What changed in this filing

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Item 1A. Risk Factors

2021-03-22 compared with 2020-02-20 · 78 added, 51 removed, 266 unchanged (33% of the section changed)

An investment in our securities involves certain risks, including those set forth below and elsewhere in this Report.

In addition to the risks set forth below and elsewhere in this Report, other risks and uncertainties may exist that could adversely affect our business and financial condition.

If any of the following risks actually materialize, our business, financial condition and/or operations could suffer.

In such event, the value of our common stock could decline, and you could lose all or a substantial portion of your investment.

You should carefully consider the risks described below as well as other information and data included in this Report .

Our short and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict or beyond our control.

As a result, investing in our common stock involves substantial risk.

Before deciding to purchase, hold or sell our common stock, stockholders, and potential stockholders should carefully consider the risks and uncertainties described below, in addition to the other information contained in or incorporated by reference into this Report, as well as the other information we file with the SEC.

If any of these risks are realized, our business, financial condition, results of operations, and prospects could be materially and adversely affected.

In that case, the value of our common stock could decline, and stockholders may lose all or part of their investment.

Furthermore, additional risks and uncertainties of which we are currently unaware, or which we currently consider to be immaterial, could have a material adverse effect on our business.

Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous risks and uncertainties including those described in this section.

Refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” within this Report for additional information .

Risks Associated with Our Company

We have not generated any significant revenue since our inception, and we may never achieve profitability.

We have incurred significant losses, and we may never achieve profitability.

We are a clinical stage company and have incurred losses since our formation.

As of December 31, 2020, we have an accumulated total deficit of approximately $110.2 million.

As we continue the discovery and development of our future diagnostic products, our expenses are expected to increase significantly.

As we continue the discovery and development of our future diagnostic products, we expect our expenses to increase significantly.

Even as we begin to market and sell our intended products, we expect our losses to continue as a result of ongoing research and development expenses, as well as increased manufacturing, sales and marketing expenses.

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If we are unable to secure adequate funds on terms acceptable to us, we may be unable to execute our plan of operations.

We will require additional capital to fully fund our current strategic plan, which includes successfully commercializing our Nu.Q TM cancer pipeline and developing future products.

If we incur delays in commencing commercialization of our Nu.Q TM cancer pipeline or other future products or in achieving significant product revenue, or if we encounter other unforeseen adverse business developments, we may exhaust our capital resources prior to the commencement of commercialization.

We will require additional capital to fully fund our current strategic plan, which includes successfully commercializing our Nu.Q ® cancer pipeline and developing future products.

If we incur delays in commencing commercialization of our Nu.Q ® cancer pipeline or other future products or in achieving significant product revenue, or if we encounter other unforeseen adverse business developments, we may exhaust our capital resources prior to the commencement of commercialization.

We cannot be certain that additional capital will be available when needed or that our actual cash requirements will not be greater than anticipated.

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· our ability to obtain regulatory clearances or approvals;

 our success in collecting payments from third-party payer and customers;

· our success in collecting payments from third-party payors and customers;

· changes in technology that may render our future products uncompetitive or obsolete;

· competition with other cancer diagnostics companies;

 adverse changes in the healthcare industry.

· adverse changes in the healthcare industry (human and canine).

Our future success depends on our ability to retain our officers and directors, scientists, and other key employees and to attract, retain and motivate qualified personnel.

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We are focused on developing our pipeline for future products.

Our efforts will result in significant growth in the number of our consultants, advisors, and employees and the scope of our operations.

It is likely that our efforts will result in significant growth in the number of our consultants, advisors, and employees, in addition to the scope of our operations.

In order to manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel.

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Our products will require several dynamic and evolving sales models tailored to different worldwide markets, users and products.

In 2015, we decided to focus our sales strategy on the clinical IVD market with the CE marking of our first product in Europe.

Our sales strategy is initially focused on the clinical IVD market with the CE marking of our first product in Europe.

Following CE marking of our first product in Europe we intend to enter the European markets and, following the completion of any necessary regulatory clearances, certain Asian markets.

Even when we have received a CE mark, we must still seek regulatory clearance in other jurisdictions.

Even if we receive a CE mark, we must still seek regulatory clearance in other jurisdictions.

A failure to obtain these regulatory clearances in other jurisdictions could negatively affect our business.

Pending completion of our review of the regulatory environment in the United States, including the effect of recent pronouncements regarding Laboratory Developed Tests, or LDTs, by the FDA, we may decide to enter the United States market through a CLIA certified laboratory located in the United States.

Pending completion of our review of the regulatory environment in the United States, including the effect of recent pronouncements regarding Laboratory Developed Tests, or LDTs, by the FDA, we may decide to enter the United States market through a Clinical Laboratory Improvement Amendments, or CLIA, certified laboratory located in the United States.

We remain firmly committed to pursuing FDA approval as our primary objective.

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The exact nature of the ideal sales strategy will evolve as we continue to develop our intended products and seek entry into the IVD markets.

We have limited experience with direct sales and marketing and we currently intend to engage a network of distributors to help commercialize our products worldwide.

We also have limited experience with direct sales and marketing and we intend to engage a network of distributors to help commercialize our products worldwide.

Any failure to build and manage a direct sales and marketing team effectively, or to successfully engage third-party providers for such services, could have a material adverse effect on our business.

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Our failure to adequately address these risks could have a material adverse effect on our ability to increase sales and use of our future products, which would cause our revenues to be lower than expected and harm our results of operations.

Our Second Amended and Restated Certificate of Incorporation exculpates our officers and directors from certain liability to our Company and our stockholders.

Our Second Amended and Restated Certificate of Incorporation contains a provision limiting the liability of our officers and directors for their acts or failures to act, except for acts involving intentional misconduct, fraud or a knowing violation of law.

This limitation on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our stockholders from suing our officers and directors based upon breaches of their duties to our Company.

Further, we are required to comply with numerous other federal, state, and local laws relating to matters such as safe working conditions, industrial safety, and labor laws.

We may incur significant costs to comply with such laws and regulations in the future, and lack of compliance could have material adverse effects on our operations.

We believe that we have structured our business operations to comply with applicable legal requirements.

However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise, which could have a material adverse impact on our business.

We have identified material weaknesses in our internal control over financial reporting that have not yet been remediated, and the failure to address these material weaknesses, or the identification of any others, could impact the reliability of our financial reporting and harm investors’ views of us, which could adversely impact our stock price.

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We have determined that we have material weaknesses in our internal control over financial reporting as of December 31, 2020.

See Item 9A .

Controls and Procedures of this Report for a complete discussion of these material weaknesses in our internal control over financial reporting and remediation efforts.

See Part II, Item 9A of this Report for a complete discussion of these material weaknesses in our internal control over financial reporting and remediation efforts.

Although we are undertaking steps to address these material weaknesses, the existence of a material weakness is an indication that there is more than a remote likelihood that a material misstatement of our financial statements will not be prevented or detected in the current or any future period.

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Our management has broad discretion over the use of our available cash and might not spend available cash in ways that increase the value of your investment .

As of December 31, 2019, we had $16,966,168 in combined cash and cash equivalents compared to $13,427,222 as of December 31, 2018.

Our management currently expects to deploy these resources primarily to expand our commercialization activities, to fund our product development efforts and for general corporate and working capital purposes.

As of December 31, 2020, we had approximately $19.4 million in combined cash and cash equivalents compared to approximately $17.0 million as of December 31, 2019.

Our management expects to deploy these resources primarily to expand our commercialization activities, to fund our product development efforts and for general corporate and working capital purposes.

However, our management has broad discretion to pursue other objectives.

You will be relying on the judgment of our management regarding the application and prioritization of our resources.

Our management might not apply our cash in ways that increase or permit any return of your investment.

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The success of our business will depend on our ability to fully develop and commercialize the diagnostic products in our current development pipeline as well as continue the discovery and development of other diagnostics products.

Prior to commercializing the Nu.Q TM tests and other diagnostic products, we will be required to undertake time-consuming and costly development activities with uncertain outcomes, including conducting clinical studies and obtaining regulatory clearance or approval in the United States, Asia and in Europe.

Prior to commercializing the Nu.Q ® tests and other diagnostic products, we will be required to undertake time-consuming and costly development activities with uncertain outcomes, including conducting clinical studies and obtaining regulatory clearance or approval in the United States, Asia and in Europe.

Delays in obtaining approvals and clearances could have material adverse effects on us and our ability to fully carry out our plan of operations.

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Our failure to obtain necessary regulatory clearances or approvals on a timely basis would significantly impair our ability to distribute and market our future products on the clinical IVD market.

We are subject to regulation by the FDA in the United States, the Conformité Européenne in Europe, the CFDA in China, and other regulatory bodies in other countries where we intend to sell our future products.

We are subject to regulation by the FDA in the United States, the CE in Europe, the CFDA in China, and other regulatory bodies in other countries where we intend to sell our future products.

Before we are able to place our intended products in the clinical IVD markets in the United States, China and Europe, we will be required to obtain clearance or approval of our future products from the FDA and the CFDA with respect to the United States and China, respectively, and receive a CE mark with respect to Europe.

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The new regulations will require each product submission to be thoroughly audited by notified bodies, instead of the current self-certification process.

The European Medical Device Regulations (EU MDR) will be fully applicable in 2020 and the EU IVDR will be fully applicable in 2022.

The European Medical Device Regulations, or EU MDR, will be fully applicable in 2020 and the EU IVDR will be fully applicable in 2022.

Additionally, even if we receive the required government clearance or approval of our intended products, we are still subject to continuing regulation and oversight.

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The process of complying with such regulations with respect to current and new products can be costly and time-consuming.

Failure to comply with these regulations could have a material adverse effect on our business, financial condition, and results of operations.

Failure to comply with these regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, delays by the FDA or other regulators in granting clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, any FDA regulations governing our future products are subject to change at any time, which may cause delays and have material adverse effects on our operations.

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European national agencies, such as customs authorities and/or the Departments of Health, Industry and Labor, conduct market surveillance to ensure the applicable requirements have been met for products marketed within the European Union.

The cancer diagnostics market is highly competitive and subject to rapid technological change;

accordingly, we will face fierce competition and our intended products may become obsolete.

The cancer diagnostics market is extremely competitive and characterized by evolving industry standards and new product enhancements.

Cancer diagnostic tests are technologically innovative and require significant planning, design, development, and testing at the technological, product, and manufacturing process levels.

These activities require significant capital commitments and investment.

There can be no assurance that our intended products or proprietary technologies will remain competitive following the introduction of new products and technologies by competing companies within the industry.

Furthermore, there can be no assurance that our competitors will not develop products that render our future products obsolete or that are more effective, accurate or can be produced at lower costs.

There can be no assurance that we will be successful in the face of increasing competition from new technologies or products introduced by existing companies in the industry or by new companies entering the market.

Reductions or changes in reimbursement policies could limit our ability to sell our products.

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If the market for our future products does not develop sufficiently or the products are not accepted, our revenue potential will be harmed.

The cancer diagnostics market is highly competitive and subject to rapid technological change;

accordingly, we will face fierce competition and our intended products may become obsolete.

The cancer diagnostics market is extremely competitive and characterized by evolving industry standards and new product enhancements.

Cancer diagnostic tests are technologically innovative and require significant planning, design, development, and testing at the technological, product, and manufacturing process levels.

These activities require significant capital commitments and investment.

Furthermore, there can be no assurance that our competitors will not develop products that render our future products obsolete or that are more effective, accurate or can be produced at lower costs.

We expect to face intense competition from companies with greater resources and experience than us, which may increase the difficulty for us to achieve significant market penetration.

The market for cancer diagnostics is intensely competitive, subject to rapid change, and significantly affected by new product introductions and other market activities of industry participants.

Our competitors include large multinational corporations and their operating units, including Exact Sciences Corporation, Guardant Health, GRAIL Inc., Freenome Holdings Inc., CellMax Life, Archer DX Inc., Thrive Earlier Detection Corp., Foundation Medicine Inc., Oncocyte Corporation, OpKo Health Inc., MDNA Life Sciences Inc., Oncimmune Holdings Plc, Abbott Laboratories Inc., Cepheid Inc., Koninklijke Philips N.V., GE Healthcare, Siemens, Gen-Probe Incorporated, EpiGenomics AG, MDxHealth SA, and Roche Diagnostics.

Our competitors include large multinational corporations and their operating units, including Exact Sciences Corporation, Guardant Health, GRAIL Inc., Freenome Holdings Inc., CellMax Life, Archer DX Inc., Thrive Earlier Detection Corp., Foundation Medicine Inc., Oncocyte Corporation, OpKo Health Inc, MDNA Life Sciences Inc., Oncimmune Holdings Plc, Abbott Laboratories Inc., Cepheid Inc., Koninklijke Philips N.V., GE Healthcare, Siemens, Gen-Probe Incorporated, EpiGenomics AG, MDxHealth SA, Roche Diagnostics, Mars Incorporated, and IDEXX Laboratories, Inc.

There may also be other companies developing products competitive with ours of which we are not aware.

Many of our competitors have greater resources than us and may enjoy several competitive advantages, including:

Many of our competitors have greater resources and experience than us and may enjoy several competitive advantages, including:

· significantly greater name recognition;

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Concerns over United States healthcare reform legislation and energy costs, geopolitical issues, the availability and cost of credit and government stimulus programs in the United States and other countries may contribute to increased volatility and diminished expectations for the global economy.

If the economic climate deteriorates, our business, including our access to the Research Use Only, or RUO, or clinical IVD markets for diagnostic tests, could be adversely affected, resulting in a negative impact on our business, financial condition and results of operations.

On June 23, 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit”.

On March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty, and withdrawal negotiations began in June 2017.

The United Kingdom’s withdrawal from the European Union rules became effective on January 31, 2020 .

Existing trade rules will continue to apply through December 31, 2020 (subject to extension), during which the United Kingdom and the European Union will negotiate the rules that will govern their economic relationship following such period.

The negotiations between the parties have yet to produce an overall structure for their ongoing relationship following Brexit.

Although it is unknown what those terms will be, it is possible that there will be greater restrictions on imports and exports between the European Union countries and the United Kingdom and increased regulatory complexities.

If the economic climate deteriorates, our business, including our access to the RUO or clinical IVD markets for diagnostic tests, could be adversely affected, resulting in a negative impact on our business, financial condition and results of operations.

The United Kingdom’s withdrawal from the European Union became effective on January 1, 2021.

Although it is known what the terms of this withdrawal are, it is still possible that greater restrictions on imports and exports between the European Union countries and the United Kingdom and increased regulatory complexities are forthcoming.

These changes may adversely affect our ability to market our future products in the United Kingdom which could have an adverse effect on our business, financial condition, and results of operations.

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We will rely on third parties to manufacture and supply our intended products.

Any problems experienced by these third parties could result in a delay or interruption in the supply of our intended products to our customers, which could have a material negative effect on our business.

We will rely on third parties to manufacture and supply our intended products.

The manufacture of our intended diagnostic products will require specialized equipment and utilize complicated production processes that would be difficult, time-consuming and costly to duplicate.

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The delays associated with the verification of a new manufacturer could negatively affect our ability to develop products or receive approval of any products in a timely manner.

The COVID-19 pandemic could adversely impact our business, including our clinical trials, development activities, business and operations.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

Since then, the COVID-19 coronavirus has spread worldwide, including the United States and Europe.

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic.

Governments around the world have taken unprecedented actions to mitigate the spread of COVID-19, including stay-at-home orders, quarantine requirements, and limitations on travel, including the closing of national borders.

As a result of these restrictions, most of our employees are working remotely where possible and we have limited employee travel.

As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could severely impact our business and clinical trials, including:

· delays or difficulties in enrolling patients in clinical trials;

· delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

· diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as clinical trial sites and hospital staff supporting the conduct of our clinical trials;

· interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by governments, employers and others;

· limitations in employee resources that would otherwise be focused on the conduct of clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

· shutdowns or other business disruptions at our customers and collaborators;

· diversion of management resources to focus on mitigating the impacts of the COVID-19 pandemic;

· impacts from prolonged remote work arrangements, such as strains on our business continuity plans and the inability of certain employees to perform their work remotely.

The global COVID-19 pandemic continues to rapidly evolve.

The extent to which the COVID-19 pandemic may impact our business and clinical trials and development activities will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic, travel restrictions and social distancing requirements in the countries where we conduct business, the effectiveness of actions taken to contain and treat the disease, and how quickly and to what extent more normalized economic and operating conditions can resume.

If we or our customers experience prolonged shutdowns or other business disruptions beyond current expectations, our ability to conduct our business could be materially and adversely impacted, and our business, liquidity, and financial results may be adversely affected.

The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty.

This volatility and uncertainty may adversely affect our stock price.

The actions that governments and individuals have taken in response to COVID-19 have led to a sharp contraction in many aspects of economies worldwide.

The pandemic may cause an economic slowdown of potentially extended duration, and it is possible that it could cause a global recession.

If this occurs, it could negatively impact our ability to develop and commercialize our products, among other things.

Even after the COVID-19 pandemic has subsided, we may continue to experience material adverse effects to our business as a result of the global economic impact of the pandemic.

The manufacturing operations of our future third-party manufacturers will likely be dependent upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

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If we fail to establish and maintain satisfactory relationships with our future third-party distributors, our revenues and market share may not grow as anticipated, and we could be subject to unexpected costs which could harm our results of operations and financial condition.

If the patents that we rely on to protect our intellectual property prove to be inadequate, our ability to successfully commercialize our future products will be harmed and we may never be able to operate our business profitably.

If the patents we rely on to protect our intellectual property prove to be inadequate, our ability to successfully commercialize our future products will be harmed and we may never be able to operate our business profitably.

Our success depends, in large part, on our ability to protect proprietary methods, discoveries and technologies that we develop under the patents and intellectual property laws of the United States, Europe and other countries, so that we can seek to prevent others from unlawfully using our inventions and proprietary information.

Our patent portfolio includes 23 patent families related to our diagnostic tests, with 8 patents granted in the United States, 9 patents granted in Europe and a further 27 patents granted worldwide.

Additionally, we have 13 patent applications currently pending in the United States, 10 in Europe and a further 82 worldwide.

Our patent portfolio includes 27 patent families related to our diagnostic tests (including veterinary applications), with 10 patents granted in the United States, 14 patents granted in Europe and a further 40 patents granted worldwide.

Additionally, we have 90 patent applications pending, with 11 patent applications in the United States, 8 in Europe and a further 71 patent applications pending worldwide.

If we are not able to protect our proprietary technology and information, our competitors may use our inventions to develop competing products.

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Share ownership by our executive officers and directors make it more difficult for third parties to acquire us or effectuate a change of control that might be viewed favorably by other stockholders.

As of February 17, 2020, our executive officers and directors beneficially owned, in the aggregate, approximately 14.9% of our outstanding shares.

As of March 10, 2021, our executive officers and directors beneficially owned, in the aggregate, approximately 11.3% of our outstanding shares.

As a result, if the executive officers and directors were to oppose a third party’s acquisition proposal for, or a change in control of, the Company, such officers and directors may have sufficient voting power to be able to block or at least delay such an acquisition or change in control from taking place, even if other stockholders would support such a sale or change of control.

Our Second Amended and Restated Certificate of Incorporation exculpates our officers and directors from certain liability to our Company and our stockholders.

Our corporate governance documents, and certain corporate laws applicable to us, could make a takeover attempt, which may be beneficial to our stockholders, more difficult.

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We are a smaller reporting company and a non-accelerated filer and we cannot be certain if the reduced disclosure requirements applicable to our filing status, as well as the exemption from the requirement to provide an auditor’s attestation report regarding the effectiveness of our internal controls, will make our common stock less attractive to investors.

We are currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million measured as of the last business day of our most recently completed second fiscal quarter.

We are a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million measured as of the last business day of our most recently completed second fiscal quarter.

“Smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.

We are also a “non-accelerated filer,” meaning we have a public float of less than $75 million measured as of the last business day of our most recently completed second fiscal quarter.

We are also a “non-accelerated filer,” meaning that although we have a public float of more than $75 million measured as of the last business day of our most recently completed second fiscal quarter, our annual revenues are less than $100 million.

As a “non-accelerated filer,” we are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting.

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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