10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

or

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

For the transition period from             to            

Commission File Number: 001-34753

GenMark Diagnostics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	27-2053069
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5964 La Place Court Carlsbad, California	92008-8829
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: 760-448-4300

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

Title of each class	Trading  Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	GNMK	The NASDAQ Stock Market LLC

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  x    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).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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:

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Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
Emerging growth company	¨

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

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. ¨

The number of outstanding shares of the registrant’s common stock on October 31, 2019 was 58,080,388.

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GENMARK DIAGNOSTICS, INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46

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PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

	September 30, 2019			December 31, 2018
ASSETS:
Current Assets:
Cash and cash equivalents	$	24,308		$	36,286
Short-term marketable securities	8,879			8,882
Accounts receivable, net of allowances of $131 and $75, respectively	10,448			11,534
Inventories, net	12,570			10,244
Prepaid expenses and other current assets	2,071			1,483
Total current assets	58,276			68,429
Property and equipment, net	18,863			21,070
Intangible assets, net	1,580			2,023
Restricted cash	758			758
Noncurrent operating lease right-of-use assets	4,766			—
Other long-term assets	809			701
Total assets	$	85,052		$	92,981
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	10,007		$	9,886
Accrued compensation	7,720			7,358
Current operating lease liability	1,828			—
Other current liabilities	2,089			3,043
Total current liabilities	21,644			20,287
Deferred rent	—			2,996
Long-term debt	48,720			36,042
Noncurrent operating lease liability	6,071			—
Other noncurrent liabilities	55			109
Total liabilities	76,490			59,434
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000 authorized, none issued	—			—
Common stock, $0.0001 par value; 100,000 authorized; 58,044 and 56,240 shares issued and outstanding, respectively	6			6
Additional paid-in capital	512,451			500,344
Accumulated deficit	(503,946		)	(466,883		)
Accumulated other comprehensive income	51			80
Total stockholders’ equity	8,562			33,547
Total liabilities and stockholders’ equity	$	85,052		$	92,981

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue:
Product revenue	$	20,822		$	15,713		$	60,413		$	51,156
License and other revenue	96			82			412			225
Total revenue	20,918			15,795			60,825			51,381
Cost of revenue	13,868			10,165			41,339			37,172
Gross profit	7,050			5,630			19,486			14,209
Operating expenses:
Sales and marketing	6,279			5,375			17,991			15,964
General and administrative	4,765			4,718			14,217			13,398
Research and development	6,294			6,105			20,386			22,007
Total operating expenses	17,338			16,198			52,594			51,369
Loss from operations	(10,288		)	(10,568		)	(33,108		)	(37,160		)
Other income (expense):
Interest income	126			188			438			577
Interest expense	(1,527		)	(661		)	(4,331		)	(2,246		)
Other income (expense)	(19		)	53			(34		)	(49		)
Total other income (expense)	(1,420		)	(420		)	(3,927		)	(1,718		)
Loss before provision for income taxes	(11,708		)	(10,988		)	(37,035		)	(38,878		)
Income tax (benefit) expense	(33		)	5			28			59
Net loss	$	(11,675	)	$	(10,993	)	$	(37,063	)	$	(38,937	)
Net loss per share, basic and diluted	$	(0.20	)	$	(0.20	)	$	(0.65	)	$	(0.70	)
Weighted average number of shares outstanding, basic and diluted	57,718			55,847			57,161			55,535
Other comprehensive loss:
Net loss	$	(11,675	)	$	(10,993	)	$	(37,063	)	$	(38,937	)
Other comprehensive income/(loss):
Foreign currency translation adjustments, net of tax	(46		)	(51		)	(37		)	(31		)
Net unrealized gains on marketable securities, net of tax	—			4			8			27
Total other comprehensive income	(46		)	(47		)	(29		)	(4		)
Total comprehensive loss	$	(11,721	)	$	(11,040	)	$	(37,092	)	$	(38,941	)

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine Months Ended   September 30,
	2019			2018
Operating activities:
Net loss	$	(37,063	)	$	(38,937	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,393			5,281
Net accretion of premiums/discounts on investments	(134		)	(110		)
Amortization of deferred debt issuance costs	1,266			725
Stock-based compensation	8,840			8,895
Provision for bad debt	93			24
Non-cash inventory adjustments	1,653			1,061
Other non-cash adjustments	175			(62		)
Changes in operating assets and liabilities:
Accounts receivable	993			797
Inventories	(5,471		)	(3,847		)
Prepaid expenses and other assets	(857		)	384
Accounts payable	345			(3,408		)
Accrued compensation	(406		)	1,053
Other current and non-current liabilities	(398		)	(756		)
Net cash used in operating activities	(25,571		)	(28,900		)
Investing activities:
Purchases of property and equipment	(1,193		)	(1,060		)
Purchases of marketable securities	(26,735		)	(28,785		)
Maturities of marketable securities	26,880			56,500
Net cash (used in) provided by investing activities	(1,048		)	26,655
Financing activities:
Proceeds from issuance of common stock, net of offering costs	2,837			535
Principal repayment of borrowings	(35,070		)	(68		)
Proceeds from borrowings	50,000			—
Payments associated with debt issuance	(3,588		)	(20		)
Proceeds from stock option exercises	432			22
Net cash provided by financing activities	14,611			469
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	30			27
Net decrease in cash, cash equivalents, and restricted cash	(11,978		)	(1,749		)
Cash, cash equivalents, and restricted cash at beginning of year	37,044			27,512
Cash, cash equivalents, and restricted cash at end of period	$	25,066		$	25,763
Non-cash investing and financing activities:
Transfer of systems to property and equipment from inventory	$	1,492		$	2,477
Property and equipment included in accounts payable	$	147		$	746
Supplemental cash flow information:
Cash paid for income taxes, net	$	85		$	133
Cash paid for interest	$	2,890		$	1,517

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

(In thousands)

	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
	Shares	Par Value
Balance—June 30, 2019	57,430	6		506,949		97			(492,271		)	14,781
Stock-based compensation expense	—	—		3,129		—			—			3,129
Restricted stock awards issued, net of cancellations	219	—		—		—			—			—
Shares issued under stock-based compensation plans	3	—		—		—			—			—
Net loss	—	—		—		—			(11,675		)	(11,675		)
Issuance of common stock, net of offering costs	392	—		2,373		—			—			2,373
Foreign currency translation adjustments	—	—		—		(46		)	—			(46		)
Balance—September 30, 2019	58,044	$	6	$	512,451	$	51		$	(503,946	)	$	8,562

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

(In thousands)

	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
	Shares	Par Value
Balance—June 30, 2018	55,753	6		493,921		51			(444,329		)	49,649
Stock-based compensation expense	—	—		3,096		—			—			3,096
Restricted stock awards issued, net of cancellations	202	—		—		—			—			—
Shares issued under stock-based compensation plans	—	—		1		—			—			1
Net loss	—	—		—		—			(10,993		)	(10,993		)
Foreign currency translation adjustments	—	—		—		(51		)	—			(51		)
Unrealized gain on marketable securities	—	—		—		4			—			4
Balance—September 30, 2018	55,955	$	6	$	497,018	$	4		$	(455,322	)	$	41,706

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(In thousands)

	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
	Shares	Par Value
Balance—December 31, 2018	56,240	6		500,344		80			(466,883		)	33,547
Stock-based compensation expense	—	—		8,840		—			—			8,840
Issuance of employee stock purchase plan shares	105	—		464		—			—			464
Restricted stock awards issued, net of cancellations	1,233	—		—		—			—			—
Shares issued under stock-based compensation plans	74	—		430		—			—			430
Net loss	—	—		—		—			(37,063		)	(37,063		)
Issuance of common stock, net of offering costs	392	—		2,373		—			—			2,373
Foreign currency translation adjustments	—	—		—		(37		)	—			(37		)
Unrealized gain on marketable securities	—	—		—		8			—			8
Balance—September 30, 2019	58,044	$	6	$	512,451	$	51		$	(503,946	)	$	8,562

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(In thousands)

	Common Stock			Additional paid-in capital		Accumulated other comprehensive loss			Accumulated deficit			Total stockholders' equity
	Shares	Par Value
Balance—December 31, 2017	55,066	6		487,525		8			(416,385		)	71,154
Stock-based compensation expense	—	—		8,895		—			—			8,895
Issuance of employee stock purchase plan shares	134	—		535		—			—			535
Restricted stock awards issued, net of cancellations	750	—		—		—			—			—
Shares issued under stock-based compensation plans	5	—		23		—			—			23
Net loss	—	—		—		—			(38,937		)	(38,937		)
Reimbursement of offering costs	—	—		40		—			—			40
Foreign currency translation adjustments	—	—		—		(31		)	—			(31		)
Unrealized gain on marketable securities	—	—		—		27			—			27
Balance—September 30, 2018	55,955	$	6	$	497,018	$	4		$	(455,322	)	$	41,706

See accompanying notes to unaudited condensed consolidated financial statements.

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GENMARK DIAGNOSTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

GenMark Diagnostics, Inc., the Company or GenMark, was formed by Osmetech plc as a Delaware corporation in February 2010, and had no operations prior to its initial public offering, which was completed in June 2010. The Company is a provider of multiplex molecular diagnostic solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and applicable regulations of the U.S. Securities and Exchange Commission, or the SEC, and should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 25, 2019. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for the full year or any future period.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The Company has experienced net losses and negative cash flows from operating activities since its inception and had an accumulated deficit of $503,946,000 as of September 30, 2019. The Company's ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure through expanding its product offerings and consequently increasing its product revenues. As of September 30, 2019, the Company had available cash, cash equivalents, and marketable securities of $33,187,000 and working capital of $36,632,000 available to fund future operations. The Company has prepared cash flow forecasts which indicate, based on the Company's current cash resources available and working capital, that the Company will have sufficient resources to fund its operations for at least one year after the date the financial statements are issued.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes thereto. The Company’s significant estimates included in the preparation of the financial statements are related to accounts receivable, inventories, property and equipment, leases, intangible assets, employee-related compensation accruals, warranty liabilities, tax valuation accounts, and stock-based compensation. Actual results could differ from those estimates.

In June 2019, the Company changed its estimate of the forfeiture rate used to determine stock-based compensation expense based upon recent employment history. The change in forfeiture rate resulted in an additional $174,000 in stock-based compensation expense.

Segment Information

The Company currently operates in one reportable business segment, which encompasses the development, manufacturing, sales and support of instruments and molecular tests based on its proprietary eSensor® detection technology. Substantially all of the Company’s operations and assets are in the United States.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or the FASB, or other standard setting bodies that the Company adopts as of the specified effective date.

In June 2018, the FASB issued Accounting Standards Update, or ASU, 2018-07, Compensation - Stock Compensation (Topic 718), which simplifies the accounting for non-employee share-based payment transactions. The new standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 (including interim periods within that fiscal year), with early adoption permitted. The Company adopted this new standard in the second quarter of 2018 and determined its application did not have a material impact on the Company's unaudited condensed consolidated financial statements.

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In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new methodology for recognizing credit losses on financial instruments. The new standard requires entities to measure financial instruments at their amortized cost basis net of an allowance for credit losses. The allowance for credit losses must reflect an entity's current estimate of all expected credit losses. The new guidance also requires entities to present credit losses on debt securities accounted for under the available-for-sale method as an allowance rather than a write down. The new guidance must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented and is effective for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of this standard on its unaudited consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the prior lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use, or ROU, assets for all leases with lease terms of greater than 12 months. The guidance also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and is effective for annual periods beginning after December 15, 2018. The Company adopted the new standard in the first quarter of 2019 using the package of transition practical expedients. The Company recognized non-current ROU assets of $5,097,000 and current and non-current lease liabilities of $1,780,000 and $6,832,000, respectively, upon adoption. Deferred rent is now presented as an offset to the Company's non-current operating lease ROU assets. The new lease standard did not have a material impact on the Company's unaudited condensed consolidated statements of operations, cash flows, or stockholders' equity.

Revenue

The Company recognizes revenue from operations through the sale of products and other services. Product revenue comprises the sale of diagnostic tests and instruments, as well as related services.

Revenue is recognized when control of products and services is transferred to the customer in an amount that reflects the consideration that the Company expects to receive from the customer in exchange for those products and services. This process involves identifying the contract with the customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when it determines there are no uncertainties regarding payment terms or transfer of control.

Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue from instrument services is recognized as the services are rendered, typically evenly over the contract term.

Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general, and administrative expenses when incurred or amortized over the estimated contract term when resulting from new contract acquisition efforts.

The Company allocates contract price to each performance obligation in proportion to its stand-alone selling price. The stand-alone selling price is determined by the Company's best estimate of stand-alone selling price using average selling prices over a rolling 12-month period along with a specific assessment of any unique circumstances of the contract. For those products for which there is limited sales history, the Company makes price determinations based on similar product sales data.

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The following table represents disaggregated revenue by source (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Revenue Source:
ePlex product revenue	$	13,365	$	6,743	$	41,051	$	25,757
XT-8 product revenue	7,457		8,970		19,362		25,399
Total product revenue	20,822		15,713		60,413		51,156
License and other revenue	96		82		412		225
Total revenue	$	20,918	$	15,795	$	60,825	$	51,381

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash on deposit with banks, money market instruments, and certificates of deposit with original maturities of three months or less at the date of purchase. Marketable securities consist of certificates of deposits that mature in greater than three months. Marketable securities are accounted for as "available-for-sale" with the carrying amounts reported in the balance sheets stated at cost, which approximates their fair market value, with unrealized gains and losses, if any, reported as a separate component of stockholders' equity and included in comprehensive loss.

Restricted Cash

Restricted cash represents amounts designated for uses other than current operations and was $758,000 as of both September 30, 2019 and December 31, 2018, which represented an amount held as security for the Company’s letter of credit with Banc of California.

The following table shows a reconciliation of the Company's cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheet to cash, cash equivalents, and restricted cash in the Unaudited Condensed Consolidated Statement of Cash Flows as of September 30, 2019 and 2018 (in thousands):

	September 30,
	2019	2018
Cash and cash equivalents	24,308	25,005
Restricted cash	758	758
Total cash, cash equivalents, and restricted cash	25,066	25,763

Receivables

Accounts receivable consist of amounts due to the Company for sales to customers and are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based on an assessment of the collectability of specific customer accounts, the aging of accounts receivable, and a reserve for unknown items based upon the Company’s historical experience.

Product Warranties

The Company generally offers a one-year warranty for its instruments sold to customers and typically up to a sixty-day warranty for consumables. Factors that affect the Company’s warranty reserves include the number of units sold, historical and anticipated rates of warranty repairs, and the cost per repair. The Company periodically assesses the adequacy of its warranty reserve and adjusts the amount as appropriate.

Intangible Assets

Intangible assets consist of licenses or sublicenses to technology covered by patents owned by third parties, and are amortized on a straight-line basis over the expected useful lives of these assets, which is generally ten years. Amortization of licenses typically begins upon the Company obtaining access to the licensed technology and is recorded in cost of revenues for licenses supporting commercialized products. The amortization of licenses to technology supporting products in development is recorded in research and development expenses.

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Impairment of Long-Lived Assets

The Company assesses the recoverability of long-lived assets, including intangible assets, by periodically evaluating the carrying value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If impairment is indicated, the Company writes down the carrying value of the asset to its estimated fair value. This fair value is primarily determined based on estimated discounted cash flows.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and include direct labor, materials, and manufacturing overhead. The Company periodically reviews inventory for evidence of slow-moving or obsolete parts, and writes inventory down to net realizable value, as needed. This write-down is based on management’s review of inventories on hand, compared to estimated future usage and sales, shelf-life assumptions, and assumptions about the likelihood of obsolescence. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not reversed subsequently to income, even if circumstances later suggest that increased carrying amounts are recoverable.

Property and Equipment, net

Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are identified below. Repair and maintenance costs are expensed as incurred.

Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	3 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in the consolidated balance sheets as noncurrent operating lease ROU assets and current and noncurrent operating lease liabilities. Finance leases are recorded in the consolidated balance sheets as other current assets and liabilities and other non-current assets and liabilities.

ROU assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at the commencement date based on the present value of the Company’s lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of its lease payments. ROU assets are recognized at the commencement date based upon the initial measurement of the operating lease liability less any lease incentives received.

The Company’s lease agreements can include both lease and non-lease components. The Company accounts for each lease component separately from the non-lease components within its lease agreements.

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Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. A full valuation allowance has been recorded against the Company’s net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the future. The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. The Company recognizes accrued interest related to uncertain tax positions as a component of income tax expense.

A tax position that is more likely than not to be realized is measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority that has full knowledge of all relevant information. Measurement of a tax position that meets the more likely than not threshold considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the reporting date.

2. Net Loss per Common Share

Basic net loss per share is calculated by dividing loss available to stockholders of the Company's common stock (the numerator) by the weighted average number of shares of the Company's common stock outstanding during the period (the denominator). Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted loss per share is calculated in a similar way to basic loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if the dilutive potential shares had been issued, unless the effect would be anti-dilutive.

The calculations of diluted net loss per share for each of the nine months ended September 30, 2019 and 2018 did not include the effects of the following stock options and other equity awards which were outstanding as of the end of each period because the inclusion of these securities would have been anti-dilutive (in thousands):

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2019	2018	2019	2018
Options outstanding to purchase common stock	2,052	2,445	2,052	2,445
Other unvested equity awards	3,635	3,466	3,635	3,466
Total	5,687	5,911	5,687	5,911

3. Stock-Based Compensation

Equity awards may be granted at the discretion of the Compensation Committee of the Board of Directors under the Company's 2010 Equity Incentive Plan, as amended, or the 2010 Plan, in connection with the hiring or retention of personnel and are subject to certain conditions. The Company recognizes stock-based compensation expense related to stock options, restricted stock units, and market-based stock units granted to employees, directors and non-employee advisors in exchange for services under the 2010 Plan, and employee stock purchases under the Company's Amended and Restated 2013 Employee Stock Purchase Plan, or the ESPP. Employee participation in the 2010 Plan is at the discretion of the Compensation Committee of the Board of Directors of the Company. Each equity award grant reduces the number of shares available for grant under the 2010 Plan. Stock-based compensation expense is recorded in cost of sales, sales and marketing, research and development, and/or general and administrative expenses based on the employee's respective function. During the nine months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $8,840,000 and $8,895,000, respectively. The Company recognized stock-based compensation expense of $3,129,000 and $3,096,000, respectively, during the three months ended September 30, 2019 and 2018.

Stock Options

The fair value of stock options granted is derived from the Black-Scholes Option Pricing Model, which uses several judgment-based variables to calculate the expense. The inputs include the expected term of the stock option, the expected volatility, and other factors.

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• Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding and is determined by using the simplified method.

• Expected Volatility. Expected volatility represents the estimated volatility in the Company’s stock price over the expected term of the stock option and is determined by review of the Company’s and similar companies’ historical experience.

• Expected Dividend. The Black-Scholes Option Pricing Model calls for a single expected dividend yield as an input. The Company has assumed no dividends as it has never paid dividends and has no current plans to do so.

• Risk-Free Interest Rate. The risk-free interest rate used in the Black-Scholes Option Pricing Model is based on published U.S. Treasury rates in effect at the time of grant for periods corresponding with the expected term of the option.

All stock options granted under the 2010 Plan are exercisable at a per share price equal to the closing quoted market price of a share of the Company’s common stock on the NASDAQ Global Market on the grant date and generally vest over a period of four years. Stock options are generally exercisable for a period of up to ten years after grant and are typically forfeited if employment is terminated before the options vest.

The Company's stock option activity for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2018	2,439,914		$	9.57
Granted	—		$	—
Exercised	(114,883	)	$	5.99
Cancelled	(273,414	)	$	11.56
Outstanding at September 30, 2019	2,051,617		$	9.51
Vested and expected to vest at September 30, 2019	2,051,617		$	9.51
Exercisable at September 30, 2019	2,051,617		$	9.51

Options that were exercisable as of September 30, 2019 had a remaining weighted average contractual term of 3.50 years, and an aggregate intrinsic value of $759,000. As of September 30, 2019, there were 2,051,617 stock options outstanding, which had a remaining weighted average contractual term of 3.50 years and an aggregate intrinsic value of $759,000. No stock options were granted during the nine months ended September 30, 2019.

Restricted Stock Units

Restricted stock units granted under the 2010 Plan generally vest over a period of between one and four years and are typically forfeited if service to the Company ceases before the restricted stock units vest. The compensation expense related to the restricted stock units is calculated as the fair market value of the Company's stock on the grant date and is adjusted for estimated forfeitures. Restrictions expire after the grant date in accordance with specific provisions in the applicable award agreement.

The Company’s restricted stock unit activity for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	2,665,708		$	6.12
Granted	1,564,623		$	6.73
Vested	(1,087,440	)	$	6.02
Cancelled	(268,332	)	$	6.72
Unvested at September 30, 2019	2,874,559		$	6.43

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As of September 30, 2019, there was $14,125,000 of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 2.62 years. The total fair value of restricted stock units that vested during the nine months ended September 30, 2019 and 2018 was $7,479,000 and $4,392,000, respectively.

Market-Based Stock Units

The Company granted market-based stock units in each of February 2019, 2018, and 2017, which may result in the recipient receiving shares of stock equal to 200% of the target number of units granted. The vesting and issuance of Company stock pursuant to market-based stock units depends on the Company's stock performance as compared to the NASDAQ Composite Index over the three-year period following the grant, subject to the recipient's continued service with the Company. As of September 30, 2019, there was $2,685,000 of unrecognized stock-based compensation expense related to market-based stock unit awards, which is expected to be recognized over a weighted average period of 1.65 years.

The Company’s market-based stock unit activity for the nine months ended September 30, 2019 was as follows:     

	Number of Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	328,739	$	10.03
Granted	460,000	$	10.22
Cancelled	(28,334)	$	9.39
Unvested at September 30, 2019	760,405	$	10.16

The fair value of these market-based stock units was estimated on the grant date using the Monte Carlo Simulation Valuation Model, which estimates the potential outcome of achieving the market conditions based on simulated future stock prices, with the following assumptions for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended   September 30,
	2019		2018
Expected volatility	64	%	65		%
Risk-free interest rate	2.50	%	2.40		%
Expected dividend	—	%	—		%
Weighted average fair value	$10.11 - $10.31		$	7.19

Employee Stock Purchase Plan

The Company's stockholders originally approved the ESPP in May 2013. In May 2018, the Company's stockholders approved the amendment and restatement of the ESPP, which increased the shares authorized for issuance under the ESPP from 650,000 shares to 1,750,000 shares.

The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the Company's common stock on the first or the last day of the offering period, whichever is lower. Generally, each offering under the ESPP will be for a period of six months as determined by the Company's Board of Directors; provided that no offering period may exceed 27 months. Employees may invest up to 10% of their qualifying gross compensation through payroll deductions. In no event may an employee purchase more than 1,500 shares of common stock during any six-month offering period. As of September 30, 2019, there were 835,818 shares of common stock available for issuance under the ESPP.  The ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation; therefore, stock-based compensation expense related to the ESPP has been recorded during each of the nine months ended September 30, 2019 and 2018.

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Stock-Based Compensation Expense Recognition

Stock-based compensation was recognized in the unaudited condensed consolidated statements of comprehensive loss as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Cost of revenue	$	248	$	230	$	700	$	637
Sales and marketing	801		719		2,212		2,059
Research and development	436		605		1,308		1,890
General and administrative	1,644		1,542		4,620		4,309
Total stock-based compensation expense	$	3,129	$	3,096	$	8,840	$	8,895

Stock-based compensation capitalized during the periods presented was not material and there was no unrecognized tax benefit related to stock-based compensation for either of the nine months ended September 30, 2019 and 2018.

4. Stockholders' Equity

On August 5, 2019, the Company entered into an Equity Distribution Agreement, or the Distribution Agreement, with Canaccord Genuity LLC, or Canaccord, pursuant to which the Company may offer and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $35 million. Under the Distribution Agreement, Canaccord may sell shares by any method deemed to be an “at-the-market” offering as defined in Rule 415 under the U.S. Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. The Company is not obligated to sell any shares under the Distribution Agreement. Canaccord is entitled to a commission of 3% of the aggregate gross proceeds from each sale of shares occurring pursuant to the Distribution Agreement. During the three and nine months ended September 30, 2019, the Company sold 392,247 shares of common stock under the Equity Distribution Agreement at a weighted average price per share of $6.58 resulting in aggregate gross proceeds of $2.6 million. The Company incurred $207,000 in related transaction costs, comprising commissions paid to Canaccord of $77,000, as well as $130,000 in additional miscellaneous expenses.

5. Condensed Consolidated Financial Statement Details

The following tables show the Company's unaudited condensed consolidated financial statement details as of September 30, 2019 and December 31, 2018 (in thousands):

Inventory

	September 30, 2019		December 31, 2018
Raw materials	$	3,678	$	2,449
Work-in-process	5,102		3,349
Finished goods	3,790		4,446
Total inventories	$	12,570	$	10,244

Property and Equipment, Net

	September 30, 2019			December 31, 2018
Property and equipment — at cost:
Machinery and laboratory equipment	$	15,414		$	15,206
Instruments	16,025			15,089
Office equipment	2,141			2,114
Leasehold improvements	11,259			10,648
Total property and equipment — at cost	44,839			43,057
Less: accumulated depreciation	(25,976		)	(21,987		)
Property and equipment, net	$	18,863		$	21,070

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Accrued Warranty

The following table shows changes in the Company's accrued warranties for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2019			2018			2019			2018
Beginning accrued warranty balance	$	226		$	439		$	330		$	470
Warranty expenses incurred	(342		)	(148		)	(1,054		)	(1,222		)
Provisions	319			84			927			1,127
Ending accrued warranty balance	$	203		$	375		$	203		$	375

6. Intangible Assets, net

Intangible assets as of each of September 30, 2019 and December 31, 2018 comprised the following (in thousands):

	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Licensed intellectual property	$	4,750	$	(3,170	)	$	1,580	$	4,750	$	(2,727	)	$	2,023

In July 2012, the Company entered into a development collaboration and license agreement with Advanced Liquid Logic, Inc., or ALL, which was acquired by Illumina, Inc. in July 2013. Under the terms of the agreement, the Company established a collaborative program to develop in-vitro diagnostic products incorporating ALL’s proprietary electro-wetting technology in conjunction with the Company’s electrochemical detection technology.

Intellectual property licenses have a weighted average remaining amortization period of 2.68 years as of September 30, 2019. Amortization expense for these licenses was $147,000 and $156,000 for the three months ended September 30, 2019 and 2018, respectively, and was $443,000 and $453,000 during the nine months ended September 30, 2019 and 2018, respectively.

Estimated future amortization expense for these licenses is as follows (in thousands):

Fiscal Years Ending	Future Amortization Expense
Remaining in 2019	$	150
2020	593
2021	593
2022	244
Total	$	1,580

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7. Marketable Securities

The following table summarizes the Company’s marketable securities as of each of September 30, 2019 and December 31, 2018 (in thousands):

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	7,078	$	3	$	—		$	7,081
U.S. government and agency securities	1,000		—		—			1,000
Commercial paper	798		—		—			798
Total	$	8,876	$	3	$	—		$	8,879
December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	6,393	$	—	$	(4	)	$	6,389
Commercial paper	2,493		—		—			2,493
Total	$	8,886	$	—	$	(4	)	$	8,882

All of the Company's marketable securities have a maturity of one year or less.

8. Fair Value of Financial Instruments

The carrying amounts of financial instruments, such as cash equivalents, restricted cash, accounts receivable, and accounts payable approximate the related fair values due to the short-term maturities of these instruments.

The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last is considered unobservable, to measure fair value:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The following table presents the financial instruments measured at fair value on a recurring basis and the valuation approach applied to each class of financial instruments as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	2,719	$	—	$	—	$	2,719
Commercial paper	—		1,596		—		1,596
Marketable securities
Corporate notes and bonds	—		7,081		—		7,081
U.S. government and agency securities	—		1,000		—		1,000
Commercial paper	—		798		—		798
Total	$	2,719	$	10,475	$	—	$	13,194
	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	8,953	$	—	$	—	$	8,953
Marketable securities
Corporate notes and bonds	—		6,389		—		6,389
U.S. government and agency securities	—		2,493		—		2,493
Total	$	8,953	$	8,882	$	—	$	17,835

Level 2 marketable securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs.

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9. Long-term debt

As of September 30, 2019 and December 31, 2018, long-term debt consisted of the following (in thousands):

	September 30, 2019			December 31, 2018
Term Loans
Term Loan A - 6.9% interest	$	—		$	7,619
Term Loan B - 6.9% interest	—			7,619
Term Loan C - 7.4% interest	—			12,000
Term Loan D - 8.8% interest	—			663
Term Loan E - 8.8% interest	—			7,098
Term Loan - 8.4% interest	50,000			—
Final fee obligation	2,975			3,288
Unamortized issuance costs	(4,255		)	(2,245		)
Total debt, net	48,720			36,042
Current portion of long-term debt	—			—
Long-term debt	$	48,720		$	36,042

Term Loans

In January 2015, the Company entered into a Loan and Security Agreement, or the LSA, with Solar Capital Partners (as successor-in-interest to General Electric Capital Corporation), and certain other financial institutions party thereto, as lenders. Pursuant to the LSA and its subsequent amendments, the Company borrowed $42,762,000 in a series of term loans and had the ability to borrow against a revolving loan in the maximum amount of $5,000,000. During the term of the LSA, the term loans thereunder accrued interest at a rate equal to (a) the greater of 1.00% or the three year treasury rate in effect at the time of funding, plus (b) an applicable margin between 4.95% and 5.90% per annum.The Company borrowed all $42,762,000 under the term loans as provided in the LSA, and the Company did not borrow any of the $5,000,000 available under the revolving loan.

On February 1, 2019, or the Effective Date, the Company entered into a new Loan and Security Agreement, or the New LSA, with Solar Capital Ltd. and certain other financial institutions, or, collectively, the Lenders. Pursuant to the New LSA, the Lenders are providing the Company with up to $65,000,000 in a series of term loans, or, collectively, the Term Loans, of which $50,000,000, or the Tranche 1 Loan, was funded on the Effective Date. An additional $15,000,000, or the Tranche 2 Loan, is available to be funded at the Company's option, but no later than December 31, 2019, provided that the Company achieves a designated amount of product revenues on a trailing six-month basis.

On the Effective Date, approximately $38,800,000 of the proceeds from the Tranche 1 Loan were used by the Company to repay all outstanding principal, interest, related fees, and other obligations under the LSA, with the remaining borrowings to be used to satisfy the Company's working capital needs and for other general business purposes. The Company accounted for the repayment of its obligations under the LSA as a debt modification. The Company has capitalized the issuance costs it incurred when entering into the New LSA, which are being amortized over the remaining term of the New LSA.

The Term Loans under the New LSA will accrue interest at a floating per annum rate in effect from time-to-time equal to (a) the greater of 2.51% or the one-month LIBOR rate then in effect as of the applicable payment date, plus (b) 5.90% per annum. The Company is only required to make interest payments on amounts borrowed pursuant to the Term Loans from the applicable funding date until February 28, 2021, or the Interest Only Period. If the Company exercises its option to borrow the Tranche 2 Loan and the Company achieves an additional designated amount of product revenues on a trailing six-month basis on or before December 31, 2020, then the Interest Only Period may, at the Company’s election, be extended for both Term Loans through February 28, 2022. Following the Interest Only Period (as the same may be extended pursuant to the terms of the New LSA), monthly installments of principal and interest under the Term Loans will be due until the original principal amount and applicable interest is fully repaid by February 1, 2023, or the Final Maturity Date.

Under the New LSA, the Company is required to comply with certain affirmative and negative covenants, including, without limitation, delivering reports and notices relating to the Company’s financial condition and certain regulatory events and intellectual property matters, as well as limiting the creation of liens, the incurrence of indebtedness, and the making of certain investments, dividends, payments and acquisitions, other than as specifically permitted by the New LSA. As of September 30, 2019, the Company was in compliance with all covenants under the LSA.

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The New LSA also contains customary events of default (subject, in certain instances, to specified cure periods), including, but not limited to, the failure to make payments of interest or premium when due, the failure to comply with certain covenants and agreements specified in the New LSA, and the occurrence of a material adverse change, certain regulatory events, or certain insolvency events. Upon the occurrence of an event of default, the Lenders may declare all outstanding principal and accrued but unpaid interest under the New LSA immediately due and payable and may exercise the other rights and remedies as set forth in the New LSA.

Debt Issuance Costs

As of September 30, 2019 and December 31, 2018, the Company had $4,255,000 and $2,245,000, respectively, of unamortized debt issuance discount, which is offset against borrowings in long-term and short-term debt.

Amortization of debt issuance costs was $450,000 and $142,000 for the three months ended September 30, 2019 and 2018, respectively, and $1,266,000 and $725,000 for the nine months ended September 30, 2019 and 2018, respectively. Amortization of debt issuance costs is included in interest expense in the Company's unaudited condensed consolidated statements of comprehensive loss for the periods presented.

Letter of Credit

In September 2012, the Company provided a $758,000 letter of credit issued by Banc of California to the landlord of its executive office facility in Carlsbad, California. This letter of credit was secured with $758,000 of restricted cash as of September 30, 2019.

10. Leases

The Company has operating and finance lease agreements for its office, manufacturing, warehousing and laboratory space and for office equipment. Rent and operating expenses charged under these arrangements was $474,000 and $485,000 for the three months ended September 30, 2019 and 2018, respectively, and $1,483,000 and $1,355,000 for the nine months ended September 30, 2019 and 2018.

Pursuant to the adoption of the new lease standard, the Company reported noncurrent operating lease ROU assets of $4,766,000, and current and noncurrent operating lease liabilities of $1,828,000 and $6,071,000, respectively, as of September 30, 2019. The Company reported current and noncurrent deferred rent under the existing lease standard of $520,000 and $2,996,000, respectively, at December 31, 2018. The Company's operating lease liabilities were measured at a weighted average discount rate of 11.2% and have a weighted average remaining term of 5.22 years.

As of September 30, 2019, the future minimum lease payments required under the Company's lease arrangements are as follows (in thousands):

Fiscal Years Ending	Future Minimum Lease Payments
Remaining in 2019	$	504
2020	1,997
2021	2,015
2022	2,077
2023	1,939
Thereafter	2,084
Total	10,616
Less: imputed interest	(2,717		)
Total operating lease liabilities	$	7,899

11. Income Taxes

The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

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As of September 30, 2019, the Company recorded a full valuation allowance against all of its net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the future. Due to the Company's losses, it only records a tax provision or benefit related to uncertain tax positions and related interest and minimum tax payments or refunds. The Company recorded income tax (benefit) expense of $(33,000) and $5,000 for the three months ended September 30, 2019 and 2018, respectively, and $28,000 and $59,000 for the nine months ended September 30, 2019 and 2018, respectively.

The Company is subject to taxation in the United States and in various state and foreign jurisdictions. The Company's federal and state tax returns since inception are subject to examination due to the carryover of net operating losses. The statute of limitations for the assessment and collection of income taxes related to other foreign tax returns varies by country. In the foreign countries where we have operations, these time periods generally range from three to five years after the year for which the tax return is due or the tax is assessed.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements for the nine months ended September 30, 2019 and the notes thereto included in Part I, Item 1 of this Quarterly Report, as well as the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding our results of operations, sales and marketing expenses, general and administrative expenses, research and development expenses, and the sufficiency of our cash for future operations. Words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “estimate,” “potential,” “predict,” “plan,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in or implied by any forward-looking statements.

Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report. We assume no obligation to update these forward looking statements to reflect future events or circumstances.

Trademarks and Trade Names

GenMark®, eSensor®, XT-8® and ePlex® and our other logos and trademarks are the property of GenMark Diagnostics, Inc. or its subsidiaries. All other brand names or trademarks appearing in this Quarterly Report are the property of their respective holders. Our use or display of other parties’ trademarks, trade dress or products in this Quarterly Report does not imply that we have a relationship with, or the endorsement or sponsorship of, the trademark or trade dress owners. 

Overview

GenMark was formed by Osmetech plc, or Osmetech, as a Delaware corporation in February 2010, and had no operations prior to its initial public offering, which was completed in June 2010. Immediately prior to the closing of the initial public offering, GenMark acquired all of the outstanding ordinary shares of Osmetech in a reorganization under the applicable laws of the United Kingdom. Following the reorganization, Osmetech became a wholly-owned subsidiary controlled by GenMark, and the former shareholders of Osmetech received shares of GenMark. Any historical discussion of GenMark relates to Osmetech and its consolidated subsidiaries prior to the reorganization. In September 2012, GenMark placed Osmetech into liquidation to simplify its corporate structure. The liquidation of Osmetech was competed in the fourth quarter of 2013.

We are a molecular diagnostics company focused on developing and commercializing multiplex solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care. We currently develop and commercialize high-value, simple to perform, clinically relevant multiplex molecular tests based on our proprietary eSensor electrochemical detection technology.

Since inception, we have incurred net losses from operations each year, and we expect to continue to incur losses for the foreseeable future. Our net losses for the nine months ended September 30, 2019 and 2018 were approximately $37,063,000 and $38,937,000,

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respectively. As of September 30, 2019, we had an accumulated deficit of $503,946,000. Our operations to date have been funded principally through sales of capital stock, borrowings, and cash from operations. We expect to incur increasing expenses over the next several years, principally to expand our product offerings, as well as to increase our manufacturing capabilities and commercial organization. 

Our Products and Technology

We offer our ePlex sample-to-answer instrument and Respiratory Pathogen (RP) Panel, Blood Culture Identification Gram-Positive (BCID-GP) Panel, Blood Culture Identification Gram-Negative (BCID-GN) Panel, and Blood Culture Identification Fungal Pathogen (BCID-FP) Panel for sale in the United States and internationally. We are also developing our ePlex Gastrointestinal Pathogen Panel for the detection of pathogens associated with gastrointestinal infections. We continue to actively evaluate the development of additional assay panels that we believe will meet important, unmet clinical needs, which our ePlex system is uniquely positioned to address. 

We offer four FDA-cleared diagnostic tests which run on our XT-8 instrument: our Respiratory Viral Panel; our Cystic Fibrosis Genotyping Test; our Warfarin Sensitivity Test; and our Thrombophilia Risk Test. We also offer a Hepatitis C (HCV) Genotyping Test and associated custom manufactured reagents, as well as a 2C19 Genotyping Test, each of which is available for use with our XT-8 instrument for research use only (RUO).

Revenue

Revenue from operations includes product sales, principally of our diagnostic panels. We primarily place our instruments with customers through a reagent rental agreement, under which we retain title to the instrument and customers generally commit to purchasing minimum quantities of reagents and test cartridges over a period of one to five years. We also offer our instruments for sale.

Cost of Revenues

Cost of revenues includes the cost of materials, direct labor, and manufacturing overhead costs used in the manufacture of our consumable tests, including royalties on product sales. Cost of revenues also includes depreciation on revenue generating instruments that have been placed with our customers under a reagent rental agreement, cost of instruments sold to customers, amortization of licenses related to our products, and other costs such as warranty, royalty, and customer and product technical support. Any potential underutilized capacity may result in a high cost of revenues relative to revenue, if manufacturing volumes are not able to fully absorb operating costs. Our instruments are procured from contract manufacturers. We expect our cost of revenues to increase as we place additional instruments and manufacture and sell additional diagnostic panels; however, over time, we expect our cost per unit to decrease as production volume increases, manufacturing efficiencies are realized, improvements to procurement practices are made, product reliability increases, and other improvements decrease costs.

Sales and Marketing Expenses

Sales and marketing expenses include costs associated with our direct sales force, sales management, marketing, technical support, and business development activities. These expenses primarily consist of salaries, commissions, benefits, stock-based compensation, travel, advertising, promotions, product samples, and trade show expenses. We expect sales and marketing expenses to continue to increase as we scale-up our domestic and international commercial efforts and expand our customer base.

Research and Development Expenses

Research and development expenses primarily include costs associated with the development and expansion of our ePlex instrument's diagnostic test menu. These expenses also include certain clinical study expenses incurred in preparation for FDA clearance for these products, intellectual property prosecution and maintenance costs, and quality assurance expenses. The expenses primarily consist of salaries, benefits, stock-based compensation, outside design and consulting services, laboratory supplies, costs of consumables and materials used in product development, and clinical studies and facility costs. We expense all research and development expenses in the periods in which they are incurred.

General and Administrative Expenses

Our general and administrative expenses include costs associated with our executive, accounting and finance, compliance, information technology, legal, facilities, human resources, administrative, and investor relations activities. These expenses consist primarily of salaries, benefits, stock-based compensation costs, independent auditor costs, legal fees, consultant costs, insurance premiums, and public company expenses, such as stock transfer agent fees and listing fees for NASDAQ.

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Foreign Exchange Gains and Losses

Transactions in currencies other than our functional currency, the U.S. Dollar, are translated at the prevailing rates on the dates of the applicable transaction. Foreign exchange gains and losses arise from differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is settled or translated.

Interest Income and Interest Expense

Interest income includes interest earned on our cash and cash equivalents and investments. Interest expense represents interest incurred on our loan payable and on other liabilities.

Provision for Income Taxes

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If it is more likely than not that we will not recover our deferred tax assets, we will increase our provision for income taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.

Our income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate 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 on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe we have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable, and deferred taxes in the period in which the facts that give rise to a revision become known.

Results of Operations — Three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
(dollars in thousands)
Revenue	$	20,918	$	15,795	$	5,123	32	%	$	60,825	$	51,381	$	9,444	18	%

Our revenue consists primarily of revenue from the sale of test cartridges (which we refer to as consumables), instruments, and other revenues.

Revenue increased by $5.1 million or 32%, during the three months ended September 30, 2019 when compared to the same period of the prior year, primarily driven by growth in ePlex product revenue which features a higher selling price due to the additional technology and features of its sample-to-answer capabilities. For the three months ended September 30, 2019, ePlex product revenue increased by $6.6 million or 98%, to $13.4 million due to new customers adopting the ePlex system for respiratory and blood stream infection testing. ePlex product revenue represented approximately 64% of total product revenue during the three months ended September 30, 2019. XT-8 revenue decreased by $1.5 million over the prior year period, or 17%, to $7.5 million during the three months ended September 30, 2019, primarily due to XT-8 customers that converted in 2018 to our ePlex system for respiratory testing.

Revenue increased by $9.4 million or 18% during the nine months ended September 30, 2019 when compared to the same period of the prior year, primarily driven by growth in ePlex product revenue. For the nine months ended September 30, 2019, ePlex product revenue increased by $15.3 million or 59%, to $41.1 million due to new customers adopting the ePlex system for respiratory and blood stream infection testing. ePlex product revenue represented approximately 68% of total product revenue during the nine months ended September 30, 2019. XT-8 revenue decreased by $6 million over the prior year period, or 24%, to $19.4 million during the nine months ended September 30, 2019, primarily due to customers converting to our ePlex system for respiratory testing.

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	Three Months Ended September 30,								Nine Months Ended September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
(dollars in thousands)
Cost of revenue	$	13,868	$	10,165	$	3,703	36	%	$	41,339	$	37,172	$	4,167	11	%
Gross profit	$	7,050	$	5,630	$	1,420	25	%	$	19,486	$	14,209	$	5,277	37	%

The increase in cost of revenue for the three months ended September 30, 2019, compared to the same period of the prior year is a result of the growth in ePlex product revenue, which increased by 98% versus the same period of the prior year and represented 64% of total revenue for the current period. The ePlex system carries a higher cost profile due to its enhanced technology and features as compared to XT-8. Standard product costs increased by $3.7 million when comparing the three months ended September 30, 2019 to the same period of the prior year. Cost of revenue also increased by $507 thousand due to increased inventory reserves expense, $319 thousand from increased freight and royalty expense, and $290 thousand in warranty and customer product and technical support expense resulting from higher product revenue. The increase in cost of sales was partially offset by a decrease of $1.2 million in the current period from overhead cost absorption and the realization of manufacturing efficiencies.

The increase in cost of revenue for the nine months ended September 30, 2019, compared to the same period of the prior year is a result of the growth in ePlex product revenue, which increased by 59% versus the same period of the prior year and represented 67% of total revenue for the current period. Standard product costs increased by $7.3 million when comparing the nine months ended September 30, 2019 to the same period of the prior year. Cost of revenue also increased by $687 thousand in the current period due to increased freight and royalties expense and $553 thousand in inventory reserves expense. The increase in cost of revenue was partially offset by decreases of $3.5 million from overhead cost absorption and the realization of manufacturing efficiencies and $1.1 million in reduced warranty costs and customer and product technical support expense.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
(dollars in thousands)
Sales and marketing	$	6,279	$	5,375	$	904	17	%	$	17,991	$	15,964	$	2,027	13	%

The increase in sales and marketing expense for the three months ended September 30, 2019, when compared to the same period of the prior year, was primarily driven by increases of $588 thousand in personnel costs and $452 thousand in evaluation kits expense resulting from new ePlex system evaluations.

The increase in sales and marketing expense for the nine months ended September 30, 2019, when compared to the same period of the prior year, was primarily driven by an increase of $1.2 million in personnel costs and $745 thousand in evaluation kits expense resulting from new ePlex system evaluations.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
(dollars in thousands)
General and administrative	$	4,765	$	4,718	$	47	1	%	$	14,217	$	13,398	$	819	6	%

The increase in general and administrative expense for the three months ended September 30, 2019, compared to the same period of the prior year, was primarily driven by an increase of $136 thousand in personnel costs, which was partially offset by a decrease of $102 thousand in administrative costs.

The increase in general and administrative expense for the nine months ended September 30, 2019, compared to the same period of the prior year, was primarily driven by increases of $576 thousand in personnel costs, $321 thousand in higher facilities and information technology expenses, and $310 thousand in legal expenses. The increase was partially offset by a decrease of $213 thousand in professional services expense.

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	Three Months Ended September 30,								Nine Months Ended September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change			% Change
(dollars in thousands)
Research and development	$	6,294	$	6,105	$	189	3	%	$	20,386	$	22,007	$	(1,621	)	(7	)%

The increase in research and development expense for the three months ended September 30, 2019, compared to the same period of the prior year, was primarily driven by an increase of $851 thousand in prototype materials used by our assay development teams. The increase in research and development expense was partially offset by decreases of $419 thousand in clinical study expense based upon the timing of the completed ePlex BCID clinical studies and $112 thousand in professional services expense.

The decrease in research and development expense for the nine months ended September 30, 2019, compared to the same period of the prior year, was primarily driven by a decrease of $1.4 million in clinical study expense based upon the timing of the completed ePlex BCID clinical studies and a decrease of $769 thousand in prototype materials used by our assay development teams. The decrease in research and development expense was partially offset by a $669 thousand increase in personnel costs resulting from more technical resources focused on the development of future technologies.

	Three Months Ended September 30,											Nine Months Ended September 30,
	2019			2018			$ Change			% Change		2019			2018			$ Change			% Change
(dollars in thousands)
Other income (expense)	$	(1,420	)	$	(420	)	$	(1,000	)	238	%	$	(3,927	)	$	(1,718	)	$	(2,209	)	129	%

Other income (expense) represents non-operating income and expense, including, but not limited to, earnings on cash, cash equivalents, restricted cash, marketable securities, exchange gains and losses of foreign currency denominated balances, and interest expense related to debt.

The change in other income (expense) for the three and nine months ended September 30, 2019, compared to the same periods of the prior year, were primarily due to higher interest expense attributable to additional borrowings from our new loan and security agreement.

	Three Months Ended September 30,										Nine Months Ended September 30,
	2019			2018		$ Change			% Change		2019		2018		$ Change			% Change
(dollars in thousands)
Income tax (benefit) expense	$	(33	)	$	5	$	(38	)	(760	)%	$	28	$	59	$	(31	)	(53	)%

Due to net losses incurred, we have only recorded tax provisions related to minimum tax payments in the United States and tax liabilities generated by our foreign subsidiaries, which have remained immaterial.

Liquidity and Capital Resources

To date, we have funded our operations primarily from the sale of our common stock, borrowings, and cash from operations. We have incurred net losses from continuing operations each year and have not yet achieved profitability. As of September 30, 2019, we had $36,632,000 of working capital, including $33,187,000 in cash, cash equivalents, and marketable securities. We believe our existing cash, cash equivalents and marketable securities as of September 30, 2019 will enable us to fund our operations for at least the next 12 months.

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The following table summarizes, for the periods indicated, selected items in our unaudited condensed consolidated statements of cash flows:

	September 30,
Nine months ended (in thousands):	2019			2018
Net cash used in operating activities	$	(25,571	)	$	(28,900	)
Net cash (used in) provided by investing activities	(1,048		)	26,655
Net cash provided by financing activities	14,611			469
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	30			27
Net decrease in cash, cash equivalents, and restricted cash	$	(11,978	)	$	(1,749	)

Cash used in operating activities

Net cash used in operating activities decreased $3.3 million for the nine months ended September 30, 2019 compared to the same period of the prior year. The decrease in cash used in operating activities was primarily due to a decrease of $1.9 million in net loss and a $1.5 million increase in non-cash adjustments.

Cash (used in) provided by investing activities

Net cash used in investing activities increased by $27.7 million for the nine months ended September 30, 2019, compared to the same period of the prior year, primarily due to a decrease in the net proceeds from purchases, maturities, and sales of marketable securities of $27.6 million and an increase in purchases of property and equipment of $133 thousand.

Cash provided by financing activities

Net cash provided by financing activities increased by $14.1 million for the nine months ended September 30, 2019, compared to the same period of the prior year, primarily due to an increases in proceeds from net borrowings of $11.4 million, proceeds from the issuance of common stock (net of issuance costs) of $2.3 million, and proceeds from stock option exercises of $410 thousand.

We have prepared cash flow forecasts which indicate, based on our current cash resources available, that we will have sufficient resources to fund our business for at least the next 12 months. We expect capital outlays and operating expenditures to increase over the next several years as we grow our customer base and revenues, and expand our research and development, commercialization and manufacturing activities. Factors that could affect our capital requirements, in addition to those previously identified, include, but are not limited to: 

• the level of revenues and the rate of our revenue growth;

• changes in demand from our customers;

• the level of cost of revenues and their impact to our gross margin;

• the level of expenses required to expand our commercial (sales and marketing) activities;

• the level of research and development investment required to develop and commercialize our ePlex system and maintain our XT-8 system;

• the level of investment required to scale our manufacturing operations to support our anticipated growth;

• our need to acquire or license complementary technologies;

• the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;

• competing technological and market developments; and

• changes in regulatory policies or laws that affect our operations.

Loan and Security Agreement

On February 1, 2019, or the Effective Date, we entered into a Loan and Security Agreement, or the New LSA, with Solar Capital Ltd. and certain other financial institutions, or, collectively, the Lenders. Pursuant to the New LSA, the Lenders are providing us with up to $65 million in a series of term loans, of which $50 million was funded on the Effective Date. We may borrow an additional $15 million at our option, but no later than December 31, 2019, provided that we achieve a designated amount of product revenues on a trailing six-month basis. As of September 30, 2019, we have borrowed $50 million under the terms of the New LSA.

Pursuant to the terms of the New LSA, the Lenders are granted a security interest in (a) all of our personal property, other than intellectual property (which is subject to a negative pledge), but including our rights to payment in respect of intellectual property, and (b) the stock of all of our subsidiaries; provided that if the pledge of 100% of the voting shares of our non-U.S. subsidiaries

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would result in adverse tax consequences, such pledge shall be limited to 65% of the voting stock and 100% of the non-voting stock of each of our non-U.S. subsidiaries.

The New LSA contains customary affirmative and negative covenants, including, without limitation, delivering reports and notices relating to our financial condition and certain regulatory events and intellectual property matters, as well as limiting the creation of liens, the incurrence of indebtedness, and the making of certain investments, payments and acquisitions, other than as specifically permitted by the New LSA. The New LSA also contains customary events of default (subject, in certain instances, to specified cure periods), including, but not limited to, the failure to make payments of interest or premium when due, the failure to comply with certain covenants and agreements specified in the New LSA, and the occurrence of a material adverse change, certain regulatory events, or certain insolvency events. Upon the occurrence of an event of default, the Lenders may declare all outstanding principal and accrued but unpaid interest under the LSA immediately due and payable and may exercise the other rights and remedies as set forth in the New LSA.

Equity Distribution Agreement

On August 5, 2019, we entered into an Equity Distribution Agreement, or the Distribution Agreement, with Canaccord Genuity LLC, or Canaccord, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $35 million. Under the Distribution Agreement, Canaccord may sell shares by any method deemed to be an “at-the-market” offering as defined in Rule 415 under the U.S. Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. We are not obligated to sell any shares under the Distribution Agreement. Canaccord is entitled to a commission of 3% of the aggregate gross proceeds from each sale of shares occurring pursuant to the Distribution Agreement. During the three and nine months ended September 30, 2019, we sold 392,247 shares of common stock under the Equity Distribution Agreement at a weighted average price per share of $6.58 resulting in aggregate gross proceeds of $2.6 million. We incurred $207 thousand in related transaction costs, comprising commissions paid to Canaccord of $77 thousand, as well as $130 thousand in additional miscellaneous expenses.

Letter of Credit

In September 2012, we provided a $758 thousand letter of credit issued by Banc of California to the landlord of our executive office facility in Carlsbad, California. This letter of credit was secured with $758 thousand of restricted cash at September 30, 2019.

If we require additional capital, we cannot be certain that it will be available when needed or that our actual cash requirements will not be greater than anticipated. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or products, or grant licenses on terms that are not favorable to us.

Contractual Obligations

As of September 30, 2019, there were no material changes to our contractual obligations from those disclosed within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis, including those related to doubtful accounts, inventories, valuation of intangible assets and other long-term assets, income taxes, and stock-based compensation. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2019.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements. We have provided a $758 thousand standby letter of credit to our landlord as security for future rent in connection the lease of our executive office facility in Carlsbad, California, which is recorded as restricted cash on our unaudited condensed consolidated balance sheets.

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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2019, there have been no material changes in our market risks described at December 31, 2018.

Our exposure to market risk is currently limited to our cash and cash equivalents, all of which have maturities of less than three months, and marketable securities, which have maturities of greater than three months. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs, and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we may in the future maintain a portfolio of cash equivalents and investments in a variety of securities that management believes to be of high credit quality. We currently do not hedge interest rate exposure. Because of the short-term nature of our cash equivalents and investments, we do not believe that an increase in market rates would have a material negative impact on the value of our portfolio.

Interest Rate Risk

As of September 30, 2019, based on current interest rates and total borrowings outstanding, a hypothetical 100 basis point increase or decrease in interest rates would have an immaterial pre-tax impact on our results of operations.

Foreign Currency Exchange Risks

We are a U.S. entity and our functional currency is the U.S. dollar. We have business transactions in foreign currencies, however, we believe we do not have significant exposure to risk from changes in foreign currency exchange rates at this time. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports we file under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The design of any system of controls 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, controls 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 the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, with the participation of management, concluded that, as of September 30, 2019, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal controls over financial reporting that occurred in the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are from time to time subject to various claims and legal actions in the ordinary course of our business. We believe that there are currently no legal actions that would reasonably be expected to have a material adverse effect on our results of operations or financial condition.

ITEM 1A.RISK FACTORS

You should consider the risks described below and all of the other information set forth in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” in evaluating our business and prospects. If any of the risks described below occurs, our business, financial condition or results of operations could be negatively affected. In that case, the market price of our common stock could decline.

We may not successfully commercialize our ePlex system at the levels we anticipate.

Our current plan for achieving positive cash flow and our future growth projections relies upon the successful commercialization of our ePlex system at the levels we project. Our ePlex system integrates automated nucleic acid extraction and amplification with our eSensor technology to allow operators to place raw or minimally prepared patient samples directly into our test cartridges and obtain clinically relevant results. We believe that our ePlex system offers certain advantages over competitive systems, including superior multiplexing capability, reduced hands-on processing time, testing capacity and flexibility, and other attributes. However, the commercial success of ePlex will depend on a number of factors, including, but not limited to:

• Our ability to consistently manufacture highly complex products that deliver valid and accurate results at the level required for large-scale market adoption;

• product reliability;

• overall market acceptance;

• our ability to offer a broad and clinically relevant test menu at a competitive price;

• our ability to effectively sell our products into integrated delivery networks and group purchasing organizations;

• adequate reimbursement for our products; and

• the development of clinical utility and health economic evidence to support adoption of our products.

If we are unsuccessful in effectively commercializing our ePlex system at the levels we project within our expected time frame, or at all, our investment in anticipation of growth that does not materialize, or which develops more slowly than we expect, may harm our financial results, reduce our cash balances, and result in overcapacity, which may adversely affect our business and future prospects.

Our financial results will depend on the acceptance and increased demand among our target customers and the medical community of our molecular diagnostic technologies and products.

Our future success depends on the belief by our target customers and the medical community that our molecular diagnostic products, including our ePlex instrument and its panel test menu, are a reliable, medically-relevant, accurate and cost-effective replacement for other diagnostic testing methods. Our business success depends on our ability to convince our target customers to perform these tests internally with our products if they have historically outsourced their testing needs or have historically used non-molecular methods to perform such testing, or to replace their current molecular testing platforms with our system and its related test panel offerings.

Many other factors may affect the market acceptance and commercial success of our molecular diagnostic technology and products, including:

• the relative convenience, ease of use, accuracy, reliability, validity, scalability, cost, price, and time-to-result of our diagnostic products over competing products;

• the introduction of new technologies and competing products that may make our technologies and products a less attractive solution for our target customers;

• the breadth and relevance of our menu of available diagnostic test panels relative to our competitors;

• our success in training our customers in the proper use of our products;

• the acceptance in the medical community and key opinion leaders of our molecular diagnostic technology and products;

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• the extent and success of our marketing and sales efforts; and

• general economic conditions.

Professional societies, government agencies, practice management groups, private health/science foundations and organizations involved in healthcare issues may publish guidelines, recommendations or studies for the healthcare and patient communities. Recommendations of government agencies or these other organizations may relate to such matters as cost-effectiveness and use of related products. Organizations like these have in the past made recommendations about our competitors’ products, such as the need for less frequent screening tests, which could result in reduced product sales. Moreover, the perception by the investment community or stockholders that recommendations, guidelines or studies will result in decreased use of our products could adversely affect the prevailing market price for our common stock.

We face intense competition from established and new companies in the molecular diagnostics field and expect to face increased competition in the future.*

The markets for our technologies and products are highly competitive and we expect the intensity of competition to increase. We compete with companies engaged in the development, commercialization and distribution of similar products intended for clinical molecular diagnostic applications. Categories of our competitors include:

• companies developing and marketing multiplex molecular diagnostics systems, including: Luminex (which acquired Nanosphere, Inc.); bioMerieux (which acquired BioFire Diagnostics, Inc.); Abbott Molecular Diagnostics; Qiagen (which acquired Stat-Dx); Siemens (which acquired Fast Track Diagnostics); T2 BioSystems; Accelerate Diagnostics; Hologic, Inc.; Seegene; and Danaher Corporation (which acquired Cepheid);

• companies developing and marketing other technologies that can be used for identification of infectious agents, for example, Matrix Assisted Laser Desorption/Ionization Time of Flight (MALDI-TOF) Mass Spectrometry, including: Bruker, Becton Dickinson, bioMerieux, and Shimadzu;

• large hospital-based laboratories and reference laboratories who provide large-scale testing using their own proprietary testing methods, including Quest Diagnostics Incorporated and Laboratory Corporation of America; and

• companies that manufacture laboratory-based tests and analyzers, including: Danaher; Siemens; Hologic, Inc.; Qiagen NV; bioMérieux; Roche Diagnostics; and Abbott Molecular Diagnostics.

Our diagnostic test panels also face competition from laboratory developed tests (LDTs) developed by national and regional reference laboratories and hospitals. LDTs may not currently be subject to the same regulatory requirements, including those requiring clinical studies and FDA review and clearance or approval that may apply to our diagnostic products.

We anticipate that we will face increased competition in the future as new companies enter the market with new technologies, our competitors improve their current products and expand their menu of diagnostic tests, and as we expand our operations internationally. Many of our current and potential competitors have greater name recognition, more substantial intellectual property portfolios, longer operating histories, additional test menu, significantly greater resources to invest in new technologies, more substantial experience in new product development, greater regulatory expertise, and more extensive manufacturing and distribution capabilities. It is critical to our success that we anticipate changes in technology and customer requirements and successfully introduce enhanced and competitive technology to meet our customers’ and prospective customers’ needs on a timely basis.

In addition, we have limited marketing, sales and distribution experience and capabilities. Our ability to achieve profitability depends on attracting customers for our products and building brand loyalty. To successfully perform sales, marketing, distribution, and customer support functions ourselves, we face a number of risks, including:

• our ability to attract and retain the skilled support team, marketing staff and sales force necessary to commercialize and gain market acceptance for our technology and our products;

• the ability of our sales and marketing team to identify and penetrate the potential customer base, including hospitals, national and regional reference laboratories, group purchasing organizations, and integrated delivery networks; and

• the difficulty of establishing brand recognition and loyalty for our products.

Some hospital-based and reference laboratories may not consider adopting our instrument systems unless we offer a broader menu of diagnostic test panels or may choose not to convert from competitive products. In addition, in order to commercialize our products, we are required to undertake time consuming and costly development activities, including clinical studies for which the outcome is uncertain. Products that appear promising during early development and preclinical studies may, nonetheless, fail to demonstrate the results needed to support regulatory approval or, if approved, may not generate the demand we expect. If we are unable to effectively compete, our revenues and our ability to achieve profitability will be significantly impaired.

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We may not expand sales of our ePlex system outside the United States at the levels or within the time frame we anticipate.

We have obtained CE Mark for our ePlex Instrument and the following ePlex assays: the ePlex Respiratory Pathogen (RP) Panel, the ePlex Blood Culture Identification Gram-Positive (BCID-GP) Panel, the ePlex Blood Culture Identification Gram-Negative (BCID-GN) Panel, and the ePlex Blood Culture Identification Fungal Pathogen (BCID-FP) Panel. We are commercializing our ePlex system internationally via a network of distribution partners, which is augmented by a limited set of direct sales and technical support personnel based in Europe. If we are unable to establish the infrastructure or recruit highly qualified personnel to support our international sales and support organization, if we fail to identify new distribution partners, or if we are unsuccessful in developing awareness and acceptance of our products and technology internationally, our anticipated revenue growth internationally may not materialize at the levels or within the time frame we expect, our customers may not receive the level of service or product dependability they expect from us, and our future financial performance may be adversely affected. Furthermore, the distributors we establish in particular geographic regions may not commit the necessary resources to market and sell our products to meet our expectations. If our distributors do not perform adequately or in compliance with applicable laws and regulations in particular geographic areas, or if we are unable to locate distributors in particular geographic areas, our ability to realize revenue growth based on sales outside the United States would be harmed. We also must comply with applicable foreign regulatory agency post-market requirements, including routine Notified Body conformity assessments to quality system standards (e.g. ISO13485). Any failure to maintain post-market compliance with foreign regulatory requirements could harm our business, operations, and/or financial condition.

If our customers are not adequately reimbursed or compensated for the use of our products, we may have difficulty selling our products.*

Our ability to sell our products depends in part on the extent to which reimbursement related to performing tests using our products is available from governmental authorities, such as Medicare and other domestic and foreign governmental programs, private insurance plans, managed care organizations, and other organizations. There are ongoing efforts by governmental and third party payors to contain or reduce the costs of healthcare coverage. For example, a number of Medicare Administrative Contractors (MACs) recently issued final local coverage determinations limiting or eliminating Medicare coverage for the use of certain multiplex molecular respiratory tests such as our ePlex RP Panel and XT-8 Respiratory Viral Panel (RVP) in an outpatient setting. As a result, this determination may negatively impact the use of our and certain of our competitors’ multiplex respiratory tests within the geographic regions covered by these MACs. In addition, if other MACs and private payors take a similar approach, this potential negative impact could affect the available market for our ePlex RP Panel and XT-8 RVP Panel in additional geographic regions and patient populations. Furthermore, if our competitors are able to obtain product-specific reimbursement levels higher than those for our similarly situated products, or if the scope of coverage applicable to our competitors’ products exceeds the scope of coverage applicable to our products, the overall demand for our products or the prices at which we are able to sell our products may be negatively impacted.

In addition, efforts to reform the healthcare delivery system in the United States and Europe has increased pressure on healthcare providers to reduce costs. For example, implementation of certain provisions of the Protecting Access to Medicare Act (PAMA) in the United States had a negative impact on reimbursement payments from the Centers for Medicare and Medicaid Services (CMS) for our diagnostics test panels paid under the Clinical Laboratory Fee Schedule (CLFS). Under these provisions of PAMA, payments under the CLFS are likely to be reduced annually for the next several years. If purchasers or users of our products are not able to obtain adequate reimbursement for the cost of using our products, either directly or indirectly, they may forego or reduce their purchase and use of our products or the price we may be able to charge for our products could be reduced.

Obtaining coverage and reimbursement approval for a product from each government or third-party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each government or third-party payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. In addition, eligibility for coverage does not imply that any product will be covered and reimbursed in all cases or reimbursed at a rate that allows our potential customers to make a profit or even cover their costs. Further, third-party payors may choose to reimburse our customers per test based on individual biomarker detection, rather than on the basis of the number of results given by the test panel. This may result in our customers electing to use separate tests to screen for each disease or condition so that they can receive reimbursement for each test they conduct. In that event, these entities may purchase separate tests for each disease, rather than products, such as ours, that can be used to return highly multiplexed test panel results.

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From time to time we and our key suppliers experience, and may in the future experience, difficulties scaling manufacturing operations to the levels required to support our anticipated growth in a timely and cost-effective manner.

To date, we have produced our products in limited quantities relative to the quantities necessary to achieve our desired revenue growth. Developing the necessary manufacturing and quality procedures internally and in conjunction with our key suppliers for a significant number of our newly developed, highly complex products and product components is a challenging process. From time to time we and our suppliers experience, and may in the future experience, manufacturing variability and may not be able to consistently produce sufficient quantities of high quality products and product components at the levels necessary to achieve our revenue growth expectations or to support customer demand or our product development timelines. If we or our key suppliers encounter difficulties in producing sufficient yields of high quality products or product components, or scaling manufacturing operations as a result of, among other things, process and manufacturing transfer complexities, quality control and quality assurance issues, and/or availability of subcomponents, equipment and raw material supplies, our reputation may be harmed and we may not achieve our anticipated financial results or product development goals within the time frame we expect, or at all.

Finding solutions to product quality, reliability, variability, and raw material sourcing issues is time consuming and expensive, and we may incur significant additional costs or lose revenue as a result of, among other things, delayed product introduction, product recalls, shipment holds, scrapped material, manufacturing delays or inefficiencies, and warranty and service obligations. In addition, we are implementing a number of measures to reduce the cost of manufacturing our ePlex products. If these efforts are unsuccessful, or if these efforts prove less successful than we anticipate or do not deliver the results within the timeframes we expect, we may not achieve our profitability targets in a timely manner, or at all.

To manage our anticipated future growth effectively, we must enhance our manufacturing and supply chain capabilities, infrastructure and operations, information technology infrastructure, and financial and accounting systems and controls. Organizational growth and scale-up of operations could strain our existing managerial, operational, financial, and other resources. If our management is unable to effectively prepare for our expected future growth, our expenses may increase more than anticipated, our revenue could grow more slowly than expected, and we may not be able to achieve our commercialization, profitability, or product development goals. Our failure to effectively implement the necessary processes and procedures and otherwise prepare for our anticipated growth could have a material adverse effect on our future financial condition and prospects.

Disruptions in the supply of raw materials, consumable goods, or other key product components, or issues associated with their cost or quality from our single source suppliers, could result in delays or difficulties successfully commercializing our ePlex system or a significant disruption in sales and profitability.

We must manufacture or engage third parties to manufacture components of our products in sufficient quantities and on a timely basis, while maintaining product quality and acceptable manufacturing costs and complying with regulatory requirements. Our instrument systems and certain critical components are custom-made by only a few outside suppliers. In certain instances, we and our customers have a sole source supply for certain key products, product components, ancillary items, and raw materials used to run our tests. If we are unable to satisfy our forecasted demand from existing suppliers for our products, or we or our customers are unable to find alternative suppliers for key product components, ancillary items or raw materials at reasonably comparable prices, it could have a material adverse effect on our financial condition and results of operations. Additionally, although we have entered into supply agreements with most of our suppliers of strategic reagents and parts to help ensure component availability and flexible purchasing terms with respect to the purchase of such components, if our suppliers discontinue production of a key component for one or more of our products, we may be unable to identify or secure a viable, cost-effective alternative on reasonable terms, or at all, which could limit our ability to manufacture our products.

In determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on seasonality, inventory levels, current market trends, product development timelines, overall capacity, and other related factors. Because of the inherent nature of estimates and our limited experience in marketing our products, there could be significant differences between our estimates and the actual amounts of products we require. This can result in shortages if we fail to anticipate demand, or excess inventory and write-offs if we order more than we need.

Reliance on third-party manufacturers entails risk to which we would not be subject if we manufactured these components ourselves, including:

• reliance on third parties for regulatory compliance and quality assurance;

• possible breaches of manufacturing agreements by the third parties because of factors beyond our control;

• possible regulatory violations or manufacturing problems experienced by our suppliers;

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• possible termination or non-renewal of agreements by third parties, based on their own business priorities, at times that are costly or inconvenient for us;

• the potential obsolescence and/or inability of our suppliers to obtain required components;

• the potential delays and expenses of seeking alternate sources of supply or manufacturing services;

• the inability to qualify alternate sources without impacting performance claims of our products;

• reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternate suppliers or assemblers;

• the potential for financial hardship or other detrimental circumstances at key suppliers that may impact our ability to source key materials or services required for the manufacturing of our products; and

• increases in prices of raw materials and key components.

The manufacturing operations for our test panel cartridges use highly technical processes involving unique, proprietary techniques. In addition, the manufacturing equipment we use would be costly and time consuming to repair or replace. Any interruption in our operations or decrease in the production capacity of our manufacturing facilities or the facilities of any of our key suppliers because of equipment failure, natural disasters such as earthquakes, tornadoes and fires, or otherwise, would limit our ability to meet customer demand for our products and would have a material adverse effect on our business, financial condition, and results of operations. In the event of a disruption, we may lose customers and we may be unable to regain those customers thereafter. Our 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.

If our products do not perform as expected our operating results and business would suffer.

Our success depends on the market’s confidence that we can provide reliable, high quality, molecular diagnostic products. We believe that customers in our target markets are likely to be particularly sensitive to product defects and errors. As a result, our reputation and the public image of our products and technologies will be significantly impaired if our products fail to perform as expected. Although our diagnostic systems are designed to be user friendly, the functions they perform are complex and our products may develop or contain undetected defects or errors.

We currently manufacture our proprietary test cartridges at our Carlsbad, California manufacturing facilities. We outsource the manufacture of our ePlex instrument to Plexus, which specializes in the manufacturing of electronic and electro-mechanical devices. We currently maintain an inventory of XT-8 instruments and related components to satisfy the expected demand for our XT-8 system for the foreseeable future, as well as to service XT-8 instruments installed at customer locations. While we work closely with Plexus to ensure continuity of supply while maintaining high quality and reliability, and we believe our current stock of XT-8 instruments and related components will be sufficient for our and our customers’ anticipated needs, we cannot guarantee that these efforts will be successful.

If we experience a material defect or error in any of our current or future products, it could result in the loss or delay of revenues, increased costs, delayed or reduced market acceptance, damaged reputation, diversion of development and management resources, legal and/or regulatory claims, recalls, increased insurance costs, or increased service and warranty costs, any of which could materially harm our business, financial condition, and results of operations.

We also face the risk of product liability exposure related to the sale of our products. We currently carry product liability insurance that covers us against specific product liability claims. We also carry a separate general liability and umbrella policy that covers us against certain claims but excludes coverage for product liability. Any claim in excess of our insurance coverage, or for which we do not have insurance coverage, would need to be paid out of our cash reserves, which would harm our financial condition. We cannot assure you that we have obtained sufficient insurance or broad enough coverage to cover potential claims. Also, we cannot assure you that we can or will maintain our insurance policies on commercially acceptable terms, or at all. A product liability claim could significantly harm our business, financial condition and results of operations.

We may need to raise additional funds in the future, and such funds may not be available on a timely basis, or at all.

Until such time, if ever, as we can generate positive cash flows from operations, we will be required to finance our operations with our cash resources and amounts made available under our new credit facility and the Distribution Agreement. We may need to raise additional funds in the future to support our operations. We cannot be certain that additional capital will be available as needed, on acceptable terms, or at all. If we require additional capital at a time when investment in our company, in molecular diagnostics companies, or the marketplace in general is limited, we may not be able to raise such funds at the time that we desire, or at all. If we do raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our common stock could be significantly diluted. In addition, newly issued securities may have rights, preferences or privileges senior to those of holders of our common stock. If we raise additional funds through collaborations and

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licensing arrangements, we could be required to relinquish significant rights to our technologies and products, or grant licenses on terms that are not favorable to us.

Our quarterly revenue and operating results may vary significantly and we may experience constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand.

Revenue from our infectious disease products fluctuates based upon the occurrence of related outbreaks and changes in testing recommendations and available therapies. Influenza and other respiratory-related outbreaks are usually more concentrated in the first and fourth quarters of the year. New information or the introduction of advanced treatment options with respect to a particular disease may also affect the rate of related diagnostic testing. Although certain infectious disease outbreaks tend to occur each year, the timing, severity and length of these incidents varies from one year to another and can vary across different patient populations. In addition, we may not accurately predict the impact of new therapies on disease prevalence or changes to infectious disease testing recommendations affecting our products. As a result of one or more of these factors, we may not be able to accurately forecast sales from our infectious disease products.

Also, unanticipated changes in customer demand for our products may result in constraints or inefficiencies related to our manufacturing, sales force, customer service and administrative infrastructure. These constraints or inefficiencies may adversely affect us as a result of delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

Our revenue, results of operations and cash flows would suffer upon the loss of a significant customer.

Our largest customer, Laboratory Corporation of America, Inc., accounted for approximately 16% of our total revenue for the fiscal year ended December 31, 2018. The loss of a significant customer or a significant reduction in the amount of product ordered by our significant customers may adversely affect our revenue, results of operations and cash flows.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.*

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which may be outside of our control. These factors include, but are not limited to:

• the time and resources required to develop, and conduct clinical studies and obtain regulatory clearances for, our diagnostic tests;

• the expenses we incur to increase our manufacturing capabilities, including expenses to purchase capital equipment and increase our manufacturing capacity and yield;

• the expenses we incur for research and development required to maintain and improve our technology, including developing new ePlex test menu;

• the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation;

• the expenses we incur in connection with commercialization activities, including product marketing, sales, and distribution expenses;

• the expenses we incur in licensing technologies or securing rights to new products from third parties to expand the menu of products and services we plan to offer;

• our sales strategy and whether the revenues from sales of our test cartridges or systems will be sufficient to offset our expenses;

• the costs to attract and retain personnel with the skills required for effective operations; and

• the costs associated with being a public company.

Our budgeted expense levels are based in part on our expectations concerning manufacturing costs and yield and future revenues from sales of our products, as well as our assessment of the future investments needed to expand our commercial organization and manufacturing capabilities to support our anticipated revenue growth and research and development activities. We may be unable to reduce our expenditures in a timely manner, we may incur expenses for unexpected events, or we may experience a shortfall in revenue. Accordingly, a shortfall in demand for our products or other unexpected costs or events could have an immediate and material impact on our business and financial condition.

The regulatory clearance or approval process for certain products is expensive, time consuming and uncertain, and the failure to obtain and maintain required clearances or approvals could prevent us from commercializing our products.*

We obtained 510(k) clearance from the FDA for our ePlex Instrument and the following ePlex assays: the ePlex RP Panel; the ePlex BCID-GP Panel; the ePlex BCID-GN Panel; and the ePlex BCID-FP Panel. We are investing significantly in the

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development of new ePlex molecular diagnostic tests to expand our future product offerings, which will require clinical studies and subsequent 510(k) clearance or pre-market approval by the FDA prior to marketing those tests for commercial use in the United States. There are a number of potential risks associated with conducting clinical studies and obtaining regulatory clearance. For example, we may have difficulty maintaining the level of reliability and clinical accuracy required to complete clinical studies and obtain FDA clearance or approval. In addition, the FDA may require that we conduct additional studies that could impact the cost associated with product clearance and could potentially delay commercial launch of new ePlex molecular diagnostic tests in the United States. We may be unsuccessful in obtaining FDA clearance for our expanding ePlex test menu within our expected time frame, or at all, which could adversely impact our future financial performance and cause our stock price to decline.

The regulatory environment is constantly evolving. For example, the FDA conducted a review of the pre-market clearance process in response to internal and external concerns regarding the 510(k) program and, in January 2011, announced 25 action items designed to make the process more rigorous and transparent. Some of these proposals, if enacted, could impose additional regulatory requirements for device manufacturers which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. Similarly, the European Union, or EU, is transitioning from the existing European Directive 98/79/EC on in vitro diagnostic medical devices, or IVD Directive (IVDD), to the In Vitro Diagnostic Device Regulation, or IVDR. Specifically, the IVDR repeals and replaces the IVDD. Unlike the directive, which must be implemented into the national laws of the European Economic Area, or EEA, Member States, the IVD regulation is directly applicable in all EEA Member States and is intended to eliminate current differences in regulation of IVDs among EEA Member States. Under the IVDR, the classification of our molecular diagnostic products are impacted, and will result in additional regulatory requirements, which could delay our ability to CE Mark our products. Delays in receipt of, or failure to obtain, clearances or approvals for future products would result in delayed, or no, realization of revenues from such products and in substantial additional costs, which could decrease our profitability.

We must also comply with the applicable FDA and foreign regulatory agency post-market requirements, including routine Notified Body conformity assessments to quality system standards (e.g., ISO13485). Any failure to maintain post-market compliance with FDA or foreign regulatory requirements could harm our business, operations, and/or financial condition.

We derive revenues from the sale of research use only (RUO) tests and custom manufactured reagents, which are not intended for diagnostic purposes. Clinical laboratories are regulated under CLIA and may validate the clinical diagnostic use of an LDT specifically for use in their laboratory using any labeled products. While the FDA has traditionally practiced enforcement discretion regarding the use of the LDTs for clinical diagnostic purposes, there have been regulatory actions indicating a potential change in enforcement practices (e.g., the FDA has promulgated draft guidance which outlines stringent regulatory requirements for CLIA labs to use LDTs for clinical diagnostic application and the FDA has issued warning letters to labs marketing the clinical utility of LDTs). These proposed requirements, if implemented, may result in a significant reduction in the sale of our RUO or custom manufactured products, which could reduce our revenues and adversely affect our operations and/or financial condition.

We are subject to various federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties.

Our commercial, research and other financial relationships with healthcare providers and institutions are subject to various federal and state laws intended to prevent health care fraud and abuse. The federal anti-kickback statute prohibits the knowing offer, receipt or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. Many states have similar laws that apply to their state health care programs as well as private payors. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.

The False Claims Act (FCA) imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. We have implemented procedures designed to ensure our compliance with relevant legal requirements. Nevertheless, if our marketing, sales or other arrangements, including our reagent rental arrangements, were determined to violate anti-kickback or related laws, including the FCA, then our revenues could be adversely affected, which would likely harm our business, financial condition and results of operations.

The Health Care Act also imposes reporting and disclosure requirements on device manufacturers for payments to healthcare providers and ownership of their stock by healthcare providers. In February 2013, the Centers for Medicare and Medicaid Services, or, CMS, released the final rule implementing the federal Physician Payments Sunshine Act, or the Sunshine Act. The law requires certain pharmaceutical, biologic, and medical device manufacturers to annually report to CMS payments or

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other transfers of value they furnish to physicians and teaching hospitals. These reporting requirements took effect on August 1, 2013. Failure to submit required information may result in significant civil monetary penalties. We expect compliance with the Sunshine Act to impose significant administrative and financial burdens on us.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing. Some states, such as California, Massachusetts and Vermont, mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increases the possibility that a healthcare company may run afoul of one or more of the requirements.

We are also subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other countries’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and results of operations.

Legislative or regulatory healthcare reforms may have a material adverse effect on our business and results of operations.

Federal and state governments in the United States are undertaking efforts to control growing health care costs through legislation, regulation and voluntary agreements with medical care providers and third-party payors. In March 2010, Congress enacted the Patient Protection and Affordable Care Act, or the PPACA. While the PPACA involves expanding coverage to more individuals, it includes regulatory mandates and other measures designed to constrain medical costs. Among other requirements, the PPACA imposes a 2.3% excise tax on sales of medical devices by manufacturers. In December 2015, the excise tax was suspended for 2016 and 2017, and, in January 2018, the excise tax was further suspended until 2020. Taxable devices include certain medical devices intended for use by humans, with limited exclusions for devices purchased by the general public at retail for individual use. There is no exemption for small companies, and we paid the tax from 2013 through 2015. Recently, Congress and the administration have proposed and taken various steps to revise, repeal, or delay implementation of various aspects of PPACA. If the PPACA is significantly revised, repealed, or if implementation of various aspects are delayed, such modification, repeal, or delay may impact our business, financial condition, results of operations, cash flows and the trading price of our securities. Complying with PPACA may significantly increase our tax liabilities and costs, which could adversely affect our business and financial condition.

The Budget Control Act of 2011 provided, among other things, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which began in 2013 and will remain in effect through 2025 unless additional Congressional action is taken. In addition to the potential impacts to PPACA under the current administration, there could be sweeping changes to the Budget Control Act and other healthcare reforms. For example, the Tax Cuts and Jobs Act enacted in December 2017 eliminated the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code of 1986, commonly referred to as the individual mandate, beginning in 2019. Additional changes to the PPACA remain possible. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Our products could infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our products.

Our commercial success depends on our ability to develop, manufacture and market our systems and tests and use our proprietary technology without infringing the patents and other proprietary rights of third parties. As the molecular diagnostics industry expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our products and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Our products may infringe or may be alleged to infringe these patents.

The patent positions of medical device 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 patents in these fields has emerged to date in the United States or in many foreign jurisdictions. Both the U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. For example, three Supreme Court cases, Association for Molecular Pathology et al. v. Myriad Genetics, Inc., et al., Mayo Collaborative Services v. Prometheus Laboratories, and Alice v. CLS Bank, have introduced additional

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questions regarding the patentability of isolated naturally occurring genes and gene fragments, proteins, peptides, natural products, and related diagnostic and therapeutic methods, which are likely to be resolved only through continued litigation. The overall impact of these decisions and others on the molecular diagnostics industry remains uncertain and our interpretation of the scope of these rulings on existing or future patents may be inaccurate.

There is a significant amount of uncertainty regarding the extent of patent protection and infringement. Companies may have filed pending patent applications that cover technologies we incorporate in our products. As a result, we could be subjected to substantial damages for past infringement or be required to modify our products or stop selling them if it is ultimately determined that our products infringe a third party’s proprietary rights. Even if we are successful in defending against potential intellectual property infringement claims, we could incur substantial costs in doing so. Any litigation related to such claims could consume our resources and lead to significant damages, royalty payments, or an injunction on the sale of certain products. Any additional licenses to patented technology could obligate us to pay substantial additional royalties, which could adversely impact our product costs and harm our business.

If we are unable to obtain, maintain and enforce intellectual property protection covering our products, others may be able to make, use or sell products substantially the same as ours, which could adversely affect our ability to compete in the market.

Our commercial success is dependent in part on obtaining, maintaining and enforcing intellectual property rights, including our patents and other intellectual property rights. If we are unable to obtain, maintain and enforce intellectual property protection covering our products, others may be able to make, use or sell products that are substantially the same as ours without incurring the sizable development and licensing costs that we have incurred, which would adversely affect our ability to compete in the market.

We seek to obtain and maintain patents and other intellectual property rights to restrict the ability of others to market products that compete with our products. Currently, our patent portfolio is comprised on a worldwide basis of more than 100 owned and exclusively licensed patents and approximately 50 additional pending patent applications. In general, patents have a term of at least 20 years from the application filing date or earlier claimed priority date. Several of our pending applications have the potential to mature into patents that may expire between 2028 and 2038. However, not all of the pending or future patent applications owned by or licensed to us are guaranteed to mature into patents, and, moreover, issued patents owned by or licensed to us now or in the future may be found by a court to be invalid or otherwise unenforceable. Also, even if our patents are determined by a court to be valid and enforceable, they may not be sufficiently broad to prevent others from marketing products similar to ours or designing around our patents, despite our patent rights, nor provide us with freedom to operate unimpeded by the patent rights of others.

We also rely on trade-secret protection to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. We have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. We rely, in part, on non-disclosure and confidentiality agreements with our employees, consultants and other parties to protect our trade secrets and other proprietary technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. Any disclosure of confidential data into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us.

We and our suppliers, contract manufacturers and customers are subject to various governmental regulations, and we may incur significant expenses to comply with, and experience delays in our product commercialization as a result of, these regulations.

Our manufacturing processes and facilities and those of some of our contract manufacturers must comply with Quality System Regulation, or QSR, and certain foreign regulatory requirements, which cover the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of our devices. The FDA and other foreign regulatory bodies enforce the QSR and similar foreign regulatory requirements through periodic announced and/or unannounced inspections of manufacturing facilities. We and our contract manufacturers have been, and anticipate in the future being, subject to such inspections, as well as to inspections by other federal and state regulatory agencies.

We must also file reports of device corrections and removals and adhere to the domestic and foreign rules on labeling and promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and

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a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

Failure to comply with applicable regulatory requirements, or later discovery of previously unknown problems with our products or manufacturing processes, including our failure or the failure of one of our contract manufacturers to take satisfactory corrective action in response to an adverse regulatory inspection, can result in, among other things:

• administrative or judicially imposed sanctions;

• injunctions or the imposition of civil penalties;

• recall or seizure of our products;

• total or partial suspension of production or distribution;

• withdrawal or suspension of marketing clearances or approvals;

• clinical holds;

• warning letters;

• refusal to permit the import or export of our products; and

• criminal prosecution.

Any of these actions, in combination or alone, could prevent us from marketing, distributing or selling our products and would likely harm our business.

In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe that the FDA would request that we initiate a voluntary recall if a product was defective or presented a reasonable risk of injury or gross deception. Regulatory agencies in other countries have similar authority to recall devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert management attention and financial resources, could cause the price of our common stock to decline and expose us to product liability or other claims, including contractual claims from parties to whom we sold products, and harm our reputation with customers.

The use of our diagnostic products by our customers is also affected by CLIA and related federal and state regulations that provide for regulation of laboratory testing. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, patient test management, quality assurance, quality control and inspections. Current or future CLIA requirements or the promulgation of additional regulations affecting laboratory testing may prevent some laboratories from using some or all of our diagnostic products.

Our credit facility contains restrictions that limit our flexibility in operating our business.

We must comply with certain affirmative and negative covenants under our credit facility, including covenants that limit or restrict our ability to, among other things:

• incur additional indebtedness or issue certain preferred shares;

• pay dividends on, repurchase or make distributions in respect of, our capital stock or make other restricted payments;

• make certain investments or acquisitions;

• sell certain assets;

• create liens; or

• enter into certain transactions with our affiliates.

If we default under the agreement, because of a covenant breach or otherwise, the outstanding amounts thereunder could become immediately due and payable, and the lenders could terminate all commitments to extend further financing.

We have a history of net losses, and we may never achieve or maintain profitability.

We have a history of significant net losses and a limited history commercializing our molecular diagnostic products. Our net losses were approximately $50.5 million, $61.9 million and $50.6 million for the years ended December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018, we had an accumulated deficit of $466.9 million. We expect to continue to incur significant expenses for the foreseeable future in connection with our ongoing operations, primarily related to expanding our commercial organization (sales and marketing) and manufacturing activities related to our ePlex system, maintaining our existing intellectual property portfolio, obtaining additional intellectual property rights, and investing in corporate infrastructure. We cannot provide any assurance that we will achieve profitability and, even if we achieve profitability, that we will be able to sustain or increase profitability on a quarterly or annual basis. Further, because of our limited commercialization history and the rapidly evolving

42

nature of our target market, we have limited insight into the trends that may emerge and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business and financial condition.

We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, and failure to comply with these laws could harm our business and the price of our common stock.

As a public company listed in the United States, we incur significant legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC, the Public Company Accounting Oversight Board (PCAOB), and The NASDAQ Global Market, may increase our legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If we nevertheless fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Economic conditions and an uncertain economic outlook may adversely impact our business, results of operations, financial condition or liquidity.

Global economic conditions may remain challenging and uncertain for the foreseeable future. These conditions may not only limit our access to capital but also make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses and consumers to slow spending on our products and services, which would delay and lengthen sales cycles. Some of our customers rely on government research grants to fund technology purchases. If negative trends in the economy affect the government’s allocation of funds to research, there may be less grant funding available for certain of our customers to purchase technologies from us. Certain of our customers may face challenges gaining timely access to sufficient credit or may otherwise be faced with budget constraints, which could result in decreased purchases of our products or in an impairment of their ability to make timely payments to us. If our customers do not make timely payments to us, we may be required to assume greater credit risk relating to those customers, increase our allowance for doubtful accounts, and our days sales outstanding would be negatively impacted. Although we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, we may not continue to experience the same loss rates that we have in the past. Additionally, these economic conditions and market turbulence may also impact our suppliers, causing them to be unable to supply sufficient quantities of customized components in a timely manner, thereby impairing our ability to manufacture on schedule and at commercially reasonable costs.

We are exposed to risks associated with long-lived and intangible assets that may become impaired and result in an impairment charge.

The carrying amounts of long-lived and intangible assets are affected whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. These events or changes might include an inability to successfully deliver an instrument to the marketplace and attain customer acceptance, a change in the rights or use of licensed intellectual property, adjustments to our depreciation assumptions, or other matters. Adverse events or changes in circumstances may affect the estimated discounted future cash flows expected to be derived from long-lived and intangible assets. If at any time we determine that an impairment has occurred, we will be required to reflect the impaired value as a charge, resulting in a reduction in earnings in the quarter such impairment is identified and a corresponding reduction in our net asset value. In the past we have incurred, and in the future we may incur, impairment charges. A material reduction in earnings resulting from such a charge could cause us to fail to meet the expectations of investors and securities analysts, which could cause the price of our stock to decline.

Providing instrument systems to our customers through reagent rental agreements may harm our liquidity.

Many of our systems are provided to customers via “reagent rental” agreements, under which customers are generally afforded the right to use the instrument in return for a commitment to purchase minimum quantities of reagents and test cartridges over a period of time. Accordingly, we must either incur the expense of manufacturing instruments well in advance of receiving sufficient revenues from test cartridges to recover our expenses or obtain third party financing sources for the purchase of our instrument. The amount of capital required to provide instrument systems to customers depends on the number of systems placed. Our ability to generate capital to cover these costs depends on the amount of our revenues from sales of reagents and test cartridges sold through our reagent rental agreements. We do not currently sell enough reagents and test cartridges to recover all of our fixed

43

expenses, and therefore we currently have a net loss. If we cannot sell a sufficient number of reagents and test cartridges to offset our fixed expenses, our liquidity will continue to be adversely affected.

We use hazardous chemicals, biological materials and infectious agents in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our research, product development and manufacturing processes involve the controlled use of hazardous materials, including chemicals, biological materials and infectious disease agents. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resulting injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters. Our operations are regulated and may require that environmental permits and approvals be issued by applicable government agencies. Compliance with environmental laws and regulations may be expensive and may impair our research, development and production efforts. If we fail to comply with these requirements, we could incur substantial costs, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance. In addition, we cannot predict the impact on our business of new or amended environmental laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.

If we are unable to retain key employees or hire additional skilled employees, we may be unable to achieve our goals.

Our performance is substantially dependent on the performance of our senior management. Competition for top management personnel is intense and we may not be able to recruit and retain the personnel we need. Our senior managers can terminate their relationship with us at any time. The loss of services of any of these key personnel could significantly reduce our operational effectiveness and investor confidence and our stock price could decline. We do not maintain key-man life insurance on any of our employees.

In addition, our product development and marketing efforts could be delayed or curtailed if we are unable to attract, train and retain highly skilled technical employees and scientific advisors. To expand our research, product development and commercial efforts, we will need to retain additional people skilled in areas such as electrochemical and molecular science, information technology, manufacturing, sales, marketing and technical support. Because of the complex and technical nature of our systems and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our technology. We may not be successful in hiring or retaining qualified personnel, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

Cyberattacks and other security breaches could compromise our proprietary information which could harm our business and reputation.

In the ordinary course of our business, we generate, collect and store proprietary information, including intellectual property and business information. The secure storage, maintenance, and transmission of and access to this information is critical to our operations, business strategy, and reputation. Computer hackers may attempt to penetrate our computer systems or our third party IT service providers' systems and, if successful, misappropriate our proprietary information. In addition, an employee, contractor, or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and may purposefully or inadvertently cause a breach involving such information. While we will continue to implement additional protective measures to reduce the risk of and detect cyberattacks, these incidents are becoming more sophisticated and frequent, and the techniques used in such attacks evolve rapidly and are difficult to detect. Despite our cybersecurity measures, our information technology networks and infrastructure may still be vulnerable to unpermitted access by hackers or other breaches, or employee error or malfeasance. Any such compromise of our, or our third party IT service providers' data security and access to, or public disclosure or loss of, confidential business or proprietary intellectual property information could disrupt our operations, damage our reputation, provide our competitors with valuable information, and subject us to additional costs which could adversely affect our business.

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Information technology systems implementation issues could disrupt our internal operations and adversely affect our financial results.

Portions of our information technology infrastructure may experience interruptions, delays or cessations of service or produce errors in connection with ongoing systems implementation work. In particular, we have implemented an enterprise resource planning software system. To more fully realize the potential of this system, we are continually reassessing and upgrading processes and this may be more expensive, time consuming and resource intensive than planned. Any disruptions that may occur in the operation of this system or any future systems could increase our expenses and adversely affect our ability to report in an accurate and timely manner the results of our consolidated operations, our financial position and cash flows and to otherwise operate our business in a secure environment, all of which could adversely affect our financial results, stock price and reputation.

Our ability to use our net operating loss carryforwards may be limited.

As of December 31, 2018, we had net operating loss, or NOL, carryforwards available of approximately $306.8 million for U.S. federal income tax purposes. These loss carryforwards will expire in varying amounts through 2037. Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, generally imposes an annual limitation on the amount of NOL carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. We have determined that we have experienced multiple ownership changes under Section 382 of the Code. Our ability to use the current federal and state NOL carryforwards may also be limited by the issuance of common stock in the future. To the extent our use of federal and state NOL carryforwards is limited, our income may be subject to corporate income tax earlier than it would if we were able to use the state or federal NOL carryforwards. We have recorded a full valuation allowance against our federal and state net deferred tax assets.

We also had state NOL carryforwards of approximately $215 million as of December 31, 2018. We have recorded a full valuation allowance against our net deferred tax assets.

Provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board and management.

Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of our Board of Directors. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions:

• allow the authorized number of directors to be changed only by resolution of our Board of Directors;

• provide that our stockholders may remove our directors only for cause;

• establish a classified board of directors, such that not all members of the Board of Directors may be elected at one time;

• authorize our Board of Directors to issue without stockholder approval up to 100,000,000 shares of common stock, that, if issued, would dilute our stock ownership and could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board of Directors;

• authorize our Board of Directors to issue without stockholder approval up to 5,000,000 shares of preferred stock, the rights of which will be determined at the discretion of the Board of Directors that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board of Directors;

• require that stockholder actions must be effected at a duly called stockholder meeting or by unanimous written consent;

• establish advance notice requirements for stockholder nominations to our Board of Directors or for stockholder proposals that can be acted on at stockholder meetings;

• limit who may call stockholder meetings; and

• require the approval of the holders of 80% of the outstanding shares of our capital stock entitled to vote in order to amend certain provisions of our certificate of incorporation and bylaws.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

On October 31, 2019, we and the Lenders entered into a first amendment to the New LSA, which provides that we may borrow the additional $15 million currently available under the New LSA at our option, but no later than December 20, 2019, provided that we achieve a designated amount of product revenues for the period beginning on June 1, 2019 and ending on November 30, 2019.

ITEM 6.     EXHIBITS

Exhibit	Description
3.1	Certificate of Incorporation (incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on March 19, 2010).
3.2	Amended and Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 2, 2018).
10.1	The GenMark Diagnostics, Inc. Executive Severance Plan.*
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* Indicates a management contract or compensatory plan or arrangement in which any director or named executive officer participates.

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SIGNATURES

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.

			GENMARK DIAGNOSTICS, INC.
Date:	November 6, 2019	By:	/s/ HANY MASSARANY
			Hany Massarany
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 6, 2019	By:	/s/ JOHNNY EK
			Johnny Ek
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

GENMARK DIAGNOSTICS, INC

EXECUTIVE SEVERANCE PLAN

1.ESTABLISHMENT AND PURPOSE OF PLAN

1.1    Establishment. The GenMark Diagnostics, Inc. Executive Severance Plan (the “Plan”) is hereby established by the Compensation Committee (the “Committee”) of the Board of Directors of GenMark Diagnostics, Inc., effective July 31, 2019 (the “Effective Date”).

1.2    Purpose. The Company draws upon the knowledge, experience and advice of its senior leadership team in order to manage its business for the benefit of the Company’s stockholders. The Committee has determined that it is in the best interests of the Company and its stockholders to provide for the continued dedication of its employees by establishing this Plan to provide severance benefits to eligible employees whose employment terminates under circumstances described in this Plan.

2.     DEFINITIONS AND CONSTRUCTION

2.1    Definitions. Whenever used in this Plan, the following terms shall have the meanings set forth below:

(a)“Accrued Amounts” mean, collectively:

(1)any accrued but unpaid base salary prorated to the Termination Date and accrued but unused vacation, both of which shall be paid on the Termination Date in accordance with the Company’s customary payroll procedures;

(2)reimbursement of unreimbursed business expenses properly incurred by the Participant, which shall be subject to, and paid in accordance with, the Company’s expense reimbursement policy; and

(3)such employee benefits (including equity compensation), if any, to which the Participant may be entitled under the Company’s employee benefit plans as of the Termination Date.

(b)“Acquiror” means the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be, in connection with a Change in Control.

(c)“Base Salary Rate” means the Participant’s monthly base salary rate in effect immediately prior to the Participant’s termination of employment (without giving effect to any reduction in the Participant’s base salary rate constituting Good Reason). Base Salary Rate does not include any bonuses, commissions, fringe benefits, car allowances, other irregular payments or any other compensation except base salary.

(d)“Board” means the Board of Directors of the Company.

(e)“Cause” means the occurrence of any of the following:

(1)the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Company documents or records; or

(2)the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company (including, without limitation, the Participant’s improper use or disclosure of the Company’s confidential or proprietary information); or

(3)the Participant’s substantial and continuing willful refusal to perform duties ordinarily performed by an employee in the same or similar position; or

(4)the Participant’s conviction (including any plea of guilty or nolo contendere) of a felony, or of a misdemeanor which would have a material adverse effect on the Company’s goodwill if the Participant were to be retained as an employee of the Company; or

(5)the Participant’s willful failure to comply with the written policies and procedures of the Company including but not limited to the Company’s Code of Business Conduct and the Company’s Insider Trading Policy.

(f)“Change in Control” means the occurrence of any of the following after the Effective Date:

(1)Any one person, or more than one person acting as a group (a “Person”) acquires ownership of the Company’s securities that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the Company’s then outstanding stock. The term “Person” shall include any natural person, corporation, partnership, trust, or association, or any group or combination thereof, whose ownership of the Company’s securities would be required to be reported under Regulation 13(D) under the Securities Exchange Act of 1934, as amended, or any similar successor regulation or rule. For purposes of this clause (1), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control;

(2)A change in the effective control of the Company which occurs on the date that a majority of the members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or

(3)The closing of any transaction involving a change in ownership of a substantial portion of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during any twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this clause (3), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

Notwithstanding the foregoing, the term “Change in Control” shall not include a consolidation, merger, or other reorganization if, upon consummation of such transaction, all of the outstanding voting stock of the Company is owned, directly or indirectly, by a holding company, and the holders of the Company’s common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company immediately after such transaction.

(g)“Change in Control Period” means the period beginning on the date ninety (90) days preceding the date of an event constituting a Change in Control and ending with the close of business on the first anniversary of the date of such event.

(h)“CIC Severance Benefit Period” means, for each Participant, the CIC Severance Benefit Period set forth in the Participant’s Participation Agreement, which will apply in connection with a Qualifying Termination that occurs during a Change in Control Period.

(i)“Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto and any applicable regulations promulgated thereunder.

(j)“Committee” means the Compensation Committee of the Board.

(k)“Company” means GenMark Diagnostics, Inc., a Delaware corporation, and a Successor that agrees to assume all of the rights and obligations of the Company under this Plan or a Successor which otherwise becomes bound by operation of law under this Plan.

(l)“Company Group” means the group consisting of the Company and each present or future parent and subsidiary corporation or other affiliated business entity thereof.

(m)“Equity Award” means an award relating to the Company’s common stock (or an equivalent equity award as assumed, continued or substituted for by an Acquiror), whether a stock option, stock appreciation right, shares of restricted stock, restricted stock units, performance shares, performance units, or other share-based compensation award.

(n)“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(o)“Good Reason” means the occurrence of any of the following during a Change in Control Period without the Participant’s written consent:

(1)a material reduction by the Company of the Participant’s Base Salary Rate as in effect immediately prior to such reduction (provided that any reduction by 10% or more in a Participant’s Base Salary Rate shall be treated as material hereunder); or

(2)the material diminution of the Participant’s authority, position or duties so that the Participant’s duties are no longer consistent with the Participant’s position immediately prior to such change; provided that if the Participant is determined to have a disability, and if the Company offers the Participant the opportunity to remain employed in a different capacity that accommodates the Participant’s disability, with different duties and compensation structure in lieu of termination, such change in responsibilities and compensation shall not constitute Good Reason; or

(3)the relocation of the Participant’s principal work location that increases the Participant’s one-way commuting distance from the Participant’s home to such new work location by thirty (30) miles or more.

Before the Participant may resign for Good Reason, (i) the Participant must provide the Company with a Notice of Termination within ninety (90) days following the initial event that the Participant believes constitutes “Good Reason” specifically identifying the facts and circumstances claimed to constitute the grounds for the Participant’s resignation for Good Reason, and the thirty (30) day Notice Period will commence on the date of delivery of such Notice of Termination. The Company shall have an opportunity within such Notice Period to cure the Good Reason condition, provided that the Company may waive such cure period by giving written notice to the Participant that it does not intend to cure such condition. The failure by the Participant to include in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason will not preclude the Participant from asserting such fact or circumstance in enforcing the Participant’s rights under this Plan. For the purposes of any determination regarding the existence of Good Reason, any claim by the Participant that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board that Good Reason does not exist, and the Board, acting in good faith, affirms such determination (excluding the Participant if the Participant is a member of the Board).

(p)“Non-CIC Severance Benefit Period” means, for each Participant, the Non-CIC Severance Benefit Period set forth in the Participant’s Participation Agreement, which will apply in connection with a Qualifying Termination that does not occur during a Change in Control Period.

(q)“Non-Qualifying Termination” means any termination of a Participant’s employment with the Company which is not a Qualifying Termination.

(r)“Notice of Termination” means the notice described in Section 4.

(s)“Notice Period” means a period of thirty (30) days commencing on the date of delivery of a Notice of Termination.

(t)“Participant” means an employee of the Company or its subsidiaries who is designated by the Committee to participate in the Plan and who has executed a Participation Agreement.

(u)“Participation Agreement” means an Agreement to Participate in the GenMark Diagnostics, Inc. Executive Severance Plan in the form attached hereto as Exhibit A or in such other form as the Committee may approve from time to time; provided, however, that, after a Participation Agreement has been entered into between a Participant and the Company, it may be modified only by a supplemental written agreement executed by both the Participant and the Company. The terms of such forms of Participation Agreement need not be identical with respect to each Participant.

(v)“Permanent Disability” means a Participant’s incapacity due to bodily injury or disease which (1) prevents the Participant from engaging in the full-time performance of the Participant’s duties for a period of six (6)

consecutive months and (2) will, in the opinion of a qualified physician, be permanent and continuous during the remainder of the Participant’s life.

(w)“Pre-Change in Control Period” means that portion of the Change in Control Period occurring prior to the consummation of a Change in Control.

(x)“Qualifying Termination” means, as applicable:

(1)if such termination does not occur during a Change in Control Period, termination by the Company Group of the Participant’s employment for any reason other than Cause; or

(2)if such termination occurs during a Change in Control Period, either (i) termination by the Company Group of the Participant’s employment for any reason other than Cause or (ii) the Participant’s termination of employment with the Company Group for Good Reason, provided that such termination for Good Reason occurs within ninety (90) days following the initial occurrence of the condition constituting Good Reason;

provided, however, that Qualifying Termination shall not include any termination of the Participant’s employment which is (i) for Cause, (ii) a result of the Participant’s death or Permanent Disability, or (iii) a result of the Participant’s voluntary termination of employment other than for Good Reason.

(y)“Release” means a general release of all known and unknown claims against the Company and its affiliates and their stockholders, directors, officers, employees, agents, successors and assigns substantially in the form attached hereto as Exhibit B (“General Release of Claims [Age 40 and over]”) or Exhibit C (“General Release of Claims [Under age 40]”), whichever is applicable, with any modifications thereto determined by legal counsel to the Company to be necessary or advisable to comply with applicable law or to accomplish the intent of Section 10 (Exclusive Remedy) hereof.

(z)“Release Deadline Date” means the sixtieth (60th) day following the Participant’s Termination Date.

(aa)“Section 409A” means Section 409A of the Code.

(bb) “Section 409A Deferred Compensation” means compensation and benefits provided by the Plan that constitute deferred compensation subject to and not exempted from the requirements of Section 409A.

(cc) “Separation from Service” means a separation from service within the meaning of Section 409A.

(dd) “Short-Term Deferral Period” means a period determined in accordance with Treasury Regulation Section 1.409A-1(b)(4) beginning on the Termination Date with respect to a Qualifying Termination of the Participant and ending on the 15th day of the third month following the later of (i) the last day of the calendar year or (ii) the last day of the Company’s taxable year in which, in either case, the Termination Date occurs.

(ee) “Successor” means any successor in interest to substantially all of the business and/or assets of the Company.

(ff) “Target Bonus” means the target amount of Participant’s annual cash incentive bonus for the Company fiscal year in which the Termination Date occurs, determined by assuming achievement of all Company performance goals and individual performance goals at their target levels in accordance with the Company’s annual incentive bonus plan and as established by the Committee.

(gg) “Termination Date” means:

(1)if the Company terminates the Participant’s employment without Cause, the date specified in the Notice of Termination, which shall be the day immediately following completion of the Notice Period commencing on the date on which the Notice of Termination is delivered to the Participant; provided that the Company shall have the option to relieve the Participant of all job duties, positions and responsibilities for all or any part of the Notice Period and provide the Participant with payment at the Participant’s then current Base Salary Rate in lieu of any portion of the Notice Period for which the Participant is so relieved of duty, which amount shall be paid in a lump sum on the Participant’s

Termination Date, and, in such case, for all purposes of this Plan, the Participant’s Termination Date shall be the date as of which the Participant is relieved of all job duties; and

(2)if the Participant terminates his/her employment with or without Good Reason, the date specified in the Participant’s Notice of Termination, which shall be the day immediately following completion of the Notice Period commencing on the date on which the Notice of Termination is delivered to the Company; provided that the Company may waive all or any part of the Notice Period by giving written notice of such waiver to the Participant and providing the Participant with payment at the Participant’s then current Base Salary Rate in lieu of the portion of the Notice Period waived, which amount shall be paid in a lump sum on the Participant’s Termination Date, and, in such case, for all purposes of this Plan, the Participant’s Termination Date shall be the date as of which the Participant is relieved of all job duties.

Notwithstanding anything contained herein to the contrary, the Termination Date shall not occur until the date on which the Participant incurs a Separation from Service.

2.2    Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

3.ELIGIBILITY AND PARTICIPATION

Eligibility to participate in the Plan shall be limited to those employees of the Company and its subsidiaries who are designated by the Committee. Notwithstanding the foregoing, the individuals eligible to become Participants shall be limited to a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 404 of ERISA. To become a Participant, an eligible individual must execute a Participation Agreement.

4.NOTICE OF TERMINATION

Any termination of a Participant’s employment by the Company or by the Participant (other than termination on account of the Participant’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 17. The Notice of Termination shall specify (a) the facts and circumstances claimed to provide a basis for termination of the Participant’s employment and (b) the applicable Termination Date.

5.NON-QUALIFYING TERMINATION

In the event of a Participant’s Non-Qualifying Termination, the Participant shall be entitled to receive only the Participant’s Accrued Amounts.

6.QUALIFYING TERMINATION

6.1    Not During a Change in Control Period. In the event of a Participant’s Qualifying Termination that does not occur during a Change in Control Period, the Participant shall be entitled to receive the Participant’s Accrued Amounts. In addition, provided that the Participant executes a Release that becomes effective and irrevocable on or before the Release Deadline Date, the Participant shall be entitled to receive the following severance payments and benefits:

(a)Base Salary Severance Benefit. An amount equal to the product of the Participant’s Base Salary Rate and the number of months contained in the Participant’s Non-CIC Severance Benefit Period shall be paid in cash in a single lump sum on the next regular payroll date following the effective date of the Release (but in no event later than the lapsing of the Short-Term Deferral Period).

(b)Health Care Benefit. Payment by the Company of the premiums required to continue the Participant’s group health care coverage for the same level of health coverage and benefits as in effect for the Participant on the day immediately preceding the Termination Date for the Participant’s Non-CIC Severance Benefit Period following the Termination Date (the “Premium Payment Period”) under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), provided that the Participant elects to continue and remains eligible for these benefits under COBRA and does not become eligible for health coverage through another employer during this period. Notwithstanding the foregoing, if the Company determines, in its reasonable discretion, that either (i) the payment of the premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or

regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act) (the “Impermissible Payment”) or (ii) any portion of the Premium Payment Period would exceed the maximum healthcare continuation coverage period available to the Participant under COBRA (the “Excess Payment”), then, in lieu of paying such premiums with respect to the Impermissible Payment or the Excess Payment, the Company, in its sole discretion, may elect to instead pay the Participant on the first day of each month during the Premium Payment Period, a fully taxable cash payment (the “Special Separation Payment”) equal to the Impermissible Payment or the Excess Payment, as applicable, for that month, for the remainder of the Premium Payment Period. The Special Separation Payment with respect to the Impermissible Payment (but not the Excess Payment) will cease should Executive elect to cease, or become ineligible for, continued health care coverage under COBRA.

6.2    During a Change in Control Period. In the event of a Participant’s Qualifying Termination that occurs during a Change in Control Period, the Participant shall be entitled to receive the Participant’s Accrued Amounts. In addition, provided that the Participant executes a Release that becomes effective and irrevocable on or before the Release Deadline Date, the Participant shall be entitled to receive the following severance payments and benefits, reduced by the portion, if any, of such severance payments and benefits previously provided in accordance with Section 6.1 if the Participant’s Qualifying Termination occurred during the Pre-Change in Control Period:

(a)Base Salary Severance Benefit. An amount equal to the product of the Participant’s Base Salary Rate and the number of months contained in the Participant’s CIC Severance Benefit Period shall be paid in cash in a single lump sum on the next regular payroll date following the later of (i) the effective date of the Release or (ii) the consummation of the Change in Control (but in no event later than the lapsing of the Short-Term Deferral Period).

(b)Bonus Severance Benefit. An amount equal to the Participant’s Target Bonus shall be paid in cash in a single lump sum on the next regular payroll date following the later of (i) the effective date of the Release or (ii) the consummation of the Change in Control (but in no event later than the lapsing of the Short-Term Deferral Period).

(c)Health Care Benefit. Payment by the Company of the premiums required to continue the Participant’s group health care coverage for the same level of health coverage and benefits as in effect for the Participant on the day immediately preceding the Termination Date for the Participant’s CIC Severance Benefit Period following the Termination Date under the applicable provisions of COBRA and upon the same terms and subject to the same conditions provided in Section 6.1(b).

7.INTENTIONALLY OMITTED

8.CERTAIN TAX MATTERS

8.1    Federal Excise Tax Under Section 4999 of the Code.

(a)Excess Parachute Payments. If any payments and other benefits provided to a Participant by this Plan or otherwise (collectively, the “Payments”) would, either separately or in the aggregate, constitute “parachute payments” within the meaning of Section 280G of the Code and, but for this Section 8.1, would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Payments will be payable to the Participant either in full or in such lesser amounts as would result, after taking into account the applicable federal, state and local income taxes and the Excise Tax, in the Participant’s receipt on an after-tax basis of the greatest amount of Payments, by reducing Payments in the following order: (i) reduction or elimination of cash severance benefits that are subject to Section 409A of the Code; (ii) reduction or elimination of cash severance benefits that are not subject to Section 409A of the Code; (iii) cancellation or reduction of accelerated vesting of Equity Awards that are not stock options or stock appreciation rights; (iv) cancellation or reduction of accelerated vesting of stock options and stock appreciation rights; and (v) reduction or elimination of other Payments. In the event that acceleration of vesting of Equity Award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant. If two or more Equity Awards are granted on the same date, the accelerated vesting of each award will be reduced on a pro-rata basis.

(b)Determination by Tax Firm. The professional firm engaged by the Company for general tax purposes as of the day prior to the date of the event that might reasonably be anticipated to result in Payments that would otherwise be subject to the Excise Tax will perform the foregoing calculations. If the tax firm so engaged by the Company is serving as accountant or auditor for the Acquiror, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section. The Company will bear all expenses with respect to the determinations by such firm required to be made by this Section. The Company and the Participant shall furnish such tax firm such information and documents as the tax firm may reasonably request in order to make its required determination. The tax firm will provide its

calculations, together with detailed supporting documentation, to the Company and the Participant as soon as practicable following its engagement. Any good faith determinations of the tax firm made hereunder will be final, binding and conclusive upon the Company and the Participant.

8.2    Compliance with Section 409A. The Company intends that this Plan (and all payments and other benefits provided under this Plan) shall be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Section 409A is applicable to such payments, the Company intends that this Plan (and such payments and benefits) shall comply with the requirements of Section 409A. Notwithstanding any other provision of this Plan to the contrary, this Plan shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of this Plan to the contrary, the provision, time and manner of payment or distribution of all compensation and benefits provided by the Plan that constitute Section 409A Deferred Compensation shall be subject to, limited by and construed in accordance with the requirements of Section 409A, including the following:

(a)Separation from Service. To the extent required to be exempt from, or to comply with Section 409A, payments and benefits otherwise payable or provided pursuant to the Plan upon a Participant’s Qualifying Termination shall be paid or provided only at the time of a termination of the Participant’s service which constitutes a Separation from Service.

(b)Six-Month Delay Applicable to Specified Employees. Payments and benefits constituting Section 409A Deferred Compensation to be paid or provided pursuant to the Plan upon the Separation from Service of a Participant who is a “specified employee” within the meaning of Section 409A (determined using the identification methodology selected by the Company from time to time, or if none, the default methodology described in applicable Treasury Regulation) shall be paid or provided only upon the later of (1) the date that is six (6) months and one (1) day after the date of such Separation from Service or, if earlier, the date of death of the Participant (in either case, the “Delayed Payment Date”), or (2) the date or dates on which such Section 409A Deferred Compensation would otherwise be paid or provided in accordance with the Plan. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

(c)Separate Payments. Each payment made under this Plan shall be treated as a separate payment, and the right of a Participant to a series of installment payments under this Plan shall be treated as a right to a series of separate payments.

(d)Expense Reimbursements and In-Kind Benefits. With regard to any provision in this Plan for reimbursement of expenses or in-kind benefits, except for any expense, reimbursement or in-kind benefit provided pursuant to this Plan that does not constitute Section 409A Deferred Compensation, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be deemed to be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, and (iii) such payments shall be made on or before the last day of Participant’s taxable year following the taxable year in which the expense occurred.

(e)Intentionally Omitted.

8.3    Tax Withholding. The Company shall have the right to withhold from any amount payable under this Plan any Federal, state, local and foreign taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

9.CONFLICT IN BENEFITS; NONCUMULATION OF BENEFITS

9.1    Effect of Plan. With the exception of any Equity Award agreements, the terms of this Plan, when accepted by a Participant pursuant to an executed Participation Agreement, shall supersede all prior severance pay and benefit arrangements, whether written or oral, and understandings regarding the subject matter of this Plan and, subject to Section 9.2, shall be the exclusive agreement for the determination of any payments and benefits due to the Participant upon the events described in this Plan.

9.2    Noncumulation of Benefits. Except as expressly provided in a written agreement between a Participant and the Company entered into after the date of such Participant’s Participation Agreement and which expressly disclaims this Section 9.2 and is approved by the Board or the Committee, the total amount of payments and benefits that may be received by the Participant as a result of the events described in (a) the Plan, (b) any agreement between the Participant and the Company, or (c) any other plan, practice or statutory obligation of the Company, shall not exceed the amount of payments and benefits provided by this Plan upon such events, and the aggregate amounts payable under this Plan shall be reduced to the extent of any excess (but not below zero).

10.EXCLUSIVE REMEDY

The payments and benefits provided by this Plan, shall constitute the Participant’s sole and exclusive remedy for any alleged injury or other damages arising out of the cessation of the employment relationship between the Participant and the Company in the event of the Participant’s Qualifying Termination. The Participant shall be entitled to no other compensation, benefits, or other payments from the Company as a result of the Participant’s Qualifying Termination with respect to which the payments and benefits described in this Plan have been provided to the Participant, except as expressly set forth in this Plan or, subject to the provisions of Section 9.2, in a duly executed employment agreement between Company and the Participant.

11.PROPRIETARY AND CONFIDENTIAL INFORMATION

Each Participant agrees to continue to abide by the terms and conditions of the confidentiality and/or proprietary rights agreement between the Participant and the Company or any other member of the Company Group.

12.NON-SOLICITATION

If the Company performs its obligations to deliver the payments and benefits required by this Plan, then for a period equal to the CIC Severance Benefit Period or Non-CIC Severance Benefit Period applicable to a Participant following the Participant’s Qualifying Termination, the Participant shall not, directly or indirectly, recruit, solicit or invite the solicitation of any employees of the Company or any other member of the Company Group to terminate their employment relationship with the Company Group.

13.NO CONTRACT OF EMPLOYMENT

Neither the establishment of the Plan, nor any amendment thereto, nor the payment or provision of any benefits thereunder shall be construed as giving any person the right to be retained by the Company, a Successor or any other member of the Company Group. Except as otherwise established in a written employment agreement between the Company and a Participant, the employment relationship between the Participant and the Company is an “at-will” relationship. Accordingly, either the Participant or the Company may terminate the relationship at any time, with or without cause, and with or without notice except as otherwise provided by Section 4. In addition, nothing in this Plan shall in any manner obligate any Successor or other member of the Company Group to offer employment to any Participant or to continue the employment of any Participant which it does hire for any specific duration of time.

14.CLAIMS FOR BENEFITS

14.1    ERISA Plan. This Plan is intended to be (a) an employee welfare benefit plan as defined in Section 3(1) of ERISA and (b) a “top-hat” plan maintained for the benefit of a select group of management or highly compensated employees of the Company Group.

14.2    Application for Benefits. All applications for payments and/or benefits under the Plan (“Benefits”) shall be submitted to the Company’s Vice President, Human Resources (the “Claims Administrator”), with a copy to the Company’s General Counsel. Applications for Benefits must be in writing on forms acceptable to the Claims Administrator and must be signed by the Participant or beneficiary. The Claims Administrator reserves the right to require the Participant or beneficiary to furnish such other proof of the Participant’s expenses, including without limitation, receipts, canceled checks, bills, and invoices as may be required by the Claims Administrator.

14.3    Appeal of Denial of Claim.

(a)If a claimant’s claim for Benefits is denied, the Claims Administrator shall provide notice to the claimant in writing of the denial within ninety (90) days after its submission. The notice shall be written in a manner calculated to be understood by the claimant and shall include:

(1)The specific reason or reasons for the denial;

(2)References to the specific Plan provisions on which the denial is based;

(3)A description of any additional material or information necessary for the applicant to perfect the claim and an explanation of why such material or information is necessary; and

(4)An explanation of the Plan’s claims review procedures and time limits applicable to such procedures, including a statement of claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination.

(b)If special circumstances require an extension of time for processing the initial claim, a written notice of the extension and the reason therefor shall be furnished to the claimant before the end of the initial ninety (90) day period. In no event shall such extension exceed ninety (90) days.

(c)If a claim for Benefits is denied, the claimant, at the claimant’s sole expense, may appeal the denial to the Committee (the “Appeals Administrator”) within sixty (60) days of the receipt of written notice of the denial. In pursuing such appeal the claimant or his or her duly authorized representative:

(1)may request in writing that the Appeals Administrator review the denial;

(2)may review pertinent documents; and

(3)may submit issues and comments in writing.

(d)The decision on review shall be made within sixty (60) days of receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty (120) days after receipt of the request for review. If such an extension of time is required, written notice of the extension shall be furnished to the claimant before the end of the original sixty (60) day period. The decision on review shall be made in writing, shall be written in a manner calculated to be understood by the claimant, and, if the decision on review is a denial of the claim for Benefits, shall include:

(1)The specific reason or reasons for the denial;

(2)References to the specific Plan provisions on which the denial is based;

(3)A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, the Plan and all documents, records and other information relevant to his or her claim for benefits; and

(4)A statement of claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination.

14.4    Exhaustion of Administrative Remedies. The exhaustion of these claims procedures is mandatory for resolving every claim and dispute arising under the Plan. As to such claims and disputes:

(a)No claimant shall be permitted to commence any legal action to recover benefits or to enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any other provision of law, whether or not statutory, until these claims procedures have been exhausted in their entirety; and

(b)In any such legal action, all explicit and implicit determinations by the Claims Administrator (including, but not limited to, determinations as to whether the claim, or a request for a review of a denied claim, was timely filed) shall be afforded the maximum deference permitted by law.

15.DISPUTE RESOLUTION

In the event of any dispute or claim relating to or arising out of this Plan that is not resolved in accordance with procedure described in Section 14, the Company and the Participant, each by executing a Participation Agreement, agree that all such disputes or claims shall be resolved by means of binding arbitration in San Diego County, California before a sole arbitrator, in accordance with the laws of the State of California for agreements made in that State or as otherwise required by ERISA. Any arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to enforce any right arising out of this Plan.

16.SUCCESSORS AND ASSIGNS

16.1    Successors of the Company. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.

16.2    Heirs and Representatives of Participant. This Plan shall inure to the benefit of and be enforceable by the Participants’ personal or legal representatives, executors, administrators, successors, heirs, distributees, devises, legatees or other beneficiaries. If a Participant should die while any amount would still be payable to the Participant hereunder (other than amounts which, by their terms, terminate upon the death of the Participant) if the Participant had continued to live, then all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executors, personal representatives or administrators of the Participant’s estate.

17.NOTICES

For purposes of this Plan, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States certified mail, return receipt requested, or by overnight courier, postage prepaid, as follows:

(a)if to the Company:

GenMark Diagnostics, Inc.

5964 La Place Court

Carlsbad, California 92008

Attention: General Counsel

(b)    if to the Participant, at the home address which the Participant most recently communicated to the Company in writing.

Either party may provide the other with notices of change of address, which shall be effective upon receipt.

18.TERMINATION AND AMENDMENT OF PLAN

Unless extended by the Board or the Committee, the Plan and all Participation Agreements shall expire on the third (3rd) anniversary of the Effective Date. Except as provided by the preceding sentence, the Plan and/or any Participation Agreement executed by a Participant may not be terminated with respect to such Participant without the written consent of the Participant and the approval of the Board or the Committee. The Plan and/or any Participation Agreement executed by a Participant may be modified, amended or superseded with respect to such Participant only by a supplemental written agreement between the Participant and the Company approved by the Board or the Committee. Notwithstanding any other provision of the Plan to the contrary, the Board for the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Participation Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Participation Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder.

19.MISCELLANEOUS PROVISIONS

19.1    Administration. The Plan shall be administered by the Committee. The Committee shall have the exclusive discretion and authority to establish rules, forms and procedures for the administration of the Plan, to construe and interpret the Plan, and to decide all questions of fact, interpretation, definition, computation or administration arising in connection with the Plan, including, but not limited to, eligibility to participate in the Plan and the amount of benefits paid under the Plan. The rules, interpretations and other actions of the Committee shall be binding and conclusive on all persons. All expenses incurred in connection with the administration of the Plan, including the claims procedures described in Section 14, shall be paid by the Company.

19.2    Unfunded Obligation. Any amounts payable to Participants pursuant to the Plan are unfunded obligations. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Board or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of the Company.

19.3    No Duty to Mitigate; Obligations of Company. A Participant shall not be required to mitigate the amount of any payment or benefit contemplated by this Plan by seeking employment with a new employer or otherwise, nor shall any such payment or benefit (except for the benefits described in Section 6.1(b) or Section 6.2(c)) be reduced by any compensation or benefits that the Participant may receive from employment by another employer. Except as otherwise provided by this Plan, the obligations of the Company to make payments to the Participant and to make the arrangements provided for herein are absolute and unconditional and may not be reduced by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Participant or any third party at any time.

19.4    Recoupment. Without the consent of any Participant and notwithstanding any other provision of this Plan or any other agreement between the Participant and the Company to the contrary, any incentive-based compensation, or any other compensation, paid to the Participant pursuant to this Plan or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and recoupment as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement). This Section 19.4 shall survive the termination of this Plan for a period equal to the greater of (a) three (3) years and (b) such longer period required by the applicable law, government regulation, order or stock exchange listing requirement.

19.5    No Representations. By executing a Participation Agreement, the Participant acknowledges that in becoming a Participant in the Plan, the Participant is not relying and has not relied on any promise, representation or statement made by or on behalf of the Company which is not set forth in this Plan.

19.6    Waiver. No waiver by the Participant or the Company of any breach of, or of any lack of compliance with, any condition or provision of this Plan by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

19.7    Choice of Law. The validity, interpretation, construction and performance of this Plan shall be governed by the substantive laws of the State of California, without regard to its conflict of law provisions.

19.8    Validity. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect.

19.9    Benefits Not Assignable. Except as otherwise provided herein or by law, no right or interest of any Participant under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any other manner, and no attempted transfer or assignment thereof shall be effective. No right or interest of any Participant under the Plan shall be liable for, or subject to, any obligation or liability of such Participant.

19.10    Consultation with Legal and Financial Advisors. By executing a Participation Agreement, the Participant acknowledges that this Plan confers significant legal rights, and may also involve the waiver of rights under other

agreements; that the Company has encouraged the Participant to consult with the Participant’s personal legal and financial advisors; and that the Participant has had adequate time to consult with the Participant’s advisors before executing the Participation Agreement.

19.11    Further Assurances. From time to time, at the Company’s request and without further consideration, the Participant shall execute and deliver such additional documents and take all such further action as reasonably requested by the Company to be necessary or desirable to make effective, in the most expeditious manner possible, the terms of the Plan, the Participant’s Participation Agreement and the Release, and to provide adequate assurance of the Participant’s due performance thereunder.

20.Agreement

By executing a Participation Agreement, the Participant acknowledges that the Participant has received a copy of this Plan and has read, understands and is familiar with the terms and provisions of this Plan. This Plan shall constitute an agreement between the Company and the Participant executing a Participation Agreement.

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Plan as duly adopted by the Committee on July 31, 2019.

/s/ Eric Stier

Eric Stier, Secretary

EXHIBIT A

FORM OF

AGREEMENT TO PARTICIPATE IN THE

GENMARK DIAGNOSTICS, INC.

EXECUTIVE SEVERANCE PLAN

AGREEMENT TO PARTICIPATE IN THE

GENMARK DIAGNOSTICS, INC.

EXECUTIVE SEVERANCE PLAN

In consideration of the benefits provided by the GenMark Diagnostics, Inc. Executive Severance Plan (the “Plan”), the undersigned employee of GenMark Diagnostics, Inc. (the “Company”) and the Company agree that, as of the date written below, the undersigned shall become a Participant in the Plan and shall be fully bound by and subject to all of its provisions. All references to a “Participant” in the Plan shall be deemed to refer to the undersigned.

Definitions. For the purposes of the Participant’s participation in the Plan, certain capitalized terms shall have the following meanings:

1. “CIC Severance Benefit Period” means a period of [twelve (12)] [nine (9)] [six (6)] months.

2. “Non-CIC Severance Benefit Period” means a period of six (6) months.

The undersigned employee acknowledges that the Plan confers significant legal rights and may also constitute a waiver of rights under other agreements with the Company; that the Company has encouraged the undersigned to consult with the undersigned’s personal legal and financial advisors; and that the undersigned has had adequate time to consult with the undersigned’s advisors before executing this agreement.

The undersigned employee acknowledges that he or she has received a copy of the Plan and has read, understands and is familiar with the terms and provisions of the Plan. The undersigned employee further acknowledges that (1) by accepting the arbitration provision set forth in Section 15 of the Plan, the undersigned is waiving any right to a jury trial in the event of any dispute covered by such provision and (2) except as otherwise established in a written employment agreement between the Company and the undersigned, the employment relationship between the undersigned and the Company is an “at-will” relationship.

Executed as of July 31, 2019.

PARTICIPANT	GENMARK DIAGNOSTICS, INC.
________________________________	By:______________________________
Signature
________________________________	Title:____________________________
Name Printed
________________________________
Address__________________________

EXHIBIT B

FORM OF

GENERAL RELEASE OF CLAIMS

[Age 40 and over]

GENERAL RELEASE OF CLAIMS

[Age 40 and over]

This Agreement is by and between [Employee Name] (“Employee”) and [GenMark Diagnostics, Inc. or Successor that agrees to assume the Executive Severance Plan] (the “Company”). This Agreement will become effective on the eighth (8th) day after it is signed by Employee (the “Effective Date”), provided that the Company has signed this Agreement and Employee has not revoked this Agreement (by written notice to [Company Contact Name] at the Company) prior to that date.

RECITALS

A.    Employee was employed by the Company as of ___________, ____.

B.    Employee and the Company entered into an Agreement to Participate in the GenMark Diagnostics, Inc. Executive Severance Plan (such agreement and plan being referred to herein as the “Plan”) effective as of __________, ____ wherein Employee is entitled to receive certain benefits in the event of an Qualifying Termination (as defined by the Plan), provided Employee signs and does not revoke a Release (as defined by the Plan).

C.    Employee’s employment has been terminated as a result of an Qualifying Termination (as defined by the Plan). Employee’s last day of work and termination are effective as of _______________, ____. Employee desires to receive the payments and benefits provided by the Plan by executing this Release.

NOW, THEREFORE, the parties agree as follows:

1.    Commencing on the Effective Date, the Company shall provide Employee with the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan. Employee acknowledges that the payments and benefits made pursuant to this paragraph are made in full satisfaction of the Company’s obligations under the Plan. Employee further acknowledges that Employee has been paid all wages and accrued, unused vacation that Employee earned during his or her employment with the Company.

2.    Employee and Employee’s successors release the Company, its respective subsidiaries, stockholders, investors, directors, officers, employees, agents, attorneys, insurers, legal successors and assigns of and from any and all claims, actions and causes of action, whether now known or unknown, which Employee now has, or at any other time had, or shall or may have against those released parties based upon or arising out of any matter, cause, fact, thing, act or omission whatsoever directly related to Employee’s employment by the Company or the termination of such employment and occurring or existing at any time up to and including the Effective Date, including, but not limited to, any claims of breach of written contract, wrongful termination, retaliation, fraud, defamation, infliction of emotional distress, or national origin, race, age, sex, sexual orientation, disability or other discrimination or harassment under the Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967, the Americans with Disabilities Act, the Fair Employment and Housing Act or any other applicable law. Notwithstanding the foregoing, this release shall not apply to any right of the Employee to receive the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan.

3.    Employee acknowledges that he or she has read Section 1542 of the Civil Code of the State of California, which states in full:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Employee waives any rights that Employee has or may have under Section 1542 and comparable or similar provisions of the laws of other states in the United States to the full extent that he or she may lawfully waive such rights pertaining to this general release of claims, and affirms that Employee is releasing all known and unknown claims that he or she has or may have against the parties listed above.

4.    Employee and the Company acknowledge and agree that they shall continue to be bound by and comply with the terms and obligations under the following agreements: (i) any proprietary rights or confidentiality agreements between the Company and Employee, (ii) the Plan, and (iii) any Equity Award agreements between the Company and Employee.

5.    This Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, assigns, heirs and personal representatives.

6.    The parties agree that any and all disputes that both (i) arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement or the interpretation of the terms of this Agreement shall be subject to the provisions of Section 14 and Section 15 of the Plan.

7.    The parties agree that any and all disputes that (i) do not arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement, the interpretation of the terms of this Agreement or any of the matters herein released or herein described shall be resolved by means of a court trial conducted by the superior or district court in San Diego County, California. The parties hereby irrevocably waive their respective rights to have any such disputes tried to a jury, and the parties hereby agree that such courts will have personal and subject matter jurisdiction over all such disputes. Notwithstanding the foregoing, in the event of any such dispute, the parties may agree to mediate or arbitrate the dispute on such terms and conditions as may be agreed in writing by the parties. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to resolve any such dispute.

8.    This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, with the exception of any agreements described in paragraph 4 of this Agreement. This Agreement may not be modified or amended except by a document signed by an authorized officer of the Company and Employee. If any provision of this Agreement is deemed invalid, illegal or unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected.

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO [21] [45] DAYS TO CONSIDER THIS AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY TIME DURING THE 7 DAYS AFTER EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME EFFECTIVE UNTIL THAT 7-DAY PERIOD HAS PASSED. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 1.

Dated:___________________________________________	________________________________________________
	[Employee Name]
Dated:___________________________________________	[Company] By:_____________________________________________

EXHIBIT C

FORM OF

GENERAL RELEASE OF CLAIMS

[Under age 40]

GENERAL RELEASE OF CLAIMS

[Under age 40]

This Agreement is by and between [Employee Name] (“Employee”) and [GenMark Diagnostics, Inc. or Successor that agrees to assume the Executive Severance Plan] (the “Company”). This Agreement is effective on the day it is signed by Employee (the “Effective Date”).

RECITALS

A.    Employee was employed by the Company as of ____________, ____.

B.    Employee and the Company entered into an Agreement to Participate in the GenMark Diagnostics, Inc. Executive Severance Plan (such agreement and plan being referred to herein as the “Plan”) effective as of ___________, ____ wherein Employee is entitled to receive certain benefits in the event of an Qualifying Termination (as defined by the Plan), provided Employee signs a Release (as defined by the Plan).

C.    Employee’s employment has been terminated as a result of an Qualifying Termination (as defined by the Plan). Employee’s last day of work and termination are effective as of ______________, ____ (the “Termination Date”). Employee desires to receive the payments and benefits provided by the Plan by executing this Release.

NOW, THEREFORE, the parties agree as follows:

1.    Commencing on the Effective Date, the Company shall provide Employee with the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan. Employee acknowledges that the payments and benefits made pursuant to this paragraph are made in full satisfaction of the Company’s obligations under the Plan. Employee further acknowledges that Employee has been paid all wages and accrued, unused vacation that Employee earned during his or her employment with the Company.

2.    Employee and Employee’s successors release the Company, its respective subsidiaries, stockholders, investors, directors, officers, employees, agents, attorneys, insurers, legal successors and assigns of and from any and all claims, actions and causes of action, whether now known or unknown, which Employee now has, or at any other time had, or shall or may have against those released parties based upon or arising out of any matter, cause, fact, thing, act or omission whatsoever directly related to Employee’s employment by the Company or the termination of such employment and occurring or existing at any time up to and including the Termination Date, including, but not limited to, any claims of breach of written contract, wrongful termination, retaliation, fraud, defamation, infliction of emotional distress, or national origin, race, age, sex, sexual orientation, disability or other discrimination or harassment under the Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967, the Americans with Disabilities Act, the Fair Employment and Housing Act or any other applicable law. Notwithstanding the foregoing, this release shall not apply to any right of the Employee to receive the applicable payments and benefits set forth in the Plan in accordance with the terms of the Plan.

3.    Employee acknowledges that he or she has read Section 1542 of the Civil Code of the State of California, which states in full:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Employee waives any rights that Employee has or may have under Section 1542 and comparable or similar provisions of the laws of other states in the United States to the full extent that he or she may lawfully waive such rights pertaining to this general release of claims, and affirms that Employee is releasing all known and unknown claims that he or she has or may have against the parties listed above.

4.    Employee and the Company acknowledge and agree that they shall continue to be bound by and comply with the terms and his obligations under the following agreements: (i) any proprietary rights or confidentiality agreements between the Company and Employee, (ii) the Plan, and (iii) any Equity Award agreements between the Company and Employee.

5.    This Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors, assigns, heirs and personal representatives.

6.    The parties agree that any and all disputes that both (i) arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement or the interpretation of the terms of this Agreement shall be subject to Section 14 and Section 15 of the Plan.

7.    The parties agree that any and all disputes that (i) do not arise out of the Plan, the interpretation, validity or enforceability of the Plan or the alleged breach thereof and (ii) relate to the enforceability of this Agreement, the interpretation of the terms of this Agreement or any of the matters herein released or herein described shall be resolved by means of a court trial conducted by the superior or district court in San Diego County, California. The parties hereby irrevocably waive their respective rights to have any such disputes tried to a jury, and the parties hereby agree that such courts will have personal and subject matter jurisdiction over all such disputes. Notwithstanding the foregoing, in the event of any such dispute, the parties may agree to mediate or arbitrate the dispute on such terms and conditions as may be agreed in writing by the parties. The prevailing party shall be entitled to recover from the losing party its attorneys’ fees and costs incurred in any action brought to resolve any such dispute.

8.    This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, with the exception of any agreements described in paragraph 4 of this Agreement. This Agreement may not be modified or amended except by a document signed by an authorized officer of the Company and Employee. If any provision of this Agreement is deemed invalid, illegal or unenforceable, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected.

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 1.

Dated:___________________________________________	________________________________________________
	[Employee Name]
Dated:___________________________________________	[Company] By:_____________________________________________

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Hany Massarany, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of GenMark Diagnostics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2019	By:	/s/ Hany Massarany
			Hany Massarany
			President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Johnny Ek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 of GenMark Diagnostics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 6, 2019	By:	/s/ Johnny Ek
			Johnny Ek
			Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GenMark Diagnostic, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), we, Hany Massarany, President and Chief Executive Officer of the Company, and Johnny Ek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(i) the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 6, 2019	By:	/s/ Hany Massarany
			Hany Massarany
			President and Chief Executive Officer
Date:	November 6, 2019	By:	/s/ Johnny Ek
			Johnny Ek
			Chief Financial Officer

XML

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of share-based compensation, stock options, activity

nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2018	2,439,914		$	9.57
Granted	—		$	—
Exercised	(114,883	)	$	5.99
Cancelled	(273,414	)	$	11.56
Outstanding at September 30, 2019	2,051,617		$	9.51
Vested and expected to vest at September 30, 2019	2,051,617		$	9.51
Exercisable at September 30, 2019	2,051,617		$	9.51

Schedule of share-based compensation, restricted stock units, activity

The Company’s restricted stock unit activity for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	2,665,708		$	6.12
Granted	1,564,623		$	6.73
Vested	(1,087,440	)	$	6.02
Cancelled	(268,332	)	$	6.72
Unvested at September 30, 2019	2,874,559		$	6.43

Schedule of share-based compensation, market based stock units, activity

The Company’s market-based stock unit activity for the nine months ended September 30, 2019 was as follows:     

	Number of Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	328,739	$	10.03
Granted	460,000	$	10.22
Cancelled	(28,334)	$	9.39
Unvested at September 30, 2019	760,405	$	10.16

Schedule of share-based compensation, market based stock units, valuation assumptions

The fair value of these market-based stock units was estimated on the grant date using the Monte Carlo Simulation Valuation Model, which estimates the potential outcome of achieving the market conditions based on simulated future stock prices, with the following assumptions for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended   September 30,
	2019		2018
Expected volatility	64	%	65		%
Risk-free interest rate	2.50	%	2.40		%
Expected dividend	—	%	—		%
Weighted average fair value	$10.11 - $10.31		$	7.19

Schedule of employee service share-based compensation, allocation of recognized period costs

Stock-based compensation was recognized in the unaudited condensed consolidated statements of comprehensive loss as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Cost of revenue	$	248	$	230	$	700	$	637
Sales and marketing	801		719		2,212		2,059
Research and development	436		605		1,308		1,890
General and administrative	1,644		1,542		4,620		4,309
Total stock-based compensation expense	$	3,129	$	3,096	$	8,840	$	8,895

XML

Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of future minimum lease payments

As of September 30, 2019, the future minimum lease payments required under the Company's lease arrangements are as follows (in thousands):

Fiscal Years Ending	Future Minimum Lease Payments
Remaining in 2019	$	504
2020	1,997
2021	2,015
2022	2,077
2023	1,939
Thereafter	2,084
Total	10,616
Less: imputed interest	(2,717		)
Total operating lease liabilities	$	7,899

XML

Organization and Basis of Presentation - Property and equipment (Details)	9 Months Ended
	Sep. 30, 2019
Property and Equipment
Finite-Lived Intangible Asset, Useful Life	10 years
Machinery and laboratory equipment | Minimum
Property and Equipment
Property, Plant, and Equipment, Useful Life	3 years
Machinery and laboratory equipment | Maximum
Property and Equipment
Property, Plant, and Equipment, Useful Life	5 years
Instruments | Minimum
Property and Equipment
Property, Plant, and Equipment, Useful Life	4 years
Instruments | Maximum
Property and Equipment
Property, Plant, and Equipment, Useful Life	5 years
Office equipment | Minimum
Property and Equipment
Property, Plant, and Equipment, Useful Life	3 years
Office equipment | Maximum
Property and Equipment
Property, Plant, and Equipment, Useful Life	7 years
Leasehold improvements
Property and Equipment
Property, Plant and Equipment, Estimated Useful Lives	over the shorter of the remaining life of the lease or the useful economic life of the asset

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 33	$ (5)	$ (28)	$ (59)

XML

Leases - Future minimum lease payments (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Schedule of future minimum lease payments
Remaining in 2019	$ 504
2019	1,997
2020	2,015
2021	2,077
2022	1,939
Thereafter	2,084
Total future minimum payments	10,616
Imputed interest, operating leases	(2,717)
Operating Lease, Liability	$ 7,899

XML

Condensed Consolidated Financial Statement Details - Accrued warranty (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Product Warranties Disclosures [Abstract]
Beginning accrued warranty balance	$ 226	$ 439	$ 330	$ 470
Warranty expenses incurred	(342)	(148)	(1,054)	(1,222)
Provisions	319	84	927	1,127
Ending accrued warranty balance	$ 203	$ 375	$ 203	$ 375

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	GenMark Diagnostics, Inc.
Entity Central Index Key	0001487371
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Small Business	true
Entity Emerging Growth Company	false
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Current Reporting Status	Yes
Entity Shell Company	false
Amendment Flag	false
Entity Common Stock, Shares Outstanding		58,080,388

XML

Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Statement of Cash Flows [Abstract]
Net Income (Loss) Attributable to Noncontrolling Interest	$ (37,063,000)
Operating activities:
Net loss	37,063,000	$ 38,937,000
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,393,000	5,281,000
Net amortization/(accretion) of premiums/discounts on investments	(134,000)	(110,000)
Amortization of deferred debt issuance costs	1,266,000	725,000
Stock-based compensation	8,840,000	8,895,000
Provision for bad debt	93,000	24,000
Non-cash inventory adjustments	1,653,000	1,061,000
Other non-cash adjustments	175,000	(62,000)
Changes in operating assets and liabilities:
Accounts receivable	993,000	797,000
Inventories	(5,471,000)	(3,847,000)
Prepaid expenses and other assets	(857,000)	384,000
Accounts payable	345,000	(3,408,000)
Accrued compensation	(406,000)	1,053,000
Other current and non-current liabilities	(398,000)	(756,000)
Net cash used in operating activities	(25,571,000)	(28,900,000)
Investing activities:
Purchases of property and equipment	(1,193,000)	(1,060,000)
Purchases of marketable securities	(26,735,000)	(28,785,000)
Maturities of marketable securities	26,880,000	56,500,000
Net cash provided by (used in) investing activities	(1,048,000)	26,655,000
Financing activities:
Proceeds from issuance of common stock	2,837,000	535,000
Principal repayment of borrowings	(35,070,000)	(68,000)
Proceeds from borrowings	50,000,000	0
Payments associated with debt issuance	(3,588,000)	(20,000)
Proceeds from stock option exercises	(432,000)	(22,000)
Net cash provided by (used in) financing activities	14,611,000	469,000
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	30,000	27,000
Net increase (decrease) in cash, cash equivalents, and restricted cash	(11,978,000)	(1,749,000)
Cash, cash equivalents, and restricted cash at beginning of year	37,044,000	27,512,000
Cash, cash equivalents, and restricted cash at end of period	25,066,000	25,763,000
Non-cash investing and financing activities:
Transfer of systems (from) to property and equipment into (from) inventory	1,492,000	2,477,000
Property and equipment included in accounts payable	147,000	746,000
Supplemental cash flow information:
Cash paid for income taxes, net	85,000	133,000
Cash paid for interest	$ 2,890,000	$ 1,517,000

XML

Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Equity awards may be granted at the discretion of the Compensation Committee of the Board of Directors under the Company's 2010 Equity Incentive Plan, as amended, or the 2010 Plan, in connection with the hiring or retention of personnel and are subject to certain conditions. The Company recognizes stock-based compensation expense related to stock options, restricted stock units, and market-based stock units granted to employees, directors and non-employee advisors in exchange for services under the 2010 Plan, and employee stock purchases under the Company's Amended and Restated 2013 Employee Stock Purchase Plan, or the ESPP. Employee participation in the 2010 Plan is at the discretion of the Compensation Committee of the Board of Directors of the Company. Each equity award grant reduces the number of shares available for grant under the 2010 Plan. Stock-based compensation expense is recorded in cost of sales, sales and marketing, research and development, and/or general and administrative expenses based on the employee's respective function. During the nine months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $8,840,000 and $8,895,000, respectively. The Company recognized stock-based compensation expense of $3,129,000 and $3,096,000, respectively, during the three months ended September 30, 2019 and 2018.

Stock Options

The fair value of stock options granted is derived from the Black-Scholes Option Pricing Model, which uses several judgment-based variables to calculate the expense. The inputs include the expected term of the stock option, the expected volatility, and other factors.

• Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding and is determined by using the simplified method.

• Expected Volatility. Expected volatility represents the estimated volatility in the Company’s stock price over the expected term of the stock option and is determined by review of the Company’s and similar companies’ historical experience.

• Expected Dividend. The Black-Scholes Option Pricing Model calls for a single expected dividend yield as an input. The Company has assumed no dividends as it has never paid dividends and has no current plans to do so.

• Risk-Free Interest Rate. The risk-free interest rate used in the Black-Scholes Option Pricing Model is based on published U.S. Treasury rates in effect at the time of grant for periods corresponding with the expected term of the option.

All stock options granted under the 2010 Plan are exercisable at a per share price equal to the closing quoted market price of a share of the Company’s common stock on the NASDAQ Global Market on the grant date and generally vest over a period of four years. Stock options are generally exercisable for a period of up to ten years after grant and are typically forfeited if employment is terminated before the options vest.

The Company's stock option activity for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2018	2,439,914		$	9.57
Granted	—		$	—
Exercised	(114,883	)	$	5.99
Cancelled	(273,414	)	$	11.56
Outstanding at September 30, 2019	2,051,617		$	9.51
Vested and expected to vest at September 30, 2019	2,051,617		$	9.51
Exercisable at September 30, 2019	2,051,617		$	9.51

Options that were exercisable as of September 30, 2019 had a remaining weighted average contractual term of 3.50 years, and an aggregate intrinsic value of $759,000. As of September 30, 2019, there were 2,051,617 stock options outstanding, which had a remaining weighted average contractual term of 3.50 years and an aggregate intrinsic value of $759,000. No stock options were granted during the nine months ended September 30, 2019.

Restricted Stock Units

Restricted stock units granted under the 2010 Plan generally vest over a period of between one and four years and are typically forfeited if service to the Company ceases before the restricted stock units vest. The compensation expense related to the restricted stock units is calculated as the fair market value of the Company's stock on the grant date and is adjusted for estimated forfeitures. Restrictions expire after the grant date in accordance with specific provisions in the applicable award agreement.

The Company’s restricted stock unit activity for the nine months ended September 30, 2019 was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	2,665,708		$	6.12
Granted	1,564,623		$	6.73
Vested	(1,087,440	)	$	6.02
Cancelled	(268,332	)	$	6.72
Unvested at September 30, 2019	2,874,559		$	6.43

As of September 30, 2019, there was $14,125,000 of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 2.62 years. The total fair value of restricted stock units that vested during the nine months ended September 30, 2019 and 2018 was $7,479,000 and $4,392,000, respectively.

Market-Based Stock Units

The Company granted market-based stock units in each of February 2019, 2018, and 2017, which may result in the recipient receiving shares of stock equal to 200% of the target number of units granted. The vesting and issuance of Company stock pursuant to market-based stock units depends on the Company's stock performance as compared to the NASDAQ Composite Index over the three-year period following the grant, subject to the recipient's continued service with the Company. As of September 30, 2019, there was $2,685,000 of unrecognized stock-based compensation expense related to market-based stock unit awards, which is expected to be recognized over a weighted average period of 1.65 years.

The Company’s market-based stock unit activity for the nine months ended September 30, 2019 was as follows:     

	Number of Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2018	328,739	$	10.03
Granted	460,000	$	10.22
Cancelled	(28,334)	$	9.39
Unvested at September 30, 2019	760,405	$	10.16

The fair value of these market-based stock units was estimated on the grant date using the Monte Carlo Simulation Valuation Model, which estimates the potential outcome of achieving the market conditions based on simulated future stock prices, with the following assumptions for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended   September 30,
	2019		2018
Expected volatility	64	%	65		%
Risk-free interest rate	2.50	%	2.40		%
Expected dividend	—	%	—		%
Weighted average fair value	$10.11 - $10.31		$	7.19

Employee Stock Purchase Plan

The Company's stockholders originally approved the ESPP in May 2013. In May 2018, the Company's stockholders approved the amendment and restatement of the ESPP, which increased the shares authorized for issuance under the ESPP from 650,000 shares to 1,750,000 shares.

The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the Company's common stock on the first or the last day of the offering period, whichever is lower. Generally, each offering under the ESPP will be for a period of six months as determined by the Company's Board of Directors; provided that no offering period may exceed 27 months. Employees may invest up to 10% of their qualifying gross compensation through payroll deductions. In no event may an employee purchase more than 1,500 shares of common stock during any six-month offering period. As of September 30, 2019, there were 835,818 shares of common stock available for issuance under the ESPP.  The ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation; therefore, stock-based compensation expense related to the ESPP has been recorded during each of the nine months ended September 30, 2019 and 2018.

Stock-Based Compensation Expense Recognition

Stock-based compensation was recognized in the unaudited condensed consolidated statements of comprehensive loss as follows (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Cost of revenue	$	248	$	230	$	700	$	637
Sales and marketing	801		719		2,212		2,059
Research and development	436		605		1,308		1,890
General and administrative	1,644		1,542		4,620		4,309
Total stock-based compensation expense	$	3,129	$	3,096	$	8,840	$	8,895

Stock-based compensation capitalized during the periods presented was not material and there was no unrecognized tax benefit related to stock-based compensation for either of the nine months ended September 30, 2019 and 2018.

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Loan Payable (Notes)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Loan payable

Long-term debt

As of September 30, 2019 and December 31, 2018, long-term debt consisted of the following (in thousands):

	September 30, 2019			December 31, 2018
Term Loans
Term Loan A - 6.9% interest	$	—		$	7,619
Term Loan B - 6.9% interest	—			7,619
Term Loan C - 7.4% interest	—			12,000
Term Loan D - 8.8% interest	—			663
Term Loan E - 8.8% interest	—			7,098
Term Loan - 8.4% interest	50,000			—
Final fee obligation	2,975			3,288
Unamortized issuance costs	(4,255		)	(2,245		)
Total debt, net	48,720			36,042
Current portion of long-term debt	—			—
Long-term debt	$	48,720		$	36,042

Term Loans

In January 2015, the Company entered into a Loan and Security Agreement, or the LSA, with Solar Capital Partners (as successor-in-interest to General Electric Capital Corporation), and certain other financial institutions party thereto, as lenders. Pursuant to the LSA and its subsequent amendments, the Company borrowed $42,762,000 in a series of term loans and had the ability to borrow against a revolving loan in the maximum amount of $5,000,000. During the term of the LSA, the term loans thereunder accrued interest at a rate equal to (a) the greater of 1.00% or the three year treasury rate in effect at the time of funding, plus (b) an applicable margin between 4.95% and 5.90% per annum.The Company borrowed all $42,762,000 under the term loans as provided in the LSA, and the Company did not borrow any of the $5,000,000 available under the revolving loan.

On February 1, 2019, or the Effective Date, the Company entered into a new Loan and Security Agreement, or the New LSA, with Solar Capital Ltd. and certain other financial institutions, or, collectively, the Lenders. Pursuant to the New LSA, the Lenders are providing the Company with up to $65,000,000 in a series of term loans, or, collectively, the Term Loans, of which $50,000,000, or the Tranche 1 Loan, was funded on the Effective Date. An additional $15,000,000, or the Tranche 2 Loan, is available to be funded at the Company's option, but no later than December 31, 2019, provided that the Company achieves a designated amount of product revenues on a trailing six-month basis.

On the Effective Date, approximately $38,800,000 of the proceeds from the Tranche 1 Loan were used by the Company to repay all outstanding principal, interest, related fees, and other obligations under the LSA, with the remaining borrowings to be used to satisfy the Company's working capital needs and for other general business purposes. The Company accounted for the repayment of its obligations under the LSA as a debt modification. The Company has capitalized the issuance costs it incurred when entering into the New LSA, which are being amortized over the remaining term of the New LSA.

The Term Loans under the New LSA will accrue interest at a floating per annum rate in effect from time-to-time equal to (a) the greater of 2.51% or the one-month LIBOR rate then in effect as of the applicable payment date, plus (b) 5.90% per annum. The Company is only required to make interest payments on amounts borrowed pursuant to the Term Loans from the applicable funding date until February 28, 2021, or the Interest Only Period. If the Company exercises its option to borrow the Tranche 2 Loan and the Company achieves an additional designated amount of product revenues on a trailing six-month basis on or before December 31, 2020, then the Interest Only Period may, at the Company’s election, be extended for both Term Loans through February 28, 2022. Following the Interest Only Period (as the same may be extended pursuant to the terms of the New LSA), monthly installments of principal and interest under the Term Loans will be due until the original principal amount and applicable interest is fully repaid by February 1, 2023, or the Final Maturity Date.

Under the New LSA, the Company is required to comply with certain affirmative and negative covenants, including, without limitation, delivering reports and notices relating to the Company’s financial condition and certain regulatory events and intellectual property matters, as well as limiting the creation of liens, the incurrence of indebtedness, and the making of certain investments, dividends, payments and acquisitions, other than as specifically permitted by the New LSA. As of September 30, 2019, the Company was in compliance with all covenants under the LSA.

The New LSA also contains customary events of default (subject, in certain instances, to specified cure periods), including, but not limited to, the failure to make payments of interest or premium when due, the failure to comply with certain covenants and agreements specified in the New LSA, and the occurrence of a material adverse change, certain regulatory events, or certain insolvency events. Upon the occurrence of an event of default, the Lenders may declare all outstanding principal and accrued but unpaid interest under the New LSA immediately due and payable and may exercise the other rights and remedies as set forth in the New LSA.

Debt Issuance Costs

As of September 30, 2019 and December 31, 2018, the Company had $4,255,000 and $2,245,000, respectively, of unamortized debt issuance discount, which is offset against borrowings in long-term and short-term debt.

Amortization of debt issuance costs was $450,000 and $142,000 for the three months ended September 30, 2019 and 2018, respectively, and $1,266,000 and $725,000 for the nine months ended September 30, 2019 and 2018, respectively. Amortization of debt issuance costs is included in interest expense in the Company's unaudited condensed consolidated statements of comprehensive loss for the periods presented.

Letter of Credit

In September 2012, the Company provided a $758,000 letter of credit issued by Banc of California to the landlord of its executive office facility in Carlsbad, California. This letter of credit was secured with $758,000 of restricted cash as of September 30, 2019.

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Income Taxes (Notes)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

As of September 30, 2019, the Company recorded a full valuation allowance against all of its net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the future. Due to the Company's losses, it only records a tax provision or benefit related to uncertain tax positions and related interest and minimum tax payments or refunds. The Company recorded income tax (benefit) expense of $(33,000) and $5,000 for the three months ended September 30, 2019 and 2018, respectively, and $28,000 and $59,000 for the nine months ended September 30, 2019 and 2018, respectively.

The Company is subject to taxation in the United States and in various state and foreign jurisdictions. The Company's federal and state tax returns since inception are subject to examination due to the carryover of net operating losses. The statute of limitations for the assessment and collection of income taxes related to other foreign tax returns varies by country. In the foreign countries where we have operations, these time periods generally range from three to five years after the year for which the tax return is due or the tax is assessed.

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Condensed Consolidated Financial Statement Details - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Summary of inventory on hand
Raw materials	$ 3,678	$ 2,449
Work-in-process	5,102	3,349
Finished goods	3,790	4,446
Total	$ 12,570	$ 10,244

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Stock-Based Compensation - Valuation assumptions (Details) - 2010 Equity Incentive Plan - Market-based share unit - $ / shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions, expected volatility rate	64.00%	65.00%
Fair value assumptions, risk free interest rate	2.50%	2.40%
Fair value assumptions, expected dividend rate	0.00%	0.00%
Equity award other than options, granted, weighted average grant date fair value	$ 10.22	$ 7.19
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award other than options, granted, weighted average grant date fair value	10
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award other than options, granted, weighted average grant date fair value	$ 10

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Organization and Basis of Presentation - Additional information (Details Textual)	9 Months Ended
	Sep. 30, 2019 USD ($) Segment	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (503,946,000)	$ (466,883,000)
Cash, cash equivalents, and marketable securities	33,187,000
Working Capital	$ 36,632,000
Sufficient capital to fund its operations	1 year
Number of Reportable Segments | Segment	1
Restricted cash	$ 758,000	$ 758,000	$ 758,000
Instruments
Product Warranty Liability
Product warranty period	one-year
Reagents
Product Warranty Liability
Product warranty period	sixty-day

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Intangible Assets, net (Notes)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets, net

. Intangible Assets, net

Intangible assets as of each of September 30, 2019 and December 31, 2018 comprised the following (in thousands):

	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Licensed intellectual property	$	4,750	$	(3,170	)	$	1,580	$	4,750	$	(2,727	)	$	2,023

In July 2012, the Company entered into a development collaboration and license agreement with Advanced Liquid Logic, Inc., or ALL, which was acquired by Illumina, Inc. in July 2013. Under the terms of the agreement, the Company established a collaborative program to develop in-vitro diagnostic products incorporating ALL’s proprietary electro-wetting technology in conjunction with the Company’s electrochemical detection technology.

Intellectual property licenses have a weighted average remaining amortization period of 2.68 years as of September 30, 2019. Amortization expense for these licenses was $147,000 and $156,000 for the three months ended September 30, 2019 and 2018, respectively, and was $443,000 and $453,000 during the nine months ended September 30, 2019 and 2018, respectively.

Estimated future amortization expense for these licenses is as follows (in thousands):

Fiscal Years Ending	Future Amortization Expense
Remaining in 2019	$	150
2020	593
2021	593
2022	244
Total	$	1,580

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Marketable Securities (Notes)

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Marketable securities

Marketable Securities

The following table summarizes the Company’s marketable securities as of each of September 30, 2019 and December 31, 2018 (in thousands):

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	7,078	$	3	$	—		$	7,081
U.S. government and agency securities	1,000		—		—			1,000
Commercial paper	798		—		—			798
Total	$	8,876	$	3	$	—		$	8,879
December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	6,393	$	—	$	(4	)	$	6,389
Commercial paper	2,493		—		—			2,493
Total	$	8,886	$	—	$	(4	)	$	8,882

All of the Company's marketable securities have a maturity of one year or less.

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Stock-Based Compensation - Expense recognition (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation	$ 3,129,000	$ 3,096,000	$ 8,840,000	$ 8,895,000
Allocated share-based compensation expense, capitalized amount	0	0	0	0
Allocated share-based compensation expense, tax benefit	0	0	0	0
2010 Equity Incentive Plan | Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Allocated share-based compensation expense	248,000	230,000	700,000	637,000
2010 Equity Incentive Plan | Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Allocated share-based compensation expense	801,000	719,000	2,212,000	2,059,000
2010 Equity Incentive Plan | Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Allocated share-based compensation expense	436,000	605,000	1,308,000	1,890,000
2010 Equity Incentive Plan | General and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Allocated share-based compensation expense	$ 1,644,000	$ 1,542,000	$ 4,620,000	$ 4,309,000

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Organization and Basis of Presentation Recent Accounting Pronouncements (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Text Block [Abstract]
Schedule of Change in Accounting Estimate [Table Text Block]	174000
Operating Lease, Liability, Current	$ 1,828,000	$ 1,780,000	$ 0
Operating Lease, Liability, Noncurrent	6,071,000	6,832,000	0
Operating Lease, Right Of Use Asset, Noncurrent	$ 4,766,000	$ 5,097,000	$ 0

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Condensed Consolidated Financial Statement Details - Property and equipment, net (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property and Equipment
Property and equipment — at cost:	$ 44,839	$ 43,057
Less: accumulated depreciation	(25,976)	(21,987)
Property and equipment, net	18,863	21,070
Machinery and laboratory equipment
Property and Equipment
Property and equipment — at cost:	15,414	15,206
Instruments
Property and Equipment
Property and equipment — at cost:	16,025	15,089
Office equipment
Property and Equipment
Property and equipment — at cost:	2,141	2,114
Leasehold improvements
Property and Equipment
Property and equipment — at cost:	$ 11,259	$ 10,648

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Organization and Basis of Presentation - Revenue disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Revenue
Revenue from Contract with Customer, Excluding Assessed Tax	$ 20,822	$ 15,713	$ 60,413	$ 51,156
License and other revenue	96	82	412	225
Total revenue	20,918	15,795	60,825	51,381
ePlex Revenue
Disaggregation of Revenue
Revenue from Contract with Customer, Excluding Assessed Tax	13,365	6,743	41,051	25,757
XT-8 Revenue
Disaggregation of Revenue
Revenue from Contract with Customer, Excluding Assessed Tax	$ 7,457	$ 8,970	$ 19,362	$ 25,399

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Net Loss per Common Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Computations of diluted net loss per share

The calculations of diluted net loss per share for each of the nine months ended September 30, 2019 and 2018 did not include the effects of the following stock options and other equity awards which were outstanding as of the end of each period because the inclusion of these securities would have been anti-dilutive (in thousands):

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2019	2018	2019	2018
Options outstanding to purchase common stock	2,052	2,445	2,052	2,445
Other unvested equity awards	3,635	3,466	3,635	3,466
Total	5,687	5,911	5,687	5,911

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Loan Payable (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of long-term debt instruments

As of September 30, 2019 and December 31, 2018, long-term debt consisted of the following (in thousands):

	September 30, 2019			December 31, 2018
Term Loans
Term Loan A - 6.9% interest	$	—		$	7,619
Term Loan B - 6.9% interest	—			7,619
Term Loan C - 7.4% interest	—			12,000
Term Loan D - 8.8% interest	—			663
Term Loan E - 8.8% interest	—			7,098
Term Loan - 8.4% interest	50,000			—
Final fee obligation	2,975			3,288
Unamortized issuance costs	(4,255		)	(2,245		)
Total debt, net	48,720			36,042
Current portion of long-term debt	—			—
Long-term debt	$	48,720		$	36,042

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Leases - Additional information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 01, 2019	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Rent and operating expenses	$ 474,000	$ 485,000	$ 1,483,000	$ 1,355,000
Operating Lease, Right Of Use Asset, Noncurrent	4,766,000		4,766,000		$ 5,097,000	$ 0
Operating Lease, Liability, Current	1,828,000		1,828,000		1,780,000	0
Operating Lease, Liability, Noncurrent	6,071,000		6,071,000		$ 6,832,000	0
Deferred rent						520,000
Deferred rent	$ 0		$ 0			$ 2,996,000
Operating Lease, Weighted Average Discount Rate, Percent	11.20%		11.20%
Operating Lease, Weighted Average Remaining Lease Term	5 years 2 months 19 days		5 years 2 months 19 days

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Intangible Assets, net - Components of gross and net intangible asset balances (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 147,000	$ 156,000	$ 443,000	$ 453,000
Finite-lived intangible assets
Net carrying amount	1,580,000		$ 1,580,000
Finite-lived intangible assets, remaining amortization period			2 years 8 months 5 days
Intellectual Property
Finite-lived intangible assets
Gross carrying amount	4,750,000		$ 4,750,000		$ 4,750,000
Accumulated amortization	(3,170,000)		(3,170,000)		(2,727,000)
Net carrying amount	$ 1,580,000		$ 1,580,000		$ 2,023,000

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Net Loss per Common Share (Notes)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss per Common Share

Net Loss per Common Share

Basic net loss per share is calculated by dividing loss available to stockholders of the Company's common stock (the numerator) by the weighted average number of shares of the Company's common stock outstanding during the period (the denominator). Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted loss per share is calculated in a similar way to basic loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if the dilutive potential shares had been issued, unless the effect would be anti-dilutive.

The calculations of diluted net loss per share for each of the nine months ended September 30, 2019 and 2018 did not include the effects of the following stock options and other equity awards which were outstanding as of the end of each period because the inclusion of these securities would have been anti-dilutive (in thousands):

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2019	2018	2019	2018
Options outstanding to purchase common stock	2,052	2,445	2,052	2,445
Other unvested equity awards	3,635	3,466	3,635	3,466
Total	5,687	5,911	5,687	5,911

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 20,822	$ 15,713	$ 60,413	$ 51,156
Revenue:
License and other revenue	96	82	412	225
Total revenue	20,918	15,795	60,825	51,381
Cost of revenue	13,868	10,165	41,339	37,172
Gross profit	7,050	5,630	19,486	14,209
Operating expenses:
Sales and marketing	6,279	5,375	17,991	15,964
General and administrative	4,765	4,718	14,217	13,398
Research and development	6,294	6,105	20,386	22,007
Total operating expenses	17,338	16,198	52,594	51,369
Loss from operations	(10,288)	(10,568)	(33,108)	(37,160)
Other income (expense):
Interest income	126	188	438	577
Interest expense	(1,527)	(661)	(4,331)	(2,246)
Other income (expense)	(19)	53	(34)	(49)
Total other income (expense)	(1,420)	(420)	(3,927)	(1,718)
Loss before provision for income taxes	(11,708)	(10,988)	(37,035)	(38,878)
Income tax expense	(33)	5	28	59
Net Income (Loss) Attributable to Parent	$ (11,675)	$ (10,993)	$ (37,063)	$ (38,937)
Net loss per share, basic and diluted	$ (0.20)	$ (0.20)	$ (0.65)	$ (0.70)
Weighted average number of shares outstanding, basic and diluted	57,718	55,847	57,161	55,535
Other comprehensive loss:
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	$ (46)	$ (51)	$ (37)	$ (31)
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, after Tax	0	4	8	27
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	(46)	(47)	(29)	(4)
Other Comprehensive Income (Loss), Net of Tax	$ (11,721)	$ (11,040)	$ (37,092)	$ (38,941)

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Stockholders' Equity (Details) $ / shares in Units, shares in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares Rate shares
Type of Issuance Cost [Line Items]
Maximum ATM Offering Amount	$ 35,000,000
Underwriters commission | Rate	3.00%
Stock Issued During Period, Shares, New Issues | shares	392
Weighted Average Price Per Share | $ / shares	$ 6.58
Gross Proceeds from Issuance of Common Stock	$ 2,600,000
Payments of Stock Issuance Costs	207,000
Issuance Costs Due to Canaccord
Type of Issuance Cost [Line Items]
Payments of Stock Issuance Costs	77,000
Issuance Costs Due to Additional Parties
Type of Issuance Cost [Line Items]
Payments of Stock Issuance Costs	$ 130,000

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Stock-Based Compensation - Stock awards activity (Details) - 2010 Equity Incentive Plan - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Dec. 31, 2018
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, outstanding at December 31, 2017, shares	2,439,914
Options, granted, shares	0
Options, exercised, shares	(114,883)
Options, cancelled, shares	(273,414)
Options, outstanding at June 30, 2018, shares	2,051,617
Options, vested and expected to vest, shares	2,051,617
Options, exercisable, shares	2,051,617
Options, outstanding at December 31, 2017, weighted average exercise price	$ 9.51		$ 9.51	$ 9.57
Options, granted, weighted average exercise price	0.00
Options, exercised, weighted average exercise price	5.99
Options, cancelled, weighted average exercise price	11.56
Options, outstanding at June 30, 2018, weighted average exercise price	9.51
Options, vested and expected to vest, weighted average exercise price	9.51
Options, exercisable, weighted average exercise price	$ 9.51
Options, exercisable, weighted average remaining contractual term	3 years 6 months
Options, exercisable, intrinsic value			$ 759
Options, outstanding, weighted average remaining contractual term	3 years 6 months
Options, outstanding, intrinsic value			759
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award other than options, unvested at December 31, 2017, shares	2,665,708
Equity award other than options, granted, shares	1,564,623
Equity award other than options, vested, shares	(1,087,440)
Equity award other than options, cancelled, shares	(268,332)
Equity award other than options, unvested at June 30, 2018, shares	2,874,559
Equity award other than options, unvested, weighted average grant date fair value	$ 6.12
Equity award other than options, granted, weighted average grant date fair value	6.73
Equity award other than options, vested, weighted average grant date fair value	6.02
Equity award other than options, cancelled, weighted average grant date fair value	6.72
Equity award other than options, unvested, weighted average grant date fair value	$ 6.43
Equity award other than options, vested in period, fair value	$ 7,479	$ 4,392
Nonvested award, compensation cost not yet recognized			14,125
Nonvested award, compensation cost not yet recognized, weighted average period for recognition	2 years 7 months 13 days
Market-based share unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award other than options, unvested at December 31, 2017, shares	328,739
Equity award other than options, granted, shares	460,000
Equity award other than options, cancelled, shares	(28,334)
Equity award other than options, unvested at June 30, 2018, shares	760,405
Equity award other than options, unvested, weighted average grant date fair value	$ 10.03
Equity award other than options, granted, weighted average grant date fair value	10.22	$ 7.19
Equity award other than options, cancelled, weighted average grant date fair value	9.39
Equity award other than options, unvested, weighted average grant date fair value	$ 10.16
Nonvested award, compensation cost not yet recognized			$ 2,685
Nonvested award, compensation cost not yet recognized, weighted average period for recognition	1 year 7 months 24 days

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Stockholders' Equity (Notes)

9 Months Ended

Sep. 30, 2019

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity

Stockholders' Equity

On August 5, 2019, the Company entered into an Equity Distribution Agreement, or the Distribution Agreement, with Canaccord Genuity LLC, or Canaccord, pursuant to which the Company may offer and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $35 million. Under the Distribution Agreement, Canaccord may sell shares by any method deemed to be an “at-the-market” offering as defined in Rule 415 under the U.S. Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. The Company is not obligated to sell any shares under the Distribution Agreement. Canaccord is entitled to a commission of 3% of the aggregate gross proceeds from each sale of shares occurring pursuant to the Distribution Agreement. During the three and nine months ended September 30, 2019, the Company sold 392,247 shares of common stock under the Equity Distribution Agreement at a weighted average price per share of $6.58 resulting in aggregate gross proceeds of $2.6 million. The Company incurred $207,000 in related transaction costs, comprising commissions paid to Canaccord of $77,000, as well as $130,000 in additional miscellaneous expenses.

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Leases (Notes)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

The Company has operating and finance lease agreements for its office, manufacturing, warehousing and laboratory space and for office equipment. Rent and operating expenses charged under these arrangements was $474,000 and $485,000 for the three months ended September 30, 2019 and 2018, respectively, and $1,483,000 and $1,355,000 for the nine months ended September 30, 2019 and 2018.

Pursuant to the adoption of the new lease standard, the Company reported noncurrent operating lease ROU assets of $4,766,000, and current and noncurrent operating lease liabilities of $1,828,000 and $6,071,000, respectively, as of September 30, 2019. The Company reported current and noncurrent deferred rent under the existing lease standard of $520,000 and $2,996,000, respectively, at December 31, 2018. The Company's operating lease liabilities were measured at a weighted average discount rate of 11.2% and have a weighted average remaining term of 5.22 years.

As of September 30, 2019, the future minimum lease payments required under the Company's lease arrangements are as follows (in thousands):

Fiscal Years Ending	Future Minimum Lease Payments
Remaining in 2019	$	504
2020	1,997
2021	2,015
2022	2,077
2023	1,939
Thereafter	2,084
Total	10,616
Less: imputed interest	(2,717		)
Total operating lease liabilities	$	7,899

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Organization and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and applicable regulations of the U.S. Securities and Exchange Commission, or the SEC, and should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 25, 2019. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for the full year or any future period.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The Company has experienced net losses and negative cash flows from operating activities since its inception and had an accumulated deficit of $503,946,000 as of September 30, 2019. The Company's ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure through expanding its product offerings and consequently increasing its product revenues. As of September 30, 2019, the Company had available cash, cash equivalents, and marketable securities of $33,187,000 and working capital of $36,632,000 available to fund future operations. The Company has prepared cash flow forecasts which indicate, based on the Company's current cash resources available and working capital, that the Company will have sufficient resources to fund its operations for at least one year after the date the financial statements are issued.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes thereto. The Company’s significant estimates included in the preparation of the financial statements are related to accounts receivable, inventories, property and equipment, leases, intangible assets, employee-related compensation accruals, warranty liabilities, tax valuation accounts, and stock-based compensation. Actual results could differ from those estimates.

Segment Information

Segment Information

The Company currently operates in one reportable business segment, which encompasses the development, manufacturing, sales and support of instruments and molecular tests based on its proprietary eSensor® detection technology. Substantially all of the Company’s operations and assets are in the United States.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or the FASB, or other standard setting bodies that the Company adopts as of the specified effective date.

In June 2018, the FASB issued Accounting Standards Update, or ASU, 2018-07, Compensation - Stock Compensation (Topic 718), which simplifies the accounting for non-employee share-based payment transactions. The new standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 (including interim periods within that fiscal year), with early adoption permitted. The Company adopted this new standard in the second quarter of 2018 and determined its application did not have a material impact on the Company's unaudited condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new methodology for recognizing credit losses on financial instruments. The new standard requires entities to measure financial instruments at their amortized cost basis net of an allowance for credit losses. The allowance for credit losses must reflect an entity's current estimate of all expected credit losses. The new guidance also requires entities to present credit losses on debt securities accounted for under the available-for-sale method as an allowance rather than a write down. The new guidance must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented and is effective for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of this standard on its unaudited consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the prior lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use, or ROU, assets for all leases with lease terms of greater than 12 months. The guidance also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and is effective for annual periods beginning after December 15, 2018. The Company adopted the new standard in the first quarter of 2019 using the package of transition practical expedients. The Company recognized non-current ROU assets of $5,097,000 and current and non-current lease liabilities of $1,780,000 and $6,832,000, respectively, upon adoption. Deferred rent is now presented as an offset to the Company's non-current operating lease ROU assets. The new lease standard did not have a material impact on the Company's unaudited condensed consolidated statements of operations, cash flows, or stockholders' equity.

Revenue from Contract with Customer

Revenue

The Company recognizes revenue from operations through the sale of products and other services. Product revenue comprises the sale of diagnostic tests and instruments, as well as related services.

Revenue is recognized when control of products and services is transferred to the customer in an amount that reflects the consideration that the Company expects to receive from the customer in exchange for those products and services. This process involves identifying the contract with the customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when it determines there are no uncertainties regarding payment terms or transfer of control.

Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue from instrument services is recognized as the services are rendered, typically evenly over the contract term.

Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general, and administrative expenses when incurred or amortized over the estimated contract term when resulting from new contract acquisition efforts.

The Company allocates contract price to each performance obligation in proportion to its stand-alone selling price. The stand-alone selling price is determined by the Company's best estimate of stand-alone selling price using average selling prices over a rolling 12-month period along with a specific assessment of any unique circumstances of the contract. For those products for which there is limited sales history, the Company makes price determinations based on similar product sales data.

The following table represents disaggregated revenue by source (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Revenue Source:
ePlex product revenue	$	13,365	$	6,743	$	41,051	$	25,757
XT-8 product revenue	7,457		8,970		19,362		25,399
Total product revenue	20,822		15,713		60,413		51,156
License and other revenue	96		82		412		225
Total revenue	$	20,918	$	15,795	$	60,825	$	51,381

Cash, Cash Equivalents and Marketable Securities

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash on deposit with banks, money market instruments, and certificates of deposit with original maturities of three months or less at the date of purchase. Marketable securities consist of certificates of deposits that mature in greater than three months. Marketable securities are accounted for as "available-for-sale" with the carrying amounts reported in the balance sheets stated at cost, which approximates their fair market value, with unrealized gains and losses, if any, reported as a separate component of stockholders' equity and included in comprehensive loss.

Receivables

Receivables

Accounts receivable consist of amounts due to the Company for sales to customers and are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based on an assessment of the collectability of specific customer accounts, the aging of accounts receivable, and a reserve for unknown items based upon the Company’s historical experience.

Product Warranties

Product Warranties

The Company generally offers a one-year warranty for its instruments sold to customers and typically up to a sixty-day warranty for consumables. Factors that affect the Company’s warranty reserves include the number of units sold, historical and anticipated rates of warranty repairs, and the cost per repair. The Company periodically assesses the adequacy of its warranty reserve and adjusts the amount as appropriate.

Intangible Assets

Intangible Assets

Intangible assets consist of licenses or sublicenses to technology covered by patents owned by third parties, and are amortized on a straight-line basis over the expected useful lives of these assets, which is generally ten years. Amortization of licenses typically begins upon the Company obtaining access to the licensed technology and is recorded in cost of revenues for licenses supporting commercialized products. The amortization of licenses to technology supporting products in development is recorded in research and development expenses.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company assesses the recoverability of long-lived assets, including intangible assets, by periodically evaluating the carrying value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If impairment is indicated, the Company writes down the carrying value of the asset to its estimated fair value. This fair value is primarily determined based on estimated discounted cash flows.

Inventories

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and include direct labor, materials, and manufacturing overhead. The Company periodically reviews inventory for evidence of slow-moving or obsolete parts, and writes inventory down to net realizable value, as needed. This write-down is based on management’s review of inventories on hand, compared to estimated future usage and sales, shelf-life assumptions, and assumptions about the likelihood of obsolescence. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not reversed subsequently to income, even if circumstances later suggest that increased carrying amounts are recoverable.

Property and Equipment, net

Property and Equipment, net

Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are identified below. Repair and maintenance costs are expensed as incurred.

Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	3 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset

Income Taxes

Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. A full valuation allowance has been recorded against the Company’s net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the future. The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. The Company recognizes accrued interest related to uncertain tax positions as a component of income tax expense.

A tax position that is more likely than not to be realized is measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority that has full knowledge of all relevant information. Measurement of a tax position that meets the more likely than not threshold considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the reporting date.

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Condensed Consolidated Financial Statement Details (Tables)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Inventories

Inventory

	September 30, 2019		December 31, 2018
Raw materials	$	3,678	$	2,449
Work-in-process	5,102		3,349
Finished goods	3,790		4,446
Total inventories	$	12,570	$	10,244

Property and equipment, net

Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are identified below. Repair and maintenance costs are expensed as incurred.

Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	3 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset

Property and Equipment, Net

	September 30, 2019			December 31, 2018
Property and equipment — at cost:
Machinery and laboratory equipment	$	15,414		$	15,206
Instruments	16,025			15,089
Office equipment	2,141			2,114
Leasehold improvements	11,259			10,648
Total property and equipment — at cost	44,839			43,057
Less: accumulated depreciation	(25,976		)	(21,987		)
Property and equipment, net	$	18,863		$	21,070

Accrued warranty

Accrued Warranty

The following table shows changes in the Company's accrued warranties for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2019			2018			2019			2018
Beginning accrued warranty balance	$	226		$	439		$	330		$	470
Warranty expenses incurred	(342		)	(148		)	(1,054		)	(1,222		)
Provisions	319			84			927			1,127
Ending accrued warranty balance	$	203		$	375		$	203		$	375

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Assets measured at fair value on a recurring basis

The following table presents the financial instruments measured at fair value on a recurring basis and the valuation approach applied to each class of financial instruments as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	2,719	$	—	$	—	$	2,719
Commercial paper	—		1,596		—		1,596
Marketable securities
Corporate notes and bonds	—		7,081		—		7,081
U.S. government and agency securities	—		1,000		—		1,000
Commercial paper	—		798		—		798
Total	$	2,719	$	10,475	$	—	$	13,194
	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	8,953	$	—	$	—	$	8,953
Marketable securities
Corporate notes and bonds	—		6,389		—		6,389
U.S. government and agency securities	—		2,493		—		2,493
Total	$	8,953	$	8,882	$	—	$	17,835

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Current Assets:
Cash and cash equivalents	$ 24,308,000	$ 36,286,000	$ 25,005,000
Short-term marketable securities	8,879,000	8,882,000
Accounts receivable, net of allowances of $75 and $75, respectively	10,448,000	11,534,000
Inventories, net	12,570,000	10,244,000
Prepaid expenses and other current assets	2,071,000	1,483,000
Total current assets	58,276,000	68,429,000
Property and equipment, net	18,863,000	21,070,000
Intangible assets, net	1,580,000	2,023,000
Restricted cash	758,000	758,000	758,000
Operating Lease, Right Of Use Asset, Noncurrent	4,766,000	0
Other long-term assets	809,000	701,000
Total assets	85,052,000	92,981,000
Current liabilities:
Accounts payable	10,007,000	9,886,000
Accrued compensation	7,720,000	7,358,000
Operating Lease, Liability, Current	1,828,000	0
Other current liabilities	2,089,000	3,043,000
Total current liabilities	21,644,000	20,287,000
Deferred rent	0	2,996,000
Long-term debt	48,720,000	36,042,000
Operating Lease, Liability, Noncurrent	6,071,000	0
Other noncurrent liabilities	55,000	109,000
Total liabilities	76,490,000	59,434,000
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000 authorized, none issued	0	0
Common stock, $0.0001 par value; 100,000 authorized; 57,026 and 56,240 shares issued and outstanding, respectively	6,000	6,000
Additional paid-in capital	512,451,000	500,344,000
Accumulated deficit	(503,946,000)	(466,883,000)
Accumulated other comprehensive income	51,000	80,000
Total stockholders’ equity	8,562,000	33,547,000	41,706,000
Total liabilities and stockholders’ equity	85,052,000	92,981,000
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 25,066,000	$ 37,044,000	$ 25,763,000

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Statement of Stockholders' Equity Statement - USD ($) shares in Thousands, $ in Thousands	Total	Additional Paid-in Capital [Member]	Common Stock [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]
Shares, Outstanding			55,066
Stockholders' Equity Attributable to Parent	$ 71,154	$ 487,525	$ 6	$ 8	$ (416,385)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	8,895	8,895
Stock Issued During Period, Shares, Employee Stock Purchase Plans			134
Stock Issued During Period, Value, Employee Stock Purchase Plan	535	535
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			5
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	23	23
Net Income (Loss) Attributable to Parent	(38,937)				(38,937)
Temporary Equity, Foreign Currency Translation Adjustments	(31)			(31)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			750
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs	40	40
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, after Tax	27			27
Shares, Outstanding			55,753
Stockholders' Equity Attributable to Parent	49,649	493,921	$ 6	51	(444,329)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	3,096	3,096
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			0
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	1	1
Net Income (Loss) Attributable to Parent	(10,993)				(10,993)
Temporary Equity, Foreign Currency Translation Adjustments	(51)			(51)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			202
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, after Tax	4			4
Shares, Outstanding			55,955
Stockholders' Equity Attributable to Parent	41,706	497,018	$ 6	4	(455,322)
Shares, Outstanding			56,240
Stockholders' Equity Attributable to Parent	33,547	500,344	$ 6	80	(466,883)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	8,840	8,840
Stock Issued During Period, Shares, Employee Stock Purchase Plans			105
Stock Issued During Period, Value, Employee Stock Purchase Plan	464	464
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures			$ 1,233
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			74
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	430	430
Net Income (Loss) Attributable to Parent	$ (37,063)				(37,063)
Stock Issued During Period, Shares, New Issues	392		392
Stock Issued During Period, Value, New Issues	$ 2,373	2,373
Temporary Equity, Foreign Currency Translation Adjustments	(37)			(37)
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Portion Attributable to Parent	8			8
Shares, Outstanding			57,430
Stockholders' Equity Attributable to Parent	14,781	506,949	$ 6	97	(492,271)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition	3,129	3,129
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures			$ 219
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures			3
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	0	0
Net Income (Loss) Attributable to Parent	(11,675)				(11,675)
Stock Issued During Period, Shares, New Issues			392
Stock Issued During Period, Value, New Issues		2,373	$ 2,373
Temporary Equity, Foreign Currency Translation Adjustments	(46)			(46)
Shares, Outstanding			58,044
Stockholders' Equity Attributable to Parent	$ 8,562	$ 512,451	$ 6	$ 51	$ (503,946)

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Marketable Securities - Gross unrealized gains/losses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Marketable securities
Estimated fair value	$ 8,879	$ 8,882
Due in one year or less
Marketable securities
Amortized cost	(8,876)	(8,886)
Gross unrealized gains	3	0
Gross unrealized losses	0	(4)
Estimated fair value	8,879	8,882
Commercial Paper [Member]
Marketable securities
Estimated fair value	798
Commercial Paper [Member] | Due in one year or less
Marketable securities
Amortized cost	(798)	(2,493)
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Estimated fair value	798	2,493
US Government Corporations and Agencies Securities [Member]
Marketable securities
Estimated fair value	1,000	2,493
US Government Corporations and Agencies Securities [Member] | Due in one year or less
Marketable securities
Amortized cost	(1,000)
Gross unrealized gains	0
Gross unrealized losses	0
Estimated fair value	1,000
Corporate notes and bonds
Marketable securities
Estimated fair value	7,081	6,389
Corporate notes and bonds | Due in one year or less
Marketable securities
Amortized cost	(7,078)	(6,393)
Gross unrealized gains	3	0
Gross unrealized losses	0	(4)
Estimated fair value	$ 7,081	$ 6,389

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Loan Payable - Term loans and line of credit (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Debt Instrument
Final fee obligation	$ 2,975,000		$ 2,975,000		$ 3,288,000
Unamortized debt issuance costs	(4,255,000)		(4,255,000)		(2,245,000)
Long-term debt, excluding current maturities	$ 48,720,000		48,720,000		36,042,000
Amortization of deferred debt issuance costs			1,266,000	$ 725,000
Debt instrument, maturity date	Feb. 01, 2023
Debt instrument, interest rate terms	(a) the greater of 2.51% or the one-month LIBOR rate then in effect as of the applicable payment date, plus (b) 5.90% per annum
Long-term Debt, Contingent Payment of Principal or Interest	December 31, 2020
Line of credit facility, maximum borrowing capacity	$ 42,762,000		42,762,000		42,762,000
Term Loans, Debt Facility, Maximum Borrowing Capacity	$ 65,000,000
Tranche 2 Availability Date	Dec. 31, 2019
Proceeds from Issuance of Debt	$ 38,800,000
Restricted cash	758,000	$ 758,000	758,000	758,000	758,000
Letter of credit
Debt Instrument
Letters of credit outstanding, amount	758,000		758,000
Revolving credit facility
Debt Instrument
Line of credit facility, maximum borrowing capacity	5,000,000		5,000,000
Line of credit facility, fair value of amount outstanding	0		0		0
Term Loan A - 6.9% interest
Debt Instrument
Long-term debt	$ 0		$ 0		7,619,000
Debt instrument, interest rate, stated percentage	6.90%		6.90%
Line of credit facility, maximum borrowing capacity	$ 10,000,000		$ 10,000,000		10,000,000
Term Loan B - 6.9% interest
Debt Instrument
Long-term debt	$ 0		$ 0		7,619,000
Debt instrument, interest rate, stated percentage	6.90%		6.90%
Line of credit facility, maximum borrowing capacity	$ 10,000,000		$ 10,000,000		10,000,000
Term Loan C - 7.4% interest
Debt Instrument
Long-term debt	$ 0		$ 0		12,000,000
Debt instrument, interest rate, stated percentage	7.40%		7.40%
Line of credit facility, maximum borrowing capacity	$ 15,000,000		$ 15,000,000		15,000,000
Term Loan D - 8.8% interest
Debt Instrument
Long-term debt	$ 0		$ 0		663,000
Amortization of deferred debt issuance costs		$ 142,000		$ 725,000
Debt instrument, interest rate terms			a) the greater of 1.00% or the three year treasury rate in effect at the time of funding, plus (b) an applicable margin between 4.95% and 5.90% per annum.
Debt instrument, interest rate, stated percentage	8.80%		8.80%
Line of credit facility, maximum borrowing capacity	$ 663,455		$ 663,455		663,455
Term Loan E [Member]
Debt Instrument
Debt instrument, interest rate, stated percentage	8.80%		8.80%
Line of credit facility, maximum borrowing capacity	$ 7,098,450		$ 7,098,450		7,098,450
Term Loans [Member]
Debt Instrument
Amortization of deferred debt issuance costs	$ 450,000		$ 1,266,000
Debt instrument, interest rate, stated percentage	8.40%		8.40%
Debt Instrument, Face Amount	$ 50,000,000		$ 50,000,000		0
Term Loan E - $7.1 million at 8.8% interest
Debt Instrument
Long-term debt	0		0		7,098,000
Term Loan - $50 million at 8.4% interest
Debt Instrument
Long-term debt	50,000,000		50,000,000		0
Total debt, net
Debt Instrument
Long-term debt	48,720,000		48,720,000		36,042,000
Long-term debt, current maturities	0		0		0
Long-term debt, excluding current maturities	$ 48,720,000		$ 48,720,000		$ 36,042,000
Tranche 1 Loan [Member]
Debt Instrument
Debt instrument, interest only period end	Feb. 28, 2021
Term Loans, Debt Facility, Maximum Borrowing Capacity	$ 50,000,000
Tranche 2 Loan [Member]
Debt Instrument
Debt instrument, interest only period end	Feb. 28, 2022
Term Loans, Debt Facility, Maximum Borrowing Capacity	$ 15,000,000

XML

Intangible Assets, net (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of intangible assets

Intangible assets as of each of September 30, 2019 and December 31, 2018 comprised the following (in thousands):

	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Licensed intellectual property	$	4,750	$	(3,170	)	$	1,580	$	4,750	$	(2,727	)	$	2,023

Summary of estimated future amortization expense

Estimated future amortization expense for these licenses is as follows (in thousands):

Fiscal Years Ending	Future Amortization Expense
Remaining in 2019	$	150
2020	593
2021	593
2022	244
Total	$	1,580

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Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Marketable securities, gross unrealized gains/losses

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	7,078	$	3	$	—		$	7,081
U.S. government and agency securities	1,000		—		—			1,000
Commercial paper	798		—		—			798
Total	$	8,876	$	3	$	—		$	8,879
December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate notes and bonds	$	6,393	$	—	$	(4	)	$	6,389
Commercial paper	2,493		—		—			2,493
Total	$	8,886	$	—	$	(4	)	$	8,882

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Accounts receivable - net of allowance	$ 107	$ 75
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, authorized	100,000,000	100,000,000
Common stock, issued	58,044,000	56,240,000
Common stock, outstanding	58,044,000	56,240,000

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Organization and Basis of Presentation (Notes)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

GenMark Diagnostics, Inc., the Company or GenMark, was formed by Osmetech plc as a Delaware corporation in February 2010, and had no operations prior to its initial public offering, which was completed in June 2010. The Company is a provider of multiplex molecular diagnostic solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and applicable regulations of the U.S. Securities and Exchange Commission, or the SEC, and should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 25, 2019. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for the full year or any future period.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The Company has experienced net losses and negative cash flows from operating activities since its inception and had an accumulated deficit of $503,946,000 as of September 30, 2019. The Company's ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure through expanding its product offerings and consequently increasing its product revenues. As of September 30, 2019, the Company had available cash, cash equivalents, and marketable securities of $33,187,000 and working capital of $36,632,000 available to fund future operations. The Company has prepared cash flow forecasts which indicate, based on the Company's current cash resources available and working capital, that the Company will have sufficient resources to fund its operations for at least one year after the date the financial statements are issued.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes thereto. The Company’s significant estimates included in the preparation of the financial statements are related to accounts receivable, inventories, property and equipment, leases, intangible assets, employee-related compensation accruals, warranty liabilities, tax valuation accounts, and stock-based compensation. Actual results could differ from those estimates.

In June 2019, the Company changed its estimate of the forfeiture rate used to determine stock-based compensation expense based upon recent employment history. The change in forfeiture rate resulted in an additional $174,000 in stock-based compensation expense.

Segment Information

The Company currently operates in one reportable business segment, which encompasses the development, manufacturing, sales and support of instruments and molecular tests based on its proprietary eSensor® detection technology. Substantially all of the Company’s operations and assets are in the United States.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or the FASB, or other standard setting bodies that the Company adopts as of the specified effective date.

In June 2018, the FASB issued Accounting Standards Update, or ASU, 2018-07, Compensation - Stock Compensation (Topic 718), which simplifies the accounting for non-employee share-based payment transactions. The new standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 (including interim periods within that fiscal year), with early adoption permitted. The Company adopted this new standard in the second quarter of 2018 and determined its application did not have a material impact on the Company's unaudited condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new methodology for recognizing credit losses on financial instruments. The new standard requires entities to measure financial instruments at their amortized cost basis net of an allowance for credit losses. The allowance for credit losses must reflect an entity's current estimate of all expected credit losses. The new guidance also requires entities to present credit losses on debt securities accounted for under the available-for-sale method as an allowance rather than a write down. The new guidance must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented and is effective for fiscal years beginning after December 15, 2019. The Company is in the process of evaluating the impact of this standard on its unaudited consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the prior lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use, or ROU, assets for all leases with lease terms of greater than 12 months. The guidance also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and is effective for annual periods beginning after December 15, 2018. The Company adopted the new standard in the first quarter of 2019 using the package of transition practical expedients. The Company recognized non-current ROU assets of $5,097,000 and current and non-current lease liabilities of $1,780,000 and $6,832,000, respectively, upon adoption. Deferred rent is now presented as an offset to the Company's non-current operating lease ROU assets. The new lease standard did not have a material impact on the Company's unaudited condensed consolidated statements of operations, cash flows, or stockholders' equity.

Revenue

The Company recognizes revenue from operations through the sale of products and other services. Product revenue comprises the sale of diagnostic tests and instruments, as well as related services.

Revenue is recognized when control of products and services is transferred to the customer in an amount that reflects the consideration that the Company expects to receive from the customer in exchange for those products and services. This process involves identifying the contract with the customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when it determines there are no uncertainties regarding payment terms or transfer of control.

Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and the term between invoicing and when payment is due is not significant. Revenue from instrument services is recognized as the services are rendered, typically evenly over the contract term.

Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general, and administrative expenses when incurred or amortized over the estimated contract term when resulting from new contract acquisition efforts.

The Company allocates contract price to each performance obligation in proportion to its stand-alone selling price. The stand-alone selling price is determined by the Company's best estimate of stand-alone selling price using average selling prices over a rolling 12-month period along with a specific assessment of any unique circumstances of the contract. For those products for which there is limited sales history, the Company makes price determinations based on similar product sales data.

The following table represents disaggregated revenue by source (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Revenue Source:
ePlex product revenue	$	13,365	$	6,743	$	41,051	$	25,757
XT-8 product revenue	7,457		8,970		19,362		25,399
Total product revenue	20,822		15,713		60,413		51,156
License and other revenue	96		82		412		225
Total revenue	$	20,918	$	15,795	$	60,825	$	51,381

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash on deposit with banks, money market instruments, and certificates of deposit with original maturities of three months or less at the date of purchase. Marketable securities consist of certificates of deposits that mature in greater than three months. Marketable securities are accounted for as "available-for-sale" with the carrying amounts reported in the balance sheets stated at cost, which approximates their fair market value, with unrealized gains and losses, if any, reported as a separate component of stockholders' equity and included in comprehensive loss.

Restricted Cash

Restricted cash represents amounts designated for uses other than current operations and was $758,000 as of both September 30, 2019 and December 31, 2018, which represented an amount held as security for the Company’s letter of credit with Banc of California.

The following table shows a reconciliation of the Company's cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheet to cash, cash equivalents, and restricted cash in the Unaudited Condensed Consolidated Statement of Cash Flows as of September 30, 2019 and 2018 (in thousands):

	September 30,
	2019	2018
Cash and cash equivalents	24,308	25,005
Restricted cash	758	758
Total cash, cash equivalents, and restricted cash	25,066	25,763

Receivables

Accounts receivable consist of amounts due to the Company for sales to customers and are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based on an assessment of the collectability of specific customer accounts, the aging of accounts receivable, and a reserve for unknown items based upon the Company’s historical experience.

Product Warranties

The Company generally offers a one-year warranty for its instruments sold to customers and typically up to a sixty-day warranty for consumables. Factors that affect the Company’s warranty reserves include the number of units sold, historical and anticipated rates of warranty repairs, and the cost per repair. The Company periodically assesses the adequacy of its warranty reserve and adjusts the amount as appropriate.

Intangible Assets

Intangible assets consist of licenses or sublicenses to technology covered by patents owned by third parties, and are amortized on a straight-line basis over the expected useful lives of these assets, which is generally ten years. Amortization of licenses typically begins upon the Company obtaining access to the licensed technology and is recorded in cost of revenues for licenses supporting commercialized products. The amortization of licenses to technology supporting products in development is recorded in research and development expenses.

Impairment of Long-Lived Assets

The Company assesses the recoverability of long-lived assets, including intangible assets, by periodically evaluating the carrying value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If impairment is indicated, the Company writes down the carrying value of the asset to its estimated fair value. This fair value is primarily determined based on estimated discounted cash flows.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and include direct labor, materials, and manufacturing overhead. The Company periodically reviews inventory for evidence of slow-moving or obsolete parts, and writes inventory down to net realizable value, as needed. This write-down is based on management’s review of inventories on hand, compared to estimated future usage and sales, shelf-life assumptions, and assumptions about the likelihood of obsolescence. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not reversed subsequently to income, even if circumstances later suggest that increased carrying amounts are recoverable.

Property and Equipment, net

Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are identified below. Repair and maintenance costs are expensed as incurred.

Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	3 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in the consolidated balance sheets as noncurrent operating lease ROU assets and current and noncurrent operating lease liabilities. Finance leases are recorded in the consolidated balance sheets as other current assets and liabilities and other non-current assets and liabilities.

ROU assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at the commencement date based on the present value of the Company’s lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of its lease payments. ROU assets are recognized at the commencement date based upon the initial measurement of the operating lease liability less any lease incentives received.

The Company’s lease agreements can include both lease and non-lease components. The Company accounts for each lease component separately from the non-lease components within its lease agreements.

Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. A full valuation allowance has been recorded against the Company’s net deferred tax assets due to the uncertainty surrounding the Company’s ability to utilize these assets in the future. The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. The Company recognizes accrued interest related to uncertain tax positions as a component of income tax expense.

A tax position that is more likely than not to be realized is measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority that has full knowledge of all relevant information. Measurement of a tax position that meets the more likely than not threshold considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the reporting date.

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Fair Value of Financial Instruments - Fair value hierarchy (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair value, assets measured on a recurring basis
Marketable securities	$ 8,879	$ 8,882
Assets, Fair Value Disclosure	13,194	17,835
Level 1
Fair value, assets measured on a recurring basis
Assets, Fair Value Disclosure	2,719	8,953
Level 2
Fair value, assets measured on a recurring basis
Assets, Fair Value Disclosure	10,475	8,882
Level 3
Fair value, assets measured on a recurring basis
Assets, Fair Value Disclosure	0	0
US Government Corporations and Agencies Securities [Member]
Fair value, assets measured on a recurring basis
Marketable securities	1,000	2,493
US Government Corporations and Agencies Securities [Member] | Level 1
Fair value, assets measured on a recurring basis
Marketable securities	0	0
US Government Corporations and Agencies Securities [Member] | Level 2
Fair value, assets measured on a recurring basis
Marketable securities	1,000	2,493
US Government Corporations and Agencies Securities [Member] | Level 3
Fair value, assets measured on a recurring basis
Marketable securities	0	0
Corporate notes and bonds
Fair value, assets measured on a recurring basis
Marketable securities	7,081	6,389
Corporate notes and bonds | Level 1
Fair value, assets measured on a recurring basis
Marketable securities	0	0
Corporate notes and bonds | Level 2
Fair value, assets measured on a recurring basis
Marketable securities	7,081	6,389
Corporate notes and bonds | Level 3
Fair value, assets measured on a recurring basis
Marketable securities	0	0
Commercial Paper [Member]
Fair value, assets measured on a recurring basis
Cash equivalents	1,596
Marketable securities	798
Commercial Paper [Member] | Level 1
Fair value, assets measured on a recurring basis
Cash equivalents	0
Marketable securities	0
Commercial Paper [Member] | Level 2
Fair value, assets measured on a recurring basis
Cash equivalents	1,596
Marketable securities	798
Commercial Paper [Member] | Level 3
Fair value, assets measured on a recurring basis
Cash equivalents	0
Marketable securities	0
Money Market Funds [Member]
Fair value, assets measured on a recurring basis
Cash equivalents	2,719	8,953
Money Market Funds [Member] | Level 1
Fair value, assets measured on a recurring basis
Cash equivalents	2,719	8,953
Money Market Funds [Member] | Level 2
Fair value, assets measured on a recurring basis
Cash equivalents	0	0
Money Market Funds [Member] | Level 3
Fair value, assets measured on a recurring basis
Cash equivalents	$ 0	$ 0

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Intangible Assets, net - Future amortization expense (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Summary of estimated future amortization expense
Remaining in 2019	$ 150
2020	593
2021	593
2022	244
Net carrying amount	$ 1,580

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Stock-Based Compensation - Additional information (Details) - shares	9 Months Ended
	Sep. 30, 2019	May 22, 2013
2010 Equity Incentive Plan | Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	4 years
Award expiration period	10 years
2010 Equity Incentive Plan | Restricted Stock Units (RSUs) | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	1 year
2010 Equity Incentive Plan | Restricted Stock Units (RSUs) | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	4 years
2010 Equity Incentive Plan | Market-based share unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum MSU payout percentage	200.00%
Award vesting period	3 years
2013 Employee Stock Purchase Plan | Employee stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		650,000
Number of shares available for grant	835,818
Discount from market price, offering date	85.00%
Maximum number of shares per employee	1,500
Maximum employee subscription rate	0.00%
2013 Employee Stock Purchase Plan | Employee stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Offering period	6 months
2013 Employee Stock Purchase Plan | Employee stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Offering period	27 months
2013 Employee Stock Purchase Plan Amended and Restated | Employee stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized	1,750,000

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Net Loss per Common Share - Basic and diluted (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Computations of diluted net loss per share
Antidilutive securities excluded from calculation	5,687	5,911	5,687	5,911
Employee Stock Option
Computations of diluted net loss per share
Antidilutive securities excluded from calculation	2,052	2,445	2,052	2,445
Other unvested equity awards
Computations of diluted net loss per share
Antidilutive securities excluded from calculation	3,635	3,466	3,635	3,466

XML

Organization and Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Disaggregation of Revenue

The following table represents disaggregated revenue by source (in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2019		2018		2019		2018
Revenue Source:
ePlex product revenue	$	13,365	$	6,743	$	41,051	$	25,757
XT-8 product revenue	7,457		8,970		19,362		25,399
Total product revenue	20,822		15,713		60,413		51,156
License and other revenue	96		82		412		225
Total revenue	$	20,918	$	15,795	$	60,825	$	51,381

Property, Plant and Equipment

Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are identified below. Repair and maintenance costs are expensed as incurred.

Machinery and laboratory equipment	3 - 5 years
Instruments	4 - 5 years
Office equipment	3 - 7 years
Leasehold improvements	over the shorter of the remaining life of the lease or the useful economic life of the asset

Property and Equipment, Net

	September 30, 2019			December 31, 2018
Property and equipment — at cost:
Machinery and laboratory equipment	$	15,414		$	15,206
Instruments	16,025			15,089
Office equipment	2,141			2,114
Leasehold improvements	11,259			10,648
Total property and equipment — at cost	44,839			43,057
Less: accumulated depreciation	(25,976		)	(21,987		)
Property and equipment, net	$	18,863		$	21,070

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Condensed Consolidated Financial Statement Details (Notes)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidated Financial Statement Details

Condensed Consolidated Financial Statement Details

The following tables show the Company's unaudited condensed consolidated financial statement details as of September 30, 2019 and December 31, 2018 (in thousands):

Inventory

	September 30, 2019		December 31, 2018
Raw materials	$	3,678	$	2,449
Work-in-process	5,102		3,349
Finished goods	3,790		4,446
Total inventories	$	12,570	$	10,244

Property and Equipment, Net

	September 30, 2019			December 31, 2018
Property and equipment — at cost:
Machinery and laboratory equipment	$	15,414		$	15,206
Instruments	16,025			15,089
Office equipment	2,141			2,114
Leasehold improvements	11,259			10,648
Total property and equipment — at cost	44,839			43,057
Less: accumulated depreciation	(25,976		)	(21,987		)
Property and equipment, net	$	18,863		$	21,070

Accrued Warranty

The following table shows changes in the Company's accrued warranties for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2019			2018			2019			2018
Beginning accrued warranty balance	$	226		$	439		$	330		$	470
Warranty expenses incurred	(342		)	(148		)	(1,054		)	(1,222		)
Provisions	319			84			927			1,127
Ending accrued warranty balance	$	203		$	375		$	203		$	375

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Fair Value of Financial Instruments (Notes)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair value of financial instruments

Fair Value of Financial Instruments

The carrying amounts of financial instruments, such as cash equivalents, restricted cash, accounts receivable, and accounts payable approximate the related fair values due to the short-term maturities of these instruments.

The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last is considered unobservable, to measure fair value:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the financial instruments measured at fair value on a recurring basis and the valuation approach applied to each class of financial instruments as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	2,719	$	—	$	—	$	2,719
Commercial paper	—		1,596		—		1,596
Marketable securities
Corporate notes and bonds	—		7,081		—		7,081
U.S. government and agency securities	—		1,000		—		1,000
Commercial paper	—		798		—		798
Total	$	2,719	$	10,475	$	—	$	13,194
	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents
Money market funds	$	8,953	$	—	$	—	$	8,953
Marketable securities
Corporate notes and bonds	—		6,389		—		6,389
U.S. government and agency securities	—		2,493		—		2,493
Total	$	8,953	$	8,882	$	—	$	17,835

Level 2 marketable securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs.