QSI US Equity☆

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2023

or

For the transition period fromto

Commission File Number: 001-39486

QUANTUM-SI INCORPORATED

(Exact name of registrant as specified in its charter)

29 Business Park Drive

Branford, Connecticut 06405

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (866) 688-7374

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbols(s) Name of each exchange on which registered

Class A common stock, $0.0001 per share QSI The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐

No ☒

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 every Interactive Data File required to be submitted 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 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.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing

reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of

the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the registrant’s voting and non-voting equity held by non-affiliates of the registrant (without admitting that any

person whose securities are not included in such calculation is an affiliate) computed by reference to the price at which the Class A common stock was last sold as of June 30, 2023, the last business day of the registrant’s most recently

completed second fiscal quarter, was approximately $179.3 million.

As of February 20, 2024, the registrant had 121,832,417

shares of Class A common stock outstanding and 19,937,500 shares of Class B common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Thefollowing documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required in Part III of this Annual Report on Form 10-K is incorporated by reference from the

Registrant’s Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

QUANTUM-SI INCORPORATED

FORM 10-K

For the fiscal year ended December 31, 2023

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements 3

Part I 6

Item 1. Business 6

Item 1A. Risk Factors 28

Item 1B. Unresolved Staff Comments 59

Item 1C. Cybersecurity 59

Item 2. Properties 60

Item 3. Legal Proceedings 60

Item 4. Mine Safety Disclosures 60

Item 6. [Reserved] 61

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71

Item 8. Financial Statements and Supplementary Data 72

Item 9A. Controls and Procedures 103

Item 9B. Other Information 103

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 104

Item 10. Directors, Executive Officers and Corporate Governance 104

Item 11. Executive Compensation 104

Item 14. Principal Accountant Fees and Services 104

Item 15. Exhibits and Financial Statement Schedules 105

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”), that relate to future events, our future operations or financial performance, or our plans, strategies and prospects. These statements are based on the beliefs and assumptions of

our management team. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure that we will achieve or realize these plans, intentions or

expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies,

events or performance, are forward-looking statements. The actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events.

Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such

words or expressions) are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expectations with respect to future performance and development and commercialization of products

and services. The forward-looking statements are based on projections prepared by, and are the responsibility of, management and involve significant risks and uncertainties that could cause the actual results to differ materially from those

discussed in the forward-looking statements. Most of these factors are outside our control and are difficult to predict. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:

• the impact of pandemics or epidemics on our business;

• changes in applicable laws or regulations;

• our ability to raise financing in the future;

• our ability to identify, in-license or acquire additional technology;

• our financial performance.

These forward-looking statements are based on information available as of the date of this report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and

uncertainties. Important factors could cause actual results, performance or achievements to differ materially from those indicated or implied by forward-looking statements such as those described in Part I, Item 1A, “Risk Factors” in this Annual

Report on Form 10-K as filed with the Securities and Exchange Commissions (the “SEC”). The risks described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such

risk factors, nor can we assess the impact of all such risk 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.

Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to us or persons acting on our behalf are

expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as

required by law.

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SUMMARY OF RISK FACTORS

We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage you

to carefully review the full risk factors contained in this Annual Report on Form 10-K in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and

uncertainties include, but are not limited to, the following:

References in the summary below to “we”, “us”, “our” the “Company” and “Quantum-Si” refer to Quantum-Si and its subsidiaries.

Risks Related to Our Financial Condition and Capital Requirements

Risks Related to Our Business and Industry

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Risks Related to Government Regulation

Risks Related to Our Intellectual Property

Risks Related to Our Securities and to Being a Public Company

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PART I

ITEM 1. BUSINESS

Overview

Prior to June 10, 2021, we were a blank check company, incorporated in Delaware, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase,

reorganization or similar business combination with one or more businesses. On June 10, 2021, we completed a business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement dated February 18, 2021

(the “Business Combination Agreement”), by and among HighCape Capital Acquisition LLC (“HighCape”), Tenet Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Quantum-Si Incorporated, a Delaware corporation (“Legacy Quantum-Si”).

Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (the “Closing”), Merger Sub merged with and into Legacy Quantum-Si, with Legacy Quantum-Si surviving the

Business Combination as a wholly owned subsidiary of HighCape. In connection with the Closing, HighCape changed its name to “Quantum-Si Incorporated” (the parent company) and Legacy Quantum-Si changed its name to “Q-SI Operations Inc.” (a

wholly-owned subsidiary of Quantum-Si Incorporated).

We are an innovative life sciences company with the mission of transforming single-molecule analysis and democratizing its use by providing researchers and clinicians access to the proteome, the

set of proteins expressed within a cell. We have developed a proprietary universal single-molecule detection platform that we are first applying to proteomics to enable Next-Generation Protein SequencingTM (“NGPS”), to sequence proteins in a massively parallel fashion (rather than sequentially, one at a time), which can also be used for the study of nucleic acids. We believe that the ability to

sequence proteins in a massively parallel fashion and offer a simplified workflow with a faster turnaround time provides NGPS with the potential to unlock significant biological information through improved resolution and unbiased access to the

proteome at a speed and scale that is not available today. Traditionally, proteomic workflows to sequence proteins required days or weeks to complete. Our platform, as originally planned, was designed to offer an end-to-end workflow including

both sample preparation and sequencing and was comprised of CarbonTM, our automated sample preparation instrument, our Platinum® NGPS instrument, the Platinum Analysis Software service, and reagent kits and proprietary semiconductor chips for use with our Platinum® instrument. In 2021, we introduced our Platinum® early access program to sites with participation from leading academic centers

and key industry partners. The early access program introduced the Platinum® single-molecule sequencing system to key opinion leaders across the globe for both

expansion and development of applications and workflows. We began a controlled launch of the Platinum® instrument and started to take orders in December 2022, and

subsequently began limited commercial shipments of Platinum® in January 2023.

Since our initial launch of the Platinum® instrument, we have found that, consistent with other proteomics

detection technologies, customers select the biological sample type and sample preparation method they use. The range of sample types and sample preparation methods utilized in proteomics is extensive and often some level of optimization is

required to make them compatible with the downstream detection technology. Our initial platform contemplated CarbonTM as an automated sample preparation

instrument. While CarbonTM could help reduce sample preparation variation and streamline the end-to-end workflow in utilizing our Platinum®protein sequencing instrument, it is not an absolute requirement, and may not be

the best solution long-term. To this end, in October 2023, we completed an evaluation of CarbonTM as it relates to the workflow and in comparison to other

potential liquid handler and sample preparation solutions. This evaluation concluded that pursuing efforts to continue development of CarbonTM was not the most

effective use of our research and development efforts. As a result, we paused development related to CarbonTM to focus efforts on Platinum®, our reagent kits and semiconductor chips for use on Platinum®, and our Platinum

Analysis Software environment as our go forward platform to maximize value.

Now that our Platinum® and Platinum Analysis Software service have launched, we intend to follow a systematic,

phased approach to continue to successfully launch updates to our platform. We believe we are the first company to successfully enable NGPS on a semiconductor chip, thus digitizing a massive proteomics opportunity, which allows for a vast

parallel solution at the ultimate level of sensitivity -single-molecule detection.

We believe that our platform offers a differentiated workflow solution in a rapidly evolving proteomics tools market. Within our initial focus market of proteomics, our workflow is designed to

provide users a seamless opportunity to gain key insights into the immediate state of biological pathways and cell state. Our platform aims to address many of the key challenges and bottlenecks with legacy proteomic solutions, such as mass

spectrometry (“MS”), which include high instrument costs both in terms of acquisition and ownership, and complexity with data analysis, which together limit broad adoption. We believe our platform, which is designed to streamline sequencing and

data analysis at a lower instrument cost and with greater automation than legacy proteomic solutions, could allow our product to have wide utility across the study of the proteome. For example, our platform could be used for biomarker discovery

and disease detection, pathway analysis, immune response, vaccine development, quality assurance and quality control, among other applications.

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According to SVB Leerink Research, proteomics represented a $75 billion market opportunity spanning from life science research through diagnostics in 2021. Within this, proteomics research represented $20 billion,

while proteomic diagnostics and personalized medicine represented the remaining $55 billion. Within the $20 billion current addressable target market, we are focusing on an initial target market of approximately $8 billion that includes protein

identification (approximately $3 billion), protein expression and quantification (approximately $3 billion) and proteoforms and post translational modifications (approximately $1.5 billion).

Our team has decades of cumulative experience in developing, commercializing and scaling tools in the life sciences industry. Our management team has previously employed similar approaches at other

companies to launch other disruptive technologies, including market leading next generation DNA sequencing technologies. We believe this experience will allow us to introduce our platform in a structured manner to demonstrate its use, value and

practicality, while working directly with our key customers, to help ensure a positive experience.

We were founded in 2013 by Dr. Jonathan Rothberg, a serial entrepreneur who received the Presidential Medal of Technology & Innovation in 2016 for inventing next generation DNA sequencing. Dr.

Rothberg has founded more than 10 healthcare technology companies, including 454 Life Sciences, Ion Torrent, Hyperfine and Butterfly Network. We received net proceeds of $512.8 million from the Closing of the Business Combination in 2021 to help

support our platform development.

We began a controlled launch of Platinum® in December 2022, operated under this controlled commercial launch in 2023

and anticipate a full commercial launch in early 2024. Revenue for the year ended December 31, 2023 was $1.1 million. There was no revenue for years ended December 31, 2022 and 2021. We incurred net losses of $96.0 million, $132.4 million and

$95.0 million for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.

Importance of Proteomics

Central Dogma of Biology

The central dogma of biology describes the flow of information within a cell, first originating with information encoded as deoxyribonucleic acid (“DNA”), subsequent transcription to ribonucleic

acid (“RNA”), and ultimate translation to proteins. While our genomes contain approximately 20,000 genes, current estimates are that these genes ultimately code for more than 1,000,000 different protein variants called proteoforms. Thus, the

majority of diversity that exists in our cells comes from proteins. Proteins are organic compounds made up of amino acids. Aside from water, the majority of the molecules in our bodies are comprised of proteins. They are found throughout the body

and play a central role in the body’s biological processes, from the immune system response, signalizing pathways to transporting oxygen molecules and providing our cells with structure. Proteins or a group of interacting proteins are responsible

for virtually every biological function within a living organism. Unlike the genome, the proteome is in constant flux depending on the state of the cell. However, even with the knowledge of the proteome’s influence, the proteome remains largely

unexplored relative to the genome. Over the past decades, genomics has ushered in a greater understanding of human biology and disease through the decoding of the human genome, providing a greater understanding of the genes that lay out the

instructions for the function, development and reproduction of organisms. While genomics has allowed the interrogation of genetic variation, protein variants hold information yet to be explored or connected to the network of genomic knowledge to

better understand cellular function and disease. The protein’s elaborate structure, complicated composition, and vast number of variants, provide a dynamic look into the functions they provide. For example, proteins function as antibodies that

bind to specific particles like viruses to protect the body; they act as enzymes to carry out chemical reactions in cells; they act as messengers like hormones to transmit signals; they exist as structural components; and form the basis for

storage to carry additional molecules throughout the body.

Proteomic discovery provides insight into what is immediately happening biologically. This insight may be based on both genetic and environmental factors that influence protein structure and

function. Given their dynamic nature, proteins, while complex structures, are an excellent indicator that we believe can be used to track therapeutic response, disease progression and a person’s overall health. In a sense, DNA tells us “what

could happen” and proteins tell us “what is happening.”

Proteomics tools have been broadly used across a wide range of applications, including:

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Legacy Proteomic Technologies

There is higher diversity and level of complexity related to proteins than genes. Depending on the combination of genes, specific proteins are built to perform specialized functions in the body. A

single gene can encode multiple proteoforms depending on the role the protein will ultimately play in the cell. Protein synthesis happens in two stages. First is transcription, where DNA is converted into messenger RNA. Second is translation,

where a cell’s ribosomes read the RNA instructions to assemble the protein. An increase in the complexity of the proteome is facilitated by post translational modifications (“PTMs”) where pieces of the protein are modified to either activate or

inactivate the protein as part of a signaling pathway to localize the protein to a certain cellular compartment. Legacy proteomic techniques can be grouped into various lower-plex and higher-plex methods to better analyze complex proteins:

Limitations of Legacy Proteomic Techniques

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Our Market Opportunity

The proteomic market is dynamic and includes legacy solutions and new entrants all aiming to become market leaders. The proteomics market is less concentrated, with no single technology dominating

the majority of the market.

Proteomics is an emerging research area and highly fragmented with numerous technologies that address a variety of points along a typical protein analysis workflow, such as sample preparation,

analysis, target number, dynamic range and sample throughput.

Proteomics Landscape

Our protein sequencing platform is currently intended for RUO applications, and most potential future use of our products for clinical use would require regulatory authorization. Many technologies

across these segments are decades old with limitations that have prevented broad spread adoption of proteomics research. We believe our products and technologies have the potential to provide users across life sciences research market access to

the proteome in a simple, cost effective, unbiased, and scalable manner.

Today, legacy proteomics users generally rely on MS for high throughput protein characterization. Typical MS workflows are disaggregated, expensive, and require significant training to perform,

which ultimately limits access to specialty facilities or core MS labs. A primary mission of our technology platform is to provide broad access to proteomics tools across academic research labs, core labs, and biopharma R&D labs. Our price

point and simplicity of workflow are designed to attract users who seek to replace a legacy technology or are entering the proteomics market as new customers. Some of our potential customers may have an existing MS system but may choose our

products to supplement their system. Some users may wish to add proteomics analysis capacity, particularly for low throughput needs. We believe these customers value the speed, data driven analytical insights, deeper insights, affordability, and

simplicity we expect our platform to provide to them.

Additionally, we believe that our proteomics platform may appeal to existing users of DNA sequencing technologies to directly augment their research and discovery of biomarkers and further deepen

their understanding of biology. We believe our benchtop proteomics instruments will allow genomics users the ability to pursue multi-omic approaches to tackle basic and applied research questions.

Further, we expect users within the analyte testing segment to adopt our technologies for a variety of clinical research and translational applications. The analyte testing market comprises multiple

technologies ranging from basic enzyme-linked immunosorbent assay (“ELISA”) tests for interrogating a small number of targets to more complex, high throughput protein analyzers. Successful technologies for use in broad clinical testing generally

require specificity and sensitivity as well as the ability to scale to reliably meet volume demand. Developed to be a true single molecule detection platform, our products are designed to achieve the highest level of resolution for sensitivity by

sequencing information at the individual amino acid level, and therefore the specificity to meet the requirements of clinical testing, if our products are ultimately authorized for such use. In addition, because our technology utilizes

semiconductor chip technology and is positioned to make use of the supply chain and fabrication of the semiconductor industry, our platform has the potential to scale to meet demand on a global scale.

Our Products

We have designed and developed a hardware, consumable and software solution to provide a solution for protein detection and analysis.

Collectively, we believe our products provide a comprehensive and flexible platform. We believe that our universal unbiased single molecule detection platform will enable a proteomics solution at an

affordable cost and provide users the opportunity to perform proteomics studies. Our launched product consists of Platinum®, the Platinum Analysis Software and

consumables. We believe we are the first company to successfully enable NGPS for a scalable and parallel solution at the level of single molecule sensitivity.

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Our Launch Platform Consists of Platinum®, Platinum Analysis Software and Consumables

Platinum® - Single Molecule Detection Instrument

Our flagship protein sequencing instrument, Platinum®, is designed to make the power of single-molecule detection and

NGPS broadly accessible. While traditional instruments like mass spectrometers may cost anywhere from $250,000 to over $1,000,000 per new instrument, our Platinum®

device is currently priced at approximately $85,000. Platinum® is designed to provide a streamlined rapid workflow compared to legacy MS workflows. Platinum® uses our proprietary semiconductor chip that leverages Time-Domain SequencingTM with an initial focus on NGPS for an unbiased view of the proteome. We believe the

nature of the sequencing readout could enable users to answer three key questions:

Our semiconductor chip is the core of our technology. By leveraging developments in the semiconductor industry, we are developing our scalable single-molecule next-generation protein sequencer. Our

semiconductor chip is produced in standard semiconductor foundries and is designed to provide insight into biology. The power of our approach is that rather than analyzing proteins one at a time, our semiconductor chip is designed to enable

parallel sequencing across millions of independent chambers, and for the number of parallel sequencing reactions to be rapidly scalable. Each independent sequencing reaction takes place at the ultimate level of sensitivity and specificity, single

molecules, which is critical to protein detection because there is no way to amplify protein, preventing existing amplification-based technologies to enable protein sequencing.

Pictured above: An Individual Semiconductor Chip

Our team has considerable experience in the complex fabrication processes for semiconductor chips and has successfully utilized semiconductor chips to advance next-generation sequencing (“NGS”)

previously at other companies. We have developed and optimized processes with the third-party foundry that supplies our wafers, allowing us to manufacture integrated semiconductor chips using standard foundry processes with sufficient and

scalable performance for our commercial needs and customer demand. We believe our proprietary semiconductor chip is a core component in our ability to scale. Our current research and development focus includes expanding the capabilities of our

current semiconductor chip through manufacturing technology improvements and enhancements in chemistry.

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In November 2021, we acquired Majelac Technologies LLC (“Majelac”), a semiconductor assembly company based in Garnet Valley, Pennsylvania. The acquisition brought our semiconductor microchip

assembly capabilities in-house in order to secure our supply chain and support our commercialization efforts.

Consumables for Use in Platinum®

We expect to derive recurring revenue from the sale of consumables that are required to run samples through the Platinum® instrument.

Consumables consist of our reagent kits and semiconductor chips and are designed for use only with our instruments.

Platinum Analysis Software

Our Platinum Analysis Softwareplatform is designed to integrate a cloud-based solution into the instrument to

provide data to the cloud where analytical workflows can then interpret the data. Our Platinum Analysis Software solution is designed to map peptide sequences to proteins and facilitate the required counting for protein identification and

quantitation in the cloud.

We are also developing our cloud-based solution to include the following features:

• User management for secured data access; and

• Light-weight library information management system for data management.

We believe our Platinum Analysis Software solution is designed to address the key needs of researchers today and includes a solution for potential bottlenecks that might otherwise limit customer

satisfaction and routine use of our instruments.

Time-Domain SequencingTM and Next Generation Protein Sequencing

Within proteins it is widely accepted there are there are 20 naturally occurring amino acids. Technologies that use color alone to detect amino acids would not be able to scale to that number of

characters. Our proprietary semiconductor chip is designed to use time, instead of color, to detect amino acids. We combine time with intensity and single-molecule kinetics to capture three dimensions of data. We expect that three dimensions of

data will enable us to cover all 20 amino acids.

The core of our proprietary detection method, which we refer to as Time-Domain SequencingTM, is based on the fluorescence lifetime of dyes. Fluorescence lifetime is a measure of the time a

fluorophore dye spends in the excited state before returning to the ground state by emitting a photon of light. Different dyes emit photons of light at different rates that follow a known distribution.

Example Photon Emission Distribution of a Dye After Excitation

Our Platinum® instrument includes a proprietary mode-locked laser, which provides the excitation light pulse, and our

semiconductor chip allows us to reject the laser light and then rapidly collect, bin and measure the arrival time of emitted photons of a fluorescently labeled molecule. By binning and measuring the arrival times of photons we can then calculate

the fluorescence lifetime, which can be used as a surrogate for the wavelength/color measurements. By using time instead of color to analyze proteins, we can leverage semiconductors’ ability to measure time.

For NGPS, we fluorescently label recognizer molecules, which are designed to bind to the terminal end of a peptide (piece of a protein) that has been immobilized to the bottom of the reaction

chamber. A single recognizer is capable of uniquely identifying more than one amino acid. Our technology is designed to accurately determine the recognizer by leveraging the fluorescent lifetime and intensity of the dye. We believe our technology

can accurately identify the amino acid by measuring the on and off rate (kinetic information) of a recognizer as it interacts with the terminal amino acid tens to hundreds of times.

After removing the terminal amino acid, the recognition process repeats until the full peptide chain is sequenced. While traditional single-molecule platforms rely on single measurement for the

detection of an event, the advantage of our approach is that our technology can obtain tens to hundreds of data points for each amino acid. Cumulatively, we expect the multiple measurements to deliver high amino acid call accuracy.

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Overview of the Protein Sequencing Process

Our Competitive Strengths

We believe that our competitive strengths include the following:

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Our Strategies

Our strategies include the following:

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Commercial Strategy

Our proprietary platform has been specifically designed to provide deeper insights into the proteome at various scales. Our workflow solution is comprised of our Platinum® instrument, consumables, and software and has been designed at a favorable price point relative to legacy technologies to promote easy adoption, while simplifying

and automating the single molecule proteomics workflow. Our commercial strategy is designed to place our instruments initially with a wide variety of customer types, and ultimately to improve our products by increasing throughput and developing

additional applications to expand our users and increase the consumable utilization by our installed base. We began a controlled launch of the Platinum® instrument

and started to take orders in December 2022, and subsequently began commercial shipments of Platinum® in January 2023.

Now that our Platinum® and Platinum Analysis Software system has launched, we intend to follow a systematic, phased

approach to continue to successfully launch updates to our platform. We believe we are the first company to successfully enable NGPS on a semiconductor chip, thus digitizing a massive proteomics opportunity, which allows for a massively

parallel solution at the ultimate level of sensitivity - single-molecule detection.

As we continue to commercialize our platform, we plan to build out our commercial operations infrastructure necessary to sell and support our platform, across a growing number of market segments and

geographies. We are focusing our direct sales and marketing efforts primarily on principal investigators, directors, and other core personnel at academic research and biopharma labs that are critical to their organization’s buying decisions,

primarily in the United States. In addition, we intend to launch a combined direct and distributor approach in Europe, and opportunistic sales in the rest of the world.

Members of our team have previously successfully utilized this approach to launch other disruptive technologies at other companies. We believe this approach will allow us to introduce our platform

in a structured manner to demonstrate its use and practicality, while working directly with key potential customers to help ensure a positive experience. Our core leadership team has decades of experience working directly in the life sciences

industry with many of the companies and research centers that have the potential to become key customers and we expect to build into our prospective customer pipeline.

Our commercial launch plan is comprised of the following phases following beta testing in product development:

Product Roadmap

Our product roadmap is designed to position us as a potential leader in the proteomic analysis market. We plan to continue to improve our platform through hardware, chemistry and data analysis

related product improvements. Hardware improvement may include enhancements to the existing technology as well as development of next-generation technologies that introduce new platform architectures and could include onboard analysis

capabilities. Chemistry-related improvements will likely include iterations of our library preparation and sequencing kits, which will allow for greater coverage, enhanced throughput, deeper insights and broader sample types capabilities.

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Now that we have launched Platinum®, we are focused on building our installed base and expanding global access to our

platform. We expect to make product enhancements to our initial platform and to make them available to our new and then existing customers. Potential improvements could include an increase in the capacity of our semiconductor chips or chemistry

enhancements to our instruments, which may improve accuracy, coverage, and speed.

In addition to potential future advancements in hardware, we plan to expand our computational capabilities by developing software enhancements and data analytics tools. We believe that our software

solution could be a key differentiating advantage relative to legacy systems. We believe the integration of our Platinum Analysis Software solution directly into the platform can ensure seamless data streaming to the cloud where analytical

workflows can help simplify data interpretation.

Through this product roadmap, we have the potential to become a leader in the proteomic analysis market, with the mission of transforming single molecule analysis and democratizing its use by

directly enabling researchers and clinicians access to the proteome. We believe we are the first company to successfully enable NGPS on a semiconductor chip, thus digitizing a substantial proteomics opportunity, which allows for a massively

parallel solution at the ultimate level of sensitivity - single molecule detection.

Suppliers and Manufacturing

Our products are built using both custom-made and off-the-shelf components supplied by outside manufacturers and vendors located in Asia, Europe, and the United States. One key custom-made component

is the disposable semiconductor chip. Others include the proprietary mode-locked laser and enzymes, recognizers and buffers used for protein sequencing. The majority of other components for the instruments are off-the-shelf.

We purchase some of our components and materials used in manufacturing, including the underlying wafers for our semiconductor chip as well as other critical manufacturing steps, from single source

suppliers. We believe that alternatives would be available; however, it will likely take a significant amount of time to identify and validate replacement components, which could negatively affect our ability to supply our products on a timely

basis. To mitigate this future risk, we and our third-party contractors attempt to carry a significant inventory of our critical components. However, any transaction disruptions in these suppliers and potential associated ramp up time of a new

supplier would result in a supply disruption that could impact our business.

Our Platinum® instrument is developed and designed by us, but has historically been manufactured by a third party manufacturing

partner. In November 2023 we began a process of transitioning the manufacturing of our Platinum® instrument to a new provider. This transition is expected to be

completed in 2024. We currently anticipate that this transition will be executed within our expected timeline and will not result in any impact to our business. However, this transition is complex, involves qualifying and onboarding suppliers,

technology transfer activities, and other key work streams to ensure an effective and timely ramp up of production. Overall, we believe that our manufacturing strategy is efficient and conserves capital. However, we do not have long-term supply

or manufacturing commitments from our suppliers or manufacturers, as our products and components are currently supplied on a purchase order basis. In addition, we will need to increase the supply and manufacturing of our products as we continue

to grow. If we are unable to begin manufacturing at these new contract manufacturers in a timely fashion, it will affect our ability to produce Platinum® instruments

which would harm our research and development efforts and commercial operations. In the event that it becomes necessary to utilize a different contract manufacturer or suppliers for our products, now or in the future, we may experience additional

costs, delays and difficulties in doing so, and our business could be harmed.

Certain processes related to our semiconductor chip technology are developed by us, but manufactured by a third-party partner. Currently, we are in the process of transitioning these activities to a new partner.

Though this partner has produced some completed wafers with surface coatings that are usable, this process is not completed or optimized for long-term production. We do have a limited supply of completed semiconductor chip safety stock that

addresses near term commercial and development needs, but will need to complete certain further steps of this transition before we have a sustainable process, and, even then, further steps will be required to optimize the process for the highest

yield and lowest cost supply. We are targeting the completion of a sustainable process in mid-2024, and a long-term optimized process sometime in the first half of 2025. However, transitioning these processes could take more time than anticipated

and may ultimately prove to be unsuccessful. If we are unable to begin consistently manufacturing our semiconductor chip surface coating process at this new contract manufacturer in a timely fashion, it will affect our ability to supply

semiconductor chips, affecting our ability to complete development activities that allow us to improve the Platinum® instrument throughput, and ultimately harm our

ability to deliver consumable sequencing kits to our customers, both of which would harm our research and development efforts and commercial operations.

In November 2021, we acquired Majelac, a semiconductor packaging company based in Garnet Valley, Pennsylvania. The acquisition brought our semiconductor chip assembly capabilities in-house to

simplify our supply chain and support our commercialization efforts.

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Human Capital Management

Our people are the reason for our success, and we have structured our organization to maximize productivity and performance. Our future success largely depends upon our continued ability to attract

and retain highly-skilled employees.As of December 31, 2023, we employed 159 full-time employees in the United States and six full-time employees internationally with the majority of our employees engaged

directly in research and development, and are actively building our commercial organization as demand increases; 39% of whom hold PhDs. In addition, we utilize Professional Employment Organizations to provide labor for certain key activities

outside the United States, which we consider part of our workforce. None of our employees are covered by collective bargaining agreements. We understand that our success depends on our highly talented employees, and our human capital management

practices focus on attracting and retaining a diverse and engaged workforce.

Mission and Core Values. Our mission is to put the groundbreaking power of protein sequencing in the hands of every scientist, every lab, everywhere. We are

committed to pioneering a new generation of technology to democratize protein sequencing so that scientists can generate deeper insights faster. Employees are made aware of our values - Embrace Change, Stand Up, Speak Up, Never Settle, and

Succeed Together. These values are the basis of our actions and decisions.

Diversity, Equity and Inclusion. Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all

levels. We believe that our business benefits from the different perspectives a diverse workforce brings, and we strive to maintain a strong, inclusive and positive culture based on our shared mission and values.

We believe in attracting, developing, and retaining diverse talent that is inclusive of every age, gender, gender identity, race, sexual orientation, physical capability, ethnicity, belief and

perspective. Each individual, regardless of their role makes a difference and impacts our progress. We continue to focus on seeking diverse candidates for all open opportunities.

Employee Engagement. We have established an annual employee survey process to gather feedback from our employees. The feedback received allows us to grow

stronger as a company and allows us to create an environment where employee contributions matter and employees feel valued.

Training and Development. We listen to our employees to understand their training needs. Employees are encouraged to take advantage of our training platform

which has a plethora of online learning courses. We conduct monthly seminars to update employees on what is happening throughout our Company.

Compensation and Benefits. Healthcare technology companies, both large and small compete for a limited number of qualified applicants to fill specialized

positions. To attract qualified applicants and retain employees, we offer a total rewards package consisting of base salary, cash bonus, and equity compensation. Bonus opportunity and equity compensation increase as a percentage of total

compensation based on level of responsibility. The actual bonus payout is based on performance. In addition, we also provide a comprehensive benefits package inclusive of medical, dental, and vision healthcare coverage including a paid

reimbursement account, life insurance and disability coverage, 401(k) investment plans, tax advantaged savings account, generous paid time off and leaves of absence, employee assistance programs, and wellness programs.

Employee Health and Safety. We have training programs for general, chemical and biological safety. We are continuously evaluating the guidance from federal

and local authorities and have created strict policies and guidelines that put our employees’ health and safety first.

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Information About Our Executive Officers and Directors

The following persons were our executive officers and directors as of February 29, 2024:

Name Position

Executive Officers

Jeffrey Hawkins President, Chief Executive Officer and Director

Jeffry Keyes Chief Financial Officer and Treasurer

Grace Johnston, Ph.D. Chief Commercial Officer

Christian LaPointe, Ph.D. General Counsel and Corporate Secretary

Directors

Jonathan M. Rothberg, Ph.D. Chairman of the Board of Directors

Amir Jafri Chief Executive Officer, Immunicom Inc.

John Patrick Kenny Independent Director, Bioamerica, Inc.

Scott Mendel Director, Akoya Bioscience, Inc. and Visby Medical, Inc.

Kevin Rakin Co-Founder and Partner, HighCape Capital

Competition

We face significant competition in the life sciences technology market. We currently compete with life sciences technology and the diagnostic companies that are supplying components, products and

services that serve customers engaged in proteomics analysis. These companies include Agilent Technologies, Bio-Rad Laboratories, Danaher, Luminex, Merck KGaA (and its subsidiary MilliporeSigma) and Thermo Fisher Scientific.

We also may compete with a number of emerging growth companies that have developed, or are developing, proteomic products and solutions, such as Nautilus Biotechnology, Olink Proteomics, Quanterix,

Seer and Standard BioTools. In addition, there are a number of privately-held entities working on similar technologies as ours.

We believe there are currently no commercially available NGPS platforms beyond our Platinum® system. The legacy

proteomics market today is largely served by companies that offer a variety of analytical instruments, such as MS and microarray instruments and associated reagents and consumables. There are also a number of companies that provide proteomic

analysis services and have developed or are developing novel proteomic technologies. Additional competing products may emerge from various sources, including life sciences tools, diagnostics, pharmaceutical and biotechnology companies,

third-party service providers, academic research institutions, governmental agencies and/or public and private research institutions, among others. Many of the companies with which we compete have substantially greater resources than we have.

The life science instrumentation industry is highly competitive and expected to grow more competitive with the increasing knowledge gained from ongoing research and development. Given the potential

market opportunity and scientific importance of proteomic analysis, we expect increased competition and competitor technologies to emerge in the future. We believe the principal competitive factors in our target markets include:

• resolution and sensitivity;

• cost of instruments and consumables;

• efficiency and speed of workflows;

• throughput to meet lab testing volume;

• reputation among customers and key thought leaders;

• innovation in product offerings;

• accuracy and reproducibility of results;

• strength of intellectual property portfolio;

• operational and manufacturing footprint;

• customer support infrastructure; and

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We believe that there are currently no other commercially available products that provide the same level of analysis at the same scale and sensitivity that we expect our platform will provide.

Following our commercial launch for RUO, we aim to enhance our position through our ongoing product development, commercial strategy, potential new products and ongoing collaborations and partnerships with key thought leaders.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patents, trademark, copyright, trade secret and other intellectual property rights

protection and contractual restrictions to protect our proprietary technologies.

Patented Technologies

The patents owned and in-licensed by us provide comprehensive coverage of our sample preparation, peptide sequencing and nucleic acid sequencing devices and are directed to aspects including sample

preparation, instrument and laser light source architecture, pixel design, waveguide architecture, lifetime discrimination methods, machine learning, and surface chemistry. We have developed a portfolio of issued patents and pending patent

applications directed to commercial products and technologies for potential development. We believe that our intellectual property is a core strength of our business, and our strategy includes the continued development of our patent portfolio.

Patent Portfolio

As of December 31, 2023, we owned 293 issued patents and 666 pending patent applications. Of our 293 issued patents, 81 were issued U.S. utility patents. Of our 666 pending patent applications, 120

were pending U.S. utility patent applications, 9 of which were allowed. In addition, we owned 212 issued patents in foreign jurisdictions, including Australia, Brazil, China, Europe, Hong Kong, India, Japan, Korea, Mexico, and Taiwan, and 546

pending patent applications in foreign jurisdictions, including Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand, 16 of which were allowed. In total, we owned 118 patent

families generally directed to our sample preparation, peptide sequencing and nucleic acid sequencing devices. These issued patents and pending patent applications (if they were to issue as patents) have expected expiration dates ranging between

2025 and 2043.

Trademark Portfolio

We also protect important marks through trademark registrations. As of December 31, 2023, we owned 56 trademark registrations and 44 trademark applications, of which 13 are U.S. trademark

applications. Four of the U.S. trademark applications have been allowed.

Other Intellectual Property

In addition to patents, we also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. We seek to protect our proprietary information

and other intellectual property by generally requiring our employees, consultants, contractors, suppliers, outside scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements on commencement of

their employment or engagement. Agreements with our employees also forbid them from using or incorporating the proprietary rights of third parties during their engagement with us.

We also generally require confidentiality or material transfer agreements from third parties that receive our confidential data or materials.

Licensed Intellectual Property

We have entered into exclusive and non-exclusive licenses in the ordinary course of business relating to our technologies or other intellectual property rights or assets.

Government Regulation

Life Sciences Research Use Only Technologies

Our protein sequencing products are currently intended for RUO applications, although the systems may provide data to customers and other third parties that are themselves engaged in the research

and development of potential diagnostic and therapeutic products and services for which they may later pursue clearance, authorization or approval from regulatory authorities, such as the U.S. Food and Drug Administration (“FDA”). All our

products are labeled “For Research Use Only,” and will be sold to academic and research life sciences institutions that conduct basic and translational research, and biopharmaceutical and biotechnology companies for non-diagnostic and

non-clinical purposes.

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Under a long-standing FDA regulation, products that are intended for RUO and are labeled as RUO are not regulated by the FDA as in vitro diagnostic (“IVD”) devices and are not subject to the

regulatory requirements discussed below for clinical diagnostic products. RUO products may therefore be used or distributed for research use without first obtaining FDA clearance, authorization, or approval. Such products must bear the statement:

“For Research Use Only. Not for Use in Diagnostic Procedures.” RUO products also cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended for human clinical diagnostic use.

Accordingly, a product labeled RUO but intended or promoted for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the Federal Food, Drug, and Cosmetic Act (“FDCA”)

and subject to FDA enforcement action. The FDA will consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed and to whom, when determining its intended use. If the FDA

disagrees with a company’s RUO status for its product, the company may be subject to FDA enforcement activities, including, without limitation, requiring the company to seek clearance, authorization or approval for the product.

Clinical Diagnostics in the United States

In the United States, medical devices are subject to extensive regulation by the FDA under the FDCA and its implementing regulations, and other federal and state statutes and regulations. The laws

and regulations govern, among other things, medical device design and development, non-clinical and clinical testing, pre-market clearance, authorization or approval, establishment registration and product listing, product manufacturing, product

packaging and labeling, product storage, advertising and promotion, product distribution, recalls and field actions, servicing and post-market clinical surveillance. A number of U.S. states also impose licensing and compliance regimes on

companies that manufacture or distribute prescription devices into or within the state.

The Federal Trade Commission (“FTC”) also oversees the advertising and promotion of our current and future products pursuant to its broad authority to police deceptive advertising for goods or

services within the United States. Under the Federal Trade Commission Act, the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce; (b) seek

monetary redress and other relief for conduct injurious to consumers; and (c) gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce. In the

context of performance claims for products, compliance with the FTC Act includes ensuring that there is scientific data to substantiate the claims being made, that the advertising is neither false nor misleading, and that any user testimonials or

endorsements disseminated related to the goods or services comply with disclosure and other regulatory requirements. In addition, with respect to products that are marketed as in vitro diagnostic or

clinical products, FDA’s regulations applicable to medical device products prohibit them from being promoted for uses not within the scope of a given product’s intended use(s), among other promotional and labeling rules applicable to products

subject to the FDCA.

If a product is marketed for clinical or diagnostic uses, it will be regulated by the FDA as an IVD medical devices. The FDCA and FDA’s implementing regulations define a medical device as an

instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in

the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes

through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes. IVDs are a type of medical device and include reagents and

instruments used in the diagnosis or detection of diseases, conditions or infections, including, without limitation, the presence of certain chemicals, genetic information or other biomarkers. Predictive, prognostic, and screening tests can also

be IVDs. Medical devices, including IVD products, must undergo pre-market review by and receive clearance, authorization, or approval from the FDA prior to commercialization, unless the device is of a type exempted from such review by statute,

regulation, or an FDA exercise of enforcement discretion. The FDA classifies medical devices into three classes based on risk. Regulatory control increases from Class I (lowest risk) to Class III (highest risk). The FDA generally must clear or

approve the commercial sale of most new medical devices that fall within product categories designated as Class II and III. Commercial sales of most Class II and III medical devices within the United States must be preceded either by pre-market

notification and FDA clearance pursuant to Section 510(k) of the FDCA (Class II) or by the granting of a pre-market approval (“PMA”) (Class III), after a pre-market application is submitted. Both 510(k) notifications and PMA applications must be

submitted to FDA with significant user fees, although reduced fees for small businesses are available. Class I devices are generally exempt from pre-market review and notification, as are some moderate-risk Class II devices. Manufacturers of all

classes of devices must comply with FDA’s Quality System Regulation (“QSR”), establishment registration, medical device listing, labeling requirements, and medical device reporting (“MDR”) regulations, which are collectively referred to as

medical device general controls. Class II devices may also be subject to special controls such as performance standards, post-market surveillance, FDA guidelines, or particularized labeling. Some Class I and Class II devices may be exempted by

regulation from the requirement of compliance with substantially all of the QSR.

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Moreover, as electronic and digital medical devices have become increasingly connected to the Internet, hospital networks, and other medical devices to provide features that improve health care and

patient accessibility, FDA and other regulatory authorities have recognized that those same features also increase the risk of cybersecurity threats. These types of medical devices may be vulnerable to cybersecurity incidents that could

potentially impact the safety and effectiveness of the device, and we, as device manufacturers are responsible for identifying cybersecurity risks and hazards associated with our products. In recent years, the FDA has increased its scrutiny of

this issue as part of the review and marketing authorization process for new medical devices; the agency also monitors reports of cybersecurity incidents as part of its post-marketing device surveillance activities. In addition, as part of the

Consolidated Appropriations Act for 2023, signed into law on December 29, 2022 (P.L. 117-328), Congress created new pre-market requirements for developers of “cyber devices,” defined as medical devices that include software, connect to the

Internet, and contain any technological features that could be vulnerable to cybersecurity threats.

510(k) Clearance Pathway

A 510(k) pre-market notification must contain information sufficient to demonstrate that the new device is substantially equivalent to a device commercially distributed prior to May 28, 1976 or to a

device that has been determined by the FDA to be substantially equivalent to such a so-called “pre-amendments” device. To obtain 510(k) clearance for a non-exempt Class II device, the product developer must submit a pre-market notification to the

FDA demonstrating that its product is substantially equivalent to such a predicate device. The FDA’s 510(k) clearance process generally takes from three to twelve months from the date the application is submitted, but it may take significantly

longer if FDA has significant questions or needs more information about the new device or its manufacturing or quality controls.

As part of the 510(k) notification process for Class II devices that have an existing classification regulation available for purposes of the regulatory filing, the FDA may require the following:

• Development of comprehensive product description and indications for use.

Assuming successful completion of all required testing, a detailed 510(k) notification is submitted to the FDA requesting clearance to market the product. This pre-market notification includes all

relevant data from pertinent nonclinical studies and clinical trials (if applicable), together with detailed information relating to the product’s manufacturing controls and proposed labeling, and other relevant documentation. The FDA evaluates

all 510(k) submissions prior to filing for substantive review based on specific acceptance criteria and may issue a refuse-to-accept notification if the submission is deficient with respect to any of the established criteria. If the FDA

determines that the applicant’s device is substantially equivalent to the identified predicate device(s), the agency will issue a 510(k) clearance letter that authorizes commercial marketing of the device for one or more specific indications for

use. If the FDA determines that the applicant’s device is not substantially equivalent to the predicate device(s), the agency will issue a not-substantially-equivalent letter stating that the new device may not be commercially distributed.

After a new medical device receives 510(k) clearance from the FDA, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its

intended use, requires a new 510(k) clearance or could require the submission of a PMA. The FDA requires each manufacturer to make the determination of whether a device modification requires a new 510(k) notification or PMA in the first instance,

but the FDA may review any such decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k) clearance or PMA for a particular change, the FDA may retroactively require the manufacturer to submit a 510(k) pre-market

notification or a PMA. The FDA may also require the manufacturer to cease U.S. marketing and/or recall the modified device until 510(k) clearance or PMA approval for the modification is obtained.

De Novo Classification

If a previously unclassified new medical device does not qualify for the 510(k) pre-market notification process because no predicate device to which it is substantially equivalent can be identified,

the device is automatically classified into Class III. However, if such a device would be considered low or moderate risk (in other words, it does not rise to the level of requiring the approval of a PMA), it may be eligible for the De Novo

classification process. The De Novo classification process allows a device developer to request that the novel medical device be reclassified as either a Class I or Class II device, rather than having it regulated as a high-risk Class III device

subject to the PMA requirements. If the manufacturer seeks reclassification into Class II, the classification request must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and

effectiveness of the medical device.

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Under the FDCA, the FDA is required to classify a device within 120 days following receipt of the De Novo classification request from an applicant; however, the most recent FDA performance review

goals state that the FDA will attempt to issue a decision within 150 days of receipt on 70% of all De Novo classification requests received during the year. De Novo classification requests are subject to user fees, unless a specific exemption

applies (over $145,000 in fiscal year 2024).

As with the 510(k) pre-market notification process described above, any modification to a device authorized through the De Novo process that could significantly affect the safety or effectiveness of

such device, or that would constitute a major change in its intended use, requires a new 510(k) clearance or could require the submission of a PMA.

As an alternative to the De Novo classification process, a company could also file a reclassification petition seeking to change the automatic Class III designation of a novel post-amendment device

under Section 513(f)(3) of the FDCA. The FDA can also initiate reclassification of an existing device type on its own initiative. To reclassify a device under Section 513(e) of the FDCA, the FDA must first publish a proposed reclassification

order that includes a summary of the valid scientific evidence that supports the reclassification; convene a device classification panel meeting; and consider comments to the public docket before it then publishes a final reclassification order

in the Federal Register.

Pre-market Approval Pathway

Products classified by the FDA as Class III generally require marketing approval via a PMA. A PMA application must be supported by valid scientific evidence, which typically requires extensive data,

including technical, nonclinical, clinical, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use(s). A PMA application also must include a complete description of the

device and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and proposed labeling. After a PMA application is submitted and found to be sufficiently complete, it is considered “filed”

and the FDA begins an in-depth review of the submitted information. During this substantive review period, the FDA may request additional information or clarification of information already provided. Also, during the review period, an advisory

panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA. In addition, the FDA generally will conduct a pre-approval inspection of the manufacturing facility to evaluate

compliance with the QSR, which requires manufacturers to implement and follow design, testing, control, documentation and other quality assurance procedures.

FDA review of a PMA application is required to be completed within 180 days of the application’s filing date although the process generally takes between one and three years, but may take

significantly longer. The current user fee agreement between the FDA and the medical device industry sets as a target for PMA reviews to be completed in under one year. The FDA can delay, limit or deny approval of a PMA application for many

reasons, including:

If an FDA evaluation of a PMA application or manufacturing facilities is favorable, the FDA will either issue an approval letter, or approvable letter, which usually contains a number of conditions

which must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of a device, subject to

the conditions of approval and the limitations established in the approval letter. If the FDA’s evaluation of a PMA application or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter.

The FDA may also determine that additional trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an

amendment to the PMA. The PMA process can be expensive, uncertain and lengthy. PMA approval may also be granted with post-approval requirements such as the need for additional patient follow-up for an indefinite period of time.

New PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling, device specifications, materials or design of a device that is approved through the

PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA

application and may or may not require as extensive clinical data or the convening of an advisory panel.

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Clinical Investigations Using Devices in Development

Clinical trials are almost always required to support a PMA application and are sometimes required for a De Novo classification request or 510(k) pre-market notification. In order to conduct a

clinical investigation involving human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, an investigator acting on behalf of the company must, among other things, apply for and obtain Institutional Review

Board (“IRB”) approval of the proposed investigation. In addition, if the clinical study involves a “significant risk” (as defined by the FDA) to human health, the company sponsoring the investigation (referred to as the “sponsor”) must also

submit and obtain FDA approval of an Investigational Device Exemption (“IDE”) application. An IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in

humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of study participants, unless the product is deemed a non-significant risk device and eligible for

abbreviated IDE requirements. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by a duly-constituted IRB for each clinical

trial site. Most clinical studies of IVDs are exempt from the IDE requirements, if certain requirements are met.

FDA’s IDE regulations govern investigational device labeling, prohibit promotion, and specify an array of Good Clinical Practice, or GCP, requirements, which include, among other things,

recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. Clinical trials must further comply with the FDA’s regulations for IRB approval and for informed consent and other human subject protections.

Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable or, even if the intended safety and efficacy success criteria are achieved, may not be considered sufficient for the FDA to

grant approval or clearance of a product.

The Consolidated Appropriations Act for 2023 also recently amended the FDCA to require sponsors of most clinical studies of investigational medical devices intended to support marketing

authorization to develop and submit a diversity action plan for such clinical trial. The action plan must include the sponsor’s diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet

them. Depending on the type of medical device investigation, such diversity action plans would be submitted with the sponsor’s IDE application or with the device’s pre-market submission (in the case of human studies that may be IDE exempt). It is

unknown at this time how the diversity action plan may affect the planning and timing of medical device investigations or what specific information FDA will expect in such plans, but if FDA objects to a sponsor’s diversity action plan, it may

delay trial initiation or review of the pre-market submission.

The commencement or completion of any clinical trials may be delayed or halted, or be inadequate to support approval of a PMA application (or FDA’s grant of a De Novo classification request or

clearance of a 510(k) notification, as applicable), for numerous reasons, including, but not limited to, the following:

• participants do not enroll in clinical trials at the expected rate;

• participants do not comply with trial protocols;

• participant follow-up is not at the expected rate;

• participants experience adverse side effects;

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Ongoing Post-Market Regulatory Requirements and FDA Enforcement

After a medical device is authorized for marketing and placed in commercial distribution (or, for 510(k)-exempt products, placed into commerce without first obtaining FDA clearance or approval),

numerous regulatory requirements apply. These general controls that must be met for all device classes include:

• establishment registration and device listing;

To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA and certain

state authorities. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may lead to any of the following sanctions:

• Warning Letters or Untitled Letters that require corrective action;

• fines and civil penalties;

• unanticipated expenditures;

• suspension or withdrawal of FDA approval or clearance (as may be applicable);

• product recall or seizure;

• partial suspension or total shutdown of production;

• operating restrictions;

• injunctions or consent decrees; and

• civil or criminal prosecution.

A company, any contract manufacturers, and some suppliers of components or device accessories would also be required to manufacture medical device products in compliance with current Good

Manufacturing Practice requirements set forth in the QSR, unless explicitly exempted by regulation, should we develop and seek regulatory authorization for one or more diagnostic intended uses for our products. The QSR requires a quality system

for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and

handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping. The FDA recently issued a final rule that

amends its implementing regulations in order to harmonize the QSR with ISO 13485:2016; the rule changes will become effective on February 2, 2026. Although the harmonization process is not expected to have a significant impact on the quality

system compliance operations of device manufacturers because most requirements described in the QSR correspond to requirements set forth in ISO 13485:2016, device manufacturers will likely need to revise certain quality system procedures to

ensure compliance with the harmonized regulations. Any failure to make such revisions or adapt to the harmonized regulations, once they become effective, may result in observations of non-compliance during facility inspections by the FDA or

comparable regulatory authorities.

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The FDA evaluates compliance with the QSR, as well as other applicable device regulatory requirements, through periodic pre-scheduled or unannounced inspections that may include registered

manufacturing facilities. Following such inspections, FDA may issue reports known as Forms FDA 483 or Notices of Inspectional Observations, which list instances where the FDA inspector believes the manufacturer has failed to comply with

applicable regulations and/or procedures. If the observations are sufficiently serious or the manufacturer fails to respond appropriately, the FDA may issue Warning Letters, which are notices of intended enforcement actions against the

manufacturer. For less serious violations that may not rise to the level of regulatory significance, FDA may issue Untitled Letters. The FDA may take more significant administrative or legal action if a manufacturer continues to be in substantial

noncompliance with applicable regulations.

For example, if the FDA believes a medical device developer or any of its contract manufacturers or regulated suppliers are not in compliance with these requirements and patients are being subjected

to serious risks, the agency can shut down manufacturing operations, require recalls of medical device products, refuse to approve new marketing applications for future products, initiate legal proceedings to detain or seize products, enjoin

future violations, or assess civil and criminal penalties against a manufacturer or its officers or other employees.

U.S. Fraud and Abuse Laws and Other Compliance Requirements

Successfully commercializing a medical device or technology depends not on only FDA authorization, but also on broad health insurance or third party payor coverage. Government and private payors

institute coverage criteria to ensure the appropriate utilization of products and services and to control costs. Limited third party payor coverage for a technology or procedure may limit adoption and commercial viability, while broader coverage

supports optimal market uptake. Favorable coverage decisions by government payors like Medicare or Medicaid is critical because private payors typically follow the government’s lead regarding reimbursement. However, manufacturers whose technology

is reimbursed by government payors are subject to various U.S. federal and state laws pertaining to healthcare fraud and abuse. These laws can be implicated by inappropriate sales and marketing arrangements with healthcare providers. Many

commonly accepted commercial practices are illegal in the healthcare industry and violations of these laws are punishable by criminal and civil sanctions, including, in some instances, exclusion from participation in U.S. federal and state

healthcare programs, including Medicare and Medicaid.

Anti-kickback Laws. The federal Anti-Kickback Statute (“AKS”) prohibits persons from knowingly and willfully soliciting, receiving, offering or paying

remuneration directly or indirectly to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal healthcare program such as Medicare and

Medicaid. A person or entity does not need to have actual knowledge of the AKS or specific intent to violate it to have committed a violation. Certain arrangements are protected from enforcement through AKS safe harbors and exceptions, but an

arrangement must meet every element of the applicable safe harbor or exception in order to obtain this protection. The fact that an arrangement does not meet the requirements of a safe harbor or exception does not mean that it violates the AKS;

such arrangements would be subject to a facts and circumstances analysis to determine compliance with the AKS or lack thereof. The definition of “remuneration” has been broadly interpreted to include anything of value, including such items as

gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments, and providing anything at less than its fair market value. The AKS is broadly interpreted and aggressively enforced with the result that

beneficial commercial arrangements can be criminalized in the health care industry because of the AKS. The penalties for violating the federal AKS can be severe, include fines and imprisonment for up to ten years, as well as possible exclusion

from federal healthcare programs such as Medicare and Medicaid. Additionally, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the False Claims Act.

Federal False Claims Act. The federal False Claims Act (“FCA”) prohibits knowingly presenting or causing to be presented a false claim or the knowing use of

false statements or records to obtain payment from the federal government. The FCA also prohibits the knowing retention of overpayments (sometimes referred to as “reverse false claims”). When an entity is determined to have violated the FCA, it

must pay three times the actual damages sustained by the government, plus mandatory and substantial civil penalties for each separate false claim. The entity also faces the possibility of exclusion from federal health care programs. Suits filed

under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals (known as “relators” or, more commonly, as “whistleblowers”) may share in any amounts paid by the entity to

the government in fines or settlement.

Civil Monetary Penalties Law. The Civil Monetary Penalties Law (“CMPL”) authorizes the imposition of substantial civil money penalties and the possibility of

exclusion against an entity that engages in certain prohibited activities including but not limited to violations of the Stark Law or Anti-Kickback Statute, knowing submission of a false or fraudulent claim, employment of an excluded individual,

and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know is likely to influence beneficiary selection of a particular provider for which payment may be made in whole or

part by a federal health care program, commonly known as the Beneficiary Inducement CMP.

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Table of Contents

State Analogs of Federal Fraud and Abuse Laws. Many U.S. states have their own laws intended to protect against fraud and abuse in the health care industry

and more broadly. In some cases, these laws prohibit or regulate additional conduct beyond what federal law affects. Penalties for violating these laws can range from fines to criminal sanctions.

HIPAA. The Health Insurance Portability and Accountability Act of 1996, as amended by the American Recovery and Reinvestment Act of 2009, and implementing

regulations (“HIPAA”), created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit

program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits knowingly and willfully falsifying,