☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if hethe registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 2, 2017,~~ May 5, 2023,the registrant had ~~12,507,215~~ 2,214,233shares of common stock, $0.001 par value per share, outstanding.



Liabilities and stockholders’ deficit
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,693,238		$	761,663		$	1,097,538		$	1,157,449
Accrued liabilities		1,997,570			1,670,286			1,321,771			2,209,606
Deferred revenue - current		780,965			335,659
SVB Term Loan, net of discount and debt issuance costs								3,075,506			3,812,498
NuvoGen obligation - current		460,698			604,751			446,031			446,031
Term loan payable - current, net of discount and debt issuance costs of $103,738 at September 30, 2017 and $0 at December 31, 2016		7,363,662			6,389,782
Operating lease liabilities - current								481,967			475,126
Other current liabilities		228,779			258,850			136,074			170,047
Total current liabilities		13,524,912			10,020,991			6,558,887			8,270,757
Term loan payable - non-current, net of discount and debt issuance costs of $0 at September 30, 2017 and $263,378 at December 31, 2016		—			5,389,137
NuvoGen obligation - non-current, net of discount		7,709,162			8,017,356			3,370,279			3,519,058
Operating lease liabilities - non-current, net of discount								423,237			546,324
Other non-current liabilities		523,315			619,587			38,723			49,819
Total liabilities		21,757,389			24,047,071			10,391,126			12,385,958
Commitments and Contingencies
Stockholders’ deficit:
Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2017 and December 31, 2016; 12,507,215 shares issued and outstanding, at September 30, 2017; 7,939,967 and 7,938,571 shares issued and outstanding, respectively, at December 31, 2016		12,506			7,938
Commitments and Contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.001 par value; 26,666,667 shares authorized at March 31, 2023 and December 31, 2022; 2,214,077 shares issued and outstanding at March 31, 2023 and 2,213,897 shares issued and outstanding at December 31, 2022								2,214			2,214
Additional paid-in-capital		128,114,619			110,081,334			235,450,053			235,314,311
Treasury stock, no shares as of September 30, 2017 and 1,396 shares as of December 31, 2016		—			(75,000	)
Accumulated other comprehensive loss		—			(1,090	)
Accumulated other comprehensive income								4,514			2,679
Accumulated deficit		(132,644,066	)		(115,606,044	)		(234,982,279	)		(229,927,507	)
Total stockholders’ deficit		(4,516,941	)		(5,592,862	)
Total liabilities and stockholders' deficit	$	17,240,448		$	18,454,209
Total stockholders’ equity								474,502			5,391,697
Total liabilities and stockholders' equity							$	10,865,628		$	17,777,655

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended March 31,
Revenue:
Product	$	625,605		$	506,065		$	1,573,926		$	1,683,382
Service		3,097,879			407,836			5,281,483			1,991,567
Total revenue		3,723,484			913,901			6,855,409			3,674,949
Cost of revenue		1,088,987			1,125,009			3,621,193			2,901,455
Gross margin		2,634,497			(211,108	)		3,234,216			773,494
													2023			2022
Product and product-related services revenue													$	1,032,510		$	1,184,454

Operating expenses:
Cost of product and product-related services revenue														1,149,608			855,048
Selling, general and administrative		4,258,347			3,937,600			12,910,251			13,343,945			3,282,948			4,663,011
Research and development		3,478,419			1,910,116			6,364,371			6,515,808			1,612,553			1,920,430
Total operating expenses		7,736,766			5,847,716			19,274,622			19,859,753			6,045,109			7,438,489
Operating loss		(5,102,269	)		(6,058,824	)		(16,040,406	)		(19,086,259	)		(5,012,599	)		(6,254,035	)

Other income (expense):
Interest expense		(300,272	)		(490,825	)		(1,048,750	)		(1,422,171	)		(138,399	)		(249,312	)
Interest income		22,438			26,196			52,149			92,767			98,444			6,214
Other income		—			35,011			8			53,453
Total other income (expense)		(277,834	)		(429,618	)		(996,593	)		(1,275,951	)		(39,955	)		(243,098	)
Net loss before income taxes		(5,380,103	)		(6,488,442	)		(17,036,999	)		(20,362,210	)		(5,052,554	)		(6,497,133	)
Provision for income taxes		743			—			1,023			4,259			(2,218	)		(386	)
Net loss	$	(5,380,846	)	$	(6,488,442	)	$	(17,038,022	)	$	(20,366,469	)	$	(5,054,772	)	$	(6,497,519	)
Net loss per share, basic and diluted	$	(0.46	)	$	(0.92	)	$	(1.74	)	$	(2.92	)	$	(2.28	)	$	(9.73	)
Shares used in computing net loss per share, basic and diluted		11,603,617			7,053,010			9,794,651			6,985,924			2,214,082			667,647

Condensed ~~Statement~~Consolidated Statements of Changes in Stockholders’ ~~Deficit~~Equity

Common Stock

Additional
Paid-In

Treasury

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders'

Shares

Amount

Capital

Stock

Loss

Deficit

Deficit

Balance at January 1, 2017

7,938,571

$
7,938

$
110,081,334

$
(75,000
)

$
(1,090
)

$
(115,606,044
)

$
(5,592,862
)
Exercise of stock options

41,815

42

165,219

—

—

—

165,261

Stock-based compensation expense

—

—

1,171,660

—

—

—

1,171,660

Vesting of restricted stock units

328,000

328

—

—

—

—

328

Stock issued under stock purchase plan

65,972

66

115,820

—

—

—

115,886

Issuance of common stock from ATM offering, net of issuance
costs of $0.7 million

4,132,857

4,133

16,655,585

—

—

—

16,659,718

Retirement of treasury stock

—

(1
)

(74,999
)

75,000

—

—

—

Net loss

—

—

—

—

—

(17,038,022
)

(17,038,022
)
Unrealized gain on short and long-term investments

—

—

—

—

1,090

1,090

Balance at September 30, 2017

12,507,215

$
12,506

$
128,114,619

$
-

$
-

$
(132,644,066
)

$
(4,516,941
)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2023			2022
Operating activities
Net loss	$	(17,038,022	)	$	(20,366,469	)	$	(5,054,772	)	$	(6,497,519	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		893,334			1,086,752			86,104			185,492
Accretion of discount on NuvoGen obligation		147,753			156,103
Accretion of interest on NuvoGen obligation								(2,747	)		(2,983	)
Write off deferred offering costs								80,692			—
Provision for excess inventory		302,085			437,893			409,670			59,353
Amortization of Growth Term Loan discount and issuance costs		325,517			415,355
Amortization of SVB Term Loan discount and issuance costs								71,832			117,727
Stock-based compensation expense		1,171,988			552,054			129,332			251,214
Employee stock purchase plan expense		44,170			—			7,776			16,591
Accretion of incentive from landlord		(106,500	)		(94,667	)
Non-cash operating lease expense								114,517			100,316
Accrued interest on available-for-sale securities investments		5,991			130,576			(27,183	)		(5,128	)
Other operating adjustments		1,307			—
Changes in operating assets and liabilities:
Accounts receivable		(1,781,782	)		124,385			289,715			1,343,246
Inventory		13,944			(104,277	)		5,511			(120,164	)
Prepaid expenses and other		(94,295	)		3,911			278,042			93,299
Deferred offering costs		49,630			—
Accounts payable		1,521,391			367,529			(25,921	)		(352,934	)
Accrued liabilities		327,284			(258,073	)		(571,519	)		(1,069,543	)
Deferred revenue		469,276			236,187
Contract liabilities								(38,394	)		40,279
Operating lease liabilities								(116,246	)		(98,809	)
Net cash used in operating activities		(13,746,929	)		(17,312,741	)		(4,363,591	)		(5,939,563	)
Investing activities
Purchase of property and equipment		(525,437	)		(1,859,155	)		(6,238	)		(8,415	)
Sales, redemptions and maturities of available-for-sale securities		4,300,000			23,000,000
Maturities of available-for-sale securities								—			5,400,000
Purchase of available-for-sale securities		—			(3,381,271	)		(3,538,390	)		—
Net cash provided by investing activities		3,774,563			17,759,574
Net cash (used in) provided by investing activities								(3,544,628	)		5,391,585
Financing activities
Payment of offering costs		(231,475	)		—
Proceeds from Growth Term Loan		—			5,000,000
Payments on Growth Term Loan		(4,740,774	)		(2,932,482	)
Proceeds from ATM offering		16,891,193			—
Payments on capital leases		(43,813	)		(99,863	)
Proceeds from exercise of stock options		165,261			10,132
Proceeds from shares purchased under the stock purchase plan		71,716			167,721
Proceeds from March 2022 Securities Purchase Agreement, net of issuance costs of $0.4 million								—			7,207,499
Payments on SVB Term Loan								(808,824	)		(1,250,000	)
Payments of December 2022 Securities Purchase Agreement issuance costs								(350,523	)		—
Payments on NuvoGen obligation		(600,000	)		(362,500	)		(146,032	)		(172,624	)
Net cash provided by financing activities		11,512,108			1,783,008
Increase in cash and cash equivalents		1,539,742			2,229,841
Payments of deferred offering costs								—			(38,500	)
Payments on financing leases								(3,866	)		(4,635	)
Taxes paid for net share settlement of restricted stock awards								(215	)		(8,129	)
Cash in lieu of fractional shares related to reverse stock split								(640	)		—
Payments on 2021 Insurance Note								—			(167,586	)
Net cash (used in) provided by financing activities								(1,310,100	)		5,566,025
Effect of exchange rates on cash								3,871			(3,570	)
(Decrease) increase in cash and cash equivalents								(9,214,448	)		5,014,477
Cash and cash equivalents at beginning of period		7,507,659			3,293,983			12,210,857			9,599,950
Cash and cash equivalents at end of period	$	9,047,401		$	5,523,824		$	2,996,409		$	14,614,427
Noncash investing and financing activities
Fixed asset purchases payable and accrued at period end		410,184			25,496
Carrying value of demonstration units transferred from property and equipment to inventory		55,739			—
Stock issued for settlement of accrued bonus		—			(364,910	)
Purchase of property and equipment under capital lease		—			226,835
Incentive from landlord		—			710,000
Retirement of treasury stock		75,000			—
Supplemental disclosure of noncash investing and financing activities
Net reclassification of instruments from inventory to property and equipment, net							$	16,625		$	—
Deferred financing costs payable and accrued at period end								—			98,713
Issuance costs payable at period end								447
Disposal of fully depreciated assets								177,451			—
Issuance of common stock upon conversion of Series A convertible preferred stock								—			1,402,430
Supplemental cash flow information
Cash paid for interest	$	575,480		$	850,713		$	74,976		$	139,846
Cash paid for taxes								1,838			—

Note 1. Description of Business, Basis of Presentation and Principles of Consolidation

HTG Molecular Diagnostics, Inc. (the “Company”) is a ~~commercial stage~~life science company ~~that develops~~whose mission is to advance precision medicine through its innovative transcriptome-wide profiling and ~~markets products and services based on proprietary technology that facilitates the routine use of targeted molecular profiling.~~advanced medicinal chemistry technologies. The Company derives revenue primarily from sales of its ~~automation~~HTG EdgeSeq system and integrated next-generation sequencing-based (“NGS-based”) HTG EdgeSeq research use only (“RUO”) assays and from sample processing ~~custom research use only assay development, and collaborative development services.~~services performed in its VERI/O laboratory.

The Company operates in one segment and ~~the majority of~~ its customers and distributors are located primarily in the United States and Europe. For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023, approximately ~~68% and 49%, respectively,~~51% of the Company’s revenue was generated from sales tooriginated by customers located outside of the United States, compared with ~~15% and 11%, respectively,~~18% for the three ~~and nine~~ months ended September 30, 2016. The increase in sales to customers located outside of the United States is primarily the result of the Master Assay Development, Commercialization and Manufacturing Agreement with QIAGEN Manchester Limited (See Note 14), which accounted for 85% and 72% of sales to customers located outside of the United States for the three and nine months ended September 30, 2017.March 31, 2022.

~~Note 2.~~ Basis of Presentation

~~Basis of Presentation~~

The accompanying ~~interim unaudited~~ condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect the accounts of the Company as of ~~September 30, 2017~~March 31, 2023 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted ~~accounting principles~~ in the United States of America (“GAAP”) for complete financial statements. The accompanying ~~interim unaudited~~ condensed consolidated financial statements reflect all ~~adjustments consisting of~~ normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows, as of and for the periods presented. The ~~unaudited~~accompanying condensed consolidated balance sheet at December 31, ~~2016~~2022 has been derived from the audited consolidated financial statements at that date but does not include all of the information and disclosures required by GAAP for annual financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the ~~fiscal~~ year ended December 31, ~~2016,~~2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~23, 2017.~~30, 2023.

In December 2022, the Company completed a reverse stock split of its outstanding shares of common stock pursuant to which every 12 shares of issued and outstanding common stock were exchanged for one share of common stock. All share and per share amounts within the condensed consolidated financial statements and notes thereto have been adjusted to reflect the reverse stock split for all periods and dates presented. See Note 14 for more information about the Company’s reverse stock split.

Going Concern andLiquidity

~~In accordance with the criteria of Accounting Standards Update (“ASU”) No. 2014-15,~~ ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management~~Management has assessed the Company’s ability to continue as a going concern within one year of ~~the filing date~~issuance of ~~this Quarterly Report on Form 10‑Q with the SEC in November 2017.~~these financial statements. The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, the Company has had recurring operating losses and negative operating cash flows ~~from operations~~ since its ~~inception and~~inception. The Company has an accumulated deficit of ~~approximately $132.6~~$235.0 million, working capital of $2.6 million and long-term liabilities of $3.8 million as of September 30, 2017. As of September 30, 2017, the Company had available cash and cash equivalents of approximately $9.0 million, and had current liabilities of approximately $13.5 million plus an additional $8.2 million in long-term liabilities.March 31, 2023. The Company’s liability ~~balance is~~balances consist primarily ~~attributable to~~of its asset-secured ~~growth capital term~~ loan (the "SVB Term Loan") with ~~Oxford Finance, LLC and~~ Silicon Valley Bank ~~(the “Growth Term Loan”~~(now named Silicon Valley Bank, N.A., a division of First-Citizens Bank and Trust Company, following the closure of Silicon Valley Bank on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Company ("FDIC") as receiver) ("SVB") (see Note 8) and to an obligation to NuvoGen Research, LLC ~~(“NuvoGen”~~(the “NuvoGen obligation”) (see Note 10). The Company has raised $16.7 million in net proceeds through September 30, 2017 under a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) (see Note 11). In addition, the Company received $3.0 million in gross proceeds from, and issued a subordinated convertible promissory note incurrently expects that principal amount to, QIAGEN North American Holdings, Inc. (“QNAH”) in October 2017 (see Note 15). Taking into account the $3.0 million investment from QNAH in October 2017, and without assuming any additional sales that may be made under the sales agreement with Cantor Fitzgerald, management believes that the Company’sits existing resources will be sufficient to fund ~~the Company’s~~its planned operations and expenditures through ~~the midpoint~~July 2023. In addition, potentially changing circumstances, including those related to a resurgence of ~~the first quarter of 2018. However, the Company cannot provide assurance that its plans will not change~~COVID-19, inflation or ~~that changed circumstances will not~~high interest rates, may result in the depletion of ~~its~~the Company’s capital resources more rapidly than it currently anticipates. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying ~~interim unaudited~~ condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

The Company will need to raise additional capital to fund its operations and service its ~~near and~~ long-term debt obligations until its revenue reaches a level sufficient to provide for self-sustaining cash flows. There can be no assurance that additional capital will be available on acceptable terms, or at all, or that the Company’s revenue will reach a level sufficient to provide for self-sustaining cash flows. If ~~sufficient~~the Company is not able to generate additional capital, ~~is not available as and when needed,~~ the Company may have to delay, scale back or discontinue one or more ~~product~~of its therapeutics development programs, curtail its ~~commercialization~~commercial activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that the Company otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue a sale of the Company at a price that may result in ~~up to~~ a ~~total~~significant loss on investment for its stockholders, file for bankruptcy or seek other protection from ~~creditors, or liquidate all assets.~~creditors. In addition, if the Company defaults under ~~its~~any of the provisions of the Loan and Security Agreement for the SVB Term Loan (the "Loan Agreement"), including as a result of a "material adverse change" as such term ~~loan agreement, its lenders~~is defined in the Loan Agreement. SVB could charge an interest rate of 5% above the otherwise applicable floating rate, accelerate the payment of the SVB Term Loan and ultimately foreclose on the Company’s assets. The definition of “material adverse change” is broad and includes a material impairment in the value of the collateral securing the SVB Term Loan, a material adverse change in the Company's business, operations, or condition (financial or otherwise), and a material impairment of the prospect of repayment of any portion of the SVB Term Loan. Moreover, the determination as to whether a material adverse change has occurred is not within the Company's control and it is unclear how the current managers of SVB will view the SVB Term Loan from a risk standpoint and what actions they may elect to take under the SVB Term Loan to protect the financial interests of the lender.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its ~~assets, including substantially~~wholly owned subsidiary, HTG Molecular Diagnostics France, SARL, after elimination of all ~~of its cash~~intercompany transactions and ~~cash equivalents which are held in accounts with its lenders.~~balances.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, ~~and~~ disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s ~~significant~~ estimates include revenue recognition, stock-based compensation expense, bonus and warranty accrual, income tax valuation allowances and reserves, recovery of ~~long-lived~~long‑lived assets, lease liability, inventory ~~obsolescence~~valuation, allowance for credit losses and ~~inventory valuation.~~available-for-sale securities. Actual results could materially differ from those estimates.

Concentration Risks

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains the majority of its cash balances in the form of cash deposits in checking and money market accounts in amounts in excess of federally insured limits. In accordance with the Loan Agreement, the Company's cash balances were held primarily in operating accounts at and in a custodial account at U.S. Bank, subject to a control agreement with SVB. On March 13, 2023, the U.S. Treasury, Federal Reserve and FDIC provided SVB depositors access to all of their money. Management believes that the credit risk with regard to these deposits is not significant based on the quality of the financial institution or as a result of the guarantee provided by the U.S. Treasury, Federal Reserve and FDIC.

The Company sells its instrument, related consumables, sample processing services and custom RUO assay design services primarily to biopharmaceutical companies, academic institutions and molecular labs. The Company routinely assesses the financial strength of its customers and credit losses have been minimal to date.

One customer accounted for 13% of the Company’s revenue for three months ended March 31, 2023, compared with three customers accounting for 24%, 20% and 12% of the Company’s revenue for the three months ended March 31, 2022.

Two customers accounted for 44% and 12% of the Company’s accounts receivable as of March 31, 2023, compared with three customers accounting for approximately 37%, 24% and 13% of the Company’s accounts receivable as of December 31, 2022.

Two vendors accounted for 21% and 12% of the Company’s accounts payable as of March 31, 2023, compared with one vendor who accounted for 13% of the Company’s accounts payable as of December 31, 2022.

Note 2. Summary of Significant Accounting Policies

There have been no changes to the Company's significant accounting policies from those previously disclosed in the consolidated financial statements included in the Company's Annual Report on Form 10-K, filed with the SEC on March 30, 2023, except those related to the recently adopted accounting pronouncements on January 1, 2023, as discussed below.

Fair Value of Financial Instruments

The carrying value of financial instruments classified as current assets and current liabilities approximate fair value due to their liquidity and short-term nature. Investments that are classified as available-for-sale are recorded at fair value, which is determined using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The ~~Growth~~carrying value of the SVB Term Loan is estimated to approximate its fair value as the interest rate approximates the market rate for debt with similar terms and ~~NuvoGen~~risk characteristics.

The Company’s obligation related to an asset purchase transaction with a then-common stockholder of the Company, (the “NuvoGen obligation”) had an estimated fair value of approximately $3.0 million as of March 31, 2023. This estimated fair value represents a Level 3 measurement that has been determined using a Monte Carlo simulation with key assumptions including future revenue, volatility, discount and risk-free rates.

Investments in Available-for-Sale Securities

The Company classifies its debt securities, which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income, net of tax, as available-for-sale securities. Investments in securities with maturities of less than one year, or where management’s intent is to use the investments to fund current operations, or to make them available for current operations, are classified as short-term investments. Realized gains, realized losses and declines in value of securities judged to be other-than-temporary, are included in other income (expense) within the condensed consolidated statements of operations. The cost of investments for purposes of computing realized and unrealized gains and losses is based on the specific identification method. Interest earned on securities is also included in other income (expense) within the condensed consolidated statements of operations.

The Company's investment securities are considered ~~financial instruments. However,~~available-for-sale and currently consist of short-term U.S. Treasury securities with scheduled maturities within the next twelve months. These securities are considered “investment grade” and are carried at fair value. The Company assesses its investment in available-for-sale debt securities for impairment each reporting period. If an unrealized loss exists, the Company determines whether any portion of the decline in fair value below the carrying value is ~~unable~~credit-related by reviewing several factors, including, but not limited to, ~~reasonably determine~~the extent of the fair value decline and changes in the financial condition of ~~these obligations.~~

~~Revenue Recognition – Collaborative Development Service Revenue~~

~~The Company follows ASC 605-25, Revenue Recognition – Multiple-Element Arrangements~~the issuer and ASC 808, Collaborative Arrangements, if applicable, to determine the appropriate recognition of revenue under its collaborative research, development and commercialization agreements that contain multiple elements. These multiple elements, or deliverables, may include accessrecords an impairment for credit-related losses through an allowance, limited to the ~~Company’s technology through grants~~amount of ~~licenses to its intellectual property, research and development services and participation in joint development steering committees, amongst others. The payments~~the unrealized loss. If the Company ~~receives under these arrangements typically include one~~either intends to sell or more of the following: non-refundable up-front fees, monthly development service fees, milestone payments upon acceptance of contract deliverables or profit sharing payments for completed contract milestones.

~~Research and Development Costs~~

Research and development expenses represent costs incurred internally for research and development activities and costs incurred externally to fund research activities. These costs include those generated through research and development efforts for the improvement and expansion of the Company’s proprietary technology and product offerings as well as those related to third-party collaborative development agreements, for which related revenue is included in service revenue in the condensed statements of operations.

~~Concentration Risks~~

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and uncollateralized accounts receivable. The Company maintains the majority of its cash balances in the form of cash deposits in bank checking and money market accounts in amounts in excess of federally insured limits. Management believes, based upon the quality of the financial institution, that the credit risk with regard to these deposits is not significant.

The Company sells its instruments, consumables, sample processing services, custom panel design and collaborative development services primarily to biopharmaceutical companies, academic institutions and molecular labs. The Company routinely assesses the financial strength of its customers and credit losses have been minimal to date.

~~The Company had product revenue consisting of revenue from the sale of instruments and consumables for the three and nine months ended September 30, 2017 and 2016, as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Instruments

$
199,205

$
5,846

$
370,263

$
88,146

Consumables

426,400

500,219

1,203,663

1,595,236

Total product revenue

$
625,605

$
506,065

$
1,573,926

$
1,683,382

The Company had service revenue consisting of revenue from custom assay development, sample processing and collaborative development services for the three and nine months ended September 30, 2017 and 2016, as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Custom assay development

$
73,567

$
103,719

$
419,515

$
103,719

Sample processing

893,618

304,117

2,428,863

1,887,848

Collaborative development services

2,130,694

—

2,433,105

—

Total service revenue

$
3,097,879

$
407,836

$
5,281,483

$
1,991,567

The Company’s top three customers accounted for 57%, 10% and 4% of the Company’s total revenue for the three months ended September 30, 2017, compared with 27%, 24% and 9% for the three months ended September 30, 2016. The top three customers accounted for 35%, 13% and 5% of the Company’s revenue for the nine months ended September 30, 2017, compared with 38%, 14% and 7% for the nine months ended September 30, 2016.

~~The top two customers accounted for approximately 62% and 6% of the Company’s accounts receivable as of September 30, 2017, compared with approximately 28% and 15% as of December 31, 2016.~~

The Company currently relies on a single supplier to supply a subcomponent used in the HTG EdgeSeq processors and a second single supplier to provide raw materials used in its HTG EdgeSeq proprietary assays. A loss of either of these suppliers could significantly delay the delivery of products or the completion of services to be performed, which in turn would materially affect the Company’s ability to generate revenue.

~~Recently Adopted Accounting Pronouncements~~

~~In July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-11,~~ ~~Inventory: Simplifying the Measurement of Inventory~~. The standard requires inventory within the scope of the ASU to be measured using the lower of cost and net realizable value. The changes apply to all types of inventory, except those measured using last-in, first-out (“LIFO”) method or the retail inventory method, and are intended to more clearly articulate the requirements for the measurement and disclosure of inventory and to simplify the accounting for inventory by eliminating the notions of replacement cost and net realizable value less a normal profit margin. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017. The Company previously measured its inventory at the lower of cost or market with cost being determined by the first-in, first-out (“FIFO”) method. The adoption of the guidance did not have a material impact on the Company’s interim unaudited condensed financial statements.

~~In April 2016, the FASB issued ASU No. 2016-09,~~ ~~Share-Based Payment: Simplifying the Accounting for Share-Based Payments~~. The standard addresses several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017. Excess tax benefits recorded upon adoption of this standard are not material to the condensed balance sheets. The elimination of the APIC pool affects the treasury stock method used to calculate weighted average shares outstanding; however, the impact was not material. The Company elected to change its policy surrounding forfeitures, and beginning January 1, 2017, the Company no longer estimates the number of awards expected to be forfeited but instead accounts for them as they occur. The Company implemented this portion of the guidance using a modified retrospective approach. However, the cumulative adjustment was not material to additional paid-in capital and therefore was not recorded. Other provisions of ASU 2016-09 had no impact on the Company’s interim unaudited condensed financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

~~In March 2016, the FASB issued ASU No. 2016-08,~~ ~~Revenue Recognition: Clarifying the new Revenue Standard’s Principal-Versus-Agent Guidance~~ ~~(“ASU 2016-08”). The standard amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09. ASU 2016-08 clarifies that an entity should evaluate whether~~ it is the principal or the agent for each specified good or service promised in a contract with a customer. As defined in ASU 2016-08, a specified good or service is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore, for contracts involving more likely than ~~one specified good or service, the Company may be the principal in one or more specified goods or services and the agent for others.~~

~~In April 2016, the FASB issued ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this standard affect the guidance in ASU 2014-09 by clarifying two aspects: identifying performance obligations and the licensing implementation guidance.~~

~~In May 2016, the FASB issued ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients.~~ The amendments in this standard affect the guidance in ASU 2014-09 by clarifying certain specific aspects of ASU 2014-09, including assessment of collectability, treatment of sales taxes and contract modifications, and providing certain technical corrections.

~~The new revenue standard and the standards that amend~~not it will be effective for public entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company plans to adopt the new guidance beginning January 1, 2018 and is currently assessing which transition method to apply. The Company is in the process of analyzing the new guidance for all of its contracts with customers, which includes performing a detailed review of how the new standard affects each of its different types of customer contracts, comparing historical accounting policies and practices to the new standard and assessing the impact on internal controls over financial reporting. As of September 30, 2017, the Company has completed and documented a preliminary assessment of the impact of the new revenue standard on its standard instrument, consumables and sample processing contracts. Additionally, the Company’s assessments of the impact of the new revenue standard on its collaborative arrangements are in process and are mostly complete. The FASB has included on its agenda a project to make targeted improvements to the guidance in ASC 808, ~~Collaborative Arrangements~~, to clarify when transactions between participants in collaborative arrangements are within the scope of the new revenue guidance. Any resulting Accounting Standards Update could impact how the Company is currently adopting the new revenue standard for its collaborative arrangements. The Company plans to finalize its assessment of the impact of the new revenue standard on its results of operations, internal controls and disclosures in the fourth quarter of 2017.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~ ~~(“ASU 2016-02”). Under this standard, which applies to both lessors and lessees, lessees~~ will be required to ~~recognize~~sell the debt security before its anticipated recovery, any allowance is written off and the amortized cost basis is written down to fair value through a charge against net earnings. Unrealized gains and non-credit-related unrealized losses are recorded, net of tax, in other comprehensive (loss) income. The Company did not have any investments in available-for-sale debt securities in unrealized loss positions as of either March 31, 2023 or December 31, 2022.

Accounts Receivable and Allowance for ~~all leases (except~~Credit Losses

Accounts receivable are stated net of an allowance for short-term leases) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-of-use asset, which is an asset that representscredit losses. The Company uses available information over the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginninglife of the ~~earliest comparative period presented in~~receivables including analysis of past credit losses, recoveries of past credit losses, management's expectation of future economic positions, as well as market conditions and other extenuating factors to determine whether or not an allowance is necessary. The Company has considered all information and factors and noted no indicators that a company’s financial statements, with certain practical expedients available. The effect of adoption of this standard on our financial statements will depend on the leases existing at January 1, 2018. Based on the Company’s preliminary assessment of its office and equipment leases that are in placecredit loss exists as of September 30, 2017, however, and considering the practical expedients, the Company expects that adoption of ASU 2016‑02 will not have a material effect on its statements of operations, will result in a gross-up on its balance sheets of less than $3.0 million relating to office and equipment leases and will have no effect on its statements of cash flows.March 31, 2023. The Company ~~will continue~~has not experienced any significant credit loss to ~~assess the new guidance and its potential applicability to the other existing agreements, or to new agreements that it may enter into subsequent to September 30, 2017, through the date of adoption.~~date.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses,, which was subsequently amended by ASU 2018-19, ASU 2019-10 and ASU 2020-02, and requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for

available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a ~~security’s~~security's amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The effect of adoption will depend on the financial instruments held by the Company at the time. Based on the instruments currently held, however, the Company does not believe theCompany's adoption of this standard ~~will~~on January 1, 2023 did not have a ~~significant~~material impact on its condensed consolidated financial statements or related disclosures, given the high credit quality of the obligors to its available-for-sale debt securities and its ~~limited~~ history of minimal bad debt expense relating to trade accounts receivable.

In August ~~2016,~~2020, the FASB issued ASU No. ~~2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~2020-06, Debt – Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Classification of Certain Cash Receipts~~Accounting for Convertible Instruments and ~~Cash Payments~~ (“Contracts in an Entity’s Own Equity (“ASU ~~2016-15”~~2020-06”), which ~~addresses eight specific cash flow issues with~~simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the ~~objective~~derivative scope exception and also simplifies the diluted earnings per share calculation in certain areas. The Company early adopted this standard on January 1, 2023 using a modified retrospective approach. The Company's adoption of ~~reducing~~this standard did not have a material impact on its condensed consolidated financial statements or related disclosures.

New Accounting Pronouncements

The following are new Financial Accounting Standards Board ("FASB") Accounting Standard Updates ("ASU") that had not been adopted by the ~~existing diversity~~Company as of March 31, 2023. The Company's management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying condensed consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"), which amends ASC 820 to clarify that a contractual sales restriction is not considered in ~~practice~~measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 applies to both holders and issuers of equity and equity-linked securities measured at fair value. The amendments in ~~how certain cash receipts~~this ASU are effective for the Company in fiscal years and ~~cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for~~interim periods within those fiscal years, beginning after December 15, ~~2017, including~~2023. Early adoption is permitted for both interim ~~periods within those fiscal years with early adoption permitted, including adoption in an interim period. When considering~~and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the ~~activity within the Company’s condensed statements of cash flows for the nine months ended September 30, 2017 and 2016, the Company does not believe the adoption~~impact of this ~~standard will have a significant impact on its financial statements.~~

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting~~. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The new standard will be effective on January 1, 2018; however, early adoption is permitted. The adoption of this standard is not expected to have a material impactpronouncement on the ~~Company’s financial position or results of operations.~~

~~In July 2017, the FASB issued ASU 2017-11,~~ ~~Accounting for Certain Financial Instruments with Down Round Features~~. The new standard makes limited changes to previous guidance on classifying certain financial instruments as either liabilities or equity. The new standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted, including adoption in an interim period. When considering the Company’s existing financial instruments, the Company does not believe the adoption of this standard will have a significant impact on its financial statements.

Note 3. Inventory

Inventory - current, net of allowance, consisted of the following as of the ~~date~~dates indicated:


	March 31,			December 31,
	2023			2022
Raw materials	$	291,094		$	426,516
Work in process		135,139			113,063
Finished goods		236,809			394,016
Total gross inventory - current		663,042			933,595
Less general inventory allowance		(8,125	)		(24,267	)
	$	654,917		$	909,328

Inventory - non-current, net of excess inventory allowance, included in other non-current assets on the condensed consolidated balance sheets, consisted of the following as of the dates indicated:

September 30,

December 31,

2017

2016

Raw materials

$
1,058,466

$
1,222,437

Work in process

376

1,762

Finished goods

378,396

557,161

Total gross inventory

1,437,238

1,781,360

Less inventory allowance

(186,475
)

(270,307
)

$
1,250,763

$
1,511,053


	March 31,		December 31,
	2023		2022
Raw materials - non-current, net	$	75,544	$	244,915
Work in process - non-current, net		—		81,958
Finished goods - non-current		147,864		73,930
	$	223,408	$	400,803

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023, the Company recorded ~~net decreases in~~a provision for excess inventory of $422,946, primarily related to the write-down of excess quantities of raw materials, whose inventory ~~reserve~~levels were higher than our updated forecasts of ~~$21,405~~future demand for those products and ~~$83,832, respectively, compared with net increases of $291,692~~reduced the general inventory allowance for estimated shrinkage, obsolescence and ~~$383,234, respectively, for the three and nine months ended September 30, 2016.~~ cycle count adjustments by $13,276.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, the Company recorded adjustments to ~~provision~~its specific inventory reserve of $54,033, to reflect the projected obsolescence of a specific inventory item and $5,320 to the general inventory allowance for ~~excess inventory of $58,059~~estimated shrinkage, obsolescence and ~~$302,085, respectively. For the three and nine months ended September 30, 2016, the Company recorded adjustments to provision for excess inventory of $288,130 and $437,893, respectively.~~cycle count adjustments. Adjustments in these periods to the allowance for estimated shrinkage, obsolescence and excess inventory ~~were recognized within~~have been included in cost of product and product-related services revenue in the accompanying condensed consolidated statements of operations.

HTG EdgeSeq instruments at customer locations under evaluation agreements are included in finished goods inventory. Finished goods inventory under evaluation was $0.1 million as of both March 31, 2023 and December 31, 2022.

Note 4. Fair Value Instruments

~~using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency.~~ Financial assets and liabilities measured at fair value are classified in their entirety in the fair value hierarchy based on the lowest level input significant to the fair value measurement. The following table classifies the Company’s financial assets and liabilities measured at fair value on a recurring basis ~~at September 30, 2017~~as of March 31, 2023 and December 31, ~~2016, respectively,~~2022 in the fair value hierarchy:


	Balance at September 30, 2017								March 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Asset included in:
Cash and cash equivalents
Money market securities	$	8,369,374	$	—	$	—	$	8,369,374	$	998,534	$	—	$	—	$	998,534
U.S. Treasury securities										1,894,167		—		—		1,894,167
Investments available-for-sale at fair value
U.S. Treasury securities										3,566,628		—		—		3,566,628
Total	$	8,369,374	$	—	$	—	$	8,369,374	$	6,459,329	$	—	$	—	$	6,459,329

	Balance at December 31, 2016								December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Asset included in:
Cash and cash equivalents
Money market securities	$	6,443,102	$	—	$	—	$	6,443,102	$	10,753,684	$	—	$	—	$	10,753,684
Investments available-for-sale at fair value
U.S. government obligations	$	1,300,663	$	—	$	—	$	1,300,663
Corporate debt securities	$	—	$	3,004,238	$	—	$	3,004,238
Total	$	7,743,765	$	3,004,238	$	—	$	10,748,003	$	10,753,684	$	—	$	—	$	10,753,684

There are no other financial instruments subject to fair value measurement on a recurring basis. Transfers to and from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 or ~~for~~ the year ended December 31, ~~2016.~~2022.

Level 1 instruments include ~~U.S. Government~~investments in money market funds and U.S. Treasuries. These instruments are valued using quoted market prices for identical unrestricted instruments in active markets. The Company defines active markets for debt instruments based on both the average daily trading volume and the number of days with trading activity. Level 2 instruments include corporate debt securities. Valuations of Level 2 instruments can be verified to quoted prices, recent trading activity for identical or similar instruments, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g., indicative or firm) and the relationship of recent market activity to the prices provided from alternative pricing sources.

Fair values of these assets are based on prices provided by independent market participants that are based on observable inputs using market-based valuation techniques. These valuation models and analytical tools use market pricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. The Company did not adjust any of the valuations received from these third parties with respect to any of its Level 1 ~~or 2~~ securities for the ~~periods~~three months ended ~~September 30, 2017~~March 31, 2023 or the year ended December 31, ~~2016.~~2022.

Note 5. ~~Available for Sale~~Available-for-Sale Securities

The ~~Company had no~~Company’s portfolio of available-for-sale securities asconsists of ~~September 30, 2017.~~U.S. Treasuries. The following is a summary of the Company’s available-for-sale securities atas of March 31, 2023:


	March 31, 2023
			Gross		Gross		Fair Value
	Amortized		Unrealized		Unrealized		(Net Carrying
	Cost		Gains		Losses		Amount)
U.S. Treasury securities	$	3,565,990	$	638	$	—	$	3,566,628
Total available-for-sale securities	$	3,565,990	$	638	$	—	$	3,566,628

The Company did not have any investments in available-for-sale securities as of December 31, ~~2016.~~2022.

December 31, 2016

Gross

Gross

Fair Value

Amortized

Unrealized

Unrealized

(Net Carrying

Cost

Gains

Losses

Amount)

U.S. Treasury securities
$
1,300,151

$
512

$
—

$
1,300,663

Corporate debt securities

3,005,840

—

(1,602
)

3,004,238

Total available-for-sale securities
$
4,305,991

$
512

$
(1,602
)

$
4,304,901

The net adjustment to unrealized holding gains ~~(losses)~~ on ~~available-for-sale securities,~~investments, net of tax in other comprehensive income totaled ~~$0 and $1,090~~$638 for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, and $(2,836) and $41,037 for~~March 31, 2023.

Contractual maturities of all of the ~~three and nine months ended September 30, 2016, respectively.~~Company’s available-for-sale securities investments were less than one year as of March 31, 2023. Expected maturities may differ from contractual maturities where issuers of the securities have the right to prepay obligations without prepayment penalties.

Note 6. Property and Equipment

Property and equipment, net, ~~consists~~consisted of the ~~following:~~following as of the dates indicated:

September 30,

December 31,

2017

2016

Office equipment

$
517,353

$
447,580

Leasehold improvements

1,854,052

1,847,378

Laboratory and manufacturing equipment

3,323,787

2,659,621

Field equipment

131,096

131,096

Software

150,451

150,451

Construction in progress

265,611

176,963

6,242,350

5,413,089

Less: accumulated depreciation and amortization

(2,986,912
)

(2,142,892
)

$
3,255,438

$
3,270,197


	March 31,			December 31,
	2023			2022
Furniture & fixtures	$	756,065		$	756,065
Leasehold improvements		1,938,981			1,938,981
Equipment used in manufacturing		1,863,976			1,863,976
Equipment used in research & development		2,080,319			2,080,319
Equipment used in the field		124,456			159,563
Software		329,160			469,408
Property and equipment		7,092,957			7,268,312
Less: accumulated depreciation and amortization		(6,564,430	)		(6,670,306	)
	$	528,527		$	598,006

Depreciation and leasehold improvement amortization expense was ~~$305,868 and $893,334~~approximately $0.1 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, and $357,924 and $1,086,752~~March 31, 2023, compared with $0.2 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2022.

Note 7. Accrued Liabilities

Accrued liabilities ~~consist~~consisted of the ~~following:~~following as of the dates indicated:


	March 31,		December 31,
	2023		2022
Accrued employee bonuses	$	665,241	$	1,252,622
Payroll and employee benefit accruals		308,890		416,070
Other accrued liabilities		347,640		540,914
	$	1,321,771	$	2,209,606

September 30,

December 31,

2017

2016

Employee compensation and benefits

$
1,448,208

$
1,088,773

Employee compensation for future absences

193,662

173,533

Interest

48,702

82,591

Professional fees

108,136

79,029

Other

198,862

246,360

$
1,997,570

$
1,670,286

Note 8. ~~Growth~~Debt Obligations

SVB Term Loan

On June 24, 2020 (the “Closing Date”), the Company entered into the SVB Term Loan, by and among the Company and SVB, as lender, which provided a secured term loan in the principal amount of $10.0 million. The proceeds from the SVB Term Loan were fully funded on June 25, 2020.

~~There have been no significant modifications~~The SVB Term Loan bears interest at a floating rate equal to the ~~terms~~greater of 2.50% above the Prime Rate (as defined in the Loan Agreement) and ~~conditions~~5.75%. Interest on the SVB Term Loan is due and payable monthly in arrears. The SVB Term Loan originally required interest-only payments through June 30, 2021. As a result of the ~~Growth~~Company’s achievement of an equity milestone defined in the Loan Agreement during the quarter ended June 30, 2021, the interest-only period was extended for six months through December 31, 2021. Following the extended interest-only period, the Loan Agreement required equal monthly payments of principal and interest through the maturity date of December 1, 2023.

In July 2022, the Company and SVB entered into an amendment to the SVB Term Loan (the "Term Loan Amendment"). Under the Term Loan Amendment, the Company and SVB agreed to remove the financial covenant under the Loan Agreement that had required the Company to maintain unrestricted cash, including short term investments available-for-sale, of not less than the greater of (i) $12.5 million and (ii) an amount equal to six times the amount of the Company’s average monthly Cash Burn (as defined in the Loan Agreement) over the trailing three months. In exchange for this accommodation, the Company prepaid $2.5 million of outstanding principal under the Term Loan (the “Prepayment”). SVB waived the prepayment fee that otherwise would have applied to the Prepayment. The remaining outstanding principal amount due under the Term Loan will continue to be paid in equal monthly payments of principal and interest through the maturity date of December 1, 2023. The Term Loan Amendment was accounted for as a modification of the original SVB Term Loan.

On March 10, 2023, the FDIC took control and was appointed receiver of SVB. SVB has since been acquired by First Citizens Bank and is now operating as Silicon Valley Bank, a division of First-Citizens Bank and Trust Company. The SVB Term Loan remains intact and the ~~disclosures~~Company will continue to make required payments through the end of the current year, at which time the SVB Term Loan will be repaid in full.

The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of its assets, excluding intellectual property (which is subject to a negative pledge), and the Company’s future subsidiaries, if any, may be required to become co-borrowers or guarantors under the Loan Agreement. If we default under our obligations under the SVB Term Loan, including as a result of a material adverse change, as defined in the SVB Term Loan, the lender could proceed against the collateral granted to them to secure our indebtedness or declare all obligations under the SVB Term Loan to be due and payable. The determination as to whether a material adverse change has occurred is not within the Company's control and it is unclear how the new owners of Silicon Valley Bridge Bank will view the SVB Term Loan from a risk standpoint and what actions they may elect to take under the SVB Term Loan to protect the financial interests of the lender.

The Company included $0.2 million of debt discount associated with the SVB Term Loan, resulting from fees and debt issuance costs, inclusive of the fair value of warrants issued, in SVB Term Loan, net of discount and debt issuance costs in the accompanying condensed consolidated balance sheets as of both March 31, 2023 and December 31, 2022. Amortization of the debt discount associated with the SVB Term Loan was approximately $0.1 million for three months ended March 31, 2023 and 2022, and was included in interest expense in the accompanying condensed consolidated statements of operations.

Insurance Note

In May 2021, the Company entered into a commercial financing agreement to extend the payment period related to its directors and officers insurance policy (the “2021 Insurance Note”). The remaining unpaid premium balance of approximately $0.7 million was repaid prior to February 2022.

Note 9. Revenue from Contracts with Customers

Product and Product-Related Services Revenue

The Company had product and product-related services revenue consisting of revenue from the sale of instruments and consumables and the use of the HTG EdgeSeq proprietary technology to process samples and design custom RUO assays for the three months ended March 31, 2023 and 2022 as follows:


	Three Months Ended March 31,
	2023		2022
Product revenue:
Instrument	$	75,821	$	193,186
Consumables		568,711		471,214
Total product revenue		644,532		664,400
Product-related services revenue:
RUO sample processing		387,978		520,054
Total product-related services revenue		387,978		520,054
Total product and product-related services revenue	$	1,032,510	$	1,184,454

Revenue is reported based upon the geographic locations of the customers or distributors who purchase the Company's products and services. For sales to certain customers and distributors, their locations may be different from the locations of the end customers. Revenue by primary geographic market for the three months ended March 31, 2023 and 2022 was as follows:


	March 31, 2023
	United States		Europe		Other		Total
Product revenue:
Instrument	$	40,538	$	30,283	$	5,000	$	75,821
Consumables		163,933		404,778		—		568,711
Total product revenue		204,471		435,061		5,000		644,532
Product-related services revenue:
RUO sample processing		298,926		70,084		18,968		387,978
Total product-related services revenue		298,926		70,084		18,968		387,978
Total product and product-related services revenue	$	503,397	$	505,145	$	23,968	$	1,032,510


	March 31, 2022
	United States		Europe		Other		Total
Product revenue:
Instrument	$	169,043	$	22,478	$	1,665	$	193,186
Consumables		285,380		185,834		—		471,214
Total product revenue		454,423		208,312		1,665		664,400
Product-related services revenue:
RUO sample processing		512,700		7,354		—		520,054
Total product-related services revenue		512,700		7,354		—		520,054
Total product and product-related services revenue	$	967,123	$	215,666	$	1,665	$	1,184,454

As the Company’s agreements for product and product-related services revenue have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.

Contract Liabilities

The Company may receive up-front payments from customers for sample processing services in addition to payments for instrument extended warranty contracts which are required to be made in advance. The Company recognizes such up-front payments as contract liabilities. The contract liabilities are subsequently reduced as revenue is recognized. Contract liabilities of approximately $0.1 million were included in other current liabilities and an additional immaterial amount of contract liabilities were included in other non-current liabilities in the accompanying condensed consolidated balance sheets as of March 31, 2023, reflecting the period in which the Company expects to realize the deferred revenue.

Changes in the Company’s ~~Annual Report on Form 10-K, filed with the SEC on March 23, 2017. The remaining principal repayments due under the Growth Term Loan~~contract liabilities were as follows as of ~~September 30, 2017 are as follows for each fiscal year:~~the dates indicated:


	Product Revenue			Sample Processing			Total Contract Liability
Balance at January 1, 2023	$	146,714		$	27,000		$	173,714
Deferral of revenue		36,630			6,800			43,430
Recognition of deferred revenue		(53,649	)		(28,175	)		(81,824	)
Balance at March 31, 2023	$	129,695		$	5,625		$	135,320


	Product Revenue			Sample Processing			Total Contract Liability
Balance at January 1, 2022	$	128,529		$	30,621		$	159,150
Deferral of revenue		147,893			—			147,893
Recognition of deferred revenue		(102,812	)		(4,800	)		(107,612	)
Balance at March 31, 2022	$	173,610		$	25,821		$	199,431

2017

$
1,649,008

2018

5,163,822

Total Growth Term Loan payments

6,812,830

Less discount and deferred financing costs

(103,738
)
Plus final fee premium

654,570

Total Growth Term Loan, net

$
7,363,662

Note 9.10. Other Agreements

NuvoGen Obligation

Pursuant to the Company’s asset purchase agreement with NuvoGen Research, LLC (“NuvoGen”), as amended, the Company is obligated to pay NuvoGen annually the greater of $0.4 million or 6% of annual revenue until the NuvoGen obligation is paid in full.

In addition to the fixed quarterly payment of $0.1 million, there was no revenue-based amount payable as of March 31, 2023, compared with $46,031 of revenue-based payments due as of December 31, 2022. There have been no ~~significant~~ modifications to the terms and conditions of the ~~Company’s~~ NuvoGen obligation since the disclosures made in Part II, Item 8, Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K, filed with the SEC on March ~~23, 2017. The~~30, 2023.

Remaining minimum ~~remaining~~ payments ~~due~~to be made in 2023 and in the first quarter of 2024 as reflected in the table below include an estimate of additional revenue-based payments to be made in these quarters, estimated using actual revenue generated in the same quarter in the prior year. Remaining minimum payments include only the minimum quarterly payments to be made in each period. Actual payments could vary from what is shown in the table, to the extent that 6% of the Company’s revenue in 2023 and the first quarter of 2024 varies from the same periods in prior years and revenue in the second quarter of 2024 and later periods exceeds $400,000.

1213

The remaining minimum payments to be made to NuvoGen ~~at September 30, 2017~~as of March 31, 2023 are as follows for each fiscal ~~year, although actual~~year:


2023	$	300,000
2024		446,031
2025		400,000
2026		400,000
2027		400,000
2028 and beyond		1,817,406
Total NuvoGen obligation payments		3,763,437
Plus interest accretion		52,873
Total NuvoGen obligation, net	$	3,816,310

The Company has recorded the obligation at the estimated present value of the future payments ~~could be significantly more than provided~~using a discount rate of 2.5%, which represents the Company’s estimate of its effective borrowing rate for similar obligations. The unamortized interest accretion was $(52,873) and $(55,620)as of March 31, 2023 and December 31, 2022, respectively. Discount accreted during the three months ended March 31, 2023 was $(2,747), compared with $(2,983) for the three months ended March 31, 2022 and was included in interest expense in the accompanying condensed consolidated statements of operations.

Note 11. Leases

Operating Leases

The Company leases office space under agreements classified as operating leases. The Company’s active leases as of March 31, 2023 are for office and manufacturing space in Tucson, Arizona, which expire in 2025. The Company’s leases do not include any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees.

The components of lease cost for operating leases consisted of the following as of the dates indicated:


	Three Months Ended March 31,
	2023		2022
Operating leases
Operating lease cost	$	128,645	$	119,458
Variable lease cost		32,459		27,526
Total rent expense	$	161,104	$	146,984

The table ~~in 2018 and beyond,~~below summarizes other information related to the ~~extent that 6%~~Company’s operating leases:


	Three Months Ended March 31,
	2023			2022
Cash paid for amounts included in measurement of operating lease liabilities	$	130,375		$	117,952
Weighted-average remaining lease term – operating leases		1.8			2.8
Weighted-average discount rate – operating leases		5.8	%		5.8	%

Remaining maturities of the Company’s ~~revenue exceeds $400,000:~~operating leases, included in operating lease liabilities – current and operating lease liabilities - non-current, net of discount, in the condensed consolidated balance sheets as of March 31, 2023 are as follows:


2023	$	391,093
2024		521,379
2025		43,444
Total		955,916
Less present value discount		(50,712	)
Total operating lease liabilities		905,204
Less operating lease liabilities - current		(481,967	)
Operating lease liabilities - non-current	$	423,237

2017

$
200,000

2018

400,000

2019

400,000

2020

400,000

2021

400,000

2022 and beyond

6,298,743

Total NuvoGen obligation payments

8,098,743

Less discount

71,117

Total NuvoGen obligation, net

$
8,169,860

Financing Leases

~~Development Agreements~~

~~Illumina, Inc. Agreement~~

~~In June 2017, the~~The Company ~~entered into an Amended~~has a small number of computer and Restated Development and Component Supply Agreement with Illumina, Inc. (“Illumina”), effective May 31, 2017 (the “Restated Agreement”), which amended and restated the parties’ IVD Test Development and Component Supply Agreement entered intocopier equipment leases that are classified as financing leases. Incremental borrowing rates used to discount future lease payments in ~~October 2014 (the “Original Agreement”). The Restated Agreement provides for the development and worldwide commercialization~~calculating lease liabilities were estimated by reference to information received by the Company ~~of nuclease-protection-based RNA or DNA profiling tests (“IVD test kits”)~~from bankers regarding estimated current borrowing rates for ~~use~~collateralized loans with ~~Illumina’s MiSeqDx sequencer in~~similar amount and duration as the ~~field of diagnostic oncology testing in humans (the “Field”).~~

Under the Restated Agreement, the parties have agreed to continue activities under the first development plan which was entered into pursuant to the Original Agreement, and the Company may, at its discretion, submit additional development plans for IVD test kits in the Field to Illumina for its approval, not to be unreasonably withheld.

Under each development plan, Illumina will provide specified regulatory support and rights, and develop and deliver to the Company an executable version of custom software, which, when deployed on Illumina’s MiSeqDx sequencer, would enable sequencing by the end-user of the subject IVD test kit probe library. Illumina retains ownership of the custom software, subject to the Company’s right to use the custom software in connection with the commercialization of IVD test kits.leases. The Company ~~is required to pay Illumina up to $0.6 million in the aggregate upon achievement~~does not have any material financing leases as of specified regulatory milestones relating to the IVD test kits. There have been no additional contractual milestones reached since the disclosures made by the Company in its Annual Report on Form 10-K, filed with the SEC on March 23, 2017. In addition, the Company has agreed to pay Illumina a single digit percentage royalty on net sales of any IVD test kits that the Company commercializes pursuant to the Restated Agreement. The Company submitted one additional development plan for an IVD test kit to Illumina in the second quarter of 2017, resulting in $031, 2023 and $50,000 for the required payment to Illumina being included in the condensed statements of operations for the three and nine months ended September 30, 2017. Ongoing research and development costs for development plans under the Restated Agreement have been expensed as incurred.

Absent earlier termination, the Restated Agreement will expire in May 2027; however, Illumina is no longer obligated to notify the Company of changes in its products that may affect the Company’s IVD test kits after MayDecember 31, 2023. The Company may terminate the Restated Agreement at any time upon 90 days’ written notice and may terminate any development plan under the Restated Agreement upon 30 days’ prior written notice. Illumina may terminate the Restated Agreement upon 30 days’ prior written notice if the Company undergoes certain changes of control, subject to a transition period of up to 12 months for then-ongoing development plans. Either party may terminate the Restated Agreement upon the other party’s material breach of the Restated Agreement that remains uncured for 30 days, or upon the other party’s bankruptcy.2022.

~~Other Development Agreements~~

There have been no significant modifications or financial events relating to the development agreements entered into by the Company in prior periods with Invetech PTY Ltd., Life Technologies Corporation or Bristol-Myers Squibb since the disclosures made by the Company in its Annual Report on Form 10-K, filed with the SEC on March 23, 2017.

~~Collaborative Development Agreements~~

~~Merck KGaA Agreement~~

The Company earned the first milestone-based payment under its Master CDx Agreement with Merck KGaA, Darmstadt, Germany (“Merck KGaA”) in the second quarter of 2017. There were no additional milestone payments earned, significant modifications or financial events relating to this collaborative development agreement during the third quarter of 2017. Service revenue of $0 and $25,000, was recognized for the completion of these research and development services using the proportional performance method of revenue recognition for the three and nine months ended September 30, 2017, respectively, related to this agreement.

~~Other Agreements with Related Parties~~

~~See Note 14 for discussion of agreements with related parties.~~

Note ~~10.~~12. Net Loss Per Share

~~Net~~Basic loss per common share is computed by dividing ~~the~~ net loss allocable to common stockholders by the ~~weighted-average~~weighted average number of shares of common stock or common stock equivalents outstanding. ~~The numerator and the denominator used in computing both basic and diluted net~~Diluted loss per common share ~~for each period are~~is computed similar to basic loss percommon share except that it reflects the ~~same.~~ potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

The following ~~table provides the numerator and denominator used in computing basic and diluted net loss per share for the periods presented:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Numerator:

Net loss

$
(5,380,846
)

$
(6,488,442
)

$
(17,038,022
)

$
(20,366,469
)
Denominator:

Weighted-average shares outstanding-basic and diluted

11,603,617

7,053,010

9,794,651

6,985,924

Net loss per share, basic and diluted

$
(0.46
)

$
(0.92
)

$
(1.74
)

$
(2.92
)

~~The following outstanding options and warrants~~common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive:


	Three Months Ended March 31,
	2023		2022
Options to purchase common stock		72,904		44,788
Common stock warrants		3,164,267		544,917
Unvested restricted stock units		729		1,906

Note 13. Warrants

In connection with certain of its redeemable convertible preferred stock issuances, debt agreements, convertible debt and other financing arrangements, the Company has issued warrants for shares of its common stock and various issues of its redeemable convertible preferred stock, which have since been converted to common stock warrants.

In connection with the March 2022 Securities Purchase Agreement (see Note 14), the Company issued and sold pre-funded warrants exercisable for an aggregate of 200,911 shares of common stock. The pre-funded warrants had an exercise price of $0.012 per share and were exercised in full in May 2022 for proceeds of $2,411. The Company also issued and sold to the investor common warrants to purchase 270,415 shares of common stock that will expire on March 17, 2024 and common warrants to purchase an additional 270,415 shares of common stock that will expire on September 17, 2027. Each of these common warrants became exercisable commencing September 21, 2022 and has an exercise price of $24.744 per share.

In connection with the December 2022 Securities Purchase Agreement (see Note 14), the Company issued and sold pre-funded warrants exercisable for an aggregate of 1,188,322 shares of common stock. The pre-funded warrants had an exercise price of $0.001 per share and were exercised in full in December 2022 for proceeds of $1,188. The Company also issued and sold to the investor warrants to purchase 1,290,322 shares of common stock that will expire on December 23, 2027 and warrants to purchase an additional 1,290,322 shares of common stock that will expire on December 23, 2024. Each of these common warrants became exercisable commencing December 23, 2022 and has an exercise price of $7.50 per share.

Also in connection with the December 2022 Securities Purchase Agreement, the Company issued warrants to purchase up to an aggregate of 38,709 shares of common stock to designees of the placement agent for the transaction. The warrants issued to the placement agent have substantially the same terms as the warrants above, except the placement agent warrants have an exercise price of $9.6875 per share and expire on December 21, 2027.

Nine Months Ended September 30,

2017

2016

Options to purchase common stock

1,532,979

1,200,644

Common stock warrant

219,723

219,723

Restricted stock units

34,999

350,499

The following table shows the common stock warrants outstanding as of March 31, 2023:


Warrant Issuance Date	Shares of Common Stock Underlying Warrants		Exercise Price/Share		Expiration Date
August 2014		159	$	4,231.80	2024
March 2016		251		496.80	2026
March 2018		100		1,391.40	2028
June 2020		3,574		139.878	2030
March 2022		270,415		24.744	2024
March 2022		270,415		24.744	2027
December 2022		1,290,322		7.50	2024
December 2022		1,290,322		7.50	2027
December 2022		38,709		9.6875	2027

Note ~~11.~~14. Stockholders’ Deficit

Reverse Stock Split

~~Cantor Fitzgerald & Co. Market Offering~~On December 20, 2022, the Company completed a reverse stock split of its outstanding shares of common stock pursuant to which every 12 shares of issued and outstanding common stock were exchanged for one share of common stock.No fractional shares were issued in the reverse stock split. Instead, fractional shares that would have otherwise resulted from the stock split were purchased by us at the applicable percentage of $8.20 per share. All share and per share amounts included within these condensed consolidated financial statements have been retrospectively adjusted to reflect the reverse stock split.

Equity Offerings

Series A Preferred

In ~~April 2017,~~March 2022, the remaining 23,770 shares of Series A convertible preferred stock (“Series A Preferred”) were converted by the holders into an aggregate of 13,206 shares of common stock. Accordingly, no shares of Series A Preferred are outstanding as of March 31, 2023. All of the previously designated Series A Preferred have resumed the status of authorized, unissued and undesignated preferred stock, which may be designated from time to time by the Company’s Board of Directors.

March 2022 Securities Purchase Agreement

In March 2022, the Company entered into a ~~Controlled Equity Offering Sales~~Securities Purchase Agreement (the ~~“Sales~~“March 2022 Securities Purchase Agreement”) with a single investor pursuant to which it agreed to issue to the investor 270,415 units at a price of $27.744 per unit (less $0.012 for each pre-funded warrant purchased in lieu of a share of common stock) for net proceeds, after deducting the placement agent fees and other estimated fees and expenses, of approximately $7.0 million. Each unit consists of one share of common stock (or one pre-funded warrant in lieu thereof), a common warrant to purchase one share of common stock with a term of 24 months from the issuance date, and a common warrant to purchase one share of common stock with a term of 66 months from the issuance date. Each of the common warrants became exercisable commencing on September 21, 2022 and has an exercise price of $24.744 per share. Each pre-funded warrant has an exercise price of $0.012 per share and does not expire until exercised in full. The pre-funded warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof. In May 2022, the 200,911 pre-funded warrants were exercised for proceeds of $2,411.

The common warrants issued in this transaction may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, which ownership cap may be increased by the holder up to 9.99% upon 61 days’ prior notice.

Cantor Fitzgerald & Co. ("Cantor") served as ~~sales~~the placement agent in connection with the March 2022 Securities Purchase Agreement. The Company paid Cantor a fee of approximately $0.3 million plus reimbursement for certain out-of-pocket expenses for its role as placement agent and has incurred approximately $0.2 million of additional transaction costs.

December 2022 Securities Purchase Agreement

In December 2022, in connection with a best-efforts public offering, the Company entered into a Securities Purchase Agreement (the "December 2022 Securities Purchase Agreement") with a certain institutional investor, pursuant to which the Company sold the investor 1,290,322 units at a combined public offering price of $7.75 per share (less $0.001 for each pre-funded warrant purchased in lieu of a share of common stock) for net proceeds, after deducting the Placement Agent fees and expenses and other estimated fees and expenses, of approximately $8.7 million. Each unit consisted of one share of common stock (or one pre-funded warrant in lieu thereof), a common warrant to purchase one share of common stock with a term of 24 months from the issuance date, and a common warrant to purchase one share of common stock with a term of 60 months from the issuance date.

Each pre-funded warrant had an exercise price of $0.001 per share and did not expire until exercised in full. In December 2022, the 1,188,322 pre-funded warrants were exercised for proceeds of $1,188. Each of the common warrants became immediately exercisable upon issuance and has an exercise price of $7.50 per share. The exercise price of the warrants issued in this agreement is subject to adjustment for stock split, reverse splits and similar capital transactions as described in the warrants.

H.C. Wainwright & Co., LLC (the "Placement Agent") served as the exclusive placement agent in connection with the December 2022 Securities Purchase Agreement. The Company paid the Placement Agent a cash fee of 6.5% of the aggregate gross proceeds raised at the closing of the December 2022 Securities Purchase Agreement, plus a management fee equal to 0.5% of the gross proceeds raised at the closing, and reimbursement of certain expenses and legal fees in the amount of $125,000. The Company also issued to designees of the Placement Agent warrants to purchase up to an aggregate of 38,709 shares of common stock (the "Placement Agent warrants"). The Placement Agent warrants have substantially the same terms as the warrants issued under the December 2022 Securities Purchase Agreement, except the Placement Agent warrants have an exercise price of $9.6875 per share and expire on December 21, 2027

Stock-based Compensation

The Company incurs stock-based compensation expense relating to the grants of RSUs and stock options to employees, non-employee directors and consultants under its equity incentive plans and through stock purchase rights granted under the employee stock purchase plan. Stock-based compensation expense (including employee stock purchase plan expense) recorded in the accompanying condensed consolidated statements of operations for three months ended March 31, 2023 and 2022 was as follows:


	Three Months Ended March 31,
	2023		2022
Selling, general and administrative	$	91,523	$	192,903
Research and development		42,173		66,904
Cost of product and product-related services revenue		3,412		7,998
	$	137,108	$	267,805

Equity Compensation Plans

In August 2020, the Company’s stockholders, upon the recommendation of the Company’s Board of Directors, approved the 2020 Equity Incentive Plan (the “2020 Plan”) as a successor to and continuation of the previous 2001 Stock Option Plan, 2011 Equity Incentive Plan and 2014 Equity Incentive Plan (the "2014 Plan"). Upon approval of the 2020 Plan, 62,057 shares, including 5,712 remaining shares reserved for issuance under the 2014 Plan (excluding shares available for the granting of inducement awards under the 2014 Plan’s inducement share pool), were reserved for issuance under the 2020 Plan. No new awards may ~~offer and sell, from time to time, through Cantor Fitzgerald,~~be granted under the 2001, 2011 or 2014 equity plans.

There were 19,446 shares of the Company’s common stock ~~par value $0.001 per share, by any method deemed to be an “at the market offering” as defined in Rule 415~~available for issuance under the ~~Securities Act~~2020 Plan as of ~~1933,~~March 31, 2023 in addition to shares that may become available from time to time as ~~amended (the “ATM Offering”). In April 2017, the Company also filed a prospectus supplement (File No. 333-216977) with the SEC relating to the offer and sale~~shares of ~~up to $20,000,000 of~~our common stock ~~in the ATM Offering. In June 2017, the Company filed an amendment~~subject to ~~the prospectus supplement with the SEC to increase the amount of common stock that may be offered and sold in the ATM Offering~~outstanding awards granted under the ~~Sales Agreement to $40,000,000 in~~2014 Plan (excluding Inducement Awards) or the ~~aggregate, inclusive of~~2011 Plan that, following the ~~common stock previously sold in the ATM Offering prior to the~~effective date of the ~~amendment.~~

As2020 Plan (i) are not issued because such award or any portion thereof expires or otherwise terminates without all of ~~September 30, 2017,~~the shares covered by such award having been issued; (ii) are not issued because such award or any portion thereof is settled in cash; or (iii) are forfeited back to or repurchased by the Company ~~has sold 4,132,857~~because of the failure to meet a contingency or condition required for the vesting of such shares. The 2020 Plan does not contain an evergreen provision.

In July 2021, the Company’s Board of Directors adopted the Company’s 2021 Inducement Plan (the “2021 Inducement Plan”), pursuant to which 25,000 shares were initially authorized and reserved for issuance exclusively for the grant of awards to individuals who were not previously employees or non-employee directors of the Company, as inducement material to the individuals’ entering into employment with the Company (“Inducement Awards”). There were 14,378 shares of common stock available for issuance under the ~~ATM Offering at then-market prices for total gross proceeds~~2021 Inducement Plan as of ~~approximately $17.4 million. After sales commissions and $0.2 million~~March 31, 2023, in addition to shares that may become available from time to time as shares of ~~other offering expenses paid and payable~~common stock subject to outstanding awards granted under the 2021 Inducement Plan are forfeited back to or repurchased by the Company in connection with the ATM Offering, the Company’s aggregate net proceeds through September 30, 2017 were approximately $16.7 million. These costs have been recorded as a reduction of proceeds received in arriving at the amount recorded in additional paid-in capital as of September 30, 2017.

~~Treasury Stock~~

~~In January 2017, the Company’s board of directors approved the retirement~~because of the ~~1,396 shares~~failure to meet a contingency or condition required for the vesting of ~~the Company’s common stock previously held in treasury, and returned them to the status of authorized and unissued shares of the Company’s common stock.~~such shares.

~~Stock-based Compensation~~

A summary of the ~~Plan’s~~Company’s stock option activity (including inducement award activity) for the three months ended March 31, 2023 is as follows:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2016		1,161,705		$	3.35	7.7		$	36,887
										Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2022											76,099		$	84.73		8.3	$	—
Granted		474,000			2.10						666			4.35
Exercised		(41,815	)	2.68				$	152,130		—			—
Forfeited		(54,758	)		2.78						(3,693	)		10.57
Expired/Cancelled		(6,153	)		10.08						(168	)		117.29
Balance at September 30, 2017		1,532,979		$	2.98		7.8	$	-
Exercisable at September 30, 2017		803,458		$	3.32		6.6	$	-
Balance at March 31, 2023											72,904		$	87.67		8.2	$	—
Exercisable at March 31, 2023											43,268		$	128.21		7.6	$	—

As of ~~September 30, 2017, there was~~March 31, 2023, total unrecognized compensation ~~expense of $1,266,892~~cost related to ~~unvested~~ stock ~~options,~~option awards was approximately $0.7 million, which ~~the Company expects~~is expected to ~~recognize~~be recognized over ~~a weighted-average period of~~ approximately ~~1.74~~1.67 years.

~~A summary of the Plan’s RSU activity is as follows:~~

Restricted
Stock Units
(RSU)

Weighted-
Average
Grant Date
Fair Value
Per Share

Balance at December 31, 2016

355,499

$
2.41

Granted

10,000

1.75

Vested

(328,000
)

2.45

Forfeited

(2,500
)

2.46

Balance at September 30, 2017

34,999

$
1.91

Unrecognized compensation expense related to the remaining unvested RSUs was $40,090 at September 30, 2017, which the Company expects to recognize over a weighted-average remaining service period of 2.2 years.

~~Stock-based compensation expense recorded in the condensed statements of operations~~The following table summarizes restricted stock unit (“RSU”) award activity for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023:


	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Balance at December 31, 2022		1,249		$	44.40
Granted		—			—
Released		(312	)		44.38
Forfeited		—			—
Balance at March 31, 2023		937		$	44.40
Vested and unissued at March 31, 2023		208		$	62.42

Vested and ~~2016~~unissued awards at March 31, 2023 represents RSU awards for which the vesting date was ~~as follows:~~March 31, 2023, but for which issuance of the awards occurred in April 2023. As of March 31, 2023, the total unrecognized compensation cost related to RSU awards was approximately $28,400, which is expected to be recognized over approximately 0.71 years.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Selling, general and administrative

$
251,924

$
166,167

$
826,098

$
399,760

Research and development

79,619

49,891

261,083

117,681

Cost of revenue

25,862

13,860

84,807

34,613

$
357,405

$
229,918

$
1,171,988

$
552,054

In September 2017, the Company entered into an arrangement with certain of its non-executive officer employees to provide for retention bonus payments to those eligible employees providing continuing service to the Company through July 31, 2018 and December 31, 2018, respectively, with one half of the retention bonus commitment payable at each of these dates. Compensation

expense of $87,965 has been included in the condensed statements of operations for both the three and nine months ended September 30, 2017. Retention bonus accrual is included in accrued liabilities in the condensed balance sheets as of September 30, 2017. ~~The remaining retention bonuses will be accrued on a straight-line basis through December 31, 2018.~~ ~~No forfeiture rate has been estimated. Forfeitures will be recognized as they occur.~~

The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property and product liability. As a result, the Company may be subject to various legal proceedings from time to time. The results of any ~~current or~~ future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on usthe Company because of defense and settlement costs, diversion of management resources and other factors. ~~Any current litigation is considered immaterial and counter claims have been assessed as remote.~~

The Company leases office and laboratory space in Tucson, Arizona under two non-cancelable operating leases. There have been no changes to the Company’s office and laboratory space leases since the disclosures made by the Company in its Annual Report on Form 10-K, filed with the SEC on March 23, 2017. The Company’s remaining minimum real estate lease payments before common area maintenance charges for each fiscal year as of September 30, 2017 are as follows:

As of September 30, 2017, the Company also has remaining capital lease commitments consisting of approximately $103,000 for computer equipment varying in length from 36 to 48 months and for an equipment financing arrangement of approximately $5,000 with a vendor that expires in December 2017 that have not been included in the minimum lease payments schedule above.

The Company provides for income taxes based upon management’s estimate of taxable income or loss for each respective period. The Company recognizes an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These temporary differences would result in deductible or taxable amounts in future years, when the reported amounts of the assets are recovered or liabilities are settled, respectively.

In each period since inception, the Company has recorded a valuation allowance for the full amount of its net deferred tax assets, as it is not more likely than not that these will be realized. As a result, the Company has not recorded any federal or state income tax benefit in the condensed statements of operations; however, state income tax expense has been recorded for state minimum taxes.

The Company periodically reviews its filing positions for all open tax years in all U.S. federal, state and international jurisdictions where the Company is or might be required to file tax returns or other required reports.

The Company applies a two-step approach to recognizing and measuring uncertain tax positions. The Company evaluates the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in a court of last resort. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the more likely than not criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s results of operations, financial position and cash flows. The Company has not identified any uncertain tax positions at September 30, 2017 or December 31, 2016.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at September 30, 2017 and December 31, 2016, respectively, and has not recognized interest or penalties of significance during the nine months ended September 30, 2017 and 2016, respectively, since there are no material unrecognized tax benefits. The Company has not made or had payments due for income taxes for the periods ended September 30, 2017 or December 31, 2016, other than state minimum taxes. Management believes no material change to the amount of unrecognized tax benefits will occur within the next 12 months.

The Company has established a valuation allowance against the entire net deferred tax asset. A preliminary analysis of past and subsequent equity offerings by the Company, and other transactions that have an impact on the Company’s ownership structure, concluded that the Company may have experienced one or more ownership changes under Sections 382 and 383 of the Internal Revenue Code or IRC. Provisions of the IRC place special limitations on the usage of net operating losses and credits following an ownership change. Such limitations may limit or eliminate the potential future tax benefit to be realized by the Company from its accumulated net operating losses and research and development credits.

In November 2016, the Company entered into a Master Assay Development, Commercialization and Manufacturing Agreement (“Governing Agreement”) with QIAGEN Manchester Limited (“QML”), a wholly owned subsidiary of QIAGEN, N.V. QIAGEN North American Holdings, Inc., a wholly owned subsidiary of QIAGEN N.V., is a greater than 5% holder of the Company’s outstanding common stock.

In June 2017, the Company entered into the first statement of work (“SOW One”) under the Governing Agreement with QML. SOW One addresses the initial activities of the Company and QML in support of the development and potential commercialization of a next generation sequencing-based companion diagnostic assay (the “PDP Assay”) that is the subject of a sponsor project agreement between QML and a biopharmaceutical company (“Pharma One”). The parties expect development activities for the PDP Assay to be the subject of more than one work plan under the sponsor project agreement and a corresponding number of statements of work under the Governing Agreement.

The Company has determined that SOW One is a collaborative arrangement under ASC 808 and a multiple-element arrangement under ASC 605-25. After reviewing the deliverables under the arrangement, the Company concluded that all of the fixed and determinable contract consideration should be allocated to the development services to be performed by the Company.

QML pays the Company a monthly fee for development work performed by Company and its subcontractors (collectively, the “Monthly Fee”). The Monthly Fee is not contingent upon successful acceptance of project milestones by Pharma One; therefore, the Monthly Fee is recognized as the respective payment amount becomes fixed or determinable and collectability from QML is reasonably assured. The Company and QML also will share any net profits resulting from performance of the development work as determined pursuant to the Governing Agreement. Such profit sharing payment(s) is deemed to be fixed or determinable upon completion of SOW One deliverables, acceptance of corresponding deliverables by Pharma One, and the mutual agreement by QML and the Company on the calculation of net profit.

Revenue of $846,368 and $1,123,779 has been included in service revenue in the condensed statements of operations for the three and nine months ended September 30, 2017, respectively, relating to SOW One Monthly Fees. Accounts receivable of $671,765 remains in the condensed balance sheets as of September 30, 2017, and no profit sharing payments have been received or recognized as of September 30, 2017. Costs relating to SOW One of $653,938 and $876,186 have been included in research and development expense in the condensed statements of operations for the three and nine months ended September 30, 2017, respectively. No costs or revenue relating to SOW One were included in the condensed statements of operations for the three and nine months ended September 30, 2016 as SOW One was not established until June 2017.

SOW One will expire when all activities and deliverables have been completed by the respective responsible party and all payments from QML to the Company have been delivered, including any required profit sharing, unless terminated earlier in accordance with the terms of the Governing Agreement.

Contemporaneous with entry into SOW One, the Governing Agreement was amended to provide that neither the Company nor QML may terminate SOW One or the Governing Agreement to the extent it relates to SOW One in the event of a change of control.

In contemplation of the expected signing of the second statement of work (“SOW Two”) under the Governing Agreement in October 2017, QML requested that the Company initiate procurement and histology services for the samples that will be needed for the companies to support the development and potential commercialization of a next generation sequencing-based clinical trial assay that is the subject of a sponsor project agreement between QML and Bristol-Myers Squibb Company (“BMS”). In an effort to avoid project delays during the contracting process for SOW Two and a related three-party agreement, among BMS, QML and the Company, QML and the Company entered a preliminary written agreement for such procurement and histology services during the second quarter of 2017. Fees for sample procurement and histology services have been billed as services have been provided in accordance with the preliminary agreement and revenue is being recognized as the respective payment amount becomes fixed or determinable and collectability from QML is deemed to be reasonably assured.

Revenue of $1,284,326 has been included in service revenue in the condensed statements of operations for both the three and nine months ended September 30, 2017, relating to the Company’s performance of the sample procurement and histology service arrangement with QML, all of which collaborative development service revenue remains in accounts receivable in the condensed balance sheets as of September 30, 2017. Costs relating to sample acquisition and the outsourcing of certain services under these arrangements of $1,284,326 have been included in research and development expense in the condensed statements of operations for both the three and nine months ended September 30, 2017.

Internal development costs incurred by the Company in anticipation of SOW Two have not been included in revenue or billed to QML as of September 30, 2017, as SOW Two was not executed prior to the end of the third quarter of 2017. With the signing of SOW Two by the parties in October 2017 (see Note 15), the Company will recognize, in the fourth quarter of 2017, additional collaboration revenue of approximately $500,000 for internal development costs incurred from June through September 2017, which will be reimbursable under the terms of the Governing Agreement and SOW Two in the fourth quarter of 2017.

~~See Note 15 for a description of additional transactions relating to QML and its affiliates.~~

On October 26, 2017, the Company issued a subordinated convertible promissory note (the “Note”) to QNAH in the principal amount of $3.0 million against receipt of cash proceeds equal to such principal amount. The Note bears simple interest at the rate of 3.0% per annum and matures on October 26, 2020 (the “Maturity Date”). The Company’s indebtedness under the Note is expressly subordinated in right of payment to the Company’s prior repayment in full of its indebtedness under its Loan and Security Agreement, dated August 22, 2014, as amended, with Oxford Finance LLC and Silicon Valley Bank. QNAH may elect to convert all or any portion of the outstanding principal balance of the Note and all unpaid accrued interest thereon at any time prior to the Maturity Date into shares of the Company’s common stock at a conversion price of $3.984 per share.

On October 26, 2017, the Company and QML entered into SOW Two under the Governing Agreement. SOW Two was made effective as of June 2, 2017 (“Onset Date”). SOW Two addresses development activities conducted by the Company and QML since

~~the Onset Date and those expected to be further conducted by parties in connection with a sponsor project agreement, dated June 2, 2017, between QML and BMS (the “BMS/QML SPA”).~~

The development work performed and expected to be performed by the Company and QML under SOW Two (“Initial Phase Work”) is expected to form the basis of a multi-stage project leading to the potential development and commercialization of a companion diagnostic assay in support of one or more of BMS’s therapeutic development and commercialization programs. SOW Two will expire upon completion of the Initial Phase Work and receipt by the Company of all amounts due for such work, which the Company believes will occur in mid‑2018 barring any unexpected project delays. QML will pay the Company mid-single digit millions of dollars for the Initial Phase Work performed by the Company under SOW Two. In addition, the Company and QML will share in any net profits (as determined under the Governing Agreement) generated by the Initial Phase Work on an approximately quarterly basis throughout the SOW Two term.

SOW Two also provides that, notwithstanding anything in the Governing Agreement to the contrary, neither QML nor the Company shall have the right to terminate SOW Two or the Governing Agreement to the extent it relates to SOW Two upon a change of control of either party.

Concurrent with SOW Two, as a condition to BMS’s approval of SOW Two, the Company, QML and BMS entered into a Supplement Agreement, made effective as of the Onset Date. The Supplement Agreement establishes certain rights and obligations of the parties with regard to confidential information and other intellectual property needed to perform, and/or produced as a result of, the Initial Phase Work. The Company will receive sole ownership of “HTG Technology Improvements” (as defined in the Supplement Agreement) that may be produced as a result of the Initial Phase Work, and has agreed to grant certain royalty‑free, non-exclusive license rights to its technology in the event of a project delay caused by the Company and to certain patent rights the Company may obtain as a result of the Initial Phase Work. In addition, the Company will have joint ownership of certain other results of the Initial Phase Work, and royalty‑free, non‑exclusive license rights to BMS‑ or QML-owned (solely or jointly) patents resulting from the Initial Phase Work. The Supplement Agreement will expire or terminate upon expiration or termination of the BMS/QML SPA, which is expected to be approximately coextensive with the term of SOW Two.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, ~~2016,~~2022, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ~~or SEC,~~(“SEC”) on March ~~23, 2017.~~30, 2023. This discussion and analysis contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ~~or the Securities Act,~~(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as ~~amended.~~amended (the “Exchange Act”). These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward looking statements include, but are not limited to, statements about:

In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” ~~“expects,~~“expect,” “intend,” “may,” “plan,” “potential,” “predict,” “continue,” “seek,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this filing and are subject to risks and ~~uncertainties.~~uncertainties, including, without limitation, risks associated with our ability to enter into licensing, partnering or other transactions for programs or candidates arising from our drug discovery platform, which transactions may not occur when anticipated, or at all; the risk that our drug discovery approach may not result in the selection or development of a drug candidate; various risks associated with drug discovery and development; the risk that our technologies may not provide the benefits that we expect; risks associated with our ability to develop and commercialize our products; the risk that our products and services may not be adopted by biopharmaceutical companies or other customers as anticipated, or at all; and risks related to our need for additional capital. We discuss ~~many of~~ these and other risks in greater detail in Part II, Item 1A - “Risk Factors” and elsewhere in this filing. You should carefully read the “Risk Factors” section of this filing to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. These statements, like all statements in this report, speak only as of their date, and except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

We are focused on advancing precision medicine and drug discovery through our innovative transcriptome-wide profiling and advanced drug discovery platform technologies. Building on more than a ~~commercial stage company that develops and markets products and services based on~~decade of pioneering innovation, our proprietary next-generation HTG EdgeSeq technology ~~that facilitates the routine use of targeted molecular profiling. Molecular profiling~~ is the ~~collection~~basis for our tech-driven hybrid business model allowing our RNA molecular profiling applications to be more effective, efficient and relevant and also serving as a key component of the engine behind our platform-based drug discovery process. Central to our business strategy is our proprietary platform-based approach to improve drug discovery through transcriptome-informed drug discovery and design. At the center of this approach is the application of our RNA profiling technologies and advanced medicinal chemistry, functionally brought together using a novel AI-based platform. This unique drug candidate optimization platform allows for more biologically relevant insight into drug candidate selection and design much earlier in the discovery process than is currently possible using other technologies. We believe this approach can result in higher efficiency, improved risk management and lower cost to bring novel drug candidate molecules from early discovery through entry into development. To make this potentially disruptive and transformative approach available more broadly, we are actively engaging in partnering discussions to identify potential investors to license our early-stage portfolio molecules and customers interested in using our AI-based platform to screen their own target molecules.

The training data sets for our machine learning platform utilize our own primary data generated specifically for use in our AI-based drug discovery process. This high quality, standardized data provides a clear advantage over other platform approaches which are typically dependent upon publicly available data. The medicinal chemistry portion of our platform allows for rapid design and in silico evaluation of large chemical libraries in order to prioritize and select compounds for synthesis and advancement into early testing. These data are then integrated and processed into an iterative loop using a series of proprietary machine learning algorithms prior to further advancing the molecules to more traditional drug discovery studies. We expect that this will allow for rapid identification, selection and optimization of drug candidates for entrance into development. Further, we believe that our ability to rapidly iterate between primary data and computational analyses provides us valuable information ~~about multiple molecular~~and insights for candidate molecule design and selection.

Our business strategy is to build our drug discovery pipeline in order to out-license certain drug candidates and potentially advance other candidates into preclinical and early development ourselves. In addition, we would expect to retain and potentially capitalize upon CDx rights through the clinical development and commercialization of these assets where appropriate.

To date, we have used our transcriptome-informed drug discovery engine to develop an early pipeline of drug candidate molecules for two known pharmacologic targets, such as DNA and RNA, also called biomarkers, in a biological sample. Molecular profiling information has many important applications, from basic research to molecular diagnostics in personalized medicine.both of which can target several potential therapeutic indications. Our ~~technology can be used throughout that range of applications, which is just one of its many benefits. Our~~initial focus is on oncology and neurodegenerative diseases. The most advanced discovery program in oncology is a small molecule program for treatment of liquid tumors for which lead optimization has been advanced throughout the first quarter of 2023, with further advancement supporting potential entry into preclinical development later in the year. We believe that our technology provides a differentiated and potentially disruptive approach to drug discovery, that may allow ourselves and our partners to potentially improve upon key attrition factors, namely efficacy and toxicity, early in the discovery process, thereby allowing for better chances for candidate success when entering development.

We also operate a gene expression profiling business in life science tools. Our profiling product and service solutions enable targeted RNA profiling using a small amount of biological sample, in liquid or solid forms. Our menu of HTG EdgeSeq assays, including our HTP, which has been designed to measure approximately 20,000 mRNA targets using our HTG EdgeSeq technology, is automated on our HTG EdgeSeq system, which applies NGS tools agnostically, enabling the generation of gene expression data in a timely manner utilizing our simplified workflow. We seek to leverage key business drivers in molecular profiling for biomarker analysis and diagnostics, including the acceleration of precision medicine, the migration of molecular testing to NGS-based applications, the movement to smaller and less invasive biopsies, the need for greater diagnostic sensitivity, the need to conform to challenging healthcare economics and the need for automation and an easily deployable workflow, including simplified bioinformatics. These capabilities enable customers to extend the use of limited biological samples for retrospective or prospective analysis, gaining further understanding of the molecular drivers of disease with the goal of developing biomarker-driven targeted therapies.

Our existing profiling products include instruments, consumables and software that, as an integrated platform, automate sample processing and can quickly, robustly and simultaneously profile hundreds, thousands or tens of thousands of molecular targets from samples which are a fraction of the size required by many prevailing technologies. Customers can access our technology by purchasing our HTG EdgeSeq system and assays for their internal use or through our Tucson, Arizona-based VERI/O service laboratory, including molecular profiling of cohorts and development of custom RUO panels to support early-stage clinical ~~applications.~~programs and investigational-use-only assays for clinical trials. Our product and service solutions have enabled us to access a number of early-stage biomarker discovery programs. We believe this approach will enable new opportunities collaborating with biopharmaceutical companies in their future drug development programs.

Since the initiation of our drug discovery business in 2021, we have worked to integrate our proprietary profiling technologies into the drug discovery process, using an advanced machine learning-based medicinal chemistry approach, to establish a novel AI-based transcriptome-informed small molecule discovery engine. We believe that our AI-based drug discovery approach will result in the design and selection of drug candidate molecules that are intrinsically lower risk and will therefore have greater potential for success in development when compared to currently existing early-stage drug discovery methods in the biopharmaceutical industry. We further expect that this flexible and scalable approach to small molecule discovery can be applied agnostically across therapeutic areas, allowing us to adapt our strategic and therapeutic focus rapidly as new information emerges on the pathogenesis of diseases.

We believe that our approach will potentially provide multiple revenue opportunities, including collaboration or out-licensing arrangements for small molecule drug candidates we generate from as early as lead optimization through early preclinical development, the out-licensing of our technology to pharmaceutical companies to enable them to implement our advanced drug discovery approach into their own internal discovery efforts, and potentially leverage this novel platform for drug repurposing.

In the first quarter of 2023, we successfully completed three key milestones relating to our drug discovery business in addition to further advancing our AI-based drug discovery platform. These first quarter efforts have significantly advanced our initial candidate molecules for our first oncology indication in liquid tumors up to lead optimization, with an additional program in solid tumors following closely behind.

First, as a result of additional studies completed during the period, we were able to demonstrate the power of our medicinal chemistry platform by showing in vitro efficacy of the initial lead compounds in our target portfolio, both as a standalone therapy and in combination with the current standard of care. We consider this result a powerful demonstration of our medicinal chemistry platform.

In addition, we were able to successfully use our HTG EdgeSeq profiling technology to biologically interrogate these lead compounds. This data, along with other primary and secondary data, was then introduced into our AI-driven drug discovery engine, resulting in the creation of a second generation of molecules. The second generation of molecules has been subjected to the same in vitro experiments as the first and exhibited improved efficacy over the first generation of molecules. These results also demonstrate

the utility of the AI-based drug discovery engine in combination with the high-quality full transcriptome data that is available through the use of our proprietary profiling technology.

Finally, we were able to use our AI-based drug discovery engine to design compounds using transcriptomic data as the starting point. These system-designed compounds showed highly similar characteristics to our initial lead compounds that were designed starting with the resultant transcriptomic profiles associated with cellular perturbation that resulted from target engagement. These results demonstrated the ability of our engine to design novel compounds based on transcriptomic data alone, which we believe will open other applications for our platform, including drug repurposing.

We expect to initiate several early discovery-stage programs evaluating small molecule candidates against a variety of different cancers, from which we plan to select candidates for additional indications to continually expand our drug discovery pipeline. As additional candidates are identified, we may choose to retain certain candidates internally for advancement through early development, with the intention to increase the value of these pipeline assets before moving to license or partner for further development. In parallel to these therapy-area specific programs, we continue to enrich the proprietary dataset that supports our transcriptome-informed drug discovery platform and to further evolve and refine the complementary AI and machine learning portions of this engine.

As a result of post-pandemic trends such as the reduction of and delay in clinical trial activities during the pandemic generating lower quantities of retrospective samples for testing, budget reductions and labor shortages and supply chain issues experienced by a number of our customers, we have taken, and continue to consider further actions to reduce our operating expenses and minimize the impact of reduced revenue on our operating loss and cash utilization, including a significant reduction in force in the second quarter of 2022. We have continued to closely monitor profiling customer ~~segments include~~needs, study trends and purchasing patterns and to make additional operating adjustments as appropriate to determine the most appropriate strategy for the future of our profiling business and to allow us to ensure that we can continue to progress our quickly evolving drug discovery business.

In response to the trends seen in our profiling business and our organizational operating adjustments, our commercial focus has shifted from the quantity of customers adopting our profiling technology to the quality and sustainability of future revenue, including higher revenue per sample, larger cohorts and minimum batch sizes for service in our VERI/O laboratory and at contract research organizations ("CROs") who have adopted our technology. This has allowed us to reduce cost and focus the efforts of our smaller organization as well as to align our profiling commercial focus more closely with the customer population that we project will be most likely to utilize our AI-based drug discovery engine for asset acquisition or development of their own targets. In addition, the slowing of retrospective sample profiling volume resulting from reduced clinical trial activity during the pandemic together with the release of our HTP in 2021 has begun to allow a shift in our profiling business strategy. Where we have historically generated revenue from retrospective testing of samples from past late stage trials for research purposes, our HTP has allowed us to begin to compete for phase I and II trials with retrospective batch testing planned throughout the trials, some of which are expected to span multiple years. While these opportunities are not expected to drive significant revenue in the early stages, we believe they will provide ongoing collaboration with and revenue from our biopharmaceutical company customers, potentially both in profiling and in drug discovery, leading to later stage opportunities including the potential of a companion diagnostic partnership opportunity.

Our product and product-related services revenue is generated primarily through the sale of our profiling instruments and consumables and sample processing services performed on behalf of pharmaceutical companies, academic research centers and molecular testing laboratories.

~~Historically, molecular~~RUO profiling has faced several technical challenges in clinical applications. These include (i) limited “multiplexing,” which means only a few biomarkers could be tested in a single sample; (ii) the need for vast amounts of sample to test more than a few biomarkers, which often required several different technologies conducted in different locations; (iii) complex sample preparation; and (iv) manual and/or time-consuming workflows. Even where it was possible to test tens, hundreds or thousands of biomarkers, such as with fixed arrays, data analysis could be quite complicated and time consuming.

Our proprietary technology has several key differentiators, including (i) multiplexing from tens to thousands of biomarkers in a single sample; (ii) very low sample input requirements; (iii) simple, extraction-free sample preparation, which is effective with a wide variety of samples; (iv) automated workflow with sample-to-result turnaround times rivaling any current competitor; and (v) simplified data output. In addition, our HTG EdgeSeq assay technology, launched in 2014, generates a molecular profiling library for detection using NGS. Among other things, NGS provides improved sensitivity and dynamic range for our HTG EdgeSeq assays. We believe these advantages position us to outperform most other now-available molecular profiling technologies, especially in certain sample types, such as formalin-fixed, paraffin-embedded, or FFPE, tissue. While we continue to advance our technology, we are particularly focused on gaining market recognition and expanding our product offerings and biopharmaceutical company collaborations.

Our current sources of revenue include sample processing, custom research use only, or RUO, assay development and collaboration services and sales of our automation system and integrated NGS-based HTG EdgeSeq assays. Our current assay product offerings include the following:

~~Our assays are currently sold for research use only, except in Europe where our diffuse large B-cell lymphoma, or DLBCL, assay and our HTG EdgeSeq ALKPlus~~ ~~Assay EU are CE-marked and~~made available ~~for diagnostic use. We continue work on the pre-market approval, or PMA, submission for our HTG EdgeSeq ALKPlus~~ ~~Assay in the United States. We also have a focused development pipeline of new profiling products, which includes planned panels for translational research, drug development, and molec~~ular diagnostics with initial focus in immuno-oncology. Our HTG EdgeSeq EGFR, KRAS and BRAF Mutation Assay is the first commercially available application of our direct-target-sequencing “version 2” chemistry, or V2 chemistry, and is available as a service offering for detection of certain DNA mutations in our VERI/O laboratory.

Our HTG EdgeSeq assays are automated on our HTG EdgeSeq platform, which may also be referred to as an “instrument” or “processor” and which, together with the assay, is a fully integrated system.

Customers can also obtain the advantages of our proprietary technology by engaging us to perform certain pre-clinical and clinical research-related services, including drug development and translational research. Our services include processing samples for molecular profiling data and designing custom research or investigational profiling assays. We also perform collaborative development services for biopharmaceutical company customers, primarily through a Master Assay Development, Commercialization and Manufacturing Agreement, or Governing Agreement, entered into with QIAGEN Manchester Limited, or QML, in November 2016. We initiated development services under the Governing Agreement in June 2017, with the signing of the first statement of work, or SOW One, and as of October 2017, have two signed statements of work.

As we navigate product-related regulatory requirements to launch additional molecular diagnostic products, initially in Europe and then in the United States, we expect our research products and services will continue to drive market recognition and technology

adoption. Further, we expect that expanding our collaborative development services and otherwise strategically positioning our proprietary technology, products and services in drug or other clinical development programs will drive a future, ongoing portfolio of molecular diagnostic products, including companion diagnostic products.

We have incurred significant losses since our inception, and we have never been profitable. We incurred net losses of $5.4 million and $17.0 million for the three and nine months ended September 30, 2017, respectively, and $6.5 million and $20.4 million for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017, we had an accumulated deficit of approximately $132.6 million. As of September 30, 2017, we had available cash and cash equivalents totaling approximately $9.0 million, and had current liabilities of approximately $13.5 million, plus an additional $8.2 million in long-term liabilities primarily attributable to our ~~obligation to NuvoGen.~~

In August 2017, we announced that our HTG EdgeSeq technology will be used together with Illumina NGS technology in a clinical trial conducted by the Worldwide Innovative Networking Consortium, or WIN, investigating a novel therapeutic approach using a combination of three targeted therapies for the first line treatment of patients with advanced non-small cell lung cancer.

~~In September 2017, we announced that we expect to complete~~customers through product and ~~file the fourth and final module related to the PMA submission for our HTG EdgeSeq ALKPlus~~ ~~Assay in the second quarter of 2018. The first three modules of the PMA have already been submitted to the U.S. Food and Drug Administration for review.~~

In September 2017, we successfully completed an audit of our Quality Management System for continued ISO 13485 certification by a Canadian Medical Device Conformity Assessment System-accredited registrar, which is required by Health Canada for us to market in vitro diagnostic, or IVD, products in Canada.

In September 2017, the United States Patent and Trademark Office issued two U.S. patents covering our technology and applications of our technology. The first patent, U.S. Patent No. 9,758,829 entitled Molecular Malignancy in Melanocytic Lesions, was issued to us and the John Wayne Cancer Institute, who co-invented the technology. It claims a method of treating an indeterminate or atypical nevi that involves measuring the nucleic acid expression of certain biomarkers, including MAGEA2, PRAME, PDIA4, NR4A1, PDLIM7, B4GALT1, SAT1, RUNX1, and SOCS3. The patent will expire in June 2033. The second patent, U.S. Patent No. 9,765,385 entitled Nuclease Protection Methods for Detection of Nucleotide Variants, claims a nuclease-protection-based method for targeted detection of single nucleotide variants. This patent will expire in October 2033.

In October 26, 2017, we entered into the second statement of work, or SOW Two, with QML under the Governing Agreement. SOW Two was made effective as of June 2, 2017, or the Onset Date, and addresses development activities conducted by us and QML since the Onset Date and those expected to be further conducted by parties in connection with a sponsor project agreement, dated June 2, 2017, between QML and Bristol-Myers Squibb Company, or BMS. Under SOW Two we and QML are expected to perform development work for the initial phase of what is expected to become a multi-stage project leading to the potential development and commercialization of an NGS-based companion diagnostic assay in support of one or more of BMS’s therapeutic development and commercialization programs.

Concurrent with SOW Two, as a condition to BMS’s approval of SOW Two, we entered into a Supplement Agreement with QML and BMS, made effective as of the Onset Date. The Supplement Agreement establishes certain rights and obligations of the parties with regard to confidential information and other intellectual property needed to perform, and/or produced as a result of, the Initial Phase Work.

Three Months Ended September 30,

Change

Nine Months Ended September 30,

Change

2017

2016

$

%

2017

2016

$

%

Revenue:

Product

$
625,605

$
506,065

$
119,540

24
%

$
1,573,926

$
1,683,382

$
(109,456
)

(7
%)
Service

3,097,879

407,836

2,690,043

660
%

5,281,483

1,991,567

3,289,916

165
%
Total revenue

3,723,484

913,901

2,809,583

307
%

6,855,409

3,674,949

3,180,460

87
%
Cost of revenue

1,088,987

1,125,009

(36,022
)

(3
%)

3,621,193

2,901,455

719,738

25
%
Gross margin

2,634,497

(211,108
)

2,845,605

(1348
%)

3,234,216

773,494

2,460,722

318
%
Gross margin percentage

71
%

-23
%

47
%

21
%

Operating expenses:

Selling, general and administrative

4,258,347

3,937,600

320,747

8
%

12,910,251

13,343,945

(433,694
)

(3
%)
Research and development

3,478,419

1,910,116

1,568,303

82
%

6,364,371

6,515,808

(151,437
)

(2
%)
Total operating expenses

7,736,766

5,847,716

1,889,050

32
%

19,274,622

19,859,753

(585,131
)

(3
%)
Operating loss

(5,102,269
)

(6,058,824
)

956,555

(16
%)

(16,040,406
)

(19,086,259
)

3,045,853

(16
%)
Other expense, net

(277,834
)

(429,618
)

151,784

(35
%)

(996,593
)

(1,275,951
)

279,358

(22
%)
Net loss before income taxes

$
(5,380,103
)

$
(6,488,442
)

$
1,108,339

(17
%)

$
(17,036,999
)

$
(20,362,210
)

$
3,325,211

(16
%)

~~We generate revenue by offering customers two primary methods to adopt our technology.~~service offerings. Customers can purchase our HTG EdgeSeq instrument and related RUO consumables, which consist primarily of our proprietary molecular profiling panels and other assay ~~components. Together, all such consumables may be referred to as assays, assay kits~~components, for use in their own facilities or ~~kits. Customers~~at CROs. They can also ~~purchase~~access our technology through contracted RUO profiling services ~~related~~using our instruments and consumables to process their samples in our VERI/O laboratory.

Product and product-related services revenue, which includes revenue generated through the sale of our HTG EdgeSeq instruments and consumables and from services performed for customers using our proprietary RUO technology, ~~such as sample processing, custom research use only assay development~~decreased by 13% to $1.0 million for the three months ended March 31, 2023, compared with $1.2 million for the three months ended March 31, 2022, and ~~pursuant~~was comprised of the following:

Product revenue, which includes gene expression profiling revenue generated through the sale of our HTG EdgeSeq instruments and consumables, decreased by 3% to ~~collaborative development agreements~~$0.6 million for three months ended March 31, 2023, compared with $0.7 million for three months ended March 31, 2022. This decrease primarily reflects a reduction in the number of instruments sold when compared with the same period in prior year, partially offset by an increase in consumables revenue over the period year. This increase reflects a shift in customer mix over the same period in prior year, with a larger number of customers outside of the United States, where customers primarily access our ~~biopharmaceutical company customers and with QML pursuant to~~technology through product purchases, making purchases in the first quarter of 2023. Consumables revenue generated from the sale of our ~~Governing Agreement, development~~HTP, commercially launched in August 2021, represented 30% of ~~assays with potential clinical utility (e.g., IVD assays). Total~~our product revenue for the three months ended ~~September 30, 2017, increased by 307% to $3.7 million~~March 31, 2023, compared with ~~$0.9~~45% of our product revenue for the three months ended March 31, 2022, respectively.

Product-related services revenue, consisting of RUO sample processing using our HTG EdgeSeq instruments and consumables in our VERI/O laboratory and custom RUO assay design, decreased by 25% to $0.4 million for the three months ended ~~September 30, 2016. Total revenue for the nine months ended September 30, 2017 increased by 87% to $6.9 million~~March 31, 2023, compared with $3.7 million for the nine months ended September 30, 2016. The increase in total revenue for the nine months ended September 30, 2017 compared with the same period in the prior year was primarily the result of revenue generated from collaborative development services relating to our Governing Agreement with QML, for which SOW One was entered into in June 2017. This increase is also attributable to the continued expansion of our customer base, both in the United States and in Europe.

~~Product revenue includes revenue from the sale of HTG EdgeSeq instruments and related consumables, and was $0.6 million and $1.6~~$0.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with $0.5 million and $1.7 million for the three and nine months ended September 30, 2016, respectively, and was comprised of the following:~~

~~Product~~March 31, 2022. RUO sample processing revenue ~~generated from instrument sales, rental and extended warranty services increased over the prior year~~decreased primarily due to the sale of three instruments during the nine months ended September 30, 2017 compared with one instrument during the nine months ended September 30, 2016. Consumables revenue decreased from the prior year primarily as a result of the timing of several larger pharma customer ~~projects and our focus on biopharmaceutical customers whose preference has been to gain access to~~studies, many of which were pending decisions from data generated in previous studies using our technology, ~~by way~~certain of our ~~service offerings. We expect~~customers purchasing kits through CROs who are conducting studies on their behalf and continued delays in our ~~revenue mix~~ability to ~~continue to contain a high proportion of biopharmaceutical service revenue in the~~

near term. Longer term, we expect that potential companion diagnostic products resulting from our collaborations with biopharmaceutical company customers (either directly or with QML) will generate future clinical diagnostic product related revenues as the biopharmaceutical companies’ drugs are commercialized and gain acceptance in the market. We will also continue to work independently to develop additional research use only and commercial clinical diagnostic menu items, both in European and U.S. marketsobtain customer samples for ~~customer use with our HTG EdgeSeq platform to drive further product revenues in future periods.~~

~~Service revenue, consisting of services such as~~planned sample processing ~~custom assay development and collaborative development~~programs. Revenue generated from sample processing services ~~for biopharmaceutical company customers, increased significantly to $3.1 million and $5.3 million for~~using the ~~three and nine months ended September 30, 2017, respectively, compared with $0.4 million and $2.0 million for the three and nine months ended September 30, 2016, respectively, and was comprised~~HTP represented 40% of ~~the following:~~

Our increased service revenue for the three and nine months ended September 30, 2017, compared with the same periods in 2016, reflects growth in all of our service offerings. We have experienced growth in both the number of biopharmaceutical company customers purchasing our service offerings and in the amount of work performed on newly initiated biopharmaceutical company collaborative development agreements, including the initiation of development services performed for a large biopharmaceutical company pursuant to our Governing Agreement with QML. Collaborative developmentproduct-related services revenue for the three ~~and nine~~ months ended ~~September 30, 2017 included revenue relating to SOW One executed~~March 31, 2023, compared with QML in June 2017, and a second arrangement with QML for sample procurement and histology services. We entered the second arrangement with QML in anticipation of the October 2017 signing of a second statement of work for development work to be performed in collaboration with QML for BMS under the Governing Agreement.

We, together with QML where controlled by our Governing Agreement, continue to pursue new, and expand existing, research (i.e., sample processing and custom research assay design and development) and collaborative development service agreements with new and existing biopharmaceutical company and academic medical center customers. These customers have chosen our proprietary technologies for use in their translational research and drug development programs and may prefer to gain access to our technology through purchase37% of our ~~services. Because of existing agreements with biopharmaceutical company customers (including those collaborative development~~product-related services contracted by QML pursuant to our Governing Agreement) and continued efforts to expand our services to new biopharmaceutical company and academic medical center customers in the future, we expect our service revenue to continue to increase in both absolute dollars and as a percentage of total revenue for the ~~remainder of 2017 and into 2018.~~three months ended March 31, 2022.

Cost of product and product-related services revenue includes both product-related and services-related costs. Product-related costs include the aggregate costs incurred in manufacturing, delivering, installing and servicing instruments and consumables. The components of our product-related costs of revenue include consumables ~~as well as~~and lab supplies, subcomponent and servicing costs, manufacturing costs incurred internally (which include direct labor costs), and equipment and infrastructure expenses associated with the manufacturing and distribution of our products. Due to the fixed nature of certain of these expenses, such as overhead, equipment and infrastructure, associated with our regulated industry and our expectations for further growth in customer demand, we expect our cost of product and product-related services ~~performed for customers by~~revenue as a percentage to decrease over time as our ~~VERI/O laboratory~~product and ~~product development group.~~ product-related services revenue increases, further absorbing these fixed costs.

Cost of product and product-related services revenue ~~decreased by $(36,000), or -3%, and~~ increased by ~~$720,000, or 25%,~~34% to $1.1 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2023, compared with ~~the three and nine months ended September 30, 2016. Gross margin has improved to 71% and 47%~~$0.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with -23% and 21% for the three and nine months ended September 30, 2016, respectively.~~March 31, 2022. This ~~gross margin improvement is~~increase primarily attributable to the initiation of collaborative development projects under our Governing Agreement with QML in 2017, the revenue from which is accounted for in service revenue as collaborative development services revenue, and development costs which are included in research and development expensereflects an excess inventory reserve recorded in the ~~condensed statements~~first quarter 2023 of ~~operation for the three and nine months ended September 30, 2017. Additional gross margin improvement is attributable to the overall increase~~$0.4 million, reflecting our estimation of inventory on hand in ~~service revenue which has allowed for further absorption~~excess of our ~~fixed operating~~projections of future demand for certain of our products as a result of our shifting commercial focus, partially offset by a decrease in compensation expenses ~~incurred~~following the reduction in force completed in the ~~expansion of our VERI/O laboratory staffing, facilities and equipment to accommodate the anticipated increase in demand for services when compared to prior periods. In addition, in the third~~second quarter of ~~2016, we recorded a $292,000 provision for excess inventory relating to our now obsolete chemiluminescent reader inventory within cost of revenue in the condensed statements of operation.~~2022.

Selling, general and administrative expenses ~~were $4.3 million~~consist primarily of personnel costs for our sales and ~~$12.9 million~~marketing, regulatory, legal, executive management and finance and accounting functions. The expenses also include third-party professional and consulting fees incurred by these functions, promotional expenses and facility and overhead costs for the three and nine months ended September 30, 2017, respectively, compared with $3.9 million and $13.3 million for the three and nine months ended September 30, 2016, respectively. The full year reductions in selling,our administrative offices. Selling, general and administrative expenses ~~from 2016~~decreased by 30% to 2017 are a direct result of the reorganization of our commercial sales team in 2016 that we undertook to gain efficiency and to focus predominantly on the biopharmaceutical market while reducing our investments in the academic research market, as well as an overall effort by the organization to improve productivity and reduce discretionary costs. The increase in our selling, general and administrative expenses$3.3 million for the three months ended September 30, 2017 compared to the same period in 2016 is primarily due to current period increases in employee bonus expense based on anticipated attainment of Company goals and other incentive compensation expenses.

~~Research and development expenses were $3.5 million and $6.4 million for the three and nine months ended September 30, 2017, respectively,~~March 31, 2023 compared with ~~$1.9~~$4.7 million ~~and $6.5 million for the three and nine months ended September 30, 2016, respectively. The increase in research and development expenses~~ for the three months ended ~~September 30, 2017 compared~~March 31, 2022. This decrease primarily reflects a decrease in legal fees incurred to protect our intellectual property and decreased compensation and stock-based compensation expenses following a reduction in force completed in the ~~same period in 2016, is primarily due to collaborative development costs associated with projects initiated in 2017 under our Governing Agreement with QML which are included in research~~second quarter of 2022.

Research and development expense in the consolidated statements of operations as the contracts are accounted for under the Financial Accounting Standards Board’s guidance for collaborative arrangements. For the nine months ended September 30, 2017 when compared to the same period in 2016, the increase in collaborative arrangement development costs in 2017 is offset by development costs incurred in 2016 for Project JANUS, which was suspended in the third quarter 2016 in favor of higher-value, near-term development projects.expenses

~~We anticipate additional increases in research~~Research and development expenses ~~as our collaborative development services revenue is expected~~decreased by 16% to ~~grow~~$1.6 million for the three months ended March 31, 2023, compared with $1.9 million for the three months ended March 31, 2022. This decrease primarily reflects a decrease in ~~future periods. However, we do not expect research~~compensation expenses following a reduction in force completed in the second quarter of 2022. Research and development ~~expense to increase at~~expenses included investments in HTG Therapeutics technology, consultants and personnel of approximately $1.2 million for the ~~same rate as collaborative development services revenue~~three months ended March 31, 2023, compared with $0.7 million for the three months ended March 31, 2022.

Changes in future periods. Although the majority of expenses under SOW One have been incurred and included in research and development expense as of September 30, 2017, none of the potential profit sharing payments have been earned or recognized as of that date.

Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022

The following table summarizes the primary sources and uses of cash for each of the periods presented:

Net cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2017 totaled $13.7~~March 31, 2023 was $4.4 million ~~and~~compared with net cash used in operating activities of $5.9 million for the three months ended March 31, 2022. Net cash used in operating activities for the three months ended March 31, 2023 reflected (i) a net loss of ~~$17.0~~$5.1 million; (ii) net non-cash items of ~~$2.8~~$0.9 million consisting primarily of stock-based compensation of $1.2 million, depreciation and amortization of $0.9 million, amortization of the discount, final payment premium and deferred financing costs on our asset-secured Growth Term Loan with Oxford Finance, LLC and Silicon Valley Bank, or Growth Term Loan, of $0.3 million, and a provision for excess inventory of ~~$0.3 million;~~$0.4 million, stock-based compensation expense of $0.1 million, depreciation and amortization expense of $0.1 million, amortization of loan discount and issuance costs of $0.1 million, write-off of deferred offering costs of $0.1 million and amortization of right-of-use assets of $0.1 million and (iii) a net cash ~~inflow~~outflow from changes in balances of operating assets and liabilities of ~~$0.5~~$0.2 million. The significant items comprising the changes in balances of operating assets and liabilities were increase in accounts receivable partly offset by an increase in accounts payable during the period both primarily driven by collaborative development work performed under the Governing Agreement with QML during the period.

Net cash used in operating activities for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2022 was ~~$17.3~~$5.9 million and reflected (i) ~~the~~a net loss of ~~$20.4 million,~~$6.5 million; (ii) net non-cash items ~~of $2.7 million,~~ consisting primarily of stock-based compensation expense of $0.3 million, depreciation and amortization expense of ~~$1.1~~$0.2 million, amortization of ~~the~~loan discount ~~on the NuvoGen obligation~~ and issuance costs of ~~the discount, final payment premium and deferred financing costs on the Growth Term Loan~~$0.1 million, amortization of ~~$0.6 million, stock-based compensation of $0.6 million, a provision for excess inventory of $0.4 million, and accrued interest on available-for-sale securities~~right-of-use assets of $0.1 million and (iii) a net cash ~~inflow~~outflow from changes in balances of operating assets and liabilities of ~~$0.4~~$0.2 million.

Net cash used in investing activities for the three months ended March 31, 2023 was $3.5 million ~~consisting~~compared with net cash provided by investing activities of $5.4 million for the three months ended March 31, 2022. Net cash used in investing activities for the three months ended March 31, 2023 was comprised primarily of ~~decrease in accounts receivable due to collections efforts in~~$3.5 million of available-for-sale securities purchased during the third quarter of 2016 and increased deferred revenue due to longer term biopharmaceutical company customer service contracts, partially offset by an increase in accounts payable primarily relating to research and development project expenses.period.

Net cash provided by investing activities for the ~~nine~~three months ended ~~September 30, 2017 totaled $3.8~~March 31, 2022 was $5.4 million and was comprised primarily of ~~proceeds from maturities of available-for-sale securities of $4.3 million during the period, partially offset by the purchase of laboratory automation and other fixed assets during the period.~~

Net cash provided by investing activities of $17.8 million for the nine months ended September 30, 2016 was comprised primarily of available-for-sale securities activities, including maturities of $23.0 million and purchases of $3.4$5.4 million of available-for-sale securities maturing during the period.

Net cash used in financing activities for the three months ended March 31, 2023 was $1.3 million compared with net cash provided by financing activities for the three months ended March 31, 2022 of $5.6 million. This activity for the three months ended March 31, 2023 consisted primarily of $0.8 million of payments on our SVB Term Loan, $0.4 million of payments on our December 2022 Securities Purchase Agreement issuance costs (see Note 14 to the accompanying condensed consolidated financial statements for the quarter ended March 31, 2023) and $0.1 million of payments made on our outstanding NuvoGen obligation.

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2017 totaled $11.5 million and~~March 31, 2022 was $5.6 million. This activity for the three months ended March 31, 2022 consisted primarily of ~~$16.7~~$7.2 million in net proceeds from ~~our ATM Offering,~~the March 2022 Securities Purchase Agreement (see Note 14 to the accompanying condensed consolidated financial statements for the quarter ended March 31, 2023), partially offset by ~~$4.7~~$1.3 million ~~and $0.6~~of payments made on our SVB Term Loan, $0.2 million inof payments made on our outstanding ~~Growth Term Loan~~NuvoGen obligation, and ~~NuvoGen obligations, respectively.~~$0.2 million of payments made on our 2021 Insurance Note.

Net cash provided by financing activities for the nine months ended September 30, 2016 consisted primarily of $5.0 million in proceeds from the draw of the second tranche of our Growth Term Loan in March 2016 to fund ongoing business operations, partially offset by $2.9 million in payments on the outstanding Growth Term Loan balance that began in April 2016.

Since our inception, our operations have primarily been financed through the issuance of our common stock, redeemable convertible preferred stock, the incurrence of debt and cash received from product sales, services revenue and other income. As of ~~September 30, 2017,~~March 31, 2023, we had ~~$9.0~~$6.6 million in cash, ~~and~~ cash equivalents and ~~$15.6~~investments in available-for-sale securities, and current liabilities of approximately $6.6 million. We also had approximately $3.8 million of ~~debt~~long-term liabilities outstanding, onrelating primarily to our ~~Growth Term Loan,~~ NuvoGen obligation and ~~capital lease obligations.~~operating leases.

In June 2020, we entered into the SVB Term Loan with SVB. The proceeds from the SVB Term Loan, together with cash on hand, were used to repay in full all outstanding amounts and fees due under our prior MidCap Credit Facility and a subordinated convertible note that has since been repaid. Our SVB Term Loan bears interest at a floating rate equal to the greater of 2.50% above the Prime Rate (as defined in the Loan Agreement) and 5.75%. In July 2022, we entered into the Term Loan Amendment with SVB. Under the Term Loan Amendment, SVB agreed to remove the financial covenant under the Loan Agreement. In exchange for this accommodation, we prepaid $2.5 million of outstanding principal under the SVB Term Loan. The remaining outstanding principal amount due under the SVB Term Loan will continue to be paid in equal monthly payments of principal and interest through the maturity date of December 1, 2023.

In ~~August 2014,~~March 2022, we entered into a ~~Growth Term Loan~~Securities Purchase Agreement with ~~Oxford Finance, LLC~~a single investor pursuant to which we issued and ~~Silicon Valley Bank (see Note 8~~sold to the investor 270,415 units at a price of $27.744 per unit (less $0.012 for each pre-funded warrant purchased in lieu of a share of common stock) for net proceeds, after deducting the placement agent fees and other estimated fees and expenses, of approximately $7.0 million. Each unit consisted of one share of common stock (or one pre-funded warrant in lieu thereof), a common warrant to purchase one share of our ~~interim unaudited condensed financial statements included in this report). We borrowed~~common stock with a term of 24 months from the ~~first tranche~~issuance date, and a common warrant to purchase one share of our common stock with a term of 66 months from the issuance date. Each of the ~~Growth Term Loan~~common warrants became exercisable commencing on September 21, 2022 and has an exercise price of $24.744 per share. Each pre-funded warrant had an exercise price of $0.012 per share and had no expiration date. In May 2022, all of the 200,911 pre-funded warrants were exercised for proceeds of $2,411.

In December 2022, in connection with a best-efforts public offering we entered into a Securities Purchase Agreement (the "December 2022 Securities Purchase Agreement") with a certain institutional investor, pursuant to which we issued and sold to the investor 1,290,322 units at a combined public offering of $7.75 per share (less $0.001 for each pre-funded warrant purchased in lieu of a share of common stock) for net proceeds, after deducting the Placement Agency fees and expenses and other estimated fees and expenses of approximately $8.7 million. Each unit consisted of one share of common stock (or one pre-funded warrant in lieu thereof), a common warrant to purchase one share of common stock with a term of 24 months from the issuance date, and a common warrant to purchase one share of common stock with a term of 60 months from the issuance date. In December 2022, all of the 1,188,322 pre-funded warrants were exercised for proceeds of $1,188.

The current volatility in the equity markets and the depressed valuations in the biotechnology sector, coupled with the trading price of our common stock and our financial condition, create additional challenges to raising a sufficient amount of ~~$11.0 million~~capital through an equity financing in ~~August 2014~~the near term. If sufficient additional capital is not available as and ~~the second tranche~~when needed, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercial activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, pursue a sale of the ~~Growth Term Loan in the amount of $5.0 million in March 2016. The first and second tranches of the Growth Term Loan accrue interest annually~~Company at ~~8.5% and 8.75%, respectively, and mature on September 1, 2018. Payments under the Growth Term Loan could~~a price that may result in a significant ~~reduction~~loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all assets. In addition, if we default under any of the terms of the Loan Agreement, including as a result of a “material adverse change,” SVB could accelerate the payment of the SVB Term Loan and ultimately foreclose on our ~~working capital.~~

~~Pursuant to~~assets. The definition of “material adverse change” is broad and includes a material impairment in the value of the collateral securing the SVB Term Loan, a material adverse change in our ~~Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.~~business, operations, or condition (financial or otherwise), we may offer and sell, from time to time, through Cantor Fitzgerald as our sales agent, shares of our common stock having an aggregate sale price of up to $40.0 million under our Registration Statement on Form S-3 (File No. 333-216977) and a ~~prospectus supplement, as amended,~~material impairment of the prospect of repayment of any portion of the SVB Term Loan.

Contractual Obligations, Commitments and accompanying prospectus thereunder. All sales of common stock pursuant to the agreement with Cantor Fitzgerald must be made by a method deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. As of September 30, 2017, we have sold 4,132,857 shares of common stock in the ATM Offering at then-market sales prices for total gross proceeds of approximately $17.4 million, and accordingly we may sell up to additional $22.6 million of common stock in the ATM Offering. There can be no assurance that we will be able to access additional capital through the ATM Offering when needed or in sufficient amounts, or at all.Material Cash Requirements

We have had recurring operating losses and negative cash flows from operations since our inception and have an accumulated deficit of ~~approximately $132.6~~$235.0 million as of ~~September 30, 2017.~~March 31, 2023. As of ~~September 30, 2017,~~March 31, 2023, we had cash, ~~and~~ cash equivalents and investments in available-for-sale securities of ~~approximately $9.0~~$6.6 million and ~~had~~ current liabilities of ~~approximately $13.5 million, plus an additional $8.2~~$6.6 million. As of March 31, 2023, we also had $3.8 million in long-term liabilities outstanding, relating primarily ~~attributable~~ to our NuvoGen ~~obligation.~~ obligation and operating leases.

We ~~believe~~currently expect that our existing resources including $3.0 million in gross proceeds received from QIAGEN North American Holdings, Inc., or QNAH, in exchange for a subordinated convertible promissory note in that principal amount issued in October 2017, will only be sufficient to fund our planned operations and expenditures ~~through the midpoint~~until at least June 2023. In addition, potentially changing circumstances, including those related to a resurgence of ~~the first quarter of 2018. However, we cannot provide assurances that our plans will not change or that changed circumstances will not~~COVID-19, inflation and high interest rates, may also result in the depletion of our capital resources more rapidly than we currently anticipate. Moreover, the recent closures SVB and Signature Bank has resulted in broader financial institution liquidity risk and concerns. If other banks and financial institutions fail or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds may be threatened and our ability to raise additional capital could be substantially impaired, any of which could materially and adversely affect our business and financial condition. These circumstances raise substantial doubt about our ability to continue as a going concern.

Our primary capital needs, including contractual obligations and commitments, which are subject to change, include:

Until our revenue reaches a level sufficient to support self-sustaining cash flows, if ever, we ~~will need~~expect to ~~raise~~finance our cash needs through public or private equity offerings, debt financings, or other capital sources which may include strategic collaborations, licensing arrangements or other arrangements with third parties. The current volatility in the equity markets and the depressed valuations in the biotechnology sector, coupled with the trading price of our common stock and our financial condition, create additional challenges to raising a sufficient amount of capital ~~to fund our continued operations, including our product development and commercialization activities related to our current and future products, and service our~~through an equity financing in the near ~~and long-term debt obligations.~~term. Future funding requirements will depend on a number of factors, including our ability to generate significant ~~product and service revenues,~~revenue, our ability to repay our debt obligations as they become due, the cost and timing of establishing additional sales, marketing and distribution capabilities, the ongoing cost of research and development activities, the cost and timing of regulatory clearances and approvals, the effect of competing technology and market developments, the nature and timing of companion diagnostic development collaborations we may establish and the extent to which we acquire or invest in businesses, products and technologies.

Additional capital may not be available at such times or in amounts needed by us. Even if sufficient capital is available to us, it might be available only on unfavorable terms. If we are unable to raise additional capital in the future when required and in sufficient amounts or on terms acceptable to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue ~~a sale~~an acquisition of our company at a price that may result in ~~up to~~ a ~~total~~significant loss on investment to our stockholders, file for bankruptcy, or seek other protection from creditors, or liquidate all of our assets. In addition, if we default under our ~~Growth~~SVB Term Loan agreement, including as a result of a “material adverse change,” our ~~lenders~~lender could foreclose on our ~~assets, including substantially all~~assets. The definition of ~~our cash~~“material adverse change” is broad and ~~short-term investments which are held~~includes a material impairment in ~~accounts with our lenders.~~

~~As of September 30, 2017, there have been no material changes to our contractual obligations and commitments outside~~the value of the ~~ordinary course of business from those disclosed under~~collateral securing the ~~heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations”~~SVB Term Loan, a material adverse change in our ~~Annual Report on Form 10-K filed with~~business, operations, or condition (financial or otherwise), and a material impairment of the ~~SEC on March 23, 2017.~~prospect of repayment of any portion of the SVB Term Loan.

~~Through September 30, 2017, we have not entered into any off-balance sheet arrangements as defined by applicable SEC regulations.~~

See Note 2. ~~Basis~~Summary of ~~Presentation~~Significant Accounting Policies – Recently Adopted and Recently Issued Accounting Pronouncements in the notes to the ~~interim unaudited~~ condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Significant Judgments and Critical Accounting Estimates

~~Our management’s~~Management’s discussion and analysis of our financial condition and results of ~~operation~~operations is based on our condensed consolidated financial statements, which have been prepared in accordance with ~~accounting principles generally accepted in the United States of America, or~~ GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. ~~Items subject~~Critical accounting policies and estimates are those that we consider most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates ~~based on judgments~~about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include ~~but are not limited to:~~those related to revenue recognition, ~~stock-based compensation expense, the~~fair value ~~of the warrant liability, the resolution of uncertain tax positions, income tax valuation allowances, recovery of long-lived assets and provisions for doubtful accounts, inventory obsolescence~~measurements and inventory valuation. Actual results could materially differ from these estimates and such differences could affect the results of operations in future periods.

There were no changes in our critical accounting policies and estimates during the nine months ended September 30, 2017 from those set forth in “Critical Accounting Policies and Significant Judgments and Estimates” in our December 31, 2016 Annual Report on Form 10-K filed with the SEC on March 23, 2017 other than the addition of the accounting policy for Revenue Recognition – Collaborative Development Service Revenue (see Note 2) and the following:

~~In July 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2015-11,~~ ~~Inventory: Simplifying the Measurement of Inventory~~. The standard requires inventory within the scope of the ASU to be measured using the lower of cost and net realizable value. The changes apply to all types of inventory, except those measured using the last-in, first-out, or LIFO, method or using the retail inventory method, and are intended to more clearly articulate the requirements for the measurement and disclosure of inventory and to simplify the accounting for inventory by eliminating the notions of replacement cost and net realizable value less a normal profit margin. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. We adopted this guidance prospectively for the fiscal year beginning January 1, 2017. We previously measured our inventory at the lower of cost or market with cost being determined by the first-in, first-out, or FIFO, method. The adoption of the guidance did not have a material impact on our interim unaudited condensed financial statements.

~~In April 2016, the FASB issued ASU No. 2016-09,~~ ~~Share-Based Payment: Simplifying the Accounting for Share-Based Payments~~. The standard addresses several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. We adopted this guidance effective January 1, 2017. Excess tax benefits to be recorded upon adoption of this standard are not material to the condensed balance sheets. The elimination of the APIC pool affects the treasury stock method used to calculate weighted average shares outstanding; however, the impact was not material. We elected to change our policy surrounding forfeitures, and beginning January 1, 2017, we no longer estimate the number awards expected to be forfeited but rather account for them as they occur. We were required to implement this portion of the guidance using a modified retrospective approach. However, the cumulative adjustment was not material to additional paid-in capital and, as such, was not recorded. Other provisions of ASU No. 2016-09 had no impact on our interim unaudited condensed financial statements.

We are ~~exposed to market risks in~~a smaller reporting company as defined by Rule 12b-2 of the ordinary course of our business. These risks primarily relate to interest rates. We had cash and cash equivalents of $9.0 million at September 30, 2017, which primarily consist of U.S. Government money market funds. These funds have lower risk than traditional money market fundsExchange Act and are ~~subject~~not required to fewer withdrawal penalties and limitations. Still, such interest-bearing instruments carry some degree of risk; however, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. The first tranche of our Growth Term Loan inprovide the ~~principal borrowed amount of $11.0 million and the second tranche of our Growth Term Loan~~information otherwise required under the principal borrowed amount of $5.0 million bear interest at fixed interest rates of 8.5% and 8.75%, respectively. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed financial statements.this item.

As we continue to expand internationally our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates. Until the third quarter of 2017, historically a majority of our revenue has been denominated in U.S. dollars, although we have historically sold and continue to sell our products and services directly in certain markets outside of the United States denominated in local currency, principally the Euro. Our expenses are generally

denominated in the currencies in which our operations are located, which is primarily in the United States. The effect of a 10% adverse change in exchange rates on foreign denominated receivables and payables would not have a material impact on our results of operations during the periods presented. As our operations in countries outside of the United States grow, our results of operations and cash flows will be subject to potentially greater fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any foreign currency hedging contracts, although we may do so in the future.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported ~~with~~within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and ~~our~~ Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As of ~~September 30, 2017,~~March 31, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of ~~the end of the period covered by this quarterly report,~~March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and ~~our~~ Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during ~~our latest fiscal~~the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

We are not engaged in any material legal proceedings. However, in the normal course of business, we may from time to time be named as a party to legal claims, actions and complaints, including matters involving employment, intellectual property, vendors, customers or others.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our common stock.

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this report, and in our other public filings, before deciding to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. You should consider all of the risk factors described when evaluating our business. We have marked with an asterisk (*) those risk factors that did not appear as separate risk factors in, or reflect changes to the similarly titled risk factors included in, our Annual Report on Form 10-K filed with the SEC on March 23, 2017.

We have incurred losses since our inception and expect to incur losses for the foreseeable future. We cannot be certain that we will achieve or sustain profitability.*

We have incurred losses since our inception and expect to incur losses in the future. We incurred net losses of $5.4 million and $17.0 million for the three and nine months ended September 30, 2017, respectively, and $6.5 million and $20.4 million for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $132.6 million. We expect that our losses will continue for the foreseeable future as we will be required to invest significant additional funds to support product development, including development of our next generation instrument platforms, development of our new HTG EdgeSeq panels, including our initial U.S. IVD assay, development of assays pursuant to our Governing Agreement with QML, and the commercialization of our HTG EdgeSeq system and proprietary consumables. We also expect that our selling, general and administrative expenses will continue to increase due to the additional costs associated with market development activities and expanding our staff to sell and support our products and services. Our ability to achieve or, if achieved, sustain profitabilityThere is based on numerous factors, many of which are beyond our control, including the market acceptance of our products and services, competitive product development and our market penetration and margins. We may never be able to generate sufficient revenue to achieve or, if achieved, sustain profitability.

We might not be able to continue as a going concern absent our ability to raise additional equity or debt capital. Even if capital is available, it might be available only on unfavorable terms.*

This Quarterly Report on Form 10-Q for the period ended September 30, 2017 includes disclosures regarding management’s assessment of its ability to continue as a going concern, as our current liquidity position and recurring losses from operations since inception and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern. We will need to raise additional capital to fund our operations in the future. If we are unsuccessful in attracting new capital, we may be forced to delay, reduce or eliminate at least some of our product development programs or business development plans, may not be able to continue operations or may be forced to sell assets to do so. Alternatively, capital may not be available to us on favorable terms, or if at all. If available, financing terms may lead to significant dilution of our stockholders’ equity.*

We are not profitable and have had ~~recurring operating losses and~~ negative cash ~~flows~~flow from operations since inception, and we have an accumulated deficit of approximately $132.6 million as of September 30, 2017. As of September 30, 2017, we had cash and cash equivalents of approximately $9.0 million and had current liabilities of approximately $13.5 million plus an additional $8.2 million in long-term liabilities primarily attributable to our NuvoGen obligation. We have raised approximately $16.7 million in net proceeds through September 30, 2017 under our sales agreement with Cantor Fitzgerald & Co., or Cantor Fitzgerald. In addition, we received $3.0 million in gross proceeds from an investment by QNAH in a subordinated convertible promissory note in October 2017. Taking into account the $3.0 million of gross proceeds received from QNAH pursuant to the subordinated convertible promissory note in October 2017, and without assuming any additional sales that may be made under our sales agreement with Cantor Fitzgerald, we believe that our existing cash resources will be sufficient to fund our planned operations and expenditures through the midpoint of the first quarter of 2018. However, we cannot provide assurances that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate.

inception. To ~~date, to~~ fund our operations and develop and commercialize our products, we have relied primarily on equity and debt financings and revenue generated from the sale of our HTG EdgeSeq ~~system, the sale of our proprietary consumables~~products and related services. We currently expect that our existing resources will ~~need to raise additional capital~~only be sufficient to fund our ~~continued~~planned operations and expenditures until at least July 2023. In addition, potentially changing circumstances may also result in the depletion of our ~~revenue reaches~~capital resources more rapidly than we currently anticipate. These circumstances raise substantial doubt about our ability to continue as a ~~level sufficient~~going concern.

Our efforts to ~~provide for self-sustaining cash flows, if ever. There can be no assurance that additional capital~~use our transcriptome-based drug discovery engine to deliver new drug candidates in areas of significant unmet medical need are broad, expensive to achieve and will ~~be available to us when needed or on acceptable terms, or that our revenue will reach a level sufficient to provide for self-sustaining cash flows. If we are unable to raise~~require substantial additional capital in the ~~future when required~~future. Our existing programs span early and late-stage discovery, with some approaching entrance into preclinical development. We expect our expenses to increase in connection with our ongoing activities as we continue research and development and add to our pipeline that we believe will be an accelerating number of additional programs. Preclinical testing is expensive and can take many years, which may make equity and debt financing more difficult to obtain.

We will need to obtain additional funds to finance our operations. Additional capital may not be available at such times or in ~~sufficient~~ amounts ~~or on terms acceptable~~needed by us. Historically we have financed our business in part by access to us, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercialization activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationshipsthe capital markets. However, the current volatility in the equity markets and the depressed valuations in the biotechnology sector, coupled with ~~third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue a sale~~the trading price of our ~~company at~~common stock and our financial condition, create additional challenges to raising a ~~price that may result~~sufficient amount of capital through an equity financing in a total loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets. In addition, if we default under our term loan agreement, our lenders could foreclose on our assets, including substantially all of our cash and short-term investments which are held in accounts with our lenders.

the near term. Even if capital is available, it might be available only on unfavorable terms. Any additional equity or convertible debt financing into which we enter could be dilutive to our existing stockholders. Any future debt financing into which we enter may impose covenants upon us that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through ~~collaborative development and~~strategic collaborations, partnerships or licensing arrangements with third parties, itwe may ~~be necessary~~need to relinquish ~~some~~ rights to our technologies, our products or our ~~products,~~drug candidates or grant licenses on terms that are not favorable to us. ~~Further, even if we obtain additional financing~~If access to ~~fund~~sufficient capital is not available as and when needed, our business ~~activities~~will be materially impaired, and we may be required to cease operations, curtail one or more product development or commercialization programs, or significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all of our assets. Any of these factors could harm our operating results.

We have incurred losses since our inception and expect to incur losses for the foreseeable future. We cannot be certain that we will achieve or sustain profitability.*

We have incurred losses since our inception and expect to incur losses in the future. We incurred net losses of $5.1 million and $6.5 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $235.0 million. We expect that our losses will continue for the foreseeable future ~~there could remain doubt about~~as we will be required to invest significant additional funds to support product development, including the commercialization of our HTG EdgeSeq platform and proprietary consumables and advancement of our HTG Therapeutics business unit. Our ability to ~~continue as a going concern and investors~~achieve or, ~~other financing sources may be unwilling to provide additional funding~~if achieved, sustain profitability is based on ~~commercially reasonable terms or at all. If we~~numerous factors, many of which are ~~unable to continue as a going concern, holders~~beyond our control, including the market acceptance of our ~~common stock~~products and services, competitive product development and our market penetration and margins. We may never be able to generate sufficient revenue to achieve or, ~~other securities may lose the entire value of their investment.~~if achieved, sustain profitability.

Payments under the instruments governing our indebtedness may reduce our working capital. In addition, a default under our ~~term loan agreement~~SVB Term Loan could cause a material adverse effect on our financial position.*

In August 2014, we entered into a $16.0 million Growth Term Loan agreement with Oxford Finance LLC and Silicon Valley Bank, who we collectively refer to as our senior lenders. Under the terms of the Growth Term Loan agreement, the senior lenders initially provided us with a term loan of $11.0 million. In March 2016, we borrowed the remaining $5.0 million pursuant to the term loan agreement. The loan is secured by a lien covering substantially all of our assets, excluding patents, trademarks and other intellectual property rights (except for rights to payments related to the sale, licensing or disposition of such intellectual property rights) and certain other specified property. The interest-only payment period expired in April 2016, and we are currently required to make monthly principal and interest payments through September 2018. Payments under the Growth Term Loan agreement could result in a significant reduction of our working capital, which in turn could significantly impact our need to raise additional capital in order to continue as a going concern. As of September 30, 2017, we had $7.4 million outstanding under the Growth Term Loan agreement, all of which is scheduled to become due and payable over the 12 months following such date, compared to cash and cash equivalents of approximately $9.0 million. If we default under the Growth Term Loan agreement, our senior lenders could foreclose on our assets, including substantially all of our cash, which is held in accounts with our senior lenders.

Pursuant to the terms of ~~an asset purchase agreement with~~the NuvoGen ~~Research, LLC, or~~obligation, we have paid NuvoGen ~~pursuant~~$11.2 million, and are required to ~~which we acquired certain intellectual property, we agreed to~~annually pay NuvoGen the greater of $400,000 or 6% of our yearly revenue until the total aggregate cash compensation paid to NuvoGen under the agreement equals $15.0 million. For fiscal years 2013 to 2017, NuvoGen agreed to accept annual fixed fees in the range of $543,750 to $800,000, paid in quarterly installments, and to defer the balance of any revenue-based payments. To date, we have paid NuvoGen approximately $6.9 million. As of September 30, 2017, we have not deferred any revenue-based payments. For 2017, our annual fixed fee payable to NuvoGen is $800,000, payable in quarterly installments. Beginning in 2018, we are again obligated to pay the greater of $400,000 or 6% of our annual revenue plus amounts, if any, deferred in the 2017 period by which 6% of revenue exceeds the $800,000 fixed fee plus 5% interest on any such deferred amounts until the obligation is repaid in full. Payments to NuvoGen ~~could~~will result in a ~~significant~~ reduction in our working ~~capital.~~capital as we continue to make payments on this obligation.

Pursuant to the terms of the $3.0 million principal amount subordinated convertible promissory note that we issued to QNAH in October 2017, we will be required to repay the entire outstanding principal amount of the note and unpaid accrued interest thereon in October 2020, subject to the terms of a subordination agreement between QNAH and our senior lenders, provided QNAH may, at its election, convert all or any portion of the outstanding principal balance of the note and unpaid accrued interest at any time prior to the maturity date into shares of our common stock at a conversion price of $3.984 per share. If we become required to repay any portion of the note at maturity, our working capital may be significantly reduced, which in turn could significantly impact our need to raise additional capital in order to continue as a going concern.

The ~~Growth~~SVB Term Loan ~~agreement~~ requires us, and any debt arrangements we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

These restrictions could inhibit our ability to pursue our business strategies. If we default under our obligations under the ~~Growth~~SVB Term Loan, ~~agreement,~~including as a result of a “material adverse change,” the ~~senior lenders~~lender could proceed against the collateral granted to them to secure our indebtedness or declare all ~~obligation~~obligations under the ~~Growth~~SVB Term Loan ~~agreement~~ to be due and payable. The definition of “material adverse change” is broad and includes a material impairment in the value of the collateral securing the SVB Term Loan, a material adverse change in our business, operations, or condition (financial or otherwise), and a material impairment of the prospect of repayment of any portion of the SVB Term Loan. Moreover, the determination by the lender as to whether a “material adverse change” has occurred is not within our control. This risk may be exacerbated by the recent closure of SVB. On March 10, 2023, the FDIC took control and was appointed receiver of SVB. The SVB Term Loan remains intact and we will continue to make required payments through the end of the current year, at which time the SVB Term Loan will be repaid in full. However, it is unclear how the current managers of SVB will view the SVB Term Loan from a risk standpoint and what actions they may elect to take under the SVB Term Loan to protect the financial interests of SVB.

In certain circumstances, procedures by the ~~senior lenders~~lender could result in a loss by us of all of our equipment and inventory, which are included in the collateral granted to the ~~senior lenders. If any indebtedness under~~lender. Our intellectual property is not included in the ~~Growth Term Loan agreement were~~collateral granted to ~~be accelerated, there can be no assurance that our assets would be sufficient~~the lender but is subject to ~~repay in full that indebtedness.~~a negative pledge. In addition, upon any distribution of assets pursuant to any liquidation, insolvency, dissolution, reorganization or similar proceeding, the holders of secured indebtedness will be entitled to receive payment in full from the proceeds of the collateral securing our secured indebtedness before the holders of other indebtedness or our common stock will be entitled to receive any distribution with respect thereto.

Unfavorable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.*

The global economy, including credit and financial markets particularly in the emerging biotech sector, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, record inflation and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. Similarly, the current Russia-Ukraine conflict has resulted and may result in the future in volatility in the global capital markets and has disrupted the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of bank failures, political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.

Our HTG Therapeutics business strategy is unique, may not lead to successful drug products for various reasons, may require significant investments in working capital and may not generate any revenue.

In July 2021, we formed a new drug discovery business unit, HTG Therapeutics. This business unit uses our HTP and our epitranscriptomic profiling technologies to more thoroughly understand at the cellular level how cells respond to pharmacologic perturbation. By leveraging these profiling technologies earlier in the drug discovery process, our objective is for HTG Therapeutics to generate lead compounds faster, and with potentially more favorable efficacy and toxicity profiles, with the ultimate goal of generating interest from pharmaceutical companies that results in research or licensing collaborations for, or acquisitions of, these compounds. While we have hired experienced employees and added drug development depth to our Board of Directors, as a company we have no prior experience with drug discovery and development and may not be successful in this endeavor. If studying the transcriptomic profile does not prove to be a more insightful approach to understand diseases and the effects of molecules or does not lead to the biological insights for selection and design of drug candidates that we anticipate, our drug discovery platform may not be as useful or may not lead to as successful drug products, or we may have to move to a new business strategy, any of which could have an adverse effect on our reputation and results of operations.

Moreover, drug discovery and development is expensive and will require investments in working capital by us that may be significant. Our current drug candidates are discovery stage and are approaching entrance to preclinical development. Before we or a partner can bring any drug candidate to market, we must, among other things, complete preclinical studies, have the candidate manufactured to appropriate specifications, conduct extensive clinical trials to demonstrate safety and efficacy in humans, prepare regulatory registration packages and ultimately obtain marketing approval from global regulatory authorities, which, based on our early stage, we have not yet demonstrated our ability to do. Even if we are successful in partnering for one or more early-stage drug discovery programs with a pharmaceutical company, we will need to expend potentially significant capital resources on these programs prior to any such partnering, and potentially after, and there can be no assurance that we will generate meaningful revenue from these programs. Preclinical and clinical development are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of a clinical trial can occur at any stage of testing. The outcome of preclinical development testing and early clinical trials may not be predictive of success in later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

We have a limited history of operations for our preclinical-stage platform-based drug discovery business and no products approved by regulators for commercial sale, which may make it difficult to evaluate our current and future business prospects.

Since the creation of our drug discovery business in July 2021, we have focused substantial efforts and financial resources on building our drug discovery platform and developing our initial target compounds. All of our compounds are in the discovery stages and/or approaching preclinical development. We may ~~incur additional indebtedness~~never establish an out-licensing or collaboration arrangement for any compounds we develop, or if we do, the terms may not be favorable to us. Until we successfully partner, out-license develop and/or commercialize drug candidates for these targets, which may never occur, we expect to finance our operations through a combination of equity offerings, debt financings and strategic collaborations or similar arrangements. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. For these and other reasons discussed elsewhere in this Risk Factors section, it may be difficult to evaluate our current business and our future prospects.

As part of our current business model, we intend to seek to enter into strategic collaborations and licensing arrangements with third parties.

We have entered into agreements with third parties to facilitate or enable our development of assays, and ultimately diagnostic tests, to aid in the ~~future.~~diagnosis of oncology diseases, such as breast cancer and melanoma, and other diseases. We intend to enter into additional similar agreements with life sciences companies, biopharmaceutical companies and other researchers for future diagnostic products.

In addition, we intend to seek strategic collaborations, partnerships and licensing arrangements with pharmaceutical and biotechnology companies related to preclinical or clinical development or commercialization to fund expenses associated with development, registration and commercialization of our potential drug candidates. In the near term, the value of our company will depend in part on the number and quality of the collaborations and similar arrangements that we create. Whether we reach a definitive agreement for a collaboration will depend, among other things, on our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the potential collaborator's evaluation of our technologies and capabilities.

We cannot guarantee that we will enter into any additional agreements or collaborations. For example, our life sciences research or biopharmaceutical customers are not obligated to collaborate with us or license technology to us, and they may choose to develop diagnostic products themselves or collaborate with our competitors. Establishing strategic collaborations and licensing arrangements is difficult and time-consuming. Discussions may not lead to development collaborations or licenses on favorable terms, or at all. Potential collaborators or licensors may elect not to work with us based upon their assessment of our financial, regulatory or intellectual property position. To the extent that we enter new collaborative development or licensing agreements, they may never result in the successful development or commercialization offuture drug candidates or other products or the generation of future sales revenue for a variety of reasons. The ~~debt instruments governing such indebtedness may contain provisions~~success of these arrangements will depend heavily on the efforts and activities of our collaborators. We cannot control the amount and timing of our collaborators’ resources that ~~are as,~~will be devoted to performing their responsibilities under our agreements with them. Moreover, to the extent we agree to work exclusively with a party in a given area, our opportunities to collaborate with others would be limited. Disputes with our collaborators could also impair our reputation or ~~more, restrictive than the provisions governing~~result in development delays, could consume time and divert management resources away from operations, impact our ~~existing indebtedness under the Growth Term Loan agreement.~~ ability to enter into future collaboration agreements, decrease future revenue and or result litigation expenses or payments to settle disputes.

If we are unable to ~~repay, refinance or restructure~~successfully commercialize our ~~indebtedness when payment is due, the senior lenders could proceed against the collateral granted to them to secure such indebtedness or force us into bankruptcy or liquidation.~~products, our business may be adverselyaffected.

~~We are dependent~~Our sales of life science research products, profiling and diagnostic products, and potential future products will depend in large part on our ~~Governing Agreement~~ability to successfully increase the scope of our marketing efforts and establish and maintain a sales force commensurate with ~~QML,~~our then applicable markets. We currently market our products through our own sales force in the United States and ~~poor performance under the agreement or the termination~~Europe and have distributors in parts of Europe, though we may choose to expand our marketing and sales efforts into other parts of the agreement could negatively impact our business.*

A key strategic focus of our business is to enter into collaborative development agreements with biopharmaceutical companies for the development, manufacture and commercialization of companion diagnostic assays for use with their drug development programs. In particular, we are focused on oncology-based collaborations.

In November 2016, we entered a Governing Agreement with QML, a wholly owned subsidiary of QIAGEN N.V. Under the Governing Agreement, we and QML jointly seek collaborative development agreements with biopharmaceutical companies for the development, manufacture and potential commercialization of companion diagnostic assays. QML contracts with interested biopharmaceutical companies for specified projects, and we and QML enter into statements of work for each project. Our relationship with QML under the Governing Agreement is exclusive for NGS-based diagnostic assays (or certain related research assays) in the oncology field, subject to the achievement of certain performance targets. We expect that revenues under the Governing Agreement will constitute a significant portion of our revenues over the next few years.

We have limited or no control over the amount and timing of resources that QML will dedicate to activities under the Governing Agreement, and we are subject to a number of other risks associated with our dependence on the Governing Agreement, including:

~~In addition, we and QML have the right to terminate the Governing Agreement in certain circumstances. If the Governing Agreement is terminated early,~~world. However, we may not be able to ~~find another company~~market and sell our products effectively. If we do not build and maintain an efficient and effective sales force and distributor relationships targeting new markets, our business and operating results will be adversely affected. Further, if our products fail to ~~assist us~~achieve and sustain sufficient market acceptance, or we are not able to continue to expand our service relationships with third parties, we may not generate the expected revenues and our prospects could be harmed.

If our HTG EdgeSeq platform and proprietary profiling panels fail to achieve and sustain sufficient market acceptance, or we are not able to continue to expand our service relationships with biopharmaceutical customers, either directly or through a partner, we will not generate expected revenue, and our prospects may be harmed. If the utility of our HTG EdgeSeq platform, proprietary profiling panels, services and solutions in development is not supported by studies published in peer-reviewed medical publications, the rate of adoption of our current and future products and the rate of reimbursement of our future products by third-party payors may be

negatively affected. We may provide our HTG EdgeSeq instrument and profiling panels free of charge or through other arrangements to customers or key opinion leaders through evaluation agreements or reagent rental programs, and these programs may not be successful in generating recurring revenue from sales of our systems and proprietary panels.

In addition, a component of our strategy is to develop diagnostic tools in conjunction with biopharmaceutical companies’ drug development programs, to help assess the proper course of treatment for specific diseases. Even if we are successful in developing those diagnostic tools and receive regulatory approval, we still may not be successful in marketing those diagnostic tests. Furthermore, the decision to advance an underlying drug candidate through clinical trials and ultimately to commercialization is at the discretion of biopharmaceutical companies with which we collaborate. Our biopharmaceutical partners may take certain actions that could negatively impact the utility and marketability of our diagnostic tests. For example, our biopharmaceutical partners could:

To the extent that we develop diagnostic assays for a biopharmaceutical ~~companies should~~company in collaboration with a collaboration partner, we ~~wish~~may not have responsibility for some or all aspects of developing, marketing or commercializing any resulting diagnostic tests. In addition to ~~do so. If~~this biopharmaceutical partner risk, a collaboration partner may take certain actions that could negatively impact the development, utility and marketability of the applicable diagnostic tests. For example, a collaboration partner could fail to satisfy or fall behind in its obligations to us or to the biopharmaceutical company for which we ~~fail maintain~~develop a ~~successful relationship with QML under the Governing Agreement, our~~companion diagnostic test, which may delay development, ~~manufacture and~~regulatory approvals, market development and/or commercialization of the applicable companion diagnostic ~~assays~~test.

COVID-19 has adversely affected our business and a resurgence of COVID-19 or another health epidemic or pandemic may ~~be delayed, scaled back,~~have an adverse impact on our business in the future.

Our business, including our workforce, supply chain and customer base, has been adversely affected by COVID‑19 in the past and a resurgence of COVID-19 or another health epidemic or pandemic may adversely affect us in the future.

COVID-19 had a negative impact on our product and product-related services revenue in 2020, 2021 and 2022. While we saw some recovery in customers returning to work in 2022, the period of reduced revenue continued in 2022 as many customers did not return to historical operating levels, did not allow visitors on site at their facilities for some portion of the year or have not resumed previously planned studies. The extent of this impact has varied from customer to customer depending upon how they have been directly or indirectly impacted by local stay-at-home orders and other social distancing measures, priorities for the customers when the immediate impacts of the pandemic had passed, and the workforce and supplier impacts that each customer experienced during the pandemic.

It is also possible that COVID-19 or another epidemic or pandemic will impact our workforce, supply chains or distribution networks or otherwise impact our ability to conduct sample processing services in our laboratory or to travel to customer facilities for commercial or support functions in the future. Governmental mandates may ~~not occur,~~require forced shutdowns of our facilities for extended or indefinite periods. A public health crisis could also substantially interfere with general commercial activity related to our supply chain and our anticipated revenue from the Governing Agreement could be severely limited or eliminated. In addition, we may be unable to enter into new collaborative arrangements with biopharmaceutical companies or, if necessary, modify our existing arrangements on acceptable terms. Any of thesecustomer base, which could have a material adverse effect on our ~~business,~~financial condition, results of operations, business or prospects. Restrictions resulting from a public health crisis may disrupt our supply chains or distribution networks or limit our ability to obtain sufficient materials for our consumables or instruments and ~~financial condition.~~

~~Our HTG EdgeSeq product portfolio requires~~may disrupt our ability to process customer samples or, to the ~~use of NGS instrumentation and reagents and could be~~extent we enter into collaborative services agreements with biopharmaceutical customers, perform collaborative development services. Further, to the extent our customers’ businesses are adversely affected by ~~actions~~the pandemic, they might delay or reduce purchases from us or development projects with us, which could adversely affect our results of ~~third party NGS product manufacturers over whom~~operations. The effects of ongoing or future health epidemics on our business remain uncertain and subject to change. While we do not know the full extent of potential delays or impacts on the global economy, these effects could have ~~no control.~~a material adverse impact on our operations, financial position and liquidity.

~~A key element of our strategy is to establish~~Our business operations might be disrupted or adversely affected by catastrophic events.

We manufacture our HTG EdgeSeq ~~system as~~instrument and consumable products and perform our RUO profiling and custom RUO assay design services in our Tucson, Arizona facilities. In addition, our Tucson facilities are the ~~best sample and library preparation method~~center for ~~clinical applications~~order processing, receipt of ~~next generation sequencers. We depend at least in part on the availability of NGS instrumentation and reagents, and the ability~~critical components of our HTG EdgeSeq instrument and shipping products to ~~operate seamlessly with NGS instrumentation. Any significant interruption~~customers. We do not have redundant facilities. Damage or ~~delay~~the inability to utilize our Tucson facilities and the equipment we use to perform research, development or services and manufacture our products could be costly, and we would require substantial lead-time to repair or replace this facility and equipment. The Tucson facilities may be harmed or rendered inoperable by natural or man-made disasters, including flooding, wind damage, power spikes and power outages, which may render it difficult or impossible for us to perform these critical functions for some period of time. The inability to manufacture consumables or instruments, process customer samples, perform development services or ship products to customers for even a short period of time may result in the ~~ability~~loss of customers or harm our reputation, and we may be unable to regain those customers in the future. Although we possess insurance for damage to our property and the disruption of our ~~HTG EdgeSeq products~~business, this insurance may not be sufficient to ~~operate on or with NGS instrumentation could reduce demand for~~cover all of our ~~products~~potential losses and ~~result in a loss of customers.~~

~~Our reputation, and our ability to~~may not continue to ~~establish~~be available to us on acceptable terms, or ~~develop~~at all. In addition, natural disasters or other catastrophic events in various parts of the world, including interruptions in the supply of natural resources, political and governmental changes, disruption in transportation networks or delivery services, severe weather conditions, wildfires and other fires, explosions, actions of animal rights activists, terrorist attacks, earthquakes, wars, conflicts (including the current Russia-Ukraine conflict), and public health issues could disrupt our ~~technology for clinical applications~~operations or those of ~~next generation sequencers,~~our collaborators, contractors and vendors or contribute to unfavorable economic or other conditions that could adversely impact us.

Our financial results may vary significantly from quarter to quarter or may fall below the expectations of investors or securities analysts, each of which may adversely affect our stock price.*

Investors should consider our business and prospects considering the risks and difficulties we expect to encounter in the new, uncertain and rapidly evolving markets in which we compete. Because these markets are ~~dependent upon the availability of NGS instrumentation~~new and ~~the reliable performance~~evolving, predicting their future growth and size is difficult. We expect that our visibility into future sales of our products, ~~with NGS instrumentation. We~~including volumes, prices and product mix between instruments, consumables and services, will continue to be limited and could result in unexpected fluctuations in our quarterly and annual operating results.

Numerous other factors, many of which are ~~not able~~outside our control, may cause or contribute to ~~control the providers of NGS instrumentation, which increases~~significant fluctuations in our ~~vulnerability to interoperability problems with the products that they provide.~~quarterly and annual operating results. For example, ~~providers of NGS instruments may discontinue existing products, or introduce new NGS instrumentation products with little or no notice to us. This may cause some~~one customer accounted for 13% of our ~~products not to be operable with one or more NGS instruments or may adversely affect regulatory approvals~~revenue for the three months ended March 31, 2023. The two largest customers accounted for 44% and 12% of our ~~future IVD HTG EdgeSeq products, potentially for extended periods~~accounts receivable balance as of ~~time. Any interruption in the ability of~~March 31, 2023. If orders from our ~~products to operate on NGS instruments could harm our reputation or decrease market acceptance of our products,~~top customers are discontinued and our business, financial condition and operating results may be materially and adversely affected. We also could experience additional expense in developing new products or changes to existing products to meet developments in NGS instrumentation, and our business, financial condition and operating results may be materially and adversely affected.

Current medical device regulation in the United States and other jurisdictions requires manufacturers of IVD molecular profiling tests that use NGS detection, referred to as NGS IVD tests, to include in regulatory submissions, technical information about the NGS products that are required for performance of, but are not supplied with, the NGS IVD test. These regulatory agencies also require that the NGS instrumentation have “locked” software for the detection of the NGS IVD test results. Thus, to obtain regulatory approval for NGS IVD tests, manufacturers like us, currently must have arrangements with NGS product manufacturers to gain access to technical information and NGS instrument software. We currently have agreements with two NGS product manufacturers that grant us rights to develop, manufacture and sell future HTG EdgeSeq NGS IVD tests in specified fields, subject to, among other things, the NGS product manufacturers’ rights to terminate such agreements and discontinue products or implement product design changes that could adversely affect our HTG EdgeSeq NGS IVD tests. There can be no assurance that our agreements with these NGS product manufacturers, or any future NGS product manufacturers that we contract with, will not be terminated earlier than we currently expect, that an NGS product manufacturer will perform its contractual duties to us, or that we will otherwise receive the benefits we anticipate receiving under those agreements. In addition, if regulatory agencies do not change their requirements for NGS IVD test approval or clearance and the NGS instrument manufacturers close their systems to third party NGS IVD test development (in general or with specific NGS IVD test manufacturers) and we are not able to maintain or enforce our agreements with such manufacturers, we may not be able to meet our commercial goals and our business, financial condition and operating results may be materially and adversely affected.

The development of future products is dependent on new methods and/or technologies that we may not be successful in developing.*

We are planning to expand our product offerings in the fields of detecting expressed gene rearrangements (e.g., gene fusions and/or insertions) and genomic or expressed DNA mutations. We believe we have successfully demonstrated that our technology is able to detect certain expressed gene rearrangements with our HTG EdgeSeq ALK~~Plus~~ Assay EU now available in Europe, and genomic DNA mutations with our HTG EdgeSeq EGFR, KRAS and BRAF Mutation Assay service offering. Nevertheless, there are other potential applications for the foregoing technologies and opportunity for additional technology developments, such as detection of expressed DNA mutations, that we consider when planning our product pipeline. We believe we have successfully demonstrated proof of concept for detection of express DNA mutations but to date our work in this area has only been on relatively few applications or may not have the specificity required for certain applications. We cannot guarantee that we will be able to successfully develop additional applications or new technologies on a commercial scale. If we are unsuccessful at developing additional applications involving gene rearrangements or genomic DNA mutations, or developing technology to detect expressed DNA mutations we may be limited in the breadth of additional products we can offer in the future, which could impact our future revenues and profits.

We have initiated development of a new version of our HTG EdgeSeq system that will target the lower-volume throughput lab market. This development program, which we refer to as Project JANUS, is expected to increase our addressable market by enabling efficient molecular profiling of smaller quantity batches of samples. This program involves the development of new chemistry that is not currently compatible with our existing HTG EdgeSeq platform. We have temporarily suspended the development of the Project JANUS program in favor of other product development projects. If we are unable to ~~resume~~establish new projects or ~~successfully develop~~continue to expand our customer base, our revenue in future periods may materially decrease. In addition, we experienced a significant slowing of product and product-related services revenue generation beginning in March 2020 as a result of COVID-19. This period of reduced revenue continued through the remainder of 2020, 2021, 2022 and into 2023 due to disruptions to our customers’ businesses as a result of the pandemic. The extent of this ~~new version~~impact on our ongoing business is likely to vary from customer to customer depending upon how they are directly or indirectly impacted by local stay-at-home orders and other social distancing measures, priorities for the customers when the immediate impacts of the pandemic have passed, and the workforce and supplier impacts that each customer has experienced during the pandemic. Fluctuations in our operating results may make financial planning and forecasting difficult. In addition, these fluctuations may result in unanticipated decreases in our available cash, which could negatively affect our business and prospects. Factors that may contribute to fluctuations in our operating results include many of the risks described under the caption “Risk Factors – Risks Related to Our Business and Strategy” of this report. In addition, one or more of such factors may cause our revenue or operating expenses in one period to be disproportionately higher or lower relative to the others. Our products involve a significant capital commitment from our customers or may depend on customer studies that have variable or indefinite timelines and accordingly, involve a lengthy sales cycle. We may expend significant effort in attempting to make a particular sale, which may be deferred by the customer or never occur. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful, and investors should not rely on our past results as an indication of our ~~HTG EdgeSeq system~~future performance. If such fluctuations occur or if our operating results deviate from our expectations or the expectations of investors or securities analysts, our stock price may be adversely affected.

Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results.

Our sales process involves numerous interactions with multiple individuals within any given organization, and often includes in-depth analysis by potential customers of our products (where in some instances we will provide a demonstration unit for their use and evaluation), performance of proof-of-principle studies, preparation of extensive documentation and a lengthy review process. As a result of these factors, the capital investment required in purchasing our instrument and the budget cycles of our customers, the time from initial contact with a customer to our receipt of a purchase order can vary significantly and be up to 12 months or longer. Given the length and uncertainty of our sales cycle, we have in the ~~market window~~past experienced, and likely will in the future experience, fluctuations in our product and product-related services revenue on a period-to-period basis. In addition, any failure to meet customer expectations could result in customers choosing to retain their existing systems or service providers or to purchase systems or services other than ours. To the extent we ~~anticipate, automation of~~enter into collaborative services agreements with biopharmaceutical customers, the revenue that we expect to earn from our ~~new chemistry could be delayed and~~collaborative development services are also subject to an extended, variable timeline based on each project agreement, which will likely result in fluctuations in our ~~addressable market could be limited, which could harm our business, results of operations and financial condition.~~collaborative development services revenue on a period-to-period basis as well.

We may not be able to develop new products or enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements, which could have a material adverse effect on our business and operating results.

Our success depends on our ability to develop new products and applications for our technology in existing and new markets, while improving the performance and cost-effectiveness of our systems. If we do not successfully manage the development and launch of new products, our products or our financial results could be adversely affected. Developing new products and applications may require large investments in working capital and/or the development of new methods or technologies.

Although we believe that our HTG Transcriptome Panel will be a foundational product for RUO profiling, future companion diagnostics and potential proprietary diagnostic products, and will allow us to further expand our product offerings outside of oncology and autoimmune, we have only recently initiated commercial sales of this panel and it may not have the commercial success that we anticipate or hope for, and we may not be able to continue to expand our product offerings.

In July 2021, we formed a new drug discovery business unit, HTG Therapeutics, which uses our HTP and epitranscriptomic profiling technologies in RNA profiling, and we expect that, by leveraging these profiling technologies earlier in the drug discovery process, HTG Therapeutics will generate lead compounds faster, and with potentially more favorable efficacy and toxicity profiles. However, there can be no assurance that HTG Therapeutics will be able to accomplish these goals or will otherwise be successful. In addition, we have built a machine learning-based chemical library design platform, which is expected to better predict the binding properties of a drug candidate to its target. If we are unsuccessful at developing this full machine learning-based chemical library design platform, or it, HTG Therapeutics or our HTP do not provide the benefits that we anticipate, our future revenue opportunities will be limited.

New technologies, techniques or products could emerge that might offer better combinations of price and performance than our current or future products and systems. Existing or future markets for our products, including gene expression analysis, liquid-based specimen analysis (e.g., plasma, blood and urine) and single-cell analysis, as well as potential markets for our diagnostic product candidates, are characterized by rapid technological change and innovation. It is critical to our success that we anticipate changes in technology and customer requirements and successfully introduce new, enhanced and competitive technologies to meet our customers’ and prospective customers’ needs on a timely and cost-effective basis. At the same time, however, we must carefully manage the introduction of new products. If customers believe that such products will offer enhanced features or be sold for a more attractive price, they may delay purchases until such products are available. We may also have excess or obsolete inventory of older products as we transition to new products and our experience in managing product transitions is very limited. If we do not successfully innovate and introduce new technology into our product lines or effectively manage the transitions to new product offerings, our ~~revenues~~revenue and results of operations will be adversely impacted.

Competitors may respond more quickly and effectively than we do to new or changing opportunities, technologies, standards or customer requirements. We anticipate that we will face increased competition in the future as existing companies and competitors develop new or improved products and as new companies enter the market with new technologies.

If we do not successfully manage the development and launch of new products, our financial results could be adversely affected.*

We face risks associated with launching new products and with undertaking to comply with regulatory requirements for certain types of our products. If we encounter development or manufacturing challenges, adjust our product development priorities, or discover ~~errors~~deficiencies during our product development cycle, the product launch date(s) may be delayed, or certain product development projects may be terminated. The expenses or losses associated with unsuccessful product development or launch activities or lack of market acceptance of our new products could adversely affect our business or financial condition.

We may not be successful in expanding our customer base and introducing new applications for our profiling business.

Our current customer base is primarily composed of biopharmaceutical companies, academic institutions and molecular labs that perform analyses using or directly or indirectly obtain services based on our HTG EdgeSeq platform and consumables for research use only, which means that the products or data from services may not be used for clinical diagnostic purposes. The success of our profiling business will depend, in part, upon our ability to increase our market penetration among our customer bases, to continue to introduce new applications for our existing technology and to expand existing customer adoption of our RUO applications (whether product or service). To achieve these goals, we will need to enter into service arrangements with biopharmaceutical company customers, expand and adjust our sales strategy, continue to train our sales force and support publication of scientific publications that reflect the application of our technology in various areas. Additionally, we must demonstrate to laboratory directors, physicians and third-party payors that our products are effective in obtaining relevant information, and that our HTG EdgeSeq platform and related panels can enable an equivalent or superior approach than other available technology. Furthermore, we expect that a combination of increasing the installed base of our HTG EdgeSeq instruments and entering into additional service agreements with biopharmaceutical customers will drive increased demand for our relatively high margin panels. If we are not able to successfully increase our installed base and biopharmaceutical customer relationships,then sales of our products and services, and our margins for these revenue items may not meet expectations. Attracting new customers and introducing new applications for our products and services requires time and expense. Any failure to expand adoption of our technology would adversely affect our ability to improve our operating results.

The common warrants issued in our March 2022 private placement and in our December 2022 best-efforts registered offering include a right to receive the Black-Scholes value of the warrants in the event of a fundamental transaction approved by our board of directors, which payment could be significant.*

The warrants to purchase shares of common stock, other than the pre-funded warrants, issued by us in connection with our March 2022 private placement and our December 2022 best-efforts public offering (see Notes 13 and 14 to the condensed consolidated financial statements included elsewhere in this report for more information on these warrants) provide that, in the event of a “fundamental transaction” that is approved by our board of directors, including, among other things, a merger or consolidation of our company or sale of all or substantially all of our assets, the holders of such warrants have the option to require the Company to pay to such holders an amount of cash equal to the Black-Scholes value of the warrants. Such amount could be significant and would reduce the consideration that holders of common stock would be concurrently entitled to receive in such fundamental transaction.

Our HTG EdgeSeq product portfolio requires the use of NGS instrumentation and reagents and could be adversely affected by actions of third-party NGS product manufacturers over whom we have no control.

We depend at least in part on the availability of NGS instrumentation and reagents, and the ability of our HTG EdgeSeq products to operate seamlessly with NGS instrumentation. Any significant interruption or delay in the ability of our HTG EdgeSeq products to operate on or with NGS instrumentation could reduce demand for our products and result in a loss of customers.

Our reputation, and our ability to continue to establish or develop our technology for clinical applications of next-generation sequencers, are dependent upon the availability of NGS instrumentation and the reliable performance of our products with NGS instrumentation. We are not able to control the providers of NGS instrumentation, which increases our vulnerability to interoperability problems with the products that they provide. For example, providers of NGS instruments may discontinue existing products, or introduce new NGS instrumentation products with little or no notice to us.

If we do not achieve, sustain or successfully manage our anticipated long-term growth, our business and growth prospects will be harmed.*

Our current personnel, systems and facilities may not be adequate to support our business plan and future ~~growth.~~growth in the long term. Our need to effectively manage our operations, growth and various projects requires that we, among other things:

Moreover, growth will place significant strains on our management and our operational and financial systems and processes. For example, expanded market penetration of our HTG EdgeSeq ~~system~~platform and related proprietary panels, and future development and approval of diagnostic products, are key elements of our growth strategy that will require us to hire and retain additional sales and marketing, regulatory, manufacturing and quality assurance personnel. If we do not successfully forecast the timing and cost of the development of new panels and diagnostic products, the regulatory clearance or approval for product marketing of any future diagnostic products or the demand and commercialization costs of such products, or manage our anticipated expenses accordingly, our operating results will be harmed.

We expect to generate a portion of our revenue internationally and are subject to various risks relating to our international activities, which could adversely affect our operating results.*

~~Our~~For the three months ended March 31, 2023, approximately 51% of our revenue was generated from sales originated by customers located outside of the United States, respectively, compared with 18% for the three months ended March 31, 2022. We expect that a percentage of our future ~~success is dependent upon our ability~~revenue will continue to come from international sources, and we expect to expand our ~~customer base~~overseas operations and introduce new applications.*develop opportunities in additional areas. Engaging in international business involves a number of difficulties and risks, including:

As we expand internationally our results of operations and cash flows will become increasingly subject to ~~successfully complete development of or commercialize any~~fluctuations due to changes in foreign currency exchange rates. Historically, most of our ~~planned future tests and applications. To achieve these goals,~~revenue has been denominated in U.S. dollars, although we will need to conduct substantial research and development, conduct clinical validation studies, expend significant funds, expand and scale-up our research, development, service and manufacturing processes and facilities, expand the number of projects under our Governing Agreement, expand and train our sales force; and seek and obtain regulatory clearance or approvals of our new tests and applications, as required by applicable regulations. Additionally, we must demonstrate to laboratory directors, physicians and third-party payors that our current and any future diagnostic products are effective in obtaining clinically relevant information that can inform treatment decisions, and that our HTG EdgeSeq system and related panels can enable an equivalent or superior approach than other available technology. Furthermore, we expect that a combination of increasing the installed base of our HTG EdgeSeq systems, expanding the number of projects under our Governing Agreement, and entering into additional service and custom assay development agreements with biopharmaceutical customers will drive increased demand for our relatively high margin panels. If we are not able to successfully increase our installed base and biopharmaceutical customer relationships, then sales ofhave sold our products and services and our margins for these revenue items may not meet expectations. Attracting new customers and introducing new products and services requires substantial time and expense. Any failure to expand our existing customer base, or launch new products, including diagnostic products or services, would adversely affect our ability to improve our operating results.

in local currency outside of the United States, principally the Euro. Our financial results may vary significantly from quarter to quarter or may fall below the expectations of investors or securities analysts, each of which may adversely affect our stock price.*

~~Investors should consider our business and prospects considering the risks and difficulties we expect to encounter~~expenses are generally denominated in the ~~new, uncertain and rapidly evolving markets~~currencies in which ~~we compete. Because these markets~~our operations are ~~new~~located, which is primarily in the United States. As our operations in countries outside of the United States grows, our results of operations and evolving, predicting their future growth and size is difficult. We expect that our visibility into future sales of our products, including volumes, prices and product mix between instruments, consumables and services,cash flows will ~~continue~~increasingly be subject to ~~be limited and could result~~fluctuations due to changes in ~~unexpected fluctuations in our quarterly and annual operating results.~~

Numerous other factors, many of which are outside our control, may cause or contribute to significant fluctuations in our quarterly and annual operating results. For example, three customers accounted for 35%, 13% and 5% of our revenue for the nine months ended September 30, 2017, and two customers accounted for 62% and 6% of our accounts receivable balance as of September 30, 2017. If orders from our top customers are reduced or discontinued, our revenue in future periods may materially decrease. Fluctuations in our operating results may make financial planning and forecasting difficult. In addition, these fluctuations may result in unanticipated decreases in our available cash,foreign currency exchange rates, which could negatively ~~affect~~impact our results of operations in the future. For example, if the value of the U.S. dollar increases relative to foreign currencies, in the absence of an offsetting change in local currency prices, our revenue could be adversely affected as we convert revenue from local currencies to U.S. dollars.

If we dedicate significant resources to our international operations and are unable to manage these risks effectively, our business, ~~and prospects. Factors that may contribute to fluctuations in our~~ operating results ~~include many~~and prospects will suffer. Moreover, we cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of ~~the risks described under the caption “Risk Factors – Risks Related to Our Business and Strategy” of this report. In addition, one or more of such factors may cause our~~ revenue or ~~operating expenses in one period to be disproportionately higher or lower relative to the others. Our products involve a significant capital commitment from~~profitability.

our customers or may depend on customer studies that have variable or indefinite timelines and accordingly, involve a lengthy sales cycle. We may expend significant effort in attempting to make a particular sale, which may be deferred by the customer or never occur. Also, activities performed under our Governing Agreement involve significant resource3 commitments by us and depend on QML activities over which we have limited control and on biopharmaceutical customer activities and studies that have variable or indefinite timelines and outcomes. We may expend significant effort in attempting to meet our development obligations under the Governing Agreement, the respective payments for which may occur in a different period. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful, and investors should not rely on our past results as an indication of our future performance. If such fluctuations occur or if our operating results deviate from our expectations or the expectations of investors or securities analysts, our stock price may be adversely affected.

~~Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results.~~

Our sales process involves numerous interactions with multiple individuals within any given organization, and often includes in-depth analysis by potential customers of our products (where in some instances we will provide a demonstration unit for their use and evaluation), performance of proof-of-principle studies, preparation of extensive documentation and a lengthy review process. As a result of these factors, the capital investment required in purchasing our instruments and the budget cycles of our customers, the time from initial contact with a customer to our receipt of a purchase order can vary significantly and be up to 12 months or longer. Given the length and uncertainty of our sales cycle, we have in the past experienced, and likely will in the future experience, fluctuations in our instrument sales or service revenues on a period-to-period basis. In addition, any failure to ~~meet customer expectations~~comply with applicable legal and regulatory obligations could ~~result~~negatively impact us in ~~customers choosing~~a variety of ways that include, but are not limited to, ~~retain their existing systems or service providers or to purchase systems or services other than ours.~~significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of products and restrictions on certain business activities.

If the utility of our HTG EdgeSeq ~~system,~~platform, proprietary profiling panels, services and solutions in development is not supported by studies published in peer-reviewed medical publications, the rate of adoption of our current and future products and the rate of reimbursement of our future products by third-party payors may be negatively affected.*

We anticipate that we will need to maintain a continuing presence in peer-reviewed publications to promote adoption of our products by biopharmaceutical companies, academic institutions and molecular labs and to promote favorable coverage and reimbursement decisions. We believe that peer-reviewed journal articles that provide evidence of the utility of our current and future products or the technology underlying the HTG EdgeSeq ~~system,~~platform, consumables and services are important to our commercial success. It is critical to the success of our sales efforts that we educate a sufficient number of clinicians and administrators about our HTG EdgeSeq ~~system,~~technology, including our epitranscriptomic profiling technology, our current panels and services and our future solutions, and demonstrate the research and clinical benefits of these solutions. Our customers may not adopt our current and future solutions, and third-party payors may not cover or adequately reimburse our future products, unless they determine, based on published peer-reviewed journal articles and the experience of other researchers and clinicians, that our products provide accurate, reliable, useful and cost-effective information. Peer-reviewed publications regarding our products and solutions may be limited by many factors, including delays in the completion of, poor design of, or lack of compelling data from studies that would be the subject of the article. If our current and future product and product-related service solutions or the technology underlying such products and services do not receive sufficient favorable exposure in peer-reviewed publications, the rate of research and ~~clinician~~clinical adoption and positive coverage and reimbursement decisions could be negatively affected.

We may provide our HTG EdgeSeq ~~system~~instrument and profiling panels free of charge or through other arrangements to customers or key opinion leaders through evaluation agreements or reagent rental programs, and these programs may not be successful in generating recurring revenue from sales of our systems and proprietary panels.*

We sell our HTG EdgeSeq ~~system~~instrument and profiling panels under different arrangements to expand our installed base and facilitate the adoption of our platform.

In some instances, we provide equipment free of charge under evaluation agreements for a limited period of time to permit the user to evaluate the system for their purposes in anticipation of a decision to purchase the system. We retain title to the equipment under such arrangements unless the evaluator purchases the equipment, and in most cases, require evaluation customers to purchase a minimum quantity of consumables during the evaluation period.

When we place a system under a reagent rental agreement, we install equipment in the customer’s facility without a fee and the customer agrees to purchase consumable products at a stated ~~priced~~price over the term of the agreement. While some of these agreements did not historically contain a minimum purchase requirement, we have included a minimum purchase requirement in all current reagent rental agreements ~~since 2015,~~ and will continue to do so in the future. We retain title to the equipment and such title is transferred to the customer at no additional charge at the end of the initial arrangement. The cost of the instrument under the agreement is expected to be recovered in the fees charged for consumables, to the extent sold, over the term of the agreement.

Other arrangements might include a ~~collaborative development~~research agreement whereby an academic ~~or a commercial~~ collaborator agrees to provide biological samples ~~free of charge~~ in exchange for the use of an HTG EdgeSeq ~~system~~instrument at no cost in furtherance of athe collaborator’s professional goals and/or the educational or research ~~or clinical project.~~objectives of an applicable institution.

Any of the foregoing arrangements could result in lost ~~revenues~~revenue and profit and potentially harm our long-term goal of achieving profitable operations. In addition, ~~despite the fact~~ we require customers who receive systems that we continue to own to carry insurance sufficient to protect us against any equipment losses, we cannot guarantee that they will maintain such coverage, which may expose us to a loss of the value of the equipment in the event of any loss or damage.

There are instances where we provide our systems to key opinion leaders free of charge, to gather data and publish the results of their research to assist our marketing efforts. We have no control over some of the work being performed by these key opinion leaders, or whether the results will be satisfactory. It is possible that the key opinion leader may generate data that is unsatisfactory and could potentially harm our marketing efforts. In addition, customers may from time to time create negative publicity about their experience with our systems, which could harm our reputation and negatively affect market perception and adoption of our platform.

Placing our HTG EdgeSeq ~~systems~~instruments under evaluation agreements, under reagent rental agreements or with our key opinion leaders without receiving payment for the instruments could require substantial additional working capital to provide additional units for sale to our customers.

We face risks related to handling of hazardous materials and other regulations governing environmental safety.

Our ~~strategy~~operations are subject to complex and stringent environmental, health, safety and other governmental laws and regulations that both public officials and private individuals may seek to enforce. Our activities that are subject to these regulations include, among other things, our use of ~~developing companion~~hazardous materials and the generation, transportation and storage of waste. We could discover that we or an acquired business is not in material compliance with these regulations. Existing laws and regulations may also be revised or reinterpreted, or new laws and regulations may become applicable to us, whether retroactively or prospectively, that may have a negative effect on our business and results of operations. It is also impossible to eliminate completely the risk of accidental environmental contamination or injury to individuals. In such an event, we could be liable for any damages that result, and any liability could exceed our resources or any applicable insurance coverage we may have, which events could adversely affect our business.

The life sciences research and diagnostic markets are highly competitive. We face competition from enhanced or alternative technologies and products, ~~may require large investments~~which could render our products and/or technologies obsolete. If we fail to compete effectively, our business and operating results will suffer.

We face significant competition in ~~working capital~~the drug discovery, life sciences research and ~~may not generate any revenues.~~diagnostics markets.

The biopharmaceutical sector is populated with companies seeking to advance new and differentiated approaches to discovery and experimental therapeutics by way of different platform technologies or modalities with the intent for application to specific disease areas through focus on pharmacologic targets or through phenotypic approaches. In drug discovery, companies such as Accent Therapeutics, Arrakis Therapeutics, Storm Therapeutics and other discovery-stage biotechnology companies are focused in similar therapeutic areas.

~~A key component of our strategy is the development of companion diagnostic products designed to determine the appropriate patient population~~We currently compete with both established and early-stage life sciences research companies that design, manufacture and market instruments and consumables for administration of a particular therapeutic to more successfully treat a variety of illnesses. Successfully developing a companion diagnostic product depends both on regulatory approval for administration of the therapeutic,gene expression analysis, liquid-based specimen analysis (e.g., plasma, blood and urine), single-cell analysis, PCR, digital PCR, other nucleic acid detection and additional applications. These companies use well-established laboratory techniques such as microarrays or qPCR as well as ~~regulatory approval~~newer technologies such as next-generation sequencing. We believe our principal competitors in the life sciences research market are Abbott Molecular, Affymetrix, Inc., Agilent Technologies, Inc., BioRad Laboratories, Invitae, Fluidigm Corporation, Illumina, Inc., Luminex Corporation, NanoString Technologies, Inc., Personal Genome Diagnostics (acquired by Labcorp), entities owned and controlled by QIAGEN N.V., Roche Diagnostics, a division of the Roche Group of companies, and Thermo Fisher Scientific, Inc. In addition, there are several other market entrants in the process of developing novel technologies for the life sciences market. One or more of our competitors could develop a product that is superior to a product we offer or intend to offer, or our technology and products may be rendered obsolete or uneconomical by advances in existing technologies.

Within the diagnostic ~~product. Even if~~market, there are competitors that manufacture systems for sales to hospitals and laboratories and other competitors that offer tests conducted through CLIA certified laboratories. We will also compete with commercial diagnostics companies. Most of our current competitors are either publicly traded, or are divisions of publicly traded companies, and enjoy a number of competitive advantages over us, including:

We believe that the principal competitive factors in all of our target markets include:

We believe that additional competitive factors specific to the diagnostics market include:

Our products may not compete favorably, and we ~~are~~may not be successful in ~~developing products that would be useful as companion diagnostic~~the face of increasing competition from new products and ~~potentially receive regulatory approval for such~~technologies introduced by our existing competitors or new companies entering our markets. In addition, our competitors may have or may develop products ~~the biopharmaceutical companies~~or technologies that ~~develop the corresponding therapeutics may ultimately be unsuccessful in obtaining regulatory approval for any such therapeutic,~~currently or even if successful, select a competing technology to use in their regulatory submission instead of ours. The development of companion diagnostic products requires a significant investment of working capital which may not result in any future income. This could require us to raise additional funds which could dilute our current investors, or could impact our ability to continue our operations in the ~~future.~~future will enable them to produce competitive products with greater capabilities or at lower costs than ours. Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

Our ~~current business~~revenue currently depends in part on ~~levels of~~ research and development spending by academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our products and adversely affect our business and operating results.*

Our revenue is currently derived from sales of our HTG EdgeSeq ~~system,~~instrument and related proprietary panels, ~~and~~ the ~~development~~design of custom RUO assays and sample processing for research applications to biopharmaceutical companies, academic institutions and molecular labs, predominantly in the United States and Europe. The demand for our products and services will depend in part upon the research and development budgets of these customers, which are impacted by factors beyond our control, such as:

We believe that any uncertainty regarding the availability of research funding may adversely affect our operating results and may adversely affect sales to customers or potential customers that rely on government funding. In addition, academic, governmental and other research institutions that fund research and development activities may be subject to stringent budgetary constraints that could result in spending reductions, reduced allocations or budget cutbacks, which could jeopardize the ability of these customers to purchase our ~~products.~~products or services. Our operating results may fluctuate substantially due to reductions and delays in research and development expenditures by these customers. Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of capital or operating expenditures, could materially and adversely affect our business, operating results and financial condition.

We have limited experience in marketing and selling our products, and if we are unable to successfully commercialize our products, our business may be adversely affected.*

We have limited experience marketing and selling our products. Our HTG Edge system was introduced for sale in the life sciences research market in the third quarter of 2013. Our HTG EdgeSeq chemistry was introduced for sale in the life sciences research market in the third quarter of 2014. Our dedicated HTG EdgeSeq system was introduced for sale in the life sciences research market in the fourth quarter of 2015 and has been our primary product focus since 2016. Our VERI/O service laboratory was announced in June 2016. We currently market our products through our own sales force in the United States and Europe, and have distributors in parts of Europe and the Middle East. In the future, we intend to expand our sales and support team in the United States, continue to build a direct sales and support team in Europe and establish additional distributor and/or third party contract sales team relationships in other parts of the world. However, we may not be able to market and sell our products effectively. Our sales of life science research products and potential future diagnostic products will depend in large part on our ability to successfully increase the scope of our marketing efforts and establish and maintain a sales force commensurate with our then applicable markets. Because we have limited experience in marketing and selling our products in the life science research market and in marketing and selling our products in the diagnostic market, our ability to forecast demand, the infrastructure required to support such demand and the sales cycle to customers is unproven. If we do not build an efficient and effective sales force and distributor relationships targeting these markets, our business and operating results will be adversely affected.

If we do not obtain regulatory clearance or approval to market our products for diagnostic purposes, we will be limited to marketing our products for research use only. In addition, if regulatory limitations are placed on our diagnostic products our business and growth will be harmed.*

In many jurisdictions, including the United States, we are currently limited to marketing our HTG EdgeSeq system and proprietary profiling panels for research use only, which means that we cannot make any diagnostic or clinical claims for those products in those jurisdictions. We have sought and intend to continue to seek regulatory clearances or approvals in the United States and other jurisdictions to market certain panels for diagnostic purposes; however, we may not be successful in doing so.

The FDA regulates diagnostic kits sold and distributed through interstate commerce in the United States as medical devices. Unless an exemption applies, generally, before a new medical device may be sold or distributed in the United States, or may be marketed for a new use in the United States, the medical device must receive either FDA clearance of a 510(k) pre-market notification or pre-market approval. Thus, before we can market or distribute our profiling panels, including our mRNA and miRNA panels, as IVD kits for use by clinical testing laboratories in the United States, we must first obtain pre-market clearance or pre-market approval from the FDA. Even if or when we apply for clearance or approval from the FDA for any of our products, the process can be lengthy and unpredictable. We are working collaboratively with multiple biopharmaceutical companies to clinically validate our HTG EdgeSeq DLBCL Cell of Origin Assay, which we believe can classify DLBCL as either ABC or GCB subtype and detect the expression of additional drug-linked gene targets such as PD-1, PD-L1 and CD19. We expect to submit the DLBCL assay for U.S. regulatory clearances or approvals at some future time if and when our work with the biopharmaceutical companies reaches an appropriate stage. We initiated a modular PMA submission process to obtain FDA approval of our HTG EdgeSeq ALK~~Plus~~ Assay to detect certain gene fusions in lung cancer in 2016. We cannot provide any assurances that our clinical studies or collaborative development services with biopharmaceutical companies will be completed or, if completed, have the desired outcomes or that we will meet the regulatory clearance or approval timelines for either product. Further, even if we complete the requisite clinical validations and submit or complete submission of an application, we may not receive FDA clearance or approval for the commercial use of our tests on a timely basis, or at all. If we are unable to obtain regulatory clearance or approval, or if clinical diagnostic laboratories do not accept our cleared or approved tests, our ability to grow our business could be compromised.

Similarly, foreign countries have either implemented or are in the process of implementing increased regulatory controls that require that we submit applications for review and approval by foreign regulatory bodies. We obtained the right to CE mark the HTG EdgeSeq DLBCL Cell of Origin Assay EU and the HTG EdgeSeq ALK~~Plus~~ Assay EU for sale as IVDs in Europe, in July 2016 and March 2017, respectively. If we are unable to maintain CE marking or achieve appropriate ex-U.S. approvals on any of our products for their intended commercial uses on a timely basis or at all, or if clinical diagnostic laboratories or other customers outside the United States do not accept our tests, our ability to grow our business outside of the United States could be compromised.

~~Clinical studies of any product candidate that we intend to market as an IVD kit may not be successful.~~ If we are unable to successfully complete non-clinical and clinical studies of our product candidates or experience significant delays in doing so, our business will be materially harmed.*

Our clinical diagnostic business prospects in the United States and other applicable jurisdictions will depend on our ability to successfully complete clinical studies for product candidates that we intend to market as IVD kits. A failure of one or more clinical studies can occur at any stage of testing. The outcome of non-clinical studies may not be predictive of the success of clinical studies, and interim results, if any, of a clinical study do not necessarily predict final results. Moreover, non-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in non-clinical and clinical studies have nonetheless failed to obtain pre-marketing clearance or approval for their products. ~~Completion of clinical studies, announcement of results of the studies and our ability to obtain regulatory approvals could be delayed for a variety of reasons, including:~~

Our development costs will increase if we have material delays in any clinical study or if we need to perform more or larger clinical studies than planned. If the delays are significant, or if any of our products do not prove to be equivalent to a predicate device or safe or effective, as applicable, or do not receive required regulatory approvals, our financial results and the commercial prospects for our product candidates will be harmed. Furthermore, our inability to complete our clinical studies in a timely manner could jeopardize our ability to obtain regulatory approval.

If our HTG EdgeSeq system and proprietary profiling panels fail to achieve and sustain sufficient market acceptance, or we are not able to continue to expand our service relationships with biopharmaceutical customers (including indirectly pursuant to our Governing Agreement), we will not generate expected revenue, and our prospects may be harmed.*

We are currently focused on selling our HTG EdgeSeq system and profiling panels within the life sciences research market. We plan to develop panels for many different disease states including companion diagnostics to determine the proper course of treatment for those diseases. We may experience reluctance, or refusal, on the part of physicians to order, and third-party payors to cover and provide adequate reimbursement for, our panels if the results of our research and clinical studies, and our sales and marketing activities relating to communication of these results, do not convey to physicians, third-party payors and patients that the HTG EdgeSeq system and related profiling panels provide equivalent or better diagnostic information than other available technologies and methodologies. We believe our panels represent an emerging methodology in diagnosing disease states, and we may have to overcome resistance among physicians to adopting it for the marketing of our products to be successful. Even if we are able to obtain regulatory approval from the FDA, the use of our panels may not become the standard diagnostic tool for those diseases on which we plan to focus our efforts.

In addition, a key component of our strategy is to develop diagnostic tools in conjunction with biopharmaceutical companies’ drug development programs, to help assess the proper course of treatment for specific diseases. Even if we are successful in developing those diagnostic tools and receive regulatory approval, we still may not be successful in marketing those diagnostic tests. Furthermore, the decision to advance an underlying drug candidate through clinical trials and ultimately to commercialization is in the discretion of biopharmaceutical companies with which we collaborate. Our biopharmaceutical partners may take certain actions that could negatively impact the utility and marketability of our diagnostic tests. For example, our biopharmaceutical partners could:

To the extent that we develop diagnostic assays for a biopharmaceutical company in collaboration with QML under our Governing Agreement and related statements of work, we may not have responsibility for some or all aspects of developing, marketing or commercializing any resulting diagnostic tests. In addition to this biopharmaceutical partner risk, QML may take certain actions that could negatively impact the development, utility and marketability of the applicable diagnostic tests. For example, QML could fail to satisfy or fall behind in its obligations to us or to the biopharmaceutical partner, which may delay development, regulatory approvals, market development and/or commercialization of an applicable companion diagnostic test.

~~Any of these events could limit our diagnostic test sales and revenues and have a material adverse effect on our business, operating results and financial condition.~~

As part of our current business model, we intend to seek to enter into strategic development collaborations and licensing arrangements with third parties to develop diagnostic tests.*

We have relied, and expect to continue to rely, on strategic development collaborations and licensing agreements with third parties to develop or in-license technologies based on which products or services we may develop or offer. We have entered into agreements with third parties to facilitate or enable our development of assays, and ultimately diagnostic tests, to aid in the diagnosis of oncology diseases, such as breast cancer and melanoma, and other diseases. We intend to enter into additional similar agreements with life sciences companies, biopharmaceutical companies and other researchers for future diagnostic products. However, we cannot guarantee that we will enter into any additional agreements. In particular, our life sciences research or biopharmaceutical customers are not obligated to collaborate with us or license technology to us, and they may choose to develop diagnostic products themselves or collaborate with our competitors. Establishing development collaborations and licensing arrangements is difficult and time-consuming. Discussions may not lead to development collaborations or licenses on favorable terms, or at all. Potential collaborators or licensors may elect not to work with us based upon their assessment of our financial, regulatory or intellectual property position. To the extent that we enter new collaborative development or licensing agreements, they may never result in the successful development or commercialization of future tests or other products for a variety of reasons, including because our collaborators may not succeed in performing their obligations or may choose not to cooperate with us. We cannot control the amount and timing of our collaborators’ resources that will be devoted to performing their responsibilities under our agreements with them. Moreover, to the extent we agree to work exclusively with a party in a given area, our opportunities to collaborate with others would be limited. Even if we establish new relationships, they may never result in the successful development or commercialization of future tests or other products. Disputes with our collaborators could also impair our reputation or result in development delays, decreased revenues and litigation expenses.

Our research and development efforts will be hindered if we are not able to contract with third parties for access to archival patient samples.

Our future development of products for clinical indications will require access to archival patient samples for which data relevant to the clinical indication of interest is known. We rely on our ability to secure access to these archived patient samples, including FFPE tissue, plasma, serum, whole blood preserved in ~~PAX-gene,~~PAXgene, or various cytology preparations, together with the information pertaining to the clinical outcomes of the patients from which the samples were taken. Owners or custodians of relevant samples may be difficult to identify and/or identified samples may be of poor quality or limited in number or amount. Additionally, others compete with us for access to these samples for both research and commercial purposes. Even when an appropriate cohort of samples is identified, the process of negotiating access to these samples can be lengthy because it typically involves numerous parties and approval levels to resolve complex issues such as usage rights, institutional review board approval, privacy rights, publication rights, and intellectual property ownership. In addition, in some instances the cost to acquire samples can be prohibitively expensive. If we are not able to negotiate access to archived patient samples on a timely basis and on acceptable terms, or at all, or if our competitors or others secure access to these samples before us, our ability to research, develop and commercialize future products will be limited or delayed.

The life sciences research and diagnostic markets are highly competitive. We face competition from enhanced or alternative technologies and products, which could render our products and/or technologies obsolete. If we fail to compete effectively, our business and operating results will suffer.*

We face significant competition in the life sciences research and diagnostics markets. We currently compete with both established and early-stage life sciences research companies that design, manufacture and market instruments and consumables for gene expression analysis, liquid-based specimen analysis (e.g., plasma, blood and urine), single-cell analysis, PCR, digital PCR, other nucleic acid detection and additional applications. These companies use well-established laboratory techniques such as microarrays or quantitative PCR, or qPCR, as well as newer technologies such as next generation sequencing. We believe our principal competitors in the life sciences research market are Agilent Technologies, Inc., ArcherDx, Inc., BioRad Laboratories, Fluidigm Corporation,

Foundation Medicine, Inc., Genomic Health, Illumina, Inc., Abbott Molecular, Luminex Corporation, Affymetrix, Inc., NanoString Technologies, Inc., entities owned and controlled by QIAGEN N.V., Roche Diagnostics, a division of the Roche Group of companies, and Thermo Fisher Scientific, Inc. In addition, there are several other market entrants in the process of developing novel technologies for the life sciences market. One or more of our competitors could develop a product that is superior to a product we offer or intend to offer or our technology and products may be rendered obsolete or uneconomical by advances in existing technologies.

Within the diagnostic market, there are competitors that manufacture systems for sales to hospitals and laboratories and other competitors that offer tests conducted through CLIA laboratories. We will also compete with commercial diagnostics companies. Most of our current competitors are either publicly traded, or are divisions of publicly traded companies, and enjoy a number of competitive advantages over us, including:

~~We believe that the principal competitive factors in all of our target markets include:~~

~~We believe that additional competitive factors specific to the diagnostics market include:~~

Our products may not compete favorably and we may not be successful in the face of increasing competition from new products and technologies introduced by our existing competitors or new companies entering our markets. In addition, our competitors may have or may develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours. Any failure to compete effectively could materially and adversely affect our business, financial condition and operating results.

We are dependent on ~~single~~ third-party suppliers for certain subcomponents of our products, including a ~~certain~~single supplier for one subcomponent of our ~~systems and raw materials~~HTG EdgeSeq instruments.

We rely on third-party suppliers to supply certain subcomponents used in our ~~assays,~~HTG EdgeSeq instruments and the loss of any of these suppliers could harm our business.*

~~We currently rely on~~consumables, including a single supplier, In Position Technologies, to ~~supply~~produce a certain subcomponent used in our HTG EdgeSeq ~~processors. We also predominantly rely on a single third-party supplier for various raw materials used to manufacture our consumable products.~~instruments. While we periodically forecast our needs for ~~raw materials for our consumables,~~these subcomponents, our contracts with these suppliers ~~which may be a standard purchase order,~~ do not commit them to carry inventory or make available any particular ~~quantifies,~~quantities, and ~~either supplier~~the suppliers 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. If we were to lose any ~~such~~of these suppliers, we may not be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, or at all. In addition, we have in the past experienced supply issues, as well as quality control problems such as shipment errors, with certain of our suppliers, and may experience problems in the future. If we should encounter delays or difficulties in securing the quality and quantity of ~~materials~~subcomponents we require for our products, ~~or services,~~ our supply chain would be interrupted or our products may not perform as expected, which would adversely affect our sales. A loss or performance failure of any of these suppliers could significantly delay the delivery or impact the performance of our ~~applicable product(s) or service(s),~~products, which in turn would materially affect our ability to generate revenue. If any of these events occur, our business and operating results could be materially harmed.

~~We may encounter manufacturing difficulties that could impede or delay production of our HTG EdgeSeq systems.~~

We began manufacturing our HTG EdgeSeq system internally in 2016. We have limited experience with manufacturing the system and our internal manufacturing operations may encounter difficulties involving, among other things, scale-up of manufacturing processes, production efficiency and output, regulatory compliance, quality control and quality assurance, and shortages of qualified personnel. Any failure in our planned internal manufacturing operations could cause us to be unable to meet demand for these systems, delay the delivery of the system to customers, and harm our business relationships and reputation.

If we encounter difficulties in our planned internal manufacturing operations, we may need to engage a third-party supplier, provided we cannot be sure we will be able to do so in a timely manner, or at all, or on favorable terms.

Any of these factors could cause us to delay or suspend production of our HTG EdgeSeq system, entail unplanned additional costs and materially harm our business, results of operations and financial condition.

If our Tucson facilities become unavailable or inoperable, the manufacturing of our instrument and consumable products or our ability to process sales orders will be interrupted and our business could be materially harmed.*

We manufacture our consumable products and our HTG EdgeSeq system in our Tucson, Arizona facilities. In addition, our Tucson facilities are the center for order processing, receipt of critical components of our HTG EdgeSeq instrument and shipping products to customers. We do not have redundant facilities. Damage or the inability to utilize our Tucson facilities and the equipment we use to perform research and development and manufacture our products could be costly, and we would require substantial lead-time to repair or replace this facility and equipment. The Tucson facilities may be harmed or rendered inoperable by natural or man-made disasters, including flooding, wind damage, power spikes and power outages, which may render it difficult or impossible for us to perform these critical functions for some period of time. The inability to manufacture consumables or instruments, process customer samples, perform development services under our Governing Agreement or ship products to customers for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future. Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

We expect to generate a portion of our revenue internationally and are subject to various risks relating to our international activities which could adversely affect our operating results.*

During the three and nine months ended September 30, 2017, approximately 68% and 49% of our revenue was generated from sales to customers located outside of the United States, respectively, compared with 15% and 11% for the three and nine months ended September 30, 2016, respectively. We expect that a percentage of our future revenue will continue to come from international sources, driven in part by activities conducted pursuant to our Governing Agreement with QML, and we expect to expand our overseas operations and develop opportunities in additional areas. Engaging in international business involves a number of difficulties and risks, including:

As we expand internationally our results of operations and cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates. Historically, most of our revenue has been denominated in U.S. dollars, although we have

sold our products and services in local currency outside of the United States, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States. As our operations in countries outside of the United States grows, our results of operations and cash flows will increasingly be subject to fluctuations due to changes in foreign currency exchange rates, which could negatively impact our results of operations in the future. For example, if the value of the U.S. dollar increases relative to foreign currencies, in the absence of an offsetting change in local currency prices, our revenue could be adversely affected as we convert revenue from local currencies to U.S. dollars.

If we dedicate significant resources to our international operations and are unable to manage these risks effectively, our business, operating results and prospects will suffer. Moreover, we cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.

In addition, any failure to comply with applicable legal and regulatory obligations could negatively impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities.

We rely on distributors for sales of our products in several markets outside of the United States.

We have established exclusive and non-exclusive distribution agreements for our HTG EdgeSeq platform and related profiling panels within parts of Europe and the Middle East. We intend to continue to grow our business internationally, and to do so, in addition to expanding our own direct sales and support team, we plan to attract additional distributors and sales partners to maximize the commercial opportunity for our products. We cannot guarantee that we will be successful in attracting desirable distribution and sales partners or that we will be able to enter into such arrangements on favorable terms. Distributors and sales partners may not commit the necessary resources to market and sell our products to the level of our expectations or may favor marketing the products of our competitors. If current or future distributors or sales partners do not perform adequately, or we are unable to enter into effective arrangements with distributors or sales partners in particular geographic areas, we may not realize long-term international revenue growth.

Limitations in the use of our products could harm our reputation or decrease market acceptance of our products; undetected errors or defects in our products could harm our reputation, decrease market acceptance of our products or expose us to product liability claims.

Our products are subject to the limitations set forth in the product labeling, which may not satisfy the needs of all customers. For example, in the past we have introduced new panels that initially were intended to be used with specific sample types. Because our customers desire that our panels be broadly applicable to many biological sample types, these initial limitations could harm our reputation or decrease market acceptance of our products. If that occurs, we may incur significant costs, the attention of our key personnel could be diverted, or other significant customer relations problems may arise, which could harm our business and operating results.

Similarly, our products may contain undetected errors or defects when first introduced or as new versions are released. Since our current customers use our products for research and, if cleared or approved for diagnostic applications, disruptions or other performance problems with our products may damage our customers’ businesses and could harm our reputation. If that occurs, we may incur significant costs, the attention of our key personnel could be diverted, or other significant customer relations problems may arise. We may also be subject to warranty and liability claims for damages related to errors or defects in our products. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products could harm our business and operating results.

The sale and use of products or services based on our technologies, or activities related to our research and clinical studies, could lead to the filing of product liability claims if someone were to allege that one of our products contained a design or manufacturing defect which resulted in the failure to adequately perform the analysis for which it was designed. A product liability claim could result in substantial damages and be costly and time consuming to defend, either of which could materially harm our business or financial condition. We cannot assure investors that our product liability insurance could adequately protect our assets from the financial impact of defending a product liability claim. Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing insurance coverage in the future.

~~The enactment of legislation implementing changes~~Uncertainties in the ~~U.S. taxation~~interpretation and application of ~~international business activities or the adoption of other~~existing, new and proposed tax ~~reform policies~~laws and regulations could materially ~~impact~~affect our ~~future financial position~~tax obligations and ~~results~~effective tax rate.

The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of ~~operations.~~

~~Existing U.S.~~additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including ~~limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings~~jurisdictions outside of the United States, ~~are repatriated to~~could materially affect our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, ~~as well as changes~~ to ~~U.S. tax~~

~~laws that may be enacted in the future, could impact the tax treatment of future foreign earnings. Should the scale of~~ our international business activities, ~~expand, any~~tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such ~~changes~~a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in ~~the U.S. taxation~~one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such ~~activities~~a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our ~~worldwide effective~~expected tax ~~rate~~liability in one or more jurisdictions.

Effective January 1, 2022, legislation enacted in 2017, informally titled the Tax Cuts and ~~harm our~~Jobs Act (the “Tax Act”) eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted in the United States and over 15 years for research activities conducted outside the United States. Although there have been legislative proposals to repeal or defer the capitalization requirement to later years, there can be no assurance that the provision will be repealed or otherwise modified. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future ~~financial position and results of operations.~~legislation.

Our ability to use net operating ~~losses to offset future taxable income~~loss carryforwards and certain other tax attributes may be ~~subject to certain limitations.~~limited.

As of December 31, ~~2016,~~2022, we had federal net operating loss carryforwards ~~or NOLs,~~(“NOLs”) to offset future taxable income of ~~approximately $102.2~~$203.0 million, of which $121.6 million will begin to expire ~~in 2021~~after 2023 if not ~~utilized.~~utilized, while the remainder can be carried forward indefinitely. A lack of future taxable income would adversely affect our ability to utilize these NOLs. Under current law, our federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely but the deductibility of these federal NOLs is limited to 80% of taxable income. In addition, under ~~Section~~Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, ~~or the Code,~~and corresponding provisions of state law, a corporation that undergoes an “ownership change” (generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period) is subject to limitations on its ability to utilize its ~~NOLs~~pre-ownership change NOL carryforwards and certain other pre-ownership change tax attributes to offset ~~future taxable income.~~post-ownership change income or taxes. We believe we may have already experienced anone or more ownership ~~change~~changes and may in the future experience one or more additional ownership changes, and thus, our ability to ~~use~~utilize pre-ownership change ~~NOLs~~NOL carryforwards and other pre-ownership change tax attributes to offset post-ownership change income or taxes may be limited. Such limitations may cause a portion of our NOL and credit carryforwards to ~~expire.~~expire before we are able to utilize them. In addition, ~~future changes in our stock ownership, including as a result of future financings, as well as changes that~~at the state level, there may be ~~outside~~periods during which the use of ~~our control,~~NOL carryforwards is suspended or otherwise limited, which could ~~result in ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of~~accelerate or permanently increase state ~~law.~~taxes owed. We have recorded a full valuation allowance related to our NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

Acquisitions or joint ventures could disrupt our business, cause dilution to our stockholders and otherwise harm our business.

We may acquire other businesses, products or technologies as well as pursue strategic alliances, partnerships, joint ventures, technology licenses or investments in complementary businesses. We have limited experience with respect to business, product or technology acquisitions or the formation of collaborations, strategic alliances and joint ventures or investing in complementary businesses. Any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:

Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. Also, the anticipated benefit of any acquisition may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results.

If any members of our management team were to leave us or we are unable to recruit, train and retain key personnel, we may not achieve our goals.

Our future success depends on our ability to recruit, train, retain and motivate key personnel, including our senior management, research and development, manufacturing, service and sales and marketing personnel. If we were to lose one or more of our key employees, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategies. Competition for qualified personnel is intense, and we may not be able to attract talent. Our growth depends, in part, on attracting, retaining and motivating highly trained sales personnel with the necessary scientific background and ability to understand our systems at a technical level to effectively identify and sell to potential new customers, including new biopharmaceutical company customers. In particular, our HTG Therapeutics business division requires us to continue to establish and maintain scientific expertise in drug discovery and early development and may require in the future additional support in the areas of expertise that contribute to our transcriptome-informed drug discovery and design platforms and well as to our therapeutics pipeline. In addition, the commercialization of our HTG EdgeSeq ~~system~~platform and related panels requires us to continue to establish and maintain a sales and support ~~team~~teams to optimize the ~~market~~markets for research tools ~~then~~and, where approved, diagnostic assays, and to fully optimize a broad array of diagnostic market opportunities ifas we receive approval for any future diagnostic products. We do not maintain fixed term employment contracts or ~~except for our Chief Executive Officer,~~ key man life insurance ~~with~~relating to any of our employees. Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to retain our management team or to attract, train, retain and motivate other qualified personnel could materially harm our operating results and growth prospects.

Our operating results may be harmed if we are required to collect sales, services or other related taxes for our products and services in jurisdictions where we have not historically done so.

We do not believe that we are required to collect sales, use, services or other similar taxes from our customers in certain jurisdictions. However, one or more countries or states may seek to impose sales, use, services, or other tax collection obligations on us, including for past sales. A successful assertion by one or more jurisdictions that we should collect sales or other taxes on the sale of our products and services could result in substantial tax liabilities for past sales and decrease our ability to compete for future sales. Each country and each state has different rules and regulations governing sales and use taxes and these rules and regulations are subject to varying interpretations that may change over time. We review these rules and regulations periodically and, when we believe sales and use taxes apply in a particular jurisdiction, voluntarily engage tax authorities in order to determine how to comply with their rules and regulations. WeHowever, we cannot ~~assure you~~guarantee that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we presently believe sales and use taxes are not due.

Providers of goods or services are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our products and services, we may be liable for past taxes in addition to being required to collect sales or similar taxes in respect of our products and services going forward. Liability for past taxes may also include substantial interest and penalty charges. Our customer contracts provide that our customers must pay all applicable sales and similar taxes. Nevertheless, customers may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes or we may determine that it would not be feasible to seek reimbursement. If we are required to collect and pay back taxes and the associated interest and penalties and if our customers do not reimburse us for all or a portion of these amounts, we will have incurred unplanned expenses that may be substantial. Moreover, imposition of such taxes on our products and services going forward will effectively increase the cost of such products and services to our customers.

Many states are also pursuing legislative expansion of the scope of goods and services that are subject to sales and similar taxes as well as the circumstances in which a vendor of goods and services must collect such taxes. Following the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., states are now free to levy taxes on sales of goods and services based on an “economic nexus,” regardless of whether the seller has a physical presence in the state. Furthermore, legislative proposals have been introduced in Congress that would provide states with additional authority to impose such taxes. Accordingly, it is possible that either federal or state legislative changes may require us to collect additional sales and similar taxes from our customers in the future.

Our insurance policies are expensive and protect us only from some business risks, which ~~will~~may leave us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property, automobile, umbrella, workers’ compensation, crime (including cybercrime), fiduciary, products liability, pollution, errors and omissions and ~~directors’~~directors and ~~officers’~~officers insurance. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis.*

Expedited, reliable shipping is essential to our operations. We rely heavily on providers of transport services for reliable and secure point-to-point transport of our HTG EdgeSeq ~~systems~~instrument and consumables to our customers and, as applicable, customers’ samples to our laboratory, and for enhanced tracking of these shipments. Should a carrier encounter delivery performance issues such as loss, damage or destruction of any instrumentation, consumables or samples, it would be costly to replace such instrumentation or consumables in a timely manner and may be difficult to replace customers’ samples lost or damaged in shipping, and such occurrences may damage our reputation and lead to decreased demand for our products and increased cost and expense to our business. In addition, any significant increase in shipping rates could adversely affect our operating margins and results of operations. Similarly, strikes, severe weather, natural disasters or other service interruptions affecting delivery services we use would adversely affect our ability to process orders for our products or receive recipient samples on a timely basis.

~~We face risks related to handling~~If our information technology systems or those of ~~hazardous materials and other regulations governing environmental safety.~~

~~Our operations~~third parties upon which we rely are subject to complex and stringent environmental, health, safety and other governmental laws and regulations that both public officials and private individuals may seek to enforce. Our activities that are subject to these regulations include, among other things, our use of hazardous materials and the generation, transportation and storage of waste. We could discover that we or an acquired business is not in material compliance with these regulations. Existing laws and regulations may also be revised or reinterpreted, or new laws and regulations may become applicable to us, whether retroactively or prospectively, that may have a negative effect on our business and results of operations. It is also impossible to eliminate completely the risk of accidental

~~environmental contamination or injury to individuals. In such an event,~~were compromised, we could ~~be liable for any damages that result, and any liability could exceed our resources or any applicable insurance coverage we may have, which events could adversely affect our business.~~

~~Cyber security risks and the failure~~experience adverse consequences resulting from such consequences including but not limited to ~~maintain the confidentiality, integrity, and availability of our computer hardware, software, and internet applications and related tools and functions could result in~~ damage to our reputation and/or subject us to costs, fines, penalties, lawsuits, business interruption or ~~lawsuits.~~otherwise adversely affect our business.

Our business requires collecting, receiving, processing, generating, transferring, disposing of, transmitting, sharing, manipulating, analyzing, disclosing, storing, making accessible and ~~storing~~otherwise using (collectively, processing) large amounts of ~~data. In addition, we rely on an enterprise software system to operate~~proprietary, confidential and ~~manage our business. We also maintain personally identifiable information~~sensitive data, including personal data about our ~~employees.~~employees and others, information we collect from samples we process, intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other third parties (collectively, sensitive data).

The confidentiality, availability, integrity and protection of our data and information technology systems is critical to our business and relevant stakeholders have a high expectation that we will adequately protect sensitive data. Our business therefore depends on the continuous, effective, reliable and secure operation of our ~~computer hardware, software, networks, Internet servers~~data and ~~related infrastructure.~~ information technology systems.

To the extent that our ~~hardware and software~~information technology systems malfunction or access to our data ~~by internal personnel~~ is interrupted or otherwise compromised, our business could suffer. ~~The~~If we or the third parties upon which we rely have experienced or in the future experience any security incident(s) or other interruption(s) that result in any data loss, deletion or destruction, unauthorized, unlawful or accidental access to, loss of, acquisition of or disclosure of, alteration, encryption or exposure of sensitive data, or compromise related to the security, confidentiality, integrity ~~and protection~~or availability of our ~~employee~~(or their) information technology systems or data, it may result in material adverse impacts.

We and ~~company data is critical to our business and employees have a high expectation that~~third parties upon which we will adequately protect their personal information. The regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs. Although our computer and communications software is protected through physical and software safeguards, it is stillrely are vulnerable to ~~natural or man-made hazards,~~cyberattacks, malicious internet-based activity and online and offline fraud and other similar activities, such as ~~fire, storm, flood, power loss, wind damage,~~social-engineering attacks, credential harvesting, supply-chain attacks, software bugs, malicious code (such as viruses and worms), employee theft or misuse, denial-of-service attacks (such as credential stuffing), ransomware attacks, phishing attacks, viruses, malware installation, server malfunction, software or hardware failures, telecommunications failures, physical or software break-ins, ~~software viruses~~loss of data and other computer assets, adware or other similar ~~events. These events~~issues. Such threats are prevalent and continue to increase and come from a variety of sources, including traditional computer “hackers”, threat actors, “hacktivists”, organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, 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 services. For example, some third parties upon which we rely to support our business are located in unstable regions and regions experiencing (or expected to experience) geopolitical or other conflicts, including Ukraine which was attacked by Russia in February 2022 through various means, including cyberattacks.

In particular, severe ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data (including sensitive data) and income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments).

Additionally, as remote work has become more common, there is an increased risk to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations. Moreover, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

In addition, we rely on enterprise software systems and third-party service providers and sub-processors to operate and manage our business, and to process sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. 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. Additionally, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us and our services.

While we have implemented security measures designed to protect against security incidents, and take steps to detect and remediate vulnerabilities, we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. We could be required to expend significant resources, fundamentally change our business activities and practices or modify our services, software, operations or information technology in an effort to protect against security incidents and to mitigate, detect and remediate actual and potential vulnerabilities and security incidents. There can be no assurances that our security measures or those of the third parties upon which we rely will be effective in protecting against all security incidents and the material adverse impacts that may arise from such incidents.

Despite the security controls we have in place, security incidents are very difficult to avoid. We have experienced specific instances of cyber events, including attempted compromises, in the past, and there could be unauthorized access, acquisition, disclosure and use of non-public ~~information.~~information (including personal data) in the future. The techniques used ~~by criminal elements~~ to attack ~~computer~~information technology systems are sophisticated ~~change frequently~~ and ~~may originate from less regulated and remote areas of the world.~~change. As a result, we or the third parties upon which we rely may not be able to address these techniques proactively or implement adequate preventative measures. If our ~~computer~~data or information technology systems (or those of third parties upon which we rely) are compromised, we could be subject to restrictions on processing sensitive data (including personal data), negative publicity, monetary fund diversions, interruptions in our operations (including availability of data), financial loss, reputational damage, fines, penalties, damages, litigation (including class claims) and enforcement actions (for example, investigations, audits and inspections), and we could lose trade secrets, the occurrence of which could harm our business. In addition, ~~any sustained disruption~~a security incident may require notification to governmental agencies, supervisory bodies, credit reporting agencies, the media or individuals pursuant to various obligations. Such disclosures are costly, and the disclosures or the failure to comply with such requirements, could lead to material adverse impacts, including without limitation, negative publicity, a loss of customer confidence in ~~internet access provided by other companies~~our services or security measures or breach of contract claims.

There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages if we fail to comply with obligations related to security incidents. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or material adverse impacts arising out of our privacy and security practices, processing or security incidents we may experience, or that such coverage will continue to be available on commercially reasonable terms or at all. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements) could ~~harm~~have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.

We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies, self-regulatory schemes, government regulation, and other obligations or standards related to data privacy and security. The actual or perceived failure by us, our customers, partners or vendors to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.

In the ordinary course of business, we process sensitive data. We are subject to numerous federal, state, local and foreign laws and regulations, as well as regulatory guidance, industry standards, and other obligations relating to data privacy and security, governing the processing of personal data, such as information that we collect about employees and patients in the United States and abroad. 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, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information. Additionally, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CPRA”) (collectively, “CCPA”), applies to personal data of California-resident consumers, business representatives, and employees, and establishes a privacy framework for covered businesses. The CCPA provides for administrative fines of up to $7,500 per violation and allows private rights of action for certain data breaches. Although the CCPA exempts some data processed in the context of clinical trials, as we expand our operations, the CCPA may increase our compliance costs and potential liability. Additionally, the CPRA expanded the CCPA’s requirements, including by expanding consumers’ rights with respect to certain sensitive personal data and creating a new state agency to implement and enforce the law. We may be subject to additional U.S. privacy regulations in the future, including the Virginia Consumer Data Protection Act, and the Colorado Privacy Act, both of which either took or take effect in 2023. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon which we rely.

Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. Many countries in the regions in which we operate or may operate have established or are in the process of establishing privacy and data security legal frameworks with which we and the third parties upon which we rely must comply. For example, the EU has adopted the General Data Protection Regulation (EU) 2016/679 (“EU GDPR”), which went into effect in May 2018, and the United Kingdom has adopted the United Kingdom’s GDPR (“UK GDPR”). These regulations introduce strict requirements for processing the personal data of individuals in the EU and UK. The EU and UK GDPR have and will continue to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process information about them. Processing sensitive personal data, such as health information, may impose heightened compliance burdens under the EU and UK GDPR and is a topic of active interest among foreign regulators. In addition, the EU and UK GDPR provide for more robust regulatory enforcement and fines of up to €20 million under the EU GDPR (or £17.5 million under the UK GDPR) or 4% of the annual global revenue of the noncompliant company, whichever is greater. Under the EU GDPR, companies may face private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. As we expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Certain data protection laws, including the EU GDPR, restrict the transfer of personal data from Europe, including the European Economic Area (“EEA”), UK and Switzerland, and other jurisdictions to the United States or other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data. In particular, the EEA and 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. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. As such, if there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties and injunctions against our processing or transferring of personal data necessary to operate our business. Companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.

In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We publish privacy policies, marketing materials and other statements regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Furthermore, the obligations are not consistent and may conflict with each other. This evolution may create uncertainty in our business, affect our or the third parties upon which we rely ability to operate in certain jurisdictions or to process personal data, necessitate the acceptance of more onerous obligations in our contracts, or result in liability or impose additional costs on us. The cost of compliance with these obligations is high and is likely to increase in the future. Compliance with these obligations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms, potentially at significant expense, to ensure compliance with such obligations.

Although we endeavor to comply with our obligations, we may at times fail to do so or may be perceived to have failed to do so. Any failure or perceived failure by us or the third parties upon which we rely to comply with data privacy and security obligations could result in negative publicity, disruptions or interruptions in our operations, fines, penalties (including changes to our data processing practices), lawsuits, liability, an inability to process personal data, diversion of management time and effort and proceedings against us by governmental entities or others, any of which could interrupt or stop our business operations (including our clinical trials) and adversely affect our business, financial condition, results of operations and growth prospects. In many jurisdictions, enforcement actions and consequences for noncompliance are rising.

Changes in laws or regulations may have a material adverse effect on our business, cash flow, financial conditions or results of operations.

New laws, statutes, rules, regulations or ordinances could be enacted at any time which could adversely affect our business operations and financial performance. Further, existing laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied in ways that are detrimental to us or our customers. For example, if regulatory limitations are placed on our products or if tax laws are changed or reinterpreted, our business and growth could be harmed.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Biden administration and Congress have proposed various U.S. federal tax law changes, which if enacted could have a material impact on our business, cash flow, financial condition or results of operations. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

We do not believe that we are required to collect sales, use, services or other similar taxes from our customers in certain jurisdictions. However, one or more countries or states may seek to impose sales, use, services, or other tax collection obligations on us, including for past sales. A successful assertion by one or more jurisdictions that we should collect sales or other taxes on the sale of our products and services could result in substantial tax liabilities for past sales and decrease our ability to compete for future sales. Each country and each state has different rules and regulations governing sales and use taxes and these rules and regulations are subject to varying interpretations that may change over time. We review these rules and regulations periodically and, when we believe sales and use taxes apply in a particular jurisdiction, voluntarily engage tax authorities in order to determine how to comply with their rules and regulations. However, we cannot guarantee that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we presently believe sales and use taxes are not due.

Providers of goods or services are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our products and services, we may be liable for past taxes in addition to being required to collect sales or similar taxes in respect of our products and services going forward. Liability for past taxes may also include substantial interest and penalty charges. Our ~~“research~~customer contracts provide that our customers must pay all applicable sales and similar taxes. Nevertheless, customers may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes or we may determine that it would not be feasible to seek reimbursement. If we are required to collect and pay back taxes and the associated interest and penalties and if our customers do not reimburse us for all or a portion of these amounts, we will have incurred unplanned expenses that may be substantial. Moreover, imposition of such taxes on our products and services going forward will effectively increase the cost of such products and services to our customers.

Our research use ~~only”~~only products for the life sciences market could become subject to regulation as medical devices by the FDA or other regulatory agencies in the future, which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our life sciences business and results of operations.

In the United States, our products are currently labeled and sold for research use only, and not for the diagnosis or treatment of disease, and are sold to a variety of parties, including biopharmaceutical companies, academic institutions and molecular labs. Because such products are not intended for use in clinical practice in diagnostics, and the products cannot include clinical or diagnostic claims, they are exempt from many regulatory requirements otherwise applicable to medical devices. In particular, while the FDA regulations require that RUO products be labeled, “For Research Use Only. Not for use in diagnostic procedures,” the regulations do not otherwise subject such products to the FDA’s pre- and post-market controls for medical devices.

A significant change in the laws governing RUO products or how they are enforced may require us to change our business model in order to maintain compliance. For instance, in November 2013 the FDA issued a guidance document entitled “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only”~~, or the RUO Guidance,~~ (the “RUO Guidance”) which highlights the FDA’s interpretation that distribution of RUO products with any labeling, advertising or promotion that suggests that clinical laboratories can validate the test through their own procedures and subsequently offer it for clinical diagnostic use as a laboratory developed test is in conflict with RUO status. The RUO Guidance further articulates the FDA’s position that any assistance offered in performing clinical validation or verification, or similar specialized technical support, to clinical laboratories, conflicts with RUO status. If we engage in any activities that the FDA deems to be in conflict with the RUO status held by the products that we sell, we may be subject to immediate, severe and broad FDA enforcement action that would adversely affect our ability to continue operations. Accordingly, if the FDA finds that we are distributing our RUO products in a manner that is inconsistent with its regulations or guidance, we may be forced to stop distribution of our RUO tests until we are in compliance, which would reduce our ~~revenues,~~revenue, increase our costs and adversely affect our business, prospects, results of operations and financial condition. In addition, the FDA’s proposed implementation for a new framework for the regulation of ~~Laboratory Developed Tests, or~~ LDTs may negatively impact the LDT market and thereby reduce demand for RUO products.

If the FDA requires marketing authorization of our RUO products in the future, there can be no assurance that the FDA will ultimately grant any clearance or approval requested by us in a timely manner, or at all.

Approval and/or clearance by the FDA and foreign regulatory authorities for any diagnostic tests will take significant time and require significant research, development and clinical study expenditures and ultimately may not succeed.

Before we begin to label and market our products for use as clinical diagnostics in the United States, including as companion diagnostics, unless an exemption applies, we will be required to obtain either 510(k) clearance or PMA from the FDA. In addition, we may be required to seek FDA clearance for any changes or modifications to our products that could significantly affect their safety or effectiveness, or would constitute a change in intended use. The 510(k) clearance processes can be expensive, time-consuming and uncertain. In addition to the time required to conduct clinical studies, if necessary, it generally takes from four to twelve months from submission of an application to obtain 510(k) clearance; however, it may take longer and 510(k) clearance may never be obtained. Even if the FDA accepts a 510(k) submission for filing, the FDA may request additional information or clinical studies during its review. Our ability to obtain additional regulatory clearances for new products and indications may be significantly delayed or may never be obtained. In addition, we may be required to obtain PMAs for new products or product modifications. The requirements of the more rigorous PMA process could delay product introductions and increase the costs associated with FDA compliance. As with all IVD products, the FDA reserves the right to redefine the regulatory path at the time of submission or during the review process, and could require a more burdensome approach. Even if we were to obtain regulatory approval or clearance, it may not be for the uses we believe are important or commercially attractive, in which case we would not be permitted to market our product for those uses.

A 510(k) clearance or PMA submission for any future medical device product would likely place substantial restrictions on how the device is marketed or sold, and we will be required to continue to comply with extensive regulatory requirements, including, but not limited to QSRs, registering manufacturing facilities, listing the products with the FDA, and complying with labeling, marketing, complaint handling, adverse event and medical device reporting requirements and corrections and removals. We cannot assure you that we will successfully maintain the clearances or approvals we may receive in the future. In addition, any clearances or approvals we obtain may be revoked if any issues arise that bring into question our products’ safety or effectiveness. Any failure to maintain compliance with FDA regulatory requirements could harm our business, financial condition and results of operations.

Sales of our diagnostic products outside the United States will be subject to foreign regulatory requirements governing clinical studies, vigilance reporting, marketing approval, manufacturing, product licensing, pricing and reimbursement. These regulatory requirements vary greatly from country to country. As a result, the time required to obtain approvals outside the United States may differ from that required to obtain FDA approval and we may not be able to obtain foreign regulatory approvals on a timely basis or at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA and foreign regulatory authorities could require additional testing. In addition, the FDA regulates exports of medical devices. Failure to comply with these regulatory requirements or obtain required approvals could impair our ability to commercialize our diagnostic products outside of the United States.

We expect to rely on third parties to conduct any future studies of our diagnostic products that may be required by the FDA or other regulatory authorities, and those third parties may not perform satisfactorily.*

We do not have the ability to independently conduct the clinical studies or other studies that may be required to obtain FDA and other regulatory clearance or approval for our diagnostic products, including the HTG EdgeSeq ~~system~~instrument and related proprietary panels. Accordingly, we expect to rely on third parties, such as medical institutions, contract research organizations and clinical investigators, and providers of NGS instrumentation, to conduct such studies and/or to provide information necessary for our submissions to regulatory authorities. Our reliance on these third parties for clinical development activities or information will reduce our control over these activities. These ~~third-parties~~third parties may not complete activities on schedule or conduct studies in accordance with regulatory requirements or our study design. Similarly, providers of NGS instrumentation may not place the same importance on our regulatory submissions as we do. Our reliance on third parties that we do not control will not relieve us of any applicable requirement to prepare, and ensure compliance with, the various procedures ~~requires~~required under good clinical practices, or the submission of all information required in connection with requested regulatory approvals. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our studies may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for our diagnostic products.

Even if we are able to obtain regulatory approval or clearance for our diagnostic products, we will continue to be subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

If we receive regulatory approval or clearance for our diagnostic products, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as compliance with QSRs, inspections by the FDA, continued adverse event and malfunction reporting, corrections and removals reporting, registration and listing, and promotional restrictions, and we may also be

subject to additional FDA post-marketing obligations. If we are not able to maintain regulatory compliance, we may not be permitted to market our diagnostic products and/or may be subject to fines, injunctions, and civil penalties; recall or seizure of products; operating restrictions; and criminal prosecution. In addition, we may be subject to similar regulatory compliance actions of foreign jurisdictions.

If Medicare and other third-party payors in the United States and foreign countries do not approve coverage and adequate reimbursement for our future clinical diagnostic tests enabled by our technology, the commercial success of our diagnostic products would be compromised.

We plan to develop, obtain regulatory approval for and sell clinical diagnostics products for a number of different indications. Successful commercialization of our clinical diagnostic products depends, in large part, on the availability of coverage and adequate reimbursement for testing services using our diagnostic products from third-party payors, including government insurance plans, managed care organizations and private insurance plans. There is significant uncertainty surrounding third-party coverage and reimbursement for the use of tests that incorporate new technology, such as the HTG EdgeSeq ~~system~~platform and related applications and assays. Reimbursement rates have the potential to fluctuate depending on the region in which the testing is provided, the type of facility or treatment center at which the testing is done, and the third-party payor responsible for payment. If our customers are unable to obtain positive coverage decisions from third-party payors approving reimbursement for our tests at adequate levels, the commercial success of our products would be compromised, and our revenue would be significantly limited. Even if we do obtain favorable reimbursement for our tests, third-party payors may withdraw their coverage policies, review and adjust the rate of reimbursement, require co-payments from patients or stop paying for our tests, which would reduce revenue for testing services based on our technology and demand for our diagnostic products.

The American Medical Association Current Procedural Terminology ~~or CPT,~~(“CPT”) Editorial Panel created ~~new~~ CPT codes that could be used by our customers to report testing for certain large-scale multianalyte ~~GSPs,~~genomic sequencing procedures (“GSPs”), including our diagnostic products, if approved. Effective January 1, 2015, these codes allow for uniform reporting of broad genomic testing panels using technology similar to ours. While these codes standardize reporting for these tests, coverage and payment rates for GSPs remain uncertain and we cannot guarantee that coverage ~~and/or~~and reimbursement for these tests will be provided in the amounts we expect, or at all. Initially, industry associations recommended that payment rates for GSPs be cross-walked to existing codes on the clinical laboratory fee schedule. On October 27, 2014, CMS issued preliminary determinations for 29 new molecular pathology codes, including the GSPs, of gapfill rather than crosswalking as recommended by the Association for Molecular Pathology. This means that local private MACs, such as Palmetto, Novidian, Novitas and Cahaba, were instructed to determine the appropriate fee schedule amounts in the first year, and CMS calculated a national payment rate based on the median of those local fee schedule amounts in the second year. This process may make it more difficult for our customers to obtain coverage and adequate reimbursement for testing services using our diagnostic products. We cannot assure that CMS and other third-party payors will establish reimbursement rates sufficient to cover the costs incurred by our customers in using our clinical diagnostic products, if approved. On September 25, 2015, CMS released final 2015 pricing for 10 of these codes, and did not issue any pricing on the remaining 19. CPTs 81445 and 81450 for the assessment of 5-50 genes in solid and liquid tumors, respectively, and final gapfill pricing of $597 and $648, respectively, was set for 2015 and is the pricing for 2016. CPT 81455 for the assessment of 51 or more genes in solid and liquid tumors has not yet been priced.

Even if we are able to establish coverage and reimbursement codes for our clinical diagnostic products in development, we will continue to be subject to significant pricing pressure, which could harm our business, results of operations, financial condition and prospects.

Third-party payors, including managed care organizations as well as government payors such as Medicare and Medicaid, have increased their efforts to control the cost, utilization and delivery of healthcare services, which may include decreased coverage or reduced reimbursement. From time to time, Congress has considered and implemented changes to the Medicare fee schedules in conjunction with budgetary legislation, and pricing and payment terms, including the possible requirement of a patient co-payment for Medicare beneficiaries for laboratory tests covered by Medicare, and are subject to change at any time. Reductions in the reimbursement rate of third-party payors have occurred and may occur in the future. Reductions in the prices at which testing services based on our technology are reimbursed in the future could result in pricing pressures and have a negative impact on our revenue. In many countries outside of the United States, various coverage, pricing and reimbursement approvals are required. We expect that it will take several years to establish broad coverage and reimbursement for testing services based on our products with payors in countries outside of the United States, and our efforts may not be successful.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and other federal and state healthcare laws applicable to our business and marketing practices. If we are unable to comply, or have not complied, with such laws, we could face substantial penalties.

Our operations may be, and may continue to be, directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal and state anti-kickback statutes, false claims statutes, civil monetary penalties laws, patient data privacy and security laws, physician transparency laws and marketing compliance laws. These laws may impact, among other things, our proposed sales and marketing and education programs.

The laws that may affect our ability to operate include, but are not limited to:

Promotional activities for FDA-regulated products have been the subject of significant enforcement actions brought under healthcare reimbursement laws, fraud and abuse laws, and consumer protection statutes, among other theories. Advertising and promotion of medical devices are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. In addition, under the Federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims.

In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities, including our relationships with physicians and other health care providers, and our evaluation, reagent rental and collaborative development agreements with customers, and sales and marketing efforts could be subject to challenge under one or more of such laws.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, ~~individual~~ imprisonment, disgorgement, exclusion from participation in federal healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of fraud or other misconduct by our employees, independent contractors, principal investigators, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless or negligent failures to, among other things: (i) comply with the regulations of the FDA, CMS, the Department of Health and Human Services Office of Inspector General ~~or OIG,~~(“OIG”) and other similar foreign regulatory bodies; (ii) provide true, complete and accurate information to the FDA and other similar regulatory bodies; (iii) comply with manufacturing standards we have established; (iv) comply with healthcare fraud and abuse laws and regulations in the United States and similar foreign fraudulent misconduct laws; or (v) report financial information or data accurately, or disclose unauthorized activities to us. These laws may impact, among other things, our activities with collaborators and key opinion leaders, as well as our sales, marketing and education programs. In particular, the promotion, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We currently have a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and our code of conduct and the other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a

significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, ~~individual~~ imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations. Any of these actions or investigations could result in substantial costs to us, including legal fees, and divert the attention of management from operating our business.

Healthcare policy changes, including recently enacted legislation reforming the United States healthcare system, may have a material adverse effect on our financial condition and results of operations.*

On April 1, 2014, the Protecting Access to Medicare Act of 2014 ~~or PAMA,~~(“PAMA”) was signed into law, which, among other things, significantly ~~alters~~altered the current payment methodology under the Medicare Clinical Laboratory Fee Schedule ~~or CLFS.~~(“CLFS”). Effective January 1, 2018, the CLFS is based on weighted median private payor rates as required by PAMA. Under the ~~new~~ law, starting January 1, 2016 and every three years thereafter (or annually in the case of advanced diagnostic lab tests), applicable clinical laboratories must report laboratory test payment data for each Medicare-covered clinical diagnostic lab test that it ~~furnishes during a period to be defined by future regulations.~~furnishes. The reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price concessions) and the volume of each test that was paid by each private payor (including health insurance issuers, group health plans, Medicare Advantage plans and Medicaid managed care organizations). ~~Beginning in 2017, the Medicare~~Reporting of payment ~~rate~~data under PAMA for ~~each~~ clinical diagnostic ~~lab test~~laboratory tests has been delayed on numerous occasions. Based on current law, between January 1, 2023 and March 31, 2023, applicable laboratories will be ~~equal~~required to ~~the weighted median amount for the~~report on data collected during January 1, 2019 and June 30, 2019. This data will be utilized to determine 2024 to 2026 clinical diagnostic laboratory test ~~from the most recent data collection period.~~rates. The payment rate ~~will apply~~applies to laboratory tests furnished by a hospital laboratory if the test is separately paid under the hospital outpatient prospective payment system. In addition, CMS updated the statutory phase-in provisions such that the rates for clinical diagnostic laboratory tests in 2020 could not be reduced by more than 10% of the rates for 2019. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as updated by the Consolidated Appropriations Act, 2023, the statutory phase-in of the payment reductions has been extended through 2026, with a 0% reduction cap for 2021-2023, and a 15% reduction cap for 2024 through 2026. It is still too early to predict the full impact on reimbursement for our products in development.

Also, under PAMA, CMS is required to adopt temporary billing codes to identify new tests and new advanced diagnostic laboratory tests that have been cleared or approved by the FDA. For an existing test that is cleared or approved by the FDA and for which Medicare payment is made as of April 1, 2014, CMS is required to assign a unique billing code if one has not already been assigned by the agency. In addition to assigning the code, CMS was required to publicly report payment for the ~~tests no later than January 1, 2016.~~tests. We cannot determine at this time the full impact of the ~~new~~ law, including its implementing regulations, on our business, financial condition and results of operations.

The Patient Protection and Affordable Care Act ~~or ACA, makes~~of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), made changes that ~~could~~ significantly ~~impact~~impacted the biopharmaceutical and medical device industries and clinical laboratories. For example, the ACA imposes a multifactor productivity adjustment to the reimbursement rate paid under Medicare for certain clinical diagnostic laboratory tests, which may reduce payment rates. These or any future proposed or mandated reductions in payments may apply to some or all of the clinical laboratory tests that our diagnostics customers use our technology to deliver to Medicare beneficiaries and may reduce demand for our diagnostic products.

Other significant measures contained in the ACA include, for example, coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and physicians, and initiatives to promote quality indicators in payment methodologies. Further, the ACA includes a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions, which became effective January 1, 2013. However, the Consolidated Appropriations Act of 2016, signed into law in December 2015, includes a two-year moratorium on the medical device excise tax that applies between January 1, 2016 and December 31, 2017. Absent further legislative action, the tax will be automatically reinstated for medical device sales beginning January 1, 2018. The ACA also includes significant new fraud and abuse measures, including required disclosures of financial arrangements with physician customers, lower thresholds for violations and increasing potential penalties for such violations. However, the future of the ACA is uncertain. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. AsOn June 17, 2021, the U.S. Supreme Court dismissed a ~~result, there have been delays~~challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the ~~implementation~~“individual mandate” was repealed by Congress. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and ~~action taken~~reconsider their existing policies and rules that limit access to ~~repeal~~healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or ~~replace, certain aspects of~~ the ACA. ~~Since January 2017,~~On August 16, 2022, President ~~Trump has~~Biden signed ~~two Executive Orders~~the Inflation Reduction Act of 2022 (“IRA”) into law, which, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. The IRA also includes measures designed to ~~delay~~lower the ~~implementation~~cost of ~~any~~ certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. The Trump administration has also announced that it will discontinue the payment of cost-sharing reduction, or CSR, payments to insurance companies until Congress approves the appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health planspharmaceutical products under the ~~ACA. Congress~~Medicare program. It is ~~considering legislation~~currently unclear how the IRA will be implemented but is likely to ~~appropriate funds for CSR payments, but~~have a significant impact on the ~~future of that bill~~pharmaceutical industry. It is uncertain. Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the ACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal or replace elements of the ACA. We continue to evaluate the effectpossible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any additional healthcare reform measures of the Biden administration will impact the ACA and ~~its possible repeal and replacement has on~~ our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, then-President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several

government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, following the passage of ~~the Bipartisan Budget Act of 2015,~~other legislative amendments, will stay in effect ~~through 2025~~until 2031 unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Further, Congress and the Biden administration are considering additional health reform measures. On January 2, 2013, then-President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Various healthcare reform proposals have also emerged from federal and state governments. Changes in healthcare law or policy, such as the creation of broad test utilization limits for diagnostic products in general or requirements that Medicare patients pay for portions of clinical laboratory tests or services received, could substantially impact the sales of our tests, increase costs and divert management’s attention from our business. Such co-payments by Medicare beneficiaries for laboratory services were discussed as possible cost savings for the Medicare program as part of the debt ceiling budget discussions in mid-2011 and may be enacted in the future. In addition, sales of our tests outside of the United States will subject us to foreign regulatory requirements, which may also change over time.

We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or in countries outside of the United States in which we may do business, or the effect any future legislation or regulation will have on us. The taxes imposed by the new federal legislation and the expansion in government’s effect on the United States healthcare industry may result in decreased profits to us, lower reimbursements by payors for our products or reduced medical procedure volumes, all of which may adversely affect our business, financial condition and results of operations. The full impact of the ACA, as well as other laws and reform measures that may be proposed and adopted in the future, remains uncertain, but may continue the downward pressure on medical device pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs, which could have a material adverse effect on our business operations. ~~There have been judicial~~

Changes in funding for the FDA, the SEC and ~~congressional challenges~~other government agencies could hinder their ability to ~~certain aspects~~hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the ~~ACA,~~FDA to review and ~~we expect additional challenges~~approve new products can be affected by a variety of factors, including government budget and ~~amendments~~funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the ~~future.~~SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs or diagnostic products to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

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

We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our U.S. and foreign patent and patent application portfolio relates to our nuclease-protection-based technologies as well as to lung cancer and melanoma and DLBCL biomarker panels discovered using our nuclease-protection-based technology. We have exclusive or non-exclusive licenses to multiple U.S. and foreign patents and patent applications covering technologies that we may elect to utilize in developing diagnostic tests for use on our HTG EdgeSeq ~~system.~~platform. Those licensed patents and patent applications cover technologies related to the diagnosis of breast cancer and melanoma.

If we fail to protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

We cannot assure investors that any of our currently pending or future patent applications will result in issued patents, and we cannot predict how long it will take for such patents to be issued. Further, we cannot assure investors that other parties will not challenge any patents issued to us or that courts or regulatory agencies will hold our patents to be valid or enforceable. We cannot guarantee investors that we will be successful in defending challenges made against our patents. Any successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents.

The patent positions of life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States. Furthermore, in the biotechnology field, courts frequently render opinions that may adversely affect the patentability of certain inventions or discoveries, including opinions that may adversely affect the patentability of methods for analyzing or comparing nucleic acids molecules, such as RNA or DNA.

The patent positions of companies engaged in development and commercialization of molecular diagnostic tests are particularly uncertain. Various courts, including the U.S. Supreme Court, have recently rendered decisions that impact the scope of patentability of certain inventions or discoveries relating to molecular diagnostics. Specifically, these decisions stand for the proposition that patent claims that recite laws of nature (for example, the relationships between gene expression levels and the likelihood of risk of recurrence of cancer) are not themselves patentable unless those patent claims have sufficient additional features that provide practical assurance that the processes are genuine inventive applications of those laws rather than patent drafting efforts designed to monopolize the law

of nature itself. What constitutes a “sufficient” additional feature is uncertain. Accordingly, this evolving case law in the United States may adversely impact our ability to obtain new patents and may facilitate third-party challenges to our existing owned and licensed patents.

The laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. For example:

In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, when needed, our advisors. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure. Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce a claim that a ~~third party~~third-party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets.

In addition, competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property is not adequately protected so as to protect our market against competitors’ products and methods, our competitive position could be adversely affected, as could our business.

We have not yet registered certain of our trademarks, including “HTG Edge,” “HTG EdgeSeq,” “VERI/O,” “qNPA,” and ~~“qNPA”~~“HTG Transcriptome Panel” in all of our potential markets. If we apply to register these trademarks, our applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.

To the extent our intellectual property, including licensed intellectual property, offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time consuming and expensive.

~~We may need to depend on certain technologies that are licensed to us. We would not control these technologies and any loss of our rights to them could prevent us from selling some of our products.~~

We have entered into several license agreements with third parties for certain licensed technologies that are, or may become relevant to the products we market, or plan to market. In addition, we may in the future elect to license third party intellectual property to further our business objectives and/or as needed for freedom to operate for our products. We do not and will not own the patents, patent applications or other intellectual property rights that are a subject of these licenses. Our rights to use these technologies and employ the inventions claimed in the licensed patents, patent applications and other intellectual property rights are or will be subject to the continuation of and compliance with the terms of those licenses.

We might not be able to obtain licenses to technology or other intellectual property rights that we require. Even if such licenses are obtainable, they may not be available at a reasonable cost or multiple licenses may be needed for the same product (e.g., stacked royalties). We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins. Further, we could encounter delays in product introductions, or interruptions in product sales, as we develop alternative methods or products.

In some cases, we do not or may not control the prosecution, maintenance, or filing of the patents or patent applications to which we hold licenses, or the enforcement of these patents against third parties. As a result, we cannot be certain that drafting or prosecution of the licensed patents and patent applications by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Certain of the U.S. patent rights we own, have licensed or may license relate to technology that was developed with U.S. government grants, in which case the U.S. government has certain rights in those inventions, including, among others, march-in license rights. In addition, federal regulations impose certain domestic manufacturing requirements with respect to any products within the scope of those U.S. patent claims.

We may be involved in lawsuits to protect or enforce our patent or other proprietary rights, to determine the scope, coverage and validity of others’ patent or other proprietary rights, or to defend against third-party claims of intellectual property infringement, any of which could be time-intensive and costly and may adversely impact our business or stock price.

We may from time to time receive notices of claims of infringement and misappropriation or misuse of other parties’ proprietary rights, including with respect to third-party trade secrets, infringement by us of third-party patents and trademarks or other rights, or challenges to the validity or enforceability of our patents, trademarks or other rights. Some of these claims may lead to litigation. We cannot assure investors that such actions will not be asserted or prosecuted against us or that we will prevail in any or all such actions.

Litigation may be necessary for us to enforce our patent and other proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others. The outcome of any litigation or other proceeding is inherently uncertain and might not be favorable to us. In addition, any litigation that may be necessary in the future could result in substantial costs, even if we were to prevail, and diversion of resources and could have a material adverse effect on our business, operating results or financial condition.

As we move into new markets and applications for our products, incumbent participants in such markets may assert their patents and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we currently have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may provide little or no deterrence or protection. Therefore, our commercial success may depend in part on our non-infringement of the patents or proprietary rights of third parties. Numerous significant intellectual property issues have been litigated, and will likely continue to be litigated, between existing and new participants in our existing and targeted markets and competitors may assert that our products infringe their intellectual property rights as part of a business strategy to impede our successful entry into those markets. We have not conducted comprehensive freedom-to-operate searches to determine whether the commercialization of our products or other business activities would infringe patents issued to third parties. Third parties may assert that we are employing their proprietary technology without authorization. In addition, our competitors and others may have patents or may in the future obtain patents and claim that use of our products infringes these patents. We could incur substantial costs and divert the attention of our management and technical personnel in defending against any of these claims. Parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products, and could result in the award of substantial damages against us. In the event of a successful claim of infringement against us, we may be required to pay damages and obtain one or more licenses from third parties or be prohibited from selling certain products. We may not be able to obtain these licenses at a reasonable cost, if at all. We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our ~~gross~~ margins. In addition, we could encounter delays in product introductions while we attempt to develop alternative methods or products to avoid infringing

third-party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, and the prohibition of sale of any of our products could materially affect our ability to grow and gain market acceptance for our products.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

In addition, our agreements with some of our suppliers, distributors, customers and other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims against us, including the claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify any of these third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, operating results, or financial condition.

We may need to depend on certain technologies that are licensed to us. We do not control these technologies and any loss of our rights to them could prevent us from selling some of our products.

We have entered into several license agreements with third parties for certain licensed technologies that are, or may become relevant to the products we market, or plan to market. In addition, we may in the future elect to license third-party intellectual property to further our business objectives and/or as needed for freedom to operate for our products. We do not and will not own the patents, patent applications or other intellectual property rights that are a subject of these licenses. Our rights to use these technologies and employ the inventions claimed in the licensed patents, patent applications and other intellectual property rights are or will be subject to the continuation of and compliance with the terms of those licenses.

We might not be able to obtain licenses to technology or other intellectual property rights that we require. Even if such licenses are obtainable, they may not be available at a reasonable cost or multiple licenses may be needed for the same product (e.g., stacked royalties). We could therefore incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our margins. Further, we could encounter delays in product introductions, or interruptions in product sales, as we develop alternative methods or products.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.

Many of our employees were previously employed at other medical diagnostic companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. A loss of key research personnel work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

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

Our products contain software tools licensed by third-party authors under ~~“open source”~~“open-source” licenses. Use and distribution of ~~open source~~open-source software may entail greater risks than use of third-party commercial software, as ~~open source~~open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some ~~open source~~open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of ~~open source~~open-source software we use. If we combine our proprietary software with ~~open source~~open-source software in a certain manner, we could, under certain ~~open source~~open-source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales.

Although we monitor our use of ~~open source~~open-source software to avoid subjecting our products to conditions we do not intend, the terms of many ~~open source~~open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. Moreover, we cannot assure investors that our processes for controlling our use of ~~open source~~open-source software in our products will be effective. If we are held to have breached the terms of an ~~open source~~open-source software license, we could be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results, and financial condition.

We use third-party software that may be difficult to replace or cause errors or failures of our products that could lead to lost customers or harm to our reputation.

We use software licensed from third parties in our products. In the future, this software may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this software could result in delays in the production of our products until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. In addition, any errors or defects in third-party software, or other third-party software failures could result in errors, defects or cause our products to fail, which could harm our business and be costly to correct. Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our customers or third-party providers that could harm our reputation and increase our operating costs.

We will need to maintain our relationships with third-party software providers and to obtain software from such providers that do not contain any errors or defects. Any failure to do so could adversely impact our ability to deliver reliable products to our customers and could harm our results of operations.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.*

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of The NASDAQ Stock Market, or NASDAQ. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. We have performed system and process evaluation and testing of our internal controls over financial reporting to allow management to report annually on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. This has required and will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts as we continue to make this assessment and ensure maintenance of proper internal controls on an ongoing basis.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we fail to establish and maintain proper and effective internal control over financial reporting, we may not be able to produce timely and accurate financial statements, and our ability to accurately report our financial results could be adversely affected. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the Securities and Exchange Commission, or SEC, or other regulatory authorities.

Changes or modifications in financial accounting standards, including those related to revenue recognition, may harm our results of operations.*

From time to time, the FASB, either alone or jointly with other organizations, promulgates new accounting principles that could have an adverse impact on our financial position, results of operations or reported cash flows. For example, in May 2014, the FASB issued ASU No. 2014-09, ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”), and subsequently issued implementation guides (collectively, the “New Revenue Standard”). The New Revenue Standard supersedes nearly all existing revenue recognition guidance under GAAP and becomes effective for us beginning January 1, 2018. We have not yet finalized our assessment of the impact of the New Revenue Standard on our results of operations, internal controls and disclosures, and plan to do so prior to December 31, 2017. Our inability to adopt the New Revenue Standard or any new accounting standard, and to update or modify our internal controls as needed, by the mandated adoption dates could adversely affect our financial reporting obligations, corresponding regulatory compliance and/or investors’ confidence in us. Also, if we were to change our critical accounting estimates, including those related to the recognition of collaboration revenue and other revenue sources, our operating results could be significantly affected.

Complying with the laws and regulations affecting public companies ~~will increase~~increases our costs and the demands on management and could harm our operating results.

As a public company, ~~and particularly after we cease to be an “emerging growth company,”~~ we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and NASDAQ impose numerous requirements on public companies, including requiring changes in corporate governance practices. Also, theexpenses. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq, impose numerous requirements on public companies, including corporate governance requirements. Our management and other personnel will need to continue to devote a substantial amount of time to compliance with these laws and regulations. These requirements have ~~increased~~resulted and will continue to ~~increase our~~result in significant legal, accounting, and financial compliance costs and have made and will continue to make some activities more time consuming and costly. ~~For example,~~

As a “non-accelerated filer” we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

~~As an “emerging growth company,” we expect to avail~~have availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. ~~However, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth company.”~~ When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting,

the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

We are ~~an “emerging growth company,”~~a “smaller reporting company” and a “non-accelerated filer” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to ~~emerging growth~~smaller reporting companies or non-accelerated filers could make our common stock less attractive to investors.*

We are ~~an “emerging growth company,”~~a “smaller reporting company” and a “non-accelerated filer” as defined in the ~~JOBS~~Exchange Act, ~~enacted in April 2012,~~ and for as long as we continue to be ~~an “emerging growth company,~~a “smaller reporting company” or a “non-accelerated filer,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to ~~“emerging growth companies,~~“smaller reporting companies” or “non-accelerated filers,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 (for so long as we are a “non-accelerated filer”) and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements ~~and exemptions from the requirements of holding~~(for so long as we are a ~~nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth~~“smaller reporting company” for up to five years following the completion of our May 5, 2015 IPO, however, we would cease to be an “emerging growth company” before the end of that five-year period as of the following December 31, if we have more than approximately $1.0 billion in annual revenue, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year, or as of the date we issue more than $1.0 billion of non-convertible debt over a three-year period.). We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

We may not be able to satisfy the applicable continued listing requirements of NASDAQ.*

Our common stock is currently listed on The NASDAQ Capital Market under the symbol “HTGM.” Effective April 17, 2017, the listing of our common stock was transferred to The NASDAQ Capital Market from The NASDAQ Global Market following our appeal to a NASDAQ Hearings Panel, or Panel, of the delisting notice we received from NASDAQ on February 14, 2017. On April 12, 2017, the Panel found us in compliance with the requirements for listing on The NASDAQ Capital Market as a result of the market value of our outstanding common stock exceeding $35.0 million, which satisfied NASDAQ’s market value of listed securities, or MVLS, listing standard. On July 31, 2017, we received a notice from NASDAQ that we are no longer in compliance with the applicable MVLS requirement for continued listing on The NASDAQ Capital Market. The NASDAQ continued listing rules provide a compliance period of 180 calendar days in which we can regain compliance with the MVLS requirement if the market value of our outstanding common stock closes at $35.0 million or more for 10 consecutive business days. There can be no assurance that we will be able to regain compliance with the MVLS requirement or satisfy alternative criteria for continued listing on The NASDAQ Stock Market. If we are not able to regain and maintain compliance with NASDAQ’s continued listing requirements, our common stock may be delisted from trading on NASDAQ. The delisting of our common stock from trading on NASDAQ may have a material adverse effect on the market for, and liquidity and price of, our common stock and impair our ability to raise capital. Delisting from NASDAQ could also have other negative results, including, without limitation, the potential loss of confidence by customers and employees, the loss of institutional investor interest and fewer business development opportunities. If our common stock is delisted from trading on NASDAQ, trading of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the OTC Markets or OTC Bulletin Board. In such event, it could become more difficult to dispose of or obtain accurate quotations for the price of our common stock, and there may also be a reduction in our coverage by security analysts and the news media, which may cause the price of our common stock to decline further.

The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:

The stock market in general, and market prices for the securities of health technology companies like ours in particular, have from ~~time to time~~time-to-time experienced volatility that often has been unrelated to the operating performance of the underlying companies. COVID-19 and recent and potential future bank closures, for example, has resulted in significant volatility in the stock market over the last several months. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations where the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.

In addition, to date our common stock has generally been sporadically and thinly traded. As a consequence, the trading of relatively small quantities of our shares may disproportionately influence the price of our common stock in either direction. The price for our common stock could decline precipitously if even a moderate amount of our common stock is sold on the market without commensurate demand.

If ~~securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.~~

~~The trading market for~~we are unable to continue to satisfy the applicable continued listing requirements of Nasdaq, our common stock could be delisted.

Our common stock is currently listed on The Nasdaq Capital Market under the symbol “HTGM.” In order to maintain this listing, we must continue to satisfy minimum financial and other continued listing requirements and standards. There can be no assurance that we will be ~~influenced by~~able to continue to comply with the ~~research and reports that industry or securities analysts publish about us or~~applicable listing standards. If we were not able to comply with applicable listing standards, our ~~business. If one or more~~shares of ~~the analysts who cover us issues an adverse opinion about our company, our~~common stock ~~price~~ would ~~likely decline. If one or more of these analysts ceases coverage of us or fails~~be subject to ~~regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.~~

~~Sales of a substantial number of shares~~delisting. The delisting of our common stock infrom trading on Nasdaq may have a material adverse effect on the ~~public~~ market could cause our stock price to fall.*

~~Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market~~for, and liquidity and price of, our common stock and ~~could~~ impair our ability to raise ~~capital through~~capital. Delisting from Nasdaq could also have other negative results, including, without limitation, the ~~sale~~potential loss of ~~additional equity securities. We are unable~~confidence by customers and employees, the loss of institutional investor interest and fewer business development opportunities. In the event that our common stock is delisted from Nasdaq and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to ~~predict~~dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the ~~effect that sales may have on~~news media, which could cause the ~~prevailing market~~ price of our common ~~stock.~~stock to decline further.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by these and subsequent sales. New investors could also gain rights superior to our existing stockholders.

Pursuant to our ~~2014~~2020 Equity Incentive Plan ~~or 2014 Plan, our board of directors is~~(“2020 Plan”), we are authorized to grant stock options and other equity-based awards to our employees, directors and consultants. Pursuant to our 2021 Inducement Plan (“Inducement Plan”), we are authorized to grant up to 300,000 shares to new employees as inducements material to such new employees entering into employment with us. The number of shares ~~available for future grant~~which may be granted under the ~~2014~~Inducement Plan ~~will automatically increase on January 1 of each year~~may be increased in the future by ~~4% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, subject to the ability of~~ our board of directors ~~to take action to reduce the size of the increase in any given year.~~without stockholder approval. In addition, our ~~board of directors approved the granting of rights to eligible employees to purchase shares of our common stock pursuant to our~~amended and restated 2014 Employee Stock Purchase Plan ~~or ESPP, beginning January 1, 2016. The number of~~(“ESPP”) authorizes us to offer, sell and issue shares ofto our common stock reserved for issuance under the ESPP will automatically increase on January 1 of each calendar year by the lesser of 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year and 195,000 shares, subject to the ability of our board of directors to take action to reduce the size of the increase in any given year. Currently, we plan to register the increased number of shares available for issuance under the 2014 Plan and ESPP each year.employees. Increases in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock price to decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.*

Our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned a significant portion of our capital stock at September 30, 2017. Accordingly, our executive officers, directors and principal stockholders acting together could exercise significant influence over all matters requiring stockholder approval, including mergers and other business combinations. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material adverse effect on our stock price and may prevent attempts by our stockholders to replace or remove the board of directors or management.

We do not intend to pay dividends on our common stock ~~so any returns will be limited to~~in the ~~value of our stock.~~foreseeable future.

We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends is currently prohibited by the terms of our debt facility, and any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any return to stockholders will therefore be limited to the appreciation of their stock.

Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a ~~third party~~third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management. These provisions include:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our ~~board~~Board of ~~directors,~~Directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our ~~board~~Board of ~~directors.~~Directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.

59Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation and our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (3) any action asserting a claim against us or any of our directors or officers or other employees arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate or our amended and restated bylaws; and/or (4) any action asserting a claim against us or any of our directors or officers or other employees governed by the internal affairs doctrine. The foregoing provisions do not apply to actions brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.

~~Item 1B. Unresolved Staff Comments~~These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive forum provision in our governing documents to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

~~None.~~Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

If we fail to maintain proper and effective internal controls, our ability to produce accurate consolidated financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of The Nasdaq Stock Market (“Nasdaq”). The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We have performed system and process evaluation and testing of our internal control over financial reporting to allow management to report annually on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. This has required and will require that we incur substantial professional fees and internal costs to augment our accounting and finance functions and that we expend significant management efforts as we continue to make this assessment and ensure maintenance of proper internal controls on an ongoing basis.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we fail to establish and maintain proper and effective internal control over financial reporting, we may not be able to produce timely and accurate consolidated financial statements, and our ability to accurately report our financial results could be adversely affected. If that were to happen, the market price of our stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

In addition, for so long as we remain a non-accelerated filer, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

As previously reported in our Annual Report on Form 10-K, filed with the SEC on March 30, 2023, John L. Lubniewski, our President and Chief Executive Officer, and Shaun D. McMeans, our Chief Financial Officer, elected to defer receipt of their annual performance bonus earned for 2022 until the earliest to occur of: (i) our company’s completion of a significant financing transaction or business development transaction with a significant upfront payment, as determined by our Board of Directors (“Board”); (ii) the determination by the Board that we have cash on hand that is estimated to be sufficient for at least nine months following the determination; (iii) the occurrence of a liquidation, bankruptcy, or similar events; (iv) the consummation of a transaction that rules in a change in control of our company, as that term is defined in our 2020 equity incentive plan; and (v) December 31, 2023. On May 8, 2023, we modified this arrangement to provide that such earned 2022 annual performance bonuses became payable no later than May 10, 2023.

* We have requested confidential treatment for certain portions of this agreement. Omitted portions have been filed separately with the SEC.+ Indicates management contract or compensatory plan.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	86-0912294
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3430 E. Global Loop Tucson, AZ	85706
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	HTGM	The Nasdaq Stock Market LLC


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
~~Non-accelerated filer~~	☐ ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☒

		Emerging growth company	☒☐


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022	3
	Condensed ~~Statement~~Consolidated Statements of Changes in Stockholders’ ~~Deficit~~Equity for the three months ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	2928
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6064
Item 5.	Other Information	6064
Item 6.	Exhibits	6065
Signatures		6367

2017	$	127,383
2018		512,533
2019		514,977
2020		517,457
2021		43,139
	$	1,715,489


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2023		2022
Assets	(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	9,047,401	$	7,507,659	$	2,996,409	$	12,210,857
Short-term investments available-for-sale, at fair value		—		4,304,901
Investments available-for-sale, at fair value						3,566,628		—
Accounts receivable		3,159,223		1,377,441		1,131,980		1,421,695
Inventory, net of allowance of $186,475 at September 30, 2017 and $270,307 at December 31, 2016		1,250,763		1,511,053
Inventory, net						654,917		909,328
Prepaid expenses and other		527,623		433,328		837,170		1,109,571
Total current assets		13,985,010		15,134,382		9,187,104		15,651,451

Deferred offering costs		—		49,630
Operating lease right-of-use assets						892,685		1,007,202
Property and equipment, net		3,255,438		3,270,197		528,527		598,006
Other non-current assets						257,312		520,996
Total assets	$	17,240,448	$	18,454,209	$	10,865,628	$	17,777,655

	Common Stock					Additional Paid-In			Treasury			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount			Capital			Stock			Loss			Deficit			Deficit
Balance at January 1, 2017		7,938,571	$	7,938		$	110,081,334		$	(75,000	)	$	(1,090	)	$	(115,606,044	)	$	(5,592,862	)
Exercise of stock options		41,815		42			165,219			—			—			—			165,261
Stock-based compensation expense		—		—			1,171,660			—			—			—			1,171,660
Vesting of restricted stock units		328,000		328			—			—			—			—			328
Stock issued under stock purchase plan		65,972		66			115,820			—			—			—			115,886
Issuance of common stock from ATM offering, net of issuance costs of $0.7 million		4,132,857		4,133			16,655,585			—			—			—			16,659,718
Retirement of treasury stock		—		(1	)		(74,999	)		75,000			—			—			—
Net loss		—		—			—			—			—			(17,038,022	)		(17,038,022	)
Unrealized gain on short and long-term investments		—		—			—			—			1,090						1,090
Balance at September 30, 2017		12,507,215	$	12,506		$	128,114,619		$	-		$	-		$	(132,644,066	)	$	(4,516,941	)


	Three Months Ended March 31, 2023
	Series A Convertible Preferred Stock				Common Stock					Additional Paid-In			Accumulated Other Comprehensive		Accumulated			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Income		Deficit			Equity
Balance at January 1, 2023		—	$	—		2,213,897		$	2,214	$	235,314,311		$	2,679	$	(229,927,507	)	$	5,391,697
Stock-based compensation expense		—		—		—			—		129,332			—		—			129,332
Release of restricted stock awards		—		—		312			—		—			—		—			—
Net share settlement of restricted stock awards		—		—		(54	)		—		(215	)		—		—			(215	)
Employee stock purchase plan expense		—		—		—			—		7,776			—		—			7,776
Issuance costs related to December 2022 Securities Purchase Agreement		—		—		—			—		(511	)		—		—			(511	)
Cash in lieu of fractional shares		—		—		(78	)		—		(640	)		—		—			(640	)
Net loss		—		—		—			—		—			—		(5,054,772	)		(5,054,772	)
Unrealized gain on investments and cash equivalents		—		—		—			—		—			1,055		—			1,055
Foreign currency translation adjustment		—		—		—			—		—			780		—			780
Balance at March 31, 2023		—	$	—		2,214,077		$	2,214	$	235,450,053		$	4,514	$	(234,982,279	)	$	474,502


	Three Months Ended March 31, 2022
	Series A Convertible Preferred Stock						Common Stock					Additional Paid-In			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares			Amount			Shares			Amount		Capital			Income (Loss)			Deficit			Equity
Balance at January 1, 2022		23,770		$	24			632,340		$	632	$	218,730,305		$	1,894		$	(208,333,031	)	$	10,399,824
Stock-based compensation expense		—			—			—			—		251,214			—			—			251,214
Release of restricted stock awards		—			—			346			—		—			—			—			—
Net share settlement of restricted stock awards		—			—			(126	)		—		(8,129	)		—			—			(8,129	)
Employee stock purchase plan expense		—			—			—			—		16,591			—			—			16,591
Issuance of common stock and pre-funded warrants from March 2022 Securities Purchase Agreement, net of issuance costs of $0.4 million		—			—			69,505			70		7,108,716			—			—			7,108,786
Conversion of Series A convertible preferred stock for common stock		(23,770	)		(24	)		13,206			13		11			—			—			—
Net loss		—			—			—			—		—			—			(6,497,519	)		(6,497,519	)
Foreign currency translation adjustment		—			—			—			—		—			(2,293	)		—			(2,293	)
Balance at March 31, 2022		—		$	—			715,271		$	715	$	226,098,708		$	(399	)	$	(214,830,550	)	$	11,268,474

	December 31, 2016
			Gross				Gross			Fair Value
	Amortized			Unrealized		Unrealized				(Net Carrying
	Cost			Gains		Losses				Amount)
U.S. Treasury securities	$	1,300,151	$		512	$		—		$	1,300,663
Corporate debt securities		3,005,840			—			(1,602	)		3,004,238
Total available-for-sale securities	$	4,305,991	$		512	$		(1,602	)	$	4,304,901

2017	$	1,649,008
2018		5,163,822
Total Growth Term Loan payments		6,812,830
Less discount and deferred financing costs		(103,738	)
Plus final fee premium		654,570
Total Growth Term Loan, net	$	7,363,662

2017	$	200,000
2018		400,000
2019		400,000
2020		400,000
2021		400,000
2022 and beyond		6,298,743
Total NuvoGen obligation payments		8,098,743
Less discount		71,117
Total NuvoGen obligation, net	$	8,169,860

	Restricted Stock Units (RSU)			Weighted- Average Grant Date Fair Value Per Share
Balance at December 31, 2016		355,499		$	2.41
Granted		10,000			1.75
Vested		(328,000	)		2.45
Forfeited		(2,500	)		2.46
Balance at September 30, 2017		34,999		$	1.91


	Three Months Ended March 31,						Change
	2023			2022			$			%
Product and product-related services revenue	$	1,032,510		$	1,184,454		$	(151,944	)		(13	%)
Operating expenses:
Cost of product and product-related services revenue		1,149,608			855,048			294,560			34	%
Selling, general and administrative		3,282,948			4,663,011			(1,380,063	)		(30	%)
Research and development		1,612,553			1,920,430			(307,877	)		(16	%)
Total operating expenses		6,045,109			7,438,489			(1,393,380	)		(19	%)
Operating loss		(5,012,599	)		(6,254,035	)		1,241,436			(20	%)
Other income (expense), net		(39,955	)		(243,098	)		203,143			(84	%)
Net loss before income taxes	$	(5,052,554	)	$	(6,497,133	)	$	1,444,579			(22	%)


Exhibit Number		Description

~~2.1~~3.1		Asset Purchase Agreement dated January 9, 2001, as amended by and between the Registrant, NuvoGen, L.L.C., Stephen Felder and Richard Kris (incorporated by reference to Exhibit 2.1 to the Registrant’s registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~3.1~~		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 12, 2015).

3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 19, 2020).

3.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation of HTG Molecular Diagnostics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File. No. 001-37369), filed with the SEC on December 20, 2022).

3.4		Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 12, 2015).

~~4.1~~3.5		Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on August 18, 2022).

4.1		Reference is made to Exhibits 3.1,3.2, 3.3, 3.4and ~~3.2.~~3.5.

4.2		Form of Common Stock Certificate of the Registrant (incorporated by reference to Exhibit ~~4.1 to~~4.2 of the Registrant’s Registration ~~Statement~~ on Form S-1 ~~as amended~~ (File No. ~~333-201313)~~333-268681), ~~originally~~ filed with the SEC on December ~~30, 2014).~~31, 2022.

4.3		Common Stock Warrant issued by the Registrant to the University of Arizona, dated March 13, 2009 (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.4~~		Series E Preferred Stock Warrant issued by the Registrant to Silicon Valley Bank, dated August 22, 2014 (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.5~~4.4		Series E Preferred Stock Warrant issued by the Registrant to Oxford Finance LLC, dated August 22, 2014 (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.6~~4.5		Form of Warrant issued by Registrant to bridge financing investors (incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.7~~		Form of Warrant issued by Registrant to bridge financing investors (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.8~~		Amended and Restated Investor Rights Agreement by and among the Registrant and certain of its stockholders, dated May 11, 2015 (incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-201313), originally filed with the SEC on December 30, 2014).

~~4.9~~		Common Stock Warrant issued by the Registrant to Oxford Finance LLC, dated March 28, 2016 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on ~~March 31,~~June 30, 2016).

~~4.10~~4.6		~~Subordinated Convertible Promissory Note,~~Warrant issued to MidCap Funding XXVIII Trust, dated ~~October~~March 26, ~~2017,~~2018 (incorporated by ~~and between~~reference to Exhibit 4.10 to the ~~Company and QIAGEN North American Holdings, Inc.~~Registrant’s Quarterly Report on Form 10-Q (File No. 001-37369), filed with the SEC on May 10, 2018).

4.7		Warrant to Purchase Common Stock, issued to Silicon Valley Bank on June 24, 2020 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on ~~October 27, 2017)~~June 25, 2020).

4.8		Form of Pre-Funded Warrant issued on March 21, 2022 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on March 21, 2022).

~~31.1~~4.9		Form of Common Stock Warrant (24-month term) issued on March 21, 2022 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on March 21, 2022).

4.10		Form of Common Stock Warrant (66-month term) issued on March 21, 2022 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on March 21, 2022).

4.11		Registration Rights Agreement, dated as of March 17, 2022 between the Registrant and the purchaser party thereto (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on March 21, 2022).

4.12		Form of Series A-1 Warrant to Purchase Common Stock, issued on December 23, 2022 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File. No. 001-37369), filed with the SEC on December 23, 2022).


4.13		Form of Series A-2 Warrant to Purchase Common Stock, issued on December 23, 2022 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File. No. 001-37369), filed with the SEC on December 23, 2022).

4.14		Form of Pre-funded Warrant to Purchase Common Stock, issued on December 23, 2022 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File. No. 001-37369), filed with the SEC on December 23, 2022).

4.15		Form of Placement Agent Warrant, issued on December 23, 2022 (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (File No. 001-37369), filed with the SEC on December 23, 2022).

31.1		Certification of ~~the~~ Principal Executive Officer ~~pursuant~~Pursuant to ~~Rule~~Rules 13a-14(a) orand 15d-14(a) ofunder the Securities Exchange Act of ~~1934.~~1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of ~~the~~ Principal Financial Officer ~~pursuant~~Pursuant to ~~Rule~~Rules 13a-14(a) orand 15d-14(a) ofunder the Securities Exchange Act of ~~1934.~~1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of ~~the~~ Principal Executive Officer ~~pursuant~~Pursuant to 18 ~~U.S.C~~U.S.C. Section 1350, as ~~adopted pursuant~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..

32.2		Certification of ~~the~~ Principal Financial Officer ~~pursuant~~Pursuant to 18 ~~U.S.C~~U.S.C. Section 1350, as ~~adopted pursuant~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Exhibit~~ ~~Number~~		~~Description~~

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


	HTG Molecular Diagnostics, Inc.

Date: ~~November 7, 2017~~May 10, 2023	By:	/s/ ~~Timothy B. Johnson~~John L. Lubniewski
		~~Timothy B. Johnson~~John L. Lubniewski
		President and Chief Executive Officer (Principal Executive Officer)

Date: ~~November 7, 2017~~May 10, 2023	By:	/s/ ~~Shaun D. McMeans~~Laura L. Godlewski
		~~Shaun D. McMeans~~Laura L. Godlewski
		~~Chief Financial Officer~~Senior Vice President of Finance and Administration (Principal ~~Financial and~~ Accounting Officer)