022, we filed suit in the Munich Regional Court in Germany alleging that NanoString’s CosMx Spatial Molecular Imager and associated instruments, reagents and services infringe EP Patent No.

2794928B1 (the "928 Patent") (the "Germany CosMx Action").

Nanostring filed its statement of defense to the Germany CosMx Action on August 26, 2022.

A hearing on infringement is scheduled for March 2023 and a decision is expected around May 2023.

On July 29, 2022, Nanostring filed a nullity action with the German Federal Patent Court challenging the validity of the 928 Patent.

On February 10, 2023, the Federal Patent Court issued a preliminary opinion upholding the validity of certain claims of the 928 Patent directed to in situ analysis.

A hearing on validity is scheduled before the Federal Patent Court in May 2024 and a decision is expected around the end of 2024.

In May 2022, we filed suit against Vizgen, Inc.

2794928B1 (the “EP 928 patent”) (the “Germany CosMx Action”).

A hearing on infringement was held on March 23, 2023.

On May 17, 2023, the Munich Regional Court found that the CosMx products infringe the EP 928 patent and issued a permanent injunction requiring NanoString to stop selling and supplying CosMx instruments and reagents for RNA detection in Germany.

The injunction took effect on June 1, 2023.

On May 25, 2023, NanoString filed an appeal of the Germany CosMx Action in the Munich Higher Regional Court.

A hearing date has not yet been set for this appeal.

On October 30, 2023, NanoString requested that the Higher Regional Court temporarily stay enforcement of the injunction pending the appeal.

On December 20, 2023, the Higher Regional Court granted NanoString’s request conditioned upon NanoString posting a 2.3 million Euro security deposit.

To date, NanoString has not posted this security deposit.

On July 29, 2022, NanoString filed a nullity action with the German Federal Patent Court challenging the validity of the EP 928 patent.

On February 10, 2023, the Federal Patent Court issued a preliminary opinion upholding the validity of certain claims of the EP 928 patent directed to in situ analysis.

A hearing on validity is scheduled before the Federal Patent Court in May 2024.

On June 1, 2023, we filed requests for preliminary injunctions in the Munich Local Division of the Unified Patent Court (“UPC”) alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP 928 patent and EP Patent No.

4108782 (the “EP 782 patent”).

Hearings were held for the EP 782 and EP 928 patents on September 5 and September 19, respectively.

On September 19, 2023, the UPC granted our request for the EP 782 patent and issued a preliminary injunction requiring NanoString to stop selling and supplying CosMx instruments and reagents for RNA detection in all 17 UPC member states.

On October 10, 2023, the UPC denied our preliminary injunction request for the EP 928 patent.

On October 2, 2023, NanoString filed an appeal of the preliminary injunction for the EP 782 patent in the UPC Court of Appeals.

A hearing was held before the UPC Court of Appeals on December 18, 2023, and a decision is pending.

On August 31 and September 18, 2023 we filed main requests in the Munich Local Division of the UPC alleging that NanoString's CosMx Spatial Molecular Imager and associated instruments, reagents and services for RNA detection infringe the EP 782 and EP 928 patents, respectively.

No hearings have yet been set for these main requests.

On July 18, 2023, NanoString filed an opposition in the European Patent Office challenging the validity of the EP 782 patent.

No schedule has yet been set for this opposition.

On July 27, 2023, NanoString filed a revocation action in the Munich Central Division of the UPC challenging the validity of the EP 928 patent.

A hearing in the revocation action is scheduled on April 17, 2024.

On January 30, 2024, NanoString filed a petition for IPR of U.S.

11,542,554, which is asserted by us against NanoString in the CosMx Action.

The impact of NanoString’s bankruptcy filing on our actions against NanoString outside of the U.S.

District Court for the District of Delaware is not yet fully resolved.

On May 3, 2022, we filed suit against Vizgen, Inc.

(“Vizgen”) in the U.S.

District Court for the District of Delaware alleging that Vizgen’s MERSCOPE Platform and workflow and Vizgen’s Lab Services program, including associated instruments and reagents, infringe U.S.

District Court for the District of Delaware alleging that Vizgen’s MERSCOPE Platform and workflow and/or Vizgen’s Lab Services program, including associated instruments and reagents, infringe U.S.

11,021,737, 11,293,051, 11,293,052, 11,293,054 and 11,299,767.

We seek, among other relief, injunction relief and unspecified damages (including attorneys’ fees) in relation to Vizgen’s making using, selling, offering to sell, exporting and/or importing in the United States the MERSCOPE Platform and workflow and/or Vizgen’s Lab Services program, including associated instruments and reagents.

On July 25, 2022, Vizgen filed a motion to dismiss our claims for willful and indirect infringement, which the Court denied on September 19, 2022.

Discovery is in progress.

A Markman hearing is scheduled for July 2023 and trial is scheduled for July 2024.

A Markman hearing was held on January 10, 2024, and the Court issued its claim construction order on February 1, 2024.

Trial is scheduled for October 2024.

On August 30, 2022, Vizgen filed its answer and counterclaims alleging that our Xenium product infringes U.S.

11,098,303 (the “303 patent”).

Vizgen seeks, among other relief, injunction relief and unspecified damages (including attorneys’ fees) in relation to our making, using, selling, offering to sell, exporting and/or importing in the United States Xenium products, including associated instruments and reagents.

Vizgen also filed counterclaims alleging that we tortiously interfered with Vizgen’s contractual and business relationship with Harvard and that we engaged in unfair practices under Massachusetts state law.

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We believe Vizgen’s claims are meritless and intend to vigorously defend ourselves.

On March 15, 2023, we filed an amended complaint additionally alleging that the MERSCOPE Platform and workflow and Vizgen’s Lab Services program infringe U.S.

11,549,136 and withdrawing our claim of infringement of U.S.

On April 17, 2023, Vizgen filed its answer adding amended counterclaims including antitrust, unfair competition, tort, and contract counterclaims.

Vizgen seeks, among other relief, injunctive relief (including that we grant Vizgen a license to the patents that we asserted against Vizgen) and unspecified damages (including attorneys’ fees).

On May 18, 2023, we filed a motion to dismiss Vizgen’s amended counterclaims.

On July 10, 2023, the Court granted our motion to dismiss Vizgen’s contract counterclaim but otherwise denied our motion to dismiss.

We believe Vizgen’s claims are meritless and intend to vigorously defend ourselves.

On June 1, 2023, we filed suit in the Hamburg Local Division of the UPC alleging that Vizgen’s MERSCOPE products infringe the EP782 patent.

We seek, among other relief, injunction relief and unspecified damages (including attorneys’ fees) in relation to Vizgen’s MERSCOPE products in all 17 UPC member states.

A hearing has not yet been set.

On August 30, 2023, we filed a petition for IPR of the 303 patent.

An institution decision is expected by March 2023.

On August 24, 2022, we filed suit against Parse Biosciences, Inc.

("Parse") in the U.S.

District Court for the District of Delaware alleging that Parse’s Evercode Whole Transcriptomics and ATAC-seq products infringe U.S.

10,155,981, 10,697,013, 10,240,197, 10,150,995, 10,619,207, and 10,738,357.

District Court for the District of Delaware alleging that Parse’s Evercode Whole Transcriptomics products and ATAC-seq products infringe U.S.

10,155,981 (the “981 patent”), 10,697,013 (the “013 patent”), 10,240,197 (the “197 patent”), 10,150,995, 10,619,207, and 10,738,357.

We seek, among other relief, injunction relief and unspecified damages (including attorneys’ fees) in relation to Parse’s making using, selling, offering to sell, exporting and/or importing in the United States Parse’s Evercode Whole Transcriptomics products and ATAC-seq products.

On October 17, 2022, Parse filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter.

The Court held a hearing on the motion to dismiss on November 22, 2022, and supplemental briefing was submitted on December 15, 2022.

A ruling on the motion to dismiss is expected around March 2023.

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

On September 14, 2023, the Court denied the motion.

Parse filed its answer on October 6, 2023.

Discovery is in progress.

A Markman hearing is scheduled for February 2024, and trial is scheduled for December 2024.

Between April 20 and June 21, 2023, Parse filed petitions for IPR of all of the patents asserted.

On October 13, 2023, IPR was instituted on the 981 patent.

The PTAB denied institution of Parse’s petitions for IPR on the other five asserted patents.

On January 2 and 5, 2024, Parse filed rehearing requests with the PTAB for the 197 and 013 patents, respectively.

On November 6, 2023, Parse filed a motion to stay the Delaware action pending the IPRs.

On December 21, 2023, the court denied Parse’s motion to stay.

On February 5, 2024, the PTAB instituted IPRs for the 197 and 013 patents on Parse’s requests for rehearing.

On February 8, 2024, Parse filed a renewed motion to stay.

On December 1, 2023, we filed suit against Curio Bioscience, Inc.

(“Curio”) in the U.S.

District Court for the District of Delaware alleging that the Curio Seeker Spatial Mapping Kit and associated products and services infringe U.S.

10,480,022, 10,662,468, 11,001,879, 11,549,138, and 11,761,030.

On February 1, 2024, Curio filed a motion to dismiss alleging that the asserted claims are directed to patent ineligible subject matter.

A case schedule has not yet been set.

On December 4, 2023, we filed a request for a preliminary injunction in the Dusseldorf Local Division of the UPC alleging that the Curio Seeker Spatial Mapping Kit and associated products and services infringe EP Patent No.

2697391 (the “EP 391 patent”).

A hearing for the preliminary injunction request has been set for March 26, 2024.

In addition to the litigation 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.

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

If we are unable to protect our intellectual property effectively, our business would be harmed.

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 700 issued or allowed patents and more than 1,050 pending patent applications as of December 31, 2022.

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

We continue to file new patent applications to attempt to obtain further legal protection of the full range of our technologies.

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.

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.

Publications of discoveries in 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 know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

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, 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.

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property.

We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, when needed, our advisors.

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

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

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, 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.

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.

With respect to all categories of intellectual property protection, our competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights.

In addition, competitors may develop their own versions of our products in countries where we did not apply for patents, where our patents have not issued or where our intellectual property rights are not recognized and compete with us in those countries and markets.

The laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions.

The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the

infringement of our patents.

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.

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

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

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.

law relating to the patentability of certain inventions in the life sciences is uncertain and rapidly changing, which may adversely impact our existing patents or our ability to obtain patents in the future.

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.

Risks related to ownership of our Class A common stock

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Our Class A common stock has one vote per share and our Class B common stock has ten votes per share, except as otherwise required by law.

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 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.

This concentrated control is expected to limit or preclude Class A stockholders' ability to influence certain corporate matters 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.

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These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company.

These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their

choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.

These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.

Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

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For example, in February 2022 we announced our expectations regarding full year 2022 revenue, which we revised in August 2022 to reflect lower expected revenue for full year 2022.

In August 2022, we announced our goal to be free cash flow positive by the end of 2023.

We may not be able to achieve this goal if we do not generate sufficient revenue or achieve our gross margin targets, if we acquire businesses or technologies, if our spending is higher than anticipated or due to many other factors.

If our guidance varies from actual results or if we fail to meet other expectations regarding our business, including our previously announced objective to become free cash flow positive by the end of 2023, the market value of our common stock could decline significantly.

In August 2022, we announced our goal to attain cash flows from operating activities in excess of our capital investment requirements by the end of 2023.

While we achieved this goal for the quarter ended December 31, 2023, we may not be able to maintain such cash flows from operating activities in excess of our capital investment requirements on a sustained basis, including if we do not generate sufficient revenue or achieve our gross margin targets, if we acquire businesses or technologies (or complete expenditures related to previous acquisitions), if our spending is higher than anticipated or due to many other factors.

If our guidance varies from actual results or if we fail to meet other expectations regarding our business, the market value of our common stock could decline significantly.

The market price of our Class A common stock may be volatile, which could result in substantial losses for investors.

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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.

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

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 compliance initiatives and corporate governance practices, including maintaining an effective system of internal controls over financial reporting.

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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 these 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 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.” However, 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.

Our board of directors currently includes two female directors, and three directors from an “underrepresented community.” However, if our current or future female or other “Diverse” directors no longer serve on our board of directors prior to the applicable dates for the new Nasdaq listing rules, we could be out of compliance with the 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 Nasdaq listing rules, which may expose us to financial penalties and adversely affect our reputation.

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