What changed in this filing

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Item 1A. Risk Factors

2023-03-15 compared with 2022-03-30 · 55 added, 56 removed, 419 unchanged (21% of the section changed)

20 unchanged sentences

It is difficult to forecast our future performance, which may cause our financial results to fluctuate unpredictably.

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

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

accordingly, we will face fierce competition, including from companies with greater resources and experience than us, and our intended products may not achieve significant market penetration and/or may become obsolete.

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We expect to expand our product development, research and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We have limited experience with direct sales and marketing and 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.

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

We have limited experience with sales and marketing and any failure to build and manage a sales and marketing team effectively, or to successfully engage and maintain third party providers for such services, could have a material adverse effect on our business.

We 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 depend on third-party distributors to market and sell our products which will subject us to a number of risks.

We depend on third-party distributors to market and sell our products, which will subject us to a number of risks.

The manufacturing operations of our 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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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, and share ownership by executive officers and directors, could make a takeover attempt, which may be beneficial to our stockholders, more difficult.

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

We do not expect to pay dividends in the foreseeable future.

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

If we incur delays in commencing commercialization of our Nu.Q ® 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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changes in technology that may render our future products uncompetitive or obsolete;

competition with other cancer diagnostics companies;

competition with other diagnostics companies;

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

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

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

The cancer diagnostics market is extremely competitive and characterized by rapidly 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.

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

Our 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.

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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.

The market for cancer diagnostics is also 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, and from companies such as Mars Incorporated, IDEXX Laboratories Inc., PetDx, One Health Company (Fidocure) and Vidium Animal Health focused on the veterinary space.

The market for diagnostics is also 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., Foundation Medicine Inc., Oncocyte Corporation, OpKo Health Inc., MDNA Life Sciences Inc., Oncimmune Holdings Plc, Abbott Laboratories Inc., Cepheid Inc., Hologic Corporation, Agilent Technologies Inc., Qiagen Inc., Thermo Fisher, Illumina, Becton Dickinson, BioMerieux, Invitae, Siemens, Gen-Probe Incorporated, EpiGenomics AG, MDxHealth SA, and Roche Diagnostics, and from companies such as PetDx, One Health Company (Fidocure) and Vidium Animal Health focused on the veterinary space.

There may also be other companies developing products competitive with ours of which we are unaware.

Successful commercialization of our services will require that we satisfactorily address the needs of various medical practitioners that constitute a target market to reach customers and to address potential resistance to recommendations for our services.

If we are unable to continue to achieve significant market penetration, we will not be able to generate sufficient revenue to become profitable and our products may become obsolete.

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

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We also face competition in our search for third parties to assist us with sales and marketing of our product candidates, which may negatively impact our ability to enter into favorable sales and marketing arrangements.

For all the foregoing reasons, we may not be able to compete successfully against our competitors.

For all the foregoing reasons, we may not be able to compete successfully against our competitors, which could jeopardize our ability to recoup research and development expenditures, hurt our reputation and harm our business, results of operations and financial condition.

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

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Failure in our information technology, storage systems or our clinical laboratory equipment could significantly disrupt our operations and our research and development efforts.

Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology systems, which support our operations including our research and development efforts.

Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology (“IT”) systems, which support our operations including our research and development efforts.

The integrity and protection of our own data, and that of our customers, clinical trial subjects and employees, is critical to our business.

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Concerns over U.S.

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.

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, and global inflationary pressures 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 clinical IVD markets for diagnostic tests, could be adversely affected, resulting in a negative impact on our business, financial condition and results of operations.

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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, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

disruptions to our operations, including a shutdown of one or more of our facilities;

restrictions on our operations and sales, marketing and distribution efforts;

and interruptions to our research and development, manufacturing, clinical/regulatory and other important business activities;

increased costs in our manufacturing, production and shipping processes;

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interruptions or delays in global shipping to transport and deliver our products to our distributors and customers;

interruptions in normal operations of certain end user customers that could result in reductions in demand for routine, elective and other non-COVID-19 related healthcare procedures and testing;

limitations on employee resources and availability, including due to sickness or personal quarantine, government restrictions, the desire of employees to avoid contact with large groups of people, or school closures or remote learning;

a COVID-19 vaccination mandate or requirement that unvaccinated employees be tested frequently could result in employee attrition and difficulty securing future labor needs, including attrition of critically skilled labor, difficulty in obtaining services from impacted suppliers and increased costs;

fluctuations in foreign currency exchange rates or interest rates resulting from market uncertainties.

The COVID-19 pandemic has resulted in government authorities implementing many measures to contain the spread of COVID-19, including travel bans and restrictions, quarantines, shelter-in-place and stay-at-home orders, and business and school shutdowns.

Although many of these measures have been lifted or relaxed, they could be reinstituted if conditions deteriorate and could be in place for a significant period of time, which could adversely affect our operations.

For example, at the outset of the pandemic, we temporarily closed our corporate offices and had personnel work remotely to the extent possible and may be required to do so again in the future.

Further, our sales and marketing activities were, and may continue to be, adversely affected by the inability to conduct in-person sales activities, meetings, events and conferences, which could negatively impact the success of our sales and marketing strategies and our relationships with our customers.

The continued spread of COVID-19 has also 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.

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, including an economic slowdown, 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 effects of COVID-19 may exacerbate our other risk factors described in this Report.

The degree 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, continuously evolving and cannot be predicted with confidence, such as the ultimate duration of the pandemic, the severity of continual outbreak surges and variants, 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.

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, including local and global inflationary pressures, further or unexpected economic recessionary fears, increased political instability and threats of war, and could suffer from increased borrowing costs that limit discretionary consumer spending, which could hamper demand for our products and delay diagnostic testing and treatment.

Further, the effects of COVID-19 may exacerbate our other risk factors described in this Report.

Because this situation continues to evolve globally, the ultimate impacts to us of COVID-19 are uncertain, but such impacts could have a material adverse effect on our business, strategy, financial performance and financial condition.

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As our clinical infrastructure expands, we expect to increasingly rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct some of our current and anticipated pre-clinical investigations and clinical trials.

If we are not able to reach mutually acceptable agreements with these third parties on a timely basis, these third parties do not successfully carry out their commitments or regulatory obligations or meet expected deadlines, or the quality or accuracy of the data they obtain is compromised due to the failure to adhere to agreed-upon clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected.

For example, we currently rely on DXOCRO to support development and clinical validation studies for our Nu.Q ® product portfolio in the United States, including by conducting large-scale finding studies across multiple sites in the U.S.

using Nu.Q ® NETs and Nu.Q ® Cancer tests to determine clinical utility in sepsis and non-Hodgkin’s lymphoma, which we hope to leverage in support of our U.S.

commercialization strategy.

However, if we are not able to maintain or reach mutually acceptable agreements with DXOCRO or other third parties on a timely basis, these third parties do not successfully carry out their commitments or regulatory obligations or meet expected deadlines, or the quality or accuracy of the data they obtain is compromised due to the failure to adhere to agreed-upon clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected.

We expect to expand our product development, research and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

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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.

For example, in connection with the anticipated commercialization of our products, we may add personnel to certain areas of our business including laboratory operations, quality assurance, and compliance.

Further, as we build our commercialization efforts and expand research and development activities for new products, the scope and complexity of our operations is increasing significantly.

As a result of our growth, our operating expenses and capital requirements have also increased, and we expect that they will continue to increase.

Our ability to manage our growth effectively requires us to expend funds to implement and improve our managerial, operational and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel.

Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.

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Any inability to manage growth could delay the execution of our business plan or disrupt our operations.

As an organization we have limited experience with direct sales however are building a team of experienced individuals in terms of market intelligence, product management and account management in addition to building connections with market-leading established distributors as potential commercial partners.

As an organization we have limited experience with direct sales however we are building a team of experienced individuals in terms of market intelligence, product management and account management in addition to building relationships with market-leading established distributors as commercial partners.

For example, subsequent to the fiscal end year ended December 31, 2022, Heska commenced pre-order sales of our Nu.Q ® Vet Cancer Test for screening and monitoring of cancer in canines to veterinarians worldwide at the point of care pursuant to our exclusive global supply and licensing agreement with Heska.

We have also engaged IDEXX to make our Nu.Q ® Vet Cancer Test available to reference laboratories in the United States.

Although we are investing in direct marketing to support these commercial launches, we may rely on third party resources such as Heska’s global network of veterinarians and IDEXX’s reference laboratory network to successfully market this test and generate revenue.

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

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

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

Our clinical sales strategy is initially focused on the clinical IVD market with the CE marking of our first product in Europe, the Nu.Q ® NETs test, in May 2022.

With this 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 if we receive a CE mark for a certain product, we must still seek regulatory clearance in other jurisdictions.

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

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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 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.

There are significant risks involved in building and managing our sales and marketing organization, as well as identifying and negotiating deals with the right sales and distribution partners, including risks related to our ability to:

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

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

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.

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

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

If the operations of third-party manufacturers are interrupted or if they are unable to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill our future sales orders.

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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.

We will depend on third-party distributors to market and sell our products, which will subject us to a number of risks.

We will depend on third-party distributors to market, sell, and service our products in our intended markets.

We are subject to a number of risks associated with reliance upon third-party distributors including the following:

We depend on third-party distributors to market and sell our products, which will subject us to a number of risks.

We depend, and expect to continue to depend, on third-party distributors to market, sell, and service our products in our intended markets.

For example, subsequent to the year ended December 31, 2022, Heska commenced pre-order sales of our Nu.Q ® Vet Cancer Test for screening and monitoring of cancer in canines to veterinarians at the point of care and we engaged IDEXX to make our Nu.Q ® Vet Cancer Test available to reference laboratories in the United States.

Further, we have engaged with others including DNAtech, Portugal, and, through our agreement with Heska, with Scil Lab Europe, to launch the Nu.Q ® Vet Cancer Test to customers in Europe.

We are subject to a number of risks associated with reliance upon these parties and other third-party distributors including the following:

lack of day-to-day control over the activities of third-party distributors;

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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.

In 2017, the European Union adopted the phased-in EU IVDR that may impose additional requirements to obtain a CE mark, which could result in delays and further expense, in terms of staff costs to us as compared to the current CE mark process.

The EU IVDR will require each product submission to be thoroughly audited by Notified Bodies, instead of the current self-certification process.

The EU IVDR will be fully applicable in May 2022.

In Europe, since May 2022, IVD medical devices are regulated by the new EU IVDR.

The most challenging changes under the EU IVDR as compared to the previous Directive are those regarding the classification of products, which brings almost all IVDs under the direct review and control of Notified Bodies, and the performance evaluation of IVDs, which requires extensive clinical and analytical performance studies in addition to a demonstration of scientific validity.

These changes and other additional requirements to obtain a CE mark could result in delays and further expense, in terms of staff costs to us compared to the process under the previous Directive.

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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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.

In Europe, IVD companies are currently able to self-certify that they meet the appropriate regulatory requirements (which are subject to change with the EU MDR and the EU IVDR noted above) but are subject to inspection for enforcement.

In Europe, IVD companies are subject to inspection for enforcement, among others things.

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.

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Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and related regulations, U.S.

state laws (such as the California Consumer Privacy Act (“CCPA”)), Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) or the applicable provincial alternatives, the EU’s General Data Protection Regulation (“GDPR”), EU member states directives, or similar applicable laws.

state laws (such as the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”)), Canada’s Personal Information and Electronic Documents Act (“PIPEDA”) or the applicable provincial alternatives, the EU’s General Data Protection Regulation (“GDPR”), EU member states directives, or similar applicable laws.

These laws place limits on how we may collect, use, share and store medical information and other personal information, and they impose obligations to protect that information against unauthorized access, use, loss, and disclosure.

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member states, and other international jurisdictions adopt or implement new data privacy and security laws and regulations as we continue to commercialize our products worldwide.

For example, amendments to privacy and security laws (such as the CCPA) may impose additional requirements on us and increase our regulatory and litigation risk.

For example, amendments to privacy and security laws (such as the CCPA and the CPRA) may impose additional requirements on us and increase our regulatory and litigation risk.

As we continue to expand, our business will need to adapt to meet these and other similar legal requirements.

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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 29 patent families and a total 84 patents granted related to our diagnostic tests (including veterinary applications), with 12 patents granted in the United States, 14 patents granted in Europe and a further 58 patents granted worldwide.

Our patent portfolio includes 34 patent families (plus three in-licensed families) and a total 97 patents granted related to our diagnostic tests (including veterinary applications), with 12 patents granted in the United States, 15 patents granted in Europe and a further 70 patents granted worldwide.

Additionally, we have 122 patent applications pending, worldwide.

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“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 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.

We are also a “non-accelerated filer,” meaning that 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.

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