Seer(SEER) - 2023 Q1 - Quarterly Report

Special Note Regarding Forward-Looking Statements This Quarterly Report contains forward-looking statements about future results, financial position, business strategy, and operational plans, which involve known and unknown risks and uncertainties that may cause actual results to differ materially - This Quarterly Report contains forward-looking statements regarding future results, financial position, business strategy, and operational plans, which involve known and unknown risks and uncertainties that may cause actual results to differ materially[9][11] - Forward-looking statements cover estimates of market, financial performance, commercialization strategy, market acceptance of the Proteograph™ Product Suite, competitive landscape, ability to manage growth, intellectual property, and impacts of macroeconomic factors like pandemics and inflation[10] Part I. Financial Information This section presents Seer, Inc.'s unaudited condensed consolidated financial statements, management's discussion and analysis of financial condition, market risk disclosures, and internal controls and procedures Item 1. Financial Statements (Unaudited) This section presents Seer, Inc.'s unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, including balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes on accounting policies and financial data Condensed Consolidated Balance Sheets This section provides a snapshot of Seer, Inc.'s financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2023, and December 31, 2022 Balance Sheet Data (in thousands) | ASSETS (in thousands) | March 31, 2023 | December 31, 2022 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $48,386 | $53,208 | | Short-term investments | 303,708 | 360,000 | | Total current assets | 367,375 | 430,000 | | Total assets | $472,787 | $480,000 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 11,754 | 10,000 | | Total liabilities | 39,798 | 40,000 | | Total stockholders' equity | 432,989 | 440,000 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details Seer, Inc.'s financial performance, including revenue, cost of revenue, operating expenses, and net loss for the three months ended March 31, 2023, and 2022 Statements of Operations Data (in thousands, except per share) | (in thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $4,053 | $3,312 | | Total cost of revenue | 1,985 | 2,068 | | Gross profit | 2,068 | 1,244 | | Total operating expenses | 29,513 | 25,030 | | Loss from operations | (27,445) | (23,786) | | Total other income | 3,486 | 140 | | Net loss | $(23,959) | $(23,646) | | Net loss per share, basic and diluted | $(0.38) | $(0.38) | - Total revenue increased by 22% year-over-year, from $3.312 million in Q1 2022 to $4.053 million in Q1 2023[17] - Gross profit increased by 66% year-over-year, from $1.244 million in Q1 2022 to $2.068 million in Q1 2023[17] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines changes in Seer, Inc.'s stockholders' equity, reflecting impacts from stock issuance, compensation, comprehensive gain, and net loss for the period Stockholders' Equity Changes (in thousands, except share amounts) | (in thousands, except share amounts) | Balance at Dec 31, 2022 | Issuance of Class A common stock | Stock-based compensation | Other comprehensive gain | Net loss | Balance at Mar 31, 2023 | | :----------------------------------- | :---------------------- | :------------------------------- | :----------------------- | :----------------------- | :------- | :---------------------- | | Total Stockholders' Equity | $446,993 | $30 | $8,724 | $1,158 | $(23,959) | $432,989 | - The accumulated deficit increased from $(219.496) million at December 31, 2022, to $(243.455) million at March 31, 2023, primarily due to the net loss incurred[20] Condensed Consolidated Statements of Cash Flows This section presents Seer, Inc.'s cash flow activities, detailing cash used in operations, provided by investing, and provided by financing for the three months ended March 31, 2023, and 2022 Cash Flow Activities (in thousands) | (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(19,331) | $(19,151) | | Net cash provided by investing activities | 14,479 | 10,920 | | Net cash provided by financing activities | 30 | 752 | | Net decrease in cash, cash equivalents and restricted cash | $(4,822) | $(7,479) | | Cash, cash equivalents and restricted cash, end of period | $48,910 | $225,858 | - Cash used in operating activities remained consistent year-over-year, at approximately $19.3 million in Q1 2023[26] - Net cash provided by investing activities increased by 32.6% year-over-year, from $10.920 million in Q1 2022 to $14.479 million in Q1 2023[26] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering accounting policies, fair value measurements, and other financial information 1. Organization and Description of the Business Seer, Inc. is a life sciences company focused on proteome insights, incorporated in Delaware in 2017. The company has primarily invested in R&D for its Proteograph Product Suite and commercial infrastructure, resulting in significant losses and negative cash flows. As of March 31, 2023, it had $352.1 million in cash and investments and an accumulated deficit of $243.5 million, with sufficient capital for at least 12 months - Seer, Inc. is a life sciences company focused on capturing deep molecular insights from the proteome to enable breakthroughs in biology and disease understanding[28] - Since inception, the company has devoted substantially all resources to research and development activities, including the Proteograph Product Suite, building commercial infrastructure, and establishing intellectual property[28] Key Financial Metrics (as of March 31, 2023) | Financial Metric (as of March 31, 2023) | Amount (in millions) | | :------------------------------------- | :------------------- | | Cash and cash equivalents and short-term investments | $352.1 | | Accumulated deficit | $(243.5) | 2. Summary of Significant Accounting Policies and Basis of Presentation This note outlines Seer, Inc.'s accounting policies, including U.S. GAAP basis, reliance on management estimates, and details on credit risk. It highlights that related party revenue constituted 32% of total revenue for Q1 2023 and Q1 2022, and international revenue was 22% and 25% respectively. The company also discusses the impact of COVID-19 and its revenue recognition policies for products, services, and grants - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include Seer, Inc. and its wholly-owned subsidiaries, with all intercompany transactions eliminated[31] - Management makes estimates and assumptions for revenue recognition, fair value of common stock, stock-based compensation, accrued R&D, credit losses, inventory valuation, property and equipment, and income tax uncertainties[32] Revenue Concentration | Revenue Concentration | Q1 2023 | Q1 2022 | | :-------------------- | :------ | :------ | | Related party revenue | 32% | 32% | | International revenue | 22% | 25% | - The company recognizes revenue when control of products (Proteograph Product Suite, consumables) and services (proteomic data generation/analysis) is transferred to customers, and grant revenue as activities are performed[46][47][52] 3. Fair Value Measurements and Fair Value of Financial Instruments This note details the fair value of Seer, Inc.'s financial assets, primarily cash equivalents and investments, categorized by the fair value hierarchy. As of March 31, 2023, total assets measured at fair value were $410.5 million, with most investments classified as Level 2. The company reported total unrealized losses of $(387) thousand, which are considered temporary and not credit-risk related Assets Measured at Fair Value (in thousands) | Assets Measured at Fair Value (in thousands) | March 31, 2023 | December 31, 2022 | | :----------------------------------------- | :------------- | :---------------- | | Total assets measured at fair value | $410,510 | $426,396 | | Level 1 (Money market funds) | $41,906 | $53,208 | | Level 2 (Investments) | $368,604 | $373,188 | Unrealized Gains and Losses (in thousands) | Unrealized Gains and Losses (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :------------- | :---------------- | | Total Unrealized Gains | $292 | $40 | | Total Unrealized Losses | $(387) | $(1,291) | - Unrealized losses on available-for-sale investments are not attributable to credit risk and are considered temporary. Approximately $0.1 million of investments have been in a continuous unrealized loss position for 12 months or longer[65] 4. Other Financial Statement Information This note provides a breakdown of Seer, Inc.'s inventory, property and equipment (net), and accrued expenses. Total inventory decreased to $3.7 million as of March 31, 2023, from $4.6 million at year-end 2022. Net property and equipment also slightly decreased, while depreciation and amortization expense increased to $1.2 million for Q1 2023 Inventory (in thousands) | Inventory (in thousands) | March 31, 2023 | December 31, 2022 | | :----------------------- | :------------- | :---------------- | | Raw materials | $1,592 | $2,129 | | Work-in-progress | 205 | 271 | | Finished goods | 1,921 | 2,227 | | Total inventory | $3,718 | $4,627 | Property and Equipment, Net (in thousands) | Property and Equipment, Net (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :------------- | :---------------- | | Total property and equipment, net | $18,675 | $19,408 | | Depreciation and amortization expense (Q1) | $1,200 | $900 | Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Accrued compensation | $3,806 | $6,139 | | Total accrued expenses | $7,175 | $8,298 | 5. Revenue and Deferred Revenue This note details Seer, Inc.'s revenue streams, including product, service, related party, and grant revenue. Product revenue for non-related customers was $2.3 million in Q1 2023, up from $2.1 million in Q1 2022. Grant revenue significantly increased to $0.3 million in Q1 2023 from $14 thousand in Q1 2022. Deferred revenue at period-end was $306 thousand, with $3.1 million in remaining performance obligations expected to be recognized Revenue by Type (non-related customers, in thousands) | Revenue Type (non-related customers, in thousands) | Q1 2023 | Q1 2022 | | :----------------------------------------------- | :------ | :------ | | Product revenue | $2,343 | $2,149 | | Service revenue | $69 | $79 | | Grant revenue | $335 | $14 | Deferred Revenue (in thousands) | Deferred Revenue (in thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Balance, end of period | $306 | $133 | - As of March 31, 2023, $3.1 million of revenue is expected to be recognized from remaining performance obligations, with 77% anticipated within 12 months[75] 6. Capital Stock and Stockholders' Equity This note outlines Seer, Inc.'s capital structure, including authorized shares of Class A common stock (94 million), Class B common stock (6 million), and preferred stock (5 million). As of March 31, 2023, 59.7 million Class A and 4.0 million Class B shares were outstanding. Class A holders have one vote per share, while Class B holders have ten votes per share, with Class B convertible to Class A. No dividends have been declared to date Common Stock Issued and Outstanding | Common Stock Issued and Outstanding | March 31, 2023 | December 31, 2022 | | :---------------------------------- | :------------- | :---------------- | | Class A common stock | 59,694,350 | 59,366,077 | | Class B common stock | 4,044,969 | 4,044,969 | | Total common stock | 63,739,319 | 63,411,046 | - Holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to 10 votes per share. Class B common shares are convertible to Class A common shares on a one-for-one basis[78] - No dividends have been declared to date[80] 7. Equity Incentive Plans This note details Seer, Inc.'s equity incentive plans, including the 2020 Equity Incentive Plan with 14.6 million Class A shares reserved. During Q1 2023, 2.2 million options were granted, and 1.8 million Market Condition Options were issued to executives, with vesting tied to a $6.885 stock price milestone. Total stock-based compensation for Q1 2023 was $8.7 million, including $2.0 million from a 2022 option repricing - 14,570,948 shares of Class A common stock are reserved for issuance under the 2020 Equity Incentive Plan, with 4,581,459 shares available for future awards[81] Stock Option Activity (Q1 2023) | Stock Option Activity (Q1 2023) | Options Outstanding | Weighted Average Exercise Price | | :------------------------------ | :------------------ | :------------------------------ | | Balance at December 31, 2022 | 10,214,430 | $13.9 | | Options granted | 2,247,900 | $4.6 | | Options exercised | (13,595) | $2.2 | | Options forfeited | (101,825) | $12.7 | | Balance at March 31, 2023 | 12,346,910 | $12.2 | - During Q1 2023, 1,794,000 Market Condition Options were granted to executives, with vesting contingent on the Class A common stock reaching a Market Price Milestone of $6.885 per share within seven years. The grant date fair value was approximately $5.2 million[83][84] Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Q1 2023 | Q1 2022 | | :------------------------------------ | :------ | :------ | | Cost of revenue | $328 | $208 | | Research and development | $2,549 | $2,001 | | Selling, general and administrative | $5,847 | $5,853 | | Total stock-based compensation | $8,724 | $8,062 | - The company recorded $2.0 million in stock-based compensation expense for Q1 2023 due to the June 2022 option repricing, with $1.6 million in unrecognized compensation remaining[95] 8. Leases Seer, Inc. leases approximately 51,000 sq ft of office and laboratory space in Redwood City, CA (lease ends 2032) and 6,000 sq ft in San Diego, CA (lease ends 2024). As of March 31, 2023, the weighted-average lease term was 9.4 years with a 6.2% incremental borrowing rate. Total lease costs for Q1 2023 were $1.2 million, and future minimum commitments are $39.9 million - The company leases approximately 51,000 square feet of office and laboratory space in Redwood City, California, with a lease term ending September 30, 2032, and an option to renew for an additional five-year term[96] - As of March 31, 2023, the remaining weighted-average lease term was 9.4 years, and the weighted-average incremental borrowing rate was 6.2%[97] Lease Costs (in thousands) | Lease Costs (in thousands) | Q1 2023 | Q1 2022 | | :------------------------- | :------ | :------ | | Operating lease costs | $1,038 | $813 | | Variable lease costs | $161 | $194 | | Short-term lease costs | $10 | $69 | | Total lease costs | $1,209 | $1,076 | Future Minimum Lease Commitments (in thousands) | Future Minimum Lease Commitments (in thousands) | | :---------------------------------------------- | | Total undiscounted future minimum lease payments | $39,870 | | Total operating lease liabilities | $29,870 | 9. Commitments and Contingencies This note outlines Seer, Inc.'s purchase commitments, guarantees, and legal contingencies. As of March 31, 2023, the company had $4.3 million in outstanding purchase commitments with manufacturing suppliers. It also enters into general indemnification agreements but has not recorded any material claims. The company is not currently a party to any material legal proceedings Purchase Commitments (in thousands) | Purchase Commitments (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Outstanding commitments | $4,300 | $5,700 | - The company enters into agreements with general indemnification provisions but has not paid any claims or recorded related liabilities as of March 31, 2023, or December 31, 2022[102] - Seer, Inc. is not currently a party to any material legal proceedings[103] 10. Related Party Transactions This note details Seer, Inc.'s related party transactions, primarily with PrognomiQ, Inc., which is accounted for using the equity method. PrognomiQ contributed $1.3 million in related party revenue for Q1 2023 and represented $1.4 million in related party receivables as of March 31, 2023. The company's investment in PrognomiQ was reduced to nil in 2022 due to net losses - PrognomiQ, Inc. was formed in August 2020, with Seer transferring human diagnostics assets in exchange for equity. Seer accounts for its investment in PrognomiQ using the equity method, and the carrying value was reduced to nil in 2022[104][105] Related Party Financials (in thousands) | Related Party Financials (in thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Related party receivables | $1,383 | $1,500 | | Related party revenue (Q1) | $1,306 | $1,070 | - A board member served as an executive officer at another customer, from which Seer had $0.2 million in lease receivables as of March 31, 2023, but recognized no revenue in Q1 2023 or Q1 2022[108] 11. Net Loss Per Share Attributable to Common Stockholders This note presents the computation of basic and diluted net loss per share for Seer, Inc. For Q1 2023 and Q1 2022, the net loss per share was $(0.38). The weighted-average common shares outstanding for Q1 2023 were 63.5 million. Potentially dilutive securities, totaling 15.8 million in Q1 2023, were excluded from diluted EPS as their inclusion would have been anti-dilutive Net Loss Per Share Data | Net Loss Per Share Data | Q1 2023 | Q1 2022 | | :---------------------- | :------ | :------ | | Net loss attributable to common stockholders (in thousands) | $(23,959) | $(23,646) | | Weighted-average common shares outstanding | 63,543,094 | 62,003,504 | | Net loss per share, basic and diluted | $(0.38) | $(0.38) | Potentially Dilutive Securities Excluded (in shares) | Potentially Dilutive Securities Excluded (in shares) | March 31, 2023 | March 31, 2022 | | :------------------------------------------------- | :------------- | :------------- | | Class A common stock options | 12,346,910 | 11,560,004 | | Restricted common stock | 65,251 | 125,231 | | Restricted stock units | 3,429,150 | 1,959,042 | | Total | 15,841,311 | 13,644,277 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Seer, Inc.'s financial condition and operational results, discussing the company's mission, commercialization strategy for the Proteograph Product Suite, manufacturing processes, and the financial performance for the three months ended March 31, 2023, compared to 2022. It also covers liquidity, capital resources, and cash flow analysis Overview Seer, Inc. is an early-stage life sciences company focused on decoding the proteome with its Proteograph Product Suite, an integrated solution of consumables, automation instrument (SP100), and software. The company is in early commercialization, aiming for broad adoption and increased consumable sales, and expects continued losses due to significant R&D and commercial infrastructure investments - Seer's mission is to decode the secrets of the proteome to improve human health, utilizing its Proteograph Product Suite, which leverages proprietary engineered nanoparticle (NP) technology[111] - The Proteograph Product Suite is an integrated solution comprising consumables, an SP100 automation instrument, and software, commercialized through direct sales in the U.S. and direct/distributor channels internationally[113][114] - The company expects to continue incurring significant losses and negative cash flows due to ongoing investments in commercialization, R&D, manufacturing capabilities, and public company infrastructure[119][120] Components of Results of Operations This section defines Seer, Inc.'s revenue sources (product, service, related party, grant, lease) and cost of revenue components (product, instrument, consumables, distribution, stock-based compensation, overhead, inventory write-downs). It also outlines the primary drivers of research and development and selling, general, and administrative expenses, anticipating increases in both as the company scales - Revenue is generated from product sales (Proteograph Product Suite, consumables, platform evaluation), services, related party sales, grant revenue for R&D, and lease arrangements[121][122] - Cost of revenue includes components of the Proteograph Product Suite (SP100 instrument, consumables), distribution expenses, stock-based compensation, employee benefits, allocated overhead, and inventory write-downs[123] - Research and Development (R&D) and Selling, General and Administrative (SG&A) expenses are expected to increase in absolute dollars due to investments in product development, personnel, commercial operations, and public company costs[125][127] Results of Operations Seer, Inc. reported a 22% increase in total revenue to $4.1 million for Q1 2023, driven by higher consumable kit sales and grant revenue. Gross profit significantly increased by 66% to $2.1 million, while operating expenses rose by 18%. Net loss remained stable at approximately $24.0 million, and total other income saw a substantial increase due to higher interest rates Key Financial Metrics (in thousands) | Financial Metric (in thousands) | Q1 2023 | Q1 2022 | Change Amount | Change % | | :------------------------------ | :------ | :------ | :------------ | :------- | | Total Revenue | $4,053 | $3,312 | $741 | 22 % | | Gross Profit | $2,068 | $1,244 | $824 | 66 % | | Total Operating Expenses | $29,513 | $25,030 | $4,483 | 18 % | | Net Loss | $(23,959) | $(23,646) | $(313) | 1 % | | Total Other Income | $3,486 | $140 | $3,346 | 2390 % | - Revenue increase was primarily due to increased consumable kit sales related to the Proteograph Product Suite and a $0.3 million increase in grant-funded activities[130] - Research and development expenses increased by $3.7 million (35%) to $14.5 million, driven by product development efforts, employee compensation, stock-based compensation, and allocated facility expenses[132] Liquidity and Capital Resources Seer, Inc. has historically funded operations through equity sales and expects continued net losses and negative cash flows. As of March 31, 2023, the company believes its $410.5 million in cash and investments provide sufficient liquidity for over 12 months. Future capital needs depend on revenue growth, commercialization efforts, R&D, and potential acquisitions - Operations have been funded primarily through equity securities sales, and the company anticipates continued net losses and negative cash flows from operations for the foreseeable future[136] - As of March 31, 2023, cash and cash equivalents and investments totaled $410.5 million, which management believes will provide sufficient capital resources for at least 12 months[119][141] - Future capital requirements depend on revenue growth, commercialization investments, acquisitions, capital expenditures, and R&D programs[140] - Outstanding purchase commitments related to inventory management amounted to $4.3 million as of March 31, 2023[139] Cash Flows Seer, Inc. reported net cash used in operating activities of $19.3 million in Q1 2023, primarily due to net loss and changes in operating assets/liabilities, partially offset by non-cash charges. Investing activities provided $14.5 million, mainly from maturities of available-for-sale securities, while financing activities provided $30 thousand from stock option exercises Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Q1 2023 | Q1 2022 | | :-------------------------------- | :------ | :------ | | Net cash used in operating activities | $(19,331) | $(19,151) | | Net cash provided by investing activities | $14,479 | $10,920 | | Net cash provided by financing activities | $30 | $752 | | Net decrease in cash, cash equivalents and restricted cash | $(4,822) | $(7,479) | - Cash used in operating activities for Q1 2023 was $19.3 million, driven by a $24.0 million net loss and a $3.4 million change in operating assets and liabilities, partially offset by $8.1 million in non-cash charges[143] - Cash provided by investing activities for Q1 2023 was $14.5 million, primarily from $146.1 million in maturities and $3.0 million in sales of available-for-sale securities, offset by $134.5 million in purchases[145] Critical Accounting Policies, Significant Judgments and Use of Estimates This section emphasizes that Seer, Inc.'s financial statements rely on management's estimates and assumptions, particularly for revenue recognition, fair value, stock-based compensation, and inventory valuation. It notes no significant changes in critical accounting policies since the 2022 Annual Report on Form 10-K - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, based on historical experience and reasonable assumptions[148] - Key areas of estimates include revenue recognition, fair value of common stock, stock-based compensation, accrued R&D expenses, allowance for credit losses, inventory valuation, and income tax uncertainties[32][148] - There have been no significant changes in critical accounting policies and estimates compared to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[149] Recent Accounting Pronouncements This section refers to Note 2 of the unaudited condensed consolidated financial statements for information on recent accounting pronouncements, their adoption timing, and the company's assessment of their potential impact - For information about recent accounting pronouncements, their adoption timing, and the company's assessment of their potential impact, refer to Note 2 to the unaudited condensed consolidated financial statements[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk Seer, Inc. is exposed to interest rate risk related to its cash, cash equivalents, and investments. However, due to the short-term nature of these assets and the company's investment policy focused on liquidity and capital preservation, management believes there is no material exposure to changes in their fair value from interest rate fluctuations - The company has exposure to interest rate risk related to its cash, cash equivalents, and investments (money market funds, U.S. Treasury securities, commercial paper, and corporate securities)[152] - Due to the short-term nature of these assets, the company believes it does not have any material exposure to changes in their fair value as a result of changes in interest rates[152] - The goals of the company's investment policy are liquidity and capital preservation[152] Item 4. Controls and Procedures Seer, Inc.'s management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate SEC reporting. The company acknowledges inherent limitations in control systems and reported no material changes in internal control over financial reporting during the quarter - As of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective in ensuring information required for SEC reports is recorded, processed, summarized, and reported timely[153] - Management acknowledges that control systems provide only reasonable assurance and can be subject to inherent limitations, such as faulty judgments, simple errors, or circumvention by individual acts or collusion[154] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[157] Part II. Other Information This section covers legal proceedings, comprehensive risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits filed with the Quarterly Report Item 1. Legal Proceedings Seer, Inc. is not currently a party to any material legal proceedings. However, the company acknowledges that future involvement in legal actions could negatively impact its reputation, business, and financial condition, and divert management's attention - The company is not currently a party to any material legal proceedings[160] - Future involvement in legal proceedings or investigations could adversely impact the company's reputation, business, financial condition, and divert management's attention[160] Item 1A. Risk Factors This section details the significant risks associated with investing in Seer, Inc., covering its early-stage nature, operational challenges, market acceptance, competition, financial reporting, regulatory compliance, intellectual property, and stock ownership. These risks could materially affect the company's business, financial condition, results of operations, and stock price Summary Risk Factor Investing in Seer, Inc. carries high risk due to its early-stage nature, history of losses, limited operating history, fluctuating results, potential for smaller-than-estimated markets, and challenges in commercializing the Proteograph Product Suite. Other risks include the need for continuous product improvement, impact of health crises, intellectual property protection, talent retention, and internal control effectiveness - The company is an early-stage life sciences technology company with a history of net losses, which are expected to continue, and may not achieve sustained profitability[163][164] - Commercialization success depends on broad scientific and market acceptance of the Proteograph Product Suite, which may be difficult to achieve, and failure to improve products or introduce new ones could harm revenues[163] - Key risks include the impact of health epidemics (like COVID-19), inability to obtain and maintain sufficient intellectual property protection, challenges in recruiting and retaining qualified employees, and failure to maintain effective internal controls[163][167] Risks Related to Our Business and Industry Seer, Inc. faces significant business and industry risks, including its early-stage status, history of net losses, and limited operating history, making future performance uncertain. The company's commercialization success depends on market acceptance of its Proteograph Product Suite, which could be hindered by market size, competition, or external factors like health epidemics and economic conditions. Challenges also include managing growth, retaining key personnel, and reliance on single suppliers - The company has incurred significant losses since 2017, with net losses of $24.0 million in Q1 2023 and $23.6 million in Q1 2022, and an accumulated deficit of $243.5 million as of March 31, 2023[164] - Commercialization success of the Proteograph Product Suite depends on broad scientific and market acceptance, which is uncertain and influenced by factors like customer adoption, competitive offerings, and publication mentions[175][176] - The company relies on a single contract manufacturer (Hamilton Company) for its SP100 instruments and limited/sole suppliers for certain components, posing risks of supply chain disruptions and inability to meet demand[203][205] - Unfavorable economic conditions, including volatility in capital markets, inflation, rising interest rates, or bank failures, could adversely affect the company's ability to raise capital and impact customer budgets[187][188] Risks Related to Financial Reporting Seer, Inc. faces risks related to financial reporting, including the challenge of maintaining effective internal controls over financial reporting (SOX Section 404(a) compliance). Deficiencies could lead to inaccurate reporting, investor distrust, increased costs, and potential delisting. The company also highlights the impact of evolving accounting rules and the reliance on management estimates, which could necessitate restatements or cause fluctuations in results - As a public company, Seer is required to evaluate the effectiveness of its internal control over financial reporting under Section 404(a) of the Sarbanes-Oxley Act[237] - Deficiencies or material weaknesses in internal controls could impede timely and accurate financial reporting, adversely affecting business, investor confidence, and stock price[238][239] - Changes in financial accounting rules or interpretations, or differences between actual circumstances and management's estimates, could result in unfavorable accounting changes, restatements, or unexpected fluctuations in operating results[244] Risks Related to Regulatory Compliance Seer, Inc.'s products are currently labeled for Research Use Only (RUO). If the company chooses to market them as clinical diagnostics or medical devices, it would face significant FDA regulatory hurdles, including 510(k) clearance or PMA, which are costly, time-consuming, and uncertain. Even without seeking approval, the FDA could deem RUO products subject to regulation if used clinically by customers, potentially impacting sales and requiring business model changes - Seer's products are currently labeled and promoted as Research Use Only (RUO) and are not intended for diagnostic procedures, clinical diagnostic tests, or as medical devices[245] - If the company elects to market products for clinical diagnostics, it would require FDA premarket 510(k) clearance or premarket approval (PMA), a process that is expensive, time-consuming, and uncertain[248] - Even if products are labeled RUO, the FDA or comparable international agencies could disagree with this classification or deem marketing efforts inconsistent, potentially subjecting products to medical device regulations[252][255] Risks Related to our Intellectual Property Seer, Inc. relies on patents, trademarks, trade secrets, and contractual restrictions to protect its intellectual property, but faces significant risks. These include challenges to patent validity, enforceability, and scope, especially given the uncertain and changing U.S. patent law for life sciences. The company may struggle to protect IP globally, defend against infringement claims, or maintain licenses from third parties, all of which could harm its competitive position and operations - The company relies on patent protection, as well as trademark, copyright, trade secret, and other intellectual property rights, but these provide limited protection and may not adequately safeguard its competitive advantage[259] - The U.S. law regarding patentability in the life sciences technology industry is uncertain and rapidly changing, potentially impacting existing patents or the ability to obtain future patents[265][268] - The company may become involved in lawsuits to defend against third-party claims of infringement or to protect its own intellectual property, which could be expensive, time-consuming, and unsuccessful, potentially delaying commercialization efforts[289][296] - Seer relies on a license from The Brigham and Women's Hospital, Inc. (BWH) for certain patents; failure to comply with license obligations or loss of licenses could significantly harm its ability to develop and commercialize products[302][305] Risks Related to Ownership of Our Class A Common Stock Ownership of Seer, Inc.'s Class A common stock carries risks including potential for an unsustainable active trading market and high price volatility due to various factors like operating results, competition, and market conditions. The multi-class stock structure concentrates voting control with founders and early investors, potentially depressing the Class A stock price. Sales by existing stockholders could also cause price declines, and the company does not expect to pay future dividends - The market price of Class A common stock has been and may continue to be volatile due to fluctuations in operating results, competitive developments, regulatory changes, and general economic conditions[323][324] - The multi-class structure of common stock concentrates voting control with Class B stockholders (founders and early investors), who hold 40.4% of the voting power as of May 5, 2023, potentially limiting influence of Class A holders and depressing its trading price[325][326] - The company does not anticipate paying any dividends in the foreseeable future, meaning investors must rely on stock price appreciation for returns[331] - Anti-takeover provisions in Delaware law and the company's organizational documents could discourage, delay, or prevent a change in control, potentially limiting opportunities for stockholders to receive a premium for their shares[336][338] General Risks Seer, Inc. faces general business risks including increasing scrutiny on Environmental, Social, and Governance (ESG) matters, which could impact reputation and costs. Operational disruptions from natural disasters or public health crises at its facilities or third-party manufacturers could severely affect R&D and manufacturing. The company is also vulnerable to significant disruptions in IT systems and data security breaches, leading to potential litigation, financial losses, and reputational harm, compounded by evolving data privacy regulations - Increasing scrutiny and evolving expectations regarding Environmental, Social, and Governance (ESG) matters may expose the company to reputational, cost, and other risks[343] - Facilities and third-party manufacturers are vulnerable to natural disasters, public health crises (e.g., COVID-19), and catastrophic events, which could seriously impair business operations, R&D, and manufacturing[345][346] - The company's information technology systems are vulnerable to disruption, cyberattacks, and data security breaches, which could damage reputation, lead to litigation, incur significant liability, and disrupt operations[347][349][350] - Seer is subject to evolving international and U.S. federal and state data privacy laws (e.g., CCPA, CPRA, HIPAA), requiring significant compliance costs and posing risks of fines or litigation for non-compliance[351][354][358] Item 2. Unregistered Sales of Equity Securities This section states that there were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities occurred during the reporting period[359] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - Defaults upon senior securities are not applicable for this reporting period[361] Item 4. Mine Safety Disclosure This section states that mine safety disclosure is not applicable to the company - Mine safety disclosure is not applicable to the company[362] Item 5. Other Information This section reports that Scott Thomas, the company's Chief Commercial Officer, will be transitioning out of the company in July 2023 - Scott Thomas, the company's Chief Commercial Officer, will be transitioning out of the company in July 2023[363] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL instance documents - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and XBRL Instance Document (101.INS) and related taxonomy extension documents[367] - Certifications 32.1 and 32.2 are furnished, not filed, and not incorporated by reference into other SEC filings[366]