2016-11-30

WATERMARK GROUP, INC. (OTCMKTS:WMHH) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement.

The disclosure in Item 2.01 below is incorporated by reference

herein.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On October 13, 2016, we entered into an exclusive license

agreement (the “License Agreement”) with Co-Diagnostics, Inc.,

a Utah corporation (“Co-Diagnostics” or the “Parent”), which

we closed on October 14, 2016, and by the acquisition of rights

under the License Agreement ceased to be a “shell company” as

such term is defined in Rule 12b-2 under the Securities Exchange

Act of 1934. Item 2.01(f) of Form 8-K states that if a registrant

was a shell company immediately before the transaction, as we

were immediately before the acquisition of the rights to the

License Agreement, then the registrant must disclose the

information that would be required if the registrant were filing,

upon consummation of the transaction, a general form for

registration of securities on Form 10 under the Securities

Exchange Act of 1934 reflecting all classes of the registrant’s

securities subject to the reporting requirements of Section 13 or

Section 15(d) of the Securities Exchange Act of 1934.

Accordingly, we are providing below the information that would be

included in a general form for registration of securities on Form

10 under the Securities Exchange Act of 1934.

Item 1. BUSINESS

The Company

The Company, Watermark Group, Inc., a Nevada corporation

headquartered in Salt Lake City, Utah, prior to consummation of

the License Agreement, was a development stage company that was a

“shell company” as that term is defined in Rule 12b-2 under the

Securities Exchange Act of 1934. On October 13, 2016, the Company

entered into the License Agreement with the Parent, which closed

on October 14, 2016. On October 12, 2016, the Parent entered into

a stock purchase agreement to purchase a controlling interest in

the Company in anticipation of entering into the License

Agreement, which closed on October 19, 2016.

The Company intends to respond to the 2016 outbreak of the Zika

virus by providing state of the art diagnostics tools to the

medical community primarily in developing nations where the

outbreak is most severe. to the License Agreement, the Company

has licensed molecular diagnostics technology from the Parent and

plans to market a panel of diagnostics tests developed using the

licensed technology. The Company plans to respond to the

international crises surrounding the spread of the Zika virus

that has become acute in the last six months. to the License

Agreement, we have licensed the exclusive rights to make, use,

manufacture, sell and license polymerase chain reaction (“PCR”)

tests using the Parent’s patented technology for detecting the

Zika virus as well as other mosquito-borne flaviviruses, which

include dengue, yellow fever, West Nile virus and Japanese

encephalitis, as well as the alphavirus chikungunya. to the

License Agreement, we have also licensed the non-exclusive right

to sell the Parent’s malaria test. The tests to be distributed

by the Company include a multiplex test for all of these

flaviviruses plus chikungunya, differentiating among the viruses

to rapidly diagnose the specific infection, as all these viruses

exhibit similar symptoms, but require different treatments.

The Licensed Technology

The Parent developed and patented a molecular diagnostics

platform system that enables rapid, low-cost, sophisticated

molecular testing for organisms and genetic diseases by greatly

automating historically complex procedures in both the

development and administration of tests. One of the Parent’s

newest technical advances involves a novel approach to PCR

primer design (cooperative primers) that eliminates one of the

key vexing issues of PCR amplification, the exponential growth

of primer-dimer pairs (false positives or false negatives)

which adversely interfere with identification of the target

DNA. In addition, the Parent’s scientists have enhanced the

understanding of the mathematics of DNA test design, so as to

“engineer” a DNA test and automate algorithms to screen

millions of possible designs to find the optimum DNA test

design. The Parent’s proprietary platform of Co-Dx

technologies integrates and streamlines these steps as it

analyzes biological samples. The Company entered into an

exclusive license to make, use, sell and licensed PCR tests

using Co-Dx technology, but only for the Zika virus and certain

other flaviviruses and alphaviruses, including dengue,

chikungunya, yellow fever, West Nile virus and Japanese

encephalitis and on a non-exclusive basis, malaria. Together

these tests are referred to as the “Licensed Tests,” and the

technology to design, make, use, sell and license the tests is

referred to as the “Licensed Technology.”

PCR Market Opportunity

The molecular diagnostics market is the fastest growing portion

of the $33 billion US in vitro (test tube based, controlled

environment) diagnostics market. In vitro diagnostics is

expected to grow to a $75 billion industry in 2020. Given the

advantages of molecular tests over other forms of diagnostic

testing, which include higher sensitivities, the ability to

perform multiplex tests and the ability to test for drug

resistance or individual genes, this segment of the market

remains the fastest growing. The molecular diagnostics market

specifically is expected to aggregate $9.3 billion by 2020 from

$5.9 billion in 2015, at a growth rate of 9.3% from 2015 to

2020.

Competitive Business Conditions

The molecular diagnostics industry is extremely competitive.

There are many firms that provide some or all of the products

we provide and provide many diagnostic tests that we have yet

to develop. Many of these competitors are larger than we are

and have significantly greater financial resources. Because we

are not established, many of our competitors have a competitive

advantage in the diagnostic testing industry because they also

have other lines of business in the diagnostics and

pharmaceutical industries from which they derive revenues and

for which they are well known and respected in the medical

profession. We will need to overcome the disadvantage of being

a start up with no history of success and not being well known

in the testing industry. In the diagnostics testing industry,

we compete with such companies as BioMerieux, Siemans, Qiagen

and Cepheid and with such pharmaceutical companies as Abbott

Laboratories, Becton Dickinson and Johnson and Johnson.

Many of these competitors already have an established customer

base with industry standard technology, which we must penetrate

to be successful.

Market Strategy

The Company anticipates generating revenue from co-ventures

with in-country test manufacturing partners, from sublicensing

agreements and from shared-revenue contracts with biotech

companies (speed-to-market test development, companion

diagnostics) and diagnostics product distributors. Our market

strategy is focused on the following goals:

1) Provide affordable and accurate Zika and other

flavivirus/alphavirus PCR tests worldwide

2) Sell to multiple prospective markets in the US Gulf States,

in the Caribbean, in Latin America and elsewhere

a) Through molecular diagnostics manufacturers and

distributors: labs, private organizations and government

agencies addressing healthcare needs in developed and

developing nations,

b) To clinical reference labs as an affordable test development

alternative in creating their own DNA-based tests internally or

outsourcing development to the Company

c) To pharmaceutical companies looking for accurate companion

diagnostics as they introduce new vaccines or therapeutics to

the market

3) Seek strategic partnerships with medium-to-large-cap biotech

companies that can provide broader distribution and a potential

merger or acquisition opportunity

Product Offering

Current: The Company has an exclusive license to a

panel of tests developed on the Parent’s proprietary

analytical systems, currently addressing the Licensed

Tests, which are Zika, dengue, chikungunya, yellow

fever, West Nile virus and Japanese encephalitis and on

a non-exclusive basis and not included in the testing

panel, malaria.

Near Future: The Company will continue to enhance its

existing tests and as its distribution channels

develop, it will seek to license other tests to sell

through its distributors. Likewise, the Parent has a

vested interest in continuing to iterate and improve

the designs of the Licensed Tests and will continue to

do so, all subsequent versions of which are licensed

under the License Agreement.

Competitive Advantages of Licensed Tests

Affordability – Much lower-cost test kits – a

fraction of competitors’ pricing (50%-90%

reductions).

Flexibility – The Licensed Tests can run on many

vendors’ DNA diagnostic testing machines. They are

particularly well suited to the new generation of

“lab-on-a-chip” and “point-of-care” (“LOC and

POC”), highly portable analysis machinery for field,

clinic and office applications.

Speed – Rapid assay development and time to results.

Sophistication – Tests are built on PCR technology,

taking advantage of one of the most advanced

diagnostic testing platforms.

Accuracy – Tests are more accurate than competitors’

and can detect more strains of viruses.

Exclusivity – The Parent licensor (Co-Diagnostics,

Inc.) owns all patents and intellectual property, and

we have acquired some exclusive and non-exclusive

rights as described above.

Broad Footprint – With a dynamic technology that

encompasses markets worldwide, the Company can

identify the best target markets, not only in highly

burdened developing countries but also in developed

nations.

Growth Industry Category – DNA testing is the

fastest-growing segment of in-vitro diagnostic

testing.

Combination Product Offering The Licensed Tests are

ultra-sensitive and are the perfect match for a new

generation of more affordable molecular diagnostic

devices now entering the market. Used together, these

affordable tests devices will revolutionize the

molecular diagnostics industry in cost, mobility,

speed of test results and simplification.

Market for Goods and Services

Severity of the Problem

“On January 22, 2016, the Center for Disease Control

(‘CDC’) activated its Incident Management System and,

working through the Emergency Operations Center (EOC),

centralized its response to the outbreaks of Zika occurring

in the Americas and increased reports of birth defects and

Guillain-Barr syndrome in areas affected by Zika. On February

1, 2016, the World Health Organization declared a Public

Health Emergency of International Concern (PHEIC) because of

clusters of microcephaly and other neurological disorders in

some areas affected by Zika. On February 8, 2016, CDC

elevated its response efforts to a Level 1 activation, the

highest response level at the agency.”

Source: http://www.cdc.gov/zika/geo/

“The Zika virus ‘is now spreading explosively’ in the

Americas, the head of the World Health Organization said

Thursday, with another official estimating between 3 million

to 4 million infections in the region over a 12-month period.

The lack of any immunity to Zika and the fact that mosquitoes

spreading the virus can be found most ‘everywhere in the

Americas’ — from Argentina to the southern United States —

explains the speed of its transmission, said Dr. Sylvain

Aldighieri, an official with the WHO and Pan American Health

Organization.

Aldighieri gave the estimate for Zika infections (including

people who do not report clinical symptoms) based on data

regarding the spread of a different mosquito-borne virus —

dengue. He acknowledged the virus is circulating with ‘very

high intensity.’

Some 80% of those infected with the Zika virus don’t even

feel sick, and most who do have relatively mild symptoms such

as a fever, rash, joint pain or pink eye. But there are major

worries about the dangers pregnant women and their babies

face.

Chan said that, where the virus has arrived, there’s been a

corresponding ‘steep increase in the birth of babies with

abnormally small heads and in cases of Guillain-Barre

syndrome.’ Having small heads can cause severe developmental

issues and sometimes death. Guillain-Barre is a rare

autoimmune disorder that can lead to life-threatening

paralysis.

Health authorities began to suspect a connection between Zika

and neurological ailments, especially in fetuses and

newborns. Brazil alone has reported more than 4,000 cases of

microcephaly — a neurological disorder resulting in the

births of babies with small heads — in infants born to women

infected with Zika while pregnant.”

Source:

http://www.cnn.com/2016/01/28/health/zika-virus-global-response/

“The more researchers learn about the Zika virus, the

scarier it appears, federal health officials said Monday as

they urged more money for mosquito control and to develop

vaccines and treatments. Scientists increasingly believe the

Zika virus sweeping through Latin America and the Caribbean

causes devastating defects in fetal brains if women become

infected during pregnancy. ‘Everything we look at with this

virus seems to be a bit scarier than we initially thought,’

Dr. Anne Schuchat of the Centers for Disease Control and

Prevention said at a White House briefing.”

Source:

http://.cbsnews.com/news/officials-zika-virus-scarier-than-we-thought/

Zika virus has been identified in 31 countries as of March

2016, including the US southern states. For the most recent

recorded year, there were over 8.3 million births in

Central and South America, in Cabo Verde in Africa and in

affected regions of Polynesia. There were an additional

900,000 births in the US Gulf States and Hawaii.

Based on current research, it appears that the Zika virus

passes through the placenta of some mothers who have an

active strain of the virus during the first trimester of

their pregnancies. It is estimated that the infection

remains active rather than latent for up to 10 days. A

pregnant woman ideally should be tested every 10 days

during the first trimester, or 9 times. To date, over 4,000

cases of birth defects from Zika have been identified in

the Brazilian states Rio de Janeiro and Bahia. Thus the

potential market for a highly accurate, affordable PCR

diagnostic test could be approximately 9.2 million X 9

tests, or over 80 million tests.

Note: Zika does not always manifest acute symptoms,

therefore a broad test initiative will have to be

implemented.

The WHO recently announced that the incidence of sexual

transmission of the Zika virus is higher than earlier

analyses indicated. Thus the market for a Zika screening

test may be double the numbers listed above. Zika is a

flavivirus, all of which are transmitted by the Aedes

aegypti mosquito. They include Zika virus, dengue, yellow

fever, West Nile virus and Japanese encephalitis.

Chikungunya, an alphavirus, is likewise transmitted by the

Aedes aegypti mosquito. Many have similar symptoms. The

Company’s next product after a Zika screening will be a

PCR multiplex test to differentiate among these viruses in

the patient. There are over a million cases of dengue in

Brazil alone, and its symptoms are very similar to those of

Zika.

Compliance with Government Regulation

We will be regulated by the U.S. Federal Drug

Administration, and our products must be approved by the

FDA before we will be allowed to sell our tests in the

United States unless we sell to clinical research labs who

are allowed to use our tests under their general umbrella

of testing for diseases without applying for FDA approval

to service the general public. Because our Parent’s lab is

ISO 9001 and ISO 13485 certified, it is well prepared to

obtain a self-certified CE-IVD marking for its products,

which will allow us to sell our tests in most developed

countries in Europe and Asia as well as in most developing

nations, which are our initial target markets. Each country

will have its individual registration and regulatory

requirements, which will need to be met as well.

Research and Development

We will have no responsibility to perform additional

research and development, as our License Agreement with our

Parent puts the responsibility to complete the development

of all of the Licensed Tests on the Parent. Further the

License Agreement gives us the right to new innovations

discovered and developed by our Parent in the course of its

development activities, including further development of

the Tests using the Parent’s unique technology.

Corporate Office

We maintain offices currently at 8160 S. Highland Drive,

Salt Lake City, Utah 84093, which includes two offices

comprising approximately 1,000 square feet leased on a

month to month basis for $750.00 per month. We are seeking

a different location, which may include relocating with or

moving adjacent to our Parent’s corporate offices in Salt

Lake City.

Employees

We currently have five employees, two of which are

part-time. All are located at our corporate offices.

Legal Proceedings

We are not aware of any material pending legal proceedings

to which we are a party or of which our property is the

subject. We also know of no proceedings to which any of our

directors, officers or affiliates, or any registered or

beneficial holders of more than 5% of any class of our

securities, or any associate of any such director, officer,

affiliate or security holder, are an adverse party or have

a material interest adverse to us.

Item 1A. RISK FACTORS

An investment in our securities involves a high degree of

risk. You should consider carefully the following risks,

along with all of the other information included in this

report, before deciding to buy our common stock. Additional

risks and uncertainties not currently known to us or that

we currently deem to be immaterial may also impair our

business operations. If we are unable to prevent events

that have a negative effect from occurring, then our

business may suffer.

Risks Related to Our Company

We have a limited commercial history upon which to base our

prospects, have not generated revenues or profits and do

not expect to generate profits for the foreseeable future.

We may never achieve or sustain profitability.

We have not earned any revenue to date and do not

expect to earn significant revenue in the near future.

We had a net loss of $ 23,636, $50,735, and $37,906, in

the three-month period ending July 31, 2016, the

twelve-month period ending April 30, 2016 and the

twelve-month period ending April 30, 2015,

respectively. Our accumulated deficit was $239,831 and

$215,745 as of July 31, 2016 and April 30, 2016,

respectively. Potential investors should be aware of

the difficulties normally encountered by a new

enterprise, many of which are beyond our control,

including substantial risks and expenses in the course

of developing new diagnostic tests, establishing or

entering new markets, organizing operations and

marketing procedures. The likelihood of our success

must be considered in light of these risks, expenses,

complications and delays, and the competitive

environment in which we operate. There is, therefore,

nothing at this time upon which to base an assumption

that our business plan will prove successful, and we

may not be able to generate significant revenue, raise

additional capital or operate profitably. We will

continue to encounter risks and difficulties frequently

experienced by early commercial stage companies,

including scaling up our infrastructure and headcount,

and may encounter unforeseen expenses, difficulties or

delays in connection with our growth. In addition, as a

result of the start-up nature of our business, we can

be expected to continue to sustain substantial

operating expenses without generating sufficient

revenues to cover expenditures. As discussed in Note 2

to our audited financial statements, our recurring

operating losses and our need for additional sources of

capital to fund our ongoing operations raise

substantial doubt about our ability to continue as a

going concern. Any investment in our company is

therefore highly speculative and could result in the

loss of your entire investment.

We will need to raise additional capital, which may not

be available on favorable terms, if at all, and which

may cause dilution to stockholders, restrict our

operations or adversely affect our ability to operate

our business.

As of April 30, 2016, our cash balance was $1,191 and

our working capital deficit was $13,712. At our current

rate of expenditures, we estimate that our existing

capital resources will fund our operations for twelve

months. Accordingly, we will need to raise additional

funds through public or private debt or equity

financing or through other means in order to sustain

our operations and current business strategy. We may be

unable to obtain adequate financing on favorable terms,

or at all, and any additional financings could result

in additional dilution to our then-existing

stockholders or restrict our operations or adversely

affect our ability to operate our business. If we are

unable to obtain needed financing on acceptable terms,

we may not be able to implement our business plan,

which could have a material adverse effect on our

business, financial condition and results of

operations. We may not be able to meet our business

objectives, our equity value may decrease and investors

may lose some or all of their investment. If we raise

funds by issuing equity securities, the percentage

ownership of our then stockholders will be reduced. If

we raise funds by issuing debt, the ability of our

stockholders to receive earnings or distributions may

be adversely affected and we may be subject to

additional covenants and restrictions.

The best efforts structure of this offering may yield

insufficient gross proceeds to execute on our business

plan.

The underwriters are offering the Shares on a

best-efforts basis. The underwriters are not required

to sell any specific number or dollar amount of Shares,

but will use their best efforts to sell the Shares

offered. As a “best-efforts” offering, there can be

no assurance that the offering contemplated hereby will

ultimately be consummated or will result in any

proceeds being made to us. The success of this offering

will impact our ability to cover expenses and finance

operations over the next 12 months. If no Shares are

sold in this offering, or if we sell only a minimum

number of Shares yielding insufficient gross proceeds,

we may be unable to cover our expenses, successfully

fund operations, or execute on our business plan. This

would result in a material adverse effect on our

business, prospects, financial condition, and results

of operations.

Our near-term success is dependent upon our ability to

commence sales of our tests.

Our success will depend, in part, upon our ability to

commence sales of our tests. Attracting new customers

requires substantial time and expense. Any failure to

initiate sales of our tests to validate our platform

would adversely affect our operating results. Many

factors could affect the market acceptance and

commercial success of our diagnostic tests, including:

our ability to convince our potential customers of

the advantages and economic value of our tests over

competing technologies and diagnostic tests;

the breadth of our test menu relative to

competitors;

changes to policies, procedures or currently

accepted best practices in clinical diagnostic

testing;

the extent and success of our marketing and sales

efforts;

our ability to manufacture our commercial

diagnostic tests and meet demand in a timely

fashion.

If we cannot successfully develop, obtain regulatory

approvals for and commercialize new diagnostic tests,

our financial results will be harmed and our ability to

compete will be harmed.

Our financial performance depends in part upon our

ability to successfully develop and market new tests in

a rapidly changing technological and economic

environment. If we fail to successfully introduce new

diagnostic tests, we could lose customers and market

share. We could also lose market share if our

competitors introduce new diagnostic tests or

technologies that render our diagnostic tests less

competitive or obsolete. In addition, delays in the

introduction of new diagnostic tests due to regulatory,

developmental or other obstacles could negatively

impact our revenue and market share, as well as our

earnings. Factors that can influence our ability to

introduce new diagnostic tests, the timing associated

with new product approvals and commercial success of

these diagnostic tests include:

the scope of and progress made in our research

and development activities;

our ability to successfully initiate and complete

clinical trial studies;

timely expansion of our menu of tests;

the results of clinical trials needed to support

any regulatory approvals of our tests;

our ability to obtain requisite FDA or other

regulatory clearances or approvals for our tests

under development on a timely basis;

demand for the new diagnostic tests we introduce;

product offerings from our competitors; and

the functionality of new diagnostic tests that

address market requirements and customer demands.

We are subject to many laws and governmental

regulations and any adverse regulatory action may

materially adversely affect our financial condition

and business operations.

Our diagnostic tests are subject to regulation by

numerous government agencies, including the FDA and

comparable foreign agencies. To varying degrees each

of these agencies requires us to comply with laws and

regulations governing the development, testing,

manufacturing, labeling, marketing and distribution

of our diagnostic tests. In the clinical market, our

diagnostic tests are regulated by the FDA and

comparable agencies of other countries. In

particular, FDA regulations govern activities such as

product development, product testing, product

labeling, product storage, premarket clearance or

approval, manufacturing, advertising, promotion,

product sales, reporting of certain product failures

and distribution. Our diagnostic tests will require

510(k) clearance from the FDA prior to marketing in

the United States. Clinical trials are required to

support a 510(k) submission.

Since 2009 the FDA has significantly increased its

oversight of companies subject to its regulations,

including medical device companies, by hiring new

investigators and stepping up inspections of

manufacturing facilities. The FDA has recently also

significantly increased the number of warning letters

issued to companies. If the FDA were to conclude that

we are not in compliance with applicable laws or

regulations, the FDA could refuse to grant pre-market

approval applications or require certificates of

foreign governments for exports, and/or require us to

notify health professionals and others. Any adverse

regulatory action, depending on its magnitude, may

restrict us from effectively marketing and selling

our diagnostic tests.

Foreign governmental regulations have become

increasingly stringent and more common, and we may

become subject to more rigorous regulation by foreign

governmental authorities in the future. Penalties for

a company’s non-compliance with foreign governmental

regulation could be severe, including revocation or

suspension of a company’s business license and

criminal sanctions. Any domestic or foreign

governmental law or regulation imposed in the future

may have a material adverse effect on us.

Our current and potential customers in the United

States and elsewhere may also be subject, directly or

indirectly, to applicable anti-kickback, fraud and

abuse, false claims, transparency, health information

privacy and security and other healthcare laws and

regulations, which could expose us to criminal

sanctions, civil penalties, contractual damages,

reputational harm, administrative burdens and

diminished profits and future earnings.

The life sciences industry is highly competitive and

subject to rapid technological change. If our

competitors and potential competitors develop

superior diagnostic tests and technologies, our

competitive position and results of operations would

suffer.

We face intense competition from a number of

companies that offer diagnostic tests in our target

markets, many of which have substantially greater

financial resources and larger, more established

marketing, sales and service organizations than we

do. The life sciences industry is characterized by

rapid and continuous technological innovation. We may

need to develop new technologies for our diagnostic

tests to remain competitive. One or more of our

current or future competitors could render our

present or future diagnostic tests obsolete or

uneconomical by technological advances. We may also

encounter other problems in the process of delivering

new diagnostic tests to the marketplace, such as

problems related to design, development or

manufacturing of such diagnostic tests, and as a

result we may be unsuccessful in selling such

diagnostic tests. Our future success depends on our

ability to compete effectively against current

technologies, as well as to respond effectively to

technological advances by developing and marketing

diagnostic tests that are competitive in the

continually changing technological landscape.

If our diagnostic tests do not perform as expected or

the reliability of the technology on which our

diagnostic tests are based is questioned, we could

experience delayed or reduced market acceptance of

our diagnostic tests, increased costs and damage to

our reputation.

Our success depends on the market’s confidence

that we can provide reliable, high-quality

diagnostic tests. We believe that customers in our

target markets are likely to be particularly

sensitive to product defects and errors. Our

reputation and the public image of our diagnostic

tests or technologies may be impaired if our

diagnostic tests fail to perform as expected or our

diagnostic tests are perceived as difficult to use.

Despite quality control testing, defects or errors

could occur in our diagnostic tests or

technologies.

In the future if our diagnostic tests experience a

material defect or error, this could result in loss

or delay of revenues, delayed market acceptance,

damaged reputation, diversion of development

resources, legal claims, increased insurance costs

or increased service and warranty costs, any of

which could harm our business. Such defects or

errors could also prompt us to amend certain

warning labels or narrow the scope of the use of

our diagnostic tests, either of which could hinder

our success in the market. Even after any

underlying concerns or problems are resolved, any

widespread concerns regarding our technology or any

manufacturing defects or performance errors in our

diagnostic tests could result in lost revenue,

delayed market acceptance, damaged reputation,

increased service and warranty costs and claims

against us.

If our international distributor relationships are

not successful, our ability to market and sell our

diagnostic tests will be harmed and our financial

performance will be adversely affected.

Outside of the United States, we depend on

relationships with distributors for the marketing

and sales of our diagnostic tests in various

geographic regions, and we have a limited ability

to influence their efforts. Relying on distributors

for our sales and marketing could harm our business

for various reasons, including:

agreements with distributors may terminate

prematurely due to disagreements or may result

in litigation between the partners;

our distributors may not devote sufficient

resources to the sale of diagnostic tests;

our distributors may be unsuccessful in

marketing our diagnostic tests; and

we may not be able to negotiate future

distributor agreements on acceptable terms.

If we become subject to claims relating to improper

handling, storage or disposal of hazardous

materials, we could incur significant cost and time

to comply.

Our research and development processes involve the

controlled storage, use and disposal of hazardous

materials, including biological hazardous

materials. We are subject to foreign, federal,

state and local regulations governing the use,

manufacture, storage, handling and disposal of

materials and waste products. We may incur

significant costs complying with both existing and

future environmental laws and regulations. In

particular, we are subject to regulation by the

Occupational Safety and Health Administration, or

OSHA, and the Environmental Protection Agency, or

EPA, and to regulation under the Toxic Substances

Control Act and the Resource Conservation and

Recovery Act in the United States. OSHA or the EPA

may adopt additional regulations in the future that

may affect our research and development programs.

The risk of accidental contamination or injury from

hazardous materials cannot be eliminated

completely. In the event of an accident, we could

be held liable for any damages that result, and any

liability could exceed the limits or fall outside

the coverage of our workers’ compensation

insurance. We may not be able to maintain insurance

on acceptable terms, if at all.

Our diagnostic tests have not been manufactured on

a high volume scale and are subject to unforeseen

scale-up risks.

While we have developed a process to manufacture

diagnostic tests, there can be no assurance that we

can manufacture our diagnostic tests at a scale

that is adequate for our future commercial needs.

We may face significant or unforeseen difficulties

in manufacturing our diagnostic tests, including

but not limited to:

technical issues relating to manufacturing

components of our diagnostic test cartridges on

a high volume commercial scale at reasonable

cost, and in a reasonable time frame;

difficulty meeting demand or timing

requirements for orders due to excessive costs

or lack of capacity for part or all of an

operation or process;

changes in government regulations or in quality

or other requirements that lead to additional

manufacturing costs or an inability to supply

product in a timely manner, if at all; and

increases in raw material or component supply

cost or an inability to obtain supplies of

certain critical supplies needed to complete

our manufacturing processes.

These and other difficulties may only become

apparent when scaling up to the manufacturing

process of our diagnostic tests to a more

substantive commercial scale. In the event our

diagnostic tests cannot be manufactured in

sufficient commercial quantities or manufacturing

is delayed, our future prospects could be

significantly impacted and our financial prospects

would be materially harmed.

We or our suppliers may experience development or

manufacturing problems or delays that could limit

the growth of our revenue or increase our

losses.

We may encounter unforeseen situations in the

manufacturing of our diagnostic tests that could

result in delays or shortfalls in our production.

Our suppliers may also face similar delays or

shortfalls. In addition, our or our suppliers’

production processes may have to change to

accommodate any significant future expansion of

our manufacturing capacity, which may increase

our or our suppliers’ manufacturing costs, delay

production of our diagnostic tests, reduce our

product gross margin and adversely impact our

business. If we are unable to keep up with demand

for our diagnostic tests by successfully

manufacturing and shipping our diagnostic tests

in a timely manner, our revenue could be

impaired, market acceptance for our diagnostic

tests could be adversely affected and our

customers might instead purchase our

competitors’ diagnostic tests. In addition,

developing manufacturing procedures for new

diagnostic tests may require developing specific

production processes for those diagnostic tests.

Developing such processes could be time consuming

and any unexpected difficulty in doing so can

delay the introduction of a product.

We expect to rely on third parties to conduct

studies of our diagnostic tests that will be

required by the FDA or other regulatory

authorities and those third parties may not

perform satisfactorily.

We do not have the ability to independently

conduct the field trial studies or other studies

that may be required to obtain FDA and other

regulatory clearances or approvals for our

diagnostic tests. Accordingly, we expect to rely

on third parties, such as independent testing

laboratories and hospitals, to conduct such

studies. Our reliance on these third parties will

reduce our control over these activities. These

third-party contractors may not complete

activities on schedule or conduct studies in

accordance with regulatory requirements or our

study design. We cannot control whether they

devote sufficient time, skill and resources to

our studies. Our reliance on third parties that

we do not control will not relieve us of any

applicable requirement to prepare, and ensure

compliance with, various procedures required

under good clinical practices. If these third

parties do not successfully carry out their

contractual duties or regulatory obligations or

meet expected deadlines, if the third parties

need to be replaced or if the quality or accuracy

of the data they obtain is compromised due to

their failure to adhere to our clinical protocols

or regulatory requirements or for other reasons,

our studies may be extended, delayed, suspended

or terminated, and we may not be able to obtain

regulatory approval for additional diagnostic

tests.

Product liability claims could adversely impact

our financial condition and our earnings and

impair our reputation.

Inadequate disclosure of product-related risks or

product-related information with respect to our

diagnostic tests could result in an unsafe

condition, injury to, or death of, a patient. The

occurrence of such a problem could result in

product liability claims, or safety alert

relating to, one or more of our diagnostic tests.

Product liability claims, regardless of their

ultimate outcome, could have a material adverse

effect on our business and reputation and on our

ability to attract and retain customers for our

diagnostic tests.

Health care policy changes, including U.S. health

care reform legislation signed in 2010, may have

a material adverse effect on us.

In March 2010 the Patient Protection and

Affordable Care Act and the Health Care and

Education Affordability Reconciliation Act of

2010 were signed into law. Elements of this

legislation, such as comparative effectiveness

research, an independent payment advisory board,

payment system reforms, including shared savings

pilots, and other provisions, could meaningfully

change the way health care is developed and

delivered, and may materially impact numerous

aspects of our business.

Consolidation in the health care industry could

have an adverse effect on our revenues and

results of operations.

Many health care industry companies, including

health care systems, are consolidating to create

new companies with greater market power. As the

health care industry consolidates, competition to

provide goods and services to industry

participants will become more intense. These

industry participants may try to use their market

power to negotiate price concessions or

reductions for diagnostic tests. If we are forced

to reduce our prices because of consolidation in

the health care industry, our projected revenues

would decrease and our earnings, financial

condition, and/or cash flows would suffer.

Our ability to compete depends on our ability to

attract and retain talented employees.

Our future success depends on our ability to

identify, attract, train, integrate and retain

highly qualified technical, development, sales

and marketing, managerial and administrative

personnel. Competition for highly skilled

individuals is extremely intense and we face

difficulty identifying and hiring qualified

personnel in many areas of our business. We may

not be able to hire and retain such personnel at

compensation levels consistent with our existing

compensation and salary structure. Many of the

companies with which we compete for hiring

experienced employees have greater resources than

we have. If we fail to identify, attract, train,

integrate and retain highly qualified and

motivated personnel, our reputation could suffer

and our business, financial condition and results

of operations could be adversely affected.

Our future success also depends on the continued

service and performance of our senior management

team. The replacement of members of our senior

management team likely would involve significant

time and costs, and the loss of any these

individuals may delay or prevent the achievement

of our business objectives.

Changes in tax laws or exposure to additional

income tax liabilities could have a material

impact on our financial condition and results of

operations.

We are subject to income taxes as well as

non-income based taxes, in both the United

States and various foreign jurisdictions.

Changes in existing tax laws, treaties,

regulations or policies or the interpretation

or enforcement thereof, or the enactment or

adoption of new tax laws, treaties, regulations

or policies could materially impact our

effective tax rate.

If we do not achieve, sustain or successfully

manage our anticipated growth, our business and

prospects will be harmed.

If we are unable to obtain or sustain adequate

revenue growth, our financial results could

suffer. Furthermore, significant growth will

place strains on our management and our

operational and financial systems and processes

and our operating costs may escalate even

faster than planned. If we cannot effectively

manage our expanding operations and our costs,

we may not be able to grow effectively or we

may grow at a slower pace. Additionally, if we

do not successfully forecast the timing of

regulatory authorization for our additional

tests, marketing and subsequent demand for our

diagnostic tests or manage our anticipated

expenses accordingly, our operating results

will be harmed.

Other companies or institutions have

commercial diagnostic tests or may develop

and market novel or improved methods for

infectious disease diagnostic testing, which

may make our diagnostic platform less

competitive or obsolete.

The market for diagnostic testing is large

and established, and our competitors may

possess significantly greater financial

resources and have larger development and

commercialization capabilities than we do. We

may be unable to compete effectively against

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