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What changed in Bionano Genomics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bionano Genomics, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+637 added−571 removedSource: 10-K (2024-03-05) vs 10-K (2023-03-09)

Top changes in Bionano Genomics, Inc.'s 2023 10-K

637 paragraphs added · 571 removed · 442 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

160 edited+31 added−24 removed153 unchanged
Biggest changeIf, in the future, we operate our own clinical laboratory to perform clinical diagnostic testing with respect to our OGM products, such activities would become subject to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its corresponding regulations, as well as additional federal and state laws that impose a variety of fraud and abuse prohibitions on healthcare providers, including clinical laboratories. 19 Table of Contents Coverage and Reimbursement Currently, our OGM products are for research use only, but clinical laboratories may acquire our instrumentation through a capital purchase or capital lease and use the Saphyr system and direct label and stain chemistry to create their own diagnostic tests and potentially seek reimbursement for such tests.
Biggest changeIf, in the future, we operate our own clinical laboratory to perform clinical diagnostic testing with respect to our OGM products, such activities would become subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and its corresponding regulations, as well as additional federal and state laws that impose a variety of fraud and abuse prohibitions on healthcare providers, including clinical laboratories.
An additional limitation of many of the traditional isolation processes is the number of cells that are required to be processed in order to obtain sufficient nucleic acid molecules for OGM analysis. Current methodologies require upwards of 1.5 million cells in order to isolate sufficient DNA for use on the Saphyr system.
An additional limitation of many of the traditional isolation processes is the number of cells that are required to be processed in order to obtain sufficient nucleic acid molecules for OGM analysis. Current methodologies require upwards of 1.5 million cells in order to isolate sufficient DNA for use on an OGM system.
Bionano Laboratories also employs Whole Exome Sequencing (WES), which aims to detect genome SNVs that are different from genome SVs and are not detectable by OGM. We believe that Bionano Laboratories is uniquely positioned to develop LDT’s that can improve upon the existing SOC for diagnostic testing for NDDs.
Bionano Laboratories also employs Whole Exome Sequencing, which aims to detect genome SNVs that are different from genome SVs and are not detectable by OGM. We believe that Bionano Laboratories is uniquely positioned to develop LDT’s that can improve upon the existing SOC for diagnostic testing for NDDs.
The regulations in other jurisdictions vary from those in the U.S. and may be easier or more difficult to satisfy and are subject to change. For example, the European Union recently published new regulations that will result in greater regulation of medical devices and IVDs.
The regulations in other jurisdictions vary from those in the U.S. and may be easier or more difficult to satisfy and are subject to change. For example, the European Union (“EU”) recently published new regulations that will result in greater regulation of medical devices and IVDs.
State and Federal Prohibitions on False Claims The federal False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government.
State and Federal Prohibitions on False Claims The federal False Claims Act (“FCA”) imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government.
We believe the integration of OGM with data types common in the industry, such as Variant Call Format (VCF), and Binary Alignment Map (BAM), should accelerate and broaden our position in digital cytogenetics and comprehensive genome analysis by enabling us to simplify the assessment of clinically relevant variants in cytogenomics applications, potentially reducing interpretation time per sample and expanding our reach into the discovery and translational research markets through the combination of OGM and NGS.
We believe the integration of OGM with data types common in the industry, such as Variant Call Format (VCF), and Binary Alignment Map (BAM), into the VIA software should accelerate and broaden our position in digital cytogenetics and comprehensive genome analysis by enabling us to simplify the assessment of clinically relevant variants in cytogenomics applications, potentially reducing interpretation time per sample and expanding our reach into the discovery and translational research markets through the combination of OGM and NGS.
Additionally, from January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom GDPR (“UK GDPR”), which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in the United Kingdom national law.
Additionally, from January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR (“UK GDPR”), which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in the UK national law.
Laboratories must bill various payors, such as private third-party payors, including managed care organizations (“MCO”), and state and federal health care programs, such as Medicare and Medicaid, and each may have different billing requirements.
Laboratories must bill various payors, such as private third-party payors, including managed care organizations, and state and federal health care programs, such as Medicare and Medicaid, and each may have different billing requirements.
This is done through their supply management process where we get notified of any parts that will become obsolete with enough lead time to identify alternatives. Consumables All of our chip consumables for both OGM and ITP applications are produced by third-party manufacturers at their facilities; however, we have established procedures for a replacement manufacturer if required.
This is done through their supply management process where we get notified of any parts that will become obsolete with enough lead time to identify alternatives. Consumables All of our chip consumables for both OGM and ITP applications are produced by third-party manufacturers at their facilities; however, we have established procedures for replacement manufacturers if required.
This commercial staff is located in North America, and the sales personnel primarily work remotely in U.S. states where Bionano Laboratories has obtained insurance reimbursement. The sales and marketing efforts are targeted primarily on specialty pediatricians, including pediatric neurologists, medical geneticists, and developmental and behavioral pediatricians. Bionano Laboratories also targets general pediatricians with large numbers of patients.
This commercial staff is located in North America, and the sales personnel primarily work remotely in U.S. states where Bionano Laboratories has obtained insurance reimbursement. The sales and marketing efforts are targeted primarily at specialty pediatricians, including pediatric neurologists, medical geneticists, and developmental and behavioral pediatricians. Bionano Laboratories also targets general pediatricians with large numbers of patients.
We believe that simplified data interpretation and a seamless integration with NGS and array data to provide the most compressive genome analysis will increase utilization. In addition, we can participate directly in the NGS and array markets for genetic disease and cancer applications independent of OGM using a monetization model with a pay-per-sample NxClinical software offering.
We believe that simplified data interpretation and a seamless integration with NGS and array data to provide the most compressive genome analysis will increase utilization. In addition, we can participate directly in the NGS and array markets for genetic disease and cancer applications independent of OGM using a monetization model with a pay-per-sample VIA software offering.
In addition, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other things, significantly altered the payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS. PAMA requires certain laboratories performing clinical diagnostic laboratory tests to report to CMS the amounts paid by private payors for laboratory tests.
In addition, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other things, significantly altered the payment methodology under the Medicare CLFS. PAMA requires certain laboratories performing clinical diagnostic laboratory tests to report to CMS the amounts paid by private payors for laboratory tests.
Additionally, Bionano Laboratories has developed OGM-based laboratory developed tests (LDTs) for facioscapulohumeral muscular dystrophy type 1 (FSHD1), which is a progressive disorder that primarily affects the muscles of the face, shoulder blades (scapula), upper arms, and lower legs, and for detecting SVs in individuals with hematologic malignancies.
Additionally, Bionano Laboratories has developed OGM-based laboratory developed tests (“LDTs”) for facioscapulohumeral muscular dystrophy type 1 (FSHD1), which is a progressive disorder that primarily affects the muscles of the face, shoulder blades (scapula), upper arms, and lower legs, and for detecting SVs in individuals with hematologic malignancies.
Available Information Access to our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed with or furnished to the SEC, may be obtained through the investor section of our website at http://www.bionanogenomics.com. We do not charge for access to and viewing of these reports.
Available Information Access to our Annual Report, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed with or furnished to the SEC, may be obtained through the investor section of our website at http://www.bionano.com. We do not charge for access to and viewing of these reports.
ITEM 1. BUSINESS Overview We are a global genomics company focused on elevating the health and wellness of all people. We are pioneers of optical genome mapping (OGM) for genome analysis and provide a suite of genome analysis solutions designed to enable researchers and clinicians to reveal answers to challenging questions in biology and medicine.
ITEM 1. BUSINESS Overview We are a global genomics company focused on elevating the health and wellness of all people. We are pioneers of optical genome mapping (“OGM”) for genome analysis and provide a suite of genome analysis solutions designed to enable researchers and clinicians to reveal answers to challenging questions in biology and medicine.
On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. It is possible that the ACA will be subject to judicial or Congressional challenges in the future.
For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. It is possible that the ACA will be subject to judicial or Congressional challenges in the future.
Beginning on January 1, 2018, CMS has begun using reported private payor pricing to periodically revise payment rates under the CLFS. Based on current law, between January 1, 2023 and March 31, 2023, applicable laboratories will be required to report on data collected during January 1, 2019 and June 30, 2019.
Beginning on January 1, 2018, CMS has begun using reported private payor pricing to periodically revise payment rates under the CLFS. Based on current law, between January 1, 2025 and March 31, 2025, applicable laboratories will be required to report on data collected during January 1, 2019 and June 30, 2019.
Laboratory services for OGM are performed in our laboratory facilities in San Diego, California and at partner laboratories in the United States and Europe, and serve as solutions for researchers and clinicians who would like to use OGM for various applications in genomics but have yet to acquire the Saphyr system.
Laboratory services for OGM are performed in our laboratory facilities in San Diego, California and at partner laboratories in the United States and Europe, and serve as solutions for researchers and clinicians who would like to use OGM for various applications in genomics but have yet to acquire an OGM system.
We are investing in these programs to build the necessary evidence to establish reimbursement and to pave the way for inclusion in professional society guidelines to advance SOC. • Support the publication of findings with OGM by our customers beyond the more than 687 papers published to date.
We are investing in these programs to build the necessary evidence to establish reimbursement and to pave the way for inclusion in professional society guidelines to advance SOC. • Support the publication of findings with OGM by our customers beyond the more than 1000 papers published to date.
HITECH expanded and strengthened HIPAA, created new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements for Covered Entities. Regulations implementing major provisions of HITECH were finalized on January 25, 2013 through publication of the HIPAA Omnibus Rule (the “Omnibus Rule”).
HITECH expanded and strengthened HIPAA, created new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements for Covered Entities. Regulations implementing major provisions of HITECH were finalized on January 25, 2013 through publication of the HIPAA Omnibus Rule.
The Saphyr system has also been shown to identify structural changes in chromosomes that cannot be identified using current commercially available solutions for gene sequencing. We market and sell the Ionic ® Purification system, which is able to deliver high quality DNA in a more natural, native form and with fewer contaminants when compared to other isolation and purifications solutions.
OGM has also been shown to identify structural changes in chromosomes that cannot be identified using current commercially available gene sequencing solutions. We market and sell the Ionic ® Purification system, which is able to deliver high quality DNA in a more natural, native form and with fewer contaminants when compared to other isolation and purifications solutions.
Today, NxClinical software is among the most comprehensive solutions for analysis and interpretation of any microarray or NGS generated data integrating CNVs, absence of heterozygosity (AOH) and loss of heterozygosity (LOH), as well as SNVs from sequencing data into a single well integrated interface that is used across the globe by renowned academic and commercial clinical laboratories.
Today, VIA software is among the most comprehensive solutions for analysis and interpretation OGM data and any microarray or NGS generated data integrating CNVs, absence of heterozygosity (AOH) and loss of heterozygosity (LOH), as well as SNVs from sequencing data into a single well integrated interface that is used across the globe by renowned academic and commercial clinical laboratories.
Laboratories that purchase certain of our OGM products and perform clinical diagnostic testing are also subject to extensive regulation under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, requiring clinical laboratories to meet specified standards in areas such as personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
Laboratories that purchase certain of our OGM products and perform clinical diagnostic testing are also subject to extensive regulation under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), requiring clinical laboratories to meet specified standards in areas such as personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
We invented, patented, developed and commercialized nanochannel arrays to capture long single molecules of DNA from a solution and unwind and linearize them for SV analysis. Each molecule is imaged separately, making it possible to deconvolute complex mixtures including haplotypes and heterogeneous tumors. • DNA labeling chemistry specifically for physical mapping.
We invented, patented, developed and commercialized nanochannel arrays to capture long single molecules of DNA from a solution and unwind and linearize them for SV analysis. Each molecule is imaged separately, making it possible to deconvolute complex mixtures including haplotypes and heterogeneous tumors. 11 Table of Contents • DNA labeling chemistry specifically for physical mapping.
These requirements vary by jurisdiction, differ from those in the United States and may require us to implement additional compliance measures or perform additional pre-clinical or clinical testing. For example, the In Vitro Diagnostic Medical Devices (2017/746/EU) (“IVDR”) will replace the existing In Vitro Diagnostic Medical Devices Directive (98/79/EC) (“IVDD”) in the European Union (“EU”).
These requirements vary by jurisdiction, differ from those in the United States and may require us to implement additional compliance measures or perform additional pre-clinical or clinical testing. For example, the In Vitro Diagnostic Medical Devices (2017/746/EU) (“IVDR”) will replace the existing In Vitro Diagnostic Medical Devices Directive (98/79/EC) (“IVDD”) in the EU.
The pattern of labels detected on all these fragments can then be related to the pattern of sequence motif sites in a reference genome for comparison. Changes in the pattern indicate structural variation. • Bioinformatic tools for SV analysis.
The pattern of labels detected on all these fragments can then be related to the pattern of sequence motif sites in a reference genome for comparison. Changes in the pattern indicate SV. • Bioinformatic tools for SV analysis.
We are investing in four multi-center clinical studies for postnatal, prenatal, hematologic malignancies and solid tumor analyses relative to SOC. Each study is designed with an expectation for recruitment of 1,000 subjects and 13 Table of Contents will assess sensitivity, specificity, reproducibility, concordance and incremental clinically relevant findings relative to SOC.
We are investing in four multi-center clinical studies for postnatal, prenatal, hematologic malignancies and solid tumor analyses relative to SOC. Each study is designed with an expectation for recruitment of 1,000 subjects and will assess sensitivity, specificity, reproducibility, concordance and incremental clinically relevant findings relative to SOC.
Because of these factors and the budget cycles of our customers, our sales cycle, the time from initial contact with a customer to our receipt of a purchase order, can often be nine to 12 months. 14 Table of Contents Bionano Laboratories primarily sells a suite of LDTs to pediatric physicians through a physician-directed “in-person” sales model.
Because of these factors and the budget cycles of our customers, our sales cycle, the time from initial contact with a customer to our receipt of a purchase order, can often be nine to 12 months. Bionano Laboratories primarily sells a suite of LDTs to pediatric physicians through a physician-directed “in-person” sales model.
Many states have adopted laws similar to the Anti-Kickback Statute, and some apply to items and services reimbursable by any payor, including private third-party payors. Further, the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.
Many states have adopted laws similar to the Anti-Kickback Statute, and some apply to items and services reimbursable by any payor, including private third-party payors. Further, the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.
Our principal executive offices are located at 9540 Towne Centre Drive, Suite 100, San Diego, California 92121, and our telephone number is (858) 888-7600. Our website address is www.bionanogenomics.com.
Our principal executive offices are located at 9540 Towne Centre Drive, Suite 100, San Diego, California 92121, and our telephone number is (858) 888-7600. Our website address is www.bionano.com.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included unless otherwise specified, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
All statements made in any of our securities filings, including all forward-looking statements or information, 28 Table of Contents are made as of the date of the document in which the statement is included unless otherwise specified, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
We believe that each of these acquisitions, together with our organic development, will significantly enhance the customer experience with OGM. OGM Systems Our system uses a proprietary approach to measure genome structure and SV through OGM. The OGM workflow is novel, comprehensive, scalable, cost effective and highly differentiated.
We believe that each of these acquisitions, together with our organic development, will significantly enhance the customer experience with OGM. OGM Systems Our systems use a proprietary approach to measure genome structure and SV through OGM. The OGM workflow is novel, comprehensive, scalable, cost effective and highly differentiated.
Testing and Laboratory Services Our Bionano Laboratories business offers tests that use CMA for evaluation of patients suspected of having certain genetic diseases, which is recommended by the American College of Medical Genetics and Genomics (ACMG), the American Academy of Pediatrics (AAP), and the American Academy of Neurology (AAN), among other renowned societies.
Testing and Laboratory Services Our Bionano Laboratories business offers tests that use CMA for evaluation of patients suspected of having certain genetic diseases, which is recommended by the American College of Medical Genetics and Genomics, the American Academy of Pediatrics, and the American Academy of Neurology, among other renowned societies.
Required breach notices must be made as soon as is reasonably practicable, but no later than 60 days following discovery of the breach. Reports must be made to affected individuals and to the Secretary and, in some cases depending on the size of the breach, they must be reported through local and national media.
Required breach notices must be made as soon as is reasonably practicable, but no later than 60 days following discovery of the breach. Reports must be made to affected individuals and to the Secretary and, in some 24 Table of Contents cases depending on the size of the breach, they must be reported through local and national media.
Fines for non-compliance can range from the greater of 2% of annual global revenues or €10 million, up to the greater of 4% of annual global revenues or €20 million. The GDPR is discussed in more detail under the heading “International Regulations” below. 21 Table of Contents Reimbursement and Billing Reimbursement and billing for diagnostic services is highly complex.
Fines for non-compliance can range from the greater of 2% of annual global revenues or €10 million, up to the greater of 4% of annual global revenues or €20 million. The GDPR is discussed in more detail under the heading “International Regulations” below. Reimbursement and Billing Reimbursement and billing for diagnostic services is highly complex.
We sell our products through a network of distributors in the Asia-Pacific region and select other markets outside of North America and Europe. Specifically, we distribute our instruments and reagents via third-party distributors in markets such as China, Japan, South Korea, Singapore, Australia, India and South Africa.
We sell our products through a network of distributors in the Asia-Pacific region and select other markets outside of North America and Europe. For example, we distribute our instruments and reagents via third-party distributors in markets such as China, Japan, South Korea, Singapore, Australia, India and South Africa.
Our hardware solution includes the Saphyr Compute Server, which provides cluster-like performance in an affordable, compact solution and the Bionano Compute Server, which expands the analytical capacity of the suite of tools.
Our hardware solution includes the Saphyr and Stratys Compute Servers, which provides cluster-like performance in an affordable, compact solution and the Bionano Compute Server, which expands the analytical capacity of the suite of tools.
Presently, approximately 90% of the diagnostic service revenue for Bionano Laboratories is paid by private third-party payors. Federal and State Fraud and Abuse Laws A variety of state and federal laws prohibit fraud and abuse involving state and federal health care programs, such as Medicare and Medicaid.
Presently, approximately 90% of the diagnostic service revenue for Bionano Laboratories is paid by private third-party payors. Federal and State Fraud and Abuse Laws 25 Table of Contents A variety of state and federal laws prohibit fraud and abuse involving state and federal health care programs, such as Medicare and Medicaid.
We are actively performing research to determine whether OGM with the Saphyr system can replace CMA as the front-line test for children with developmental disorders.
We are actively performing research to determine whether OGM with an OGM system can replace CMA as the front-line test for children with developmental disorders.
We furthered our transformation through the expansion into software solutions, made possible by our October 2021 acquisition of BioDiscovery and continued with our November 2022 acquisition of Purigen bringing their leading nucleic acid isolation and purification technology to Bionano.
We furthered our transformation through the expansion into software solutions, made possible by our October 2021 acquisition of BioDiscovery and continued with our November 2022 acquisition of Purigen bringing their leading nucleic acid 8 Table of Contents isolation and purification technology to Bionano.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA. 18 Table of Contents Laboratory Developed Tests (LDTs) Federal agencies involved in the regulation of LDTs include CMS and the FDA.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA. Laboratory Developed Tests (LDTs) Federal agencies involved in the regulation of LDTs include CMS and the FDA.
The HIPAA security standards require the adoption of administrative, physical, and technical safeguards and the adoption of written security policies and procedures. On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act, or HITECH, provisions of the American Recovery and Reinvestment Act of 2009.
The HIPAA security standards require the adoption of administrative, physical, and technical safeguards and the adoption of written security policies and procedures. On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act (“HITECH”), provisions of the American Recovery and Reinvestment Act of 2009.
Our customers include researchers and clinicians who seek to identify and understand the biological implications of genome variation. We believe that the Saphyr system can replace more traditional cytogenetic tools which are expensive, slow and labor-intense, with an advanced solution designed to simplify workflow, reduce cost, and increase assay success rates.
Our customers include researchers and clinicians who seek to identify and understand the biological implications of genome variation. We believe that our OGM systems can replace more traditional cytogenetic tools which are expensive, slow and labor-intense, with an advanced solution designed to simplify workflow, reduce cost, and increase assay success rates.
By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, became law.
By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (collectively, the “ACA”), became law.
Physical 8 Table of Contents maps of a test subject are then compared to a reference or other subjects in cross-mapping analysis that allows our system to detect genome wide SV, including the most complex balanced events.
Physical maps of a test subject are then compared to a reference or other subjects in cross-mapping analysis that allows our system to detect genome wide SV, including the most complex balanced events.
For this segment, the Saphyr system can be used as the sole tool for providing comprehensive and accurate detection of all classes of SVs and enable clinically relevant calls without the need for any sequencing or legacy cytogenetic technology.
For this segment, an OGM system can be used as the sole tool for providing comprehensive and accurate detection of all classes of SVs and enable clinically relevant calls without the need for any sequencing or legacy cytogenetic technology.
We are constantly on the look-out for opportunities to better meet the needs of our customers 7 Table of Contents whether that is through partnerships, organic development, or strategic acquisitions that accelerate and up-shift our capabilities.
We are constantly on the look-out for opportunities to better meet the needs of our customers whether that is through partnerships, organic development, or strategic acquisitions that accelerate and up-shift our capabilities.
Information in the investor section and on our website is not part of this Annual Report on Form 10-K or any of our other securities filings. Our filings with the SEC may be accessed through the SEC’s website at www.sec.gov.
Information in the investor section and on our website is not part of this Annual Report or any of our other securities filings. Our filings with the SEC may be accessed through the SEC’s website at www.sec.gov.
Importantly, OGM is expected to be able to detect full mutations consistent with fragile X syndrome, which is another front-line test for children, especially males, with 9 Table of Contents autism spectrum disorder and intellectual disability. Studies are ongoing to determine the sensitivity and specificity for OGM as it relates to fragile X syndrome.
Importantly, OGM is expected to be able to detect full mutations consistent with fragile X syndrome, which is another front-line test for children, especially males, with autism spectrum disorder and intellectual disability. Studies are ongoing to determine the sensitivity and specificity for OGM as it relates to fragile X syndrome.
Bionano Laboratories is working with payers to secure reimbursement alternatives for OGM-based testing. If reimbursements can be established, Bionano Laboratories intends to share its strategies with other labs which may drive demand for the Saphyr system.
Bionano Laboratories is working with payers to secure reimbursement alternatives for OGM-based testing. If reimbursements can be established, Bionano Laboratories intends to share its strategies with other labs which may drive demand for the OGM systems.
Both the GDPR and the UK GDPR regulations specify potential liabilities for certain data protection violations, and we anticipate that it will result in a greater compliance burden for us as we conduct our business in the European Union.
Both the GDPR and the UK GDPR regulations specify potential liabilities for certain data protection violations, and we anticipate that it will result in a greater compliance burden for us as we conduct our business in the EU.
We complete final assembly and quality control assessments of our chips at our headquarters in San Diego and our facility in Pleasanton. Our OGM reagents are sourced from a limited number of suppliers, including certain single source suppliers.
We complete final assembly and quality control assessments of our chips at our headquarters in San Diego, California. Our OGM reagents are sourced from a limited number of suppliers, including certain single source suppliers.
Our ITP reagents are sourced from a limited number of suppliers, including certain single source suppliers and also prepared in-house at our facility in Pleasanton. The OGM reagents include all components required to run a sample on OGM, such as capture and detector reagents, enzyme reagents and enzyme substrate.
Our ITP reagents are sourced from a limited number of suppliers, including certain single source suppliers and also prepared in-house at our facility in San Diego, California. The OGM reagents include all components required to run a sample on OGM, such as capture and detector reagents, enzyme reagents and enzyme substrate.
Class I devices, which have the lowest level of risk associated 17 Table of Contents with them, are subject to general controls. Class II devices are subject to general controls and special controls, including performance standards. Class III devices, which have the highest level of risk associated with them, are subject to general controls and premarket approval.
Class I devices, which have the lowest level of risk associated with them, are subject to general controls. Class II devices are subject to general controls and special controls, including performance standards. Class III devices, which have the highest level of risk associated with them, are subject to general controls and premarket approval.
OGM is designed to offer cytogeneticists the ability to fully digitize and replace these traditional methods with one simplified, cost effective and scalable workflow using the Saphyr system. We believe that DNA isolation is the critical first step in the analysis of DNA.
OGM is designed to offer cytogeneticists the ability to fully digitize and replace these traditional methods with one simplified, cost effective and scalable workflow using one of our OGM systems. We believe that DNA isolation is the critical first step in the analysis of DNA.
Depending on the reimbursement arrangement and applicable law, the party that reimburses us for our services may be: • a third-party who provides coverage to the patient, such as an insurance company or MCO; • a state or federal healthcare program; or • the patient.
Depending on the reimbursement arrangement and applicable law, the party that reimburses us for our services may be: • a third-party who provides coverage to the patient, such as an insurance company or managed care organization; • a state or federal healthcare program; or • the patient.
This data will be utilized to determine 2024 to 2026 CLFS rates. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services.
This data will be utilized to determine 2025 to 2027 CLFS rates. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services.
Additionally, our portfolio includes patents and patent applications directed to related parts of our business, including certain diagnostic tests and methods of diagnosis and analysis of microarray and image data. We have developed a global patent portfolio that includes more than 160 issued patents or allowed applications across approximately 35 patent families that are either owned or exclusively licensed.
Additionally, our portfolio includes patents and patent applications directed to related parts of our business, including certain diagnostic tests and methods of diagnosis and analysis of microarray and image data. We have developed a global patent portfolio that includes more than 151 issued patents across approximately 39 patent families that are either owned or exclusively licensed.
Testing and Laboratory Services Bionano Laboratories’ OGM testing is performed at our lab in San Diego, or at our partner labs in the United States and Europe. Bionano Laboratories intends to increase its testing capacity, and expand its menu of testing. Bionano Laboratories has CLIA certification for its San Diego lab.
Testing and Laboratory Services Bionano Laboratories’ OGM testing is performed at our lab in San Diego, California, or at our partner labs in the United States and Europe. Bionano Laboratories intends to increase its testing capacity. Bionano Laboratories has CLIA certification for its San Diego lab.
Countries with statutory health insurance (e.g., Germany, France, The Netherlands) tend to be more progressive in technology adoption with favorable reimbursement for molecular diagnostic testing. In countries such as the United Kingdom with tax-based insurance, adoption and reimbursement for molecular diagnostic testing is not uniform and is influenced by local budgets.
Countries with statutory health insurance (e.g., Germany, France, The Netherlands) tend to be more progressive in technology adoption with favorable reimbursement for molecular 23 Table of Contents diagnostic testing. In countries such as the United Kingdom (“UK”) with tax-based insurance, adoption and reimbursement for molecular diagnostic testing is not uniform and is influenced by local budgets.
We believe that if our OGM-based solutions can successfully penetrate these addressable market opportunities, this should spur additional basic and translational research creating new areas where the Saphyr instrument (or successor instruments) and OGM data can be used to improve the standard of care and patient management.
We believe that if our OGM-based solutions can successfully penetrate these addressable market opportunities, and should spur additional basic and translational research creating new areas where the OGM instruments and OGM data can be used to improve the standard of care and patient management.
We believe these long read lengths overcome the inherent challenges of genome complexity and are the key to the Saphyr system’s unprecedented sensitivity and specificity. • Proprietary nanotechnology for massively parallel linearization and analysis of long molecules with single molecule imaging. Analyzing UHMW DNA required invention.
We believe these long read lengths overcome the inherent challenges of genome complexity and are the key to our OGM systems’ unprecedented sensitivity and specificity. • Proprietary nanotechnology for massively parallel linearization and analysis of long molecules with single molecule imaging. Analyzing UHMW DNA required invention.
In addition, sales of our tests outside of the U.S. will subject us to foreign regulatory requirements, which may also change over time. Acquisitions We acquired BioDiscovery in October 2021 and Purigen in November 2022. For a further discussion of these acquisitions, please refer to Note 14, Acquisitions, to our consolidated financial statements included in this Annual Report.
In addition, sales of our tests outside of the U.S. will subject us to foreign regulatory requirements, which may also change over time. Acquisitions We acquired Purigen in November 2022. For a further discussion of this acquisition, please refer to Note 14 (Acquisitions), to our consolidated financial statements included in this Annual Report.
Under the False Claims Act, a person acts knowingly if he or she has actual knowledge of the information or acts in deliberate ignorance or in reckless disregard of the truth or falsity of the information. Specific intent to defraud is not required.
Under the FCA, a person acts knowingly if he or she has actual knowledge of the information or acts in deliberate ignorance or in reckless disregard of the truth or falsity of the information. Specific intent to defraud is not required.
Hundreds of thousands of molecules can move through hundreds of thousands of parallel nanochannels simultaneously, enabling extremely high-throughput processing on a single-molecule basis. 10 Table of Contents Saphyr Sample Prep and Labeling Kits Our Bionano Prep™ kits and DNA labeling kits provide the reagents and protocols needed to extract and label UHMW DNA for use with the Saphyr system.
Hundreds of thousands of molecules can move through hundreds of thousands of parallel nanochannels simultaneously, enabling extremely high-throughput processing on a single-molecule basis. Saphyr Sample Prep and Labeling Kits Our Bionano Prep™ kits and DNA labeling kits provide the reagents and protocols needed to extract and label UHMW DNA for use with OGM systems.
The qui tam provisions of the False Claims Act allow a private individual to bring an action on behalf of the federal government and to share in any amounts paid by the defendant to the government in connection with the action.
The qui tam provisions of the FCA allow a private individual to bring an action on behalf of the federal government and to share in any amounts paid by the defendant to the government in connection with the action.
OGM data is currently generated using the Saphyr system, which directly measures sequence specific patterns (SSPs) along UHMW DNA molecules in an unbiased approach without any amplification. Using the SSPs, software constructs a detailed physical map of the genome that accurately assigns the chromosomal location, order, orientation and quantity of sequence and in-turn, all the genome’s functional elements.
OGM data is currently generated using our OGM systems, which directly measure sequence specific patterns (“SSPs”) along UHMW DNA molecules in an unbiased approach without any amplification. Using the SSPs, software constructs a detailed physical map of the genome that accurately assigns the chromosomal location, order, orientation and quantity of sequence and in-turn, all the genome’s functional elements.
Our Bionano Laboratories business provides proprietary genetic clinical testing services for individuals demonstrating clinical presentations consistent with neurodevelopmental disorders (NDDs), including autism spectrum disorders (ASDs) and other disorders of childhood development.
Our Bionano Laboratories business provides proprietary genetic clinical testing services for individuals demonstrating clinical presentations consistent with neurodevelopmental disorders (“NDDs”), including autism spectrum disorders (“ASDs”) and other disorders of childhood development.
We believe OGM is capable of comprehensive, cost-effective and efficient detection of all classes of SVs and CNVs. Today, these SVs cannot be reliably detected by genome sequencing, from existing high throughput sequencers, which is focused on identifying genomic differences involving a few base pairs or SNVs, which the Saphyr system does not identify.
We believe OGM is capable of comprehensive, cost-effective and efficient detection of all classes of SVs and CNVs. Today, these SVs cannot be reliably detected by genome sequencing, from existing high throughput sequencers, which is focused on identifying genomic differences involving a few base pairs or SNVs, which our OGM systems do not identify.
NGS is an accurate technique for measuring genome variants below 500 bp while OGM bridges the gap by enabling detection of all SVs above 500 bp to reveal more answers and resolve previously unresolved cases from using NGS alone.
NGS is capable of measuring genome variants below 500 bp while OGM bridges the gap by enabling detection of all SVs above 500 bp to reveal more answers and resolve previously unresolved cases from using NGS alone.
We believe the Saphyr system has the potential to significantly increase success rates and provide more answers across a wide range of applications in genomics. Nucleic Acid Isolation and Purification Systems Our nucleic acid isolation and purification system uses a novel and proprietary application of isotachophoresis (ITP) to isolate nucleic acid molecules in a gentle and efficient process.
We believe our OGM systems have the potential to significantly increase success rates and provide more answers across a wide range of applications in genomics. Nucleic Acid Isolation and Purification Systems Our nucleic acid isolation and purification system uses a novel and proprietary application of isotachophoresis (“ITP”) to isolate nucleic acid molecules in a gentle and efficient process.
We believe the Saphyr system is ideally suited to be adopted alongside the installed base of high throughput sequencers as a complement that is designed to give users the ability to see a much wider scope of genome variation, from single bases of DNA to full chromosomes.
We believe that our OGM systems are ideally suited to be adopted alongside the installed base of high throughput sequencers as a complement that is designed to give users the ability to see a much wider scope of genome variation, from single bases of DNA to full chromosomes.
OGM was built upon four key elements: • Extremely long molecules for analysis (or UHMW DNA). The Saphyr system is capable of analyzing single molecules that are on average approximately 250,000 base pairs in length and can be as long as millions of base pairs.
OGM was built upon four key elements: • Extremely long molecules for analysis (or UHMW DNA). Our OGM systems are capable of analyzing single molecules that are on average approximately 250,000 base pairs in length and can be as long as millions of base pairs.
Bionano Laboratories also provides laboratory services to clinicians, scientists, pharmaceutical companies, and others who are seeking to incorporate OGM into their genomics research without the need to bring our Saphyr system in house.
Bionano Laboratories also provides laboratory services to clinicians, scientists, pharmaceutical companies, and others who are seeking to incorporate OGM into their genomics research without the need to bring one of our OGM systems in house.
The transitional period will end on 26 May 2022, the “Date of Application” (“DoA”) of the Regulation. From that point the IVDR will apply fully. The EU has also implemented the General Data Protection Regulation, or GDPR, which requires us to meet new and more stringent requirements regarding the handling of personal data about European Union residents.
The transitional period will end on 26 May 2022, the “Date of Application” of the IVDR. From that point the IVDR will apply fully. The EU has also implemented the GDPR, which requires us to meet new and more stringent requirements regarding the handling of personal data about EU residents.
DLS uses a single direct-labeling enzymatic reaction to attach a fluorophore to the DNA at a specific 6-base pair sequence motif, yielding approximately 16 labels per 100,000 base pairs in the human genome. After labeling, the molecules are linearized in the Saphyr chip on the Saphyr instrument and imaged.
DLS uses a single direct-labeling enzymatic reaction to attach a fluorophore to the DNA at a specific 6-base pair sequence motif, yielding approximately 16 labels per 100,000 base pairs in the human genome. After labeling, the molecules are linearized in the nanochannel chips on the OGM instruments and imaged.
Some reagents are supplied through a single source supplier. This supplier requires a sufficient notification period to allow for supply continuity and the identification and technology transfer to a new supplier in the event either party wishes to terminate the relationship. We actively manage component obsolescence by subscribing to our vendors’ end-of-life notifications.
This supplier requires a sufficient notification period to allow for supply continuity and the identification and technology transfer to a new supplier in the event either party wishes to terminate the relationship. We actively manage component obsolescence by subscribing to our vendors’ end-of-life notifications.
We believe the three areas of the genomics market that are driving demand for the Saphyr system today: • Consolidation of traditional cytogenetics techniques in constitutional and cancer applications. To provide a robust clinical analysis, cytogenetic assays detect known SVs that are linked to specific diseases or therapeutic responses.
We believe the three areas of the genomics market that are driving demand for the OGM systems today: • Consolidation of traditional cytogenetics techniques in two applications - constitutional genetic disease and cancer. To provide a robust clinical analysis, cytogenetic assays detect SVs that are linked to specific diseases or therapeutic responses.
Through BioDiscovery, we can now serve the NGS and array markets directly though software with an industry leading data interpretation solution for revealing more answers with delivery of copy number variants across the genome.
Additionally, through our VIA software, we serve the NGS and array markets directly though with an industry leading data interpretation solution for revealing more answers with delivery of copy number variants across the genome.
The IRA also eliminates the coverage gap under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program.
The Inflation Reduction Act of 2022 (“IRA”) also eliminates the coverage gap under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition to the risk factors discussed in this section and elsewhere in our Annual Report on Form 10-K, these factors include: • our commercial progress in marketing and selling our genome analysis systems, including sales and revenue trends; • changes in laws or regulations applicable to our systems; • adverse developments related to our laboratory facilities; • increased competition in the diagnostics services industry; • changes in the structure or funding of research at academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies, including changes that would affect their ability to purchase our products, consumables and technologies; • the failure to obtain and/or maintain coverage and adequate reimbursement for our Bionano Laboratories products and diagnostic assays and patients’ willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement; • the failure of our customers to obtain and/or maintain coverage and adequate reimbursement for their services using our Saphyr systems, Ionic Purification systems or our NxClinical software; • adverse developments concerning our manufacturers and suppliers; • our inability to establish future collaborations; • additions or departures of key scientific or management personnel; • introduction of new testing services offered by us or our competitors; • announcements of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our ability to effectively manage our growth; • the size and growth, if any, of our targeted markets; • the failure or discontinuation of any of our product development and research programs; • actual or anticipated variations in quarterly operating results; • our cash position; • our failure to meet the estimates and projections of the investment community and securities analysts or that we may otherwise provide to the public; • publication of research reports about us or our industries or positive or negative recommendations or withdrawal of research coverage by securities analysts; 59 Table of Contents • changes in the market valuations of similar companies; • overall performance of the equity markets; • issuances of debt or equity securities; • sales of our securities by us or our stockholders in the future; • trading volume of our securities; • changes in accounting practices; • ineffectiveness of our internal controls; • data breaches of our company, providers, vendors or customers; • regulatory or legal developments in the United States and other countries; • disputes or other developments relating to proprietary rights, including our ability to adequately protect our proprietary rights in our technologies; • significant lawsuits, including patent or stockholder litigation; • general political and economic conditions; • natural disasters, infectious diseases, conflict, including the ongoing military conflict between Russia and Ukraine and the related sanctions, civil unrest, epidemics or pandemics including COVID-19, outbreaks, resurgences or major catastrophic events; • general economic conditions, including economic slowdowns, recessions, inflation, rising interest rates and tightening of credit markets; and • other events or factors, many of which are beyond our control.
Biggest changeIn addition to the risk factors discussed in this section and elsewhere in our Annual Report, these factors include: • our commercial progress in marketing and selling our genome analysis systems, including sales and revenue trends; • changes in laws or regulations applicable to our systems; • adverse developments related to our laboratory facilities; • increased competition in the diagnostics services industry; • changes in the structure or funding of research at academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies, including changes that would affect their ability to purchase our products, consumables and technologies; • the failure to obtain and/or maintain coverage and adequate reimbursement for our Bionano Laboratories products and diagnostic assays and patients’ willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement; • the failure of our customers to obtain and/or maintain coverage and adequate reimbursement for their services using our OGM systems, Ionic Purification systems or our VIA software; • adverse developments concerning our manufacturers and suppliers; • our inability to establish future collaborations; • additions or departures of key scientific or management personnel; • introduction of new testing services offered by us or our competitors; • announcements of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our ability to effectively manage our growth; • the size and growth, if any, of our targeted markets; • the failure or discontinuation of any of our product development and research programs; • actual or anticipated variations in quarterly operating results; • our cash position; • our failure to meet the estimates and projections of the investment community and securities analysts or that we may otherwise provide to the public; • publication of research reports about us or our industries or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the market valuations of similar companies; 64 Table of Contents • overall performance of the equity markets; • issuances of debt or equity securities; • sales of our securities by us or our stockholders in the future; • trading volume of our securities; • changes in accounting practices; • ineffectiveness of our internal controls; • data breaches of our company, providers, vendors or customers; • regulatory or legal developments in the United States and other countries; • disputes or other developments relating to proprietary rights, including our ability to adequately protect our proprietary rights in our technologies; • significant lawsuits, including patent or stockholder litigation; • natural disasters, infectious diseases, conflict, including the ongoing military conflict between Russia and Ukraine and the related sanctions, conflicts in the middle east, civil unrest, epidemics or pandemics, outbreaks, resurgences or major catastrophic events; • general political and economic conditions, including potential future disruptions in access to bank deposits or lending commitments due to bank failures; • our cost savings initiatives announced in May 2023, October 2023 and March 2024; • the reverse stock split of the Company’s common stock effected on August 4, 2023; and • other events or factors, many of which are beyond our control.
We may have experienced one or more ownership changes in the past and we may also experience additional ownership changes in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our control.
We have experienced one or more ownership changes in the past and we may also experience additional ownership changes in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our control.
In connection with the acquisition of BioDiscovery, we issued an additional 5.0 million shares of our common stock subject to vesting based on continued service of a key employee. These shares vested in full on October 4, 2022.
In connection with the acquisition of BioDiscovery, we issued an additional 0.5 million shares of our common stock subject to vesting based on continued service of a key employee. These shares vested in full on October 4, 2022.
For example, as interest rates continue to rise, our customers may be unable to deploy additional capital to purchase, or re-prioritize their budget away from, our products and technologies.
For example, as interest rates continue to rise, our customers may be unable to deploy additional capital to purchase, or may re-prioritize their budget away from, our products and technologies.
While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. We may share or receive sensitive data with or from third parties.
While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. We share or receive Sensitive Data with or from third parties.
For example: • others may be able to develop and/or use technologies that are similar to our technologies or aspects of our technologies but that does not cover the claims of any our patents or patents that may issue from our patent applications or those we license; • we or the licensor of our licensed-in patents might not have been the first to make the inventions disclosed and/or claimed in a pending patent application that we own or license; • we or the licensor of our licensed-in patents might not have been the first to file patent applications disclosing and/or claiming an invention; • others may independently develop similar or alternative technologies without infringing our or our licensors’ intellectual property rights; • pending patent applications that we own or license may not lead to issued patents or may not result in the claims that we want (for example, as to the scope of issued claims, if any); • patents, if issued, that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors or other third parties; 58 Table of Contents • third parties may compete with us in jurisdictions where we do not pursue and obtain patent protection; • we may not be able to obtain and/or maintain necessary or useful licenses on reasonable terms or at all; • third parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property; • we may not be able to maintain the confidentiality of our trade secrets or other proprietary information; • we may not develop or in-license additional proprietary technologies that are patentable; and • the patents or other intellectual property of others may have an adverse effect on our business.
For example: • others may be able to develop and/or use technologies that are similar to our technologies or aspects of our technologies but that does not cover the claims of any our patents or patents that may issue from our patent applications or those we license; • we or the licensor of our licensed-in patents might not have been the first to make the inventions disclosed and/or claimed in a pending patent application that we own or license; • we or the licensor of our licensed-in patents might not have been the first to file patent applications disclosing and/or claiming an invention; • others may independently develop similar or alternative technologies without infringing our or our licensors’ intellectual property rights; • pending patent applications that we own or license may not lead to issued patents or may not result in the claims that we want (for example, as to the scope of issued claims, if any); • patents, if issued, that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors or other third parties; • third parties may compete with us in jurisdictions where we do not pursue and obtain patent protection; 63 Table of Contents • we may not be able to obtain and/or maintain necessary or useful licenses on reasonable terms or at all; • third parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property; • we may not be able to maintain the confidentiality of our trade secrets or other proprietary information; • we may not develop or in-license additional proprietary technologies that are patentable; and • the patents or other intellectual property of others may have an adverse effect on our business.
No assurance can be given that our or our licensors’ patent applications or granted patents will have priority over any other patent or patent application involved in such a proceeding, or will be held valid as an outcome of the proceeding; • other parties may independently develop similar or alternative products and technologies or duplicate any of our products and technologies, which can potentially impact our market share, revenue, and goodwill, regardless of whether intellectual property rights are successfully enforced against these other parties; • it is possible that our owned or licensed pending patent applications will not result in granted patents, and even if such pending patent applications issue as patents, they may not provide intellectual property protection of commercially 51 Table of Contents viable products or product features, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties, patent offices, and/or the courts; • we may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could potentially impact the validity or scope of our patents or pending patent applications, or patent applications that we intend to file; • we take efforts to enter into agreements with employees, consultants, collaborators, and, as applicable, advisors to confirm ownership and chain of title in intellectual property rights.
No assurance can be given that our or our licensors’ patent applications or granted patents will have priority over any other patent or patent application involved in such a proceeding, or will be held valid as an outcome of the proceeding; • other parties may independently develop similar or alternative products and technologies or duplicate any of our products and technologies, which can potentially impact our market share, revenue, and goodwill, regardless of whether intellectual property rights are successfully enforced against these other parties; • it is possible that our owned or licensed pending patent applications will not result in granted patents, and even if such pending patent applications issue as patents, they may not provide intellectual property protection of commercially 56 Table of Contents viable products or product features, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties, patent offices, and/or the courts; • we may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could potentially impact the validity or scope of our patents or pending patent applications, or patent applications that we intend to file; • we take efforts to enter into agreements with employees, consultants, collaborators, and, as applicable, advisors to confirm ownership and chain of title in intellectual property rights.
If a third-party claims that we or any of our licensors, customers or collaboration partners infringe upon a third-party’s intellectual property rights, we may have to: • seek to obtain licenses that may not be available on commercially reasonable terms, if at all; 54 Table of Contents • abandon any product or service alleged or held to infringe, or redesign our products or technologies or processes to avoid potential assertion of infringement; • pay substantial damages including, in exceptional cases, treble damages and attorneys’ fees, which we may have to pay if a court decides that the product or proprietary technology at issue infringes upon or violates the third-party’s rights; • pay substantial royalties or fees for, or grant cross-licenses to, our technology; or • defend litigation or administrative proceedings that may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
If a third party claims that we or any of our licensors, customers or collaboration partners infringe upon a third-party’s intellectual property rights, we may have to: • seek to obtain licenses that may not be available on commercially reasonable terms, if at all; 59 Table of Contents • abandon any product or service alleged or held to infringe, or redesign our products or technologies or processes to avoid potential assertion of infringement; • pay substantial damages including, in exceptional cases, treble damages and attorneys’ fees, which we may have to pay if a court decides that the product or proprietary technology at issue infringes upon or violates the third-party’s rights; • pay substantial royalties or fees for, or grant cross-licenses to, our technology; or • defend litigation or administrative proceedings that may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
If we are unable to keep up with demand for our products, our revenue could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’ products. Our inability to successfully manufacture our products would have a material adverse effect on our operating results.
If we are unable to keep up with demand for our products, our revenue could be impaired, market acceptance for our products and systems could be adversely affected and our customers might instead purchase our competitors’ products and systems. Our inability to successfully manufacture our products would have a material adverse effect on our operating results.
Some of these provisions include: • a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; • a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; • a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, the president or by a majority of the total number of authorized directors; • advance notice requirements for stockholder proposals and nominations for election to our board of directors; • a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors; • a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and • the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
Some of these provisions include: • a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; • a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; 67 Table of Contents • a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, the president or by a majority of the total number of authorized directors; • advance notice requirements for stockholder proposals and nominations for election to our board of directors; • a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors; • a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and • the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
Risks of a prolonged global economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis. A weak or declining economy, regardless of the reason for the decline, could also strain our suppliers, possibly resulting in supply disruption.
Risks of a prolonged economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis. A weak or declining economy, regardless of the reason for the decline, could also strain our suppliers, possibly resulting in supply disruption.
Our ability to successfully market the products and diagnostic assays that we have developed, and may develop in the future, will depend on numerous factors, including: • conducting clinical utility studies of such assays in collaboration with key thought leaders to demonstrate their use and value in important medical decisions such as treatment selection; • whether our current or future partners, vigorously support our offerings; • the success of our sales force; • whether healthcare providers believe such diagnostic assays provide clinical utility; • whether the medical community accepts that such diagnostic assays are sufficiently sensitive and specific to be meaningful in patient care and treatment decisions; • our ability to continually source raw materials, shipping kits and other products that we sell or consume in our manufacturing process that are of sufficient quality and supply; • our ability to continue to fund planned sales and marketing activities; and • whether private health insurers, government health programs and other third-party payors will adopt our current and future assays in their guidelines, or cover such diagnostic assays and, if so, whether they will adequately reimburse us.
Our ability to successfully market the products and diagnostic assays that we have developed, and may develop in the future, will depend on numerous factors, including: • conducting clinical utility studies of such assays in collaboration with key thought leaders to demonstrate their use and value in important medical decisions such as treatment selection; • whether our current or future partners, vigorously support our offerings; • the success of our sales force; • whether healthcare providers believe such diagnostic assays provide clinical utility; 38 Table of Contents • whether the medical community accepts that such diagnostic assays are sufficiently sensitive and specific to be meaningful in patient care and treatment decisions; • our ability to continually source raw materials, shipping kits and other products that we sell or consume in our manufacturing process that are of sufficient quality and supply; • our ability to continue to fund planned sales and marketing activities; and • whether private health insurers, government health programs and other third-party payors will adopt our current and future assays in their guidelines, or cover such diagnostic assays and, if so, whether they will adequately reimburse us.
The laws that may affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute, or the AKS, which prohibits, among other things, any person or entity from knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.
The laws that may affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute (the “AKS”), which prohibits, among other things, any person or entity from knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.
Integration challenges may include the following: • disruption in our relationships with our pre-acquisition customers, distributors or suppliers, or in the relationships of our acquired businesses with their pre-acquisition customers, distributors or suppliers, as a result of such a transaction; • unanticipated expenses and liabilities related to acquired companies or assets; • disputes with the seller(s) of any acquired companies or assets or litigation with the seller(s) or third parties resulting from acquired companies or assets; • difficulties integrating acquired personnel, technologies, operations and legal compliance obligations into our existing business; 31 Table of Contents • diversion of management time and focus from operating our business to acquisition integration challenges; • increases in our expenses and reductions in our cash available for operations and other uses; • possible write-offs or impairment charges relating to acquired businesses or assets; • difficulties developing and marketing new products, technologies and services or integrating new products, technologies and services into our commercial plan; • entering markets in which we have limited or no prior experience; and • coordinating our efforts throughout various localities and time zones.
Integration challenges may include the following: • disruption in our relationships with our pre-acquisition customers, distributors or suppliers, or in the relationships of our acquired businesses with their pre-acquisition customers, distributors or suppliers, as a result of such a transaction; • unanticipated expenses and liabilities related to acquired companies or assets; • disputes with the seller(s) of any acquired companies or assets or litigation with the seller(s) or third parties resulting from acquired companies or assets; • difficulties integrating acquired personnel, technologies, operations and legal compliance obligations into our existing business; • diversion of management time and focus from operating our business to acquisition integration challenges; • increases in our expenses and reductions in our cash available for operations and other uses; • possible write-offs or impairment charges relating to acquired businesses or assets; • difficulties developing and marketing new products, technologies and services or integrating new products, technologies and services into our commercial plan; • entering markets in which we have limited or no prior experience; and • coordinating our efforts throughout various localities and time zones.
If our intellectual property does not adequately protect our market share against competitors’ products or technologies, services and methods, our competitive position could be adversely affected, as could our business. 52 Table of Contents We have rights in some intellectual property that has been discovered through government funded programs and thus is subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S. industry.
If our intellectual property does not adequately protect our market share against competitors’ products or technologies, services and methods, our competitive position could be adversely affected, as could our business. 57 Table of Contents We have rights in some intellectual property that has been discovered through government funded programs and thus is subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S. industry.
The IRA also eliminates the coverage gap under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program.
The IRA also eliminates the coverage gap under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program.
Historically, most of our revenue has been denominated in U.S. dollars. For sales made to customers outside of the United States, we may sell our products and services in local currency outside of the United States.
Historically, most of our revenue has been denominated in U.S. dollars. For sales made to customers outside of the United States, we sell our products and services in local currency.
For example, in connection with our acquisition of Lineagen, a U.S.-based provider of proprietary molecular diagnostics services for individuals presenting with certain neurodevelopmental disorders, we issued 6.2 million shares of our common stock, in our acquisition of BioDiscovery, a U.S.-based software company with solutions for analysis, interpretation and reporting of genomics data, we paid upfront consideration consisting of a combination of approximately $52.3 million in cash and 2.7 million shares of our common stock, and in our acquisition of Purigen, a U.S-based DNA and RNA extraction company, we paid upfront consideration of approximately $32.0 million in cash.
For example, in connection with our acquisition of Lineagen, a U.S.-based provider of proprietary molecular diagnostics services for individuals presenting with certain neurodevelopmental disorders, we issued 0.6 million shares of our common stock, in our acquisition of BioDiscovery, a U.S.-based software company with solutions for analysis, interpretation and reporting of genomics data, we paid upfront consideration consisting of a combination of approximately $52.3 million in cash and 0.3 million shares of our common stock, and in our acquisition of Purigen, a U.S-based DNA and RNA extraction company, we paid upfront consideration of approximately $32.0 million in cash.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. 57 Table of Contents We may use third-party open source software components in future products or technologies, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell such products or technologies.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. 62 Table of Contents Use of third-party open source software components in our products or our future products or technologies, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell such products or technologies.
As we have done previously, we may need or may choose to obtain licenses and/or acquire intellectual property rights from third parties to advance our research or begin commercialization of our current or future products or services, and we cannot 53 Table of Contents provide any assurances that third-party patents do not exist that might be enforced against our current or future products or services in the absence of such a license.
As we have done previously, we may need or may choose to obtain licenses and/or acquire intellectual property rights from third parties to advance our research or begin commercialization of our current or future products or services, and we cannot 58 Table of Contents provide any assurances that third-party patents do not exist that might be enforced against our current or future products or services in the absence of such a license.
Food and Drug Administration, or FDA, to be medical devices or otherwise subject to additional regulation by the FDA; • pursue a regulatory path with the FDA, or a regulatory body outside the United States, to market our existing RUO products or new products utilized for diagnostic purposes; • lease additional facilities or build-out existing facilities as we continue to grow our employee headcount, inventory and research and development; • further expand our operations outside the United States; • enter into collaboration arrangements, if any, or in-license products and technologies; • acquire or invest in complimentary businesses or assets; • add operational, financial and management information systems; and • cover increased costs incurred as a result of continued operation as a public company, including costs resulting from our no longer qualifying as an emerging growth company and, if applicable, in the future, loss of our status as a smaller reporting company or changes in our status from a non-accelerated filer to an accelerated filer or large accelerated filer.
Food and Drug Administration, or FDA, to be medical devices or otherwise subject to additional regulation by the FDA; • pursue a regulatory path with the FDA, or a regulatory body outside the United States, to market our existing RUO products or new products utilized for diagnostic purposes; • lease additional facilities or build-out existing facilities as we continue to grow our inventory and research and development; • further expand our operations outside the United States; • enter into collaboration arrangements, if any, or in-license products and technologies; • acquire or invest in complementary businesses or assets; • add operational, financial and management information systems; and • cover increased costs incurred as a result of continued operation as a public company, including costs resulting from our no longer qualifying as an emerging growth company and, if applicable, in the future, loss of our status as a smaller reporting company or changes in our status from a non-accelerated filer to an accelerated filer or large accelerated filer.
Like the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform services for them that involve individually identifiable health information as well as their covered subcontractors; • state laws that prohibit other specified practices, such as billing physicians for tests that they order or providing tests at no or discounted cost to induce physician or patient adoption; insurance fraud laws; waiving coinsurance, co-payments, deductibles, and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other third-party payors employing, exercising control over or splitting professional fees with licensed professionals in violation of state laws prohibiting fee splitting or the corporate practice of medicine and other professions; • federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; and • federal, state, local and foreign laws that govern the data privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal data, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
Like the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • HIPAA, as amended by HITECH, and their implementing regulations, which imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform services for them that involve individually identifiable health information as well as their covered subcontractors; • state laws that prohibit other specified practices, such as billing physicians for tests that they order or providing tests at no or discounted cost to induce physician or patient adoption; insurance fraud laws; waiving coinsurance, co-payments, deductibles, and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other third-party payors employing, exercising control over or splitting 54 Table of Contents professional fees with licensed professionals in violation of state laws prohibiting fee splitting or the corporate practice of medicine and other professions; • federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; and • federal, state, local and foreign laws that govern the data privacy and security of health information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related personal data, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
As a clinical laboratory, our business practices may face additional scrutiny from government regulatory agencies such as the Department of Justice, the U.S. Department of Health and Human Services Office of Inspector General, or OIG, and CMS. Certain arrangements between clinical laboratories and referring physicians have been identified in fraud alerts issued by the OIG as implicating the AKS.
As a clinical laboratory, our business practices may face additional scrutiny from government regulatory agencies such as the Department of Justice, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”), and CMS. Certain arrangements between clinical laboratories and referring physicians have been identified in fraud alerts issued by the OIG as implicating the AKS.
If we or our collaborators are required to obtain a PMA or 510(k) clearance for products based on our technology, we or they would be subject to a substantial number of additional requirements for medical devices, including establishment registration, device listing, Quality Systems Regulations which cover the design, testing, production, control, quality assurance, labeling, packaging, servicing, sterilization (if required), and storage and shipping of medical devices (among other activities), product labeling, advertising, recordkeeping, post-market surveillance, post-approval studies, adverse event reporting, and correction and removal (recall) regulations.
If we or our collaborators are required to obtain a PMA or 510(k) clearance for products based on our technology, we or they would be subject to a substantial number of additional requirements for medical devices, including establishment registration, device listing, Quality Systems Regulations which cover the design, testing, production, control, quality assurance, labeling, packaging, servicing, sterilization (if required), and storage and shipping of medical devices (among other activities), 49 Table of Contents product labeling, advertising, recordkeeping, post-market surveillance, post-approval studies, adverse event reporting, and correction and removal (recall) regulations.
Such reporting has been subject to numerous delays. Beginning on January 1, 2018, CMS has begun using reported private payor pricing to periodically revise payment rates under the CLFS. Based on current law, between January 1, 2023 and March 31, 2023, applicable laboratories will be required to report on data collected during January 1, 2019 and June 30, 2019.
Such reporting has been subject to numerous delays. Beginning on January 1, 2018, CMS has begun using reported private payor pricing to periodically revise payment rates under the CLFS. Based on current law, between January 1, 2025 and March 31, 2025, applicable laboratories will be required to report on data collected during January 1, 2019 and June 30, 2019.
For example, we will likely need to raise substantial additional capital to: 27 Table of Contents • expand our sales and marketing efforts to further commercialize our products, technologies and services and address competitive developments; • expand our research and development efforts to improve our existing products, technologies and services and develop and launch new products, technologies and services, particularly if any of our products, technologies and services are deemed by the U.S.
For example, we will likely need to raise substantial additional capital to: • expand our sales and marketing efforts to further commercialize our products, technologies and services and address competitive developments; 31 Table of Contents • expand our research and development efforts to improve our existing products, technologies and services and develop and launch new products, technologies and services, particularly if any of our products, technologies and services are deemed by the U.S.
Recent developments in U.S. patent law have made it more difficult to stop these and related practices based on theories of patent infringement. 56 Table of Contents Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products or technologies.
Recent developments in U.S. patent law have made it more difficult to stop these and related practices based on theories of patent infringement. 61 Table of Contents Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products or technologies.
We may become subject to claims that one or more current or 55 Table of Contents former employees, consultants, advisors, or independent contractors of ours owns rights in our intellectual property and/or has assigned or is under an obligation to assign rights in our intellectual property to another party. This may include a competitor of ours.
We may become subject to claims that one or more current or 60 Table of Contents former employees, consultants, advisors, or independent contractors of ours owns rights in our intellectual property and/or has assigned or is under an obligation to assign rights in our intellectual property to another party. This may include a competitor of ours.
Our success will depend on several factors, including our ability to: • correctly identify customer needs and preferences and predict future needs and preferences; • allocate our research and development funding to products and technologies with higher growth prospects; • anticipate and respond to our competitors’ development of new products and technological innovations; • innovate and develop new technologies and applications, including software applications through our BioDiscovery subsidiary, and acquire or obtain rights to third-party technologies that may have valuable applications in the markets we serve; • our ability to successfully market our Ionic Purification system through our Purigen business, and to integrate that technology in our existing ecosystem of technologies; • successfully commercialize new technologies in a timely manner, price them competitively and manufacture and deliver sufficient volumes of new products of appropriate quality on time; and • customers’ willingness to adopt new technologies.
Our success will depend on several factors, including our ability to: • correctly identify customer needs and preferences and predict future needs and preferences; • allocate our research and development funding to products and technologies with higher growth prospects; • anticipate and respond to our competitors’ development of new products and technological innovations; • innovate and develop new technologies and applications, including software applications through our BioDiscovery subsidiary, and acquire or obtain rights to third-party technologies that may have valuable applications in the markets we serve; • our ability to successfully market our Ionic Purification system through our Purigen business; • successfully commercialize new technologies in a timely manner, price them competitively and manufacture and deliver sufficient volumes of new products of appropriate quality on time; and • customers’ willingness to adopt new technologies.
During times of war and other major conflicts, including as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
During times of war and other major conflicts, including as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, and the military conflict between Israel and Gaza, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
The FDA Guidance on “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only”, or, the RUO/IUO Labeling Guidance, emphasizes that the FDA will review the totality of the circumstances when evaluating whether equipment and testing components are properly labeled as RUO.
The FDA Guidance on “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only”, emphasizes that the FDA will review the totality of the circumstances when evaluating whether equipment and testing components are properly labeled as RUO.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or the FCA; • the Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including laboratory and pathology services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services and prohibits that entity from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies; 49 Table of Contents • federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented false, fictitious or fraudulent claims for payment or approval by the federal government, including federal health care programs, such as Medicare and Medicaid, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government; • the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA; • the Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including laboratory and pathology services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services and prohibits that entity from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies; • federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented false, fictitious or fraudulent claims for payment or approval by the federal government, including federal health care programs, such as Medicare and Medicaid, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government; • EKRA prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.
Foreign Corrupt Practices Act, data privacy and security requirements, labor laws and anti-competition regulations; • export or import restrictions; • laws and business practices favoring local companies; • longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • political and economic instability; and • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers.
FCPA, data privacy and security requirements, labor laws and anti-competition regulations; • export or import restrictions; • laws and business practices favoring local companies; • longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • political and economic instability; and • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers.
Failure to comply with applicable FDA requirements could subject us to misbranding or adulteration allegations under the Federal Food, Drug, and Cosmetic Act. We could be subject to a range of enforcement actions, including warning letters, 45 Table of Contents injunctions, civil monetary penalties, criminal prosecution, and recall and/or seizure of products, as well as significant adverse publicity.
Failure to comply with applicable FDA requirements could subject us to misbranding or adulteration allegations under the Federal Food, Drug, and Cosmetic Act. We could be subject to a range of enforcement actions, including warning letters, injunctions, civil monetary penalties, criminal prosecution, and recall and/or seizure of products, as well as significant adverse publicity.
If third-party payors do not provide coverage of, or do not provide adequate reimbursement for, a substantial portion of the list price of our Bionano Laboratories products and diagnostic assays, we may need to seek additional payment from the patient beyond any co-payments and deductibles, which may adversely affect demand for our Bionano Laboratories products and diagnostic assays.
If third-party payors do not provide coverage of, or do not provide adequate reimbursement for, 51 Table of Contents a substantial portion of the list price of our Bionano Laboratories products and diagnostic assays, we may need to seek additional payment from the patient beyond any co-payments and deductibles, which may adversely affect demand for our Bionano Laboratories products and diagnostic assays.
Our continued growth could require significant capital expenditures and might divert financial resources from other projects such as the development or integration of new products, technologies and services. As additional products and technologies are commercialized, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications.
Our continued growth is likely to require significant capital expenditures and might divert financial resources from other projects such as the development or integration of new products, technologies and services. As additional products and technologies are commercialized, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications.
If the FDA determines that our RUO products are being marketed for clinical diagnostic use without the required PMA or 510(k) clearance, we may be required to cease marketing our products as planned, recall the products from customers, revise our marketing plans, and/or suspend or delay the commercialization of our products until we obtain the required authorization.
If the FDA determines that our RUO products are being marketed for clinical diagnostic use without the required PMA or 510(k) clearance, we may be required to cease marketing our products as planned, recall the products from customers, revise our marketing plans, and/or suspend or delay the commercialization of our products until we obtain the 41 Table of Contents required authorization.
Difficulties or delays in research, development or production of new products, technologies and services or failure to gain market acceptance of new products and technologies may reduce future revenues and adversely affect our competitive position. 35 Table of Contents If we do not successfully manage the development and launch of new products and technologies, our financial results could be adversely affected.
Difficulties or delays in research, development or production of new products, technologies and services or failure to gain market acceptance of new products and technologies may reduce future revenues and adversely affect our competitive position. If we do not successfully manage the development and launch of new products and technologies, our financial results could be adversely affected.
In addition, it is important that our gene mapping and DNA isolation systems be perceived as accurate and reliable by the scientific and medical research community as a whole. 32 Table of Contents The scientific community is comprised of a small number of early adopters and key opinion leaders who significantly influence the rest of the community.
In addition, it is important that our gene mapping and DNA isolation systems be perceived as accurate and reliable by the scientific and medical research community as a whole. The scientific community is comprised of a small number of early adopters and key opinion leaders who significantly influence the rest of the community.
We currently sell our Saphyr system and Ionic Purification system for RUO, through our direct field sales and support organizations located in North America and Europe and through a combination of our own sales force and third-party distributors in additional major markets such as Australia, China, Japan and South Korea.
We currently sell our OGM systems and Ionic Purification system for RUO through our direct field sales and support organizations located in North America and Europe and through a combination of our own sales force and third-party distributors in additional major markets such as Australia, China, Japan and South Korea.
For example, we may also be subject to the Payment Card Industry Data Security Standard, or PCI DSS. The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
For example, we may also be subject to the Payment Card Industry Data Security Standard (“PCI DSS”). The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
Since our contracts with these manufacturers do not commit them to supply quantities beyond the amounts included in our 37 Table of Contents purchase orders, and do not commit them to carry inventory or make available any particular quantities, these contract manufacturers may give other customers’ needs higher priority than ours, and we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms.
Since our contracts with these manufacturers do not commit them to supply quantities beyond the amounts included in our purchase orders, and do not commit them to carry inventory or make available any particular quantities, these contract manufacturers may give other customers’ needs higher priority than ours, and we may not be able to obtain adequate supplies in a timely manner or on commercially reasonable terms.
The law includes a limited number of exceptions, some of which closely align with corresponding federal Anti-Kickback Statute exceptions and safe harbors, and others that materially differ; • the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, in connection with the delivery of or payment for healthcare benefits, items or services.
The law includes a limited number of exceptions, some of which closely align with corresponding federal Anti-Kickback Statute exceptions and safe harbors, and others that materially differ; • HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, in connection with the delivery of or payment for healthcare benefits, items or services.
We expect to continue to spend substantial amounts of cash in order to continue the commercialization of our products and technologies, fund our research and development programs, expand headcount and execute potential strategic transactions.
We expect to continue to spend substantial amounts of cash in order to continue the commercialization of our products and technologies, fund our research and development programs, and execute potential strategic transactions.
Any violations of anti-corruption and anti-money laundering laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, prospects, financial condition, or results of operations.
Any violations of anti-corruption and anti-money laundering laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could 55 Table of Contents result in a material adverse effect on our business, prospects, financial condition, or results of operations.
Accordingly, in addition to transaction costs, these acquisitions have increased our operating expenses, further increasing our net losses. We cannot predict the number, timing or size of any future strategic transactions, or the effect that any such transactions might have on our operating results.
Accordingly, in addition to transaction costs, these acquisitions have increased our operating expenses, further increasing our net losses. We cannot 36 Table of Contents predict the number, timing or size of any future strategic transactions, or the effect that any such transactions might have on our operating results.
Any addressable market opportunities identified in this Annual Report on Form 10-K should not be construed as financial guidance and should not otherwise be relied upon as being necessarily indicative of future results, and you are cautioned not to place undue reliance on our estimated addressable opportunities.
Any addressable market opportunities identified in this Annual Report should not be construed as financial guidance and should not otherwise be relied upon as being necessarily indicative of future results, and you are cautioned not to place undue reliance on our estimated addressable opportunities.
In the United States, molecular testing laboratories have multiple options for reimbursement coding, but we expect that the primary codes used will be the genomic sequencing procedure codes, or GSPs. The American Medical Association, or AMA, added GSPs to its clinical laboratory fee schedule in 2015.
In the United States, molecular testing laboratories have multiple options for reimbursement coding, but we expect that the primary codes used will be the genomic sequencing procedure codes, or GSPs. The AMA added GSPs to its clinical laboratory fee schedule in 2015.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of 44 Table of Contents biological, hazardous or radioactive materials. We do not have any insurance for liabilities arising from medical or hazardous materials.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. We do not have any insurance for liabilities arising from medical or hazardous materials.
Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our 40 Table of Contents products, or in our decreased ability to export or sell our products to existing or potential customers.
Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers.
If we 25 Table of Contents do not address these risks successfully, or if our assumptions regarding these risks and uncertainties are incorrect or change over time, 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.
If we do not address these risks successfully, or if our assumptions regarding these risks and uncertainties are incorrect or change over time, 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.
Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure, terrorism, burglary, public health crises (including restrictions that may result from various geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine and Russia or the COVID-19 pandemic) or other events, which may make it difficult or impossible for us to perform our testing services for some period of time or to receive and store samples.
Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure, terrorism, burglary, public health crises (including restrictions that may result from various geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine and Russia) or 42 Table of Contents other events, which may make it difficult or impossible for us to perform our testing services for some period of time or to receive and store samples.
Claim adjudication errors may result in a delay in payment processing or a reduction in the amount of the payment we receive. 46 Table of Contents As we introduce new products, we may need to add new codes to our billing process as well as our financial reporting systems.
Claim adjudication errors may result in a delay in payment processing or a reduction in the amount of the payment we receive. As we introduce new products, we may need to add new codes to our billing process as well as our financial reporting systems.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock.
In addition, the marketing, sale and use of our current or future products and assays could lead to the filing of product liability claims against us if someone alleges that our products failed to perform as designed.
In addition, the marketing, sale and use of our current or future products and assays could lead to the 43 Table of Contents filing of product liability claims against us if someone alleges that our products failed to perform as designed.
The total number of shares of our common stock available for the grant of awards under these plans is 8.6 million, 0.1 million and 2.1 million for our 2018 Equity Incentive Plan, as amended, 2018 Employee Stock Purchase Plan and 2020 Inducement Plan, as amended, respectively, subject to adjustment, including pursuant to automatic “evergreen” increases in certain of our plans.
The total number of shares of our common stock available for the grant of awards under these plans is 1.3 million, 1.3 million and 0.1 million for our 2018 Equity Incentive Plan, as amended, 2018 Employee Stock Purchase Plan and 2020 Inducement Plan, as amended, respectively, subject to adjustment, including pursuant to automatic “evergreen” increases in certain of our plans.
In addition, utilization of our net operating losses and research and development credit carryforwards may be subject to limitations due to ownership changes that have occurred or that could occur in the future in accordance with applicable provisions of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law.
In addition, utilization of our net operating losses and research and development credit carryforwards is subject to limitations due to ownership changes that have occurred or that could occur in the future in accordance with applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law.
In the near term, we expect that our revenue from sales of our Saphyr system, Ionic Purification system, NxClinical software, consumables and OGM services will be derived primarily from sales to academic and governmental research institutions, and academic and commercial clinical laboratories, as well as biopharmaceutical and contract research companies worldwide for research applications.
In the near term, we expect that our revenue from sales of our OGM systems, Ionic Purification system, VIA software, consumables and OGM services will be derived primarily from sales to academic and governmental research institutions, and academic and commercial clinical laboratories, as well as biopharmaceutical and contract research companies worldwide for research applications.
In March 2010, the ACA became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.
If we seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.
If we seek additional 29 Table of Contents financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We also were the assignee of approximately 97 pending patent applications and granted patents in particular jurisdictions outside the United States.
We also were the assignee of approximately 105 pending patent applications and granted patents in particular jurisdictions outside the United States.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to, loss of customers; interruptions or stoppages in our business operations; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to, loss of customers; interruptions or stoppages in our business operations; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
In particular, the European Economic Area (EEA) and the United Kingdom (UK) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.
In particular, the European Economic Area (“EEA”) and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.
We have encountered in the past, and will continue to encounter in the future, risks and difficulties frequently experienced by early commercial-stage companies, including those associated with scaling up our infrastructure, increasing the size of our organization and integrating acquired businesses.
We have encountered in the past, and will continue to encounter in the future, risks and difficulties frequently experienced by early commercial-stage companies, including those associated with scaling up our infrastructure, increasing the size of our organization, integrating acquired businesses and implementing cost savings initiatives.
In the near term, sales of our Saphyr system, Ionic Purification system, NxClinical software, consumables and genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies and products and adversely affect our business and operating results.
In the near term, sales of our OGM systems, Ionic Purification system, VIA software, consumables and genome analysis services will depend on levels of research and development spending by clinical research laboratories, academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our technologies and products and adversely affect our business and operating results.
It further states that merely including a labeling statement that a product is intended for RUO will not necessarily render the device exempt from the FDA’s 510(k) clearance, PMA, or other requirements, if the circumstances surrounding the distribution of the product indicate that the manufacturer intends for its product to be offered for clinical diagnostic use.
It further states that merely including a labeling statement that a product is intended for RUO will not necessarily render the device exempt from the FDA’s 510(k) clearance, premarket approval application (“PMA”), or other requirements, if the circumstances surrounding the distribution of the product indicate that the manufacturer intends for its product to be offered for clinical diagnostic use.
It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify a new facility, replace certain pieces of equipment or license or transfer our proprietary technology to a third party, particularly in light of licensure and accreditation requirements.
It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify a new facility with applicable regulatory authorities, replace certain pieces of equipment or license or transfer our proprietary technology to a third party, particularly in light of licensure and accreditation requirements.
Additionally, following the invasion of Ukraine by Russia, financial markets around the world experienced volatility. In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.
Additionally, following the invasion of Ukraine by Russia, financial markets around the world experienced volatility. In response to the invasion, the United States, UK and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.
If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.
If we 32 Table of Contents raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.
We rely on a single contract manufacturer for our optical genome mapping systems and a single contract manufacturer for our chip consumables. If either of these manufacturers should fail or not perform satisfactorily, our ability to supply these products would be negatively and adversely affected.
We rely on a single contract manufacturer for our OGM systems and a single contract manufacturer for our chip consumables. If either of these manufacturers should fail or not perform satisfactorily, our ability to supply these products would be negatively and adversely affected.
Although we believe that our current assays and our planned future assays represent a promising commercial opportunity, our products or assays may never gain significant acceptance in the marketplace and therefore may never generate substantial 33 Table of Contents revenue or profits for us.
Although we believe that our current assays and our planned future assays represent a promising commercial opportunity, our products or assays may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or profits for us.
Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.
Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations that govern the processing of personal data by us and on our behalf.
We may no longer qualify as a smaller reporting company in the future should the market value of our common stock held by non-affiliates as of the end of the second quarter of any given year once again exceed $700.0 million or our revenue as of the end of any fiscal year exceed $100.0 61 Table of Contents million.
We may no longer qualify as a smaller reporting company in the future should the market value of our common stock held by non-affiliates as of the end of the second quarter of any given year once again exceed $700.0 million or our revenue as for any fiscal year exceeds $100.0 million.
Currently, our Saphyr system is for RUO, but clinical laboratories may acquire our instrumentation through a capital purchase or capital lease and use the Saphyr and direct label stain chemistry to create their own potentially reimbursable products, such as laboratory developed tests for in vitro diagnostics.
Currently, our OGM systems are for RUO, but clinical laboratories may acquire our instrumentation through a capital purchase or capital lease and use the OGM system and direct label stain chemistry to create their own potentially reimbursable products, such as laboratory developed tests for in vitro diagnostics.
On August 16, 2022, President Biden signed the Inflation Reduction Act into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.
On August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.
These changes, among others, may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.
These changes in revenue and expenses, among others, may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.
In addition to other risk factors listed in this section, some of the important factors that, alone or together, may cause fluctuations in our quarterly and annual operating results include: • adoption of our OGM solutions on our Saphyr system, Ionic Purification system or successor systems; • our successful creation of an end-to-end solution for OGM; • the successful integration of our Bionano Laboratories, BioDiscovery and Purigen businesses; • execution on our commercial and reimbursement strategy involving Bionano Laboratories; • customer demand for current BioDiscovery software solutions, including NxClinical software, and future software solutions developed through BioDiscovery’s platform; • the position of our Purigen business in the DNA isolation space of genome analysis and customer demand for our Ionic Purification system; • the timing of customer orders and payments and our ability to recognize revenue; • the rate of utilization of consumables by our customers; • reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in our customer base, such as reduced or delayed investment in new technologies or spending on products, technologies or consumables; • differences in purchasing patterns across our customer base, including potential differences in consumables spending between earlier adopters of our technologies and more recent customers and variances in rates of increase of consumables spending following new technology purchases; 26 Table of Contents • geopolitical and macroeconomic developments, such as the conflict between Ukraine and Russia and related sanctions, such as the COVID-19 pandemic, inflation, increased cost of goods, supply chain issues, and global financial market conditions; • our ability to successfully integrate new personnel, technology and other assets that we may acquire into our company; • the timing of the introduction of new systems, products, technologies, system and product enhancements and services; • changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers; • future accounting pronouncements or changes in our accounting policies; and • the outcome of any current or future litigation or governmental investigations involving us or other third parties with whom we do business.
In addition to other risk factors listed in this section, some of the important factors that, alone or together, may cause fluctuations in our quarterly and annual operating results include: • adoption of our OGM solutions on our OGM systems, Ionic Purification system or successor systems; • our successful creation of an end-to-end solution for OGM; • execution on our commercial and reimbursement strategy involving Bionano Laboratories; • customer demand for current BioDiscovery software solutions, including VIA software, and future software solutions developed through BioDiscovery’s platform; • the position of our Purigen business in the DNA isolation space of genome analysis and customer demand for our Ionic Purification system; • the timing of customer orders and payments and our ability to recognize revenue; • the rate of utilization of consumables by our customers; • reductions in or other difficulties relating to staffing, capacity, shutdowns or slowdowns of laboratories and other institutions in our customer base, such as reduced or delayed investment in new technologies or spending on products, technologies or consumables; • differences in purchasing patterns across our customer base, including potential differences in consumables spending between earlier adopters of our technologies and more recent customers and variances in rates of increase of consumables spending following new technology purchases; • geopolitical and macroeconomic developments, such as the conflict between Ukraine and Russia and related sanctions, conflicts in the middle east, potential future disruptions in access to bank deposits or lending commitments due to bank failures, global pandemics, inflation, increased cost of goods, supply chain issues, and global financial market conditions; 30 Table of Contents • our ability to successfully integrate new personnel, technology and other assets that we may acquire into our company; • any cost saving and restructuring initiatives; • the timing of the introduction of new systems, products, technologies, system and product enhancements and services; • changes in governmental funding of life sciences research and development or other changes that impact budgets, budget cycles or seasonal or other spending patterns of our customers; • future accounting pronouncements or changes in our accounting policies; and • the outcome of any current or future litigation or governmental investigations involving us or other third parties with whom we do business.
We believe that the principal competitive factors in all of our target markets include: • cost of instruments and consumables; • accuracy, including sensitivity and specificity, and reproducibility of results; • reputation among customers; • innovation in product offerings; • flexibility, scalability and ease of use; and • compatibility with existing laboratory processes, tools and methods.
We believe that the principal competitive factors in all of our target markets include: • cost of instruments and consumables; • accuracy, including sensitivity and specificity, and reproducibility of results; 48 Table of Contents • reputation among customers and key opinion leaders; • innovation in product offerings; • flexibility, scalability and ease of use; and • compatibility with existing laboratory processes, tools and methods.
Risks related to government regulation and diagnostic product reimbursement If the FDA determines that our RUO products are medical devices or if we seek to market our RUO products for clinical diagnostic or health screening use, we will be required to obtain regulatory clearance(s) or approval(s), and may be required to cease or limit sales of our then marketed products, which could materially and adversely affect our business, financial condition and results of operations.
Risks related to government regulation and diagnostic product reimbursement If the FDA ends enforcement discretion for Laboratory Developed Tests or determines that our RUO products are medical devices or if we seek to market our RUO products for clinical diagnostic or health screening use, we or our collaborators or customers will be required to obtain regulatory clearance(s) or approval(s), and we may be required to cease or limit sales of our then marketed products, which could materially and adversely affect our business, financial condition and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+2 added−0 removed1 unchanged
Biggest changeIn January 2022, we executed an amendment to our headquarters lease for a new unit adding an additional 5,278 square feet of office and laboratory space in San Diego, California that expires in January 2026. 64 Table of Contents In August 2020, through the acquisition of Lineagen we obtained a lease for approximately 9,710 square feet of office space in Salt Lake City, Utah under a non-cancelable operating lease that expires in December 2026.
Biggest changeIn January 2022, we executed an amendment to our headquarters lease for a new unit adding an additional 5,278 square feet of office and laboratory space in San Diego, California that expires in January 2026.
In November 2022, through the acquisition of Purigen, we obtained an operating lease for approximately 16,165 square feet of office and laboratory space in Pleasanton, California that expires in July 2027. We continue to conduct part of our Purigen business at this property. We feel our properties are sufficient to satisfy our current needs.
In November 2022, through the acquisition of Purigen, we obtained an operating lease for approximately 16,165 square feet of office and laboratory space in Pleasanton, California that expires in July 2027. We conduct part of our Purigen business at this property. We believe our properties are sufficient to satisfy our current needs.
We continue to conduct part of our Bionano Laboratories business at this property. In October 2021, through the acquisition of BioDiscovery, we obtained a finance lease for approximately 4,786 square feet of office space in El Segundo, California that expires in February 2041. We continue to conduct part of our BioDiscovery business at this property.
In October 2021, through the acquisition of BioDiscovery, we obtained a finance lease for approximately 4,786 square feet of office space in El Segundo, California that expires in February 2041. We conduct part of our BioDiscovery business at this property.
ITEM 2. PROPERTIES We lease an aggregate of approximately 35,823 square feet of office, laboratory, and manufacturing space in two buildings at our headquarters in San Diego, California, with the lease for all rented space expiring December 31, 2025.
ITEM 2. PROPERTIES We lease an aggregate of approximately 41,101 square feet of office, laboratory, and manufacturing space in two buildings at our headquarters in San Diego, California, with the lease for all rented space expiring December 31, 2025.
Added
In August 2020, through the acquisition of Lineagen we obtained a lease for approximately 9,710 square feet of office space in Salt Lake City, Utah under a non-cancelable operating lease that expires in December 2026. We conduct part of our Bionano Laboratories business at this property.
Added
In connection with the Company’s restructuring initiatives, the Company entered into a lease termination agreement on February 28, 2024 with the landlord for the facility in Salt Lake City. The Company will continue to lease the property through June 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−2 removed3 unchanged
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on The Nasdaq Capital Market under the symbol “BNGO.” Common Stock Holders As of March 6, 2023, there were approximately 95 holders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on The Nasdaq Capital Market under the symbol “BNGO.” Common Stock Holders As of February 29, 2024, there were approximately 62 holders of record of our common stock.
Certain of our Warrants are held in “street” name and thus the actual number of beneficial owners of such Warrants is not known or included in the foregoing number. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Certain shares of our common stock are held in “street” name and thus the actual number of beneficial owners of such shares is not known or included in the foregoing number. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Removed
Certain shares of our common stock are held in “street” name and thus the actual number of beneficial owners of such shares is not known or included in the foregoing number.
Removed
Warrant Holders As of March 6, 2023, there was one holder of record of our warrants issued in our initial public offering, which are listed on the Nasdaq Stock Market LLC under the symbol “BNGOW” (“Warrants”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+62 added−49 removed37 unchanged
Biggest changePayments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 years Operating lease obligations, including interest $ 9,042,000 $ 2,586,000 $ 5,472,000 $ 984,000 $ — Finance lease obligations, including interest, related party 7,287,000 322,000 668,000 703,000 5,594,000 Purchase obligations 1,350,000 1,350,000 — — — Total contractual obligations $ 17,679,000 $ 4,258,000 $ 6,140,000 $ 1,687,000 $ 5,594,000 Operating lease obligations relate to our office, laboratory and manufacturing space for our corporate headquarters in San Diego, California, Bionano Laboratories operations in Salt Lake City, Utah, and Purigen office and laboratory space in Pleasanton, California.
Biggest changeOperating lease obligations relate to our office, laboratory and manufacturing space for our corporate headquarters in San Diego, California, Bionano Laboratories operations in Salt Lake City, Utah, and Purigen office and laboratory space in 81 Table of Contents Pleasanton, California. Finance lease obligations relate to our BioDiscovery office in El Segundo, California.
Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure, and this may continue in the future.
Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure, and this may continue in the future.
Investing Activities 2022 Compared to 2021 Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure, as well as the acquisitions of Lineagen, BioDiscovery and Purigen to grow our business. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.
Investing Activities 2023 Compared to 2022 Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure, as well as the acquisitions of Lineagen, BioDiscovery and Purigen to grow our business. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.
We expect to continue to incur significant expenses and operating losses as we: • expand our sales and marketing efforts to further commercialize our products; • continue research and development efforts to improve our existing products; • hire additional personnel; • enter into collaboration arrangements, if any; • add operational, financial and management information systems; and • incur increased costs as a result of operating as a public company.
We expect to continue to incur significant expenses and operating losses as we: • expand our sales and marketing efforts to further commercialize our products; • continue research and development efforts to improve our existing products; • enter into collaboration arrangements, if any; • add operational, financial and management information systems; and • incur increased costs as a result of operating as a public company.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report, the significant accounting estimates that we believe are important to aid in fully understanding and evaluating our reported financial results include the following: Stock-Based Compensation Expense We recognize compensation expense for employees based on an estimated grant date fair value using the Black-Scholes option-pricing method.
While our significant accounting policies are more fully described in Note 2, (Summary of Significant Accounting Policies) to our consolidated financial statements in this Annual Report, the significant accounting estimates that we believe are important to aid in fully understanding and evaluating our reported financial results include the following: Stock-Based Compensation Expense We recognize compensation expense for employees based on an estimated grant date fair value using the Black-Scholes option-pricing method.
The increase in cost of service and other revenue is primarily due to increased service costs on our growing installed base as well as increased costs to support the service offerings from Bionano Laboratories.
The increase in cost of service and other revenue was primarily due to increased service costs on our growing installed base as well as increased costs to support the service offerings from Bionano Laboratories.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that 65 Table of Contents involve risks and uncertainties.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties.
In addition, we provide instruments to certain customers under our reagent rental program, under which we provide an instrument to customers at no cost and the customers agree to purchase minimum quantities of consumables. Consumable revenue consists of sales of reagents and chips necessary to process a sample.
In addition, we provide instruments to certain customers at no cost under our reagent rental program, and the customers agree to purchase minimum quantities of consumables. Consumable revenue consists of sales of reagents and chips necessary to process a sample.
We generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through Bionano Laboratories, as well as services performed related to customer sample evaluations using the Saphyr system.
We generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through Bionano Laboratories, as well as services performed related to customer sample evaluations using an OGM system.
In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.
In response to the invasion, the United States, United Kingdom and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.
Sales of our NxClinical™ software, which provides customers with solutions for analysis, interpretation and reporting of genomics data, are made on a subscription basis.
Sales of our VIA software, which provides customers with solutions for analysis, interpretation and reporting of genomics data, are made on a subscription basis.
As discussed below, we anticipate our available cash balance will not be sufficient for the next twelve months from the issuance of this report.
As discussed above, we anticipate our available cash balance will not be sufficient for the next twelve months from the issuance of this report.
We have elected to account for forfeitures as they occur. 74 Table of Contents The inputs for the Black-Scholes valuation model require management’s significant assumptions. The common share price was determined by using the quoted price on the grant date. The risk-free interest rates were based on the rate for U.S.
We have elected to account for forfeitures as they occur. The inputs for the Black-Scholes valuation model require management’s significant assumptions. The common share price was determined by using the quoted price on the grant date. The risk-free interest rates were based on the rate for U.S.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our financial statements and the related notes included elsewhere in this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 72 Table of Contents You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our financial statements and the related notes included elsewhere in this Annual Report.
We plan to raise additional capital to fulfill our operating and capital requirements for at least 12 months through public or private equity or debt financings, however, we may not be able to secure such financing in a timely manner or an favorable terms, if it all.
We plan to raise additional capital to fulfill our operating and capital requirements for at least 12 months through equity or debt financings, however, we may not be able to secure such financing in a timely manner or on favorable terms, if it all.
Future Capital Requirements We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, additional research and development expenses associated with expanding our offerings, expenses associated with continuing to build out our corporate infrastructure and expenses associated with being a public company.
Future Capital Requirements We expect that our near and longer-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with increasing our manufacturing capacity, sales and marketing expense, increasing market awareness of our products and services to target customers, instrument placements with customers via the reagent rental sales strategy, research and development expenses associated with expanding our offerings, and expenses associated with being a public company.
Macroeconomic and Geopolitical Developments We are subject to additional risks and uncertainties as a result of adverse geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine and Russia and related sanctions, any lingering effects of COVID-19 and uncertain market conditions, including inflation and supply chain disruptions, which could continue to have a material impact on our business and financial results.
Macroeconomic and Geopolitical Developments We are subject to additional risks and uncertainties as a result of adverse geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine and Russia and related sanctions, the Israel-Hamas war, any effects of global pandemics and uncertain market conditions, including inflation and supply chain disruptions, which could continue to have a material impact on our business and financial results.
Based on these valuation assumptions, the fair value of the contingent consideration liabilities was determined to be $22.4 million as of December 31, 2022, $9.4 million of which is current as of December 31, 2022. Contractual Obligations The following table summarizes our future cash outflows for contractual obligations as of December 31, 2022.
Based on these valuation assumptions, the fair value of the contingent consideration liabilities was determined to be $10.9 million as of December 31, 2023, $0.0 of which is current as of December 31, 2023. Contractual Obligations The following table summarizes our future cash outflows for contractual obligations as of December 31, 2023.
Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability to achieve our intended business objectives. Any of these actions could materially harm our business, results of operations and future prospects.
Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability to achieve our intended business objectives.
The increase in cost of product revenue was primarily due to higher sales of instruments and consumables. Cost of service and other revenue increased $2.3 million, or 64%, to $5.9 million for the year ended December 31, 2022, compared to $3.6 million for the year ended December 31, 2021.
The increase in cost of product revenue was primarily due to higher sales of instruments and consumables. Cost of service and other revenue increased $0.2 million, or 4%, to $6.1 million for the year ended December 31, 2023, compared to $5.9 million for the year ended December 31, 2022.
We determined the likelihood of each independent milestone and used probability factors ranging from 20% to 80% which were applied to the individual payments. A Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.
We determined the likelihood of each independent milestone and used probability factors which were applied to the individual payments over the five year milestone term. A Monte Carlo Simulation was performed to determine the likelihood that the milestone will be achieved and was applied to the milestone consideration payment.
Years Ended December 31, 2022 2021 $ % $ % Americas $ 13,862,000 50 % $ 9,329,000 52 % EMEA 8,960,000 32 % 5,604,000 31 % Asia Pacific 4,980,000 18 % 3,048,000 17 % Total $ 27,802,000 100 % $ 17,981,000 100 % Cost of Revenue Cost of product revenue for our systems and consumables includes raw material parts costs and associated freight, shipping and handling costs, contract manufacturing costs, salaries and other personnel costs, equipment depreciation, overhead and other direct costs related to those sales recognized as product revenue in the period.
Years Ended December 31, 2023 2022 $ % $ % Americas $ 18,020,000 50 % $ 13,862,000 50 % EMEA 12,963,000 36 % 8,960,000 32 % Asia Pacific 5,133,000 14 % 4,980,000 18 % Total $ 36,116,000 100 % $ 27,802,000 100 % Cost of Revenue Cost of product revenue for our systems and consumables includes raw material parts costs and associated freight, shipping and handling costs, contract manufacturing costs, salaries and other personnel costs, equipment depreciation, overhead and other direct costs related to those sales recognized as product revenue in the period.
Finance lease obligations relate to our BioDiscovery office in El Segundo, California. See Note 11, Commitments and Contingencies to our consolidated financial statements included in this Annual Report. Purchase obligations primarily represent commitments for purchases of inventory from our supplier as disclosed in Note 11, Commitments and Contingencies to our consolidated financial statements included in this Annual Report.
See Note 11, Commitments and Contingencies to our consolidated financial statements included in this Annual Report. Purchase obligations primarily represent commitments for purchases of inventory from our supplier as disclosed in Note 11, Commitments and Contingencies to our consolidated financial statements included in this Annual Report.
Net cash used in operating activities was $124.8 million during the year ended December 31, 2022 as compared to $71.9 million during the year ended December 31, 2021.
Net cash used in operating activities was $125.2 million during the year ended December 31, 2023 as compared to $124.8 million during the year ended December 31, 2022.
The following table sets forth the cash flow from operating, investing and financing activities for the periods presented: Years Ended December 31, 2022 2021 Net cash provided by (used in): Operating activities $ (124,816,000) $ (71,927,000) Investing activities 82,767,000 (278,062,000) Financing activities 23,007,000 336,111,000 Operating Activities 2022 Compared to 2021 We derive cash flows from operations primarily from the sale of our products and services.
The following table sets forth the cash flow from operating, investing and financing activities for the periods presented: Years Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ (125,181,000) $ (124,816,000) Investing activities 24,158,000 82,767,000 Financing activities 113,815,000 23,007,000 Operating Activities 2023 Compared to 2022 We derive cash flows from operations primarily from the sale of our products and services.
We have incurred losses in each year since our inception. Our net losses were $132.6 million and $72.4 million for the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $348.7 million.
We have incurred losses in each year since our inception. Our net losses were $232.5 million and $132.6 million for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $581.2 million.
Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility was estimated based on historical volatility information of peer companies that are publicly available.
Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life was based on the simplified method in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110.
Other revenue consists of warranty and other service-based revenue, including support, repair and maintenance services. 67 Table of Contents The following table presents our revenue for the periods indicated: Years Ended December 31, 2022 2021 Product revenue $ 20,425,000 $ 12,686,000 Service and other revenue 7,377,000 5,295,000 Total $ 27,802,000 $ 17,981,000 The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers.
Other revenue consists of warranty and other service-based revenue, including support, repair and maintenance services. 74 Table of Contents The following table presents our revenue for the periods indicated: Years Ended December 31, 2023 2022 Product revenue $ 26,727,000 $ 20,425,000 Service and other revenue 9,389,000 7,377,000 Total $ 36,116,000 $ 27,802,000 The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers.
Net cash provided by investing activities was $82.8 million during the year ended December 31, 2022, compared to $278.1 million used in investing activities during the year ended December 31, 2021.
Net cash provided by investing activities was $24.2 million during the year ended December 31, 2023, compared to $82.8 million provided by investing activities during the year ended December 31, 2022.
As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. 66 Table of Contents We closely monitor and comply with various applicable guidelines and legal requirements in the jurisdictions in which we operate.
As a result, our business and 73 Table of Contents results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.
For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic developments, or any similar negative economic condition.
For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, high inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic developments, or any similar negative economic condition. These negative effects could have a material impact on our operations, business, earnings, and liquidity.
Our short-term capital expenditure needs relate primarily to the ongoing build out of our facilities, service lab and service-related capabilities, research and development expenses related to current and future product offerings, and enhancements to information technology.
Our short-term capital expenditure needs relate primarily to our facilities, service lab and service-related capabilities, research and development expenses related to current and future product offerings, and enhancements to information technology. We expect such expenditures to continue throughout 2024.
Financial Overview Revenue We generate product revenue from sales of our systems and consumables, which includes our instruments, and our NxClinical™ software. We currently sell our systems for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, academic and commercial clinical laboratories, as well as pharmaceutical, biotechnology and contract research companies.
We currently sell our systems for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, academic and commercial clinical laboratories, as well as pharmaceutical, biotechnology and contract research companies.
The effect of the adjustment was to decrease the net deferred tax liability and decrease goodwill recorded in connection with the acquisition by $1.8 million, which increased the valuation allowance associated with our deferred taxes by $1.8 million, which we recorded to deferred tax expense for the year ended December 31, 2022.
The effect of the adjustment was to decrease the net deferred tax liability, decrease goodwill, and increase the valuation allowance associated with our deferred taxes by $1.8 million, which we recorded to deferred tax expense for the year ended December 31, 2022. Liquidity and Capital Resources Since our inception, we have incurred net losses and negative cash flows from operations.
Financing Activities 2022 Compared to 2021 Net cash provided by financing activities was $23.0 million during the year ended December 31, 2022 as compared to $336.1 million during the year ended December 31, 2021, a decrease of $313.1 million.
Financing Activities 2023 Compared to 2022 Net cash provided by financing activities was $113.8 million during the year ended December 31, 2023 as compared to $23.0 million during the year ended December 31, 2022, an increase of $90.8 million.
Accordingly, based on recurring losses from operations incurred since inception, the expectation of continued operating losses, and the need to raise additional capital to finance our future operations, we determined that there is substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements included in this Annual Report are issued.
Accordingly, we determined that there is substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements included in this Annual Report are issued. In order to continue to operate our business beyond that time, we will need to raise substantial additional capital.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $30.1 million, or 51%, to $88.6 million for the year ended December 31, 2022 as compared to $58.5 million for the same period in 2021.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $4.9 million, or 6%, to $93.5 million for the year ended December 31, 2023 as compared to $88.6 million for the same period in 2022. The increase was primarily due to a $4.6 million increase in headcount-related expenses.
Recent Accounting Pronouncements Refer to Note 2, ‘‘Summary of Significant Accounting Policies,’’ in the accompanying notes to our consolidated financial statements included in this Annual Report for a discussion of recent accounting pronouncements. 75 Table of Contents
Updates to assumptions could have a significant impact on the Company’s results of operations in any given period. Recent Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies, in the accompanying notes to our consolidated financial statements included in this Annual Report for a discussion of recent accounting pronouncements.
Liquidity and Capital Resources Since our inception, we have incurred net losses and negative cash flows from operations. We incurred net losses of $132.6 million and $72.4 million, and used $124.8 million and $71.9 million of cash from our operating activities for the years ended December 31, 2022 and 2021, respectively.
We incurred net losses of $232.5 million and $132.6 million, and used $125.2 million and $124.8 million of cash from our operating activities for the years ended December 31, 2023 and 2022, respectively.
In addition, we have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we currently anticipate. Cash Flows We derive cash flows from operations primarily from the sale of our products and services.
In addition, our estimate as to the sufficiency of our current cash and cash equivalents and available for sale securities, and our current operating plan as discussed above are based on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we currently anticipate.
Cost of Revenue, Gross Profit, and Gross Margin Years Ended December 31, Period-to-Period Change Period-to-Period Percentage Change 2022 2021 2022 to 2021 2022 to 2021 Gross profit (loss): Product $ 4,459,000 $ 2,162,000 $ 2,297,000 106% Service and other 1,486,000 1,712,000 (226,000) (13)% Total gross profit $ 5,945,000 $ 3,874,000 $ 2,071,000 53% Gross margin: Product 22 % 17 % Service and other 20 % 32 % Total gross margin 21 % 22 % Cost of product revenue increased by $5.4 million, or 52%, to $16.0 million for the year ended December 31, 2022, compared to $10.5 million for the year ended December 31, 2021.
Cost of Revenue, Gross Profit, and Gross Margin Years Ended December 31, Period-to-Period Change 2023 2022 $ % Gross profit (loss): Product $ 6,312,000 $ 4,459,000 $ 1,853,000 42% Service and other 3,254,000 1,486,000 1,768,000 119% Total gross profit $ 9,566,000 $ 5,945,000 $ 3,621,000 61% Gross margin: Product 24 % 22 % Service and other 35 % 20 % Total gross margin 26 % 21 % Cost of product revenue increased by $4.4 million, or 28%, to $20.4 million for the year ended December 31, 2023, compared to $16.0 million for the year ended December 31, 2022.
Research and Development Expenses Research and development (R&D) expenses increased by $26.6 million, or 118%, to $49.0 million for the year ended December 31, 2022 as compared to $22.5 million for the same period in 2021. The increase is primarily due to a $19.4 million increase in compensation expenses, of which $9.9 million relates to stock-based compensation expense.
Research and Development Expenses Research and development expenses increased by $5.0 million, or 10%, to $54.0 million for the year ended December 31, 2023 as compared to $49.0 million for the same period in 2022. The increase was primarily due to a $6.8 million increase in headcount-related expenses.
Instrument revenue increased $2.7 million, or 46%, to $8.6 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021, due to an increase in instruments sold. For the year ended December 31, 2022, our installed base grew to 240 Saphyr systems compared to the 164 systems for the year ended December 31, 2021.
Instrument revenue increased $1.4 million, or 17%, to $10.0 million for the year ended December 31, 2023, as compared to $8.6 million for the year ended December 31, 2022, due to an increase in OGM and Ionic instruments sold.
We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations. Revenue from our commercial operations has increased due to our acquisition of revenue-positive BioDiscovery.
We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations. See Notes 9 (High Trail Agreement) and 10 (Stockholder’s Equity and Stock-Based Compensation) to our consolidated financial statements for a discussion of our recent debt and equity activity.
Interest Income Interest income increased by $1.3 million, or 539%, to $1.5 million for the year ended December 31, 2022, as compared to $0.2 million for the same period in 2021 resulting from positive returns on investments. We did not hold available for sale securities until August 2021.
See Note 9 (High Trail Agreement) to our consolidated financial statements for further discussion. Interest Income Interest income increased by $1.8 million, or 120%, to $3.3 million for the year ended December 31, 2023, as compared to $1.5 million for the same period in 2022 resulting from positive returns on investments.
We determined it is highly likely that the milestone will be achieved and therefore used a 95% probability factor which is applied to the $10.0 million milestone consideration. As part of the merger agreement related to the acquisition of Purigen, we agreed to pay two independent milestone payments up to an aggregate of $32.0 million.
On October 2, 2023, the $10.0 million milestone consideration was paid in full. As part of the merger agreement related to the acquisition of Purigen, we agreed to pay two independent milestone payments up to an aggregate of $32.0 million.
As of December 31, 2022, we had an accumulated deficit of $348.7 million, cash and cash equivalents of $5.1 million and $108.1 million in available-for-sale securities. Sources of Liquidity In the years ended December 31, 2022 and 2021, we have generated cash flows from sales of common stock and other equity instruments.
Sources of Liquidity and Capital Resources In the years ended December 31, 2023 and 2022, we have generated cash flows from sales of common stock, other equity instruments and the issuance of convertible notes payable.
Product gross profit increased $2.3 million, or 106%, to $4.5 million for the year ended December 31, 2022, compared to $2.2 million for the year ended December 31, 2021.
Product gross profit increased $1.9 million, or 42%, to $6.3 million for the year ended December 31, 2023, compared to $4.5 million for the year ended December 31, 2022. The increase in gross profit was primarily due to higher sales of instruments and consumables.
Service and other gross profit decreased by $0.2 million, or 13%, to $1.5 million for the year ended December 31, 2022, compared to $1.7 million for the year ended December 31, 2021.
Service and other gross profit increased by $1.8 million, or 119%, to $3.3 million for the year ended December 31, 2023, compared to $1.5 million for the year ended December 31, 2022. The increase in gross profit was primarily due to increased sales of our Bionano Laboratories service offerings.
In our December 31, 2021 income statement, “software” was included in “services and other.” Revenue increased by $9.8 million, or 55% to $27.8 million for the year ended December 31, 2022, as compared to $18.0 million for the same period in 2021, driven primarily from an increase in instrument and software sales as discussed below.
The increase is attributed to an increase in sales of our VIA software. Service and other revenue increased $2.0 million, or 27%, to $9.4 million for the year ended December 31, 2023 as compared to $7.4 million for the year ended December 31, 2022.
We expect R&D expenses to increase in 2023 relative to 2022 as we have added headcount in order to support our efforts to develop more scalable and efficient manufacturing workflows, expand the utility of Saphyr, and develop the next versions of OGM products – including integration of OGM data into our NxClinical software.
These increases were incurred in support of our efforts to develop more scalable and efficient manufacturing workflows, clinical trial research, expand the utility of OGM, and develop the next versions of OGM products – including integration of OGM data into our VIA software and full commercial launch of the Stratys system.
We believe, based on our current business plan, that our existing cash and cash equivalents will not be sufficient for the next twelve months from the issuance of this report. We plan to continue to fund our losses from operations through cash and cash equivalents on hand, as well as through public or private equity or debt financings.
Based on recurring losses from operations incurred since inception and the expectation of continued operating losses, we anticipate our available cash balance will not be sufficient to operate our business for the next twelve months from the issuance of this report.
Our qualitative assessment indicated that it was not more likely that not that goodwill is impaired . No impairments of goodwill were reported during the years ended December 31, 2022 and 2021. Business Combinations We apply the provisions of ASC 805, Business Combinations, in accounting for acquisitions.
During the years ended December 31, 2023, the Company recognized no additional impairment losses on goodwill and during the year ended December 31, 2022, no impairment losses were recorded on goodwill. 82 Table of Contents Business Combinations We apply the provisions of Accounting Standards Codification (“ASC”) 805, Business Combinations, in accounting for acquisitions.
As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all.
We are actively evaluating debt and equity financing sources available to us as well as cost reduction strategies, but there can be no assurance that financing will be available on terms acceptable to us, on a timely basis, or at all, or that we are able to effectively reduce our operating expenses.
We have based these estimates on assumptions that may prove to be wrong, 73 Table of Contents and we could use our available capital resources sooner than we currently expect. See Note 1 to our consolidated financial statements included elsewhere in this Annual Report for more information.
See Note 1 (Organization and Operations) to our consolidated financial statements included elsewhere in this Annual Report for more information. 79 Table of Contents Cash Flows We derive cash flows from operations primarily from the sale of our products and services.
Loss on debt extinguishment A loss on debt extinguishment of $2.1 million was recognized during the year ended December 31, 2021 in connection with our payment in full of the Innovatus LSA, including all accrued interest, an end of term fee, a prepayment fee, and write-off of unamortized debt issuance costs Income tax benefit (expense) Income tax expense increased by $7.6 million, or 133%, to a $1.9 million expense for the year ended December 31, 2022, as compared to a $5.7 million benefit for the same period in 2021, driven by the acquisition of BioDiscovery.
Income tax benefit (expense) Income tax expense decreased by $1.8 million, or 97%, to a $0.1 million expense for the year ended December 31, 2023, as compared to a $1.9 million expense for the same period in 2022, driven by the acquisition of BioDiscovery.
The increase in consumable revenue was attributable to higher Saphyr consumables sales given the growth of the instrument installed base. For the year ended December 31, 2022, total flowcells sold reached 15,375, an increase of approximately 23% from the 12,518 flowcells sold during the year ended December 31, 2021.
For the year ended December 31, 2023, total flowcells sold reached 26,444, an increase of approximately 72% from the 15,375 flowcells sold during the year ended December 31, 2022. Software revenue increased $0.4 million, or 9%, to $5.6 million for the year ended December 31, 2023, as compared to $5.1 million for the year ended December 31, 2022.
These proceeds were offset by our repayment in full of all outstanding amounts under our 72 Table of Contents Innovatus LSA of $15.0 million, including all accrued interest, the end of term fee, and a prepayment fee. During the year ended December 31, 2022, we raised approximately $23.1 million in gross proceeds from sales under the Cowen ATM.
During the year ended December 31, 2023, we raised approximately $57.8 million in gross proceeds from sales under the Cowen ATM as compared to $23.1 million during the year ended December 31, 2022.
We expect the number of Saphyr placements to continue to grow during 2023, driven by increased market awareness and additional published data demonstrating the utility of OGM solutions. Consumables revenue increased $0.9 million, or 16%, to $6.7 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Consumables revenue increased $4.4 million, or 66%, to $11.2 million for the year ended December 31, 2023, as compared to $6.7 million for the year ended December 31, 2022.
Our expected dividend yield assumption is zero as we have never paid dividends and have no present intention to do so in the future. Goodwill We review goodwill annually at the reporting unit level at the same time every year or when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist.
The expected volatility was estimated based on historical volatility information of the Company and peer companies that are publicly available. Our expected dividend yield assumption is zero as we have never paid dividends and have no present intention to do so in the future.
We have established December 31 as the annual impairment test date. We first make a qualitative assessment as to whether goodwill is impaired and if it is more likely than not that goodwill is impaired, we perform a quantitative impairment analysis to determine if goodwill is impaired.
Valuation of Goodwill Goodwill is tested annually for impairment, in the fourth quarter, and in interim periods if events or changes in circumstances indicate that the assets may be impaired. We first assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test.
Removed
As a result of COVID-19 and actions taken to reduce its spread, we could see additional supply chain disruptions that impact our ability to produce our products and may cause us to make strategic determinations regarding, among other things, the cost and quality of the components and supplies we acquire.
Added
We closely monitor and comply with various applicable guidelines and legal requirements in the jurisdictions in which we operate. In the past, we have experienced supply chain challenges, attributable to such adverse geopolitical and macroeconomic developments including increased costs to secure certain component parts in our products and to produce our products at our contract manufacturers.
Removed
We may also see negative effects on enrollment in our ongoing or future clinical studies. At various times throughout the pandemic, we have been unable to visit certain customer sites to support installation or service our OGM systems. Our manufacturing partners, suppliers, and customers have implemented similar operational reductions.
Added
During the twelve months ended December 31, 2023, we did not experience material increases in our supply chain costs, but we may experience such increases in future fiscal periods. We expect our costs to remain high for the foreseeable future.
Removed
This overall reduction in activity has contributed to a decrease in sales which negatively impacted our financial results in fiscal years 2021 and 2022. The future effects of the COVID-19 pandemic, if any, are unknown and our financial results may continue to be negatively affected as a result.
Added
Recent Developments On March 5, 2024, we announced a cost savings plan that aims to reduce annual savings of operating expenses of approximately $35.0 to $40.0 million starting in the second half of 2024.
Removed
The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which may present strategy, operational, talent recruiting and retention and workplace culture challenges that may adversely affect our business. During the twelve months ended December 31, 2022, we experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic.
Added
As part of the plan, we expect to reduce our overall headcount by approximately 110 to 125 employees, which represents approximately 34% to 39% of our full-time employees as of the date of this Annual Report.
Removed
While the COVID-19 pandemic did not prevent us from operating our business during the twelve months ended December 31, 2022 and 2021, we experienced increased costs to secure certain component parts in our products and to produce our products at our contract manufacturers.
Added
In addition, Bionano Laboratories will phase out over time the offering of certain testing services related to neurodevelopmental disorders, including autism spectrum disorders and other disorders of childhood development. These cost-saving measures are incremental to the cost saving initiatives previously announced in May 2023 and October 2023.
Removed
We expect these increased costs to remain high as the COVID-19 pandemic, the Ukraine-Russia conflict and their respective effects persist.
Added
At this time, we are unable to make a good faith determination of the cost estimates, or ranges of cost estimates, associated with implementation of the plan, including the reduction in force. Financial Overview Revenue We generate product revenue from sales of our OGM and Ionic ® Purification systems and consumables, which includes our instruments, and our VIA software.
Removed
Further, the travel restrictions on our business have limited our ability to support our global and domestic operations, including providing installation and training and customer service, which has and may continue to slow the pace of our commercial strategy, sales and marketing efforts. These negative effects could have a material impact on our operations, business, earnings, and liquidity.
Added
At the end of July 2023 we began installations of VIA software as a replacement to NxClinical software. Like NxClinical, VIA has a simple integrated workflow for visualization, interpretation and reporting of NGS and microarray data. VIA additionally incorporates OGM data to that workflow creating a standard software tool for use across molecular pathology and cytogenomics applications.
Removed
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and other personnel costs, amortization expense related to acquired intangibles, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal and accounting services. 68 Table of Contents Results of Operations The following table sets forth our results of operations for the years ended December 31, 2022 and 2021: Years Ended December 31, Period-to-Period Change Period-to-Period Percentage Change 2022 2021 2022 to 2021 2022 to 2021 Product revenue $ 20,425,000 $ 12,686,000 $ 7,739,000 61% Service and other revenue 7,377,000 5,295,000 2,082,000 39% Total revenue 27,802,000 17,981,000 9,821,000 55% Cost of product revenue 15,966,000 10,524,000 5,442,000 52% Cost of service and other revenue 5,891,000 3,583,000 2,308,000 64% Total cost of revenue 21,857,000 14,107,000 7,750,000 55% Research and development 49,047,000 22,485,000 26,562,000 118% Selling, general and administrative 88,596,000 58,490,000 30,106,000 51% Total operating expenses 137,643,000 80,975,000 56,668,000 70% Loss from operations (131,698,000) (77,101,000) (54,597,000) 71% Interest income 1,507,000 236,000 1,271,000 539% Interest expense (298,000) (927,000) 629,000 (68)% Gain on forgiveness of Paycheck Protection Program loan — 1,775,000 (1,775,000) 100% Loss on debt extinguishment — (2,076,000) 2,076,000 (100)% Other expense (223,000) (59,000) (164,000) 278% Loss before income taxes (130,712,000) (78,152,000) (52,560,000) 67% Benefit (provision) for income taxes (1,884,000) 5,717,000 (7,601,000) (133)% Net loss $ (132,596,000) $ (72,435,000) $ (60,161,000) 83% Revenue Years Ended December 31, Period-to-Period Change Period-to-Period Percentage Change 2022 2021 2022 to 2021 2022 to 2021 Instruments $ 8,567,000 $ 5,887,000 $ 2,680,000 46% Consumables 6,731,000 5,808,000 923,000 16% Software 5,127,000 991,000 4,136,000 417% Total product revenue 20,425,000 12,686,000 7,739,000 61% Services and other 7,377,000 5,295,000 2,082,000 39% Total revenue $ 27,802,000 $ 17,981,000 $ 9,821,000 55% We have revised the classification of its revenue between the categories in the table above for the December 31, 2021 income statement to separately present software revenue.
Added
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and other personnel costs, amortization expense related to acquired intangibles, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal and accounting services.
Removed
Software revenue increased $4.1 million, or 417%, to $5.1 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase is attributed to BioDiscovery’s NxClinical™ software contributing for a full year in 2022, and software revenue is expected to even out as a result.
Added
Results of Operations The following table sets forth our results of operations for the years ended December 31, 2023 and 2022: 75 Table of Contents Years Ended December 31, Period-to-Period Change 2023 2022 $ % Revenues: Product revenue $ 26,727,000 $ 20,425,000 $ 6,302,000 31% Service and other revenue 9,389,000 7,377,000 2,012,000 27% Total revenue 36,116,000 27,802,000 8,314,000 30% Cost of revenue: Cost of product revenue 20,415,000 15,966,000 4,449,000 28% Cost of service and other revenue 6,135,000 5,891,000 244,000 4% Total cost of revenue 26,550,000 21,857,000 4,693,000 21% Research and development 54,032,000 49,047,000 4,985,000 10% Selling, general and administrative 93,499,000 88,596,000 4,903,000 6% Goodwill Impairment 77,280,000 — 77,280,000 100 % Total operating expenses 224,811,000 137,643,000 87,168,000 63% Loss from operations (215,245,000) (131,698,000) (83,547,000) 63% Other income (expenses): Interest income 3,311,000 1,507,000 1,804,000 120% Interest expense (5,119,000) (298,000) (4,821,000) 1,618% Other income (expenses) 3,449,000 (223,000) 3,672,000 (1,647)% Loss on High Trail Agreement (18,827,000) — (18,827,000) 100% Total other income (expenses) (17,186,000) 986,000 (18,172,000) (1,843)% Loss before income taxes (232,431,000) (130,712,000) (101,719,000) 78% Benefit (provision) for income taxes (62,000) (1,884,000) 1,822,000 (97)% Net loss $ (232,493,000) $ (132,596,000) $ (99,897,000) 75% Revenue Years Ended December 31, Period-to-Period Change 2023 2022 $ % Instruments $ 9,999,000 $ 8,567,000 $ 1,432,000 17% Consumables 11,157,000 6,731,000 4,426,000 66% Software 5,571,000 5,127,000 444,000 9% Total product revenue 26,727,000 20,425,000 6,302,000 31% Services and other 9,389,000 7,377,000 2,012,000 27% Total revenue $ 36,116,000 $ 27,802,000 $ 8,314,000 30% Revenue increased by $8.3 million, or 30% to $36.1 million for the year ended December 31, 2023, as compared to $27.8 million for the same period in 2022, driven primarily from an increase in instrument, consumable, and service and other revenue as discussed below.
Removed
BioDiscovery was acquired in October 2021. 69 Table of Contents Service and other revenue increased $2.1 million, or 39%, to $7.4 million for the year ended December 31, 2022, primarily due to a $1.2 million increase in revenue contributed from diagnostic and service project revenue contributed from Bionano Laboratories.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

15 edited+1 added−2 removed5 unchanged
Biggest changeAs a result, any changes in the underlying risk-free interest rate could result in material changes to the fair value of such liabilities and could materially impact the amount of non-cash expense (or income) recorded each reporting period. As a consequence of the U.S.
Biggest changeThe risk-free interest rate used to estimate our weighted average cost of capital is a component of the discount rate used to calculate the present value of future cash flows due upon the achievement of certain milestones for the contingent consideration or upon maturity of the convertible notes payable and purchase option liability As a result, any changes in the underlying risk-free interest rate could result in material changes to the fair value of such liabilities and could materially impact the amount of non-cash expense (or income) recorded each reporting period.
The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar.
The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity. The reported results of our foreign subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar.
Although we are seeing, and expect to continue to see, increased interest rates, due to our investment in highly liquid and high quality government and other debt securities as well as short-term securities, as of the date of this Annual Report on Form 10-K, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.
Although we are seeing, and expect to continue to see, increased interest rates, due to our investment in highly liquid and high quality government and other debt securities as well as short-term securities, as of the date of this Annual Report, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods.
The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
The primary objective of our investment activities is to preserve principal while at the same time maximizing 83 Table of Contents yields without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
We believe a hypothetical 10% change in foreign exchange rates as of December 31, 2022 would not have a material impact on our business, financial condition, or results of operations.
We believe a hypothetical 10% change in foreign exchange rates as of December 31, 2023 would not have a material impact on our business, financial condition, or results of operations.
As of December 31, 2022 and December 31, 2021, we had minimal assets and liabilities denominated in foreign currencies and expect similar levels of foreign currency denomination in the next 12 months.
As of December 31, 2023 and December 31, 2022, we had minimal assets and liabilities denominated in foreign currencies and expect similar levels of foreign currency denomination in the next 12 months.
Federal Reserve raising interest rates, the underlying risk-free interest rate we use for purposes of calculating fair value of our liabilities for acquisition-related contingent consideration has increased from our prior reporting periods, but such increase did not have a material impact on our financial statements, and we currently do not expect anticipated future changes to have a material effect in future reporting periods.
Federal Reserve raising interest rates, the underlying risk-free interest rate we use for purposes of calculating fair value of our liabilities for acquisition-related contingent consideration, convertible notes payable and purchase option liability has increased from our prior reporting periods, but such increase did not have a material impact on our financial statements, and we currently do not expect anticipated future changes to have a material effect in future reporting periods.
While the effects of the above-described geopolitical and macroeconomic developments, as well as other inflationary pressures, are highly uncertain, as of the date of this Annual Report on Form 10-K, we do not expect anticipated changes in inflation to have a material effect on our business, financial condition or 76 Table of Contents results of operations for future reporting periods other than the general impacts on companies due to general economic and market conditions.
While the effects of the above-described geopolitical and macroeconomic events, as well as other inflationary pressures, are highly uncertain, as of the date of this Annual Report, we do not expect anticipated changes in inflation to have a material effect on our business, financial condition or results of operations for future reporting periods other than the general impacts on companies due to general economic and market conditions.
However we do not believe that inflation has had a material effect on our business, financial condition or results of operations, other than its impact on the general economy, as our cost of revenue for the year ended December 31, 2022 was not significantly impacted by the cost increases we experienced.
However the Company does not believe that inflation has had a material effect on our business, financial condition or results of operations, other than its impact on the general economy, as our cost of revenue as of December 31, 2023 was not significantly impacted by the cost increases we experienced.
The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported in foreign currency translation adjustments in the unaudited condensed consolidated statements of comprehensive loss.
The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported in foreign currency translation adjustments in the consolidated statements of comprehensive loss. Our foreign currency exposures are primarily concentrated in the British Pound, Chinese Renminbi, Euro, and Canadian dollar.
Interest Rate Risk We had approximately $5.1 million in cash and cash equivalents and $108.1 million in available for sale securities as of December 31, 2022, which include highly liquid, investment grade debt securities. Such interest-bearing instruments are exposed to a certain degree of interest rate risk.
Interest Rate Risk We had approximately $17.9 million in cash and cash equivalents,$48.8 million in short-term investments, and $35.5 million in restricted cash and cash equivalents and restricted short-term investments as of December 31, 2023. Our short-term investments include highly liquid, investment grade debt securities. Such interest-bearing instruments are exposed to a certain degree of interest rate risk.
During the year ended December 31, 2022, we experienced increased costs to secure certain component parts in our products and to produce our products at our contract manufacturers.
In prior periods, the Company experienced increased costs to secure certain component parts in our products and to produce our products at our contract manufacturers.
Our foreign currency exposures are primarily concentrated in the British Pound, Chinese Renminbi, Euro, and Canadian dollar. We do not currently participate in material foreign exchange hedging activities. Additionally, we have operations outside of the United States. The functional currency of each foreign subsidiary is generally the local currency.
We do not currently participate in material foreign exchange hedging activities. Additionally, we have operations outside of the United States. The functional currency of each foreign subsidiary is generally the local currency. We are exposed to foreign currency exchange risk as the functional currency financial statements of foreign subsidiaries are translated to U.S. dollars.
Inflation Geopolitical and macroeconomic developments, including the on-going conflict between Ukraine and Russia and related sanctions and the COVID-19 pandemic, have contributed to supply chain challenges, which we believe have resulted in inflation headwinds, particularly increased logistical costs and raw material prices.
Inflation Geopolitical and macroeconomic events, including the ongoing conflict between Ukraine and Russia and related sanctions, the Israel-Hamas war, and the recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures have contributed to supply chain challenges, which the Company believes have resulted in inflation headwinds, particularly increased logistical costs and raw material prices.
Due to the short holding period of our investments and the nature of our investments, a hypothetical change of 100 basis points would have approximately a $0.4 million impact on our investments. Our liabilities for acquisition-related contingent consideration, which is adjusted to fair value each reporting period, is also impacted by changes in interest rates.
Due to the short holding period of our investments and the nature of our investments, a hypothetical change of 100 basis points would have approximately a $0.1 million impact on our investments income or expense.
Removed
The risk-free interest rate used to estimate our weighted average cost of capital is a component of the discount rate used to calculate the present value of future cash flows due upon the achievement of certain milestones.
Added
Our liabilities for acquisition-related contingent consideration, convertible notes payable and purchase option liability are adjusted to fair value each reporting period, are also impacted by changes in interest rates.
Removed
We are exposed to foreign currency exchange risk as the functional currency financial statements of foreign subsidiaries are translated to U.S. dollars.

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