Predictive Technology Group (PREDQ) Risk Analysis

We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store, and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, third party relationships with parties who may or could have access to our confidential information. The size and complexity of our information technology and information security systems, and those of our third parties with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Although we have cyber-insurance coverage that may cover certain events described above, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage.  Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.

The technologies underlying our products are subject to rapid and profound technological change. Competition intensifies as technical advances in each field are made and become more widely known. We can give no assurance that others will not develop services, products, or processes with significant advantages over the products, services, and processes that we offer or are seeking to develop. Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition. We plan to enhance and broaden our product offerings in response to changing customer demands and competitive pressure and technologies. The success of any new product offering or enhancement to an existing product will depend on numerous factors, including our ability to: - Properly identify and anticipate physician and patient needs; - Develop and introduce new products or product enhancements in a timely manner; - Adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; - Demonstrate the safety and efficacy of new products; and  - Obtain the necessary regulatory clearances or approvals for new products or product enhancements. If we do not develop and, when necessary, obtain regulatory clearance or approval for new products or product enhancements in time to meet market demand, or if there is insufficient demand for these products or enhancements, our results of operations will suffer. Our research and development efforts may require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology, material, or other innovation. In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce sales in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.

Our success depends upon the skills, experience, and efforts of senior management. We have employment agreements with all members of senior management listed in management section. Should the services of any of these people become unavailable to us for any reason, our business would likely be adversely affected and may not continue at all. Competition for such personnel is intense in the genetics industry, and there can be no assurance that we will be successful in attracting and retaining such personnel. Our success will depend on our continued ability to attract and retain highly skilled and qualified personnel.

Our business is in a very competitive and evolving field. Competition from other tissue processors, genetic testing laboratories, medical device companies and from research and academic institutions is intense, expected to increase, subject to rapid change, and could be significantly affected by new product introductions. In addition, consolidation in the healthcare industry continues to lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, results of operations or financial condition. The presence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make us profitable or prevent us from selling our products at all. Our failure to compete effectively would have a material and adverse effect on our business, results of operations and financial condition.

Although we have never been sued for product liability, our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing, and marketing of medical devices, genetic tests, and human tissue products.  We may be subject to such claims if our products cause, or appear to have caused, an injury.  Claims may be made by patients, healthcare providers or others selling our products.  Defending a lawsuit, regardless of merit, could be costly, divert management attention and result in adverse publicity, and could result in the withdrawal of, or reduced acceptance of, our products in the market. Although we have product liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. If we are unable to maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims or we underestimate the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business.  A product liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

Political events, international trade disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on our business and our suppliers, contract manufacturers, distributors and other partners. International trade disputes can result in tariffs and other measures that can adversely affect the sale of our Assurance AB™ COVID-19 antibody test. For example, trade tensions have led to a series of tariffs imposed by the U.S. on imports from China. Tariffs could increase the cost of our Assurance AB™ COVID-19 antibody test. These increased costs adversely impact the gross margin that the Company earns on these tests. Tariffs can also make our Assurance AB™ COVID-19 antibody tests more expensive for customers, which could make our Assurance AB™ COVID-19 antibody test less competitive and reduce consumer demand. Political uncertainty surrounding international trade disputes and measures could also have a negative effect on consumer confidence and spending, which could adversely affect our test sales. The sole source and manufacturer of our Assurance AB™ COVID-19 antibody test is in China. The contract with our Chinese based manufacturer does not require the manufacturer to supply any minimum or maximum number of tests and the pricing and other purchase terms are subject to negotiation each time a purchase order is submitted. There can be no assurance that this manufacturer will produce a sufficient quantity of tests on a timely basis, that the tests will consistently be of acceptable quality, that the tests can be obtained at a competitive price, that there will not be unanticipated problems in moving tests through customs, that transportation of tests from China will be accomplished on a timely basis or that we will be able to replace its current manufacturer on a timely basis and on acceptable terms should circumstances require a change. In addition, the manufacture of our Assurance AB™ COVID-19 antibody test is subject to the risk of interruption by fire, power shortages, and other industrial accidents, terrorist attacks and other hostile acts, labor disputes, public health issues and other events beyond our control. Such events could make it difficult or impossible for us to manufacture and deliver our Assurance AB™ COVID-19 antibody test to our customers and distributors. Following an interruption to our business, we could require substantial recovery time, experience significant expenditures to resume operations and lose significant sales. Because we rely on single source for the supply and manufacture of our Assurance AB™ COVID-19 antibody test, a business interruption affecting such source would exacerbate any negative consequences to us.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan China. Less than four months later, in March 2020, the World Health Organization declared COVID-19 a pandemic. While the outbreak initially was largely concentrated in China and caused significant disruptions in its economy, the virus has now spread to many other countries and regions, and every state within the United States, including Utah, where our primary offices and manufacturing facility are located. Towards the end of the third quarter of fiscal 2020 we began to experience, and through the date of this filing we are continuing to experience, impacts to our business and operations related to the COVID-19 pandemic, including the impact of stay-at-home mandates and related safety measures such as the delay of elective medical procedures, resulting in a decline in the volume of procedures using our products. In response to the pandemic, healthcare providers have, and may need to further, reallocate resources, such as physicians, staff and facilities, as they prioritize limited resources and personnel capacity to focus on the treatment of patients with COVID-19 and implement limitations on access to hospitals and other medical institutions due to concerns about the potential spread of COVID-19 in such settings. These actions have significantly delayed the provision of other medical care including elective and diagnostic procedures involving our products, having an adverse effect on our revenue. These measures and challenges may continue for the duration of the COVID-19 pandemic, and such duration is uncertain, and may significantly reduce our revenue and cash flows while the pandemic continues and thereafter until we and our customers are able to resume normal business operations. In the fourth quarter of fiscal 2020, the impact of the COVID-19 pandemic on our business was more significant than we experienced in the third quarter as pandemic precautions continue to limit demand for our products. We anticipate that these negative impacts will continue for the duration of the pandemic. We cannot predict the magnitude or duration of the pandemic's impact on our business. In connection with the COVID-19 pandemic, the following risks could have a material effect on our business, financial condition, results of operations and prospects: - The delay or cancellation by healthcare providers of the elective procedures in which our allograft products are used as a result of their COVID-19 response efforts and the duration of such effects, thereby reducing sales of our products for an unknown period of time;- The inability or unwillingness of some patients to visit hospitals or clinics in order to undergo elective procedures in which our products are used, thereby reducing sales of our products for an unknown period of time;- The inability of some patients to pay for elective procedures in which our products are used due to job loss or lack of insurance, thereby reducing sales of our products for an unknown period of time;- The inability of our distributors and customers to conduct their normal operations, including supplying or conducting procedures in which our products are used, because of their COVID-19 response efforts, or the reduced capacity or productivity of their employees and contractors as a result of possible illness, quarantine or other inability to work, thereby reducing sales of our products for an unknown period of time;- The inability of suppliers of raw materials or components used in the manufacture of our products, to supply and/or transport those raw materials, components and products to us in a timely and cost effective manner due to shutdowns, interruptions or delays, limiting and precluding the production of our finished products, impacting our ability to supply customers, reducing our sales, increasing our costs of goods sold, and reducing our absorption of overhead;- The partial or complete delay or cancellation of international or domestic flights by our airfreight carriers, resulting in our inability to receive raw materials, components and products from our suppliers or to ship and deliver our finished products to our domestic and international customers in a timely or cost effective manner, thereby potentially increasing our freight costs as we seek alternate, potentially more expensive, methods to ship raw materials, components or products, and negatively impacting our sales;- The reduced capacity or productivity of our operations as a result of possible illness, quarantine or other inability of our employees and contractors to work, despite all of the preventative measures we continue to undertake to protect the health and safety of our workforce;- The illiquidity or insolvency of our suppliers and freight carriers whose business activities could be shut down, interrupted, or delayed;- The illiquidity or insolvency of our distributors and customers, or their inability to pay our invoices in full or in a timely manner, due to the reduction in their revenues caused by the cancellation or delay of procedures and other factors, which could potentially reduce our cash flow, reduce our liquidity and increase our bad debt reserves;- A portion of our raw materials or finished product inventory may expire due to reduced demand for our products;- Delays in our ability, and the ability of our development partners to conduct, enroll and complete clinical development programs such as the ARTGUIDE™ clinical development program currently being conducted by the Houston Fertility Institute;- Delays of regulatory reviews and approvals, including with respect to our product candidates, by the FDA or other health or regulatory authorities;- Decreased sales of our products due to the reduction of in-person sales and marketing activities and training caused by travel restrictions, quarantines, other similar social distancing measures and more restrictive healthcare facility access policies;- Our ability to maintain employee morale and motivate and retain management personnel and other key employees as a result of our recent reduction in force;- The instability to worldwide economies, financial markets, social institutions, labor markets and the healthcare systems as a result of the COVID-19 pandemic, which could result in an economic downturn that could adversely impact our business, results of operations and financial condition, as well as that of our suppliers, distributors, customers or other business partners; and - A recurrence of the COVID-19 pandemic after social distancing and other similar measures have been relaxed. The extent to which the COVID-19 pandemic impacts our business and our results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge in connection with the severity of the virus, the ability to treat and ultimately prevent it, its potential recurrence, and actions that may be taken to contain its impact.