F-4/A
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As filed with the Securities and Exchange Commission on August 20, 2021.

Registration No. 333-257745

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1 to

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

LUMIRADX LIMITED

(Exact name of registrant as specified in its charter)

 

 

 

Cayman Islands   2834   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary standard industrial

classification code number)

 

(I.R.S. Employer

Identification Number)

LumiraDx Limited

c/o Ocorian Trust (Cayman) Limited

PO Box 1350, Windward 3, Regatta Office Park

Grand Cayman KY1-1108

Cayman Islands

(345) 640-0540

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

LumiraDx, Inc.

221 Crescent Street. 5th Floor

Waltham, MA 02453

Telephone: (209) 721-950

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Edwin M. O’Connor

Laurie A. Burlingame

Paul R. Rosie

Goodwin Procter LLP

100 Northern Avenue

Boston, MA 02210

Telephone: (617) 570-1000

 

Ian Lopez

Warren S. de Wied

Fried, Frank, Harris, Shriver & Jacobson (London) LLP

100 Bishopsgate

London EC2N 4AG United Kingdom

Telephone: +44 20 7972 9600

 

Anna-Lise Wisdom

Appleby (Cayman) Ltd

71 Fort Street, PO Box 190

Grand Cayman, KY1-1104

Telephone: +1 345 949 4900

  David Ni

Alexander B. Temel

Joshua DuClos

Sidley Austin LLP

787 7th Avenue

New York, NY 10019

Telephone: (212) 839-5430

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the transactions contemplated by the Agreement and Plan of Merger described in the included proxy statement/prospectus have been satisfied or waived.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐


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If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title Of Each Class Of

Security To Be Registered

 

Amount

To Be

Registered(1)(7)

 

Proposed

Maximum

Offering Price
Per Security(2)

 

Proposed

Maximum
Aggregate
Offering Price

  Amount of
Registration Fee(3)

LMDX common shares(4)

  14,780,000   $9.87   $145,878,600   $15,915.36

LMDX common shares underlying warrants(5)

  5,750,000   $12.2794   $70,606,550   $7,703.17

Warrants to purchase LMDX common shares(6)

  5,750,000   —         —         —      

Total

  26,280,000       $216,485,150   $23,618.53(8)

 

 

(1)

The number of common shares (“LMDX common shares”) of LumiraDx Limited (“LumiraDx” or the “Company”) and warrants (“LMDX new warrants”) to purchase LMDX common shares being registered is based upon an estimate of the sum of: (A) the maximum number of shares of common stock of CA Healthcare Acquisition Corp. (“CAH”) that will be outstanding immediately prior to the Merger (as defined herein) and exchanged for one LMDX common share for each CAH share, assuming the Merger Subdivision (as defined herein) has occurred, and (B) the maximum number of CAH public warrants that will be outstanding immediately prior to the Merger and exchanged for one LMDX new warrant for each such CAH public warrant, assuming the Merger Subdivision has occurred.

(2)

In accordance with Rule 457(f)(1) and Rule 457(c), as applicable, based on (i) in respect of LMDX common shares to be issued to CAH stockholders, the average of the high ($9.88) and low ($9.86) prices CAH common stock on the Nasdaq Capital Market (“Nasdaq”) on August 13, 2021, and (ii) in respect of LMDX new warrants to be issued to holders of CAH public warrants, the sum of (a) the average of the high ($0.7988) and low ($0.7600) prices for the CAH public warrants on Nasdaq on August 13, 2021 and (b) $11.50, the exercise price of the CAH public warrants. The maximum number of LMDX new warrants and LMDX common shares issuable upon exercise of the LMDX new warrants are being simultaneously registered hereunder. Consistent with the response to Question 240.06 of the Securities Act Rules Compliance and Disclosure Interpretations, the registration fee with respect to the LMDX new warrants has been allocated to the underlying LMDX common shares and those LMDX common shares are included in the registration fee.

(3)

Pursuant to Rule 457(p) under the Securities Act, the filing fee for this registration statement has been offset in full by fees totaling $10,910 paid in connection with the Registration Statement on Form F-1 (File No: 333-252174) filed by the Registrant. Such registration statement was withdrawn pursuant to Form RW filed on April 7, 2021. Such registration statement was not declared effective and no securities were sold thereunder.

(4)

Represents LMDX common shares issuable in exchange for CAH shares (including the CAH common stock underlying units of CAH). To achieve an exchange ratio of one LMDX common share for each CAH share, LumiraDx shall effect pursuant to the terms of the Merger Agreement a subdivision (the “Merger Subdivision”), immediately prior to the Effective Time, of all issued, and authorized but unissued, LMDX ordinary shares and LMDX common shares at a ratio of 1.608448151:1. The number of LMDX common shares set out above assumes the completion of the Merger Subdivision.

(5)

Represents LMDX common shares issuable to CAH stockholders upon the exercise of the LMDX new warrants. Each whole warrant entitles the holder to purchase one LMDX common share at a price of $11.50 commencing 30 days after the Closing Date (as defined herein). The number of LMDX common shares set out above assumes the completion of the Merger Subdivision.

(6)

Represents the CAH public warrants, which will be assigned to and assumed by LumiraDx at the Effective Time, which we refer to herein as the LMDX new warrants. Each whole LMDX new warrant entitles the holder to purchase one LMDX common share. The number of LMDX new warrants set out above assumes the completion of the Merger Subdivision.

(7)

Pursuant to Rule 416(a), there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, subdivisions, stock dividends or similar transactions.

(8)

The Registrant previously paid a registration fee of $23,713.48 in connection with its filing of the Form F-4 on July 7, 2021.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commissions is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Any representation to the contrary is a criminal offense.

 

SUBJECT TO COMPLETION, DATED AUGUST 20, 2021

PROXY STATEMENT/PROSPECTUS

LOGO                          LOGO

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS OF

CA HEALTHCARE ACQUISITION CORP.

 

 

PROSPECTUS FOR UP TO 14,780,000 LMDX COMMON SHARES

5,750,000 LMDX WARRANTS AND 5,750,000 LMDX COMMON SHARES UNDERLYING WARRANTS

OF

LUMIRADX LIMITED

 

 

The board of directors of CA Healthcare Acquisition Corp., a Delaware corporation (“CAH”), has unanimously approved the Agreement and Plan of Merger, dated as of April 6, 2021, as amended pursuant to the Amendment to the Merger Agreement dated August 19, 2021 (collectively, the “Merger Agreement”), by and among LumiraDx Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“LumiraDx” or the “Company”), LumiraDx Merger Sub, Inc., a newly formed Delaware corporation and wholly owned subsidiary of LumiraDx (“Merger Sub”), and CAH which, among other things, provides for Merger Sub to be merged with and into CAH with CAH being the surviving corporation in the merger (the “Merger”). As a result of and upon consummation of the Merger, CAH will become a wholly owned subsidiary of LumiraDx, with security holders of CAH becoming security holders of LumiraDx.

Immediately prior to the effective time of the Merger (the “Effective Time”), LumiraDx intends to effect a Capital Restructuring (as defined below) which will include, among other things, a subdivision (the “Merger Subdivision”) of each LMDX ordinary share and each LMDX common share into such number of LMDX ordinary shares and LMDX common shares (as applicable) calculated in accordance with the terms of the Merger Agreement at the LMDX Conversion Factor (being 1.608448151:1) to achieve an exchange ratio in the Merger of one LMDX common share for each CAH share.

Pursuant to the Merger Agreement, and assuming the Capital Restructuring has occurred, each outstanding share of CAH Class B common stock shall be converted into shares of CAH common stock immediately prior to the Effective Time, and at the Effective Time each outstanding share of CAH common stock shall be automatically canceled and extinguished and reissued to LumiraDx as one share of common stock of CAH, in consideration for the right to receive one LMDX common share. The outstanding CAH public warrants shall, by their terms, automatically entitle the holders to purchase LMDX common shares upon the completion of the Merger. In addition, pursuant to the Sponsor Agreement, upon the closing of the Merger, the sponsor will exchange all 4,050,000 CAH private placement warrants for 405,000 LMDX common shares. Accordingly, this proxy statement/prospectus covers an aggregate of 14,780,000 LMDX common shares, 5,750,000 LMDX new warrants, and 5,750,000 LMDX common shares underlying LMDX new warrants exercisable by former warrant holders of CAH following the completion of the Merger.

LumiraDx’s share capital consists of LMDX common shares and LMDX ordinary shares. The rights of LMDX common shares and LMDX ordinary shares are identical, except as they relate to voting and conversion rights. Each LMDX common share entitles the holder to one vote on any proposed shareholder resolution. Each LMDX ordinary share entitles the holder to ten votes on any proposed shareholder resolution and is convertible into LMDX common shares at any time after the date that is 180 days from Closing. Upon completion of the Merger, assuming that no CAH stockholders exercise redemption rights with respect to their CAH public shares:

i. the current holders of CAH public shares will own 4.4% of the outstanding share capital of the Company and will control approximately 0.5% of the shareholder voting power of the Company;

ii. the sponsor will own 1.3% of the outstanding share capital of the Company and will control approximately 0.2% of the shareholder voting power of the Company;

iii. the Company’s directors, executive officers and their respective affiliates will own 32.78% of the outstanding share capital of the Company and will control approximately 32.11% of the shareholder voting power of the Company; and

iv. the Company’s other existing shareholders will own 61.52% of the outstanding share capital of the Company and will control approximately 67.19% of the shareholder voting power of the Company; as further described in the section titled “Beneficial Ownership of Securities” on page 258 of the attached proxy statement/prospectus.

The proposals to approve and adopt the Merger Agreement, as well as certain other matters relating to the Merger, will be presented at the special meeting of stockholders of CAH scheduled to be held on            , 2021.

CAH’s units, CAH common stock and CAH public warrants are currently listed on the Nasdaq Stock Market (“Nasdaq”) under the symbols CAHCU, CAHC and CAHCW, respectively. LumiraDx intends to apply for listing, to be effective at the time of the Merger, of the relevant LMDX common shares and the LMDX new warrants to be assumed by LumiraDx in accordance with the terms of the Merger Agreement on Nasdaq under the symbols LMDX and LMDXW, respectively. LumiraDx will not have units traded following the completion of the Merger. It is a condition of the completion of the Merger that the relevant LMDX common shares and LMDX new warrants are approved for listing on Nasdaq, but there can be no assurance such listing condition will be met.

Each of CAH and LumiraDx is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to comply with certain reduced public company reporting requirements.

LumiraDx will also be a “foreign private issuer” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and will be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, LumiraDx’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, LumiraDx will not be required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission, or SEC, as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

This proxy statement/prospectus provides you with detailed information about the Merger. We encourage you to carefully read this entire document. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 20.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated             , 2021, and is first being mailed to CAH stockholders on or about             , 2021.


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CA HEALTHCARE ACQUISITION CORP.

99 Summer Street, Suite 200

Boston, MA 02110

NOTICE OF

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON             , 2021

TO THE STOCKHOLDERS OF CA HEALTHCARE ACQUISITION CORP.

NOTICE IS HEREBY GIVEN that a special meeting of holders of Class A common stock and Class B common stock of CA Healthcare Acquisition Corp. (“CAH”), a Delaware corporation, will be held at         a.m. eastern time, on             , 2021, via a live interactive audio webcast on the internet (which we refer to as the “CAH special meeting”). You will be able to vote and submit your questions at                     during the meeting. The special meeting will be held for the following purpose:

 

(1)

to consider and vote upon a proposal to approve the merger of LumiraDx Merger Sub, Inc. (“Merger Sub”), a newly formed Delaware corporation and wholly owned subsidiary of LumiraDx Limited (“LumiraDx” or the “Company”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, with and into CAH, with CAH being the surviving corporation in the merger (the “Merger”), pursuant to the Agreement and Plan of Merger, dated as of April 6, 2021, as amended pursuant to the amendment to the merger agreement, dated August 19, 2021 (collectively the “Merger Agreement”), by and among LumiraDx, Merger Sub and CAH - we refer to this proposal as the “Merger Proposal”;

 

(2)

to consider and vote upon separate proposals to approve the following material differences between the constitutional documents of LumiraDx that will be in effect upon the closing of the Merger and CAH’s current certificate of incorporation: (i) the name of the new public entity will be “LumiraDx Limited” as opposed to “CA Healthcare Acquisition Corp.”; (ii) the authorized share capital of the new public entity will be US$10,290 divided into, assuming completion of the Merger Subdivision, (1) 1,769,292,966 LMDX ordinary shares with a par value (to seven decimal places) of $0.0000028 per LMDX ordinary share, (2) 1,769,292,966 LMDX common shares with a par value (to seven decimal places) of $0.0000028 per LMDX common share and (3) undesignated shares of such class or classes (however designated) as the board of directors of LumiraDx may determine, as opposed to CAH having 110,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock; (iii) the new public entity has two classes of shares, being the LMDX common shares and the LMDX ordinary shares, such that each holder of LMDX common shares will be entitled to one vote on any proposed shareholder resolution for each such share and each holder of LMDX ordinary shares will be entitled to ten votes on any proposed shareholder resolution for each such share; (iv) the new public entity shall have two classes of directors, other than the LMDX Founder Directors, serving staggered terms with the terms of the Class I and Class II directors expiring at the annual general meeting of shareholders to be held in 2022 and 2023, respectively, and each term expiring two years thereafter, in each case; and (v) the new public entity’s constitutional documents will not include the various provisions applicable only to special purpose acquisition corporations that CAH’s amended and restated certificate of incorporation contains (such as the obligation to dissolve and liquidate if a business combination is not consummated in a certain period of time) - we refer to these proposals collectively as the “Charter Proposals”; and

 

(3)

to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if CAH has not received sufficient votes at the special meeting to enable it to consummate the business combination contemplated by the Merger Agreement - we refer to this proposal as the “Adjournment Proposal.”

The Merger Proposal, the Charter Proposals and the Adjournment Proposal are described in the attached proxy statement/prospectus, which we encourage you to read in its entirety before voting. IN PARTICULAR, WE URGE YOU TO CAREFULLY READ THE SECTION IN THE PROXY

STATEMENT/PROSPECTUS ENTITLED “RISK FACTORS.” Terms used but not defined herein shall have the meaning given to them in the attached proxy statement/prospectus. Only holders of record of CAH Class A common stock and/or Class B common stock at the close of business on             , 2021 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting.


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After careful consideration, CAH’s board of directors has determined that the Merger Proposal, the Charter Proposals and the Adjournment Proposal is fair to, and in the best interests of, CAH and its stockholders and unanimously recommend that you vote or give instruction to vote “FOR” the Merger Proposal, “FOR” the Charter Proposals and “FOR” the Adjournment Proposal, if presented.

Consummation of the Merger is conditional on the approval of each of the Merger Proposal and the Charter Proposals. If either the Merger Proposal or the Charter Proposals is not approved, the other proposals will not be presented to the stockholders for a vote. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

All holders of CAH Class A common stock and Class B common stock are cordially invited to attend and vote at the special meeting. To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible or submit your proxy by phone or the internet. Please vote promptly whether or not you expect to attend the special meeting virtually. If your CAH shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your CAH shares or, if you wish to attend the special meeting virtually and vote, obtain a proxy from your broker or bank.

A complete list of CAH stockholders of record entitled to vote at the special meeting will be available for ten days before the special meeting at the principal executive offices of CAH for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting.

Your vote is important regardless of the number of CAH shares you own. Whether you plan to attend the special meeting virtually or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your CAH shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the CAH shares you beneficially own are properly counted.

Thank you for your participation. We look forward to your continued support.

 

By Order of the Board of Directors

/s/ Larry J. Neiterman

Larry J. Neiterman
Chairman and Chief Executive Officer

                , 2021

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR CAH SHARES WILL BE VOTED IN FAVOR OF THE MERGER PROPOSAL, THE CHARTER PROPOSALS AND, IF APPLICABLE, THE ADJOURNMENT PROPOSAL. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE CAH REDEEM YOUR CAH SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR CAH SHARES TO CAH’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE VOTE AT THE SPECIAL MEETING. YOU MAY TENDER YOUR CAH SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR CAH SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE MERGER IS NOT COMPLETED, THEN THESE CAH SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE CAH SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANKS OR BROKERS TO WITHDRAW THE CAH SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “SPECIAL MEETING OF CAH STOCKHOLDERS - REDEMPTION RIGHTS” BEGINNING ON PAGE 96 FOR MORE SPECIFIC INSTRUCTIONS.

This proxy statement/prospectus is dated                 , 2021 and is first being mailed to CAH stockholders, on

or about                 , 2021.


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TABLE OF CONTENTS

 

    

Page

 

FREQUENTLY USED TERMS

     i  

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     iv  

MERGER SUBDIVISION

     iv  

MARKET AND INDUSTRY DATA

     iv  

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

     v  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING

     vi  

SUMMARY

     1  

SUMMARY HISTORICAL FINANCIAL INFORMATION

     15  

COMPARATIVE PER SHARE DATA

     18  

RISK FACTORS

     20  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     93  

SPECIAL MEETING OF CAH STOCKHOLDERS

     96  

PROPOSAL NO. 1 — THE MERGER PROPOSAL

     103  

PROPOSAL NO. 2 — THE CHARTER PROPOSALS

     142  

PROPOSAL NO. 3 — THE ADJOURNMENT PROPOSAL

     144  

MANAGEMENT FOLLOWING THE MERGER

     145  

DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

     153  

OTHER INFORMATION RELATED TO CAH

     160  

BUSINESS OF LUMIRADX

     167  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     218  

SELECTED HISTORICAL FINANCIAL INFORMATION

     230  

LUMIRADX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     233  

BENEFICIAL OWNERSHIP OF SECURITIES

     258  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     267  

DESCRIPTION OF LUMIRADX’S SECURITIES

     273  

CERTAIN MATERIAL INCOME TAX CONSIDERATIONS

     292  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     312  

APPRAISAL RIGHTS

     314  

SUBMISSION OF STOCKHOLDER PROPOSALS

     314  

FUTURE STOCKHOLDER PROPOSALS

     314  

OTHER STOCKHOLDER COMMUNICATIONS

     314  

LEGAL MATTERS

     314  

EXPERTS

     314  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     314  

ENFORCEABILITY OF CIVIL LIABILITIES

     315  

WHERE YOU CAN FIND MORE INFORMATION

     316  

INDEX TO FINANCIAL STATEMENTS

     F-1  


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FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement/prospectus or the context otherwise requires, references to:

5% notes” are to the 5% unsecured subordinated convertible loan notes of LumiraDx in the aggregate principal amount of $75,155,586 convertible into LMDX common shares, created pursuant to a loan note instrument dated October 15, 2019 (as may be amended, restated or otherwise modified from time to time (including any amendments to implement the Merger));

10% notes” are to the 10% unsecured subordinated convertible loan notes of LumiraDx in the aggregate principal amount of $75,370,444 convertible into LMDX common shares, created pursuant to a loan note instrument dated July 1, 2020 (as may be amended, restated or otherwise modified from time to time (including any amendments to implement the Merger));

2016 warrants” are to the warrants to purchase LMDX ordinary shares issued by the Company pursuant to a warrant instrument dated October 3, 2016;

2019 warrants” are to the warrants to purchase LMDX ordinary shares issued by the Company pursuant to warrant instruments dated September 20, 2019;

2020 warrants” are to the warrants to purchase LMDX common shares issued by the Company pursuant to a warrant instrument dated July 1, 2020;

amended and restated certificate of incorporation” are to CAH’s certificate of incorporation currently in effect;

Amended and Restated Articles” are to the amended and restated memorandum of association and articles of association of LumiraDx to be adopted on completion of the Merger;

Amendment to the Merger Agreement” are to the amendment agreement to the Agreement and Plan of Merger, dated as of April 6, 2021 between CAH, LumiraDx and Merger Sub, dated August 19, 2021;

Amendment to the Sponsor Agreement” are to the amendment to the amended and restated sponsor agreement, dated as of April 6, 2021 between CAH, sponsor and the CAH initial stockholders, dated August 19, 2021;

Ancillary Agreements” are to the Registration Rights Agreement, the Sponsor Agreement, the LMDX Support Agreement and the A&R Warrant Agreement;

A&R Warrant Agreement” are to the amended and restated warrant agreement to be entered into at Closing between Continental Stock Transfer & Trust Company, LumiraDx and CAH;

CAH” are to CA Healthcare Acquisition Corp.;

CAH board of directors” are to the board of directors of CAH;

CAH common stock” are to CAH’s Class A common stock;

CAH founders” are to Larry J. Neiterman, Jeffrey H. Barnes, Tom Cibotti, Tim McMahon, David Lang, David H. Klein and Afsaneh Naimollah;

CAH founder shares” are to the 2,875,000 shares of CAH’s Class B common stock that are to be automatically converted into 2,875,000 shares of CAH common stock immediately prior to the Effective Time. The CAH founder shares are held of record by the sponsor as of the record date and are distributable to the CAH founders;

CAH initial stockholders” are to the sponsor and any other holders of the CAH founder shares immediately prior to the completion of the Merger;

 

i


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CAH IPO” are to the initial public offering by CAH which closed on January 29, 2021;

CAH private placement warrants” are to 4,050,000 warrants of CAH issued to the sponsor in a private placement simultaneously with the closing of the CAH IPO. Pursuant to the Sponsor Agreement, upon closing of the Merger, the sponsor will exchange all 4,050,000 CAH private placement warrants for 405,000 LMDX common shares;

CAH public warrants” are to CAH’s warrants sold as part of the units in the CAH IPO (whether they were purchased in the CAH IPO or thereafter in the open market);

CAH Redemption” are to the meaning given to it in the Merger Agreement;

CAH shares” are to the CAH common stock and the CAH founder shares;

CAH stockholders” are to holders of CAH common stock and/or CAH’s founder shares, as applicable;

CAH warrants” are to the CAH public warrants and/or the CAH private placement warrants, as applicable;

Closing” are to the meaning given to such term in the Merger Agreement;

Closing Date” are to the meaning given to such term in the Merger Agreement;

completion window” are to the period following the completion of the CAH IPO at the end of which, if CAH has not completed a business combination, it will redeem 100% of the public shares at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to CAH to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and certain conditions and as further described herein. The completion window ends on January 29, 2023;

convertible loan notes” are to the 5% notes and the 10% notes;

Designated Stock Exchange” are to Nasdaq or any other stock exchange or automated quotation system on which LumiraDx’s securities are then traded;

DGCL” are to the Delaware General Corporation Law, as amended;

Instrument” are to LumiraDx’s proprietary point-of-care diagnostic instrument;

Jefferies warrants” are to the warrants to purchase LMDX common shares issued by the Company to Jefferies Finance LLC pursuant to a warrant instrument dated November 6, 2020;

letter agreement” are to the letter agreement, dated January 26, 2021, by and among CAH, its officers and directors and the sponsor;

LMDX Articles” are to the memorandum of association and articles of association of LumiraDx (as may be amended from time to time (including any amendments to implement the Merger)) in effect up to the completion of the Merger;

LMDX common shares” are to the common shares of US$0.0000045 (or US$0.0000028 following the completion of the Capital Restructuring) each in the capital of LumiraDx;

LMDX Conversion Factor” are to 1.608448151:1;

 

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LMDX existing warrants” are to the (i) the 2016 warrants; (ii) the 2019 warrants; (iii) the 2020 warrants; (iv) the Jefferies warrants; (v) the SVB warrants; and (vi) the Pharmakon warrants;

LMDX Founder Directors” are to LumiraDx’s co-founders Ron Zwanziger, Dave Scott and Jerry McAleer;

LMDX group” are to the Company and its subsidiary undertakings from time to time;

LMDX new warrants” are to the warrants exercisable to purchase LMDX common shares following the assignment by CAH, and assumption by the Company, at the Effective Time of the CAH public warrants;

“LMDX ordinary shares” are to the A ordinary shares of US$0.0000045 (or US$0.0000028 following the completion of the Capital Restructuring) each in the capital of LumiraDx;

LMDX Support Agreement” are to the support agreement, dated April 6, 2021, as amended pursuant to the amended and restated support agreement, between the Company and certain of the Company’s security holders listed therein;

Merger” are to the meaning given to such term in the Merger Agreement;

North America” are to Canada and the United States;

Pharmakon warrants” are to the warrants to purchase LMDX common shares to be issued by the Company to BPCR Limited Partnership and Biopharma Credit Investments V (Master) LP;

Platform” are to the LumiraDx Platform, which is an integrated system comprised of the Instrument precise, low-cost microfluidic test strips, and seamless, secure digital connectivity;

POC” are to point-of-care;

public shares” are to shares of CAH’s Class A common stock sold as part of the units in the CAH IPO (whether they were purchased in the CAH IPO or thereafter in the open market);

“public stockholders” are to the holders of CAH’s public shares, including the CAH initial stockholders and management team, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;

Registration Rights Agreement” are to the Amended and Restated Registration Rights Agreement to be entered into on the Closing Date among LumiraDx, CAH, sponsor and certain equityholders of LumiraDx;

SEC” are to the Securities and Exchange Commission;

sponsor” are to CA Healthcare Sponsor LLC, a Delaware limited liability company in which certain of CAH’s directors and officers hold membership interests;

Sponsor Agreement” are to the amended and restated sponsor agreement, dated April 6, 2021, as amended pursuant to the Amendment to the Sponsor Agreement dated August 19, 2021, by and among CAH, sponsor and the CAH initial stockholders, each of which amended and restated the letter agreement;

sponsor group” are to the sponsor and the CAH founders;

SVB warrants” are to the warrants to purchase LMDX common shares issued by the Company to Silicon Valley Bank pursuant to a warrant instrument dated January 20, 2021; and

Trust Account” are to CAH’s trust account relating to the CAH IPO.

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms a part of a registration statement on Form F-4 filed with the Securities and Exchange Commission, or SEC, by LumiraDx, constitutes a prospectus of LumiraDx under Section 5 of the Securities Act of 1933, as amended, or the Securities Act, with respect to the LMDX common shares to be issued to CAH stockholders in connection with the Merger, as well as the LMDX new warrants and the LMDX common shares underlying such LMDX new warrants. This document also constitutes a proxy statement of CAH under Section 14(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules thereunder, and a notice of meeting with respect to the special meeting of CAH stockholders to consider and vote upon the proposals to adopt the Merger Agreement.

Unless otherwise indicated or the context otherwise requires, all references in this proxy statement/prospectus to the terms “LumiraDx” and the “Company” refer to LumiraDx Limited, together with its subsidiaries. All references in this proxy statement/prospectus to “CAH” refer to CA Healthcare Acquisition Corp.

Unless otherwise noted, all references in this proxy statement/prospectus to “$”, “US$”, “U.S. dollars”, “dollars” and “USD” mean U.S. dollars, all references to “£” and “GBP” mean pounds sterling, and all references to “€” and “euros” mean euros.

CAPITAL RESTRUCTURING AND MERGER SUBDIVISION

Unless otherwise stated in this proxy statement/prospectus, references in this document to the number of LMDX ordinary shares, LMDX common shares, LMDX series A preferred shares, LMDX series B preferred shares, 2016 warrants, 2019 warrants, 2020 warrants, Jefferies warrants, SVB warrants, Pharmakon warrants or options issued or to be issued by LumiraDx shall be to the number of such shares, warrants or options issued as of March 31, 2021 and, unless otherwise stated, have not been adjusted to reflect any subdivision or other form of consolidation of LumiraDx’s share capital following March 31, 2021 (including as part of the proposed Capital Restructuring), except that, for the avoidance of doubt, such numbers (other than the historical audited financial statements of LumiraDx and LumiraDx’s Management’s Discussion and Analysis of Financial Conditions) reflect the 220:1 subdivision effected by LumiraDx on February 1, 2021, or the February Subdivision. However, the number of LMDX common shares and the number of LMDX new warrants to be issued to CAH stockholders pursuant to the Merger which are the subject of this proxy statement/prospectus reflect the actual number to be issued and assume the Capital Restructuring has been effected.

MARKET AND INDUSTRY DATA

Certain information included in this proxy statement/prospectus concerning LumiraDx’s industry, including its total addressable market, the volume of tests and the shift of tests from the central lab to the point of care, or POC, are based on its good faith estimates and assumptions derived from management’s knowledge of the industry and other information currently available to LumiraDx. This proxy statement/prospectus also includes industry and market data that LumiraDx has obtained from periodic industry publications, third-party studies and surveys and other filings of public companies in its industry. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. This industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, LumiraDx does not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein. LumiraDx is responsible for all of the disclosure contained in this proxy statement/prospectus, and it believes the industry and market data that it obtained from third-party sources are reliable.

 

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The industry in which LumiraDx operates, as well as the assumptions and estimates of its future performance and the future performance of the industry in which it operates, are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” beginning on page 20 and elsewhere in this proxy statement/prospectus, that could cause results to differ materially from those expressed in these estimates.

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

CAH, LumiraDx and their respective subsidiaries own or have rights to trademarks, trade names and service marks that they use in connection with the operation of their business. In addition, their names, logos and website names and addresses are their trademarks or service marks. Other trademarks, trade names and service marks appearing in this proxy statement/prospectus are the property of their respective owners. Solely for convenience, in some cases, the trademarks, trade names and service marks referred to in this proxy statement/prospectus are listed without the applicable ®, ™ and SM symbols, but they will assert, to the fullest extent under applicable law, their rights to these trademarks, trade names and service marks.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING

The questions and answers below highlight only selected information from this proxy statement/prospectus and only briefly address some commonly asked questions about the special meeting and the proposals to be presented at the special meeting. The following questions and answers do not include all the information that is important to CAH stockholders. CAH stockholders are urged to read carefully this entire proxy statement/prospectus, including the Annexes and the other documents referred to herein, to fully understand the proposed Merger, the proposals to be considered at the special meeting, and the voting procedures for the special meeting.

 

Q.

Why am I receiving this proxy statement/prospectus?

 

  A.

CAH, LumiraDx and Merger Sub have entered into the Merger Agreement that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A, and CAH encourages CAH stockholders to read it in its entirety. CAH stockholders are being asked to consider and vote upon a proposal to approve and adopt the Merger Agreement, which, among other things, provides that (a) Merger Sub will be merged with and into CAH with CAH being the surviving company in the Merger and (b) CAH will become a wholly owned subsidiary of LumiraDx. See the section titled “Proposal No. 1 - The Merger Proposal” beginning on page 103.

This proxy statement/prospectus contains important information about the proposed Merger. CAH stockholders should read it carefully.

The vote of CAH stockholders is important. CAH stockholders are encouraged to vote as soon as possible after carefully reviewing this proxy statement/prospectus.

 

Q.

Are there any other matters being presented to stockholders at the meeting?

 

  A.

In addition to voting to approve the Merger, CAH stockholders will vote on the following:

 

  1.

Separate proposals to approve the following material differences between the constitutional documents of LumiraDx that will be in effect upon the closing of the Merger and CAH’s current amended and restated certificate of incorporation: (i) the name of the new public entity will be “LumiraDx Limited” as opposed to “CA Healthcare Acquisition Corp.”; (ii) the authorized share capital of the new public entity will be US$10,290 divided into, assuming completion of the Merger Subdivision, (1) 1,769,292,966 LMDX ordinary shares with a par value (to seven decimal places) of $0.0000028 per LMDX ordinary share, (2) 1,769,292,966 LMDX common shares with a par value (to seven decimal places) of $0.0000028 per LMDX common share and (3) undesignated shares of such class or classes (however designated) as the board of LumiraDx may determine, as opposed to CAH having 110,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock; (iii) the new public entity has two classes of shares, being the LMDX common shares and the LMDX ordinary shares, such that each holder of LMDX common shares will be entitled to one vote for each such share on any proposed shareholder resolution and each holder of LMDX ordinary shares will be entitled to ten votes for each such share on any proposed shareholder resolution; (iv) the new public entity shall have two classes of directors, other than the LMDX Founder Directors, serving staggered terms with the terms of Class I and Class II directors expiring at the annual general meeting of shareholders to be held in 2022 and 2023, respectively, and each term expiring two years thereafter, in each case; and (v) the new public entity’s constitutional documents will not include the various provisions applicable only to special purpose acquisition corporations that CAH’s amended and restated certificate of incorporation contains (such as the obligation to dissolve and liquidate if a business combination is not consummated in a certain period of time). This vote, however, will not actually result in stockholders of CAH approving LumiraDx’s constitutional documents or amendments to CAH’s corporate governing documents but instead will simply approve the aforementioned material differences in the two sets of documents. See the section titled “Proposal No. 2 - The Charter Proposals” beginning on page 142. The Merger will not be consummated unless the Charter Proposals and the Merger Proposal are approved by CAH stockholders.

 

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  2.

If applicable, to adjourn the meeting to a later date or dates to permit further solicitation and vote of proxies if CAH would not have received enough votes at the meeting to enable it to consummate the Merger. See the section titled “Proposal No. 3 - The Adjournment Proposal” beginning on page 144.

CAH will hold the special meeting of CAH stockholders to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the proposed Merger and the other matters to be voted upon at the special meeting. CAH stockholders should read it carefully.

Consummation of the Merger is conditional on, among other things, the approval of the Merger Proposal and the Charter Proposals. If either of these proposals are not approved, the other proposals will not be presented to stockholders for a vote and the Merger will not be consummated.

 

Q.

I am a holder of CAH warrants. Why am I receiving this proxy statement/prospectus?

 

  A.

Upon consummation of the Merger, the CAH public warrants shall be assigned to and assumed by the Company, to be referred to herein as the LMDX new warrants, and shall entitle the holder of a whole LMDX new warrant to purchase one LMDX common share in lieu of shares of CAH common stock at a purchase price of $11.50 per share and on substantially the same terms. This proxy statement/prospectus includes important information about LumiraDx and the business of LumiraDx and its subsidiaries following consummation of the Merger. Holders of LMDX new warrants (formerly CAH public warrants) will be entitled to purchase LMDX common shares following the consummation of the Merger in accordance with its terms. CAH therefore urges you to read the information contained in this proxy statement/prospectus carefully. For the avoidance of doubt, neither CAH public warrants nor the CAH private placement warrants carry rights to vote at the special meeting.

 

Q.

Why is CAH proposing the Merger?

 

  A.

CAH was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities.

On January 29, 2021, CAH completed its initial public offering of units, with each unit consisting of one share of CAH common stock and one-half of one CAH public warrant, each whole warrant to purchase one share of CAH common stock at a price of $11.50, raising total gross proceeds of approximately $115,000,000. Since the CAH IPO, CAH’s activity has been limited to the evaluation of business combination candidates.

LumiraDx is a provider of next-generation POC diagnostics to address the current limitations of legacy POC systems by bringing lab-comparable performance to the POC in minutes, on a single instrument with a low cost of ownership. LumiraDx is focused on transforming community-based healthcare by providing critical diagnostic information to healthcare providers at the point of need, thereby enabling more informed medical decisions to improve health outcomes while lowering costs. LumiraDx has developed and launched the Platform, which is an integrated system comprised of a small, versatile POC instrument, or Instrument, precise, low-cost microfluidic test strips, and seamless, secure digital connectivity. LumiraDx currently has five tests commercially available on the Platform and a broad menu of tests in development. The Platform is designed to simplify, scale down, and integrate multiple testing methodologies onto a single instrument and offer a broad menu of tests with lab-comparable performance at a low cost and with results generally in 10 minutes or less from sample to result. With the Platform, LumiraDx’s goal is to address the key challenges faced by healthcare providers in providing efficient and cost-effective patient care in a community setting. LumiraDx has benefitted from this trend, and CAH believes it will continue to benefit from this trend.

Based on its due diligence investigations of LumiraDx and the industry in which it operates, CAH believes that the Merger will provide CAH stockholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section titled “Summary—CAH’s Board of Directors’ Reasons for Approval of the Merger” beginning on page 3.

 

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Q.

Did the CAH board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Merger?

 

  A.

CAH’s board of directors did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the Merger. Collectively, on a fully diluted basis, the Relevant Parties (as defined below) own less than 0.25% of the Company’s fully-diluted equity share capital. Likewise, none of the Relevant Parties (as defined below) are, or will be, officers or directors of the Company, are a party to any voting agreement with the Company or, in any other way, control, are controlled by or are under common control with, the Company. None of the officers, directors, sponsors or advisors of CAH, or the Relevant Parties, are affiliated with LumiraDx. In addition, CAH’s board of directors did not determine that there are any material relationships between the Relevant Parties and LumiraDx. As such, CAH determined that no fairness opinion, third-party valuation or any other measures, such as an independent committee of the board, was necessary to approve the transaction. In addition, the officers and directors of CAH and CAH’s advisors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of CAH’s financial advisors, enabled them to make the necessary analyses and determinations regarding the Merger. CAH’s officers and directors and CAH’s advisors also have substantial experience with mergers and acquisitions. The Merger was approved by a majority of the independent directors of CAH.

 

Q.

Do I have redemption rights?

 

  A.

If you are a holder of public shares, you have the right to demand that CAH redeem such public shares for a pro rata portion of the cash held in CAH’s trust account provided that you vote either for or against the Merger Proposal. CAH sometimes refers to these rights to demand redemption of the public shares as “redemption rights.”

Notwithstanding the foregoing, a holder of public shares, together with any affiliate or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed.

Under CAH’s amended and restated certificate of incorporation, the Merger may be consummated only if CAH has at least $5,000,001 of net tangible assets after giving effect to the redemption of all public shares the holders of which properly demand redemption of their shares for cash. However, LumiraDx is not required to consummate the Merger unless there is at least $65,000,000 of funds in CAH’s trust account, prior to payment of any unpaid or contingent liabilities, deferred underwriting fees or transaction costs of any of the parties.

 

Q.

How do I exercise my redemption rights?

 

  A.

If you are a holder of public shares and wish to exercise your redemption rights, you must (i) demand that CAH redeem your public shares into cash no later than the second business day preceding the date of the special meeting by delivering your shares to CAH’s transfer agent physically or electronically using The Depository Trust Company’s DWAC (Deposit and Withdrawal at Custodian) System prior to the vote at the special meeting. Any holder of public shares will be entitled to demand that such holder’s shares be redeemed for a full pro rata portion of the amount then in the trust account (which, for illustrative purposes, was $            , or $             per share, as of             , 2021, the record date). Such amount, less any owed but unpaid taxes on the funds in the trust account, will be paid promptly upon consummation of the Merger. However, under Delaware law, the proceeds held in the trust account could be subject to claims which could take priority over those of CAH’s public stockholders exercising redemption rights. Therefore, the per-share distribution from the trust account in such a situation may be less than originally

 

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  anticipated due to such claims. Your vote on any proposal other than the Merger Proposal will have no impact on the amount you will receive upon exercise of your redemption rights.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the Merger Proposal at the special meeting. If you deliver your shares for redemption to CAH’s transfer agent and later decide prior to the special meeting not to elect redemption, you may request that CAH’s transfer agent return the shares (physically or electronically). You may make such request by contacting CAH’s transfer agent at the address listed at the end of this section.

Any corrected or changed proxy card or written demand of redemption rights must be received by CAH’s transfer agent prior to the vote taken on the Merger Proposal at the special meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to CAH’s transfer agent prior to the vote at the special meeting.

If a holder of CAH common stock votes for or against the Merger Proposal and demand is properly made as described above, then, if the Merger is consummated, CAH will redeem these shares for a pro rata portion of funds deposited in the trust account. If you exercise your redemption rights, then you will be exchanging your shares of CAH common stock for cash and will not be entitled to LMDX common shares upon consummation of the Merger.

If you are a holder of CAH common stock and you exercise your redemption rights, it will not result in the loss of any CAH public warrants that you may hold. Your whole CAH public warrants will become exercisable to purchase one LMDX common share in lieu of one share of CAH common stock for a purchase price of $11.50 upon consummation of the Merger.

 

Q.

Do I have appraisal rights if I object to the proposed Merger?

 

  A.

No. Neither CAH stockholders nor holders of CAH units or CAH warrants have appraisal rights in connection with the Merger under the DGCL. See the section titled “Appraisal Rights” beginning on page 311.

 

Q.

What happens to the funds deposited in the trust account after consummation of the Merger?

 

  A.

Of the net proceeds of the CAH IPO, $112,700,000, together with $2,300,000 of the amount raised from the private sale of CAH private placement warrants simultaneously with the consummation of the CAH IPO, being an aggregate total of $115,000,000, was placed in the trust account immediately following the CAH IPO. After consummation of the Merger, the funds in the trust account will be used to pay holders of the CAH common stock who exercise redemption rights, to pay fees and expenses incurred in connection with the Merger (including aggregate fees of approximately $4,025,000 to the underwriters of the CAH IPO as deferred underwriting commissions) and for LumiraDx’s working capital and general corporate purposes.

 

Q.

What happens if a substantial number of public stockholders vote in favor of the Merger and exercise their redemption rights?

 

  A.

CAH’s public stockholders may vote in favor of the Merger and still exercise their redemption rights. Accordingly, the Merger may be consummated even though the funds available from the trust account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. Also, with fewer public shares and public stockholders, the trading market for the LMDX common shares may be less liquid than the market for CAH’s shares of common stock was prior to the Merger and LumiraDx may not be able to meet the listing standards of a national securities exchange.

 

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Q.

What happens if the Merger is not consummated?

 

  A.

If CAH does not complete the Merger for whatever reason, CAH would search for another target business with which to complete a business combination. If CAH does not complete the Merger or a business combination with another target business by January 29, 2023, CAH must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the amount then held in the trust account divided by the number of outstanding public shares. The sponsor and the CAH founders have no redemption rights in the event a business combination is not effected in the required time period, and, accordingly, their CAH founder shares will be worthless. Additionally, in the event of such liquidation, there will be no distribution with respect to outstanding CAH warrants. Accordingly, such warrants will expire worthless.

 

Q.

How does the sponsor intend to vote on the proposals?

 

  A.

The sponsor owns of record and is entitled to vote an aggregate of 20% of the outstanding CAH shares. The sponsor and the CAH founders have agreed to vote any CAH founder shares and any public shares held by them as of the record date, in favor of the Merger Proposal and the Charter Proposals.

 

Q.

What interests do the sponsor and the current officers and directors of CAH have in the Merger?

 

  A.

When considering the recommendation of the CAH board of directors that CAH stockholders vote in favor of the approval of the Merger, CAH stockholders should be aware that CAH’s directors and executive officers, and entities affiliated with them, have interests in the Merger that may be different from, or in addition to, the interests of CAH stockholders. These interests include:

 

   

Tom Cibotti and other advisors of CAH are members of Covington Associates. Mr. Cibotti and Covington Associates have an over 25-year business relationship with the Chief Executive Officer of LumiraDx and each of the other LMDX Founder Directors. Since 1993, Covington Associates and CA Advisors, an affiliate of Covington Associates, have provided investment banking services to two unaffiliated companies, Inverness and Alere, previously managed by the LMDX Founder Directors. During that period, Covington Associates advised Inverness and Alere on approximately 32 mergers and acquisitions (“M&A”) and debt placement transactions.

 

   

Certain members of Covington Associates have also been involved with the LumiraDx group since its formation in mid-2014, including serving as equity and debt placement advisors to the Company and participating in many of the Company’s board meetings. Since 2014, CA Advisors has advised the Company on numerous potential business opportunities, including the closing of two debt transactions. Some of the Covington Associates principals, as well as some other members of the sponsor and CA Advisors, an affiliate of Covington Associates, have personally invested in the Company. Members of the sponsor and CA Advisors own as of April 1, 2021 LMDX ordinary shares, LMDX common shares, LMDX existing warrants and convertible notes issued by LumiraDx that, in the aggregate and following the conversion of such convertible notes and exercise of such LMDX existing warrants, equal to approximately 359,920 LMDX ordinary shares and 106,260 LMDX common shares, to be adjusted in the Capital Restructuring pursuant to the Merger Agreement, and which represent less than one quarter of one percent (0.25%) of the Company’s fully-diluted equity.

 

   

In January 2021, as part of its regular advisory services on behalf of the Company, CA Advisors was engaged by the Company as placement agent in connection with the Company’s $300 million senior secured debt facility between, inter alia, LumiraDx Investment Limited (a member of the LumiraDx group) and Pharmakon, and an accounts receivable facility of initially $50 million to be provided by Capital One, as Administrative Agent and Lender, with the potential to be upsized to a total of $100 million. The availability of such accounts receivable facility is subject to the satisfaction (or waiver) of a number of conditions set forth in a commitment letter (including negotiation and execution of long form documentation) entered into by Capital One and the Company.

 

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These financial interests of the officers and directors, and entities affiliated with them, may have influenced their decision to approve the Merger. You should consider these interests when evaluating the Merger and the recommendation of the proposal to vote in favor of the Merger and other proposals to be presented to CAH stockholders.

 

Q.

When do you expect the Merger to be completed?

 

  A.

It is currently anticipated that the Merger will be consummated promptly following the CAH special meeting which is set for             , 2021; however, such meeting could be adjourned, as described above. The Merger is also conditional on the LumiraDx Proposals (as defined herein) being approved by the requisite majorities of the relevant classes of LumiraDx security holders. For a description of the conditions to the Merger, see the section titled “Proposal No. 1 - The Merger Agreement—Additional Agreements—Conditions to Closing” beginning on page 111.

 

Q.

What do I need to do now?

 

  A.

CAH urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Merger will affect you as a stockholder and/or warrant holder of CAH. CAH stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

 

Q.

How do I vote?

 

  A.

If you are a holder of record of CAH shares on the record date, you may vote virtually at the special meeting or by submitting a proxy for the special meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope or submit your proxy by phone or the internet. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the meeting virtually and vote, obtain a proxy from your broker, bank or nominee.

 

Q.

If my shares are held in street name, will my broker, bank or nominee automatically vote my shares for me?

 

  A.

No. Your broker, bank or nominee cannot vote your shares unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.

 

Q.

May I change my vote after I have mailed my signed proxy card?

 

  A.

Yes. Stockholders may send a later-dated, signed proxy card to CAH’s transfer agent at the address set forth at the end of this section, so that it is received prior to the vote at the special meeting or attend the special meeting virtually and vote. Stockholders also may revoke their proxy by sending a notice of revocation to CAH’s transfer agent, which must be received prior to the vote at the special meeting.

 

Q.

What constitutes a quorum for the special meeting?

 

  A.

A quorum is the minimum number of CAH shares that must be held by CAH Stockholders present at the special meeting (in person or by proxy) to hold a valid meeting. A quorum will be present at the CAH special meeting if a majority of all the outstanding CAH shares entitled to vote at the meeting are represented at the virtual special meeting or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum. The CAH common stock and founder shares are entitled to vote together as a single class on all matters to be considered at the special meeting.

 

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Q:

What stockholder vote thresholds are required for the approval of each proposal brought before the special meeting?

 

  A.

The approval of the Merger Proposal and the Charter Proposals will require the affirmative vote for the proposal by the holders of a majority of the then outstanding CAH shares. Abstentions and broker non-votes have the same effect as a vote against the proposals. The approval of the Adjournment Proposal, if presented, will require the affirmative vote of the holders of a majority of CAH shares represented and entitled to vote thereon at the meeting. Abstentions are deemed entitled to vote on such proposals. Therefore, they have the same effect as a vote against the proposal. Broker non-votes are not deemed entitled to vote on such Adjournment Proposal and, therefore, they will have no effect on the vote on such Adjournment Proposal.

 

Q.

What happens if I fail to take any action with respect to the special meeting?

 

  A.

If you fail to take any action with respect to the special meeting and the Merger is approved by CAH stockholders and consummated, you will become a shareholder of LumiraDx and/or a holder of LMDX new warrants that will entitle you to purchase LMDX common shares. As a corollary, failure to vote either for or against the Merger Proposal means you will not have any redemption rights in connection with the Merger to exchange your shares of CAH common stock for a pro rata share of the funds held in CAH’s trust account. If you fail to take any action with respect to the special meeting and the Merger is not approved, you will continue to be a stockholder and/or warrant holder of CAH. You will only become a shareholder and/or warrantholder of LumiraDx following consummation of the Merger.

 

Q.

What should I do with my stock and/or warrants certificates?

 

  A.

Those stockholders who do not elect to have their CAH common stock redeemed for the pro rata share of the trust account should not submit their stock certificates now. After the consummation of the Merger, LumiraDx will send instructions to CAH stockholders regarding the exchange of their CAH shares for LMDX common shares. Holders of CAH common stock who exercise their redemption rights must deliver their stock certificates to CAH’s transfer agent (either physically or electronically) prior to the vote at the special meeting as described above.

Upon consummation of the Merger, the CAH public warrants will be assigned to and assumed by LumiraDx (which we refer to herein as the LMDX new warrants) and will entitle holders to purchase LMDX common shares. Therefore, holders of CAH public warrants need not deliver their CAH public warrants to CAH or LumiraDx at that time.

 

Q.

What should I do if I receive more than one set of voting materials?

 

  A.

CAH stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your CAH common stock.

 

Q.

Who can help answer my questions?

 

  A.

If you have questions about the Merger or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact:

CA Healthcare Acquisition Corp.

99 Summer Street, Suite 200

Boston, MA 02110

Tel: (617) 314-3901

 

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or:

You may also obtain additional information about CAH from documents filed with the SEC by following the instructions in the section titled “Where You Can Find More Information” beginning on page 313. If you are a holder of public shares and you intend to seek redemption of your public shares, you will need to deliver your stock (either physically or electronically) to CAH’s transfer agent at the address below, prior to the vote at the special meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact:

Francis Wolf; Margaret Villani

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

E-mail: fwolf@continentalstock.com;mvillani@continentalstock.com

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You should carefully read the entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus, including the annexes and exhibits, to fully understand the Merger Agreement, the Merger and the other matters being considered at the special meeting of CAH stockholders. For additional information, see the section titled “Where You Can Find More Information” beginning on page 313. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

Information About the Companies

LumiraDx Limited

LumiraDx is a next-generation POC diagnostic company addressing the current limitations of legacy POC systems by bringing lab-comparable performance to the POC in minutes, on a single instrument with a low cost of ownership. LumiraDx is focused on transforming community-based healthcare by providing critical diagnostic information to healthcare providers at the point of need, thereby enabling more informed medical decisions to improve health outcomes while lowering costs. LumiraDx has developed and launched the Platform, which is an integrated system comprised of a small, versatile POC instrument, or Instrument, precise, low-cost microfluidic test strips, and seamless, secure digital connectivity. There are currently five tests commercially available on the Platform and a broad menu of tests in development. LumiraDx’s proprietary Platform is designed to simplify, scale down, and integrate multiple testing methodologies onto a single instrument and offer a broad menu of tests with lab-comparable performance at a low cost and with results generally in 10 minutes or less from sample to result. With the Platform, LumiraDx’s goal is to address the key challenges faced by healthcare providers in providing efficient and cost-effective patient care in a community setting.

LumiraDx is initially focused on the development of tests for several of the most common conditions diagnosed or managed in community-based healthcare settings. For many of the tests LumiraDx commercializes, or plans to commercialize, there are no existing high performance POC alternatives. Its initial authorized tests and those under development are designed to address unmet diagnostic needs in the fields of infectious disease, cardiovascular disease, diabetes, and coagulation disorders. To date, LumiraDx has developed and launched five diagnostic tests for use with the Instrument: the LumiraDx SARS-CoV-2 antigen test and LumiraDx SARS-CoV-2 antibody test, commercially available under Emergency Use Authorizations in the United States, or EUA, which authorizes the emergency use of the tests during the period in which an emergency declaration remains in effect, and CE Marks (following self-certification against the relevant European Union (“E.U.”) Directive) in the European Economic Area and, for the time being, Great Britain, as well as the LumiraDx SARS-CoV-2 antigen pool test, LumiraDx International Normalized Ratio, or INR, test, and LumiraDx D-Dimer test, all of which are CE Marked. In early 2021, LumiraDx initiated voluntary recalls and field corrective actions related to a limited number of suspected false positive results associated with a limited number of SARS-CoV-2 antigen test strips and promptly took steps to mitigate further potential interference effects or false positives. Based on the same chemistry and test strip design as LumiraDx’s SARS-CoV-2 antigen test on the Platform, LumiraDx has also started development of its Amira System, which is designed as a high-sensitivity mass screening and home testing system for COVID-19.

LumiraDx’s registered office is located at Ocorian Trust (Cayman) Limited, P.O. Box 1350, Windward 3, Regatta Office Park, Grand Cayman KY1-1108, Cayman Islands, and its telephone number is +1 (345) 640-0540.

CA Healthcare Acquisition Corp.

CAH was incorporated on October 7, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. CAH’s efforts to identify a prospective target business were not limited to any particular industry or geographic region, but CAH’s intent was to capitalize on their management team’s differentiated ability to source, acquire, and manage a business in the healthcare industry, specifically healthcare


 

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services, healthcare information technology, care management, behavioral health, medical devices, diagnostics, pharma services, health and wellness, and specialty pharmacy. Prior to executing the Merger Agreement, CAH’s efforts were limited to organizational activities, completion of its initial public offering and the evaluation of possible business combinations.

On January 29, 2021, CAH consummated its initial public offering of 11,500,000 units, including 1,500,000 units under the underwriters’ over-allotment option, with each unit consisting of one share of CAH common stock and one half of one CAH public warrant, each whole warrant to purchase one share of CAH common stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $115,000,000. Simultaneously with the consummation of the initial public offering, CAH consummated the private placement of 4,050,000 CAH private placement warrants to the sponsor at a price of $1.00 per warrant, generating total proceeds of $4,050,000. The sponsor also acquired 2,875,000 shares of CAH’s Class B common stock for an aggregate purchase price of $25,000.

CAH’s units, CAH common stock and CAH public warrants are listed on the Nasdaq Capital Market under the symbols CAHCU, CAHC and CAHCW, respectively.

The mailing address of CA Healthcare Acquisition Corp.’s principal executive office is 99 Summer Street, Suite 200, Boston, MA 02110, and its telephone number is (617) 314-3901. After the consummation of the Merger, CAH’s principal executive office will be that of LumiraDx.

Merger Sub

Merger Sub is a newly formed Delaware corporation and a wholly owned subsidiary of LumiraDx. Merger Sub was formed solely for the purpose of effecting the proposed Merger and has not carried on any activities other than in connection with the proposed Merger. The address and telephone number for Merger Sub’s principal executive offices are the same as those for LumiraDx.

The Merger

The terms and conditions of the Merger are contained in the Merger Agreement, which is attached as Annex A to this proxy statement/prospectus. The Merger Agreement attached as Annex A includes the amendments provided for in the Amendment to the Merger Agreement which the Company, CAH and Merger Sub entered into on August 19, 2021 which, among other things, reduced the valuation of the Company from $5.0 billion to $3.0 billion (excluding $115 million raised by CAH in its initial public offering). We encourage you to read the Merger Agreement carefully, as it is the legal document that governs the Merger. References to the number and nominal value of any LMDX ordinary share, LMDX common share or any other security of LumiraDx in this “Summary” section unless otherwise indicated, are to the numbers and nominal values as set in the Merger Agreement and therefore assume the completion of the proposed Capital Restructuring. However, the numbers and nominal values as set out in “Pre-Merger Transactions” section do not reflect the completion of the proposed Capital Restructuring.

If the Merger Proposal and each of the Charter Proposals are approved and adopted and the Merger is subsequently completed, Merger Sub will merge with and into CAH with CAH surviving the Merger and becoming a wholly owned subsidiary of LumiraDx.

Pre-Merger Transactions

Capital Restructuring: Immediately prior to the Effective Time, (i) (A) each series A 8% cumulative convertible preferred share with a par value of US$0.0000045 each in the capital of LumiraDx, or a LMDX series A preferred share, that is issued and outstanding will be converted into one LMDX ordinary share in accordance with the LMDX Articles, or the LMDX series A preferred share conversion; (B) each series B 8% cumulative convertible preferred share with a par value of US$0.0000045 each in the capital of LumiraDx, or a LMDX series B preferred share, and together with LMDX series A preferred shares, the LMDX preferred shares,

that is issued and outstanding will be converted into LMDX common shares in accordance with the LMDX Articles, or the LMDX series B preferred share conversion, and, together with the LMDX series A preferred share conversion, the LMDX preferred share conversion; (C) the 5% notes will be converted into 9,195,340


 

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LMDX common shares, or the 5% convertible loan note conversion; (D) the 10% notes will be converted into 7,802,080 LMDX common shares, or the 10% convertible loan note conversion and, together with the 5% convertible loan note conversion, the LMDX convertible loan note conversions; and (ii) immediately following the LMDX preferred share conversion and the LMDX convertible loan note conversions, LumiraDx shall effect a subdivision of each LMDX ordinary share and each LMDX common share into such number of LMDX ordinary shares and LMDX common shares (as applicable) calculated in accordance with the terms of the Merger Agreement at the LMDX Conversion Factor (being 1.608448151:1), or the Merger Subdivision, such that the equity value per share (either LMDX ordinary share or LMDX common share) on a fully diluted basis (using the treasury stock method of accounting) is $10.00 per share, based on a valuation of LumiraDx of $3 billion (which valuation may be increased for shares issued for cash in equity financing transactions by LumiraDx prior to the Effective Time), such Merger Subdivision, together with the LMDX preferred share conversion and the LMDX convertible loan note conversions, being the Capital Restructuring. The purpose of the Merger Subdivision is to achieve an exchange ratio in the Merger of one LMDX common share for each share of CAH common stock.

CAH Class B Conversion: Pursuant to the Merger Agreement, immediately prior to the Effective Time, after giving effect to the Capital Restructuring and the redemption rights of holders of CAH common stock (i) each issued and outstanding share of Class B common stock, par value $0.0001 per share, of CAH shall be automatically converted into one share of CAH common stock, par value $0.0001, in accordance with the terms of the amended and restated certificate of incorporation of CAH (such automatic conversion, the “CAH Class B Conversion”).

Merger Consideration

After giving effect to the Capital Restructuring, the redemption rights of holders of CAH common stock and the CAH Class B Conversion, at the Effective Time, as a result of the Merger, each issued and outstanding share of CAH common stock shall no longer be outstanding and shall automatically be canceled and extinguished in exchange for one LMDX common share. At the Effective Time, as a result of the Merger, each outstanding CAH public warrant to purchase shares of CAH common stock, other than the 4,050,000 CAH private placement warrants held by the sponsor, will automatically become a LMDX new warrant to purchase LMDX common shares and thereupon be assumed by LumiraDx. Each whole LMDX new warrant shall entitle the holder to purchase one LMDX common share. At the Effective Time, as a result of the Merger, the 4,050,000 CAH private placement warrants held by the sponsor shall be exchanged for 405,000 LMDX common shares.

CAH’s Board of Directors’ Reasons for Approval of the Merger

CAH’s board of directors, in evaluating the Merger, consulted with CAH’s management and legal and financial advisors. CAH’s board of directors held multiple meetings to discuss the business and products of the Company as well as the comparable company and transaction universe. During these meetings, CAH’s board of directors was also briefed on the opportunities for the Company, which CAH’s management and advisors believed could be achieved based on the proposed strategy that the Company intends to implement following the Merger. In reaching its unanimous resolution (i) that the terms and conditions of the Merger Agreement, including the proposed Merger, are advisable, fair to and in the best interests of CAH and its stockholders and (ii) to recommend that CAH stockholders adopt and approve the Merger Agreement and approve the Merger and related proposals, CAH’s board of directors considered a range of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors, the CAH board of directors did not consider it practicable to and did not attempt to quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. The CAH board of directors viewed its position as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of CAH’s reasons for


 

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recommending the Merger and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements” beginning on page 93.

In approving the Merger, the CAH board of directors determined not to obtain a fairness opinion. Collectively, on a fully diluted basis, the Relevant Parties (as defined below) own less than 0.25% of the Company’s fully-diluted equity share capital. Likewise, none of the Relevant Parties (as defined below) are, or will be, officers or directors of the Company, are a party to any voting agreement with the Company or, in any other way, control, are controlled by or are under common control with, the Company. None of the officers, directors, sponsors or advisors of CAH, or the Relevant Parties, are affiliated with LumiraDx. In addition, CAH’s board of directors did not determine that there are any material relationships between the Relevant Parties and LumiraDx. As such, CAH determined that no fairness opinion, third-party valuation or any other measures, such as an independent committee of the board, was necessary to approve the transaction. In addition, the officers and directors of CAH have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of CAH’s advisors enabled them to make the necessary analyses and determinations regarding the Merger. CAH’s officers, directors and advisors also have substantial experience with mergers and acquisitions.

In considering the Merger, the CAH board of directors gave considerable weight to the following factors:

 

   

Management Track Record. This is the Company management team’s fourth company, having previously built the industry’s largest POC testing business (Alere, Inc.), which was subsequently sold to Abbott Laboratories;

 

   

Strong Relationship With Management. Advisors to CAH and members of the sponsor have an over 25-year relationship with the LMDX Founder Directors and have witnessed the team’s ability to create shareholder value consistently;

 

   

Disruptive Solutions for POC Testing. Unlike most of the existing POC market, the Platform delivers low-cost, rapid results for a broad menu of tests with lab comparable performance on a single platform;

 

   

Attractive Global Market Opportunity. The Company operates in over 60 countries with extensive strategic and government partnerships such as CVS Pharmacy Inc. (“CVS”), the National Health Service (“NHS”) in the UK and the Bill and Melinda Gates Foundation (“BMGF”). The Company’s goal goes beyond the POC market as it plans to also target the $45 billion global central lab testing market;

 

   

Large-Scale, Low-Cost Manufacturing Infrastructure. The Company currently has capacity to manufacture over 28 million test strips per month (expected to expand to 35 to 45 million per month by end of 2021) at a low cost. The Company also has a long standing contract manufacturing relationship with Flextronics Ltd. which has the capacity to produce over 1,000 Instruments per week;

 

   

Mass Screening. The Company’s mass screening testing system (the Amira System) is expected to complement the existing Platform and represents a significant opportunity to assist in the reopening of economies around the world;

 

   

Platform Validation. COVID-19 has validated the strength of the Platform’s performance. The Company is now delivering high performing and high sensitivity assays in the marketplace at the POC, delivering lab comparable results in 12 minutes for its SARS-CoV-2 antigen test;

 

   

Accelerated Distribution. The current COVID-19 pandemic has accelerated the distribution of the Platform. As of June 30, 2021, the Company has shipped over 15,000 Instruments to over 90 countries;


 

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Expansive Test Menu. The Company has five assays available and a pipeline of over 30 assays under development on the Platform with established commercial partnerships across common health conditions, including infectious disease (such as COVID-19), cardiovascular disease, diabetes and coagulation disorders to address the estimated over $50 billion global market opportunity with the Platform, calculated based on the Company’s estimations of the existing markets for these assays, the central laboratory testing market that could covert to POC testing and the anticipated expansion of diagnostic testing;

 

   

Extensive IP Portfolio. The Company has significant and growing patent estate relating to the Platform’s technologies, clinical assays, Amira system and related technologies;

 

   

Attractive Valuation. A $3 billion pre-money equity value of the Company (excluding any cash which CAH may have raised pursuant to its initial public offering) represents an attractive entry point for a high-growth, transformative company that is disrupting the POC landscape; and

 

   

Other Alternatives. CAH’s board of directors believes, after a thorough review of other business combination opportunities reasonably available to CAH, that the Merger represents the best potential business combination for CAH and the most attractive opportunity for CAH’s management to accelerate its business plan based upon the process utilized to evaluate and assess other potential combination targets and CAH’s board of directors’ belief that such process has not presented a better alternative.

The CAH board of directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Merger, including, but not limited to, the following:

 

   

Macroeconomic Risks. Macroeconomic uncertainty, including the potential impact of the COVID-19 pandemic, roll out of vaccination programs and the effects they could have on the Company’s revenues;

 

   

Benefits May Not be Achieved. The risk that the potential benefits of the Merger may not be fully achieved or may not be achieved within the expected timeframe;

 

   

Growth Initiatives May Not be Achieved. The risk that the growth initiatives may not be fully achieved or may not be achieved within the expected timeframe;

 

   

No Third-Party Valuation. The fact that CAH did not obtain a third-party valuation or fairness opinion in connection with the Merger;

 

   

Loss of Key Personnel. Key personnel in the Company’s industry are vital and competition for such personnel is intense. The loss of any key personnel could be detrimental to the Company’s operations;

 

   

Regulatory Risks. The risks of changes in the Company’s regulatory environment, including healthcare laws and the possibility that regulatory authorities may assert non-compliance with applicable regulations, including FDA requirements;

 

   

Liquidation. The risks and costs to CAH if the Merger is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in CAH being unable to effect a business combination within the completion window and force CAH to liquidate;

 

   

Stockholder Vote. The risk that CAH stockholders may object to and challenge the Merger and take action that may prevent or delay the consummation of the Merger, including to vote down the proposals at the special meeting or redeem their shares;

 

   

Closing Conditions. The fact that completion of the Merger is conditioned on the satisfaction of certain closing conditions that are not within CAH’s control;


 

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Litigation. The possibility of litigation challenging the Merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Merger;

 

   

Fees and Expenses. The fees and expenses associated with completing the Merger;

 

   

Redemptions. The risk that CAH’s current public stockholders may redeem their CAH common stock for cash in connection with consummation of the Merger, thereby reducing the amount of cash available and potentially resulting in an inability to consummate the Merger;

 

   

Post-Combination Corporate Governance. The corporate governance provisions of the Merger Agreement, each Ancillary Agreement and the material provisions of the proposed Amended and Restated Articles. In particular, they considered the superior voting rights that the holders of LMDX ordinary shares have and that these rights are not generally available to the holders of LMDX common shares;

 

   

Dual-Class Structure. The fact of concentrated voting power in the dual-class share structure (with 10:1 voting rights for the holders of LMDX ordinary shares), but determined that they were outweighed by the long-term benefits that a founder-controlled company would provide to CAH stockholders and future shareholders after the Closing Date;

 

   

CAH Stockholders Receiving a Minority Position in the Post-Combination Company. The fact that CAH stockholders will hold a minority share position in the post-combination Company (approximately 4.7% of the outstanding share capital of the Company, assuming that no shares of CAH common stock are elected to be redeemed by CAH stockholders), which may reduce the influence that CAH’s current stockholders have on the management of the Company;

 

   

Short-Term Revenue Fluctuations. The Company’s short-term revenue prospects will vary with the amount of demand for COVID-19 tests, potentially impacted by vaccine roll out as well as mass screening opportunities;

 

   

Customer Concentration. The Company’s largest two customers in 2020, being CVS and the NHS, accounted for 29% and 17%, respectively, of the Company’s group revenue, loss of any of these customers could therefore have a significant negative impact on the Company’s prospects;

 

   

Commercialization of Existing Products. The Company is at a pivotal point in the commercialization of the Platform, which may not succeed for a variety of reasons;

 

   

New Assays. Developing new assays involves a lengthy and complex process and the Company may be unable to commercialize additional tests on the Platform on a timely basis, or at all;

 

   

Amira System. The Company’s Amira System may not obtain regulatory approval, authorization, certification or clearance, and the Company may not be able to successfully develop and commercialize the Amira System, including scaling up manufacturing and sales capacity;

 

   

Supply Chain Risk. The Company relies on a limited number of suppliers or, in some cases, sole source suppliers, for the components of the Platform or the Amira System and materials and may not be able to find, or immediately transition to, alternative suppliers;

 

   

Manufacturing at Scale. As the Company continues to expand its business, the Company may experience problems in scaling its manufacturing and commercial operations, and if the Company is unable to support demand for the Platform and future tests, including ensuring that the Company has adequate capacity to meet increased demand, or is unable to successfully manage the evolution of the Platform, the Company’s business could suffer; and

 

   

Other Risks. Various other risks associated with the business of the Company, as described in the section titled “Risk Factors” beginning on page 20 and appearing elsewhere in this proxy statement/prospectus.


 

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The CAH board of directors concluded that the potential benefits that it expected CAH and its stockholders to achieve as a result of the Merger outweighed the potentially negative factors associated with the Merger. Accordingly, the CAH board of directors unanimously determined that the Merger Agreement and the Merger contemplated therein, were advisable, fair to, and in the best interests of CAH and its stockholders.

Related Agreements

Sponsor Agreement

In connection with the Merger Agreement, CAH, and the CAH initial stockholders collectively representing twenty percent (20%) of the outstanding stock of CAH entered into a letter agreement, pursuant to which, among other things, (i) the sponsor and each CAH initial stockholders agreed to vote to adopt the Merger Agreement and approve the Merger and related proposals, and to vote against any proposal in opposition to the approval of the Merger Agreement or inconsistent with the Merger Agreement, (ii) each CAH initial stockholder agreed not to transfer any equity securities of CAH prior to the consummation of the Merger, and thereafter to comply with an agreed lock-up period, (iii) the sponsor agreed to exchange the 4,050,000 CAH private placement warrants issued to it at the time of the CAH IPO for 405,000 LMDX common shares, and such LMDX common shares shall not be transferred, other than as provided for in the Sponsor Agreement and Amended and Restated Articles, until the six (6) month anniversary of the Closing, (iv) if more than fifty percent (50%) of the CAH common stock sold in CAH’s initial public offering is redeemed, then an equal percentage of the CAH founder shares that would have otherwise converted into LMDX common shares will be forfeited (by way of illustrative example, if sixty percent (60%) of the CAH common stock are redeemed then the CAH initial stockholders shall only receive forty percent (40%) of their entitlement to LMDX common shares pursuant to the Merger), and (v) if fifty percent (50%) or less of CAH common stock sold in CAH’s initial public offering is redeemed, then the sponsor shall retain its entitlement to one hundred percent (100%) of its CAH founder shares and LMDX common shares to be issued upon conversion of the sponsor’s founder shares, subject to the following vesting conditions: (A) 60% of the sponsor’s entitlement to the LMDX common shares will vest at Closing, (B) 20% of the sponsor’s entitlement to the LMDX common shares will vest if at any time within eighteen (18) months of Closing, the LMDX common shares close at $12.50 per share (or higher) for twenty (20) days within any thirty (30) consecutive trading days, and (C) 20% of the sponsor’s entitlement to the LMDX common shares will vest if at any time within thirty-six (36) months of Closing, the LMDX common shares close at $15.00 per share (or higher) for twenty (20) days within any thirty (30) consecutive trading days. In the event that one of the vesting conditions is not satisfied, the sponsor’s relevant entitlement to LMDX common shares shall lapse.

LumiraDx Securityholder Support Agreement

In connection with the Merger Agreement, the Company and certain holders of the Company’s LMDX ordinary shares, 5% notes, 10% notes and/or 2020 warrants, or the Relevant Holders entered into an agreement, pursuant to which, among other things, the Relevant Holders agreed (i) to vote in favor of the LumiraDx Proposals (as defined herein) at the relevant meetings to be convened by the Company in order to seek the LumiraDx Approvals (as defined herein), and to vote against any competing business combination proposal and any other proposal that would reasonably be expected to impede, frustrate or delay the Merger, and (ii) not to transfer, other than to affiliates or other Relevant Holders, any of such Relevant Holder’s LMDX ordinary shares, 5% notes, 10% notes and/or 2020 warrants (as applicable) prior to the consummation of the Merger or termination of the Merger Agreement in accordance with its terms. The Company has asked such Relevant Holders to confirm this arrangement in the light of the revised valuation.

Registration Rights Agreement

Upon consummation of the Merger, the Company, CAH, the sponsor, and certain existing equityholders of the Company, which held pre-existing registration rights will enter into an amended and restated registration rights agreement, or the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, holders of registrable securities of the Company, including the sponsor, will be entitled to registration rights. The holders


 

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of these securities are entitled to make up to an aggregate of three demands, excluding short form demands, that LumiraDx register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of the Merger. The Registration Rights Agreement also provides that the Company will pay certain expenses related to such registrations and indemnify securityholders against certain liabilities. The rights granted under the Registration Rights Agreement supersede any prior registration, qualification, or similar rights of the parties with respect to LumiraDx or CAH securities, and all such prior agreements shall be terminated. Upon completion of the Merger, it is expected that holders of         % of LMDX common shares will be entitled to registration rights pursuant to the Registration Rights Agreement, assuming that none of CAH’s public shares are redeemed in connection with the Merger.

Certain Material U.S. Federal Income Tax Considerations

For a description of certain U.S. federal income tax consequences of the Merger to holders of CAH common stock and CAH public warrants, the exercise of redemption rights in respect of shares of CAH common stock and the ownership and disposition of LMDX common shares and/or LMDX new warrants received pursuant to the Merger, please see section titled “Certain Material Income Tax Considerations—Certain Material U.S. Federal Income Tax Considerations” beginning on page 289.

Certain Material Cayman Islands Tax Considerations

For a description of certain Cayman Islands tax consequences of the Merger and the ownership and disposition of LMDX common shares and/or LMDX new warrants received pursuant to the Merger, please see the information set forth in “Certain Material Income Tax Considerations—Certain Material Cayman Islands Tax Considerations” beginning on page 308.

Certain Material U.K. Tax Considerations

For a description of certain U.K. tax consequences of the ownership and disposition of LMDX common shares received pursuant to the Merger, please see the information set forth in “Certain Material Income Tax Considerations—Certain Material U.K. Tax Considerations” beginning on page 305.

Appraisal Rights

None of the CAH stockholders or holders of CAH warrants have appraisal rights in connection the Merger under the DGCL. For further details, see the section titled “Appraisal Rights” beginning on page 311.

The Proposals

CAH stockholders will be entitled to vote or direct votes to be cast at the special meeting if they owned CAH shares at the close of business on             , 2021, which is the record date for the special meeting, on the following proposals:

 

(1)

to approve the Merger described in this proxy statement/prospectus, including Merger Agreement, the Merger, and the other transactions contemplated by the Merger Agreement and related Sponsor Agreement described in this proxy statement/prospectus - we refer to this proposal as the “Merger Proposal”;

 

(2)

to approve the following material differences between the constitutional documents of LumiraDx that will be in effect upon the closing of the Transaction and CAH’s current certificate of incorporation: (i) the name of the new public entity will be “LumiraDx Limited” as opposed to “CA Healthcare Acquisition Corp.”; (ii) the authorized share capital of the new public entity will be US$10,290 divided into, assuming completion of the Merger Subdivision, 1,769,292,966 LMDX ordinary shares with a par value (to seven decimal places) of $0.0000028 per LMDX ordinary share, (2) 1,769,292,966 LMDX common shares with a par value (to seven decimal places) of $0.0000028 per LMDX common share and (3) undesignated shares of


 

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  such class or classes (however designated) as the board of LumiraDx may determine, as opposed to CAH having 110,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock; (iii) the new public entity has two classes of shares, being the LMDX common shares and the LMDX ordinary shares, such that each holder of LMDX common shares will be entitled to one vote on any proposed shareholder resolution for each such share and each holder of LMDX ordinary shares will be entitled to ten votes on any proposed shareholder resolution for each such share; (iv) the new public entity shall have two classes of directors, other than the LMDX Founder Directors, serving staggered terms with the terms of Class I and Class II directors expiring at the annual general meeting of shareholders to be held in 2022 and 2023, respectively, and each term expiring two years thereafter, in each case; and (v) the new public entity’s constitutional documents will not include the various provisions applicable only to special purpose acquisition corporations that CAH’s amended and restated certificate of incorporation contains (such as the obligation to dissolve and liquidate if a business combination is not consummated in a certain period of time) - we refer to these proposals collectively as the “Charter Proposals”; and

 

(3)

if applicable, to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if CAH has not received sufficient votes at the special meeting to enable it to consummate the Merger contemplated by the Merger Agreement - we refer to this proposal as the “Adjournment Proposal.”

Recommendation to CAH Stockholders

CAH’s board of directors has unanimously determined that the Merger is fair to and in the best interests of CAH and CAH stockholders; has unanimously approved that the Merger Proposal, the Charter Proposals and the Adjournment Proposal be submitted for stockholder approval at the meeting; and unanimously recommends that CAH stockholders vote “FOR” the Merger Proposal, “FOR” the Charter Proposals and “FOR” the adjournment proposal (if applicable) if the Adjournment Proposal is presented at the meeting.

Comparison of Rights of Stockholders of CAH and Shareholders of LumiraDx

If the Merger is successfully completed, holders of CAH shares will become holders of LMDX common shares, and their rights as shareholders will be governed by LumiraDx’s organizational documents.

LumiraDx’s share capital consists of LMDX common shares and LMDX ordinary shares. The rights of LMDX common shares and LMDX ordinary shares are identical, except as they relate to voting and conversion rights. Each LMDX common share entitles the holder to one vote on any proposed shareholder resolution. Each LMDX ordinary share entitles the holder to ten votes on any proposed shareholder resolution and is convertible at any time after the date that is 180 days from Closing. Upon completion of the Merger, assuming that no CAH stockholders exercise redemption rights with respect to their CAH public shares: (i) the current holders of CAH public shares will own         % of the outstanding share capital of the Company and will control approximately         % of the shareholder voting power of the Company; (ii) the sponsor will own         % of the outstanding share capital of the Company and will control approximately         % of the shareholder voting power of the Company, (iii) the Company’s directors, executive officers and their respective affiliates will own         % of the outstanding share capital of the Company and will control approximately         % of the shareholder voting power of the Company, and (iv) the Company’s other existing shareholders will own         % of the outstanding share capital of the Company and will control approximately         % of the shareholder voting power of the Company. For further details, please see the section titled “Beneficial Ownership of Securities” beginning on page 258.

There are also differences between the laws governing CAH, a Delaware corporation, and LumiraDx, a Cayman Islands exempted company. Please see “Description of LumiraDx’s Securities—Comparison of Rights of CAH Stockholders and LumiraDx Shareholders” on page 280 for more information.


 

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Implications of Being an Emerging Growth Company and a Foreign Private Issuer

Each of CAH and LumiraDx is, and consequently, following the Merger, LumiraDx will be, an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, the Company will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find the Company’s securities less attractive as a result, there may be a less active trading market for the Company’s securities and the prices of the Company’s securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

The Company will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of Closing, (b) in which LumiraDx has total annual gross revenue of at least $1.07 billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of the Company’s common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which the Company has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

The Company will also be considered a “foreign private issuer.” Even after the Company no longer qualifies as an emerging growth company, as long as it qualifies as a foreign private issuer under the Exchange Act, the Company will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations with respect to a security registered under the Exchange Act;

 

   

the requirement to comply with Regulation FD, which requires selective disclosure of material information;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events.


 

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The Company may take advantage of these exemptions until such time as it is no longer a foreign private issuer. The Company would cease to be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of its executive officers or directors are U.S. citizens or residents; (ii) more than 50% of its assets are located in the United States; or (iii) its business is administered principally in the United States.

Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if the Company no longer qualifies as an emerging growth company, but remains a foreign private issuer, it will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer. As a result, some investors may find LMDX common shares less attractive, which may result in a less active trading market for LMDX common shares and/or more volatility in the price of LMDX common shares.

Summary Risk Factors

You should consider all the information contained in this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. In particular, you should consider the risk factors described under “Risk Factors” beginning on page 20. Such risks include, but are not limited to:

 

   

LumiraDx is at a pivotal point in the commercialization of the Platform, and LumiraDx may not succeed for a variety of reasons.

 

   

The short-term revenue prospects of LumiraDx will vary with the amount of demand for COVID-19 tests, which may be adversely impacted by wide-spread implementation of the recently authorized vaccines or other vaccines that are subsequently authorized.

 

   

LumiraDx may not obtain regulatory approval, authorization, certification or clearance of the Amira System, and it may not be able to successfully develop and commercialize the Amira System, including scaling up manufacturing and sales capacity.

 

   

The strategy of LumiraDx to globally launch a broad menu of tests may not be as successful as currently envisioned.

 

   

LumiraDx may not be able to generate sufficient revenue from the Platform to achieve and maintain profitability.

 

   

Business or economic disruptions or global health concerns, such as the COVID-19 pandemic, have harmed and may continue to seriously harm LumiraDx’s business and increase its costs and expenses.

 

   

LumiraDx relies on a limited number of suppliers for the components of the Platform or the Amira System and materials and may not be able to find replacements or immediately transition to alternative suppliers.

 

   

LumiraDx may experience problems in scaling its manufacturing and commercial operations, and scaling may impact performance of its products.

 

   

In early 2021, LumiraDx initiated voluntary recalls and field corrective actions related to a limited number of suspected false positive results associated with a limited number of SARS-CoV-2 antigen test strips and may continue to feel the impact of such actions.

 

   

The business and reputation of LumiraDx will suffer if the Platform does not perform as expected.

 

   

LumiraDx currently derives a significant portion of its revenue from a small number of key customers, and loss of any of these customers could cause a material reduction in revenues.


 

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The loss of any member of LumiraDx’s senior management team or an inability to attract and retain highly skilled scientists, engineers, clinicians and salespeople could adversely affect LumiraDx’s business.

 

   

LumiraDx’s business and sale of its products are subject to extensive regulatory requirements and LumiraDx’s products may not be compliant with the new regulatory framework applicable in the European Union (“E.U.”) beginning May 26, 2022, and consequently LumiraDx’s ability to continue to commercialize such products in the E.U. may be impacted and this could impact revenues.

 

   

If LumiraDx cannot compete successfully with its competitors, LumiraDx may be unable to increase or sustain its revenue or achieve and sustain profitability.

 

   

The dual class structure of the LMDX ordinary shares and LMDX common shares has the effect of concentrating voting control with those holders of LMDX’s share capital prior to the completion of the Merger.

 

   

If LumiraDx is unable to obtain and maintain patent and other intellectual property protection for its products and technology, its ability to successfully commercialize any products it develops may be adversely affected.

 

   

CAH may not have sufficient funds to consummate the Merger.

 

   

The Merger remains subject to conditions that CAH cannot control and if such conditions are not satisfied or waived, the Merger may not be consummated.

 

   

The CAH board of directors did not obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Merger.

 

   

If CAH’s stockholders fail to properly demand redemption rights, they will not be entitled to redeem their shares of CAH common stock for a pro rata portion of the trust account.

 

   

Public stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 15% of the CAH common stock.

 

   

Nasdaq may not list the LMDX common shares, which could limit investors’ ability to make transactions in its securities and subject the Company to additional trading restrictions.

 

   

CAH’s directors may decide not to enforce the indemnification obligations of the sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to CAH’s public stockholders in the event a business combination is not consummated.

 

   

If CAH is unable to complete the Merger or another business combination by January 29, 2023, CAH will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding CAH common stock and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against CAH and, as a result, the proceeds held in the trust account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

 

   

The LMDX common shares to be received by CAH’s securityholders as a result of the Merger will have different rights from the CAH shares.

 

   

CAH’s stockholders will have a reduced ownership and voting interest after consummation of the Merger and will exercise less influence over management.

 

   

The sponsor and CAH’s officers and directors have agreed to vote in favor of the Merger, regardless of how CAH’s public stockholders vote.

 

   

The other matters described in the section titled “Risk Factors” beginning on page 20.


 

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Recent Operating Results (preliminary and unaudited)

Selected Unaudited Financial Results as of and for the Six Months Ended June 30, 2021

Set forth below are certain preliminary and unaudited estimates of selected financial information for the six months ended June 30, 2021 and actual financial information for the six months ended June 30, 2020. The preliminary financial information included in this prospectus reflects management’s estimates based solely upon information available to us as of the date of this prospectus and is the responsibility of management. The preliminary financial results presented below are not a comprehensive statement of our financial results for the six-months ended June 30, 2021. In addition, the preliminary financial results presented above have not been audited, reviewed, or compiled by our independent registered public accounting firm, KPMG LLP. Accordingly, KPMG LLP does not express an opinion or any other form of assurance with respect thereto and assumes no responsibility for, and disclaims any association with, this information. The preliminary financial results presented below are subject to the completion of our financial closing procedures, which have not yet been completed. Our actual results for the six-months ended June 30, 2021 may not be available until after this offering is completed and may differ materially from these estimates. Therefore, you should not place undue reliance upon these preliminary financial results. For instance, during the course of the preparation of the respective financial statements and related notes, additional items that would require material adjustments to be made to the preliminary estimated financial results presented above may be identified. There can be no assurance that these estimates will be realized, and estimates are subject to risks and uncertainties, many of which are not within our control. Accordingly, the financial results in any particular period may not be indicative of future results. See “Special Note Regarding Forward-Looking Statements.”

Key Financial and Operating Metrics

We regularly monitor a number of metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.

 

     Six Months
Ended
June 30, 2020
    Six Months Ended
June 30, 2021
 
    LOW     HIGH  
     (in thousands)     (in thousands)  

Revenues

     12,950       193,000       195,000  

Gross profit

     5,489       54,300       57,800  

Loss from operations

     (64,522     (71,500     (64,500

Net loss

     (106,968     (201,000     (191,000

Non-GAAP Financial Data*

      

Adjusted loss

     (61,308     (74,850     (52,600

 

*

Non-GAAP measures. “Reconciliation of GAAP to non-GAAP Financial Measures” below for reconciliation to GAAP metrics for information on how we compute these measures.

Non-GAAP Financial Measures

We are presenting the following non-GAAP financial measure because we use it, among other things, as a key measure for our management and board of directors in managing our business and evaluating our performance. We believe it also provides supplemental information that may be useful to investors. The use of this measure may improve comparability of our results over time by adjusting for items that may vary from period to period or not be representative of our ongoing operations.

This non-GAAP measure is subject to significant limitations, including those identified below. In addition, other companies may use similarly titled measures but calculate them differently, which reduces their usefulness


 

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as comparative measures. Non-GAAP measures should not be considered in isolation or as a substitute for GAAP measures. They should be considered as supplementary information in addition to GAAP operating and financial performance measures.

Adjusted net loss

We believe that Adjusted net loss, which we calculate as Net loss adjusted to exclude certain non-cash items, is useful because it allows us and others to measure our performance without regard to items such as share-based compensation expense, amortization, non-cash finance expenses and other items that can vary substantially depending on our financing and capital structure, and the method by which assets are acquired. We use Adjusted net loss and GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of performance and the effectiveness of our business strategies, and in communications with our board of directors.

Reconciliation of GAAP to non-GAAP Financial Measures

The following table provides a reconciliation of Net loss to Adjusted net loss, a non-GAAP measure.

 

     Six Months
Ended
June 30, 2020
    Six Months Ended
June 30, 2021
 
    LOW     HIGH  
     (in thousands)     (in thousands)  

Net loss

   $ (106,968   $ (201,000   $ (191,000

Amortization of intangible assets

     1,160       1,100       1,300  

Share-based payments

     1,569       25,000       27,000  

Change in fair value of financial instruments

     —         57,000       63,000  

Foreign exchange (gain)/loss

     26,256       (4,500     (5,000

Dividends on preferred shares

     10,770       10,200       11,200  

Non-cash interest

     5,905       37,350       40,900  
  

 

 

   

 

 

   

 

 

 

Adjusted net loss

   $ (61,308   $ (74,850   $ (52,600

Comparison of the Six Months Ended June 30, 2021 and 2020

Revenues are expected to increase approximately $180 million, or 1,398%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in revenue is attributable to sales of our COVID-19 Platform products. We received Emergency Use Authorization from the US Food and Drug Administration for our COVID-19 antigen test in August 2020 and began commercial sales in September 2020.

Gross profit is expected to increase $49 million, or 886%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The improvement in Gross profit was driven primarily by the increase in sales of COVID-19 Platform products.

Loss from operations is expected to decrease by approximately $1 million, or 1%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to an increase in gross profit of $49 million, offset by an increase in operating expenses of approximately $48 million. The increase in operating expenses is primarily the result of increased research and development headcount and related expenses as we continue to commercialize Platform products, increased headcount and related expenses as we grow our sales and marketing staff to support our COVID-19 Platform products. In addition, our share-based payment expense increased approximately $20 million as a result of option awards to our founders.

Net loss is expected to increase approximately $85 million, or 80%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase was primarily driven by non-cash finance expenses including the change in fair value of financial instruments and the accretion of debt issuance costs.


 

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SUMMARY HISTORICAL FINANCIAL INFORMATION

We are providing the following summary historical financial information to assist you in your analysis of the financial aspects of the Merger.

CAH’s balance sheet data as of December 31, 2020 and statement of operations data for the period from October 7, 2020 (inception) through December 31, 2020 are derived from CAH’s audited financial statements, included elsewhere in this proxy statement/prospectus. CAH’s balance sheet data as of June 30, 2021 and statement of operations data for the three and six months ended June 30, 2021 are derived from CAH’s unaudited financial statements, included elsewhere in this proxy statement/prospectus.

LumiraDx’s consolidated balance sheet data as of December 31, 2019 and 2020 and consolidated statements of operations data for the fiscal years ended December 31, 2019 and 2020 are derived from LumiraDx’s audited financial statements, included elsewhere in this proxy statement/prospectus.

The information is only a summary and should be read in conjunction with each of LumiraDx’s and CAH’s consolidated financial statements and related notes and “Other Information Related to CAH—CAH’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 164 and “LumiraDx’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 233. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of LumiraDx or CAH. All amounts are in US dollars. Certain amounts that appear in this section may not sum due to rounding.

Summary Historical Financial Information – CAH

 

     Period from
October 7, 2020
(inception) through
December 31, 2020
    For the three
months ended
June 30, 2021
(unaudited)
    For the six
months ended
June 30, 2021
(unaudited)
 

Income Statement Data:

     ($ in thousands, except per share)  

General and administrative expenses

   $ 2     $ 266     $ 410  

Franchise tax expenses

     1       50       99  
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (3     (316     (509
  

 

 

   

 

 

   

 

 

 

Other income (expense)

      

Change in fair value of derivative warrant liabilities

       (3,056     271  
  

 

 

   

 

 

   

 

 

 

Financing costs - derivative warrant liabilities

       —         (361
  

 

 

   

 

 

   

 

 

 

Income from investments held in Trust Account

       3       12  
  

 

 

   

 

 

   

 

 

 

Loss before tax

       (3,370     (587

Income tax expense

       —         —    
  

 

 

   

 

 

   

 

 

 

Net loss

       (3,370     (587

Weighted average shares outstanding of Class A common stock subject to possible redemption

       10,049,964       9,925,703  
  

 

 

   

 

 

   

 

 

 

Net income per share, Class A common stock subject to possible redemption .

       —         —    
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding, basic and diluted

     2,500,000       4,325,036       4,147,748  
  

 

 

   

 

 

   

 

 

 

Basic and diluted net income per share

     0.0       (0.78     (0.14
  

 

 

   

 

 

   

 

 

 

 

     As of
December 31, 2020
     As of
June 30, 2021
 

Other Financial Data:

     ($ in thousands)  

Total assets

   $ 151      $ 115,964  

 

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Summary Historical Financial Information – LumiraDx Limited

 

    For the years ended December 31,  
            2019                      2020          
    (in thousands)  

Consolidated Statement of Profit and Loss and Comprehensive Income

    

Revenue:

    

Products

  $ 19,802      $ 135,656  

Services

    3,340        3,497  
 

 

 

    

 

 

 

Total revenue

    23,142        139,153  

Cost of sales:

    

Products

    (12,469      (84,456

Services

    (1,853      (1,750
 

 

 

    

 

 

 

Total cost of sales

    (14,322      (86,206
 

 

 

    

 

 

 

Gross profit

    8,820        52,947  

Operating expenses:

    

Research and development expenses

    (86,546      (107,539

Selling, marketing and administrative expenses

    (37,294      (46,129
 

 

 

    

 

 

 

Total operating expense

    (123,840      (153,668
 

 

 

    

 

 

 

Loss from operations

    (115,020      (100,721
 

 

 

    

 

 

 

Finance income (expense):

    

Finance income

    11,705        22,500  

Finance expense

    (39,335      (172,722
 

 

 

    

 

 

 

Total finance expense, net

    (27,630      (150,222

Loss before provision for income taxes

    (142,650      (250,943

Benefit from income taxes

    9,541        9,946  
 

 

 

    

 

 

 

Net loss

  $ (133,109    $ (240,997
 

 

 

    

 

 

 

Loss attributable to non-controlling interest

    (302      (17
 

 

 

    

 

 

 

Net loss attributable to equity holders of parent—basic and diluted

  $ (132,807    $ (240,980
 

 

 

    

 

 

 

Net loss per share attributable to equity holders of parent—basic and diluted

  $ (1.62    $ (2.93

Weighted-average number of Ordinary Shares used in loss per share—basic and diluted

    81,935,700        82,206,300  

Other Comprehensive Income:

    —          —    

Items that may be reclassified subsequently to profit or loss

    —          —    

Foreign currency translation differences - foreign operations

    (7,580      (17,560

Total Comprehensive loss for the year

    (140,689      (258,557

Total comprehensive income attributable to:

    —          —    

Equity holders of the parent

    (140,389      (258,544

Non-controlling interest

    (300      (13

Total

  $ (140,689    $ (258,557

 

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    AS OF DECEMBER 31,  
    2019      2020  
    (in thousands)  

Consolidated Statement of Financial Position

    

Cash and cash equivalents

    139,387        158,717  

Working capital (1)

    140,581        81,023  

Total assets

    249,821        515,095  

Preferred shares

    (248,640      (451,721

Total equity attributable to equity holders of the parent

    152,635        375,009  

Non-controlling interests

    194        207  

Total equity

    152,829        375,216  

 

(1)

We define working capital as current assets less current liabilities.


 

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COMPARATIVE PER SHARE DATA

The following table sets forth summary historical comparative share and unit information for CAH and LumiraDx (and assuming completion of the Merger Subdivision) and unaudited pro forma condensed combined per share information of CAH after giving effect to the Merger, assuming two redemption scenarios as follows:

 

   

Assuming No Redemptions: This section assumes that no CAH stockholders exercise redemption rights with respect to their public shares.

 

   

Assuming Maximum Redemptions: This section assumes that all CAH stockholders holding 10,679,773 shares of CAH common stock will exercise their redemption rights for $106.8 million of funds in CAH’s trust account. Under CAH’s amended and restated certificate of incorporation, the Merger may be consummated only if CAH has at least $5,000,001 of net tangible assets after giving effect to all redemptions in favor of holders of public shares that properly demand redemption of their shares for cash. However, LumiraDx is not required to consummate the Merger unless there is at least $65,000,000 of funds in CAH’s trust account, prior to payment of any unpaid or contingent liabilities, deferred underwriting fees or transaction costs of any of the parties.

The unaudited pro forma book value information reflects the Merger as if it had occurred on December 31, 2020. The weighted average shares outstanding and net earnings per share information reflect the Merger as if it had occurred on January 1, 2020.

This information is only a summary and should be read together with the summary historical financial information included elsewhere in this proxy statement/prospectus, and the historical financial statements of CAH and LumiraDx and related notes that are included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information of CAH and LumiraDx is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus.

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of CAH and LumiraDx would have been had the companies been combined during the periods presented.

 

     As of and for the Year Ended December 31, 2020  
                   Combined Pro Forma and
Equivalent Pro Forma (1)(2)
 
     CAH      LumiraDx      Assuming
No
Redemptions
     Assuming
Maximum
Redemptions
 

Book value per share (2)

   $ 0.01      $ (4.56    $ 1.42      $ 1.07  

Weighted average shares outstanding—basic and diluted

     2,500,000        82,206,300        262,141,458        248,791,741  

Net loss per share—basic and diluted

   $ (0.00    $ (2.93    $ (1.16    $ (1.12

 

(1)

No cash dividends were declared under the periods presented.


 

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(2)

Book value per share is equal to total shareholders’ equity/total basic and diluted outstanding shares and calculated as follows:

 

     CAH      LMDX      Pro Forma
Combined
(No
Redemptions)
     Pro Forma
Combined
(Maximum
Redemptions)
 
     ($ in thousands, except share and per share)  

Total equity attributable to equity holders of the parent

   $ 23      $ (375,009    $ 373,210      $ 266,412  

Ending shares

     2,875,000        82,206,300        262,141,458        248,791,741  

Book value per share

   $ 0.01      $ (4.56    $ 1.42      $ 1.07  

 

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RISK FACTORS

If the Merger is completed, LumiraDx will operate in a market environment that is difficult to predict and that involves significant risks, many of which will be beyond its control. You should carefully consider the risks described below before voting your shares. Additional risks and uncertainties not presently known to LumiraDx and CAH or that they do not currently believe are important to an investor, if they materialize, also may adversely affect the Merger. If any of the events, contingencies, circumstances or conditions described in the following risks actually occur, the Company’s business, financial condition or results of operations could be seriously harmed. If that happens, the trading price of LMDX common shares and/or LMDX new warrants, or if the Merger is not consummated, CAH shares and/or CAH warrants could decline, and you may lose part or all of the value of any LMDX common shares and/or LMDX new warrants, or if the Merger is not consummated, CAH shares and/or CAH warrants that you hold. In this section we,” “us and our refer to LumiraDx.

Risks Related to Our Business and Operations Following the Merger

Risks Related to Our Business and Strategy

We are at a pivotal point in the commercialization of the Platform, and we may not succeed for a variety of reasons.

Since our inception in 2014 until December 31, 2020, we incurred $327.9 million in research and development costs to develop our Platform. As of the date of this proxy statement/prospectus, we have five POC diagnostic tests developed and launched: our SARS-CoV-2 antigen test and SARS-CoV-2 antibody test, commercially available under EUAs and CE Marks, which we recently introduced to the European and U.S. markets; our INR test commercially available under a CE Mark, which we recently introduced to the European market, SARS-CoV-2 antigen pool test and our D-Dimer test, all of which are CE Marked. We also received EUAs for our molecular lab reagent kits, LumiraDx SARS-CoV-2 RNA STAR and LumiraDx SARS-CoV-2 RNA STAR Complete, and we recently commenced sales.

We have engaged in a large, broad-scale launch of our SARS-CoV-2 antigen test and we are relying on such test to create brand awareness and a revenue base to support our cost infrastructure as well as to create an installed base of our Instrument.

We have limited commercial experience with our Platform, and our launch of tests, including our SARS-CoV-2 antigen test and our SARS-CoV-2 antibody test, which have been launched in Europe and the U.S., or launch of additional tests may be delayed, be less successful than we anticipate, or fail for any of the reasons that large commercial launches are ultimately unsuccessful. For example:

 

   

Our tests, produced at large scale, might not perform to standards that we have experienced to date. We therefore may not obtain or maintain regulatory approval, authorization, certification or clearance for some of our diagnostic tests in research and development, which may have a significant impact on the commercialization of our Platform.

 

   

We have a number of diagnostic tests in our near-term pipeline. We may not receive relevant regulatory approval, authorization, certification or clearance for some or all of these in a timely fashion, or at all, and this may impact significantly on the commercialization of the Platform.

 

   

Unexpected or inconsistent clinical data from existing and future clinical trials, or a regulator’s or the market’s perception of these clinical data when compared to our internal comparative data, may adversely impact our ability to obtain regulatory approval, authorization, certification or clearance for, or market acceptance of, our diagnostic tests.

 

   

We make our Instrument and test strips on sophisticated manufacturing systems, and these may not operate at large scale as anticipated.

 

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We may have difficulty sourcing raw materials and components to make our Instrument and test strips in a timely fashion in necessary quantities, or these materials and components might not comply with our specifications, which are exacting.

 

   

We may not be able to supply our Platform through sales channels that are effective and efficient.

 

   

Potential users of our Platform might not accept our Platform as being better than those POC systems already available, at the prices we charge or at all.

 

   

Governmental and third-party payors might decline to cover our products or reimburse our users for the cost of our Instrument and test strips at favorable rates or at all.

 

   

We may not be able to scale-up and sustain operations to a level that allows our investments in technology, equipment, personnel and other resources to achieve sustainable and profitable commercial activities.

 

   

In early 2021, we initiated voluntary recalls and field safety corrective actions related to suspected false positive results associated with a limited number of SARS-CoV-2 antigen test strip batches and may continue to feel the impact of such actions.

 

   

Our management, manufacturing, sales and marketing, logistics, research and development, regulatory and other personnel might not be able to sustain the high level of operations that we anticipate and that we will require to produce our anticipated revenue and allow us to operate profitably.

 

   

External factors, such as the ongoing COVID-19 pandemic, or political or social instability or unrest in our principal markets, might adversely affect us in ways that we have not planned for.

Operations of the type and scope that we plan are subject to many uncertainties, and many that are undertaken are unsuccessful. We cannot be certain that we will be able to achieve our business objectives as described in this proxy statement/prospectus, and if our assumptions regarding these risks and uncertainties are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition and results of operations could be adversely affected.

Our short-term revenue prospects will vary with the amount of demand for COVID-19 tests.

Our short-term revenue prospects will vary with the amount of demand for our SARS-CoV-2 antigen test, SARS-CoV-2 antigen pool test and SARS CoV-2 antibody test. As effective COVID-19 vaccines or treatments are developed, approved or authorized and rolled out to protect against and treat the virus, demand for our SARS-CoV-2 antigen test, SARS-CoV-2 antigen pool test and SARS CoV-2 antibody test may be impacted and the size of our market opportunity for such tests may be impacted. While we believe that our SARS-CoV-2 antigen, SARS-CoV-2 antigen pool test and SARS-CoV-2 antibody tests will remain in high demand as COVID-19 vaccines are rolled out and following such rollout to be used as a verification tool to test the efficacy of such vaccines in triggering an immune response, and to facilitate the reopening of the economy, the availability and efficacy of such vaccines or the mitigation of the COVID-19 pandemic earlier than expected for any other reason could negatively impact demand for our Platform and sales of our Instrument, test strips and other products. In addition, competitors may produce more accurate tests or tests which receive more favorable demand, both of which may impact our revenue streams and profitability.

New product development involves a lengthy and complex process and we may be unable to commercialize additional tests on our Platform on a timely basis, or at all.

The launch of our Platform may be delayed or may not be successful. There can be no assurance that our Platform will accurately and rapidly identify biomarkers associated with conditions and diseases of importance to our customers, including COVID-19, for a variety of technical reasons or that our Platform will compete with market alternatives or gain market acceptance. Our diagnostic tests which are in development will take time to develop and commercialize, if we are able to commercialize them at all.

 

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Many other POC testing systems are designed for one or few related tests, increasing the odds of creating a successful test but decreasing the odds of developing a system with broad testing abilities. Our strategy involves designing a platform that is diverse and powerful enough to produce high-quality testing abilities for a broad array of tests. While we believe this strategy will result in an industry-leading standard for POC tests, it also creates a very high hurdle for success, which we may not ultimately clear.

Further, there can be no assurance that any new diagnostic tests we develop will have acceptable clinical performance. Before we can commercialize any new diagnostic tests, we will need to expend significant funds in order to:

 

   

conduct substantial research and development, including validation studies and potentially clinical trials;

 

   

further develop and scale our research and development efforts to accommodate different test strip designs or adjustments; and

 

   

further develop and scale our infrastructure to be able to analyze increasingly large amounts of data.

Our Platform development process involves a high degree of risk, and development efforts may fail for many reasons, including:

 

   

failure of the products to perform as expected at the research or development stage;

 

   

lack of validation data; or

 

   

failure to demonstrate the clinical utility of the products or pass clinical trials or obtain relevant regulatory approval, authorization, certification or clearance.

As we develop our Platform and our diagnostic tests, we will have to make significant investments in product development, marketing and selling resources. In addition, competitors may develop and commercialize competing products faster than we are able to do so.

Our Amira System may not obtain regulatory approval, authorization, certification or clearance, and we may not be able to successfully develop and commercialize our Amira System, including scaling up manufacturing and sales capacity.

We have started adjusting our high performing SARS-CoV-2 antigen test for mass screening applications with our Amira System, which is based upon our Platform and our SARS-CoV-2 antigen test. Our Amira System is still under development, which we may not be able to complete successfully. We currently have a prototype Amira system including strips, device and patient mobile device application. We expect to move to design freeze at system level shortly. We are simultaneously tooling up high volume manufacturing lines, for the strip and instrument, while we progress through design freeze and the verification and validation (V&V) phase. Even if successfully developed, our Amira System will require regulatory approval, authorization, certification or clearance prior to commercialization. In addition, we may need to seek regulatory approval, authorization, certification or clearance for specific or limited use cases based on our commercialization plans and then seek separate approval, authorization, certification or clearance over time for other settings, such as home-use settings. For example, we submitted a pre-EUA request to FDA in February 2021 and expect to obtain CE Mark for POC and over-the-counter (OTC) applications in the fall of 2021. We plan to start clinical testing of our Amira System in the fall of 2021, but we may not receive positive clinical data or we may need to perform additional clinical testing to obtain regulatory approval, authorization, certification or clearance for our Amira System. Revenues related to the Amira System depend on development of mass screening opportunities and continued need for COVID-19 testing in reopening economies.

We expect to continue to devote significant operational and financial resources to the development and commercialization of our Amira System to meet expected demand for mass screening applications, including at

 

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schools, airports, universities, for return-to-work screening and over time for testing in the home. Our ability to produce the planned volume of Amira COVID-19 tests will be dependent on our ability, and the ability of our contract manufacturers, to successfully and rapidly scale up manufacturing and sales capacities. These efforts may divert management’s attention and resources from other diagnostic tests, including our SARS-CoV-2 antigen test and our SARS-CoV-2 antibody test, available on our Platform. We may encounter significant difficulties in our efforts to scale, manufacture and supply our Amira System and we cannot guarantee that any of these challenges will be met in a timely manner or at all.

We may not be able to generate sufficient revenue from our Platform to achieve and maintain profitability.

We believe our commercial success is dependent upon our ability to successfully market and sell our Platform to customers, including large healthcare systems, government organizations, national pharmacy chains and community-based healthcare settings, to launch and commercialize our Instrument and diagnostic tests, including those for COVID-19, to continue to expand our current relationships and develop new relationships with diagnostic companies, and to develop and commercialize new POC diagnostic tests. We are scaling our operations assuming a rapid uptake of our Instrument and our SARS-CoV-2 antigen and SARS-CoV-2 antibody tests, but the demand for our Platform may not increase for a number of reasons, including due to the evolving nature of the COVID-19 pandemic, or unsuccessful execution of our strategy designed to meet the increased demand for COVID-19 tests, or otherwise. If we are unsuccessful in the commercialization of our SARS-CoV-2 antigen and antibody tests, then we will need significant financial resources to maintain our operations. We have experienced early revenue growth from the sale of our Platform to healthcare professionals, principally for our SARS-CoV-2 antigen tests, INR tests and from the sale of third-party distribution products and our anticoagulation management programs. We may not be able to continue revenue growth or maintain existing revenue levels.

Our existing customers and collaborators may decide to decrease or discontinue their use of our Platform due to changes in research and product development plans, changes in the occurrence of certain diseases, such as COVID-19, failures in clinical trials, financial constraints, or utilization of internal testing resources or tests performed by other parties, which are circumstances outside of our control. In addition to reducing our revenue, this may reduce our exposure to early stage research that facilitates the incorporation of newly-developed information about various tests into our Platform.

We are currently not profitable. Even if we succeed in increasing the adoption of our Platform by large healthcare systems, government organizations, national pharmacy chains and community-based healthcare settings, maintaining and creating relationships with our existing and new customers and collaborators and developing and commercializing additional POC diagnostic tests, we may not be able to generate sufficient revenue to achieve or maintain profitability.

Business or economic disruptions or global health concerns, such as the COVID-19 pandemic, have and may continue to seriously harm our business and increase our costs and expenses.

The global impact of the COVID-19 pandemic has been rapidly evolving in many countries, including the U.K. where our main research, development and manufacturing operations are located, as well as in other countries, and has led to the implementation of various responses, including government-imposed quarantines, travel restrictions, business and school closures and other public health safety measures. These responses to the COVID-19 pandemic have impacted and may continue to materially and adversely impact our business and results of operations due to, among other factors:

 

   

a potential for delays in launches of our non-COVID-19 diagnostic tests given reduced and limited access to clinical trial sites for our other tests and social distancing and other measures that restrict ability to work on such tests;

 

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a delay in regulatory approval, authorization, certification or clearance by FDA, and other applicable regulators to some of our diagnostic assays in development, if such regulators focus their resources on and give priority to COVID-19 testing and treatments or to a specific form of COVID-19 testing that is different than our SARS-CoV-2 antibody test, SARS-CoV-2 antigen pool test or other tests;

 

   

a disproportionate impact on the healthcare groups and other healthcare professionals with whom we contract;

 

   

supply shortages for materials used to manufacture our COVID-19 products, including of swabs and extraction buffers necessary for use with our SARS-CoV-2 antigen test;

 

   

disruptions to our supply chains and sales and marketing efforts due to restrictions on courier delivery services and other transportation systems;

 

   

disruptions to operations at our current and future manufacturing systems and facilities and those of our third-party vendors, collaborators, and suppliers;

 

   

difficulty accessing the capital and credit markets on favorable terms, or at all, a severe disruption and instability in the global financial markets, and deteriorations in credit and financing conditions which could affect our access to capital necessary to fund our existing and scaled business operations or address maturing liabilities on a timely basis;

 

   

the potential negative impact on the health or productivity of employees, especially if a significant number of them are impacted;

 

   

a deterioration in our ability to ensure business continuity during a disruption; and

 

   

social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.

This pandemic, as well as intensified measures undertaken to contain the spread of COVID-19, could decrease healthcare industry spending; adversely affect demand for our Platform; cause one or more of our customers to file for bankruptcy protection or go out of business; cause one or more of our customers to fail to renew, terminate, or renegotiate their contracts; affect the ability of our business development team to travel worldwide to potential customers and the ability of our professional services teams to conduct in-person services and trainings; impact expected spending from new customers; negatively impact collections of accounts receivable; lead to the closure of our existing or future manufacturing facilities or any of our other production, research and/or distribution facilities; and restrict the movement of people and goods, which could negatively impact employee availability (particularly, in respect of our R&D and sales and marketing teams), any of which would harm our business, results of operations, and financial condition. In addition, while we have taken remote work, group isolation and other measures to prevent an outbreak among our employees, further waves of the COVID-19 pandemic could further disrupt our operations as the success of the measures we have implemented is uncertain.

The loss of any member of our senior management team or our inability to attract and retain highly skilled scientists, engineers, clinicians and salespeople could adversely affect our business.

Our success depends on the skills, experience and performance of key members of our senior management team, including Ron Zwanziger, our Chairman and Chief Executive Officer, Dave Scott Ph.D., our Chief Technology Officer and Jerry McAleer, Ph.D., our Chief Scientist. The individual and collective efforts of these employees will be essential as we continue to develop our Platform and additional products, and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team or key scientists and engineers could adversely affect our operations, particularly if we experience difficulties hiring qualified successors. We do not have any employment agreements (other than brief at-will offer letters) or non-compete agreements with our co-founders (i.e., Ron Zwanziger, Dave Scott and Jerry McAleer), and because of their knowledge of the industry and our operations, we believe the loss of any one of their services, or any of

 

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them leaving and providing services to any of our competitors, could result in a disruption of our operations and/or put us at a competitive disadvantage, which will likely have a material adverse effect on our business.

Our R&D programs and manufacturing operations depend on our ability to attract and retain highly skilled scientists, technicians and engineers. We may not be able to attract or retain a sufficient number of qualified scientists, engineers and technicians in the future due to the competition for qualified personnel in our industry. We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel. We may also have difficulties locating, recruiting or retaining a sufficient number of qualified sales people to successfully scale up our sales and marketing efforts to meet expected demands. Recruiting and retention difficulties can limit our ability to support our R&D and sales and marketing programs. In addition, all of our employees in the United States are at-will, which means that either we or the employee may terminate their employment at any time. We also do not maintain “key person” insurance on any of our employees.

Our Platform may never achieve significant commercial market acceptance.

Our Platform may never gain significant acceptance in the marketplace and, therefore, may never generate substantial revenue or profits for us. Our ability to achieve commercial market acceptance for our Platform will depend on several factors, including:

 

   

our ability to demonstrate the clinical utility and cost effectiveness of our Platform and its potential advantages over existing POC systems, or for certain tests, over central lab counterparts, to the medical community;

 

   

our ability, and that of our collaborators, to secure and maintain FDA and other applicable regulatory clearance, authorization or approval for certain components of our Platform;

 

   

our ability to expand our test menu and provide a broad range of tests on our Platform while maintaining consistency and precision;

 

   

our ability to obtain relevant regulatory approval, authorization, certification or clearance for our diagnostic assays in development, particularly those in our near-term pipeline;

 

   

the agreement by commercial third-party payors and government payors to cover and to reimburse our Instrument and test strips, the scope and extent of which will affect healthcare providers’ willingness to pay for our Instrument and test strips and likely heavily influence their decisions to recommend use of our Platform;

 

   

the willingness of healthcare providers to use a POC system over central lab counterparts and the rate of adoption of our Platform by healthcare providers and other users; and

 

   

the impact of our investments in Platform innovation and commercial growth.

We believe that the successful completion of clinical trials, publication of scientific and medical results in peer-reviewed journals, and presentations at leading conferences will be important to facilitate the broad adoption of our Platform. Publication in leading medical journals is subject to a peer-review process, and peer reviewers may not consider the results of studies involving our Platform sufficiently novel or worthy of publication.

The failure of our Platform to be listed in physician guidelines or of our clinical trials to produce favorable results or to be published in peer-reviewed journals could limit the adoption of our Platform. We may not be successful in addressing these or other factors that might affect the market acceptance of our Platform and technologies. Failure to achieve widespread market acceptance of our Platform would materially harm our business, financial condition and results of operations.

 

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A limited number of customers currently represent a substantial portion of our revenue. If we fail to retain these customers, our revenue could decline significantly.

We currently derive a substantial portion of our revenue from sales to certain key customers, including CVS in the U.S. and NHS in the U.K. As a result, our revenue could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of these customers or any other significant future customers. Our agreements with CVS and NHS do not have minimum purchase requirements. Any of our significant customers may decide to purchase less than they have in the past, may alter their purchasing patterns at any time with limited notice, or may decide not to continue to use our Platform and test strips at all, any of which could cause our revenue to decline and adversely affect our financial condition and results of operations.

We rely on a limited number of suppliers or, in some cases, sole source suppliers, for the components of our Platform and materials and may not be able to find, or immediately transition to, alternative suppliers.

We rely on several sole source suppliers for certain components or accessories and materials used in our Instrument and our test strips, such as reagents. In addition, we currently rely solely on Flextronics Ltd, or Flex, as the sole manufacturer of our Instrument, with components and assemblies supplied by Flex and by outside vendors, and our facilities as the sole suppliers of our test strips.

In the case of any alternative supplier for our Instrument, the components of our Instrument or our test strips, there can be no assurance that replacement components or, with regards to the test strips, reagents, swabs or other accessories will be available or will meet our quality control and performance requirements for our operations or products. For example, in November 2020, there was a shortage of a component for use in our Instrument which significantly constrained the production and delivery of our Instrument to customers until we added an additional supplier. An interruption in our ability to develop and produce our Instrument or test strips could occur if we encounter delays or difficulties in securing components of our Instrument or our test strips, including due to the COVID-19 pandemic, and if we cannot then obtain an acceptable substitute. Any changes in such materials could lead to required changes in performance, regulatory approval, authorization, certification or clearance processes. If we encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and reagents we require for our Platform, our business, financial condition, results of operations and reputation could be adversely affected.

Because of a long lead-time to delivery of certain components of our manufacturing system and Platform, we are required to place orders for a variety of items well in advance of scheduled production runs. We have increased our flexibility to purchase strategic components within shorter lead times by entering into scale up arrangements with the suppliers of these components. Although we attempt to match our inventory and production capabilities to estimates of marketplace demand, to the extent Instrument and test strip orders materially vary from our estimates, we may experience continued constraints in our Platform production and delivery capacity, which could adversely impact our financial condition and results of operations. Should our need for raw materials and components used in production continue to fluctuate, we could incur additional costs associated with either expediting or postponing delivery of those materials. In an effort to control costs, we have implemented a lean manufacturing system. Managing the change from discrete to continuous flow production requires time and management commitment. Lean initiatives and limitations in our supply chain capabilities may result in component shortages that delay shipments and cause fluctuations in revenue.

Further, we believe that there are a limited number of other equipment manufacturers that are currently capable of supplying and servicing the equipment necessary for the manufacturing of our Instrument and test strips. We have spent significant time and resources developing our manufacturing processes with our existing collaborators, and the use of equipment or materials furnished by these replacement suppliers would require us to significantly alter our operations. It could take a very long time to obtain a new manufacturing system for test strips if additional capacity were needed. Transitioning to a new supplier would therefore be time consuming and expensive, may result in interruptions or delays in our operations, could affect the performance specifications of our operations or could require that we revalidate our Platform and could require us to obtain additional

 

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clearance, authorization, approval, accreditation or licensure for the changes. There can be no assurance that we will be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and materials on line and revalidate them without experiencing interruptions in our workflow.

We may experience manufacturing problems or delays that could limit the growth of our revenue or increase our losses.

Our current and planned manufacturing operations are critical to our commercialization plans, and these operations may not be sufficient to withstand the demands we intend to place on them. Any disruption in the operation of any of our facilities or the facilities of our suppliers could impact our supply chain and operation of our Platform and our ability to conduct our business and generate revenue. We may encounter unforeseen situations that would result in delays or shortfalls in our production as well as delays or shortfalls caused by our outsourced manufacturing suppliers and by other third-party suppliers who manufacture components for our Platform, including delays caused by or constraints on capacity as a result of the COVID-19 pandemic. If we are unable to keep up with demand for our Platform, our revenue could be impaired, market acceptance for our Platform could be adversely affected and our customers might instead purchase our competitors’ products. Our inability to successfully manufacture the components of our Platform would have a material adverse effect on our operating results.

If our or our suppliers’ or collaborators’ present or future facilities were to be damaged, destroyed or otherwise unable to operate, whether due to fire, floods, storms, tornadoes, earthquakes, other inclement weather events or natural disasters, employee malfeasance, terrorist acts, public health crises, power outages, or otherwise, it may render it difficult or impossible for us to increase our manufacturing and other operations sufficiently to meet increased demand, and our business could be severely disrupted. Our facilities and the equipment we use to manufacture our Platform would be costly to replace and could require substantial lead time to repair or replace.

As we continue to expand our business, we may experience problems in scaling our manufacturing and commercial operations, and if we are unable to support demand for our Platform, our Amira System and our future tests, including ensuring that we have adequate capacity to meet increased demand, or we are unable to successfully manage the evolution of our Platform or our Amira System, our business could suffer.

We currently do not have the capacity to support the projected expansion of our business. In connection with the commercialization of our Platform, we have added, and expect to continue to add, personnel in the areas of sales, marketing, manufacturing, regulatory, quality assurance, customer and technical service and other support functions. We also continue to scale our manufacturing, sales and marketing capabilities. As our volume grows, we will need to continue to increase our workflow capacity for sales, customer service, billing and general process improvements, expand our internal quality assurance program and to scale up our manufacturing systems for our Platform quickly. We will need additional sales, scientific and technical personnel to market our Platform and our Amira System and follow up on any reported quality issues. Our Amira System is focused on mass screening opportunities and OTC sales and marketing channels for professional and OTC vary significantly and may require additional support. We will also need to secure additional facilities, purchase additional equipment, some of which can take several months or more to procure, setup, and validate, and to significantly and rapidly increase our capacity to meet increased demand. There is no assurance that any of these increases in scale, expansion of personnel, equipment, software and computing capacities, or process enhancements will be successfully implemented on a timely basis, or at all, or that we will have adequate space in our facilities to accommodate such required expansion. Even if these and other measures are implemented successfully, we still expect to experience continued capacity constraints as we commercialize our products.

As additional diagnostic products are commercialized and new tests are developed, we may need to implement adjustments to our Platform and our processes and hire new personnel with different qualifications. Failure to manage this growth or transition could result in delays in the development of new test strips, higher product costs, declining product quality, deteriorating customer service, and slower responses to competitive

 

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challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our Platform and our Amira System and could damage our reputation and the prospects for our business.

If any of our facilities were damaged or destroyed, or if we experience a significant disruption in the expansion of our operations for any reason, our ability to continue to operate our business and meet increased demand could be materially harmed.

As we expand our capacity, we believe it may be necessary to both expand our existing facilities and to add one or more new facilities to meet anticipated demand. We are also in the process of scaling our manufacturing facilities and adding warehouse and office space, which are expected to continue to be rolled out in the next few years, with necessary adjustments based on market needs. Failure to complete, or timely complete, these expansion projects on time or at all, may significantly delay our workflows and operations, which may adversely affect our business, financial condition and results of operation. In addition, our financial condition may be adversely affected if we are unable to complete these expansion projects on budget and otherwise on terms and conditions acceptable to us. Finally, our financial condition will be adversely affected if demand for our Platform does not materialize in line with our current expectations and if, as a result, we end up building excess capacity that does not yield a reasonable return on our investment.

We are devoting significant resources for the scale-up and development of our COVID-19 Tests.

We are working toward the large-scale technical development and manufacturing scale-up in several countries and larger scale deployment of our COVID-19 tests, including our SARS-CoV-2 antigen test, SARS-CoV-2 antibody test, SARS-CoV-2 antigen pool test, SARS-CoV-2 RNA STAR and SARS-CoV-2 RNA STAR Complete molecular test kit, and our Amira System, and currently do not have the manufacturing, marketing or sales capacity to meet the expected demand for such tests. The number of potential tests that we are able to produce and bring to market is dependent on our ability, and the ability of our contract manufacturers, to successfully and rapidly scale up manufacturing capacity and our ability to scale up our marketing and sales capacities. To support these scale-ups, we will need to expend significant resources and capital quickly, and we therefore expect to divert resources and capital from our other non-COVID-19 diagnostic tests. Our ability to produce and successfully bring to market our COVID-19 tests will also depend on our ability to further scale up on our manufacturing, sales and marketing capacities.

We have entered into, and may continue to enter into, contractual arrangements with customers, suppliers, distributors, manufacturers or other collaborators that contain restrictions or minimum commitments which limit our ability to develop, manufacture, supply, commercialize and distribute our COVID-19 tests. For example, we entered into a purchase agreement with CVS pursuant to which we committed to make available to CVS a minimum monthly quantity of our Instrument and SARS-CoV-2 antigen test strips, as well as ancillary equipment such as collection supplies necessary to administer the SARS-CoV-2 antigen and antibody tests. Our initial minimum monthly commitment to CVS was a significant portion of our supply through to the end of 2020. We are not obligated to, but we may, subject to availability, make additional quantities of our Instrument and SARS-CoV-2 antigen test strips available to CVS to purchase, but unless CVS places purchase orders in a timely fashion, we are not required to hold such additional quantities available for purchase by CVS. If we fail to meet contractual obligations under our agreements or if we enter into agreements that restrict our ability to develop, manufacture, supply, commercialize and distribute our COVID-19 tests, we may be required to pay damages to the counterparty or contest disagreements or disputes, which could have a material and adverse effect on our financial condition and operations.

Given the rapidity of both the onset of the COVID-19 pandemic and our commercialization efforts with respect to our COVID-19 tests, as well as the complexity of the economics of a diagnostic test for a pandemic, we are still in the early stages of considering how to develop our pricing strategy for these tests and cannot provide assurance as to the ultimate impact of each COVID-19 test on our financial condition and results of operations. Focus on such COVID-19 tests could have the lasting impacts of significant diversions of resources

 

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and attention away from the development of other non-COVID-19 diagnostic tests; a possible reduction in our ability to rapidly pivot research, development and commercialization back to other areas of focus; and lost time associated with addressing the demand for our COVID-19 tests.

We are continuously updating and improving our Platform based on the needs of various tests, and this may impact changes, such as upgrades or new versions of our Instrument.

Our Platform is continuously evolving and will continue to do so as more tests are added to our Platform. A specific test may require specific test strip or design changes which could also impact Instrument set up. In addition, we are continuously improving our Instrument and have a pipeline of upgrades to make the Instrument more robust and further lower the costs over time. This may require regular updates to our Instrument, including software upgrades and in certain cases the need to swap out the Instrument for an updated version. Despite our rigorous testing and quality assurance processes, it is possible that our Instrument may prove to operate less reliably than we anticipated or degrade in efficacy over time. If this occurs, this may likewise necessitate updates to our design or software or replacement of Instruments, which could adversely affect our financial condition, results of operations and/or reputation. The replacement of an Instrument may require sales and customer support and may lead to older versions of our Platform being obsolete and impact our financials. The need for an upgrade to an Instrument may impact the commercialization of certain diagnostic assays which require an upgraded Instrument.

Our current tests or any tests that we develop to cover additional menu or diagnostic testing may not be successfully developed or commercialized or gain the acceptance of the public or the medical community.

We plan to implement a broad range of tests on our Platform over time. Each test requires a significant amount of R&D and comes with its own technical challenges. In addition, we aim for all tests to provide lab-comparable results based on comparison against the lab standard reference for such test, where such lab reference is available. In light of the technical and complicated nature of some test strips, R&D timelines may be delayed and lab-comparable results or expected performance criteria may not be met. This may affect our ability to launch or commercialize our tests and could have an adverse impact on our financial results. While we have encouraging internal data for many diagnostic tests, we have not yet performed multi-site, external clinical analyses of most of these tests or otherwise compared these results against clinical results.

Sensitivity and specificity concerns with respect to COVID-19 tests generally could negatively affect demand for our Platform and therefore our business, revenues and profits. Similar concerns about our collaborators, though unrelated to us, could likewise create negative publicity, which could negatively impact demand for our Platform or harm our reputation. These concerns could be wrongly attributed to our tests and could negatively affect sales of our Instrument. Additionally, concerns about COVID-19 tests generally could adversely affect our business as the general public may associate our SARS-CoV-2 antigen, SARS-CoV-2 antigen pool test and SARS-CoV-2 antibody tests with them. In addition, the medical community is continuously learning and publishing scientific literature about COVID-19 and the success of our SARS-CoV-2 antigen test, SARS-CoV-2 antigen pool test and SARS-CoV-2 antibody test will depend, in part, on the ability of the tests to detect the virus (or antibodies) and on acceptance of the test results by the public and medical community. If any of our tests or those of other parties developing similar products receive negative or unfavorable publicity, or the medical community publishes information criticizing the accuracy, effectiveness or utility of COVID-19 tests, whether or not ours, it could result in a decrease in demand for any product that we may develop. In addition, responses by the U.S. federal, state or foreign governments to negative public perception or ethical concerns related to COVID-19 tests may result in new legislation or regulations that could limit our ability to develop or commercialize any product, obtain or maintain regulatory approval, authorization, certification or clearance, if applicable, identify alternate regulatory pathways to market or otherwise achieve profitability. More restrictive statutory regimes, government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects, and may delay or impair the development and commercialization of our products or demand for any products we may commercialize.

 

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We have limited data on the performance of our Platform to date and limited experience in marketing and selling our Platform, and if we are unable to expand our direct sales and marketing force to adequately address our customers’ needs, our business may be adversely affected.

We have limited data on the performance of our Platform to date and limited experience in marketing and selling our Platform, which had its formal commercial launch in Europe in 2019 with our INR test. We do not currently have, and may not be successful in developing, the capacity to market, sell, or distribute our Platform or other products we may develop effectively or in volumes high enough to support our planned growth.

We currently and will continue to sell our Platform on a region or country specific basis across our footprint in Europe, the U.S., South America, Africa and Asia using a combination of direct sale or sales or through our distributors. Our future sales will depend in large part on our ability to develop and substantially expand our sales force and to significantly increase the scope of our marketing efforts. Our target market of identifying customers in healthcare systems, government organizations, national pharmacy chains and community-based healthcare settings is a large and diverse market. As a result, we believe it is necessary to develop a large sales force that includes sales representatives with a variety of specific technical backgrounds. We will also need to attract and develop a significant amount of marketing personnel with industry expertise. Competition for such employees is intense. We may not be able to attract and retain personnel or be able to build an efficient and effective sales and marketing force, which could negatively impact sales and market acceptance of our products and limit our revenue growth and potential profitability.

Our expected future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, and integrate additional employees. Our future financial performance and our ability to commercialize our products and to compete effectively will depend, in part, on our ability to manage this potential future growth effectively, without compromising quality.

We also enlist distributors, and we may potentially enlist local collaborators, to assist with sales, distribution, and customer support. Locating, qualifying, and engaging a significant number of distribution collaborators with local industry experience and knowledge will be necessary to effectively market and sell our products. We may not be successful in finding, attracting, and retaining a sufficient number of distributors or other collaborators or we may not be able to enter into such arrangements on favorable terms, or at all. Our sales in low and middle income countries also depend on support from our global health partners, such as BMGF and from national governments. Developing such relationships may require significant resources, time and management attention and could adversely affect our ability to make sales.

Sales practices utilized by our distributors that are locally acceptable may not comply with sales practices standards required under the laws of the U.K., U.S. or other jurisdictions that apply to us, which could create additional compliance costs and risk and demand additional resources, time and management attention. If our sales and marketing efforts are not successful, we may not achieve significant market acceptance for our products, which would materially and adversely impact our business and anticipated financial condition and results of operations.

If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or achieve and sustain profitability.

The diagnostics industry, including IVD and POC systems, is rapidly evolving, and we face competition from companies that offer products in our targeted application areas. Our principal competition comes from established diagnostic companies. Our competitors include laboratory or POC companies such as Abbott Laboratories, Becton, Dickinson and Company, Danaher Corporation, GenMark Diagnostics, Inc., Laboratory Corporation of America Holdings, Quest Diagnostics Incorporated, Quidel Corporation, Roche Diagnostics Corporation, Siemens Healthineers AG, Inc. and many others. In addition to diagnostic systems, we believe these companies may also develop their own approved or cleared diagnostic kits, which can be sold to the clients who

 

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have purchased their systems. In addition, new and existing companies could seek to develop tests that compete with ours.

For each of our five available tests, we face competition from other commercially available tests, including:

 

   

For our SARS-CoV-2 antigen test and SARS-CoV-2 antigen pool test: Quidel Sofia, BD Veritor Plus System, Abbott BinaxNOW COVID-19 Ag Card, general lateral flow tests and others.

 

   

For our SARS CoV-2 antibody test: Roche Elecsys Anti-SARS-CoV-2, Accelerate Diagnostics BioCheck SARS-CoV-2 Antibody Test Kits, SD Biosensor Q COVID-19 IgM/IgG Rapid Test and others.

 

   

For our INR test: Roche Coaguchek and others.

 

   

For our D-Dimer test: Roche Cobas h232 and others.

Our tests in development are designed and validated against their respective lab standard.

Many of our current and future competitors are either publicly traded, or are divisions of publicly-traded companies, and may enjoy a number of competitive technological, financial and market access advantages over us, including:

 

   

greater name and brand recognition;

 

   

substantially greater financial and human resources and expertise;

 

   

broader or superior product lines;

 

   

larger sales forces and more established distributor networks;

 

   

substantial intellectual property portfolios;

 

   

larger and more established customer bases, relationships with healthcare professionals and third-party payors; and

 

   

better established, larger scale, and lower cost manufacturing capabilities.

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

 

   

cost of instruments and consumables;

 

   

flexibility and ease of use;

 

   

time to result;

 

   

accuracy, including sensitivity and specificity, and reproducibility of results;

 

   

reputation among customers;

 

   

innovation in product offerings; and

 

   

compatibility with existing processes.

Furthermore, even if we do develop new marketable products or services, our current and future competitors may develop products and services that are more commercially attractive than ours, and they may bring those products and services to market earlier or more effectively than us. If we are unable to compete successfully against current or future competitors, we may be unable to increase market acceptance for and sales of our Platform, which could prevent us from increasing or sustaining our revenues or achieving sustained profitability. Our competitors may also use their patent portfolios, developed in connection with developing their tests, to allege that our Platform infringes their patents, and we could face litigation with respect to such allegations and the validity of such patents.

 

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The diagnostic industry is subject to rapidly changing technology which could make our Platform and other products we develop obsolete.

Our industry is characterized by rapid technological changes, frequent new product introductions and enhancements and evolving industry standards, all of which could make our Platform and the other products we are developing obsolete. Our future success will depend on our ability to anticipate and keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances. The attractiveness of our Platform partly depends on the ability to continue to add additional assays and tests in a timely manner. Failure to deliver such tests in the timelines suggested may affect our business plan and ability to obtain greater market penetration, or otherwise cause us to lose market share.

In recent years, there have been advances in methods used to analyze very large amounts of information. We must continuously enhance our Platform and develop new products to keep pace with evolving standards of care. If we do not update our Platform, including successfully developing new tests for our Instrument, such as multiplex test strips with the ability to detect an increased number of markers in a single sample, it could become obsolete and sales of our Platform and any new products could decline, which would have a material adverse effect on our business, financial condition, and results of operations.

Our business and reputation will suffer if our Platform does not perform as expected, particularly as test strip volume increases, or we are unable to establish and comply with stringent quality standards to assure that the highest level of quality is observed in the performance of our Platform.

Inherent risks are involved in providing and marketing diagnostic tests and related services. Our success depends on the market’s confidence that we can provide reliable, high-quality diagnostic products and information that may be used to make critical healthcare decisions. There is no guarantee that the accuracy and reproducibility we have demonstrated to date will continue as our volume of test strips increases or as we commercialize additional tests. We believe that our customers are likely to be particularly sensitive to product defects and errors, including if our products fail to detect certain diseases with high accuracy from clinical specimens. As a result, the failure of our Platform to perform as expected would significantly impair our operating results and our reputation. We may be subject to legal claims arising from any defects or errors.

We must maintain top service standards and government-mandated and other quality controls. Past or future performance or accuracy defects, incomplete or improper process controls, or mishandling of samples or test strips due to inadequate training can lead to incorrect diagnostic results and potentially result in adverse outcomes for patients. These events could lead to voluntary or legally mandated safety alerts relating to our Platform or our facilities and could result in the removal of our Platform from the market. Insufficient quality controls and any resulting negative outcomes could result in significant costs and litigation, as well as negative publicity that could reduce demand for our Platform and payors’ willingness to cover our Platform. Even if we maintain adequate controls and procedures, damaging and costly errors may occur.

If we cannot maintain our current relationships, or enter into new relationships, with diagnostics or research and development companies, or if our collaborators do not perform as expected, our product development could be delayed.

We rely on research and development collaborators to research and develop certain tests for our Platform. We have existing research and development agreements with well-established companies in each of respiratory, infectious, and enteric disease areas. The inability of these companies to deliver on research and development projects or our inability to use or have sufficient access to required reagents derived from such projects could have an adverse effect on our ability to launch additional tests and thus on our financial condition and results of operations.

 

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Our success in the future depends in part on our ability to maintain these relationships and to enter into new relationships. This can be difficult due to several factors, including internal and external constraints placed on these organizations that can limit the number and type of relationships with companies such as ours that can be considered and consummated. In addition, collaboration, manufacturing and supply agreements can be complex and contain certain provisions that may be susceptible to multiple interpretations. The resolution of any interpretation disagreement that may arise could be adverse to us, for example, by increasing our royalties payable to third parties, by narrowing what we believe to be the scope of our rights to certain intellectual property, or increasing what we believe to be our financial or other obligations under these agreements, and any such outcome could have a material adverse effect on our business, financial condition, results of operations, and prospects. In addition, we expect that we will have capacity constraints on demand for our COVID-19 tests, and we will need to make decisions regarding allocation of supply of such tests, which could have an adverse effect on new or existing relationships with third parties and governments.

We are currently engaged, and expect to continue to engage, in discussions with companies regarding commercial opportunities, particularly in light of our ongoing and planned rapid scale-up in response to the demand for COVID-19 testing. There is no assurance that any of these discussions will result in commercial agreements, or if an agreement is reached, that the resulting engagement will be successful and that such companies will perform as expected or that clinical, sales and marketing activities conducted as part of the engagement will produce successful outcomes.

Additionally, speculation in the industry about our existing or potential engagements with life science companies may be a catalyst for adverse speculation about us, our products, and our technology, which may result in harm to our reputation and our business.

We may acquire other businesses or form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our shareholders’ ownership, increase our debt or cause us to incur significant expense.

We may pursue acquisitions of businesses and assets as well as strategic alliances and joint ventures that leverage our Platform and industry experience to expand our offerings or distribution. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our financial condition, results of operations, and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may experience losses related to investments in other companies, which could have a material negative effect on our results of operations and financial condition. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, or joint venture.

To finance any acquisitions or joint ventures, we may choose to issue our LMDX common shares as consideration, which would dilute the ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our LMDX common shares is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our LMDX common shares as consideration.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks.

In addition to the various direct sales units that have already been established in Europe, South Africa, Japan, the U.S. and Latin America, we are planning to both continue to grow direct sales operations as well as extend distribution agreements for our Instrument and test strips in various countries. In addition, in Africa, we plan to continue to collaborate with non-governmental organizations, such as BMGF, to build programs that utilize our Platform to improve patient outcomes across multiple countries on the African continent. We plan to maintain sales

 

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representatives and distributor relationships, to conduct healthcare provider and patient association outreach activities, to extend research and development capabilities and to expand payor relationships internationally. Doing business internationally involves a number of risks, including:

 

   

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, economic sanctions, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses;

 

   

potential competition from existing or future local and regional product offerings;

 

   

difficulties in complying with a multitude of product regulations in various jurisdictions, including evolving regulatory pathways in response to the COVID-19 pandemic;

 

   

failure by us or our distributors to obtain regulatory approvals, authorizations or clearance for the use of our products in various countries;

 

   

additional potentially relevant third-party patent rights;

 

   

complexities and difficulties in obtaining protection and enforcing our intellectual property;

 

   

difficulties in staffing and managing foreign operations;

 

   

complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems;

 

   

our dependence on cooperation and donor funding of local aid sources and private foundations, particularly in developing regions such as Africa, as well as cooperation from national healthcare programs and governments;

 

   

logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays;

 

   

limits in our ability to penetrate international markets if we are not able to conduct our tests locally;

 

   

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations;

 

   

the risk that regional or local distributors may not commit the necessary resources to market and sell our products to the level of our expectations or may choose to favor marketing the products of our regional or local competitors;

 

   

natural disasters, political and economic instability, including wars, terrorism, and political and civil unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions; and

 

   

regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, or its books and records or anti-bribery provisions, or similar anti-bribery or anti-corruption laws or regulations in other jurisdictions, such as the United Kingdom’s Bribery Act 2010.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition and results of operations.

Our commercial success in Africa will be dependent on continued donor funding of healthcare initiatives in Africa from a wide variety of sources such as the African Medical Supplies Platform (AMSP), Partnership for Supply Chain Management (PSCM), The Global Fund to Fight AIDS, Tuberculosis and Malaria, the World Health Organization, the United Nations Children Fund, Médecins Sans Frontières and private foundations such as BMGF, the Clinton Health Access Initiative and the Rockefeller Foundation. Our ability to work

 

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collaboratively with these funders and with national healthcare programs will be important to our success in utilizing our Platform to help transform primary care delivery in Africa and improve patient outcomes and delays in such efforts may impact the roll out of these programs, as a lot of parties are involved and we do not control operations of such complex entities.

If we were sued for product liability or professional liability, we could face substantial liabilities that exceed our resources.

The marketing, sale and use of our products could lead to the filing of product liability claims were someone to allege that our Platform or other products identified inaccurate or incomplete information or otherwise failed to perform as designed. We may also be subject to liability for errors in, a misunderstanding of, or inappropriate reliance upon, the information we provide in the ordinary course of our business activities. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.

We maintain product and professional liability insurance, but this insurance may not fully protect us from the financial impact of defending against, settling, or paying damages in respect of product liability or professional liability claims and such policies will be subject to limitations and exclusions. Any product liability or professional liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could damage our reputation, cause current customers to terminate existing agreements, or cause potential customers to seek other suppliers, any of which could adversely impact our business, financial condition and results of operations.

We are subject to, and may in the future become subject to, claims and litigation that could result in significant expenses and could ultimately result in unfavorable outcomes for us.

From time to time, we may be involved in litigation and other proceedings, including matters related to product liability claims, commercial disputes and intellectual property claims, as well as regulatory, employment, and other claims related to our business. For example, a former employee brought an age discrimination claim against us in Massachusetts, which we believe has no factual or legal merit, and we intend to vigorously defend ourselves in the claim. The case was dismissed and an appeal is pending. Litigation related to our company, our business, and our operations or financial performance may also involve customers, competitors, suppliers, patients, shareholders, governmental authorities or other third parties, including potential whistleblower claims and other employee-related claims. Our Amira System may be marketed OTC and could thus bring consumer liability claims with it. Litigation can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty. An adverse decision could result in significant settlement amounts, monetary damages, fines or injunctive relief that could affect our financial condition or results of operations. Even if lawsuits do not result in an unfavorable outcome, the costs of defending or prosecuting such lawsuits may be material to our business and our operations. Moreover, these lawsuits may divert management’s attention from the operation of our business, which could adversely affect our business and results of operations.

Our employees, principal investigators, consultants, and collaborators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants, and collaborators. Misconduct by these parties could include intentional failures to comply with the regulations of FDA and other applicable regulators, comply with healthcare fraud and abuse laws and regulations in the U.K., United States and abroad, report financial information or data inaccurately, or fail to disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,

 

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marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We currently have a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and our code of conduct and anti-bribery policies and the other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations, particularly as we seek to rapidly expand our business on a global scale. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, which could have a significant impact on our business. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations.

We depend on our information technology systems, and any failure of these systems could harm our business.

We depend on information technology and telecommunications systems for significant elements of our operations, including all connectivity solutions associated with our Platform, our research and development data and quality management system, our knowledge and inventory management system, our factory controls, our customer provisioning and analytics reporting and our patient care database management. We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, financial controls and reporting, contract management, regulatory compliance, and other infrastructure operations. In addition to the aforementioned business systems, we intend to extend the capabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design, and the automatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety of functions, including operations, test validation, sample processing, quality control, customer service support, research and development activities, scientific and medical curation, and general administrative activities. In addition, our third-party billing and collections provider depends upon technology and telecommunications systems provided by outside vendors.

Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses, and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our information technology and telecommunications systems, failures or significant downtime of our information technology or telecommunications systems or those used by our third-party service providers could prevent our Platform from functioning properly and conducting analyses or prevent us from preparing and providing reports, conducting research and development activities, and managing the administrative aspects of our business. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we may collect and store sensitive data, including legally protected health information, personal information, intellectual property and proprietary business information owned or controlled by ourselves or our customers, payors, and collaborators. We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems, and cloud-based data center

 

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systems. We may communicate sensitive patient data to customers through our Platform. These applications and data encompass a wide variety of business-critical information and regulated information including research and development information, commercial information, and business and financial information. We face risks relative to protecting this critical information, including: loss of access risk; inappropriate disclosure risk; inappropriate modification risk; and the risk of our being unable to adequately monitor our controls over the first three risks.

The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party service providers, may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance, or other disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, and its implementing regulations, and regulatory penalties. Although we have implemented commercially reasonable security measures and a formal, dedicated enterprise security program to prevent unauthorized access to patient data, our Platform gives broad access to physicians, where the physicians control any other access to the Platform, and there is no guarantee we can continue to protect our online portal and mobile application from breach. Further, as we develop products and features that may be used or accessed outside of the traditional healthcare setting, there will be additional challenges to protecting the security of information and systems. Unauthorized access, loss or dissemination could also disrupt our operations, including our Platform’s ability to conduct analyses and provide test results and our ability to provide customer assistance services, conduct research and development activities, collect, process, and prepare company financial information, provide information about our products and other patient and healthcare provider education and outreach efforts through our website or otherwise, or to manage the administrative aspects of our business, and may damage our reputation, any of which could adversely affect our business.

The U.S. Department of Health and Human Services Office, or HHS, of Civil Rights may impose significant penalties on a covered entity or a business associate for a failure to comply with a requirement of HIPAA. Penalties will vary significantly depending on a variety of factors such as the date of the violation or whether the failure to comply was known or should have been known, or whether failure to comply was due to willful neglect. Additionally, a person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty and imprisonment. The U.S. Department of Justice is responsible for criminal prosecutions under HIPAA. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of protected health information. Furthermore, in the event of a breach as defined by HIPAA, we may be required to comply with specific reporting requirements under the HIPAA regulations, which may include notification to the general public, depending on the scale of the breach.

In addition, the interpretation and application of consumer, health-related, and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory, and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business or reputation. In addition, these privacy regulations may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

 

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Economic or business instability may have a negative impact on our business.

Continuing concerns over the economic impact of the COVID-19 pandemic, health care reform legislation, geopolitical issues, the availability and cost of credit, and government stimulus programs in the United States and other countries have contributed to volatility for the global economy. If the economic climate does not improve, our business, including our access to patient samples and the addressable market for diagnostic tests that we may successfully develop, as well as the financial condition of our suppliers and our commercial third-party payors, could be adversely affected, resulting in a negative impact on our business, financial condition, and results of operations. Additionally, the instability has resulted in diminished liquidity and credit availability in the market, which could impair our ability to access capital if required or adversely affect our operations. In the event of further economic slowdown, investment in research and development may also experience a further corresponding slowdown.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

Our borrowing arrangements contain restrictions that limit our flexibility in operating our business.

In March 2021, LumiraDx Investment Limited, one of our subsidiaries, entered into a senior secured term loan, as amended from time to time referred to herein as the 2021 Senior Secured Loan, with BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership, as lenders and BioPharma Credit PLC, as collateral agent, or collectively, Pharmakon. We have borrowed $300 million under the 2021 Senior Secured Loan, part of which was used to prepay the senior secured term loan originally dated as of October 6, 2020, as amended on October 16, 2020 and as further amended on January 15, 2021, between LumiraDx Group Limited, or LumiraDx Group, one of our subsidiaries, and Silicon Valley Bank, as lender and Jefferies Finance LLC, or Jefferies, as lender and administrative and collateral agent pursuant to which Jefferies originally made available to LumiraDx Group a $100 million senior secured term loan facility and, pursuant to an incremental term loan notice dated as of January 15, 2021, Silicon Valley Bank had provided an incremental term loan facility of an additional $40 million, or the 2020 Senior Secured Loan. The 2021 Senior Secured Loan is subject to an interest rate of 8.0% per annum payable in quarterly cash installments. The 2021 Senior Secured Loan matures on March 29, 2024. The 2021 Senior Secured Loan has been guaranteed and secured by LumiraDx and certain of its subsidiaries. The 2021 Senior Secured Loan contains various covenants that limit our ability to engage in specified types of transactions without the prior consent of Pharmakon, including:

 

   

making certain restricted payments, including paying dividends on, or repurchasing or making distributions with respect to, our shares subject to certain exceptions;

 

   

selling, transferring, leasing or disposing of certain assets;

 

   

encumbering or permitting liens on certain assets;

 

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incurring certain indebtedness; and

 

   

entering into certain transactions with affiliates.

The 2021 Senior Secured Loan also includes certain financial covenants which require:

 

   

a minimum liquidity level to be maintained which is tested on a monthly basis; and

 

   

a minimum net sales threshold to be met on a trailing twelve-month net sales basis.

Upon the occurrence of a change in control, the 2021 Senior Secured Loan also requires mandatory prepayment of amounts outstanding thereunder. Such change in control may involve one of (i) (A) prior to an IPO, a person who is not a holder of the then-outstanding share capital of LumiraDx becoming the “beneficial owner”, directly or indirectly, of the share capital of LumiraDx or (B) following an IPO, the persons who are the direct or indirect shareholders of LumiraDx as at March 23, 2021, ceasing to beneficially own, directly or indirectly, 30% of the then-outstanding share capital of LumiraDx, (ii) a sale of all or substantially all of the consolidated assets of LumiraDx Investment Limited and its subsidiaries, (iii) LumiraDx ceasing to own, directly or indirectly, 100% of the equity interests in LumiraDx Investment Limited or (iv) a merger or consolidation of one of LumiraDx, LumiraDx Group or LumiraDx Investment Limited, as applicable, in which such entity is not the surviving entity.

A breach of any of the covenants under the 2021 Senior Secured Loan could result in a default. Upon the occurrence of an event of default under the 2021 Senior Secured Loan, Pharmakon could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. Upon the occurrence of insolvency and insolvency proceedings events of default in respect of our U.S. subsidiaries all amounts outstanding will automatically be immediately due and payable. If we are unable to repay those amounts, Pharmakon could proceed against the collateral granted to secure such indebtedness.

We have also borrowed $18 million from BMGF pursuant to a note, which is structurally subordinated to the 2021 Senior Secured Loan. In the event of certain triggering events under such note, BMGF may exercise its rights under our other agreements with BMGF to require us to perform certain technology transfers to a third party to allow for the use of the related technology and to manufacture the relevant products under a license granted by us to BMGF. If we were required by BMGF to make a technology transfer, it could have a significant adverse effect on us and our business, as we would be transferring significant intellectual property for no consideration.

Our 5% notes and 10% notes will be converted into LMDX common shares in connection with the LMDX convertible loan note conversions as part of the Capital Restructuring, subject to approval by the relevant noteholders.

In addition, we may seek additional debt or restructure or refinance our existing indebtedness. We may not be able obtain additional debt or restructure or refinance our existing indebtedness on commercially reasonable terms or at all and, even if successful, those alternative actions may cause us to enter into borrowing arrangements with additional restrictions.

Risks Related to Government Regulation

If commercial third-party payors or government payors fail to provide coverage or adequate reimbursement for our Platform or future products we develop, if any, our revenue and prospects for profitability would be harmed.

In both domestic and foreign markets, the commercial success of our Platform and any future products we may develop will depend on the extent to which we obtain and maintain coverage and adequate reimbursement from governments or third-party payors. These third-party payors include government healthcare programs (such as Medicare and Medicaid in the U.S. or national or regional health services or payors in other jurisdictions),

 

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managed care organizations, health maintenance organizations, private health insurers, and other organizations. Physicians may not use our Platform or diagnostic tests unless commercial third-party payors and government payors pay for all, or a substantial portion, of the list price, and certain commercial third-party payors may not agree to reimburse our Platform if the Centers for Medicare & Medicaid Services, or CMS, or pricing and reimbursement authorities in other jurisdictions do not issue a positive coverage decision.

In the U.S., CMS decides whether and to what extent a product will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Therefore, we believe that obtaining and maintaining a favorable reimbursement rate from CMS for our Platform will be a necessary element in achieving material commercial success. Healthcare providers and patients may not order our Platform unless third-party payors cover and pay for all, or a substantial portion, of the list price, and certain commercial third-party payors may not agree to reimburse our Platform if CMS does not provide adequate coverage and reimbursement. Further, while due to the COVID-19 pandemic, millions of individuals have lost or will be losing employer-based insurance coverage, which may adversely affect our ability to commercialize our products, as part of the Families First Coronavirus Response Act, the Paycheck Protection Program and Health Care Enhancement Act, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the Coronavirus Response and Relief Supplemental Appropriations Act, HHS provides claims reimbursement to health care providers generally at Medicare rates for testing uninsured individuals for COVID-19 on or after February 4, 2020. It is unclear whether providers will use such avenue for reimbursement for our products.

If CMS denies reimbursement of our Platform, withdraws its coverage policies after reimbursement is obtained, reviews and adjusts the rate of reimbursement, or stops paying for our Platform altogether, our revenue and results of operations would be adversely effected. Additionally, we could experience negative consequences, including:

 

   

We could be forced to rely on private insurance coverage, which would greatly decrease our intended market opportunity for our Platform;

 

   

A negative coverage determination could adversely affect our ability to enter into partnerships with leading healthcare systems; and

 

   

We may need to conduct additional clinical validation, utility and other studies as part of an appeal of a negative Medicare coverage decision, and even if we expended the substantial time and resources to conduct such studies, they may not be successful and they may not result in a positive Medicare coverage determination.

Coverage and reimbursement of diagnostic tests by third-party payors may depend on a number of factors, including a payor’s determination that our Platform or other products are:

 

   

not experimental or investigational and are otherwise authorized for marketing in the jurisdiction;

 

   

medically necessary;

 

   

appropriate for the specific patient;

 

   

cost-effective;

 

   

supported by peer-reviewed publications;

 

   

included in clinical practice guidelines, and

 

   

supported by clinical utility studies.

In the U.S., no uniform policy for coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for our products can differ significantly from payor to payor. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. One payor’s determination to

 

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provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. If coverage and adequate reimbursement is not maintained or made available, or is available only to limited levels, we may not be able to successfully commercialize our Platform. We cannot be sure that coverage and reimbursement will be maintained or made available for, or accurately estimate the potential revenue from, our Platform or assure that coverage and reimbursement will be available for any product that we have or may develop. If we cannot maintain or obtain coverage and adequate reimbursement from third party payors for our Platform or any future products, demand for such products may decline or may not grow as we expect, which could limit our ability to generate revenue and have a material adverse effect on our financial condition, results of operations and cash flow.

In both domestic and foreign jurisdictions, third-party payors, including government payors, are increasingly attempting to contain healthcare costs by demanding price discounts or rebates and limiting both coverage on which diagnostic products they will pay for and the amounts that they will pay for new diagnostic products. Because of the cost-containment trends, third-party payors that currently provide reimbursement for, or in the future cover, our Platform may reduce, suspend, revoke, or discontinue reimbursement or coverage at any time.

As a result, there is significant uncertainty surrounding whether the use of products that incorporate new technology, such as our Platform, will be eligible for coverage by third-party payors or, if eligible for coverage, what the reimbursement rates will be for those products. The fact that a diagnostic product has been covered and reimbursed in the past, for any particular indication or in any particular jurisdiction, does not guarantee that such a diagnostic product will remain covered or reimbursed or that similar or additional diagnostic products will be covered or reimbursed in the future.

In addition, we may develop new assays that may require obtaining a Current Procedure Terminology, or CPT, procedure code. CMS prices the new clinical diagnostic laboratory test codes using a “crosswalking” or “gapfilling” process. “Crosswalking” occurs when a new test or substantially revised test is determined to be similar to an existing test, multiple existing test codes, or a portion of an existing test code, which can then be utilized to determine reimbursement. “Gapfilling” is a process by which CMS will refer the codes to the Medicare Administrative Contractors, or MACs, to allow them to determine an appropriate price, since there is no comparable, existing code. After a year of reimbursement at the local MAC rates, CMS calculates a national limitation amount based on the median of rates for the test code across all MACs. In addition, CMS may not provide coverage for certain of the new codes for Multi-analyte Assays with Algorithmic Analyses, or MAAAs, due to concerns that clinical efficacy and usefulness have not been widely established and documented. CMS has left the approval of new codes for MAAAs under the purview of the MACs. Our reimbursement could be adversely affected by CMS’ action in this area, including by a negative national coverage determination. If it limits coverage or reduces reimbursement for the new test codes or does not pay for our new MAAA codes, then our revenue will be adversely affected. There can be no guarantees that Medicare and other payors will establish positive or adequate coverage policies or reimbursement rates. We cannot predict whether future health care initiatives will be implemented at the federal or state level, or how any future legislation or regulation may affect us. The expansion of government’s role in the U.S. health care industry, and changes to the reimbursement amounts paid by Medicare and other payors for our current tests and our planned future tests, may reduce our profits, if any, and have a materially adverse effect on our business, financial condition, results of operations and cash flows.

In some foreign countries, the proposed pricing for a product must be approved before it may be lawfully marketed. The requirements governing pricing vary widely from country to country. For example, in the European Union, or E.U., while most Member States apply some sort of pricing measures or controls, pricing and reimbursement of IVDs is not harmonized at a European level. Member States in the E.U. have exclusive

 

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competence to determine pricing and reimbursement of IVDs within their jurisdiction. In addition, many jurisdictions reimburse IVDs as part of the costs associated with certain treatments or procedures. In those cases, the pricing and reimbursement of our tests will be determined by the costs allocated to testing as part of the procedure and whether the relevant health service will select and procure our products. Therefore, the price we obtain for our products will vary depending on the different statutory health schemes within each Member State. There can be no assurance that any country that has price controls or reimbursement limitations for diagnostic products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the E.U. do not follow price structures of the U.S. and generally prices tend to be significantly lower.

The U.S. and foreign governments continue to propose and enact or promulgate legislation, regulations, guidance and other policies designed to reduce the cost of healthcare. For example, in some foreign markets, the government controls the pricing of many healthcare products. We expect that there will continue to be federal and state proposals to implement governmental controls or impose healthcare requirements. In addition, the Medicare program and increasing emphasis on managed care in the U.S. will continue to put pressure on product pricing. Cost control initiatives could decrease the price that we would receive for any products in the future, which would limit our revenue and profitability.

Payors from whom we may receive reimbursement are able to withdraw or decrease the amount of reimbursement provided for our products at any time in the future.

Our commercial success also depends on our ability to maintain coverage and adequate reimbursement from those payors that decide to cover and reimburse our Platform. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Payors could withdraw coverage and stop providing reimbursement for our products in the future or may reimburse our products only on a case-by-case basis.

Further, even if we obtain written agreements regarding coverage and reimbursement with certain payors, these agreements are not guarantees of indefinite coverage in an adequate amount. For example, these agreements are typically terminable without cause by either party and are typically renewable annually, and the applicable payor could opt against renewal upon expiration. In addition, the terms of certain of our written arrangements may require pre-approval from the payor or other controls and procedures prior to use by a healthcare provider. To the extent these requirements are not followed, our Platform may fail to receive some or all of the reimbursement payments to which it is otherwise entitled. These payors must also conclude that claims for our Platform satisfy the applicable contractual criteria. In addition, our written agreements regarding reimbursement with payors may not guarantee the receipt of reimbursement payments at what we believe to be the applicable reimbursement rate for such claims. If payors withdraw coverage for our products or reduce the reimbursement amounts for our products, our ability to generate revenue could be limited, which may have a material adverse effect on our financial condition, results of operations and cash flow.

Our business and sale of our products are subject to extensive regulatory requirements, including compliance with labeling, manufacturing and reporting controls. If we fail or are unable to timely obtain the necessary authorizations, approvals or clearances for new products, our ability to generate revenue could be materially harmed.

Our products are classified as medical devices and are subject to extensive regulation in the U.K., European Union and the U.S. by FDA and other federal, state and local authorities and by similar regulatory authorities in other jurisdictions. Our products should be used in line with applicable Instructions for Use (“IFUs”) and product authorizations. Government regulation of medical devices is meant to assure their safety and effectiveness, and includes regulation of, among other things:

 

   

design, development and manufacturing;

 

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testing and labeling, including directions for use, processes, controls, quality assurance and packaging;

 

   

storage, distribution, installation and servicing;

 

   

preclinical studies and clinical trials;

 

   

establishment registration and listing;

 

   

product safety and effectiveness;

 

   

marketing, sales and distribution;

 

   

premarket approval, de novo classification, 510(k) clearance and EUA;

 

   

recordkeeping procedures;

 

   

advertising and promotion;

 

   

complaint handling, corrections and removals, and recalls;

 

   

post-market surveillance, including reporting of deaths or serious injuries, and malfunctions that, if they were to recur, would be likely to cause or contribute to a death or serious injury; and

 

   

product import and export.

In the U.S., before we can market a new medical device, or a new use of, or claim for, an existing product, we must first receive either 510(k) clearance, de novo classification, Premarket Approval, or PMA, or EUA from FDA, unless an exemption applies.

The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to FDA until an approval is obtained. The process of obtaining 510(k) clearances or PMA approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all.

An EUA may be granted for unapproved medical products, including IVDs, which authorizes the products to be marketed in the context of an actual or potential emergency that has been designated by the government. The COVID-19 pandemic has been designated such a national emergency. EUAs authorize the use of specific products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases when there are no adequate, approved, and available alternatives. An EUA is subject to additional conditions and restrictions and is product-specific. An EUA terminates when the emergency determination underlying the EUA terminates.

We cannot assure you that we will be able to obtain any 510(k) clearance, de novo classification, PMA approval or EUA. FDA can delay, limit or deny 510(k) clearance, de novo classification, PMA approval or EUA of a device for many reasons, including:

 

   

we may not be able to demonstrate to FDA’s satisfaction that our products are safe and effective for their intended uses;

 

   

the data from our preclinical studies and clinical trials may be insufficient to support clearance, classification, approval or authorization, where required; and

 

   

the manufacturing process or facilities we use may not meet applicable requirements.

FDA may refuse our requests for 510(k) clearance, de novo classification, premarket approval or EUA of new products, new intended uses or modifications to existing products. Additionally, even if obtained, 510(k) clearances, de novo classifications, premarket approvals or EUAs could be withdrawn or revoked at any time for a number of reasons, including the failure of our Platform to perform as expected. In particular, other companies

 

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have had their FDA approvals, or authorizations, including EUAs, revoked due to sensitivity and specificity concerns, and we cannot predict the circumstances under which the FDA would revoke an EUA for a COVID-19 test, including ours, as an understanding of the virus and the efficacy of tests and treatments is continuously evolving.

If we receive approval, authorization, certification, classification or clearance for our tests, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as compliance with the Quality System Regulation, inspections by the FDA, continued adverse event and malfunction reporting, corrections and removals reporting, registration and listing, and promotional restrictions, and we may also be subject to additional FDA post-marketing obligations. If we are not able to maintain regulatory compliance, we may not be permitted to market our tests and/or may be subject to fines, injunctions, and civil penalties; recall or seizure of products; operating restrictions; and criminal prosecution. In addition, we may be subject to similar regulatory compliance actions of foreign jurisdictions.

We may recall, replace, or make corrections to our Instrument, test strips or other products which could negatively impact manufacturing, supply and customer relationships, and may result in adverse regulatory action, including revision or revocation of an EUA. For example, beginning in early January 2021, based on reports of suspected false positive results, we initiated recalls of test strips for our SARS-CoV-2 antigen test. As of March 17, 2021, we have withdrawn 10 batches, out of more than 200 batches produced, from the field and from customers. As per applicable regulations, we notified and are in contact with FDA, U.K. regulatory authority (“MHRA”) and the national competent regulatory authorities of the affected E.U. countries regarding these actions. To mitigate further potential interference effects or false positives, we also added error checking measures in the Instrument, manufacturing process controls and quality control testing and release criteria, as well as a mandatory software update rolled out in February 2021 and a subsequent voluntary software update rolled out in March 2021. We cannot guarantee that no issues shall arise with regards to batches in the field where customers do not implement proposed software updates or batches manufactured prior to changes being implemented. We continue to monitor and investigate any complaints. The impact of the existence of various SARS-CoV-2 variants, change in seasons or mucus composition mix further impact the current SARS-CoV-2 antigen test.

We will need to submit numerous applications for approval, authorization, certification, classification or clearance for each test as it becomes available, which could put significant pressure on R&D and regulatory staff, resulting in delays. From time to time, legislation is drafted and introduced in the U.K., other European jurisdictions or the U.S. that could significantly change the statutory provisions governing any regulatory approval, authorization, certification, classification or clearance that we receive in such jurisdictions. In addition, in the U.S., the FDA may change its authorization, clearance, classification and approval policies, adopt additional regulations or revise existing regulations, or take other actions that may prevent or delay, approval, authorization, certification, classification or clearance of our products under development or impact our ability to modify any marketed products on a timely basis.

Changes in the way the FDA and other comparable regulatory authorities regulate or notified bodies assess products developed, manufactured, validated and marketed by commercial manufacturers like us could result in delay or additional expense in offering our products and products that we may develop in the future.

In the U.S., we have marketed our SARS-CoV-2 antigen test, and plan to begin marketing our SARS-CoV-2 antibody test, pursuant to the “Policy for Diagnostic Tests for Coronavirus Disease-2019 during the Public Health Emergency” issued by FDA on March 16, 2020 and most recently revised on May 11, 2020. This policy allows for the limited development and distribution of diagnostic test kits and antibody tests to detect viral particles and identify antibodies of the SARS-CoV-2 virus by commercial manufacturers, subject to certain notification requirements. Unless and until such an EUA is issued that authorizes additional testing environments for a specific test, under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, use of that test is limited to laboratories certified to perform high complexity testing, including testing at the POC when the site is

 

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covered by the laboratory’s CLIA certificate for high-complexity testing. We have obtained EUAs from FDA for our SARS-CoV-2 antigen test and our SARS-CoV-2 antibody test. An EUA allows a test to be used at POC facilities should the test be deemed to be CLIA waived through FDA authorization of the test for use at the POC under the EUA. Our SARS-CoV-2 antigen and antibody tests are authorized for use at the POC under the EUA granted for each such test. Our tests should be used in line with approved IFU and within approved claims. A wave of regulatory applications in the U.S., combined with COVID-19 operational challenges, including potential staff shortages at regulatory agencies and elsewhere, could result in delays in approvals, authorizations or clearances for our SARS-CoV-2 tests or otherwise. FDA or other comparable regulatory agencies may prioritize certain applications or submissions based on the testing methodologies or other factors. In addition, FDA has issued and may issue further guidance or change regulatory requirements at any time, which may delay our marketing and sales efforts and/or necessitate costly measures to maintain regulatory compliance with respect to these and any future products, which would have a detrimental effect on our business.

Our LumiraDx SARS-CoV-2 antigen test, LumiraDx SARS-CoV-2 antibody test, LumiraDx SARS-CoV-2 RNA STAR, and the LumiraDx SARS-CoV-2 RNA STAR Complete have not been cleared or approved by FDA. The LumiraDx SARS-CoV-2 antigen test has been authorized by FDA under an EUA only for the qualitative detection of SARS-CoV-2 nucleocapsid protein. The LumiraDx SARS-CoV-2 antibody test has been authorized by FDA under an EUA only for the qualitative detection of total antibodies to SARS-CoV-2. LumiraDx SARS-CoV-2 RNA STAR and LumiraDx SARS-CoV-2 RNA STAR Complete have been authorized by FDA under an EUA only for the qualitative detection of nucleic acid from SARS-CoV-2. They have not been authorized for use to detect any other viruses or pathogens. The tests are authorized in the United States for the duration of the declaration that circumstances exist justifying the authorization of emergency use of IVD tests for detection and/or diagnosis of COVID-19 under Section 564(b)(1) of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 360bbb-3(b)(1), unless the authorization is terminated or revoked sooner.

For our IVD devices for other indications, we may not market these devices for POC until we have received the requisite regulatory approvals, clearances, classifications or certifications for each product. Our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, including if FDA, other regulators or notified bodies change how these devices are regulated or assessed, and we cannot predict whether we will successfully develop and commercialize these devices. FDA or a comparable regulatory authority may require more information, including additional clinical data, to support approval, clearance, classification or certification, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. Any of the foregoing scenarios could materially harm the commercial prospects of our products.

Healthcare policy changes, including legislation reforming the U.S. health care system, may have a material adverse effect on our financial condition, results of operations and cash flows.

In the U.S. and in some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative initiatives and regulatory changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, or ACA, was enacted, which made a number of substantial changes in the way health care is financed by both governmental and private insurers. Among other things, the ACA required each certain medical device manufacturer to pay an excise tax, or Medical Device Excise Tax, equal to 2.3% of the price for which such manufacturer sells its medical devices that are listed with FDA. However, this tax was permanently eliminated as part of the 2020 federal spending package, effective January 1, 2020.

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and congressional challenges. Congress previously considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, the Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision that decreased the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health

 

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coverage for all or part of a year, commonly referred to as the “individual mandate,” to $0, effective January 1, 2019. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act of 2017, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. Following an appeal made by certain defendants, on June 17, 2021, the U.S. Supreme Court dismissed the plaintiffs’ challenge to the ACA without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an Executive Order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The Executive Order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administrations or other efforts, if any, to challenge repeal or replace the ACA, will impact our business.

While the current U.S. presidential administration has signaled its intent to pursue policies strengthening the ACA, the prior U.S. presidential administration sought to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. From January 2017 to January 2021, former President Trump signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directed federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Another Executive Order terminated the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. Further, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay the more than $12 billion in ACA risk corridor payments to third-party payors who argued that such payments were owed to them. This decision was appealed to the U.S. Supreme Court, which on April 27, 2020, reversed the U.S. Court of Appeals for the Federal Circuit’s decision and remanded the case to the U.S. Court of Federal Claims, concluding the government has an obligation to pay these risk corridor payments under the relevant formula. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. The Protecting Access to Medicare Act of 2014, or PAMA, was signed to law on April 1, 2014, and, among other things, significantly altered the payment methodology under the Clinical Laboratory Fee Schedule, or CLFS. The CFLS applies to a wide variety of laboratories, including national chains, physician offices, and hospital laboratories. Regulations finalized in 2016 stipulated that for the reporting period beginning in 2017 and every three years thereafter (or annually in the case of advanced diagnostic laboratory tests), applicable clinical laboratories must report laboratory test payment data for each Medicare-covered clinical diagnostic laboratory test that it furnishes during the specified time period. The reported data must include the payment rate (reflecting all discounts, rebates, coupons and other price concessions) and the volume of each test that was paid by each private payor (including health insurance issuers, group health plans, Medicare Advantage plans and Medicaid managed care organizations). Additionally, effective January 1, 2018, the Medicare payment rate for a test on the CLFS is equal to the weighted median of private payor rates determined for the test, based on the data of applicable laboratories that are collected during a specified data collection period and reported to CMS during a specified data reporting period. The payment amount for a test cannot drop more than 10 percent as compared to the previous year’s payment amount for the first three years after implementation of the new payment system, and not more than 15 percent per year for the subsequent three years. Under the Laboratory Access to

 

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Beneficiaries, or LAB Act, Congress delayed reporting for applicable clinical laboratory tests that are not advanced diagnostic laboratory tests by one year. Applicable clinical laboratory test data that was supposed to be reported between January 1, 2020 to March 31, 2020, was delayed until January 1, 2021 to March 31, 2021. The CARES Act further delayed the reporting period for another year, until January 1, 2022 to March 31, 2022. The CARES Act also delayed the 15 percent payment reduction cap under PAMA by one year. For 2020, the rates for clinical laboratory tests that are not advanced diagnostic laboratory tests or new clinical laboratory tests may not be reduced by more than 10% of the rates for 2019. There is no payment reduction for 2021, and there will be a 15% reduction cap for each of 2022, 2023, and 2024. Also, under PAMA, CMS is required to adopt temporary billing codes to identify new tests and new advanced diagnostic laboratory tests that have been cleared or approved by FDA. For an existing test that is cleared or approved by FDA and for which Medicare payment is made as of April 1, 2014, CMS is required to assign a unique billing code if one has not already been assigned by the agency. In addition to assigning the code, CMS is required to publicly report payment for the tests. We cannot determine at this time the full impact of PAMA on our business, financial condition and results of operations.

Additionally, the Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers and suppliers of up to 2% per fiscal year, starting in 2013, and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 unless additional congressional action is taken. However, these Medicare sequester reductions were suspended from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic. The full impact of the sequester law on our business is uncertain. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, the Middle-Class Tax Relief and Job Creation Act of 2012 mandated an additional change in Medicare reimbursement for clinical laboratory tests.

Additionally, the previous administration announced several executive orders since July 24, 2020 relating to implementing several of the administration’s healthcare proposals and in response the COVID-19 pandemic. For example, on August 6, 2020, the Trump administration issued an executive order that directed the U.S. Food and Drug Administration, or FDA, to identify a list of essential medicines, medical countermeasures and critical inputs that are medically necessary to have available at all times in an amount adequate to serve patient needs and in the appropriate dosage forms. In response, on October 30, 2020, the FDA published a list of 227 drug and biological product essential medicines and medical countermeasures, and a list of 96 device medical countermeasures. It is unclear what impact this order and list will have on our business.

Additionally, recent regulatory changes regarding health information may impact our products such as the Connect Manager, EHR Connect, the Connect Hub and the Engage app. On March 9, 2020, the HHS, Office of the National Coordinator for Health Information Technology, or ONC, and CMS promulgated final rules aimed at supporting seamless and secure access, exchange, and use of electronic health information, or EHI, by increasing innovation and competition by giving patients and their healthcare providers secure access to health information and new tools, allowing for more choice in care and treatment. The final rules are intended to clarify and operationalize provisions of the 21st Century Cures Act, or Cures Act, regarding interoperability and “information blocking,” and create significant new requirements for health care industry participants. Information blocking is defined as activity that is likely to interfere with, prevent, or materially discourage access, exchange, or use of EHI, where a health information technology developer, health information network or health information exchange knows or should know that such practice is likely to interfere with access to, exchange or use of EHI. The new rules create significant new requirements for health care industry participants, and require certain electronic health record technology to incorporate standardized application programming interfaces, or APIs, to allow individuals to securely and easily access structured EHI using smartphone

 

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applications. The ONC will also implement provisions of the Cures Act requiring that patients can electronically access all of their EHI (structured and/or unstructured) at no cost. Finally, to further support access and exchange of EHI, the final ONC rule implements the information blocking provisions of the Cures Act and identified eight “reasonable and necessary activities” as exceptions to information blocking activities, as long as specific conditions are met. In light of the COVID-19 public health emergency, ONC stated that it intends to exercise enforcement discretion for three months at the end of certain ONC Health IT Certification Program compliance dates associated with the Cures Act final ONC rule. Pursuant to the final rule, health IT developers were initially to be subject to requirements such as prohibitions on participating in any action that constitutes information blocking, providing certification to the Secretary of HHS that they will not take actions that constitute information blocking, and other requirements regarding information blocking six months from May 1, 2020, when the final rule was published in the Federal Register. However, on October 29, 2020, HHS released an Interim Final Rule, effective December 4, 2020, pushing compliance with such requirements to April 5, 2021. Certified API Developers must now comply with new administrative requirements by April 5, 2021 and must provide all certified API technology by December 31, 2022.

These rules seek to implement significant reforms regarding the access, use and exchange of patient data. These rules may benefit us in that they make it more difficult for EHR vendors to engage in data blocking activity, promote common standards for data exchange, and provide for easier patient access to their EHI. However, these rules may also make it easier for other similar companies to enter the market, creating increased competition and reducing our market share. It is unclear at this time what the costs of compliance with the final rules will be, and what additional risks there may be to our business.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, greater use of new technology assessment review boards for determination of cost and comparative effectiveness, lower reimbursement, and new payment methodologies. This could lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product candidates, if approved. Congress has proposed on several occasions to impose a 20% coinsurance on patients for clinical laboratory tests reimbursed under the Medicare Clinical Laboratory Fee Schedule, which would require us to bill patients for these amounts. Because of the relatively low reimbursement for many clinical laboratory tests, in the event that Congress were to ever enact such legislation, the cost of billing and collecting for these tests would often exceed the amount actually received from the patient and effectively increase our costs of billing and collecting.

The regulatory pathway for our SARS-CoV-2 antigen, SARS-CoV-2 antigen pool and SARS-CoV-2 antibody tests and healthcare professionals’ understanding of the novel coronavirus is continually evolving and may result in unexpected or unforeseen challenges.

We have obtained EUAs from the FDA for our SARS-CoV-2 antigen test and our SARS-CoV-2 antibody test and plan to submit an EUA request for our SARS-CoV-2 antigen pool test in 2021. Additionally, in the E.U./European Economic Area we affixed a CE Mark to our SARS-CoV-2 antigen test (following self-certification against the relevant E.U. Directive) and SARS-CoV-2 antibody test and we may submit such tests for regulatory approval, authorization, certification or clearance in other jurisdictions. Following the U.K.’s departure from the E.U., our E.U. CE Mark will continue to be recognized in G.B. until June 30, 2023 and then a U.K. Conformity Assessed Mark, or UKCA mark, will be required (whereas, in Northern Ireland a CE Mark or CE UKNI Mark will be required). The volume of tests being developed for COVID-19 and the speed at which parties are acting to create and test many diagnostic tests for COVID-19 is unusual and evolving or changing plans or priorities within regulatory authorities, including changes based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory timeline for our SARS-CoV-2 antigen, SARS-CoV-2 antigen pool test and SARS-CoV-2 antibody tests. The circumstances surrounding the pandemic may

 

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adversely impact the regulatory approval timeline for the Platform and its components both in relation to the COVID-19 tests, and our other tests generally if regulatory authorities prioritize tests for COVID-19 over other diseases. Results from clinical testing may raise new questions and require us to proceed with additional reviews or clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects. Additionally, our understanding of COVID-19, its infectiveness and other effects on the human body, the ability of individuals to develop antibodies against the virus and the effectiveness of any immune response in preventing future infections are constantly evolving, with new research suggesting sometimes surprising results being published on a frequent basis. New discoveries, new variants or changed understanding of how the virus affects the human body, particularly of its infectivity, impact of various variants and individuals’ immune response to it, could render existing tests, including ours, technologically or commercially obsolete or inferior to new methods that we may or may not be able to develop on a timely basis without significant resources and funding.

Even though we have obtained an EUA for our SARS-CoV-2 antigen test and our SARS-CoV-2 antibody test and even if we obtain an EUA for our SARS-CoV-2 antigen pool test, an EUA terminates when the emergency determination underlying the EUA terminates. Moreover, FDA may revoke an EUA at any time if it determines that the legal criteria for issuing the EUA are no longer met, including if the product may not be effective or the product’s potential benefits for such use do not outweigh its known and potential risks, and we therefore cannot predict how long, if ever, any EUA applicable to our Platform would remain in place. Any revocation or termination of an EUA applicable to our Platform could adversely impact our business in a variety of ways, including if we and our manufacturing collaborators have invested significantly in the supply chain to produce our SARS-CoV-2 tests.

In addition, since the regulatory path to authorization of any COVID-19 test is evolving in various jurisdictions and other third parties are simultaneously focused on bringing their COVID-19 tests to market, there may be a widely used product in circulation in a specific country prior to our receipt of regulatory approval, authorization, certification or clearance or before we can CE Mark our Instrument in such country, which would limit our ability to market and gain traction on sale of our Platform. Unexpected issues, including any that we have not yet observed, could lead to significant reputational damage for us and our Platform going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources.

If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition.

We are or expect to become subject to broadly applicable healthcare laws, including fraud and abuse, transparency, and privacy and security laws, which are regulated and enforced by both the federal government and the states in which we conduct our business. These health care laws and regulations include, for example:

 

   

the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. The ACA amended the intent element of the federal Anti-Kickback Statute to clarify that a person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if “one purpose” of the remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or

 

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fraudulent claim for purposes of the federal False Claims Act, or FCA. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, though the exceptions and safe harbors are drawn narrowly and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor;

 

   

the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs; knowingly making, using, or causing to be made or used, a false record or statement material to a false, fictitious or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

 

   

HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or the HITECH Act, and their respective implementing regulations, which impose, among other things, certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective “business associates,” or third parties that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. The HITECH Act also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

 

   

the federal Physician Payments Sunshine Act, created under the ACA, as amended by the Health Care and Education Reconciliation Act of 2010, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value made to

 

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U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers, including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives;

 

   

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and

 

   

analogous U.S. state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources, state and foreign laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or product pricing; state and local laws that require the registration of medical device sales representatives; state laws that prohibit other specified practices, such as (i) billing physicians for testing that they order or waiving coinsurance, copayments, deductibles, and other amounts owed by patients, and (ii) billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; and state and foreign laws governing the privacy and security of health information, some of which may be more stringent than those in the U.S. (such as the E.U., which adopted the General Data Protection Regulation) in certain circumstances, and may differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert the company’s attention from the business.

It is possible that governmental and enforcement authorities will conclude that our business practices, including our arrangements with physicians and other healthcare providers, some of whom may receive stock options as compensation for services provided, may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant sanctions, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similar penalties. Any action for violation of these laws, even if successfully defended, could incur significant legal expenses and divert management’s attention from the operation of the business. In addition, the marketing authorization and commercialization of any product we develop outside the U.S. will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. All of these could harm our ability to operate our business and our financial results.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that we may run afoul of one or more of the requirements.

 

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Sales of our products in other jurisdictions, including the E.U./European Economic Area and the U.K., will also be subject to equivalent or comparable laws and failure to comply with these laws could have serious financial, as well as reputational, consequences for the company. Key laws and regulations that apply to our business in the E.U. and U.K. include, amongst others:

 

   

the General Data Protection Regulation (Regulation (EU) 2016/679), which sets out the data protection laws across the E.U. and is particularly important for the collection, storage and use of patient data;

 

   

the U.K. General Data Protection Regulation, read alongside the Data Protection Act 2018, or the U.K. DPA, set out data protection laws for the U.K.; and

 

   

relevant anti-bribery and corruption laws enacted by the Member States of the E.U./European Economic Area (the applicable regime in the U.K. is the Bribery Act 2010).

Additionally, our failure to comply could lead to civil and/or criminal penalties in individual Member States.

When we seek to commercially distribute our POC IVD devices in the U.S., if our devices are not considered CLIA waived or if we are delayed in or unable to obtain a CLIA waiver for such devices, our business may be harmed.

In the U.S., our IVD devices are subject to compliance with the Clinical Laboratory Improvements Act of 1988, or the CLIA and its implementing regulations. CLIA establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results regardless of where the test is performed. A laboratory is broadly defined to include any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of, or assessment of health. Under CLIA, FDA categorizes IVD tests by their degree of complexity: (1) waived; (2) moderately complex; and (3) highly complex. When a test is categorized as waived, it may be performed by laboratories that have a Certificate of Waiver.

Tests that are waived by the CLIA regulations are automatically categorized as waived following 510(k) clearance or PMA approval. Otherwise, following clearance or approval, tests may be categorized either as moderate or high complexity according to the CLIA categorization criteria. A manufacturer of a test categorized as moderate complexity may request categorization of the test as waived through a CLIA Waiver by Application, or CW, submission to FDA. In a CW submission, the manufacturer provides evidence to FDA that a test meets the CLIA statutory criteria for waiver. Specifically, waived tests are simple laboratory examinations and procedures that have an insignificant risk of an erroneous result, including those that (A) employ methodologies that are so simple and accurate as to render the likelihood of erroneous results by the user negligible, or (B) FDA has determined pose no unreasonable risk of harm to the patient if performed incorrectly. Further, when FDA authorizes tests for use at the POC under an EUA, such tests are deemed to be CLIA waived tests. As such, such tests can be performed in a patient care setting that is qualified to have the test performed there as a result of operating under a CLIA Certificate of Waiver for the duration of the emergency declaration. A CLIA waiver is critical to the marketability of a product into the POC diagnostics market. With regard to future products for which we may seek a CLIA waiver from FDA, any failure or material delay to obtain such waiver could harm our business and could harm the marketability of our products to the POC diagnostics market.

We are subject to stringent and changing privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or otherwise adversely affect our business.

We collect, store, process and transmit sensitive data, including legally protected health information, personal information, intellectual property and proprietary business information. As we seek to expand our

 

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business, we are, and will increasingly become, subject to numerous state, federal and foreign laws, regulations and standards, as well as contractual obligations, relating to the collection, use, retention, security, disclosure, transfer and other processing of sensitive and personal information in the jurisdictions in which we operate. In many cases, these laws, regulations and standards apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships and our subsidiaries’ own data collection and processing practices. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that will materially and adversely affect our business, financial condition and results of operations. The regulatory framework for data privacy, data security and data transfers worldwide is rapidly evolving, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business, and as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Failure to comply with any of these laws and regulations could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business.

There are numerous E.U., U.K. and U.S. federal and state laws and regulations related to the privacy and security of health information. These laws and regulations include HIPAA, as amended by the HITECH Act, and their respective implementing regulations, which establish a set of national privacy and security standards for the protection of protected health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services. HIPAA requires covered entities and business associates to develop and maintain policies and procedures with respect to protected health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information and ensure the confidentiality, integrity and availability of electronic protected health information. The U.S. Department of Health and Human Services Office of Civil Rights may impose penalties for a failure to comply with a requirement of HIPAA. Penalties will vary significantly depending on factors such as the date of the violation, whether the failure to comply was known or should have been known, or whether the failure was due to willful neglect. These penalties include significant civil monetary penalties, criminal penalties and, in certain instances, imprisonment. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of protected health information. Furthermore, in the event of a breach as defined by HIPAA, we may be required to comply with specific reporting requirements under HIPAA regulations. In the event of a significant breach, the reporting requirements could include notification to the general public. Enforcement activity can result in reputational harm, and responses to such enforcement activity can consume significant internal resources. Additionally, if we are unable to properly protect the privacy and security of protected health information we create, receive, maintain, or transmit on behalf of our covered entity customers, we could be found to have breached our contracts as well as HIPAA and other applicable data privacy and security laws. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and we cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. Where state laws are more protective than HIPAA, we must comply with the state laws we are subject to, in addition to HIPAA. In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. For example, the California Consumer Privacy Act of 2018, or the CCPA, which increases privacy rights for California residents and imposes stringent data privacy and security obligations on companies that process

 

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their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. However, certain personal information, such as information that is subject to HIPAA or clinical trial regulations, is exempt from the CCPA. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Further, there is uncertainty with respect to how various provisions of the CCPA will be interpreted and enforced. While the implementing regulations have not been finalized to date, the California State Attorney General’s authority to enforce the statutory provisions commenced as of July 1, 2020. While any information we maintain in our role as a business associate may be exempt from the CCPA, other records and information we maintain on our customers may be subject to the CCPA. Additionally, a new California ballot initiative, the California Privacy Rights Act, or CPRA, recently passed in California. While it also would likely exempt personal information that we handle as a business associate, the CPRA will impose additional data protection obligations on companies doing business in California, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Further, new health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which we handle health-related information, and the cost of complying with these standards could be significant. If we do not comply with existing or new laws and regulations related to patient health information, we could be subject to criminal or civil sanctions. New legislation and state constitutional amendments proposed or enacted in several U.S. states impose, or have the potential to impose, additional obligations on companies that collect, store, use, retain, disclose, transfer and otherwise process confidential, sensitive and personal information, and will continue to shape the data privacy environment nationally. State laws are changing rapidly and there is discussion in Congress of a new federal data protection and privacy law to which we could become subject if it is enacted. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may require us to modify our data processing practices and policies, divert resources from other initiatives and projects, and could restrict the way products and services involving data are offered, all of which may have a material and adverse impact on our business, financial condition and results of operations.

Laws, regulations and standards in many foreign jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information, which impose significant compliance obligations. For example, in the E.U. and the U.K., the processing of personal data, including clinical trial data, is governed by the provisions of the General Data Protection Regulation (Regulation (EU) 2016/679), or the GDPR, in the E.U. The U.K. GDPR read alongside the U.K. DPA are the applicable laws in the U.K. Following the U.K.’s withdrawal from the E.U. on January 31, 2020, pursuant to the transitional arrangements agreed between the U.K. and E.U., the E.U. GDPR continued to have effect in U.K. law, until December 31, 2020. Following December 31, 2020, the GDPR does not have direct effect in the U.K. However, the U.K.’s E.U. (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to certain U.K. specific amendments) into U.K. law (referred to as the U.K. GDPR). The U.K. GDPR (as amended) and U.K. DPA set out the U.K.’s data protection regime, which is independent from but equivalent to the E.U.’s regime. The requirements for processing personal data under the U.K. GDPR and U.K. DPA largely align with those under the GDPR. The GDPR, the U.K. GDPR and U.K. DPA impose stringent data privacy and security requirements on both processors and controllers of personal data, including health data and other personal data collected during clinical trials. In particular, the GDPR imposes requirements relating to ensuring there is a lawful basis for processing personal data, extends the rights of individuals to whom the personal data relates, materially expands the definition of what is expressly noted to constitute personal data, requires additional disclosures about how personal data is to be used, imposes limitations on retention of personal data, imposes strict rules on the transfer of personal data out of the EEA and/or U.K. to third countries (noting also that if the U.K. receives personal data

 

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from the E.U., the U.K. will be treated as a third country for the purposes of the GDPR; although under the E.U.-U.K. Trade and Cooperation Agreement it is lawful to transfer personal data between the U.K. and E.U. for a six month bridging period), creates mandatory data breach notification requirements in certain circumstances, and establishes onerous new obligations on service providers who process personal data simply on behalf of others in connection with their E.U. or U.K. establishment. The GDPR and the U.K. GDPR and U.K. DPA authorize competent authorities to impose penalties and fines for certain violations of up to 4% of an undertaking’s total global annual revenue for the preceding financial year or €20 million (or £17.5 million under the U.K. DPA), whichever is greater. In addition to administrative fines, a wide variety of other potential enforcement powers are available to competent authorities in respect of potential and suspected violations of the GDPR and the U.K. GDPR and U.K. DPA, including extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of personal data carried out by noncompliant actors. European data protection authorities, and the U.K. Information Commissioner’s Office, may interpret the GDPR and the U.K. GDPR and U.K. DPA, and national laws differently and impose additional requirements, which contributes to the complexity of processing personal data in or from, or between, the EEA and/or U.K. Given the breadth and depth of changes in data protection obligations, complying with its requirements has caused us to expend significant resources and such expenditures are likely to continue into the near future as we respond to new interpretations, additional guidance, and potential enforcement actions and patterns. While we have taken steps to comply with the GDPR and the U.K. GDPR and U.K. DPA, and implementing legislation in the U.K. and applicable member states, including by seeking to establish appropriate lawful bases for the various processing activities we carry out as a controller, reviewing our security procedures, and entering into data processing agreements with relevant customers and business partners, we cannot assure you that our efforts to achieve and remain in compliance have been, and/or will continue to be, fully successful.

We make public statements about our use and disclosure of personal information through our privacy policy, information provided on our internet platform and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, consultants, or vendors fail to comply with our published policies, certifications and documentation. The publication of our privacy policy and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us could cause our customers to reduce their use of our products and services and could materially and adversely affect our business, financial condition and results of operations. In many jurisdictions, enforcement actions and consequences for non-compliance can be significant and are rising. In addition, from time to time, concerns may be expressed about whether our products, services or processes compromise the privacy of customers and others. Concerns about our practices with regard to the collection, use, retention, security, disclosure, transfer and other processing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and materially and adversely affect our business, financial condition and results of operations.

Many statutory requirements, both in the U.S. and abroad, include obligations for companies to notify individuals of security breaches involving certain personal information, which could result from breaches experienced by us or our third-party service providers. For example, laws in all 50 U.S. states and the District of Columbia require businesses to provide notice to consumers whose sensitive personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify customers or other counterparties of a security breach. Although we may have contractual protections with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our

 

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third-party service providers, contractors or consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.

In addition to the possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded in a manner that requires changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Any inability to adequately address data privacy or security-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to data privacy and security, could result in additional cost and liability to us, harm our reputation and brand, damage our relationships with customers and have a material and adverse impact on our business.

If the validity of an informed consent from a patient enrolled in a clinical trial was challenged, we could be forced to stop using some of our resources, which would hinder our product development efforts.

We have implemented measures to ensure that all clinical data and genetic and other biological samples that we receive from our collaborators have been collected from subjects who have provided appropriate informed consent for purposes which extend to our product development activities. We seek to ensure these data and samples are provided to us on a subject de-identified or pseudonymized manner. We also have measures in place to ensure that the subjects from whom the data and samples are collected do not retain or have conferred on them any proprietary or commercial rights to the data or any discoveries derived from them. Our clinical research organization, or CRO, collaborators conduct clinical trials in a number of different countries, and, to a large extent, we rely upon them to comply with the subject’s informed consent and with local law and international regulation. The collection of data and samples in many different countries results in complex legal questions regarding the adequacy of informed consent and the status of genetic material under a large number of different legal systems. The subject’s informed consent obtained in any particular country could be challenged and/or withdrawn in the future, and those informed consents could prove invalid, unlawful, or otherwise inadequate for our purposes. Any findings against us, or our collaborators, could deny us access to or force us to stop using some of our clinical samples, which would hinder our product development efforts. We could become involved in legal challenges, which could consume our management and financial resources.

The sales of our products in Europe and, for the time being, the U.K., are regulated through a process that either requires self-certification or certification by a European Notified Body in order to affix a CE Mark. Such processes are uncertain, particularly in light of changes to the regulatory framework. There may be a risk of delay in placing our products on the market and, once on the market, a risk of review and challenges to certain certified statuses.

Currently, until May 25, 2022, the majority of our products (including our Instrument for use with the INR test by users other than for self-testing, the INR test and control, INRstar and our SARS-CoV-2 antigen test, SARS-CoV-2 antigen pool test, SARS CoV-2 antibody test and D-Dimer test) are regulated through a self-declaration process, whereby we declare that the product meets the essential requirements of the European Directive on In-Vitro Diagnostic Devices (98/79/EC). We also have a number of products that we expect to come to market in the European Economic Area that we will self-declare compliant against this directive. After the launch of any products, we may be subject to challenges by European Regulatory Authorities if there are issues that arise that question the safety and performance of these products. Such challenges may arise from a routine audit by a regulatory authority, due to device vigilance reports submitted by us, Field Safety Corrective Actions being initiated by us or the regulatory authority, or complaints made by competitors, whether those complaints are founded or not.

We also have a number of products (including our Instrument for use by patients for self-testing and certain test strips that would fall within Annex II of the European Directive on In-Vitro Diagnostic Devices (98/79/EC)),

 

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which will likely enter the market prior to May 26, 2022 and that cannot be regulated through a self-declaration process under the European Directive on In-Vitro Diagnostic Devices (98/79/EC). Such products will require their compliance with this directive reviewed and certified by a European Notified Body. We have engaged with a European Notified Body (BSI, TÜV SÜD, TÜV Rheinland and DEKRA); however, they have yet to start reviewing technical documentation for the products. Therefore, there is a risk of delay in getting these products to market if the Notified Body has capacity constraints and/or if the Notified Body has any issues with our technical documentation.

Prior to May 26, 2022, the ability to continue to sell products using the self-declaration process of the European Directive on In-Vitro Diagnostic Devices (98/79/EC) is unaffected by the European Regulation on In-Vitro Diagnostic Devices (Regulation (EU) 2017/746). However, before May 26, 2022 and in order to continue to sell products in the E.U. after that date, most of our products that are in-vitro diagnostic devices will need to be evaluated by a European Notified Body in order to comply with the new European Regulation on In-Vitro Diagnostic Devices (2017/746/EU), which replaces the aforementioned European Directive on In-Vitro Diagnostic Devices (98/79/EC). The Regulation provides for a transition period that allows products that have certificates issued by European Notified Bodies under the Directive prior to May 26, 2022 to continue to be placed on the market until May 26, 2024 and, where they have been placed on the market prior to that date, to be distributed and supplied until May 26, 2025. However, most of our products are self-certified so will not be eligible for this transition period and those that are would lose the benefit if any significant changes have to be made to the product after May 26, 2022. Therefore, we do not intend to rely on this transition period.

Nevertheless, it should be appreciated that there is a severe shortage of capacity of the European Notified Bodies to assess all IVD devices that will require Notified Body certification under the Regulation, and that it is widely recognized that not all applications for assessment by Notified Bodies will be approved before the deadline of May 25, 2022. While we have taken a proactive approach to mitigate this risk, including approaching all the IVDR accredited Notified Bodies (BSI, TÜV SÜD, TÜV Rheinland and DEKRA) and the candidate IVDR Notified Body (SGS), a European Notified Body (TÜV Germany and BSI) and restructuring our quality management systems and technical documentation to align with the IVDR requirements, there can be no assurance that our ability to market IVD devices in the E.U. in the future will not be interrupted and this could, in turn, have a negative impact on our business and operating results.

We take our responsibilities as a manufacturer of medical devices seriously and where possible take all voluntary measures to have independent third parties assess our designs and processes. This includes certification to the international standard for quality management, ISO 13485:2016 by LRQA, an accredited management systems certification body, testing of our Instrument to the international standard for electrical safety, IEC 61010-1:2015 / IEC 61010-2-101:2015 by CSA International an independent and accredited safety certification body, and for the international standard for electromagnetic compatibility, IEC 61326-2-6:2012 by ETS Ltd, an independent and accredited EMC test laboratory.

We also offer a number of products (including Connect Manager, EHR Connect, and the Engage app) that we do not believe come within the scope of the European Directive on In-Vitro Diagnostic Devices (98/79/EC) or the European Regulation on In-Vitro Diagnostic Devices (Regulation (EU) 2017/746) nor come within the scope of the European Directive on Medical Devices (93/42/EEC) or the European Regulation on Medical Devices (Regulation (EU) 2017/745). There is a risk we may be subject to challenges by European Regulatory Authorities regarding the classification of these products, particularly if there was a question about safety or performance stemming from a user or a complaint from a competitor.

LumiraDx UK Limited is the legal manufacturer and regulatory owner of our products and is based in the U.K. The U.K.’s departure from the E.U., or Brexit, and the future relationship of the U.K. with the E.U. remains uncertain and there may be delays and barriers in obtaining access to the European Economic Area.

Following the U.K.’s prior departure from the E.U., the U.K. continued to follow the same regulations as the E.U. until the end of 2020, or the Transition Period. Now that the Transition Period has ended, there will be some

 

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regulatory divergence in the U.K. from the E.U. and the new UKCA mark will replace the E.U. CE Mark in Great Britain, or G.B. (CE Marks or CE UKNI Marks will be required in Northern Ireland). E.U. CE Marks will continue to be recognized in G.B. for medical devices until June 30, 2023, however all medical devices and IVDs must be registered with the Medicines and Healthcare products Regulatory Agency, or MHRA, in order to be placed on the G.B. market (subject to certain grace periods depending on the risk class of the medical device/IVD). The E.U. legal framework remains applicable in Northern Ireland (indeed any products placed on the market in the NI must be compliant with E.U. law). From July 1, 2023 a UKCA mark will be required in order to place a device on the G.B. market, however manufacturers can use the UKCA mark on a voluntary basis prior to July 1, 2023 if they wish to do so. The nature of any new regulation in the U.K. is uncertain, and as such, we may experience delays in obtaining future access to the U.K. and other European markets. U.K.’s prior departure from the E.U. has also impacted customs regulations and impacted timing and easy of shipments into the E.U. from U.K.

Under the European Directive on In-Vitro Diagnostic Devices (98/79/EC) and then under the In-Vitro Diagnostic Regulation (2017/746), legal manufacturers located outside of the E.U./European Economic Area are required to appoint an authorized representative that is domiciled in a Member State within the E.U./European Economic Area. Given the uncertainty at the end of the Transition Period, we have established our own dedicated authorized representative in the E.U. After considering a number of factors, including location, language capabilities, communication efficiencies and transparency considerations, we appointed LumiraDx AB, a LumiraDx affiliate domiciled in Sweden, as an authorized representative. Our regulatory experts are actively engaged through relevant industry bodies, such as the British In-Vitro Diagnostics Association, or BIVDA, to proactively communicate with the U.K. government on any new proposed regulatory regime applicable in the U.K.

We intend to export our products to numerous countries outside of the European Economic Area. Many other countries require certificates of free sales, or CFS, and/or certificates of foreign government, or CFG, as a condition of allowing the importation of medical devices from a relevant country of origin. One of the typical prerequisites to the issuance of CFS and CFG certificates is the requirement that the products being certified are legally marketed in their country of origin. Now that the Transition Period has ended and the U.K. has its own independent regulatory regime, we may face delays due to the new U.K. regulatory regime, which may in turn cause us to experience delays in obtaining requisite certificates and regulatory clearance in other countries. Additionally, as a result of Brexit, we, as a U.K. based manufacturer, will no longer be able to utilize a number of Mutual Recognition Agreements and Technical Cooperation Programs that the E.U. has agreed with other countries (subject to any agreement reached to the contrary), and therefore we may suffer delays in obtaining requisite regulatory clearances in other countries. The occurrence of any of the foregoing could have a material adverse effect on our financial condition and results of operations.

We could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws, export and import controls, sanctions, embargoes, and anti-money laundering laws and regulations.

Various of our activities may be subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. Our reliance on independent distributors to sell our Platform internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents, and we could be held responsible for their actions. Other U.S. companies in the medical device and pharmaceutical field have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with these individuals. We are also subject to similar anti-bribery laws in

 

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the other jurisdictions in which we operate, including the U.K.’s Bribery Act 2010, which also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. These laws are complex and far-reaching in nature, and, as a result, we cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, prospects, financial condition, or results of operations or our reputation. We could also suffer severe penalties, including substantial criminal and civil penalties, imprisonment, disgorgement, reputational harm and other remedial measures. We ship a significant number of Platforms into Africa as part of our collaboration with BMGF. Various countries have export control and embargo restrictions which require to be managed and monitored.

Our activities in the United States subject us to various laws relating to foreign investment and the export of certain technologies, and our failure to comply with these laws or adequately monitor the compliance of our suppliers and others we do business with could subject us to substantial fines, penalties and even injunctions, the imposition of which on us could have a material adverse effect on the success of our business.

Because we have a U.S. subsidiary and substantial operations in the United States, we are subject to U.S. laws and regulations that regulate foreign investments in U.S. businesses and access by foreign persons to technology developed and produced in the U.S. These laws include Section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018, and the regulations at 31 C.F.R. Parts 800, 801, and 802, as amended, administered by the Committee on Foreign Investment in the United States; and the Export Control Reform Act of 2018, which is being implemented in part through Commerce Department rulemakings to impose new export control restrictions on “emerging and foundational technologies” yet to be fully identified. Application of these laws, including as they are implemented through regulations being developed, may negatively impact our business in various ways, including by restricting our access to capital and markets; limiting the collaborations we may pursue; regulating the export, reexport, and transfer (in-country) of our products, services, and technology from the United States and abroad; increasing our costs and the time necessary to obtain required authorizations and to ensure compliance; and threatening monetary fines and other penalties if we do not.

Intellectual Property Risks Related to Our Business

If we are unable to obtain and maintain patent and other intellectual property protection for products we develop and for our technology, or if the scope of intellectual property protection obtained is not sufficient, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize any products we may develop may be adversely affected.

Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries for our Platform in its current or an updated form and other products. Patent law as applied to inventions in the fields in which we operate is complex and uncertain, so we cannot make any assurances that we will be able to obtain or maintain patent or other intellectual property rights, or that the patent and other intellectual property rights we may obtain will be valuable, provide an effective barrier to competitors or otherwise provide competitive advantages. If we are unable to obtain or maintain patent or other intellectual property protection with respect to our proprietary products, our business, financial condition, results of operations, and prospects could be materially harmed.

Changes in the patent laws or in the interpretation thereof in the United States and other countries may diminish our ability to protect our inventions and to obtain, maintain, and enforce our intellectual property rights; more generally, such changes could affect the value of our intellectual property, including by limiting the potential scope of patent coverage that we can obtain. We cannot predict whether any particular patent applications we are currently pursuing will be granted as a patent or whether the claims of any particular patents, if obtained, will provide sufficient exclusivity over our competitors.

 

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The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications or patents at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patent-eligible aspects of our research and development output in time to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with employees, consultants, and other parties who have access to confidential aspects of our research and development output, including aspects that may be patent-eligible, any of these parties may breach the agreements and disclose such output before we are able to file a patent application directed to the disclosed subject matter, thereby jeopardizing our ability to seek patent protection for that subject matter. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after the priority date, or in some cases not at all prior to issuance. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

The patent position of companies in our industry generally is unsettled, involves complex legal and factual questions, and has been the subject of much litigation in recent years. Whether our pending and future patent applications will be granted and the scope, validity, enforceability, and commercial value of any patents we have obtained are highly uncertain. Our pending and future patent applications may not result in patents that protect any new products or our Platform in its current or an updated form. Our pending and future patent applications may not effectively prevent others from commercializing competitive products.

Moreover, the claim scope being pursued in a patent application may need to be significantly reduced or otherwise altered in order to achieve grant of a patent, and the scope of a patent can be reinterpreted after issuance. Even if a patent application is issued as a patent, the granted claims may not provide us with any meaningful protection, prevent others from competing with us, or otherwise provide us with any competitive advantage. Any patents that we hold may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether any of our products will be protectable or remain protected by valid and enforceable patents. Our competitors and other third parties may be able to circumvent our patents by developing similar or alternative products and solutions in a non-infringing manner. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or impact our stock price.

Third parties may assert that we are using their patented or other proprietary technology without their authorization. As we continue to commercialize our Platform in its current or an updated form, launch new products, and enter new markets, we expect that, as part of business strategies designed to impede our successful commercialization and entry into new markets or otherwise, competitors will claim that our products or services infringe their intellectual property rights. Third parties, including, for example, one or more of our competitors listed in the section titled “Business of LumiraDx—Competition” beginning on page 197, may have obtained, and may in the future obtain, patents under which such third parties may claim that the use of our technologies constitutes patent infringement. For example, we are aware of third-party patents in the United States and Europe expiring in 2021 that contain claims that may be relevant to our SARS-CoV-2 RNA STAR and SARS-CoV-2 RNA STAR Complete molecular test kits, which are commercially available in the United States (pursuant to an EUA) and in Europe. If a patent infringement action based on one or more of these patents were to be brought against us, we might have to argue that our kits or the manufacture or use thereof do not infringe any valid claim of the asserted patent(s); and there would be no assurance that a court would find in our favor on issues of infringement or validity of such patents. Furthermore, because a patent application generally is unavailable to the public until 18 months from the priority date (and, at least in the United States, can optionally be kept secret until the patent is granted), we have no way of knowing, at any given time, whether others have filed new patent applications directed to technologies that we or our collaborators will use.

 

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Intellectual property litigation is costly, and even if we prevail, the substantial cost of such litigation could affect our business and financial condition. Intellectual property litigation may also be lengthy and time-consuming and may divert the attention of our management and technical personnel in defending ourselves against any of these claims. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our cash position, reputation and stock price. Furthermore, parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize, and sell products. In the event of a successful claim against us of infringement or misappropriation, we may be required to pay substantial damages to and obtain one or more licenses from third parties, or we may be prohibited from selling certain products, all of which could have a material adverse impact on our cash position and business and financial condition. Moreover, any licenses that we are compelled to obtain may be nonexclusive, and therefore our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products, which could have a material adverse effect on our business and financial condition.

In addition, we may be unable to obtain any required licenses at a reasonable cost, if at all. We could therefore incur substantial costs relating to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins. Moreover, we could encounter delays in product introductions while we attempt to develop alternative methods or products. Defense of any lawsuit or failure to obtain any required licenses on favorable terms could prevent us from commercializing products, and the prohibition of sale of any of our products would materially affect our ability to grow and maintain profitability and would have a material adverse impact on our business.

Developments in patent law could have a negative impact on our business.

Changes in either the patent laws or interpretation of patent laws could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of granted patents. From time to time, the United States Supreme Court, or the Supreme Court, other federal courts, the U.S. Congress, the U.S. Patent and Trademark Office, or the USPTO, or courts or patent offices or authorities in other jurisdictions may change the standards of patentability or patent eligibility, and any such changes could have a negative impact on our business. Generally, jurisdictions outside the United States have a “first to file” patent system. In the United States, prior to March 2013, the “first to invent” a claimed invention was entitled to the patent (assuming that all other requirements were met). Following the passage of the Leahy-Smith America Invents Act, or the America Invents Act, the United States transitioned to a “first inventor to file” system, under which the first inventor to file a patent application on an invention is entitled to the patent (assuming that all other requirements are met) even if another party was the first to invent the claimed invention. The America Invents Act also included a number of significant changes that affect the way patent applications are prosecuted and that also may affect patent litigation. These include the introduction of derivation proceedings; expansion of the permitted content of third-party submissions to the USPTO during patent prosecution; and additional procedures to challenge the validity of a patent after issuance, including post-grant review and inter partes review. The America Invents Act and its continued implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

In addition, the patent positions of companies in our industry are particularly uncertain. Recent Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. For example, diagnostic method claims and “gene patents” were considered in two landmark Supreme Court cases, Mayo Collaborative v. Prometheus Laboratories, or Prometheus, and Association for Molecular Pathology v. Myriad Genetics, or Myriad. In Prometheus, a case involving patent claims to a medical testing method directed to optimizing the amount of drug administered to a specific patient, patentee’s claims were deemed not to incorporate inventive content, above and beyond merely describing underlying natural correlations, sufficient to render the claimed processes patent-eligible. In Myriad, a case brought by multiple plaintiffs challenging the validity of patent claims relating to the breast cancer

 

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susceptibility genes BRCA1 and BRCA2, the court held that isolated genomic DNA that exists in nature, such as the DNA constituting the BRCA1 and BRCA2 genes, is not patent-eligible subject matter, but that cDNA, which is an artificial construct created from RNA transcripts of genes, may be patent eligible. The Federal Circuit has begun to apply the holdings in Prometheus and Myriad. For example, in 2015, the Federal Circuit in Ariosa v. Sequenom, or Ariosa, applying Prometheus, found claims to a prenatal diagnostic method that relied on a natural product to be patent ineligible. A number of appeals to the Federal Circuit in subsequent cases, such as Athena v. Mayo, or Athena, have been decided in a similar way.

We cannot fully predict what impact the Supreme Court’s decisions in Prometheus and Myriad and other decisions, such as the Federal Circuit’s decisions in Ariosa and Athena, may have on our ability or the ability of companies or other entities to obtain or enforce patents relating to diagnostic and therapeutic methods, DNA, genes, or genomic-related discoveries in the future. Despite the precedent set forth in these decisions, the contours of when claims reciting laws of nature, natural phenomena, or abstract ideas may meet the patent eligibility requirements are not clear and may take years to develop via application at the USPTO and interpretation in the courts. There are many patents claiming nucleic acids and diagnostic methods based on natural correlations that were issued before the recent Supreme Court decisions discussed above, and although many of these patents may be invalid under the standards set forth in the Supreme Court’s recent decisions, until successfully challenged, these patents are presumed valid and enforceable, and the patentees could allege that we infringe, or request that we obtain a license to, one or more of these patents. Whether the patents were issued prior to or after these Supreme Court decisions, we might have to defend ourselves against claims of infringement, or we might have to obtain licenses, if available. In any of the foregoing or in other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from using the patented subject matter in question if we are unable to obtain a license on reasonable terms or at all. Such outcomes could materially affect our ability to offer our products and services and could have a material adverse impact on our business. Even if we are able to obtain a license or to successfully defend against claims of patent infringement, the cost and distraction associated with the defense or settlement of these claims could have a material adverse impact on our business. Any of the foregoing could materially harm our business, prospects, financial condition and results of operations.

We may be unable to protect or enforce our intellectual property effectively, which could harm our competitive position.

Obtaining and maintaining a strong patent position is important to our business. No patent application is guaranteed to mature into a patent, and we cannot predict the total pendency of any application that does become a patent. Moreover, the granted patent rights may not be sufficiently broad to prevent others from marketing products similar to ours or from designing around our patents. Patent law relating to the scope and validity of claims in the technology fields in which we operate is complex and uncertain, so we cannot be certain that we will be able to obtain or maintain patent rights, or that the patent rights we may obtain will be valuable, provide an effective barrier to competitors, or otherwise provide competitive advantages. Others may have filed, and in the future may file, patent applications directed to subject matter similar or even identical to ours. To determine the priority of inventions or demonstrate that we did not derive our invention from another, we may have to participate in interference or derivation proceedings that could result in substantial costs in legal fees and could substantially affect the scope of our patent protection. We cannot be certain that our patent applications will prevail over those filed by others. Also, our intellectual property rights may be subject to other challenges by third parties. Patents we obtain have been and in the future could be challenged in litigation or in administrative proceedings such as ex parte reexamination, inter partes review, or post grant review in the United States or opposition proceedings in Europe or other jurisdictions and may be found to be invalid or unenforceable.

Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes periodic maintenance fees, renewal fees, annuity fees, and other governmental fees for patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the costs associated

 

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with complying with numerous procedural provisions during the patent application process. We may or may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in irrevocable abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the respective jurisdiction. If we choose to forgo patent protection or allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer.

Legal actions to enforce our patent rights can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or other proceedings against those who have infringed our patent rights, and we may or may not choose to monitor for infringing activity, taking into consideration the expense and time commitment associated with such enforcement and monitoring. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

We depend on trademarks to establish a market identity for our company and our Platform. To maintain the value of our trademarks, we may have to file lawsuits against third parties to prevent them from using trademarks confusingly similar to or dilutive of our registered or unregistered trademarks. We also may not obtain registrations for our pending or future trademark applications and might have to defend our registered trademarks and pending applications from challenges by third parties. Enforcing or defending our registered and unregistered trademarks might result in significant litigation costs and, if we are unsuccessful, might result in damages, including the inability to continue using certain trademarks.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to patent protection, we also rely upon trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants and third-parties, to protect our confidential and proprietary information. For example, significant elements of our Platform, including, for example, the manufacture of our test strips, are protected by trade secrets and know-how that are not publicly disclosed. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and any recourse we may have against such misconduct may not result in a remedy that protects our interests fully. Enforcing a claim that a party has illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, information that is a trade secret may be independently developed by others, which would prevent legal recourse for us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information were to be independently developed by a competitor, our competitive position could be harmed.

Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation.

We may use open source software in connection with our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging the use of open source software and/or compliance with open source licensing terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code, which could include valuable proprietary code of the user, on

 

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unfavorable terms or at no cost. While we monitor the use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source licensing terms are often ambiguous. Any requirement to disclose our proprietary source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations and could help our competitors develop products and services that are similar to or better than ours.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some countries do not protect intellectual property rights to the same extent as do the laws of the U.K. or of the U.S. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain such countries. The legal systems of some countries, particularly low and middle income countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to medical diagnostics. This could make it difficult for us to prevent or stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against parties such as government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Because patent and other intellectual property laws differ in each country, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.K. or the U.S. Accordingly, we may choose not to seek patent protection in certain countries, and if so, we will not have the benefit of patent protection in such countries. Moreover, we may not be able to predict all of the countries where patent protection ultimately will be desirable, for commercialization or marketing purposes or otherwise. If we fail to timely file a patent application for an invention in any country, we may be precluded from doing so at a later date, and we therefore would be unable to obtain patent protection for that invention in that country.

Additionally, the laws pertaining to patent ownership and assignment may differ from country to country. If we fail to obtain proper assignments for any inventions developed by us and/or our employees, or for any invention that we otherwise acquire rights to, we may lose rights to patent protection for those inventions, which may cause our competitive position to suffer.

Proceedings to enforce our patent rights in jurisdictions worldwide could result in substantial costs and divert our efforts and attention from other aspects of our business. Our efforts to protect our intellectual property rights in any particular jurisdiction may be inadequate. In addition, changes in the law and legal decisions by courts in jurisdictions worldwide may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

Many of our employees, including members of our senior management, were previously employed at other diagnostic companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

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In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in obtaining such an agreement from each party who in fact develops intellectual property during the course of employment, consultancy, or contractual arrangement, respectively, which may result in claims by or against us relating to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest.

Our pending and future trademark applications in the U.K., the U.S. and other jurisdictions may not be allowed or may be opposed. Once filed and registered, our trademarks or trade names may be challenged, infringed, circumvented or declared generic. Our use of our trademarks or trade names may be determined to infringe the trademarks or trade names of others. To enforce our trademark rights and prevent infringement, we may be required to file trademark claims against third parties or initiate trademark opposition proceedings. This can be expensive and time-consuming, particularly for a company of our size. We may not ultimately be able to protect our trademarks and trade names, which we need to build name recognition among potential collaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we fail to comply with our obligations under our licenses with third parties, we could lose license rights that are important to our business.

We are a party to license agreements pursuant to which we in-license certain patents and other intellectual property. Each of our existing licenses imposes various obligations on us. If we fail to comply with these obligations, our licensors may have the right to terminate the license, in which event we would not be able to use the licensed intellectual property.

We may have limited control over the maintenance and prosecution of these in-licensed rights, activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that the licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves.

Risks Related to Our Financial Condition and Capital Requirements

We are an early, commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

We are an early commercial-stage company and have a limited operating history. We began operations in 2014 under the original parent company of the group, LumiraDx Group (incorporated in England and Wales) and the current parent company was incorporated in the Cayman Islands in 2016. Our limited operating history,

 

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particularly in light of our business model based upon sales of diagnostic tests enabled by our Platform, may make it difficult to evaluate our current business and predict our future performance. Any assessment of our profitability or prediction about our future success or viability is subject to significant uncertainty. We have encountered and will continue to encounter risks and difficulties frequently experienced by early, commercial-stage companies in rapidly evolving industries. If we do not address these risks successfully, our business will suffer.

We have a history of net losses. We may incur net losses in the future and we may never achieve sustained profitability.

We have historically incurred substantial net losses, including a net loss of $240.9 million in 2020. From our inception in 2014 through to December 31, 2020, we had an accumulated deficit of $607.7 million. Our losses may continue as a result of ongoing research and development expenses and increased sales and marketing costs, as well as other factors. These losses have had, and may continue to have, an adverse effect on our working capital, total assets, and shareholders’ equity. Because of the numerous risks and uncertainties associated with our research, development, and commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations, and cash flows.

We may require additional capital to fund our existing operations, develop our Platform and Amira System, commercialize new products and expand our operations as currently planned.

Based on our current business plan, we believe our existing cash and cash equivalents and anticipated cash flow from operations, will be sufficient to meet our anticipated cash requirements for the foreseeable future. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products as a result of lower than currently expected rates of reimbursement from commercial third-party payors and government payors or other risks described in this proxy statement/prospectus, we may seek to sell common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding, or seek other debt financing.

We may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities, or for other reasons, including to:

 

   

increase our sales and marketing efforts to drive market adoption of our Platform and address competitive developments;

 

   

seek approvals, authorizations or clearances from regulatory authorities for our existing and new products;

 

   

fund development and marketing efforts of any future products;

 

   

rapidly expand our manufacturing, sales and marketing efforts, including for our SARS-CoV-2 tests and Amira System;

 

   

expand our technologies to cover additional tests;

 

   

acquire, license or invest in technologies;

 

   

acquire or invest in complementary businesses or assets; and

 

   

finance capital expenditures and general and administrative expenses.

Our present and future funding requirements will depend on many factors, including:

 

   

our ability to achieve revenue growth;

 

   

the cost of rapidly expanding our operations and offerings, including our manufacturing, sales and marketing efforts;

 

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our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of and reimbursement for our Platform;

 

   

our rate of progress in, and cost of research and development activities associated with, products in research and early development;

 

   

the effect of competing technological and market developments;

 

   

costs related to rapid international expansion;

 

   

our rate of progress in establishing reimbursement arrangements with domestic and international commercial third-party payors and government payors; and

 

   

the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.

The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our shareholders could result. Any equity securities issued also could provide for rights, preferences, or privileges senior to those of holders of our LMDX common shares. If we raise funds by issuing debt securities, those debt securities would have rights, preferences, and privileges senior to those of holders of our LMDX common shares. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us.

The global financial markets have experienced a period of disruption and instability as a result of the COVID-19 pandemic, generally increasing the difficulty of accessing the capital and credit markets and resulting in intervention from national governments around the world. Accordingly, additional equity or debt financing might not be available on reasonable terms, if at all. If we cannot secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more research and development programs or sales and marketing initiatives. In addition, we may have to work with a third party on one or more of our development programs, which could lower the economic value of those programs to us.

Projections are subject to significant risks, assumptions, estimates and uncertainties. As a result, projected revenues, market share, expenses and profitability of LumiraDx may differ materially from the CAH financial projections.

We operate in a rapidly changing and competitive industry and any projections for the LumiraDx business will be subject to the risks and assumptions made by the party that prepared such projections with respect to our industry. Operating results are difficult to forecast because they generally depend on a number of factors which may be difficult to predict, including the competition we face, our ability to obtain regulatory approval and or market acceptance of our diagnostic tests, and our ability to successfully and rapidly scale up our manufacturing, sales and marketing capabilities. This may result in decreased revenue levels, and we may be unable to adopt measures in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our operating results in a given quarter to be higher or lower than expected. These factors make creating accurate forecasts and budgets challenging and, as a result, we may fall materially short of our forecasts and expectations or the CAH financial projections included in this proxy statement/prospectus, which could cause our stock price to decline and investors to lose confidence in us.

Transformation into a public company may increase our costs and disrupt the regular operations of our business.

This Merger will have a significant transformative effect on us. Our business historically has operated as a privately-owned company, and we expect to incur significant additional legal, accounting, reporting, and other expenses as a result of having publicly traded LMDX common shares. We will also incur costs which we have

 

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not incurred previously, including, but not limited to, costs and expenses for increased directors and officers insurance, investor relations, and various other costs of a public company.

We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq. We expect these rules and regulations to increase our legal and financial compliance costs and make some management and corporate governance activities more time-consuming and costly, particularly after we are no longer an “emerging growth company.” These rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. This could have an adverse impact on our ability to retain, recruit and bring on qualified board members. We expect that the additional costs we will incur as a public company, including costs associated with corporate governance requirements, will be considerable relative to our costs as a private company.

The additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Any of these effects could harm our business, financial condition and results of operations.

Furthermore, after the date we are no longer an emerging growth company, our independent registered public accounting firm will only be required to attest to the effectiveness of our internal control over financial reporting depending on our market capitalization. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, in connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. Failure to comply with Section 404 could subject us to regulatory scrutiny and sanctions, impair our ability to raise capital, cause investors to lose confidence in the accuracy and completeness of our financial reports and negatively affect our share price or cause it to be more volatile.

The ability of our U.S. subsidiaries to use net operating loss carryforwards and other tax attributes to offset future taxable income may be subject to certain limitations.

As of December 31, 2020, our U.S. subsidiaries had $32.6 million in gross net operating losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to annual limitations on its ability to use its pre-change net operating loss carryforwards or other tax attributes, or NOLs, to offset future taxable income or reduce taxes. We have not determined whether past changes in the ownership of our equity have resulted, or whether the Merger could result, in an ownership change under Section 382 of the Code with respect to our U.S. subsidiaries. In addition, future changes in the ownership of our equity, some of which may be outside of our control, could result in ownership changes under Section 382 of the Code with respect to our U.S. subsidiaries. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, we may not be able to use a material portion of the NOLs, even if we attain profitability.

Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

Although a significant portion of our revenues is currently derived in U.S. dollars, we also have significant revenues currently being denominated in other currencies. In addition, we have raised funds in U.S. dollars but a

 

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large part of our costs is in pound sterling. Unfavorable fluctuations in foreign currency exchange rates could have a material adverse effect on our results of operations.

Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, expenses and income, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the U.S. dollar against other currencies will affect our net revenues, operating income and the value of balance-sheet items originally denominated in other currencies. These changes cause our growth in consolidated earnings stated in U.S. dollars to be higher or lower than our growth in local currency when compared against other periods.

As we continue to leverage our global delivery model, more of our expenses will be incurred in currencies other than those in which we bill for the related services. An increase in the value of certain currencies against the U.S. dollar or U.K. pound sterling could increase costs for delivery of services at off-shore sites by increasing labor and other costs that are denominated in local currency. There can be no assurance that our contractual provisions will offset their impact, or that any future currency hedging activities, which are designed to partially offset this impact, will be successful. In addition, our future currency hedging activities could themselves be subject to risk. These could include risks related to counterparty performance under future hedging contracts and risks related to currency fluctuations. We also face risks that extreme economic conditions, political instability or hostilities or disasters of the type described below could impact our underlying exposures, perhaps eliminating them. Such an event could lead to losses being recognized on any future currency hedges then in place, not offset by anticipated changes in the underlying hedge exposure.

We anticipate incurring substantial stock-based compensation expense related to the Founders Equity Awards, which may have an adverse effect on our financial condition and results of operations and may result in substantial dilution.

In light of the options granted to the LMDX Founder Directors over 5,009,400 LMDX ordinary shares, which we refer to as the Founders Equity Awards, we anticipate that we will incur substantial stock-based compensation expenses. The initial grant of options over 3,256,000 LMDX ordinary shares were fully vested upon grant. The remaining 1,753,400 LMDX ordinary shares will vest over two years based on achievement of performance conditions. For additional information regarding the Founders Equity Awards, please see the section titled “Director and Executive Officer Compensation—Founders Equity Awards” beginning on page 153. We will record substantial stock-compensation expense for the Founders Equity Awards. In addition, a potentially large number of LMDX ordinary shares will be issuable upon exercise of the Founders Equity Awards if the applicable vesting conditions are satisfied, which would dilute your ownership of us.

Risks Related to Being a Public Company and Ownership of LMDX Common Shares

A market for LMDX common shares may not develop or be sustained, which would adversely affect the liquidity and price of LMDX common shares.

Following the Closing Date, the price of the publicly traded LMDX common shares, or the LMDX traded common shares, may fluctuate significantly due to the market’s reaction to the Merger and general market and economic conditions. An active trading market for the LMDX traded common shares following the Closing Date may never develop or, if developed, it may not be sustained. In addition, the price of the LMDX traded common shares after the Closing Date may vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if the LMDX traded common shares become delisted from Nasdaq and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange) or the LMDX traded common shares are not listed on Nasdaq and are quoted on the OTC Bulletin Board, the liquidity and price of LMDX traded common shares may be more limited than if LumiraDx was quoted or listed on the NYSE, Nasdaq or another national securities exchange. You may be unable to sell your LMDX traded common shares unless a market can be established or sustained.

 

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The dual class structure of the LMDX ordinary shares and LMDX common shares has the effect of concentrating voting control with those shareholders who held our share capital prior to the Merger, including our directors, executive officers and their respective affiliates, who will hold in the aggregate 31.11% of the voting power of our share capital following the completion of the Merger. This ownership will limit or preclude the ability of holders of the LMDX traded common shares to influence corporate matters, including the election of directors, amendments of our then current memorandum and articles of association, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring shareholder approval.

The LMDX ordinary shares have ten votes per share on matters to be voted on by shareholders, and the LMDX common shares have one vote per share. Upon the consummation of the Merger, our directors, executive officers and their affiliates will hold in the aggregate 32.11% of the voting power of our issued share capital. Because of the ten-to-one voting ratio between the LMDX ordinary shares and the LMDX common shares, the holders of the LMDX ordinary shares collectively could continue to control a significant percentage of the combined voting power of the LMDX common shares and therefore be able to control all matters submitted to our shareholders for their approval. This concentrated control may limit or preclude the ability of the holders of the LMDX traded common shares to influence corporate matters for the foreseeable future, including the election of directors, the removal of the LMDX Founder Directors, amendments of our then current memorandum and articles of association, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring shareholder approval. This may prevent or discourage unsolicited acquisition proposals or offers for our issued share capital that the holders of the LMDX traded common shares may believe are in the best interest of LumiraDx as one of our shareholders. In addition, each of our co-founders (i.e., Ron Zwanziger, Dave Scott and Jerry McAleer) are directors and cannot be removed from the board absent the voting approval of the LMDX ordinary shares held by Ron Zwanziger, our Chief Executive Officer and co-founder, and his affiliates. Furthermore, the terms of our arrangements with BMGF, Morningside Venture Investments Limited, or Morningside, and CVS (which are described in further detail in the section titled “Certain Relationships and Related Person Transactions—LumiraDx Related Person Transactions” beginning on page 245), grant each of BMGF, Morningside and CVS a right to appoint a director to our board of directors. Under the applicable agreements, the appointment rights shall terminate (i) in the case of BMGF or Morningside, once either party sells or no longer controls more than 25%; or (ii) in the case of CVS, once a sale or combination of sales results in it beneficially owning less than 75%, in each case of their respective initial holding of LMDX series A preferred shares (or LMDX ordinary shares following the conversion of such LMDX series A preferred shares into LMDX ordinary shares immediately prior to the Effective Time pursuant to the Capital Restructuring). BMGF’s previous board appointee, Amit Thakker, M.D., resigned from our board of directors with effect from April 30, 2021. Dr. Thakker’s resignation was not due to any disagreement with LumiraDx, CAH or any matters relating to the Company’s operations, policies or practices. BMGF has not exercised its right to appoint a replacement director, but retains its right to do so. Apart from:

 

  (i)

in exceptional circumstances approved by our board of directors;

 

  (ii)

in the Limited Circumstances (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270);

 

  (iii)

where the Early Conversion Conditions (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied;

 

  (iv)

where the 200 LMDX common share condition or the 200 LMDX ordinary share condition (as such terms are defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied; or

 

  (v)

where our board of directors has served a Transfer Entitlement Notice (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) on the holders of our LMDX ordinary shares and LMDX common shares in the circumstances set out in the section titled “Description of LumiraDx’s Securities” beginning on page 270;

 

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LMDX ordinary shares must be converted into LMDX common shares before they can be sold or transferred and no conversion of such LMDX ordinary shares into LMDX common shares can occur for the 180-day period from the Closing Date. The conversion of LMDX ordinary shares to LMDX common shares will have the effect, over time, of increasing the relative voting power of those holders of LMDX common shares who retain their shares in the long term. As a result, it is possible that one or more of the persons or entities holding the LMDX common shares could gain significant voting control as other holders of LMDX ordinary shares sell or otherwise convert their LMDX ordinary shares into LMDX common shares. We do not expect to issue any additional LMDX ordinary shares following the Merger except to meet commitments we agreed to prior to the date of this proxy statement/prospectus. Any future issuances of LMDX ordinary shares would be dilutive to holders of LMDX common shares.

Sales of substantial amounts of the LMDX traded common shares in the public market, or the conversion of substantial amounts of LMDX ordinary shares into LMDX common shares for sale in the public market, or the perception that these sales and/or conversions may occur, could cause the market price of the LMDX traded common shares to decline.

Sales of substantial amounts of the LMDX traded common shares in the public market, or the conversion of substantial amounts of LMDX ordinary shares into LMDX common shares for sale in the public market, or the perception that these sales and/or conversions may occur, could cause the market price of the LMDX common shares to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. Under the LMDX Amended and Restated Articles (and assuming for these purposes that the Capital Restructuring has occurred), LumiraDx will be authorized to issue up to 1,769,292,966 LMDX common shares (with a par value of US$0.0000028 per share), of which, assuming no CAH Stockholders exercise redemption rights with respect to their public shares, approximately 54,648,442 LMDX common shares (with a par value of US$0.0000028 per share) will be outstanding following the completion of the Merger.

Under the LMDX Amended and Restated Articles:

 

  (A)

apart from:

 

  (i)

in exceptional circumstances that are approved by our board of directors;

 

  (ii)

in the Limited Circumstances (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270);

 

  (iii)

where the Early Conversion Conditions (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied;

 

  (iv)

where the 200 LMDX common share condition or the 200 LMDX ordinary share condition (as such terms are defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied; or

 

  (v)

where our board of directors has served a Transfer Entitlement Notice (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) on the holders of our LMDX ordinary shares and LMDX common shares in the circumstances set out in the section titled “Description of LumiraDx’s Securities” beginning on page 270;

the LMDX ordinary shares must be converted into LMDX common shares before being sold or transferred and no conversion of such LMDX ordinary shares into LMDX common shares can occur for the 180-day period from the Closing Date; and

 

  (B)

the holders of LMDX common shares which are issued: (i) upon the conversion of the LMDX series B preferred shares immediately prior to the Effective Time pursuant to the Capital Restructuring, (ii) upon the conversion of the 5% notes and the 10% notes pursuant to the LMDX convertible loan note conversions, or (iii) upon the exercise of the 2020 warrants, the Jefferies warrants, the SVB warrants, the Pharmakon warrants and the LMDX new warrants, will be subject to a 180-day lock-up period prohibiting such holders, apart from:

 

  (i)

in exceptional circumstances that are approved by our board of directors;

 

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  (ii)

in the Limited Circumstances (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270);

 

  (iii)

where the Early Conversion Conditions (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied;

 

  (iv)

where the 200 LMDX common share condition or the 200 LMDX ordinary share condition (as such terms are defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied;

 

  (v)

where our board of directors has served a Transfer Entitlement Notice (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) on the holders of our LMDX ordinary shares and LMDX common shares in the circumstances set out in the section titled “Description of LumiraDx’s Securities” beginning on page 270; or

 

  (vi)

where such LMDX common shares reflect entitlements under the 2021 Employee Stock Purchase Plan;

from selling, transferring, contracting to sell or otherwise disposing of (either directly or indirectly) any of these LMDX common shares for the 180-day period following the Closing Date.

In addition, other than LMDX common shares to be issued upon exercise of the LMDX new warrants, the LMDX common shares to be issued to the sponsor and the CAH founders in connection with the Merger shall be subject to a one-year lock up restriction pursuant to the terms of the Sponsor Agreement.

If, after the end of the relevant lock-up periods, shareholders: (i) who own LMDX common shares sell substantial amounts of LMDX common shares in the public market; or (ii) who own LMDX ordinary shares convert substantial amounts of the LMDX ordinary shares into LMDX common shares for sale in the public market, or the market perceives that such sales and/or conversions may occur, the market price of the LMDX common shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected. Concurrently with the completion of the Merger, we will enter into the Registration Rights Agreement with CAH, the sponsor and certain of our shareholders pursuant to which we will agree under certain circumstances to file a registration statement to register the resale of the LMDX securities held by such parties, as well as to cooperate in certain public offerings of such LMDX common shares.

In addition, upon consummation of the Merger, we intend to cease any new grants under our existing equity incentive plans and to adopt a new omnibus equity incentive plan under which we would have the discretion to grant a broad range of equity-based awards over LMDX common shares to eligible participants. We intend to register all LMDX common shares that we may issue under this equity incentive plan. Once we register these LMDX common shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates of the Company. If a large number of the LMDX common shares or securities convertible into LMDX common shares are sold in the public market after they become eligible for sale, the sales could reduce the trading price of the LMDX common shares and impede our ability to raise future capital. We cannot predict the size of future issuances of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of the LMDX common shares.

We cannot predict the effect our dual class structure may have on the market price of our LMDX common shares.

We cannot predict whether our dual class structure will result in a lower or more volatile market price of our LMDX traded common shares, in adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices, including FTSE Russell and S&P Dow Jones which impacted indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Under any such announced policies or future policies, the dual class structure of our shares could make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other

 

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investment vehicles that attempt to passively track those indices would not invest in our LMDX common shares. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our LMDX common shares less attractive to other investors. As a result, the market price of the LMDX traded common shares could be adversely affected. It is unclear what additional effects such policies will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included or may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our LMDX common shares less attractive to investors or otherwise increase the volatility of the price of our LMDX common shares.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” For example, for as long as we are an “emerging growth company” under the recently enacted JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We could be an emerging growth company for up to five years. See “Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer” beginning on page 10. We cannot predict if investors will find our LMDX common shares less attractive because we will rely on these exemptions. If some investors find our LMDX common shares less attractive as a result, there may be a less active trading market for our LMDX common shares and our share price may be more volatile.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Since IFRS makes no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

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We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses that we would not incur as a foreign private issuer.

We expect to qualify as a foreign private issuer upon the completion of this Merger. As a foreign private issuer, we will be exempt from the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. If in the future we are not a foreign private issuer as of the last day of the second fiscal quarter in any fiscal year, we would be required to comply with all of the periodic disclosure, current reporting requirements and proxy solicitation rules of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our LMDX common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our directors and executive officers may not be United States citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we were to lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. These rules and regulations could also make it more difficult for us to attract and retain qualified directors.

As a foreign private issuer and as permitted by the Nasdaq listing requirements, we follow certain home country governance practices rather than the corporate governance requirements of Nasdaq.

The Nasdaq listing rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we may, follow home country practice in lieu of the above requirements, or we may choose to comply with the Nasdaq listing exchange requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors. Since a majority of our board of directors may not consist of independent directors, fewer board members may be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, the Nasdaq listing rules also require U.S. domestic issuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements though we intend to have an audit committee comprising of three independent directors. The Nasdaq listing rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, as well as certain ordinary share issuances. We intend to comply with the requirements of Nasdaq listing rules for a foreign private issuer in determining whether shareholder approval is required on such matters. However, we may consider following home country practice in lieu of the requirements under the Nasdaq listing rules with respect to certain corporate governance standards which may afford less protection to investors.

We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In connection with the audits of our financial statements for the years ended December 31, 2019 and December 31, 2020, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility

 

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that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weaknesses specifically resulted from (i) insufficient segregation of duties related to the posting of manual journal entries and (ii) the lack of documented evidence for management review controls related to projected financial information used in non-recurring valuations and non-routine transactions.

We have insufficient segregation of duty related to the posting of manual journal entries. Additionally, where an independent review does occur, there is insufficient evidence to justify the operation of the control. These control failures are a result of resource constraints which result in inadequate staffing within the finance function to support sufficient segregation of duties and insufficient risk assessment procedures.

We lack documented evidence of review for management review controls related to projected financial information used in non-recurring valuations and non-routine transactions although reviews were performed by various levels of management. This lack of documented review is a result of controls that are not designed at a sufficient level of detail.

Although we have plans to add appropriate levels of staffing in the future, these material weaknesses have not been remediated as of the time of this proxy statement/prospectus.

Neither we nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting during any period in accordance with the provisions of Sarbanes Oxley. In light of the material weaknesses that were identified in connection with the audits of our financial statements described above, we believe that it is possible that, had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes Oxley, additional material weaknesses may have been identified.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Global Market.

We do not anticipate paying any cash dividends in the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our LMDX common shares. As a result, capital appreciation in the price of our LMDX common shares, if any, will be your only potential source of gain on an investment in our LMDX common shares.

The terms of the 2021 Senior Secured Loan preclude us from paying cash dividends to our shareholders without the consent of Pharmakon.

Shareholders will not be able to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of LMDX common shares.

Our directors are authorized to issue LMDX common shares or grant rights to subscribe for LMDX common shares or shares of such undesignated class or classes (however designated) as the directors may

 

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determine, up to our authorized share capital from time to time. The LMDX Amended and Restated Articles do not include any preemptive rights to entitle a shareholder to participate in any further issuances of LMDX common shares. This could cause existing shareholders to experience substantial dilution of their interest in us.

If equity or industry research analysts publish negative evaluations of the Company, including a downgrade of the price target of the LMDX traded common shares, the price of our LMDX traded common shares could decline.

The trading market for the LMDX traded common shares relies in part on the research and reports that equity and industry research analysts publish about us or our business. We do not control these analysts. If one or more of the analysts covering our business downgrade their evaluations of our LMDX traded common shares, the price of our LMDX traded common shares could decline. If one or more of these analysts cease to cover the LMDX traded common shares, we could lose visibility in the market for the LMDX traded common shares, which in turn could cause the LMDX traded common shares price to decline.

If we were classified as a “passive foreign investment company” for U.S. federal income tax purposes, or a PFIC, U.S. holders of our LMDX common shares would be subject to adverse U.S. federal income tax consequences.

In general, we will be a PFIC for any taxable year in which either: (i) at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains, rents, and royalties, other than rents or royalties derived in the active conduct of a trade or business); or (ii) at least 50% of the quarterly average value of the gross assets held by us during such taxable year produce, or are held for the production of, passive income. For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any subsidiary corporation in which we own at least 25% of the value of the subsidiary’s stock.

Based on the current and expected composition of our income and assets and the value of our assets, we do not expect to be a PFIC for our current taxable year or in the foreseeable future. However, no assurances regarding our PFIC status can be provided for the current taxable year or any future taxable years. The determination of whether we are a PFIC for any taxable year is a fact-intensive determination that can only be made after the end of each year, and will depend on the composition of our income and assets and the value of our assets from time to time (including the value of our goodwill, which will generally be determined in part by reference to the market price of our LMDX traded common shares, which may fluctuate considerably). The composition of our income and assets will also be affected by the amount of cash that we raise in any future offerings or other financing transactions. Because the value of our goodwill will generally be determined by reference to our market capitalization, we could become a PFIC for any taxable year if the price of our LMDX traded common shares declines significantly while we hold a substantial amount of cash and financial investments. We also could become a PFIC if we do not generate sufficient income from our business in any taxable year (including our current taxable year) relative to the amount of passive income that we generate in such taxable year. In addition, the application of the PFIC rules is subject to some uncertainties and the proper characterization of certain items of our income and assets is not entirely clear. Accordingly, there can be no assurance that we will not be a PFIC for our current or any future taxable year. We express no belief regarding our PFIC status with respect to any U.S. holder that acquired equity interests (or options or other rights to acquire equity interests) in us prior to the Merger.

If we were classified as a PFIC, a “U.S. holder” (as defined in the section titled Certain Material Income Tax Considerations—Certain Material U.S. Federal Income Tax Considerations beginning on page 289 in this proxy statement/prospectus) of our LMDX traded common shares would be subject to adverse U.S. federal income tax consequences, including potential increased tax liability. In addition, for each year during which we were classified as a PFIC, a U.S. holder of our LMDX common shares would generally be required to file IRS Form 8621 with such U.S. holder’s U.S. federal income tax return to report certain information

 

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concerning its ownership of our common stock. Each U.S. holder of our LMDX common shares should consult its own tax advisor regarding the PFIC rules and should read the discussion under “Certain Material Income Tax Considerations—U.S. Federal Income Tax Consequences of the Ownership and Disposition of LMDX Common Shares and the Ownership and Disposition or Conversion of LMDX New Warrants Received in the Merger—U.S. Holders—Passive Foreign Investment Company Rules” in this proxy statement/prospectus.

U.S. holders that own 10% or more of our equity interests may be subject to adverse U.S. federal income tax consequences under rules applicable to U.S. shareholders of controlled foreign corporations.

A non-U.S. corporation generally will be classified as a controlled foreign corporation for U.S. federal income tax purposes, or a CFC, if “10% U.S. equityholders” (as defined below) own, directly, indirectly or constructively, more than 50% of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value of the stock of such corporation. We do not believe that we would be classified as a CFC at the time of the Merger, although CFC status is determined after taking into account complex constructive ownership rules and, accordingly, there can be no assurance in this regard. However, certain of our subsidiaries are classified as CFCs (as a result of the application of certain constructive ownership rules which treat our U.S. subsidiaries as owning the equity of those subsidiaries), and it is possible that we may be classified as a CFC in the future. The U.S. federal income tax consequences for U.S. holders who at all times are not 10% U.S. equityholders would not be affected by the CFC rules. However, a U.S. holder that owns (or is treated as owning, directly, indirectly or constructively, including by applying certain attribution rules) 10% or more of the combined voting power or value of all of classes of our equity interests (including equity interests attributable to deemed exercise of options and convertible debt instruments) (a “10% U.S. equityholder”) would generally be subject to current U.S. federal income taxation on a portion of our applicable subsidiaries’ earnings and profits (as determined for U.S. federal income tax purposes) and our earnings and profits (if we were classified as a CFC), regardless of whether such 10% U.S. equityholder receives any actual distributions. In addition, if we were classified as a CFC, a portion of any gains realized on the sale of our LMDX common shares by a 10% U.S. equityholder may be treated as ordinary income. A 10% U.S. equityholder will also be subject to additional U.S. federal income tax information reporting requirements with respect to our subsidiaries that are classified as CFCs and with respect to us (if we were classified as a CFC) and substantial penalties may be imposed for noncompliance. Each U.S. holder should consult its own tax advisor regarding the CFC rules and whether such U.S. holder may be a 10% U.S. equityholder for purposes of these rules.

Changes in taxation legislation or practice may adversely affect LumiraDx and its group and the tax treatment for holders of LMDX common shares.

Any change in taxation legislation or practice in the U.K. or other jurisdictions to which the company and its group has exposure could adversely affect the value of the company and/or affect the post-tax returns to holders of common shares. Statements in this proxy statement/prospectus concerning the taxation of the company and taxation of holders of LMDX common shares are based upon current tax law and published practice any aspect of which is, in principle, subject to change that could adversely affect the company and its group and/or the taxation of holders of LMDX common shares, and which may have an adverse effect on the market value of the LMDX common shares.

There have been significant recent changes both made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance for all multinational groups. The Organization for Economic Co-operation and Development, or OECD, is continuously considering recommendations for changes to existing tax laws. We expect to continue to monitor these and other developments in international tax law which may adversely affect the company and its group and after-tax returns to holders of common shares.

In particular, the tax risks to the company and its group and to holders of LMDX common shares may be affected by the OECD’s Action Plan on Base Erosion and Profit Shifting, or the BEPS Action Plan. The aim of the BEPS Action Plan is that jurisdictions should change their domestic tax laws and introduce additional or

 

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amended provisions in double taxation treaties. Examples of possible outcomes of the BEPS Action Plan could be that the ability of entities such as the Company and members of its group to benefit from reliefs under double taxation treaties, or to obtain tax deductions for finance costs, could be adversely affected, potentially increasing the effective tax rate of the group. Final reports on all action points were published on October 5, 2015, but it remains unclear in many cases whether, when, how and to what extent certain jurisdictions will decide to adopt or further adopt those recommendations and different jurisdictions may implement any such recommendations in different ways. On July 12, 2016, the European Council formally adopted a directive containing a package of measures to combat tax avoidance, or ATAD. The scope of ATAD was amended and widened by a further directive formally adopted by the European Council on May 29, 2017, or ATAD 2. The implementation of ATAD and/or ATAD 2, which (among other initiatives) requires implementation of certain recommendations of the BEPS Action Plan within the E.U., may adversely affect the Company and its group.

In addition, further work is currently being undertaken by the OECD on potential future recommendations related to the challenges arising from the digitalization of the global economy, specifically relating to reform of the international allocation of taxing rights, or Pillar One, and a system ensuring a minimum level of tax for multinational enterprises, or Pillar Two, which may result in additional adverse tax consequences for the Company and its group.

Recently introduced economic substance legislation of the Cayman Islands may adversely impact us or our operations.

The Cayman Islands, together with several other non-E.U. jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the E.U. as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Cooperation (Economic Substance) Act, (as revised), or the Substance Act, came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities”. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant activities and whether we are claiming an exemption from the obligations to meet the economic substance tests to the extent required under the Cayman Economic Substance Act (the “substance test”). If we are carrying out such relevant activities, or are claiming such an exemption we are further required to file annually a report as to whether we have satisfied the substance test or the bias on which we are claiming such exemption. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.

We expect LumiraDx and LumiraDx Group to operate so as to be treated solely as a resident of the U.K. for tax purposes, but changes to our management and organizational structure and/or to the tax residency laws of other jurisdictions where we operate may cause the relevant tax authorities to treat the company as also being a resident of another jurisdiction for tax purposes.

Under current U.K. tax law, if the location of a company’s central management and control is in the U.K., or if a company is incorporated in the U.K., it is regarded as resident for tax purposes in the U.K. unless (i) it is concurrently treated as resident for tax purposes in another jurisdiction (applying the rules of that other jurisdiction for determining tax residency) that has a double tax treaty with the U.K. and (ii) there is a residency tie-breaker provision in that tax treaty which allocates tax residence to that other jurisdiction.

Based upon our anticipated management and organizational structure, we believe that the Company and LumiraDx Group (and the other U.K. incorporated companies in the group) should be regarded as tax resident solely in the U.K. However, because this analysis is highly factual and may depend on future changes in our management and organizational structure, as well as future changes in the tax residency laws of other

 

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jurisdictions where we operate, there can be no assurance regarding the determination of the tax residence of such companies in the future.

Should any such company be treated as resident in a jurisdiction other than the U.K. it could be subject to taxation in that jurisdiction and may be required to comply with a number of material and formal tax obligations, including withholding tax and/or reporting obligations provided under the relevant tax law, which could result in additional costs and expenses.

LumiraDx is a Cayman Islands company. Because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, shareholders may have fewer shareholder rights than they would have under U.S. law.

Our corporate affairs are governed by our then current memorandum and articles of association (as may be amended from time to time), the Companies Act (as revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of directors are to a large extent governed by the common law of the Cayman Islands. This common law is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. Decisions of the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of directors under Cayman Islands law are not as clearly defined as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less prescriptive body of securities law than the United States. In addition, some states in the United States, such as Delaware, have more fulsome and judicially interpreted bodies of corporate law than the Cayman Islands.

In addition, as a Cayman Islands exempted company, our shareholders have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders with the exception that the shareholders may request a copy of our then current memorandum and articles of association. Under our Amended and Restated Articles, our directors have discretion to determine whether or not, and under what conditions, our corporate records may be inspected by shareholders, but are not obliged to make them available to shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion. As a result, you may be limited in your ability to protect your interests if you are harmed in a manner that would otherwise enable you to sue in a United States federal court. As a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board or controlling shareholders than they would as shareholders of a U.S. company.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law.

We expect to conduct a significant portion of our operations outside the United States through our subsidiaries. The majority of our directors and executive officers reside outside the United States and a majority of the group’s assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is uncertainty as to whether the courts of the Cayman Islands would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state and it is uncertain whether such Cayman Islands courts would hear original actions brought in the Cayman Islands against us or such persons predicated upon the securities laws of the United States

 

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or any state. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

Anti-takeover provisions in our Amended and Restated Articles may discourage, delay or prevent a change in control.

Some provisions in our Amended and Restated Articles, may discourage, delay or prevent a change in control of our company or management that holders of our LMDX common shares may consider unfavorable, including, among other things, the following:

 

   

provisions that permit our board of directors by resolution to issue undesignated classes of shares with such preferred, deferred or other special rights or restrictions as the board of directors may determine in their discretion, without any further vote or action by our shareholders. If issued, the rights, preferences, designations and limitations of any class of undesignated shares could operate to the disadvantage of the outstanding LMDX ordinary shares or LMDX common shares, the holders of which would not have any pre-emption rights in respect of such an issue of undesignated shares. Such terms could include, among others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers;

 

   

our shareholders may not take action by written consent, but may only take action at annual or extraordinary meetings of our shareholders. As a result, a holder controlling a majority of our share capital would not be able to amend our Amended and Restated Articles or remove directors without holding a meeting of our shareholders called in accordance with our Amended and Restated Articles. Our Amended and Restated Articles will further provide that special meetings of our shareholders may be called only by shareholders holding not less than one-third of the voting rights who are entitled to vote at general meetings. However, shareholders may propose only ordinary resolutions to be put to a vote at such a meeting and shall have no right to propose resolutions with respect to the election, appointment or removal of any person as a director or to amend our Amended and Restated Articles. Our Amended and Restated Articles will provide no other right to put any proposals before an annual general meeting or an extraordinary general meeting. These provisions might delay the ability of our shareholders to force consideration of a proposal or for shareholders controlling a majority of our share capital to take any action, including the removal of directors;

 

   

our board of directors is classified into three classes of directors (being the LMDX Founder Directors, the Class I directors and the Class II directors). A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for shareholders to replace a majority of the directors on a classified board of directors. See the section titled “Management Following the MergerComposition of the Board of Directors” beginning on page 139. Shareholders may only remove the Class I directors and Class II directors for cause by way of passing a special resolution; and

 

   

each of the LMDX Founder Directors cannot be removed from the board absent the voting approval of the LMDX ordinary shares held by Ron Zwanziger, our Chief Executive Officer and co-founder, and his affiliates. This provision would prevent shareholders from removing any of the LMDX Founder Directors from their respective positions on the board.

Holders of the LMDX traded common shares may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association and have been provided for in the Amended and Restated Articles, subject to the restrictions described therein. Advance notice of at least 21 clear days is required for the

 

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convening of our annual general shareholders’ meeting and at least 14 clear days’ notice of any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least two shareholders present in person or by proxy, representing not less than one-third in nominal value of the total issued voting shares in the company. To the extent that shareholders hold in aggregate less than one-third of the outstanding voting shares in the company, they cannot call general meetings or annual general meetings. To the extent that shareholders hold in the aggregate one third of the outstanding voting shares of the Company, as set out above, an extraordinary general meeting may be convened but shareholders cannot include matters for consideration at such a meeting requiring the approval of a special resolution or are matters relating to the election, appointment, removal of any person as a director or to amend our Amended and Restated Articles.

We may become subject to taxation in the Cayman Islands which would negatively affect our results.

We have received an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Act (as revised) of the Cayman Islands, for a period of 20 years from the date of grant of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of LumiraDx or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by LumiraDx to its members or a payment of principal or interest or other sums due under a debenture or other obligation of LumiraDx. If we otherwise were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected. See “Certain Material Income Tax Considerations—Cayman Islands Taxation.”

There may be a risk of us being subject to tax in jurisdictions in which we do not currently consider ourselves to have any tax resident subsidiaries or permanent establishments.

Our tax treatment is dependent, among other things, on the jurisdiction of our residence, including the residence of our subsidiaries, for tax purposes. We are a Cayman Islands exempted company with limited liability, resident in U.K. for tax purposes. We attempt to manage our business such that each of our subsidiaries is resident for tax purposes solely in its jurisdiction of incorporation and does not unintentionally create a taxable permanent establishment or other taxable presence in any other jurisdiction.

Risks Related to the Merger

CAH may not have sufficient funds to consummate the Merger.

As of January 29, 2021, CAH had approximately $800,000 available to it outside the trust account to fund its working capital requirements. If CAH is required to seek additional capital, it would need to borrow funds from the sponsor, its management team or other third parties to operate or it may be forced to liquidate. None of such persons is under any obligation to advance funds to CAH in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to CAH upon completion of the Merger. If CAH is unable to consummate the Merger because it does not have sufficient funds available, CAH will be forced to cease operations and liquidate the trust account. Consequently, CAH’s public stockholders may receive less than $10.00 per share and their CAH public warrants will expire worthless.

The Merger remains subject to conditions that CAH cannot control and if such conditions are not satisfied or waived, the Merger may not be consummated.

The Merger is subject to a number of conditions, including the conditions that CAH have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-5(g)(1) of the Exchange Act) either immediately prior to or upon consummation of the Merger, there is at least $65,000,000 of funds in CAH’s trust account, prior to payment of any unpaid or contingent liabilities, deferred underwriting fees or transaction costs of any of the parties,

 

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there is no legal prohibition against consummation of the Merger, the LMDX common shares and LMDX new warrants be approved for listing on Nasdaq subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders, receipt of CAH and LumiraDx securityholder approvals, continued effectiveness of the registration statement of which this proxy statement/prospectus is a part, the truth and accuracy of CAH’s and LumiraDx’s representations and warranties made in the Merger Agreement, the non-termination of the Merger Agreement and consummation of each Ancillary Agreement. There are no assurances that all conditions to the Merger will be satisfied or that the conditions will be satisfied in the time frame expected.

If the conditions to the Merger are not met (and are not waived, to the extent waivable), either CAH or LumiraDx may, subject to the terms and conditions of the Merger Agreement, terminate the Merger Agreement. See the section of this proxy statement/prospectus titled “Proposal No. 1 - Merger Proposal—Termination” beginning on page 113.

CAH will not have any right to make damage claims against LumiraDx for the breach of any representation, warranty or covenant made by LumiraDx or Merger Sub in the Merger Agreement.

The Merger Agreement provides that all of the representations, warranties and covenants of the parties contained therein shall not survive the completion of the Merger, except for those covenants contained therein that by their terms apply or are to be performed in whole or in part after the Closing Date. Accordingly, there are no remedies available to the parties with respect to any breach of the representations, warranties, covenants or agreements of the parties to the Merger Agreement after the Closing Date, except for covenants to be performed in whole or in part after Closing Date. As a result, CAH will have no remedy available to it if the Merger is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by LumiraDx or Merger Sub at the time of the Merger.

The CAH board of directors did not obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Merger.

CAH’s board of directors did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the Merger. Collectively, on a fully diluted basis, the Relevant Parties own less than 0.25% of the Company’s fully-diluted equity share capital. Likewise, none of the Relevant Parties are, or will be, officers or directors of the Company, are a party to any voting agreement with the Company or, in any other way, control, are controlled by or are under common control with, the Company. None of the Relevant Parties are affiliated with LumiraDx. In addition, CAH’s board of directors did not determine that there are any material relationships between the Relevant Parties and LumiraDx. As such, CAH determined that no fairness opinion, third-party valuation or any other measures, such as an independent committee of the board, was necessary to approve the transaction. In analyzing the Merger, CAH’s board and management conducted due diligence on LumiraDx and researched the industry in which LumiraDx operates and concluded, together with the advice and expertise of CAH’s financial advisors, that the Merger was in the best interest of CAH’s stockholders. Accordingly, investors will be relying solely on the judgment of CAH’s board of directors and CAH’s advisors in valuing LumiraDx’s business, and the board of directors may not have properly valued such business. The lack of a third-party valuation or fairness opinion may also lead an increased number of stockholders to vote against the proposed Merger or demand redemption of their shares for cash, which could potentially impact CAH’s ability to consummate the Merger.

Future resales of the LMDX common shares and/or LMDX new warrants may cause the market price of our securities to drop significantly, even if our business is doing well.

The Amended and Restated Articles provide that:

 

  (A)

apart from:

 

  (i)

in exceptional circumstances that are approved by our board of directors;

 

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  (ii)

in the Limited Circumstances (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270); or

 

  (iii)

where the Early Conversion Conditions (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied,

 

  (iv)

where the 200 LMDX common share condition or the 200 LMDX ordinary share condition (as such terms are defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied; or

 

  (v)

where our board of directors has served a Transfer Entitlement Notice (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) on certain of the holders of our LMDX ordinary shares and LMDX common shares in the circumstances set out in the section titled “Description of LumiraDx’s Securities” beginning on page 270;

the LMDX ordinary shares must be converted into LMDX common shares before being sold or transferred and no conversion of such LMDX ordinary shares into LMDX common shares can occur for the 180-day period following the Closing Date; and

 

  (B)

the holders of LMDX common shares which are issued: (i) upon the conversion of the LMDX series B preferred shares immediately prior to the Effective Time pursuant to the Capital Restructuring, (ii) upon the conversion of the 5% notes and the 10% notes pursuant to the LMDX convertible loan note conversions, or (iii) upon the exercise of the 2020 warrants, the Jefferies warrants, the SVB warrants, the Pharmakon warrants and the LMDX new warrants, will be subject to a 180-day lock-up period prohibiting such holders, apart from:

 

  (i)

in exceptional circumstances that are approved by our board of directors;

 

  (ii)

in the Limited Circumstances (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270);

 

  (iii)

where the Early Conversion Conditions (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied,

 

  (iv)

where the 200 LMDX common share condition or the 200 LMDX ordinary share condition (as such terms are defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) have been satisfied;

 

  (v)

where our board of directors has served a Transfer Entitlement Notice (as defined in the section titled “Description of LumiraDx’s Securities” beginning on page 270) on certain of the holders of our LMDX ordinary shares and LMDX common shares in the circumstances set out in the section titled “Description of LumiraDx’s Securities” beginning on page 270; or

 

  (vi)

where such LMDX common shares reflect entitlements under the 2021 Employee Stock Purchase Plan;

from selling, transferring, contracting to sell or otherwise disposing of (either directly or indirectly) any of these LMDX common shares for the 180-day period following the Closing Date.

In addition, other than LMDX common shares to be issued upon exercise of the LMDX new warrants, the LMDX common shares to be issued to the sponsor and the CAH founders in connection with the Merger shall be subject to a one-year lock up restriction pursuant to the terms of the Sponsor Agreement. Further, concurrently with the consummation of the Merger, LumiraDx, CAH, the sponsor and certain existing equity holders of LumiraDx holding existing registration rights will enter into the Registration Rights Agreement, providing such holders with customary demand registration rights and piggy-back registration rights with respect to registration statements filed by LumiraDx after the Closing Date. The Registration Rights Agreement supersedes the registration rights agreements to which the aforementioned existing equityholders of LumiraDx were a party. See the section titled “Summary—Related Agreements—Registration Rights Agreement” page 7.

 

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Upon expiration of the applicable lock-up periods and upon the effectiveness of any registration statement LumiraDx files pursuant to the above-referenced Registration Rights Agreement, in a registered offering of securities pursuant to the Securities Act or otherwise in accordance with Rule 144 under the Securities Act, LumiraDx shareholders may sell large amounts of LMDX common shares and warrants in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of the LMDX common shares and/ or the LMDX new warrants or putting significant downward pressure on the price of the LMDX common shares and/ or LMDX new warrants. Additionally, downward pressure on the market price of the LMDX common shares or LMDX new warrants likely will result from sales of LMDX common shares issued in connection with the exercise of warrants. Further, sales of LMDX common shares or warrants upon expiration of any applicable lockup periods could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of LMDX common shares or LMDX new warrants could have a tendency to depress the price of the LMDX common shares or the LMDX new warrants, respectively, which could increase the potential for short sales.

We cannot predict the size of future issuances of LMDX common shares or LMDX new warrants or the effect, if any, that future issuances and sales of shares of LMDX common shares or LMDX new warrants will have on the market price of the LMDX traded common shares or LMDX new warrants. Sales of substantial amounts of LMDX common shares (including those LMDX common shares issued in connection with the Merger), or the perception that such sales could occur, may adversely affect prevailing market prices of LMDX traded common shares or LMDX new warrants.

If CAH’s stockholders fail to properly demand redemption rights, they will not be entitled to redeem their shares of common stock of CAH for a pro rata portion of the trust account.

CAH stockholders holding public shares may demand that CAH redeem their public shares for a pro rata portion of the trust account, calculated as of two business days prior to the consummation of the Merger. CAH stockholders who seek to exercise this redemption right must deliver their stock (either physically or electronically) to CAH’s transfer agent prior to the vote at the special meeting. Any CAH stockholder who fails to properly demand redemption rights will not be entitled to redeem his or her shares for a pro rata portion of the trust account. CAH stockholders should see the section titled “Special Meeting of CAH Stockholders—Redemption Rights” beginning on page 99 for the procedures to be followed if they wish to redeem their shares for cash.

Public stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 15% of the public shares.

A public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 15% of the public shares. Accordingly, if you hold more than 15% of the public shares and the Merger Proposal is approved, you will not be able to seek redemption rights with respect to the full amount of your shares and may be forced to hold the shares in excess of 15% or sell them in the open market. CAH cannot assure you that the value of such excess shares will appreciate over time following a Merger or that the market price of CAH’s shares of common stock will exceed the per-share redemption price.

Nasdaq may not list our securities, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

We intend to apply to have our securities listed on Nasdaq upon consummation of the Merger. We will be required to meet the initial listing requirements to be listed. We may not be able to meet those initial listing requirements. Even if our securities are so listed, we may be unable to maintain the listing of our securities in the future.

 

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If we fail to meet the initial listing requirements and Nasdaq does not list our securities and the related closing condition is waived by the parties, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

a limited amount of news and analyst coverage on us; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The sponsor is liable to ensure that proceeds of the trust are not reduced by vendor claims in the event a Merger is not consummated. It has also agreed to pay for any liquidation expenses if a Merger is not consummated. Such liability may have influenced the sponsor’s decision to approve the Merger.

If the Merger or another business combination is not consummated by CAH within the required time period, the sponsor will be liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by CAH for services rendered or contracted for or products sold to CAH. If CAH consummates a business combination, including the Merger, on the other hand, CAH will be liable for all such claims. Neither CAH nor the sponsor has any reason to believe that the sponsor will not be able to fulfill its indemnity obligations to CAH. See the section titled “Proposal No. 1 - The Merger Proposal—Interests of Certain Persons in the Merger” beginning on page 139 for further information. If CAH is required to be liquidated and there are no funds remaining to pay the costs associated with the implementation and completion of such liquidation, the sponsor has also agreed to advance CAH the funds necessary to pay such costs and complete such liquidation (currently anticipated to be no more than approximately $100,000) and not to seek repayment for such expense.

These obligations of the sponsor may have influenced the sponsor’s decision to approve the Merger and to continue to pursue such Merger. Larry J. Neiterman, Jeffrey H. Barnes, David Lang, David H. Klein, Afsaneh Naimollah, each of whom is an officer, director or director nominee of CAH, each has an indirect economic interest in the CAH founder shares and CAH private placement warrants purchased by the sponsor as a result of his or her membership interest in the sponsor. In considering the recommendations of CAH’s board of directors to vote for the Merger Proposal and other proposals, CAH’s stockholders should consider these interests.

CAH’s directors may decide not to enforce the indemnification obligations of the sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to CAH’s public stockholders in the event a Merger is not consummated.

If proceeds in the trust account are reduced below $10.00 per public share and the sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, CAH’s independent directors would determine whether to take legal action against the sponsor to enforce its indemnification obligations. While CAH currently expects that its independent directors would take legal action on CAH’s behalf against the sponsor to enforce the sponsor’s indemnification obligations, it is possible that CAH’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If CAH’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to CAH’s public stockholders may be reduced below $10.00 per share.

The exercise of CAH’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Merger may result in a conflict of interest when determining whether such changes to the terms of the Merger or waivers of conditions are appropriate and in CAH’s stockholders’ best interest.

In the period leading up to the Closing Date, events may occur that, pursuant to the Merger Agreement, would require CAH to agree to amend the Merger Agreement, to consent to certain actions taken by LumiraDx or to waive rights that CAH is entitled to under the Merger Agreement. Such events could arise because of changes

 

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in the course of LumiraDx’s business, a request by LumiraDx to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on LumiraDx’s business and would entitle CAH to terminate the Merger Agreement. In any of such circumstances, it would be at CAH’s discretion, acting through its board of directors, to agree to any such amendment, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in the preceding risk factors may result in a conflict of interest on the part of one or more of the directors between what he or they may believe is best for CAH and what he or they may believe is best for himself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, CAH does not believe there will be any material changes or waivers that CAH’s directors and officers would be likely to make after the mailing of this proxy statement/prospectus. CAH will circulate a new or amended proxy statement/prospectus if changes to the terms of the Merger that would have a material impact on its stockholders are required prior to the vote on the Merger Proposal.

If CAH is unable to complete the Merger or another business combination by January 29, 2023, CAH will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against CAH and, as a result, the proceeds held in the trust account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

Under the terms of CAH’s amended and restated certificate of incorporation, CAH must complete a business combination by January 29, 2023, or CAH must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against CAH. Although CAH has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the trust account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the trust account could be subject to claims which could take priority over those of CAH’s public stockholders. If CAH is unable to complete a business combination within the required time period, the executive officers have agreed they will be personally liable under certain circumstances described herein to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by CAH for services rendered or contracted for or products sold to CAH. However, he may not be able to meet such obligation. Therefore, the per-share distribution from the trust account in such a situation may be less than $10.00 due to such claims.

Additionally, if CAH is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if CAH otherwise enters compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the trust account, CAH may not be able to return to its public stockholders at least $10.00 per share.

CAH’s stockholders may be held liable for claims by third parties against CAH to the extent of distributions received by them.

If CAH is unable to complete the Merger or another business combination within the required time period, CAH will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following

 

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such redemption, subject to the approval of its remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. CAH cannot assure you that it will properly assess all claims that may be potentially brought against CAH. As such, CAH’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, CAH cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by CAH.

If CAH is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by CAH’s stockholders. Furthermore, because CAH intends to distribute the proceeds held in the trust account to its public stockholders promptly after the expiration of the time period to complete a Merger , this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, CAH’s board may be viewed as having breached their fiduciary duties to CAH’s creditors and/or may have acted in bad faith, and thereby exposing itself and CAH to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. CAH cannot assure you that claims will not be brought against it for these reasons.

Activities taken by existing CAH stockholders to increase the likelihood of approval of the Merger Proposal and other proposals could have a depressive effect on CAH’s stock.

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding CAH or its securities, the sponsor, the CAH founders, including CAH’s officers, directors and stockholders prior to CAH IPO, LumiraDx and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Merger proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of CAH common stock or vote their shares in favor of the Merger Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to consummate the Merger where it appears that such requirements would otherwise not be met. Entering into any such arrangements may have a depressive effect on CAH common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

CAH and LumiraDx will incur significant transaction and transition costs in connection with the Merger.

CAH and LumiraDx have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Merger and, in the case of LumiraDx, operating as a public company following the consummation of the Merger. All expenses incurred in connection with the Merger, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by LumiraDx following the Closing Date.

Subsequent to the completion of the Merger, the Company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and the share price of the LMDX common shares, which could cause you to lose some or all of your investment.

Although CAH has conducted extensive due diligence on LumiraDx, CAH cannot assure you that this diligence will uncover all material issues that may be present in LumiraDx’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of LumiraDx’s

 

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business and outside of its control will not later arise. As a result of these factors, the Company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in its reporting losses. Even if CAH’s due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with CAH’s preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on the Company’s liquidity, the fact that the Company reports charges of this nature could contribute to negative market perceptions of the Company or its securities. In addition, charges of this nature may cause the Company to violate net worth or other covenants to which the Company may be subject. Accordingly, any stockholders who choose to remain shareholders following the Merger could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.

The LMDX common shares to be received by CAH’s securityholders as a result of the Merger will have different rights from CAH securities.

Following completion of the Merger, CAH’s securityholders will no longer be securityholders of CAH but will instead be securityholders of LumiraDx. There will be important differences between your current rights as a CAH securityholder and your rights as an LumiraDx securityholder. See the section titled “Description of LumiraDx’s Securities” beginning on page 270 for a discussion of the different rights associated with the LMDX common shares.

CAH’s stockholders will have a reduced ownership and voting interest after consummation of the Merger and will exercise less influence over management.

After the completion of the Merger, CAH stockholders will own a smaller percentage of LumiraDx than they currently own in CAH. At Closing, existing LumiraDx shareholders would hold, assuming for these purposes the Capital Restructuring has occurred, approximately 207,507,674 of the issued and outstanding LMDX ordinary shares and 39,868,442 of the issued and outstanding LMDX common shares and current CAH stockholders would hold approximately 14,780,000 of the issued and outstanding LMDX common shares (assuming no holder of CAH common stock exercises redemption rights as described in this proxy statement/prospectus, and based on current estimates of transaction expenses). Consequently, CAH’s stockholders, as a group, will have reduced ownership and voting power in the Company compared to their ownership and voting power in CAH.

Even if we consummate the Merger, there is no guarantee that the LMDX new warrants will ever be in the money, and they may expire worthless.

The exercise price for the LMDX new warrants will be $11.50 per LMDX common share. Upon consummation of the Merger, the CAH public warrants will be assigned to and assumed by the Company, being referred to herein as the LMDX new warrants. There is no guarantee that the LMDX new warrants, following the Merger, will ever be in the money prior to their expiration, and as such, such warrants may expire worthless.

CAH’s current directors and executive officers and their affiliates own CAH shares and CAH private placement warrants that will be worthless if the Merger is not approved. Such interests may have influenced their decision to approve the Merger.

Under the terms of CAH’s amended and restated certificate of incorporation, CAH must complete a business combination by January 29, 2023, or CAH must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, all of the CAH founder shares and CAH private placement warrants held by the sponsor and CAH’s directors and officers would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such securities. On the other hand, if the Merger is consummated, each outstanding CAH share shall be converted into one common share of LumiraDx. The outstanding CAH public warrants shall be assigned to and assumed by the Company and

 

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by their terms automatically entitle the holders to purchase LMDX common shares upon consummation of the Merger. These financial interests may have influenced the decision of CAH’s directors and officers to approve the Merger and to continue to pursue the Merger. In considering the recommendations of CAH’s board of directors to vote for the Merger Proposal, for the Charter Proposals and for the Adjournment Proposal, its stockholders should consider these interests. See the section of this proxy statement/prospectus titled “Proposal No. 1 - The Merger Proposal—Interests of Certain Persons in the Merger” beginning on page 139.

The Merger may be completed even though material adverse effects may result from the announcement of the Merger, industry-wide changes and other causes.

In general, either CAH or LumiraDx may refuse to complete the Merger if there is a material adverse effect affecting the other party between the signing date of the Merger Agreement and the planned Closing. However, certain types of changes do not permit either party to refuse to consummate the Merger, even if such change could be said to have a material adverse effect on LumiraDx or CAH, including the following events (except, in certain cases where the change has a disproportionate effect on a party):

 

   

any change or proposed change in or change in the interpretation of any law or IFRS;

 

   

events or conditions generally affecting the industries or geographic areas in which LumiraDx and its subsidiaries operate;

 

   

any change in general economic conditions, including changes in the credit, debt, securities, financial or capital markets;

 

   

any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, civil unrest, cyberterrorism, terrorism, military actions, earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, epidemics, pandemics or other outbreaks of illness or public health events and other force majeure events;

 

   

any actions taken or not taken by LumiraDx or its subsidiaries required by the Merger Agreement or any Ancillary Agreement;

 

   

any failure to meet any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue, earnings, cash flow or cash position;

 

   

the public announcement or pendency of the Merger Agreement (including but not limited to any impact on the relationships with customers, vendors, or employees, including voluntary departures of employees in anticipation of the Merger); or

 

   

any actions taken, or failures to take action, or such other changes or events, in each case, which CAH has requested or to which it has consented or which actions are contemplated by the Merger Agreement.

Delays in completing the Merger may substantially reduce the expected benefits of the Merger.

Satisfying the conditions to, and completion of, the Merger may take longer than, and could cost more than, CAH expects. Any delay in completing or any additional conditions imposed in order to complete the Merger may materially adversely affect the benefits that CAH and its stockholders expects to achieve from the Merger.

CAH and LumiraDx have no history operating as a combined company. The unaudited pro forma condensed combined financial information may not be an indication of LumiraDx’s financial condition or results of operations following the Merger, and accordingly, you have limited financial information on which to evaluate LumiraDx and your investment decision.

LumiraDx and CAH have no prior history as a combined entity and their operations have not been previously managed on a combined basis. The unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus has been prepared using the consolidated historical financial

 

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statements of CAH and LumiraDx and is presented for illustrative purposes only and should not be considered to be an indication of the results of operations including, without limitation, future revenue, or financial condition of CAH following the Merger. Certain adjustments and assumptions have been made regarding CAH after giving effect to the Merger. LumiraDx and CAH believe these assumptions are reasonable, however, the information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments are difficult to make with accuracy. These assumptions may not prove to be accurate, and other factors may affect CAH’s results of operations or financial condition following the consummation of the Merger. For these and other reasons, the historical and pro forma condensed combined financial information included in this proxy statement/prospectus does not necessarily reflect LumiraDx’s results of operations and financial condition and the actual financial condition and results of operations of LumiraDx following the Merger may not be consistent with, or evident from, this pro forma financial information.

CAH may be a target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought or threatened against companies that have entered into merger agreements or similar agreements. Even if any lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on CAH’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Merger, then that injunction may delay or prevent the Merger from being completed. In addition, it is possible that any such class action lawsuits or derivative lawsuits will survive the closing, in which case they will need to continue to be defended post-closing of the Merger. Currently, CAH is not aware of any securities class action lawsuits or derivative lawsuits being filed in connection with the Merger.

The sponsor and CAH’s officers and directors have agreed to vote in favor of the Merger, regardless of how CAH’s public stockholders vote.

The sponsor, as well as CAH’s officers and directors, beneficially own and are entitled to vote an aggregate of approximately 20.0% of the outstanding CAH shares. These holders have agreed to vote their CAH shares in favor of the Merger Proposal. These holders have also indicated that they intend to vote their shares in favor of all other proposals being presented at the meeting. Accordingly, it is more likely that the necessary stockholder approval for the Merger Proposal and the other proposals will be received than would be the case if these holders agreed to vote their CAH founder shares in accordance with the majority of the votes cast by holders of CAH common stock.

If the Merger does not qualify as a tax-deferred “reorganization” under Section 368(a) of the Code, then the Merger would be taxable with respect to U.S. holders of CAH common stock and CAH public warrants.

There are significant factual and legal uncertainties as to whether the Merger will qualify as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code. For example, the treatment of the Merger as a tax-deferred “reorganization” may depend on the extent to which stockholders of CAH decide to exchange their CAH common stock for LMDX common shares rather than redeem them for cash. In addition, because of (i) the short history of CAH, (ii) the fact that its assets consist primarily of the funds held in the trust account, (iii) the possibility of a significant number of holders of redeeming their CAH common stock for cash, and (iv) the lack of authority or IRS guidance directly on-point in respect of the type of companies that includes CAH, there is significant uncertainty as to whether CAH will be able to meet the “continuity of business enterprise” requirement for qualification as a “reorganization.” It is the opinion of Sidley Austin LLP that the Merger is more likely than not to qualify as a tax-deferred reorganization pursuant to Section 368(a) of the Code. However, no assurance can be given that the IRS would not challenge the treatment of the Merger as a tax-deferred “reorganization” in light of the specific requirements of Section 368(a) of the Code.

 

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It is the opinion of Sidley Austin LLP that the Merger is more likely than not to qualify as a tax-deferred reorganization pursuant to Section 368(a) of the Code. However, no assurance can be given that the IRS would not challenge the treatment of the Merger as a tax-deferred “reorganization” in light of the specific requirements of Section 368(a) of the Code. The opinion of Sidley Austin LLP is based on facts and representations contained in representation letters provided by CAH, LumiraDx and Merger Sub and on certain factual assumptions, including the assumption that not more than 50% of the assets of CAH will be used to redeem CAH common stock in contemplation of, or in connection with, the Merger, and further assumes that the business combination is completed in the manner set forth in the Merger Agreement and the registration statement of which this proxy statement/prospectus forms part. If any of the assumptions, representations or covenants on which the opinion is based is or becomes incorrect, incomplete, inaccurate or is otherwise not complied with, the validity of the opinion described above may be adversely affected and the tax consequences of the Merger could differ from those described herein. In particular, if more than 50% of the assets of CAH were to be used to redeem CAH common stock in contemplation of, or in connection with, the Merger, the opinion described above would no longer apply and LumiraDx and CAH may, depending on the particular facts and circumstances, report the Merger as a taxable transaction. If the Merger is a taxable transaction, then U.S. holders of CAH common stock and CAH public warrants would generally recognize gain or loss on the exchange of CAH common stock and CAH public warrants for LMDX common shares and LMDX new warrants. The percentage of CAH’s assets that will be used to redeem CAH common stock depends on the extent to which holders of CAH common stock exercise their rights pursuant to the CAH Redemption, which cannot be determined as of the date of this proxy statement/prospectus. Although the Merger Agreement imposes a “Minimum Cash Condition” (as defined in Section 7.3(f) of the Merger Agreement), which generally requires that CAH have a minimum of $65,000,000 in its trust account after giving effect to the exercise of redemption rights by holders of CAH common stock, LumiraDx may waive the Minimum Cash Condition and may proceed with the Merger even if more than 50% of the assets of CAH were to be used to redeem CAH common stock in contemplation of, or in connection with, the Merger.

Subject to the foregoing, CAH and LumiraDx intend to report the Merger as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code and, if the Merger so qualifies (subject to satisfaction of the requirements of Section 367(a) of the Code), the Merger is not expected to result in gain being recognized by U.S. holders of CAH common stock and CAH public warrants immediately prior to the closing of the Merger. However, the qualification of the Merger as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code is not a condition to the closing of the Merger and the Merger Agreement does not include any covenant requiring CAH or LumiraDx to ensure that the Merger qualifies as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code.

If, at the closing of the Merger, any requirement for Section 368(a) of the Code is not met, then a U.S. holder (as defined in the section titled “Certain Material Income Tax Considerations—Certain Material U.S. Federal Income Tax Considerations” beginning on page 289) of CAH common stock and/or CAH public warrants would recognize gain or loss in an amount equal to the difference, if any, between (i) the fair market value (as of the Closing Date) of the LMDX common shares and LMDX new warrants received pursuant to the Merger and (ii) such U.S. holder’s aggregate tax basis in the CAH common stock and CAH public warrants surrendered in exchange for the LMDX common shares and LMDX new warrants.

Even if the Merger qualifies as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code, a U.S. person will be required to recognize any gain (but would not be permitted to recognize any loss), unless the Merger satisfies the requirements of Section 367(a) of the Code.

Even if the Merger qualifies as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code, Section 367(a) of the Code and the Treasury regulations promulgated thereunder provide that, where a U.S. person exchanges stock or securities in a U.S. corporation for stock or securities in a foreign corporation in a transaction that otherwise qualifies as a tax-deferred reorganization, the U.S. person is required to recognize any gain (but would not be permitted to recognize any loss) realized on such exchange unless certain additional requirements are satisfied.

 

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In general, for the Merger to meet these additional requirements, certain reporting requirements must be satisfied and (i) no more than 50% of both the total voting power and the total value of the stock of the transferee foreign corporation is received, in the aggregate, by the “U.S. transferors” (as defined in the Treasury regulations and computed taking into account direct, indirect and constructive ownership) in the transaction; (ii) no more than 50% of each of the total voting power and the total value of the stock of the transferee foreign corporation is owned, in the aggregate, immediately after the transaction by “U.S. persons” (as defined in the Treasury regulations) that are either officers or directors or “five-percent target shareholders” (as defined in the Treasury regulations and computed taking into account direct, indirect and constructive ownership) of the transferred U.S. corporation; and (iii) the “active trade or business test” as defined in Treasury regulations Section 1.367(a)-3(c)(3) must be satisfied. Conditions (i), (ii), and (iii) are expected to be met, and, as a result, the Merger is expected to satisfy the applicable requirements under Section 367(a) of the Code on account of such conditions.

It is the opinion of Sidley Austin LLP that it is more likely than not that the Merger will not result in gain recognition by a U.S. holder (as defined in the section titled “Certain Material Income Tax Considerations—Certain Material U.S. Federal Income Tax Considerations”) exchanging CAH common stock and CAH public warrants for LMDX common shares and LumiraDx new warrants so long as either (A) the U.S. holder is not a “five-percent transferee shareholder” (within the meaning of Treasury Regulation Section 1.367(a)-3(c)(5)(ii)) of LumiraDx or (B) the U.S. holder is a “five-percent transferee shareholder” of LumiraDx and enters into an agreement with the IRS to recognize gain under certain circumstances. The opinion of Sidley Austin LLP is based on facts and representations contained in representation letters provided by CAH, LumiraDx and Merger Sub and on certain factual assumptions, and further assumes that the business combination is completed in the manner set forth in the Merger Agreement and the registration statement of which this proxy statement/prospectus forms part. If any of the assumptions, representations or covenants on which the opinion is based is or becomes incorrect, incomplete, inaccurate or is otherwise not complied with, the validity of the opinion described above may be adversely affected and the tax consequences of the Merger could differ from those described herein. Furthermore, if the Merger qualifies as a tax-deferred “reorganization” pursuant to Section 368(a) of the Code but, at the Effective Time, any requirement for Section 367(a) of the Code not to impose gain on a U.S. holder is not satisfied, then a U.S. holder of CAH common stock or CAH public warrants generally would recognize gain (but would not be permitted to recognize any loss) in an amount equal to the excess, if any, of the fair market value as of the closing date of the LMDX common shares and LumiraDx new warrants received by such holder in the Merger over such U.S. holder’s tax basis in the CAH common stock and CAH public warrants surrendered by such U.S. holder in the Merger.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus includes statements that express CAH’s and/or LumiraDx’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this proxy statement/prospectus and include statements regarding CAH’s and/or LumiraDx’s intentions, beliefs or current expectations concerning, among other things, the Merger, the benefits and synergies of the Merger, including anticipated cost savings, results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which LumiraDx operates or may in the future operate and include, without limitation the CAH financial projections (as defined in the “Proposal No.1 - The Merger Proposal - Summary of Financial Analyses” section of this proxy statement/prospectus). Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting CAH and/or LumiraDx. Factors that may impact such forward-looking statements include:

 

   

LumiraDx’s ability to compete in the highly competitive markets in which it operates, and potential adverse effects of this competition;

 

   

LumiraDx’s ability to maintain revenues if its products and services do not achieve and maintain broad market acceptance, or if it is unable to keep pace with or adapt to rapidly changing technology, evolving industry standards and changing regulatory requirements;

 

   

uncertainty, downturns and changes in the markets LumiraDx serves;

 

   

LumiraDx’s ability to achieve operational cost improvements and other benefits expected from the Merger;

 

   

LumiraDx’s and/or CAH’s expectations regarding the size of the POC market for the Platform, the size of the various addressable markets for certain tests and our ability to penetrate such markets by driving the conversion of healthcare providers’ testing needs onto its Platform;

 

   

LumiraDx’s commercialization strategy, including its plans to initially focus its sales efforts on large healthcare systems, government organizations and national pharmacy chains that want to deploy comprehensive POC testing across their networks;

 

   

LumiraDx’s and/or CAH’s belief that LumiraDx will be able to drive commercialization of its Platform through the launch of its SARS-CoV-2 antigen and SARS-CoV-2 antibody tests;

 

   

the willingness of healthcare providers to use a POC system over central lab systems and the rate of adoption of the Platform by healthcare providers and other users;

 

   

the scalability and commercial viability of our manufacturing methods and processes, especially in light of the anticipated demand for the Platform and our minimum commitments to supply the Platform to customers;

 

   

LumiraDx’s ability to source suitable raw materials and components for the manufacture of its Instrument and test strips in a timely fashion;

 

   

LumiraDx’s ability to maintain its current relationships, or enter into new relationships, with diagnostics or R&D companies, third party manufacturers and commercial distribution collaborators;

 

   

LumiraDx’s ability to effectively manage its anticipated growth;

 

   

LumiraDx’s ability to rapidly develop and commercialize diagnostics tests that are accurate and cost-effective;

 

   

the timing, progress and results of LumiraDx’s diagnostics tests, including statements regarding launch plans, commercialization plans and proxy statement/prospectus for such tests, all which may be delayed by or halted due to a number of factors, including the impact of the COVID-19 pandemic;

 

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the timing, scope or likelihood of regulatory submissions, filings, approvals, authorizations or clearances;

 

   

the pricing, coverage and reimbursement of LumiraDx’s Instrument and tests, if approved;

 

   

LumiraDx’s ability to repay or service its debt obligations and meet the financial covenants related to such debt obligations;

 

   

LumiraDx’s ability to enforce its intellectual property rights and to operate its business without infringing, misappropriating, or otherwise violating the intellectual property rights and proprietary technology of third parties;

 

   

developments and projections relating to LumiraDx’s competitors and its industry;

 

   

the significant risks, assumptions, estimates and uncertainties associated with projections, which may cause projected revenues, expenses and profitability of LumiraDx to differ materially from the CAH financial projections;

 

   

LumiraDx’s and/or CAH’s expectations related to the use of proceeds from the Merger;

 

   

LumiraDx’s ability to develop effective internal controls over financial reporting as it transitions to become a publicly-traded company;

 

   

LumiraDx’s ability to attract and retain qualified employees and key personnel;

 

   

the effects of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of LumiraDx’s business or operations;

 

   

LumiraDx’s and/or CAH’s expectations regarding the time during which LumiraDx will be an emerging growth company under the JOBS Act and a foreign private issuer;

 

   

the future trading price of LMDX common shares and impact of securities analysts’ reports on these prices;

 

   

LumiraDx’s ability to fully derive anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions;

 

   

exchange rate fluctuations and volatility in global currency markets;

 

   

potential adverse tax consequences resulting from the international scope of LumiraDx’s operations, corporate structure and financing structure;

 

   

U.S. tax legislation enacted in 2017, which could materially adversely affect LumiraDx’s financial condition, results of operations and cash flows;

 

   

increased risks resulting from LumiraDx’s international operations;

 

   

LumiraDx’s ability to comply with various trade restrictions, such as sanctions and export controls, resulting from its international operations;

 

   

LumiraDx’s ability to comply with the anti-corruption laws of the United States and various international jurisdictions;

 

   

the impact on LumiraDx’s business as a result of the United Kingdom’s withdrawal from the E.U.;

 

   

fraudulent or unpermitted data access, cyber-security attacks, or other privacy breaches;

 

   

government and agency demand for LumiraDx’s products and services and LumiraDx’s ability to comply with government contracting regulations;

 

   

LumiraDx’s ability to attract, motivate and retain qualified employees, including members of its senior management team;

 

   

LumiraDx’s ability to operate in a litigious environment;

 

   

other factors disclosed in this proxy statement/prospectus; and

 

   

other risks and uncertainties, including those listed in the section titled “Risk Factors” beginning on page 20.

 

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The forward-looking statements contained in this proxy statement/prospectus are based on CAH’s and/or LumiraDx’s current expectations and beliefs concerning future developments and their potential effects on the Merger and LumiraDx. There can be no assurance that future developments affecting CAH and/or LumiraDx will be those that CAH or LumiraDx has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond either CAH’s or the LumiraDx’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. CAH and LumiraDx will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Before a stockholder grants its proxy or instructs how its vote should be cast or vote on the merger, it should be aware that the occurrence of the events described in the section titled “Risk Factors” beginning on page 20 and elsewhere in this proxy statement/prospectus may adversely affect CAH and/or LumiraDx.

 

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SPECIAL MEETING OF CAH STOCKHOLDERS

General

CAH is furnishing this proxy statement/prospectus to CAH stockholders as part of the solicitation of proxies by CAH’s board of directors for use at the special meeting of CAH stockholders to be held on             , 2021, and at any adjournment or postponement thereof. This proxy statement/prospectus provides CAH’s stockholders with information they need to know to be able to vote or instruct their vote to be cast at the special meeting.

Date, Time and Place

The special meeting of CAH stockholders will be held on             , 2021, at      :00 a.m., eastern time, in virtual format. You may attend the special meeting webcast by accessing the web portal located at https://                                 and following the instructions set forth on your proxy card.

Purpose of the CAH Special Meeting

At the special meeting, CAH is asking holders of CAH shares to:

 

   

consider and vote upon a proposal to adopt the Merger Agreement and approve the Merger contemplated thereby (the “Merger Proposal”);

 

   

consider and vote upon separate proposals to approve the following material differences between the constitutional documents of LumiraDx that will be in effect upon the closing of the Transaction and CAH’s current amended and restated certificate of incorporation: (i) the name of the new foreign public entity will be “LumiraDx Limited” as opposed to “CA Health Acquisition Corp.”; (ii) the authorized share capital of the new public entity will be US$10,290 divided into, assuming completion of the Merger Subdivision, (1) 1,769,292,966 LMDX ordinary shares with a par value (to seven decimal places) of US$0.0000028 per LMDX ordinary share, (2) 1,769,292,966 LMDX common shares with a par value (to seven decimal places) of US$0.0000028 per LMDX common share; (3) undesignated shares of such class or classes (however designated) as the board of LumiraDx may determine (iii) the new public entity has two classes of shares, being the LMDX common shares and the LMDX ordinary shares, such that each holder of LMDX common shares will be entitled to one vote on any proposed shareholder resolution for each such share and each holder of LMDX ordinary shares will be entitled to ten votes on any proposed shareholder resolution for each such share; (iv) the new public entity shall have two classes of directors, other than the LMDX Founder Directors, serving staggered terms with the terms of Class I and Class II directors expiring at the annual general meeting of shareholders to be held in 2022 and 2023, respectively, and each term expiring two years thereafter, in each case; and (v) the new public entity’s constitutional documents will not include the various provisions applicable only to special purpose acquisition corporations that CAH’s amended and restated certificate of incorporation contains (such as the obligation to dissolve and liquidate if a business combination is not consummated in a certain period of time) (the “Charter Proposals”); and

 

   

if applicable, consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that CAH is unable to consummate the Merger (the “Adjournment Proposal”).

Recommendation of CAH Board of Directors

CAH’s board of directors has unanimously determined that the Merger Proposal, each of the Charter Proposals and, if applicable, the Adjournment Proposal is fair to and in the best interests of CAH and its stockholders; has unanimously approved the Merger Proposal, each of the Charter Proposals and the Adjournment Proposal; unanimously recommends that stockholders vote “FOR” the Merger Proposal;

 

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unanimously recommends that stockholders vote “FOR” each of the Charter Proposals; and unanimously recommends that stockholders vote “FOR” the Adjournment Proposal if one is presented to the meeting.

Record Date; Persons Entitled to Vote

CAH has fixed the close of business on             , 2021, as the “record date” for determining CAH stockholders entitled to notice of and to attend and vote at the special meeting. As of the close of business on , 2021, there were 14,375,000 shares of CAH common stock outstanding and 2,875,000 CAH founder shares entitled to vote. Each of the CAH shares is entitled to one vote per share at the special meeting.

Pursuant to the Sponsor Agreement, the 2,875,000 CAH founder shares owned of record by the sponsor and any shares of CAH common stock acquired by it or the CAH founders in the aftermarket, will be voted in favor of the Merger Proposal. The sponsor has indicated it intends to vote its CAH shares in favor of the other proposals presented at the special meeting.

Quorum

The presence, in person or by proxy, of holders representing a majority of all the outstanding shares of common stock entitled to vote constitutes a quorum at the special meeting. A quorum will be present at the CAH special meeting if a majority of all the outstanding CAH shares entitled to vote at the meeting are represented at the virtual special meeting or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum. The CAH common stock and CAH founder shares are entitled to vote together as a single class on all matters to be considered at the special meeting.

Abstentions and Broker Non-Votes

Proxies that are marked “abstain” and proxies relating to “street name” shares that are returned to CAH but marked by brokers as “not voted” will be treated as shares present for purposes of determining the presence of a quorum on all matters. The latter will not be treated as shares entitled to vote on the matter as to which authority to vote is withheld from the broker. If a stockholder does not give the broker voting instructions, under applicable self-regulatory organization rules, its broker may not vote its shares on “non-routine” proposals, such as the Merger Proposal and the Charter Proposals.

Vote Required

The approval of the Merger Proposal will require the affirmative vote for the proposal by the holders of a majority of the then outstanding CAH shares. Abstentions and broker non-votes have the same effect as a vote against the proposal.

The approval of the Charter Proposals will require the affirmative vote for the proposal by the holders of a majority of the then outstanding CAH Shares. Abstentions and broker non-votes have the same effect as a vote against the charter Proposals.

The approval of the Adjournment Proposal, if presented, will require the affirmative vote of the holders of a majority of CAH shares represented and entitled to vote thereon at the meeting. Abstentions are deemed entitled to vote on such Adjournment Proposal. Therefore, they have the same effect as a vote against the Adjournment Proposal. Broker non-votes are not deemed entitled to vote on such Adjournment Proposal and, therefore, they will have no effect on the vote on such Adjournment Proposal.

Voting Your Shares

Each of the CAH shares that you own in your name entitles you to one vote. Your proxy card shows the number of CAH shares that you own. If your CAH shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

 

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Methods of Voting

CAH stockholders of record may vote their shares in four ways:

 

   

by internet at www.proxyvote.com 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on             , 2021 (have your Notice or proxy card in hand when you visit the website);

 

   

by toll-free telephone at             , until 11:59 p.m. Eastern Time on             , 2021 (have your Notice or proxy card in hand when you call);

 

   

by completing and mailing your proxy card; or

 

   

by internet during the special meeting. Instructions on how to attend and vote at the special meeting are described at             .

In order to be counted, proxies submitted by telephone or internet must be received by 11:59 p.m. Eastern Time on             , 2021. Proxies submitted by U.S. or international mail must be received before the start of the special meeting.

If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by internet, telephone, or mail before the meeting, or by internet during the special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Voting at the Special Meeting.

Shares held directly in your name as stockholder of record may be voted at the special meeting via the special meeting website. If you choose to virtually attend the special meeting and vote your shares at the meeting via the special meeting website, you will need the 16-digit control number included on your proxy card.

If you are a beneficial holder, you will need to obtain a specific control number from your broker, bank or other nominee holder of record giving you the right to vote the shares.

Even if you plan to virtually attend the special meeting, the CAH board of directors recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the special meeting.

Voting by Proxy

You may direct your vote by proxy without virtually attending the special meeting. You can vote by proxy by phone, the internet or mail by following the instructions provided in the enclosed proxy card. If you are a street name stockholder, please follow the instructions from your broker, bank, or other nominee to vote by internet, telephone, or mail before the special meeting, or by internet during the special meeting, in each case by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your CAH shares, you may contact         , toll-free at         , or for brokers and banks, collect at          or via email at         .

 

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Revoking Your Proxy

If you are a CAH stockholder and you submit a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

   

notifying CAH’s Corporate Secretary, in writing, at 99 Summer Street, Suite 200, Boston, MA 02110. Such notice must be received at the above location before 11:59 p.m. Eastern Time on , 2021;

 

   

voting again using the telephone or internet before 11:59 p.m. Eastern Time on , 2021 (your latest telephone or internet proxy is the one that will be counted); or

 

   

attending and voting during the special meeting. Simply logging into the special meeting will not, by itself, revoke your proxy.

In light of possible restrictions due to COVID-19, CAH stockholders are encouraged to change their vote by voting again using the telephone or internet.

If you are a street name stockholder, you may revoke any prior voting instructions by contacting your broker, bank or other nominee or by attending the special meeting and voting by internet during the meeting by using the 16-digit control number, which is in the instructions accompanying your proxy materials, if your broker, bank, or nominee makes those instructions available.

Who Can Answer Your Questions About Voting Your Shares

If you are a CAH stockholder and have any questions about how to vote or direct a vote in respect of your CAH shares, you may call         , CAH’s proxy solicitor, at          or CAH at (212) 380-7500.

Redemption Rights

Holders of public shares may seek to redeem their shares for cash, provided that they vote on the Merger Proposal (regardless of whether they vote for or against). Any stockholder holding public shares as of the record date who votes in favor of or against the Merger Proposal may demand that CAH redeem such shares for a full pro rata portion of the trust account (which, for illustrative purposes, was $         per share as of             , 2021, the record date), calculated as of two business days prior to the anticipated consummation of the Merger. If a holder properly seeks redemption as described in this section and the Merger is consummated, CAH will redeem these shares for a pro rata portion of funds deposited in the trust account and the holder will no longer own these shares following the Merger.

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed for cash.

The sponsor and the CAH founders will not have redemption rights with respect to any shares of CAH common stock owned by them, directly or indirectly in connection with the Merger.

CAH stockholders who seek to redeem their public shares for cash must affirmatively vote for or against the Merger Proposal. CAH stockholders who do not vote with respect to the Merger Proposal, including as a result of an abstention or a broker non-vote, may not redeem their shares for cash. Holders may demand redemption by delivering their stock, either physically or electronically using The Depository Trust Company’s DWAC System, to CAH’s transfer agent prior to the vote at the special meeting. If you hold the CAH shares in street name, you will have to coordinate with your broker to have your CAH shares certificated or delivered

 

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electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $         and it would be up to the broker whether or not to pass this cost on to the redeeming stockholder. In the event the proposed Merger is not consummated this may result in an additional cost to stockholders for the return of their shares.

Any request to redeem such shares, once made, may be withdrawn at any time up to the vote on the Merger Proposal. Furthermore, if a holder of a public share delivered its certificate in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the transfer agent return the certificate (physically or electronically).

If the Merger is not approved or completed for any reason, then CAH’s public stockholders who elected to exercise their redemption rights will not be entitled to redeem their shares for a full pro rata portion of the trust account, as applicable. In such case, CAH will promptly return any shares delivered by holders of public shares. If CAH would be left with less than $5,000,001 of net tangible assets as a result of the holders of public shares properly demanding redemption of their shares for cash, CAH will not be able to consummate the Merger.

The closing price of CAH common stock on             , 2021, the record date, was $            . The cash held in the trust account on such date was approximately $             ($             per public share). Prior to exercising redemption rights, stockholders should verify the market price of CAH common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. CAH cannot assure its stockholders that they will be able to sell their shares of CAH common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.

If a holder of public shares exercises its redemption rights, then it will be exchanging its shares of CAH common stock for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if you affirmatively vote for or against the Merger Proposal and properly demand redemption no later than the close of the vote on the Merger Proposal by delivering your stock certificate (either physically or electronically) to CAH’s transfer agent prior to the vote at the special meeting, and provided the Merger is consummated.

Appraisal Rights

Neither stockholders, unitholders nor warrant holders of CAH have appraisal rights in connection the Merger under the DGCL.

Proxy Solicitation Costs

CAH is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail but also may be made by telephone or in person. CAH and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. CAH will bear the cost of the solicitation.

CAH has hired          to assist in the proxy solicitation process. CAH will pay that firm a fee of $     plus disbursements. Such payment will be made from non-trust account funds.

CAH will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. CAH will reimburse them for their reasonable expenses.

 

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Sponsor and CAH Founders

As of             , 2021, the record date, the sponsor owned of record and was entitled to vote an aggregate of 2,875,000 CAH founder shares that were issued prior to the CAH IPO. Such shares currently constitute 20% of the outstanding CAH shares. The holders of these securities have agreed to vote the CAH founder shares, as well as any shares of CAH common stock acquired by them in the aftermarket, in favor of the Merger Proposal. The holders of these securities have also indicated that they intend to vote their shares in favor of all other proposals being presented at the meeting. The CAH founder shares have no right to participate in any redemption or distribution and will be worthless if no Merger is effected by CAH.

If the Merger is consummated, under the Sponsor Agreement the LMDX common shares to be issued to the sponsor and the CAH founders in connection with the Merger will be subject to, other than in the limited exceptions set out in the Sponsor Agreement and the Amended and Restated Articles, a one year lock-up restriction.

With certain limited exceptions, if the Merger is not consummated, the CAH founder shares will not be transferable, assignable or salable by the sponsor or the CAH founders until the earlier of: (1) one year after the completion of CAH’s initial business combination; and (2) the date on which CAH consummates a liquidation, merger, stock exchange, reorganization or other similar transactions after CAH’s initial business combination that results in all of CAH’s public stockholders having the right to exchange their shares of CAH common stock for cash, securities or other property. Notwithstanding the foregoing, if the Merger is not consummated and if the last reported sale price of CAH common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after CAH’s initial Merger, the CAH founder shares will be released from the lock-up.

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding CAH or its securities, the sponsor, the CAH founders, LumiraDx or LumiraDx shareholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Merger Proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of CAH’s common stock or vote their shares in favor of the Merger Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to complete the Merger where it appears that such requirements would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and, the transfer to such investors or holders of shares or rights owned by the CAH initial stockholders for nominal value.

Entering into any such arrangements may have a depressive effect on CAH common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the special meeting.

If such transactions are effected, the consequence could be to cause the Merger to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Merger Proposal and other proposals and would likely increase the chances that such proposals would be approved.

No agreements dealing with the above arrangements or purchases have been entered into as of the date of this proxy statement/prospectus by the sponsor, the CAH founders or any of their respective affiliates. CAH will file a Current Report on Form 8-K to disclose arrangements entered into or significant

 

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purchases made by any of the aforementioned persons that would affect the vote on the Merger Proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

 

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PROPOSAL NO. 1 - THE MERGER PROPOSAL

The following is a summary of the material terms of the Merger Agreement. A copy of the Merger Agreement is attached hereto as Annex A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. The Merger Agreement has been attached to this proxy statement/prospectus to provide you with information regarding its terms. It is not intended to provide any other factual information about CAH, LumiraDx or Merger Sub. The following description does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement. You should refer to the full text of the Merger Agreement for details of the Merger and the terms and conditions of the Merger Agreement. References to the number and nominal value of any LMDX ordinary share, LMDX common share or any other security of LumiraDx in this “Merger Proposal” section are, unless otherwise indicated, to the numbers and nominal values as set in the Merger Agreement and therefore assume completion of the Capital Restructuring. However, the sections describing the pre-Merger transactions do not reflect the completion of the proposed Capital Restructuring.

The Merger Agreement contains representations and warranties that LumiraDx and Merger Sub, on the one hand, and CAH, on the other hand, have made to one another as of specific dates. These representations and warranties have been made for the benefit of the other parties to the Merger Agreement and may be intended not as statements of fact but rather as a way of allocating the risk to one of the parties if those statements prove to be incorrect. In addition, the assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules exchanged by the parties in connection with signing the Merger Agreement. While LumiraDx and CAH do not believe that these disclosure schedules contain information required to be publicly disclosed under the applicable securities laws, other than information that has already been so disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached Merger Agreement. Accordingly, you should not rely on the representations and warranties as current characterizations of factual information about LumiraDx or CAH, because they were made as of specific dates, may be intended merely as a risk allocation mechanism between LumiraDx, Merger Sub and CAH and are modified by the disclosure schedules. The disclosure schedules are not publicly filed and are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for allocating risk among the parties as described above.

General

On April 6, 2021, LumiraDx, Merger Sub and CAH entered into the Merger Agreement, pursuant to which Merger Sub will be merged with and into CAH and CAH will become a wholly owned subsidiary of LumiraDx. The terms of the Merger Agreement, which contains customary representations and warranties, covenants, closing conditions, termination provisions and other terms relating to the Merger and the other transactions contemplated thereby, are summarized below, which include, for the avoidance of doubt, the amendments provided for in the Amendment to the Merger Agreement which the Company, CAH and Merger Sub entered into on August 19, 2021 which, among other things, reduced the valuation of the Company from $5.0 billion to $3.0 billion (excluding $115 million raised by CAH in its initial public offering).

Pro Forma Capitalization

Assuming that none of CAH’s public stockholders demand redemption of their shares of CAH Class A Common Stock pursuant to the organizational documents of CAH, we estimate that, upon completion of the Merger, the existing LumiraDx shareholders and holders of the 5% notes, 10% notes and the LMDX existing warrants will own approximately         % of the outstanding LMDX common shares and the existing CAH stockholders will own the remaining          of the LMDX common shares.

Pre-Merger Transactions

Capital Restructuring. Immediately prior to the Effective Time, (i) (A) each LMDX series A preferred share that is issued and outstanding will be converted into one LMDX ordinary share in accordance with the LMDX Articles; (B) each LMDX series B preferred share that is issued and outstanding will be converted into LMDX

 

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common shares in accordance with the LMDX Articles; (C) the 5% notes will be converted into 9,195,340 LMDX common shares; (D) the 10% notes will be converted into 7,802,080 LMDX common shares; and (ii) immediately following the foregoing transactions, LumiraDx shall effect the Merger Subdivision, such that the equity value per share (either LMDX ordinary share or LMDX common share) on a fully diluted basis (using the treasury stock method of accounting) is $10.00 per share, based on a valuation of LumiraDx of $3.0 billion (which such valuation may be increased for shares issued for cash in equity financing transactions by LumiraDx prior to the Effective Time). The purpose of the Merger Subdivision is to achieve an exchange ratio in the Merger of one LMDX common share for each share of CAH common stock. We refer to these steps collectively as the Capital Restructuring.

CAH Class B Conversion. Pursuant to the Merger Agreement, immediately prior to the Effective Time, after giving effect to the Capital Restructuring and the redemption rights of holders of CAH common stock each issued and outstanding share of Class B common stock of CAH shall be automatically converted into one share of CAH common stock in accordance with the terms of the amended and restated certificate of incorporation of CAH.

CAH Redemption. No later than one (1) Business Day prior to the Closing, CAH shall deliver to LumiraDx written notice setting forth: (i) the aggregate amount of cash proceeds that will be required to satisfy the CAH Redemption; (ii) the amount of cash in the Trust Account and the amount of expenses of CAH as of the Closing; and (iii) the number of shares of CAH common stock to be outstanding as of immediately prior to the Effective Time and after giving effect to the CAH Redemption and the CAH Class B Conversion (such written notice of (i), (ii) and (iii), together, the “Closing Statement”). If LumiraDx in good faith disagrees with any portion of the Closing Statement, then LumiraDx may deliver a notice of such disagreement to CAH prior to the Closing Date (the “Pre-Closing Notice of Disagreement”). LumiraDx and CAH shall seek in good faith to resolve any differences they have with respect to the matters specified in the Pre-Closing Notice of Disagreement. CAH shall effect the CAH Redemption (with such adjustments as shall have been agreed by the parties) no later than immediately prior to the Effective Time.

CAH Units. Immediately prior to the Effective Time, each one share of CAH common stock and one half of a CAH public warrant comprising each issued and outstanding CAH Unit immediately prior to the Effective Time shall be automatically separated (the “Unit Separation”) and the holder thereof shall be deemed to hold one share of CAH common stock and one-half of a CAH public warrant, provided that no fractional warrants will be issued in connection with the Unit Separation such that if a holder of CAH Units would be entitled to receive a fractional warrant upon the Unit Separation, the number of CAH public warrants to be issued to such holder upon the Unit Separation shall be rounded down to the nearest whole number of warrants. The shares of CAH common stock and CAH public warrants held following the Unit Separation shall be converted in the Merger as described below.

The Merger

On the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the DGCL, on the Closing Date, Merger Sub shall merge with and into CAH. Following the Effective Time, the separate existence of Merger Sub shall cease and CAH shall continue as the surviving entity of the Merger and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the DGCL.

Conversion of Securities in the Merger

Pursuant to the Merger Agreement and assuming the Merger Subdivision has occurred, at the Effective Time, as a result of the Merger each share of CAH common stock issued and outstanding as of immediately prior to the Effective Time (after giving effect to the CAH Class B Conversion and the CAH Redemption) shall be automatically canceled and extinguished and reissued to LumiraDx as one share of common stock of the surviving corporation, in consideration for the right to receive one LMDX common share, which we refer to as the Merger Consideration.

 

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At the Effective Time, as a result of the Merger each share of common stock of CAH held immediately prior to the Effective Time by CAH as treasury shares shall be canceled and extinguished, and no consideration shall be paid with respect thereto.

At the Effective Time, each share of common stock, par value $0.0001, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall automatically convert into one share of common stock of the surviving corporation, and each share of CAH common stock shall be canceled and extinguished and reissued to LumiraDx as one share of common stock of the surviving corporation in consideration for the right to receive the Merger Consideration.

At the Effective Time, as a result of the Merger and without any action on the part of any holder of a CAH public warrant, each CAH public warrant that is issued and outstanding immediately prior to the Effective Time shall be assigned to and assumed by LumiraDx and become one LMDX new warrant exercisable for one LMDX common share in accordance with its terms.

Closing; Effective Time

The Closing will occur as promptly as practicable, but in no event later than three business days, after the satisfaction or, if permissible, waiver of the conditions to the completion of the Merger set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at Closing, provided that the occurrence of the Closing shall remain subject to the satisfaction or, if permissible, waiver of such conditions at the Closing).

The Effective Time of the Merger will occur at the time of filing of a certificate of merger with the Secretary of State of the State of Delaware on the Closing Date, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL.

Representations and Warranties

The Merger Agreement contains customary representations and warranties of LumiraDx, Merger Sub and CAH relating to, among other things, their ability to enter into the Merger Agreement and their respective outstanding capitalization. These representations and warranties are subject to materiality, knowledge and other similar qualifications in many respects and expire at the Effective Time. These representations and warranties have been made solely for the benefit of the other parties to the Merger Agreement.

The Merger Agreement contains representations and warranties made by LumiraDx and Merger Sub to CAH relating to a number of matters, including the following:

 

   

organization and qualification;

 

   

subsidiaries;

 

   

organizational documents;

 

   

capitalization;

 

   

authority relative to the Merger Agreement;

 

   

no conflict;

 

   

required filings and consents;

 

   

permits and compliance;

 

   

financial statements and records;

 

   

absence of certain changes or events;

 

   

inventory;

 

   

health care matters;

 

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other regulatory compliance;

 

   

export control laws;

 

   

absence of litigation;

 

   

products liability;

 

   

employee benefit plans; labor and employment matters;

 

   

real property;

 

   

title to assets;

 

   

intellectual property;

 

   

manufacturing, marketing and development rights;

 

   

proprietary information agreements;

 

   

data privacy and security;

 

   

taxes;

 

   

environmental matters;

 

   

material contracts;

 

   

customers and suppliers;

 

   

insurance;

 

   

board approval;

 

   

vote required;

 

   

certain business practices;

 

   

international trade laws;

 

   

interested party transactions; and

 

   

no brokers.

The Merger Agreement contains representations and warranties made by CAH to LumiraDx and Merger Sub relating to a number of matters, including the following:

 

   

corporate organization;

 

   

governing documents;

 

   

capitalization;

 

   

authority relative to the Merger Agreement;

 

   

no conflict;

 

   

required filings and consents;

 

   

compliance;

 

   

SEC filings;

 

   

financial statements;

 

   

Sarbanes-Oxley;

 

   

absence of certain changes or events;

 

   

absence of litigation;

 

   

board approval;

 

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vote required

 

   

brokers;

 

   

CAH Trust Fund;

 

   

Employees;

 

   

taxes;

 

   

brokers;

 

   

registration and listing;

 

   

business activities;

 

   

affiliate transactions;

 

   

Investment Company Act; JOBS Act; and

 

   

due diligence investigations.

Conduct of Business Pending the Merger

LumiraDx has agreed that, between the date of the Merger Agreement and the Effective Time or the earlier termination of the Merger Agreement, except (1) as expressly contemplated by any other provision of the Merger Agreement or any Ancillary Agreement, (2) as set forth in the disclosure schedule delivered by LumiraDx and (3) as required by applicable law, unless CAH otherwise consents in writing (which consent shall not be unreasonably conditioned, withheld or delayed): (i) LumiraDx shall, and shall cause its subsidiaries to, conduct their business in the ordinary course of business (except as expressly required by COVID-19 measures or as LumiraDx determines to be necessary or advisable in light of the COVID-19 pandemic, geopolitical conditions, outbreaks of hostilities, acts of war, sabotage, civil unrest, cyberterrorism, terrorism, military actions, earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, epidemics, pandemics or other outbreaks of illness or public health events and other force majeure events); and (ii) LumiraDx shall use commercially reasonable efforts to preserve substantially intact the business organization of LumiraDx and its subsidiaries, to keep available the services of the current officers, key employees and consultants of LumiraDx and its subsidiaries and to preserve the current relationships of LumiraDx and its subsidiaries with customers, suppliers and other persons with which LumiraDx or any of its subsidiaries has significant business relations.

In addition to the general covenants above, LumiraDx has agreed that during this period, except (1) as expressly contemplated by the Merger Agreement or any Ancillary Agreement, (2) as set forth in the disclosure schedule delivered by LumiraDx or (3) as required by applicable law, it and its subsidiaries will not, directly or indirectly, without the prior written consent of CAH (which may not be unreasonably conditioned, withheld or delayed):

 

  (i)

other than the adoption of the Amended and Restated Articles and any amendments to the LMDX Articles required in connection with the Merger, adopt any amendments, supplements, restatements or modifications to or otherwise terminate its certificate of incorporation or bylaws or equivalent organizational documents;

 

  (ii)

declare, set aside, make or pay any dividend or other distribution, payable in cash, shares, stock, property or otherwise, with respect to any of its share capital or capital stock; or

 

  (iii)

reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its share capital, other than redemptions of equity securities from former employees upon the terms set forth in the underlying agreements governing such equity securities.

CAH has agreed that, between the date of the Merger Agreement and the Effective Time or the earlier termination of the Merger Agreement, except (1) as expressly contemplated by any other provision of the Merger

 

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Agreement or any Ancillary Agreement, (2) as set forth in the disclosure schedule delivered by CAH and (3) as required by applicable law, unless LumiraDx otherwise consents in writing (which consent shall not be unreasonably conditioned, withheld or delayed), CAH shall conduct its business in the ordinary course of business and in a manner consistent with past practice.

In addition to the general covenants above, CAH has agreed that during this period, except (1) as expressly contemplated by the Merger Agreement or any Ancillary Agreement, (2) as set forth in the disclosure schedule delivered by CAH or (3) as required by applicable law, it will not, directly or indirectly, without the prior written consent of LumiraDx (which may not be unreasonably conditioned, withheld or delayed):

 

  (i)

change or amend any of the organizational documents of CAH, or authorize or propose the same, except pursuant to the Merger;

 

  (ii)

issue, deliver or sell, or authorize or propose the issuance, delivery or sale of any securities (including any debt securities and including any options, warrants, calls, conversion rights, commitments or other securities convertible into or otherwise relating to such securities) or authorize or propose any change in the equity capitalization or capital structure of CAH, or enter into any agreement, understanding or arrangement with respect to the voting of equity securities of CAH;

 

  (iii)

declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

 

  (iv)

reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock, other than redemptions of equity securities from former employees upon the terms set forth in the underlying agreements governing such equity securities;

 

  (v)

incur, create, assume, guarantee or otherwise become liable for any indebtedness for borrowed money or guarantee any indebtedness of another person (directly, contingently or otherwise), other than working capital loans made by the CAH sponsor necessary to finance CAH’s ordinary course administrative costs and expenses and expenses incurred in connection with the consummation of the Merger, up to aggregate additional indebtedness of $250,000;

 

  (vi)

make a loan or advance to or investment in any third party;

 

  (vii)

make or agree to make any capital expenditures;

 

  (viii)

sell, assign, lease, sublease, exclusively license, exclusively sublicense, pledge or otherwise transfer or dispose of or grant any option or exclusive rights in, to or under, any material assets of CAH;

 

  (ix)

acquire (whether by merger, consolidation, acquisition of stock or assets or any other form of business combination) any non-natural person or business or initiate the start-up of any new business, subsidiary or joint venture or otherwise acquire any securities or material assets;

 

  (x)

merge or consolidate, or agree to merge or consolidate with or into any other person, or sell all or substantially all of CAH’s assets;

 

  (xi)

commence a lawsuit or settle, compromise, release or waive its rights under any claim or litigation;

 

  (xii)

enter into, amend, or terminate (other than terminations in accordance with their terms) any contract with any affiliate of CAH, or waive any material right in connection therewith;

 

  (xiii)

adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

  (xiv)

make any change in accounting methods, principles or practices, except to the extent required to comply with GAAP;

 

  (xv)

make or rescind any material election relating to taxes, settle any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy with a governmental authority relating to

 

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  a material amount of taxes, file any materially amended tax return or claim for refund of a material amount of taxes, or make any material change to a method of accounting for tax purposes, in each case except as required by applicable Law or in compliance with GAAP;

 

  (xvi)

amend, waive or otherwise change CAH’s trust agreement in any manner adverse to CAH;

 

  (xvii)

take any action that would reasonably be expected to significantly delay or impair (i) the timely filing of any of its public filings with the SEC or (ii) its compliance in all material respects with applicable securities laws; or

 

  (xviii)

authorize or agree (in writing or otherwise) to take any of the foregoing actions.

Additional Agreements

Proxy Statement/Prospectus

As promptly as practicable (and in any event no later than 15 days) after the execution of the Merger Agreement, CAH and LumiraDx agreed jointly to prepare and file with the SEC this proxy statement/prospectus to be sent to the stockholders of CAH relating the special meeting of CAH’s stockholders to be held to consider approval and adoption of the Merger Proposal.

CAH Special Meeting; LumiraDx Approvals

CAH Special Meeting. CAH has agreed to call and hold the special meeting as promptly as is practicable following the clearance of this proxy statement/prospectus by the SEC (but in any event no later than 30 days after the date on which this proxy statement/prospectus is mailed to stockholders of CAH) for the purpose of voting upon the Merger Proposal; provided that CAH may postpone or adjourn the special meeting on one or more occasions for up to 30 days in the aggregate upon the good faith determination by the CAH Board that such postponement or adjournment is necessary to solicit additional proxies to obtain approval of the Merger Proposal or otherwise take actions consistent with CAH’s obligations. CAH shall use its reasonable best efforts to obtain the approval of the Merger Proposal at the special meeting and shall take all other action reasonably necessary or advisable to secure the required vote or consent of its stockholders. Except as otherwise required by applicable Law, CAH covenants that none of the CAH Board or CAH nor any committee of the CAH Board shall change, withdraw, withhold or modify, or propose publicly or by formal action of the CAH Board, any committee of the CAH Board or CAH to change, withdraw, withhold or modify the recommendation of the CAH Board or any other recommendation by the CAH Board or CAH of the Merger Proposal.

LumiraDx Approvals. LumiraDx has agreed as soon as reasonably practicable following the execution of the Merger Agreement to send a circular to (i) LumiraDx’s shareholders, (ii) the holders of the 2020 warrants; and (iii) the holders of the 5% notes and the holders of the 10% notes, as applicable, to seek the following approvals:

 

  (i)

approval by the holders of the LMDX series A preferred shares to: (i) the adoption of certain amendments to the LMDX Articles required for the purposes of the Merger, or the Articles Amendment; (ii) the adoption of the Amended & Restated Articles; (iii) the Merger Subdivision; and (iv) the approval and adoption of the 2021 Plan, or the LMDX Series A Preferred Shareholder Proposals;

 

  (ii)

approval by the holders of the LMDX series B preferred shares to: (i) the adoption of the Articles Amendment; (ii) the adoption of the Amended & Restated Articles; and (iii) the Merger Subdivision, or the LMDX Series B Preferred Shareholder Proposals;

 

  (iii)

approval by the holders of the LMDX ordinary shares to: (i) the adoption of the Articles Amendment; (ii) the adoption of the Amended & Restated Articles; and (iii) the Merger Subdivision, or the Ordinary Shareholder Proposals;

 

  (iv)

approval by the LumiraDx shareholders to: (i) the adoption of the Articles Amendment; (ii) subject to and conditional upon the completion of the Merger, the Merger Subdivision; (iii) subject to and

 

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  conditional upon the completion of the Merger, the adoption of (A) the Amended & Restated Articles and (B) the 2021 Plan; (iv) the disapplication of pre-emption rights in relation to the allotment and issue of any LMDX common shares to be issued as Merger Consideration; (v) the adoption of the Merger Agreement; and (vi) any other proposals LumiraDx deem necessary to effectuate the Merger, or the General Shareholder Proposals;

 

  (v)

approval by the holders of the 2020 warrants to the registration and listing of the LMDX common shares to be issued as Merger Consideration, or the 2020 Warrantholder Proposal; and

 

  (vi)

approval by the holders of the 5% notes and 10% notes to certain amendments to the terms of the 5% notes and the 10% notes to cause the automatic conversion of the convertible loan notes into LMDX common shares immediately prior to the Merger Subdivision and the Effective Time pursuant to the terms of the Merger Agreement, or the Convertible Loan Note Proposals and collectively with the LMDX Series A Preferred Shareholder Proposals, the LMDX Ser