What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-24 · 361 added, 389 removed, 992 unchanged (43% of the section changed)

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Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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We identified management’s estimation of the transaction price for revenue recorded as a critical audit matter due to the significant judgments required by management to estimate payer behavior.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of more experienced engagement team members, when performing audit procedures to evaluate the estimated transaction prices.

This required a high degree of auditor judgment and

an increased extent of effort, including the involvement of more experienced engagement team members, when performing audit procedures to evaluate the estimated transaction prices.

How the Critical Audit Matter Was Addressed in the Audit

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• We understood and tested the design, implementation, and operating effectiveness of controls over management’s determination of the assumptions used and the related review and approval of the transaction price estimate.

• We tested the methodology used by the Company to estimate transaction prices.

• We tested the methodology used by the Company to estimate transaction prices by independently recalculating the estimated transaction prices.

• We tested the assumptions used by management to calculate transaction prices by:

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 24, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the Company’s change in method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases .

Basis for Opinion

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100,000,000 shares authorized at December 31, 2021 and 2020;

49,441,166 and 42,498,430 shares issued and outstanding at December 31, 2020 and 2019,

52,923,360 and 49,441,166 shares issued and outstanding at December 31, 2021 and 2020, respectively

Additional paid-in capital 853,683 632,253

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Product revenue 26,832 19,302 18,279

Digital and other revenue 9,282 4,239 595

Patient and digital solutions 10,280 9,282 4,239

Total revenue 296,397 192,194 127,068

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Cost of product 18,930 13,847 12,919

Cost of digital and other 5,338 2,914 —

Cost of patient and digital solutions 7,208 5,338 2,914

Research and development 76,525 48,941 30,711

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Other income (expense):

Interest income (expense), net 271 985 ( 3,701 )

Debt extinguishment expenses — — ( 5,780 )

Change in estimated fair value of common stock warrant and derivative liabilities

Interest income, net 160 271 985

Change in estimated fair value of common stock warrant liability

106 ( 1,495 ) 319

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Other expense, net ( 2,628 ) ( 811 ) ( 719 )

Total other income (expense) 2,778 585 ( 32,637 )

Total other (expense) income ( 2,362 ) 2,778 585

Loss before income taxes ( 32,088 ) ( 19,750 ) ( 23,947 )

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Net loss $ ( 30,662 ) $ ( 18,714 ) $ ( 21,968 )

Net loss attributable to noncontrolling interest — — ( 25 )

Net loss attributable to CareDx, Inc.

$ ( 18,714 ) $ ( 21,968 ) $ ( 46,756 )

Net loss per share attributable to CareDx, Inc.

Net loss per share (Note 3):

Basic $ ( 0.59 ) $ ( 0.40 ) $ ( 0.52 )

Diluted $ ( 0.59 ) $ ( 0.40 ) $ ( 0.52 )

Weighted-average shares used to compute net loss per share attributable to CareDx, Inc.:

Weighted-average shares used to compute net loss per share:

Basic 52,241,076 46,481,772 42,151,617

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Net comprehensive loss $ ( 33,236 ) $ ( 15,605 ) $ ( 22,895 )

Comprehensive loss attributable to noncontrolling interest, net of tax

Comprehensive loss attributable to CareDx, Inc.

$ ( 15,605 ) $ ( 22,895 ) $ ( 48,689 )

The accompanying notes are an integral part of these consolidated financial statements.

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(In thousands, except share amounts)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Noncontrolling Interest Total Stockholders’ Equity

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity

Shares Amount

Balance at December 31, 2018 41,384,960 $ 41 $ 412,010 $ ( 4,278 ) $ ( 311,845 ) $ 95,928

Adoption of ASC 606

— — — — 2,933 — 2,933

Reclassification of warrants from liability to equity

— — 6,550 — — — 6,550

Issuance of common stock in connection with public offering,

net of offering costs of $ 3,800

2,300,000 2 52,547 — — — 52,549

Conversion of convertible debt

6,161,331 6 38,846 — — — 38,852

Contingent consideration classified as equity — — 222 — — 222

Issuance of common stock under ESPP 51,712 — 759 — — 759

76,710 — 287 — — — 287

RSU settlements, net of shares withheld 285,963 — ( 4,152 ) — — ( 4,152 )

178,150 — ( 698 ) — — — ( 698 )

Issuance of common stock for services 7,569 — 209 — — 209

50,509 — 273 — — — 273

Issuance of common stock for cash upon exercise of stock options 625,685 1 3,552 — — 3,553

473,812 1 1,479 — — — 1,480

Issuance of common stock for cash upon exercise of warrants

3,091,581 3 38,709 — — — 38,712

Issuance of common stock upon exercise of warrants 142,541 — 3,181 — — 3,181

Employee stock-based compensation expense — — 22,195 — — 22,195

— — 5,868 — — — 5,868

Non-employee stock-based compensation expense

— — 1,009 — — — 1,009

Noncontrolling interests upon acquisition

— — ( 537 ) — — ( 155 ) ( 692 )

Issuance of common stock for contingent consideration

227,848 — 2,689 — — — 2,689

Issuance of warrants in connection with debt

— — 784 — — — 784

Foreign currency translation adjustment — — — ( 927 ) — ( 927 )

— — — ( 1,933 ) — — ( 1,933 )

— — — — ( 46,756 ) ( 25 ) ( 46,781 )

Net loss — — — — ( 21,968 ) ( 21,968 )

Balance at December 31, 2019 42,498,430 $ 42 $ 437,976 $ ( 5,205 ) $ ( 333,813 ) $ 99,000

Contingent consideration classified as equity

Issuance of common shares through public equity offering, net of commissions and offering costs of $ 9,166

4,492,187 4 134,580 — — 134,584

Issuance of common stock under ESPP

Issuance of common shares in connection with "at-the-market" equity offering, net of commissions and offering costs of $ 785

1,000,000 1 23,450 — — 23,451

Issuance of common stock under ESPP 76,723 — 1,393 — — 1,393

RSU settlements, net of shares withheld 333,178 — ( 4,529 ) — — ( 4,529 )

285,963 — ( 4,152 ) — — — ( 4,152 )

Issuance of common stock for services 11,116 — 315 — — 315

7,569 — 209 — — — 209

Issuance of common stock for cash upon exercise of stock options 691,318 1 8,006 — — 8,007

625,685 1 3,552 — — — 3,553

Issuance of common stock upon exercise of warrants

142,541 — 3,181 — — — 3,181

Issuance of common stock for cash upon exercise of warrants 338,214 1 8,007 — — 8,008

Employee stock-based compensation expense — — 23,055 — — 23,055

— — 22,195 — — — 22,195

Foreign currency translation adjustment — — — 3,109 — 3,109

— — — ( 927 ) — — ( 927 )

— — — — ( 21,968 ) — ( 21,968 )

Net loss — — — — ( 18,714 ) ( 18,714 )

Balance at December 31, 2020 49,441,166 $ 49 $ 632,253 $ ( 2,096 ) $ ( 352,527 ) $ 277,679

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2,211,538 2 188,853 — — 188,855

Issuance of common shares in connection with "at-the-market" equity offering, net of commissions and offering costs of $ 785

1,000,000 1 23,450 — — — 23,451

Contingent consideration classified as equity — — ( 222 ) — — ( 222 )

Issuance of common stock under ESPP 45,464 — 2,139 — — 2,139

76,723 — 1,393 — — — 1,393

RSU settlements, net of shares withheld 464,693 — ( 18,441 ) — — ( 18,441 )

333,178 — ( 4,529 ) — — — ( 4,529 )

Issuance of common stock for services 3,984 — 296 — — 296

11,116 — 315 — — — 315

Issuance of common stock for cash upon exercise of stock options 753,383 1 12,775 — — 12,776

691,318 1 8,006 — — — 8,007

Issuance of common stock upon exercise of warrants 3,132 — 205 — — 205

338,214 1 8,007 — — — 8,008

Employee stock-based compensation expense — — 35,825 — — 35,825

— — 23,055 — — — 23,055

Foreign currency translation adjustment — — — ( 2,574 ) — ( 2,574 )

— — — 3,109 — — 3,109

— — — — ( 18,714 ) — ( 18,714 )

Net loss — — — — ( 30,662 ) ( 30,662 )

Balance at December 31, 2021 52,923,360 $ 52 $ 853,683 $ ( 4,670 ) $ ( 383,189 ) $ 465,876

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Stock-based compensation 36,081 23,401 22,417

Amortization of inventory fair market value adjustment — — 234

Loss on disposal of property and equipment — 160 —

Asset impairments and write-downs 2,437 — 160

Depreciation and amortization 8,797 7,006 5,523

Amortization of right-of-use assets 3,088 2,538 1,621

Revaluation of warrants and derivative liabilities to estimated fair value 1,495 ( 319 ) 22,978

Unrealized loss on long-term marketable equity securities 1,743 — —

Revaluation of common stock warrant liability to estimated fair value ( 106 ) 1,495 ( 319 )

Revaluation of contingent consideration to estimated fair value ( 609 ) 309 210

Amortization of debt discount and noncash interest expense — — 2,232

Debt extinguishment expenses — — 5,831

Amortization of premium on short-term marketable securities, net 1,129 — —

Other non-cash items ( 222 ) — —

Changes in operating assets and liabilities:

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Change in deferred taxes ( 1,379 ) ( 1,023 ) ( 1,280 )

Net cash provided by (used in) operating activities 33,431 ( 2,769 ) ( 4,007 )

Net cash (used in) provided by operating activities ( 19,294 ) 33,431 ( 2,769 )

Investing activities:

Purchases of marketable securities ( 90,034 ) — —

Additions of capital expenditures, net ( 7,110 ) ( 2,201 ) ( 2,035 )

Maturities of short-term marketable securities 88,905 — —

Purchases of long-term marketable securities ( 5,500 ) ( 90,034 ) —

Additions of capital expenditures ( 13,559 ) ( 7,110 ) ( 2,201 )

Acquisition of intangible assets ( 6,700 ) ( 3,250 ) ( 1,148 )

Acquisition of business — ( 18,230 ) ( 692 )

Acquisition of business, net of cash acquired ( 15,434 ) — ( 18,230 )

Investment in equity securities — — ( 1,000 )

Net cash used in investing activities ( 100,394 ) ( 22,579 ) ( 7,929 )

Net cash provided by (used in) investing activities 47,712 ( 100,394 ) ( 22,579 )

Financing activities:

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Proceeds from issuance of common shares in "at-the-market" equity offering, net of issuance costs paid — 23,451 —

Proceeds from debt, net of issuance costs — — 14,282

Principal payments on debt and finance lease obligations ( 183 ) ( 172 ) ( 28,089 )

Principal payments on finance lease obligations ( 66 ) ( 183 ) ( 172 )

Contingent payments related to acquisition of Conexio Genomics Pty Ltd.

— ( 225 ) ( 225 )

Change in short-term credit facility — — ( 677 )

Proceeds from exercise of warrants 4 352 105

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Purchases of capital expenditures in accounts payable and accrued liabilities $ 3,953 $ 274 $ 576

Issuance of common stock upon conversion of convertible debt $ — $ — $ 38,852

Offering costs included in accounts payable $ — $ — $ 361

ESPP shares included in accrued compensation $ 1,521 $ 800 $ 703

Common stock warrants issued upon debt financing $ — $ — $ 784

Contingent consideration $ 5,341 $ — $ 1,442

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ORGANIZATION AND DESCRIPTION OF BUSINESS

(“CareDx” or the “Company”) together with its subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value healthcare diagnostic solutions for transplant patients and caregivers.

(“CareDx” or the “Company”), together with its subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers.

The Company’s headquarters are in South San Francisco, California.

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Omaha, Nebraska;

Fremantle, Australia and Stockholm, Sweden.

The Company’s commercially available testing services consist of AlloSure ® Kidney, which is a donor-derived cell-free DNA (“dd-cfDNA”) solution for kidney transplant patients, AlloMap ® Heart, which is a gene expression solution for heart transplant patients, and AlloSure ® Heart, a dd-cfDNA test which can identify underlying cell injury leading to organ rejection.

Fremantle, Australia;

and Stockholm, Sweden.

The Company’s commercially available testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA (“dd-cfDNA”) solution for kidney transplant patients, AlloMap® Heart, a gene expression solution for heart transplant patients, AlloSure® Heart, a dd-cfDNA solution for heart transplant patients, and AlloSure® Lung, a dd-cfDNA solution for lung transplant patients.

The Company has initiated several clinical studies to generate data on its existing and planned future testing services.

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In 2019, the Company began providing digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management (“Ottr, Inc.”) and XynManagement, Inc.

(“XynManagement”).

(“XynManagement”), as well as the acquisitions of TransChart LLC (“TransChart”), MedActionPlan.com, LLC (“MedActionPlan”) and Transplant Pharmacy (“TTP”) in 2021 .

Testing Services

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The Medicare reimbursement rate for AlloSure Kidney is currently $ 2,841 .

AlloSure Kidney has received positive coverage decisions from Blue Cross Blue Shield (“BCBS”) of South Carolina, BCB S of Kansas City and Capital Health, and is reimbursed by other private payers on a case-by-case basis .

AlloSure Kidney has received positive coverage decisions from several commercial payers , and is reimbursed by other private payers on a case-by-case basis .

AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006.

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AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S.

private payers, including Aetna, Cigna, Health Care Services Corporation, Humana, Kaiser Foundation Health Plan, Inc.

and UnitedHealthcare .

private payers.

In October 2020, AlloSure Heart received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart.

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The Medicare reimbursement rate for AlloSure Heart is currently $ 2,753 .

In May 2021, the Company purchased a minority investment of common stock in the biotechnology company Miromatrix Medical, Inc.

(“Miromatrix”), for $ 5.0 million, and the investment is marked to market.

Miromatrix works to eliminate the need for an organ transplant waiting list through the development of implantable engineered biological organs.

Clinical Studies

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OKRA is a prospective, multi-center, observational, registry of patients receiving KidneyCare for surveillance.

KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of KidneyCare iBox developing a multimodality surveillance solution.

The Company has not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or KidneyCare iBox.

Enrollment for OKRA was negatively affected by the COVID-19 restrictions during the year 2020, and the study has been delayed by six months;

however, the collection of samples are at normal levels as a result of the introduction of RemoTraC.

The Company’s suite of AlloSeq products are commercial next generation sequencing (“NGS”)-based kitted solutions that the Company has developed as a result of its license agreement with Illumina, Inc.

(“Illumina”) .

The Company has not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or KidneyCare.

The Company’s suite of AlloSeq products are commercial next generation sequencing (“NGS”)-based kitted solutions.

These products include:

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Olerup SSP ® , based on the sequence specific primer (“SSP”) technology;

and QTYPE ® , which uses real-time polymerase chain reaction (“PCR”) methodology, to perform HLA typing at a low to intermediate resolution for samples that require a fast turnaround time .

Digital and Other

and QTYPE ® , which uses real-time polymerase chain reaction (“PCR”) methodology, to perform HLA typing .

In March 2021, the Company acquired certain assets of BFS Molecular S.R.L.

(“BFS Molecular”), a software company focused on NGS-based patient testing solutions.

BFS Molecular brings extensive software and algorithm development capabilities for NGS transplant surveillance products.

Patient and Digital Solutions

Following the acquisitions of both Ottr, Inc.

and XynManagement, the Company is a leading provider of transplant patient tracking software (“Ottr software”), as well as of transplant quality tracking and waitlist management solutions.

and XynManagement, the Company is a leading provider of transplant patient management software (“Ottr software”), as well as of transplant quality tracking and waitlist management solutions.

Ottr software provides comprehensive solutions for transplant patient management and enables integration with electronic medical record ("EMR") systems providing patient surveillance management tools and outcomes data to transplant centers.

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In September 2020, the Company launched AlloCare, a mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with Patient Care Managers for AlloSure scheduling and measure health metrics.

In January 2021, the Company acquired TransChart.

TransChart provides EMR software to hospitals throughout the U.S.

to care for patients who have or may need an organ transplant.

As part of the Company's acquisition of TransChart in January 2021, the Company acquired Tx Access, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs, closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation.

In June 2021, the Company acquired the Transplant Hero patient application.

The application helps patients manage their medications through alarms and interactive logging of medication events.

Also in June 2021, the Company entered into a strategic agreement with OrganX to develop clinical decision support tools across the transplant patient journey.

Together, the Company and OrganX will develop advanced analytics that integrate AlloSure, the first transplant specific dd-cfDNA assay, with large transplant databases to provide clinical data solutions.

This partnership delivers the next level of innovation beyond multi-modality by incorporating a variety of clinical inputs to create a universal composite scoring system.

The Company has agreed to potential future milestone payments.

In November 2021, the Company acquired MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education.

MedActionPlan is a leader in patient medication management for transplant patients and beyond.

In December 2021, the Company acquired TTP, a transplant focused pharmacy located in Mississippi.

TTP provides individualized transplant pharmacy services for patients at multiple transplant centers located throughout the U.S.

COVID-19 Pandemic

On January 30, 2020, the World Health Organization (the “WHO”) announced a global health emergency because of a new strain of coronavirus ( “COVID-19”) originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 pandemic, including the impact associated with preventative and precautionary measures that the Company, other businesses and governments are taking, continues to evolve as of the date of this report.

The full impact of the continued COVID-19 pandemic, including the impact associated with preventative and precautionary measures that the Company, other businesses and governments have taken and continue to take, continues to evolve as of the date of this report.

As such, it is uncertain as to the full magnitude that the pandemic will have on the Company, but the pandemic may materially affect the Company's financial condition, liquidity and future results of operations.

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As a result, with transplant surveillance visits down, the Company experienced a slowdown in testing services volumes in the final weeks of March and during April 2020.

As a response to the COVID-19 pandemic, and to enable immune-compromised transplant patients to continue to have their blood drawn, in late March 2020, the Company launched RemoTraC, a remote home-based blood draw solution using mobile phlebotomy for AlloSure and AlloMap surveillance tests, as well as for other standard monitoring tests.

To date, more than 150 transplant centers can offer RemoTraC to their patients and over 6,000 kidney, heart and lung transplant patients have enrolled.

As a response to the COVID-19 pandemic, and to enable immune-compromised transplant patients to continue to have their blood drawn, in late March 2020, the Company launched RemoTraC, a remote

home-based blood draw solution using mobile phlebotomy for AlloSure and AlloMap surveillance tests, as well as for other standard monitoring tests.

To date, more than 200 transplant and nephrology centers can offer RemoTraC to their patients and over 11,000 kidney, heart and lung transplant patients have enrolled.

Based on existing and new relationships with partners, the Company has established a nationwide network of more than 10,000 mobile phlebotomists.

Following the introduction of RemoTraC and with the easing of stay-at-home restrictions and the opening up of many hospitals to non-COVID-19 patients, the Company’s testing services volumes returned to levels consistent with those experienced immediately prior to the COVID-19 pandemic, and through December 31, 2020, volumes continued to be at or above those levels since May 2020.

In spite of the resurgence of COVID-19 infection rates, which resulted in increased stay-at-home and renewed travel restrictions, the Company did not experience a decrease in testing services volumes.

The Company’s product business experienced a reduction in forecasted sales volume throughout the second and third quarters of 2020, as it was unable to undertake onsite discussions and demonstrations of its recently launched NGS products, including AlloSeq Tx 17, which was awarded CE mark authorization in May 2020.

The Company's product business maintained normal sales volumes during the fourth quarter of 2020.

The Company's product business regained normalized sales volumes during the fourth quarter of 2020.

The Company is maintaining its testing, manufacturing, and distribution facilities while implementing specific protocols to reduce contact among employees.

In areas where COVID-19 impacts healthcare operations, the Company’s field-based sales and clinical support teams are supporting providers through telephone and online platforms.

In August 2020, the state of California released revised criteria for loosening and tightening restrictions on certain activities on generally a county-by-county basis.

Under the updated executive orders, San Mateo County, where the Company's laboratory and headquarters are located, continues to be subject to certain restrictions.

These orders and others may be further modified, amended and adopted depending upon the COVID-19 transmission rates in our county and state, as well as other factors.

In areas where COVID-19 impacts healthcare operations, the Company’s field-based sales and clinical support teams are supporting providers through virtual platforms.

Although the executive orders that placed certain restrictions on operations in San Mateo County and the State of California, where the Company's laboratory and headquarters are located, were lifted effective June 15, 2021, new orders or restrictions may be adopted in the future depending upon the COVID-19 transmission rates in the Company's county and state, as well as other factors.

In addition, the Company has created a COVID-19 task force that is responsible for crisis decision making, employee communications, enforcing pre-arrival temperature checking, daily health check-ins and enhanced safety training/protocols in its offices for employees that do not work from home.

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The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 383.2 million at December 31, 2021.

As of December 31, 2020, the Company had cash, cash equivalents and marketable securities of $ 224.7 million.

As of December 31, 2021, the Company had cash and cash equivalents of $ 348.5 million.

CMS Accelerated and Advance Payment Program for Medicare Providers

On March 27, 2020 the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Pursuant to the CARES Act, the Centers for Medicare & Medicaid Services ( “ CMS”) expanded its current Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic.

CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submits a request to the appropriate Medicare Administrative Contractor and meets the required qualifications.

Pursuant to the CARES Act, the Centers for Medicare & Medicaid Services (“CMS”) expanded its Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic.

CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submitted a request to the appropriate Medicare Administrative Contractor and met the required qualifications.

During April 2020, the Company received an advance payment from CMS of approximately $ 20.5 million, and recorded the payment as Deferred revenue - CMS advance payment on the Company's consolidated balance sheet.

During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and determined to repay the entire amount in January 2021.

During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and repaid the entire amount in January 2021.

The Company recorded the amount as Refund liability - CMS advance payment on the consolidated balance sheet as of December 31, 2021.

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At-the-Market Equity Offering

On August 31, 2018, the Company entered into a sales agreement (the “Sales Agreement”) with Jefferies, LLC, as sales agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time, through Jefferies, up to $ 50.0 million in shares of its common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

On August 31, 2018, the Company entered into a sales agreement (the “Sales Agreement”) with Jefferies, LLC, as sales agent (“Jefferies”), pursuant to which the Company could offer and sell, from time to time, through Jefferies, up to $ 50.0 million in shares of its common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

During April 2020, the Company issued and sold 1,000,000 shares of its common stock under the Sales Agreement.

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These payments to healthcare providers are not loans and will not be required to be repaid.

As a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic.

As a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the

funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic.

Due to the recent enactment of legislation and absence of definitive guidance, there is a high degree of uncertainty around the CARES Act’s implementation and the Company continues to assess the impact on its business.

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All providers will be subject to civil and criminal penalties for any deliberate omissions, misrepresentations or falsifications of any information given to HHS.

Providers will be distributed a portion of the initial $ 30.0 billion of funds based on their share of total Medicare FFS reimbursements made by the U.S.

During April 2020, the Company received a payment of approximately $ 4.8 million, representing its portion of the initial tranche of funds, recorded in other income (expense), net on the consolidated statement of operations.

Underwritten Public Offering of Common Stock

On June 15, 2020, the Company sold 4,492,187 shares of common stock (which included shares sold pursuant to the underwriters’ full exercise of an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $ 32.00 per share for aggregate net proceeds of $ 134.6 million.

Providers will be distributed a portion of the initial $ 30.0 billion based on their share of total Medicare FFS reimbursements made by the U.S.

The Company is complying with the key terms and provisions of the CARES Act Provider Relief Fund, which includes, among other things, the requirement that the Company maintain appropriate records and cost documentation.

During the quarter ended September 30, 2021, the Company was notified by HHS that the Provider Relief Fund Reporting Portal was open for reporting on the use of Provider Relief Fund payments, and the Company completed and submitted a report indicating the use of the funds the Company received pursuant to the CARES Act.

June 2020 Underwritten Public Offering of Common Stock

On June 15, 2020, the Company sold an aggregate of 4,492,187 shares of its common stock, including 585,937 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $ 32.00 per share.

Total net proceeds received were $ 134.6 million net of underwriter's fees and issuance costs.

January 2021 Underwritten Public Offering of Common Stock

On January 25, 2021, the Company sold 1,923,077 shares of its common stock through an underwritten public offering at a public offering price of $ 91.00 per share.

The net proceeds to the Company from the offering were approximately $ 164.0 million, after deducting underwriting discounts and commissions and offering expenses.

On February 11, 2021, the Company sold 288,461 shares of its common stock pursuant to the full exercise of the overallotment option granted to the underwriters in connection with the January 2021 offering.

The net proceeds to the Company from the full exercise of the underwriters' overallotment option were approximately $ 24.7 million.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Intercompany transactions have been eliminated.

Correction to Presentation

The presentation of certain prior period amounts within the accompanying consolidated statements of operations have been corrected, including creating separate line items for the presentation of cost of testing services, cost of product and cost of digital and other, which were previously reported, in aggregate, in total cost of revenue of $ 45.5 million and $ 33.0 million for the years ended December 31, 2019 and 2018, respectively.

These corrections had no effect on loss from operations, loss before taxes, or net loss.

The Company evaluated these corrections, considering both qualitative and quantitative factors, and concluded they are immaterial to previously issued financial statements.

Use of Estimates

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On an ongoing basis, management evaluates its estimates, including those related to transaction price estimates used for testing revenue;

standalone fair value of digital revenue performance obligations;

standalone fair value of patient and digital solutions revenue performance obligations;

accrued expenses for clinical studies;

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the fair value of assets and liabilities acquired in a business combination or an assets acquisition (including identifiable intangible assets acquired);

the fair value of contingent consideration recorded in connection with a business combination;

the fair value of contingent consideration recorded in connection with a business combination or an asset acquisition;

the grant date fair value assumptions used to estimate stock-based compensation expense;

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government agencies and government-sponsored entities, commercial paper, corporate debt securities and various bank deposit accounts.

These financial instruments are held in Company accounts at nineteen financial institutions.

The counterparties to the agreements relating to the Company’s investments consist of financial institutions of high credit standing.

The Company is exposed to credit risk in the event of default by the financial institutions to the extent of amounts recorded on the balance sheets that may be in excess of insured limits.

The Company is also subject to credit risk from its accounts receivable, which are derived from revenue earned from AlloSure Kidney and AlloMap Heart tests provided for patients located in the U.S.

and billed to various third-party payers, from sales of products to distributors, strategic partners and transplant laboratories in Europe, Asia, the Middle East, Africa, the U.S., Latin America and other geographic regions, and from sales of digital solutions software.

The Company is also subject to credit risk from its accounts receivable, which are derived from revenue earned from AlloSure Kidney, AlloSure Heart and AlloMap Heart tests provided for patients located in the U.S.

and Canada, and billed to various third-party payers, from sales of products to distributors, strategic partners and transplant laboratories in Europe, Asia, the Middle East, Africa, the U.S., Latin America and other geographic regions, from sales of patient and digital solutions software.

The Company has not experienced any significant credit losses and does not require collateral on receivables.

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Restricted Cash

As a condition of the lease agreements for certain facilities and an agreement with the State of Florida Medicaid, the Company must maintain letters of credit, minimum collateral requirements and a surety bond.

These agreements are collateralized by cash.

As a condition of the lease agreements for certain facilities the Company must maintain letters of credit and certain minimum collateral requirements.

The cash used to support these arrangements of $ 0.2 million is classified as long-term restricted cash on the accompanying consolidated balance sheets.

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The Company considers all highly liquid investments in securities with a maturity of greater than three months at the time of purchase to be marketable securities.

As of December 31, 2020, the Company’s marketable securities consisted of corporate debt securities with maturities of greater than three months but less than twelve months at the time of purchase.

These marketable securities are classified as current assets on the consolidated balance sheet.

The Company classifies its marketable securities as held-to-maturity at the time of purchase and reevaluates such designation at each balance sheet date.

As of December 31, 2021, the Company had no short-term marketable securities.

At December 31, 2020, the Company’s short-term marketable securities consisted of corporate debt securities with maturities of greater than three months but less than twelve months at the time of purchase, which were classified as current assets on the consolidated balance sheet.

The Company classifies its short-term marketable securities as held-to-maturity at the time of purchase and reevaluates such designation at each balance sheet date.

The Company has the positive intent and ability to hold these marketable securities to maturity.

Marketable securities are carried at amortized cost and are adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income (expense), net on the consolidated statements of operations.

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on marketable securities are included in interest income (expense), net.

Short-term marketable securities are carried at amortized cost and are adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income (expense), net on the consolidated statements of

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on short-term marketable securities are included in interest income (expense), net.

The cost of securities sold will be determined using specific identification.

The Company considers investments in securities with remaining maturities of over one year as long-term investments.

As of December 31, 2021, the Company's long-term marketable securities consisted of corporate equity securities and corporate debt securities.

These long-term marketable securities are classified as other assets on the consolidated balance sheet.

The Company classifies its long-term marketable debt securities as available-for-sale and reevaluates such designation at each balance sheet date.

The Company records its long-term marketable equity securities at fair market value.

Unrealized gains and losses from the remeasurement of the long-term marketable equity securities to fair value are included in other expense, net, in the consolidated statements of operations.

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on long-term marketable securities are included in interest income, net.

Inventory is finished goods, work in progress, and raw materials and consists of reagent plates, laboratory supplies, reagents and finished goods kits.

Inventories are used in connection with tests performed, and kits produced and may also be used for research and product development efforts.

Inventories are used in connection with tests performed, kits produced and prescription drugs, and may also be used for research and product development efforts.

Laboratory supplies subsequently designated for research and product development use are expensed.

Obsolete or damaged inventories are written off and excluded from the physical inventory.

Obsolete or damaged inventories are written off.

Certain inventories are stated at the lower of purchased cost, determined on an average cost basis, or net realizable value.

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Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets.

The estimated useful life is generally five years for machinery, computer and office equipment, and seven years for furniture and fixtures.

The estimated useful life is generally three to five years for computer, office and laboratory equipment, and seven years for furniture and fixtures.

Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term.

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These costs include software licenses and consulting services, as well as employee payroll and payroll-related costs.

Capitalized internal-use software costs are usually amortized over a period of three to five years .

Capitalized internal-use software costs are usually amortized over a period of three to ten years .

Business Combinations

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Acquired Intangible Assets

Amortizable intangible assets include customer relationships, developed technology, trademarks, contracts and assets acquired as part of a business combination or asset acquisition.

Amortizable intangible assets include customer relationships, developed technology, commercialization rights, trademarks and in-process technology assets acquired as part of a business combination or asset acquisition.

Intangible assets subject to amortization are amortized over their estimated useful lives.

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In connection with the Company’s annual goodwill assessment on December 1, 2021, the Company performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions;

and its market capitalization.

and the Company's market capitalization.

Based on this analysis, the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount.

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The carrying amount of the contingent consideration liability also represents its fair value.

Common Stock Warrants

Common stock warrants issued with debt, equity or as standalone financing instruments are recorded as either liabilities or equity in accordance with the respective accounting guidance.

Warrants recorded as equity are recorded at their relative fair value determined at the issuance date and are not remeasured after that.

Warrants recorded as liabilities are recorded at their fair value and remeasured on each reporting date with changes recorded in change in estimated fair value of common stock warrant liability and derivative liability in the consolidated statements of operations.

The Company utilizes a binomial-lattice pricing model, or the Monte Carlo Simulation Model, that involves a market condition simulation to estimate the fair value of the warrants.

The application of the Monte Carlo Simulation Model requires the use of a number of complex assumptions including the Company's stock price, expected life of the warrants, stock price volatility determined from the Company's historical stock prices and stock prices of peer companies in the diagnostics industry, and risk-free rates based on the implied yield currently available in the U.S.

Treasury zero-coupon issues with a remaining term equal to the expected life of the warrants.

Increases (decreases) in these assumptions result in a directionally similar impact to the fair value of the common stock warrant liability.

Effective January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”).

The Company determines if an arrangement is or contains a lease at contract inception.

The Company leases office space and equipment primarily through operating leases with a limited number of finance leases.

The Company adopted ASC Topic 842, Leases (“ASC 842”) and determines if an arrangement is or contains a lease at contract inception.

A right-of-use (“ROU”) asset, representing the underlying asset during the lease term, and a lease liability, representing the payment obligation arising from the lease, are recognized on the consolidated balance sheet at lease commencement based on the present value of the payment obligation.

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The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.

As of December 31, 2020, the Company’s leases have remaining terms of 0.01 years to 8.17 years, some of which include options to extend the lease term.

The Company’s lease terms may include renewal options that are reasonably certain to be exercised and termination options that are reasonably certain not to be exercised.

Certain finance leases also include bargain purchase options of the leased equipment.

The Company recognizes revenue from testing services, product sales, and digital and other revenue in the amount that reflects the consideration that it expects to be entitled in exchange for goods or services as it transfers control to its customers.

As of December 31, 2021, the Company’s leases had remaining terms of 0.41 years to 7.17 years, some of which include options to extend the lease term.

The Company recognizes revenue from testing services, product sales, and patient and digital solutions revenue in the amount that reflects the consideration that it expects to be entitled in exchange for goods or services as it transfers control to its customers.

Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

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Amounts received may vary amongst payers based on coverage practices and policies of the payer.

The Company has used the portfolio approach, a practical expedient under ASC Topic 606, Revenue from Contracts with Customers , to identify financial classes of payers.

The Company has used the portfolio approach under ASC Topic 606, Revenue from Contracts with Customers , to identify financial classes of payers.

Revenue recognized for Medicare and other contracted payers is based on the agreed current reimbursement rate per test, adjusted for historical collection trends where applicable.

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Transaction prices are determinable and products are delivered and risk of loss passed to the customer upon either shipping or delivery, as per the terms of the agreement.

Digital and Other Revenue

Digital revenue is mainly derived from perpetual software license agreements entered into with various transplant centers (customers).

The main performance obligations in connection with the Company's perpetual software license agreement are the following:

(i) implementation services and delivery of the perpetual software license are considered a single performance obligation, and (ii) post contract support ("PCS").

Patient and Digital Solutions Revenue

Patient and digital solutions revenue is mainly derived from a combination of SaaS and perpetual software license agreements entered into with various transplant centers, which are the Company's customers for this class of revenue.

The main performance obligations in connection with the Company's SaaS and perpetual software license agreement are the following:

(i) implementation services and delivery of the perpetual software license are considered a single performance obligation, and (ii) post contract support.

The Company allocates the transaction price to each performance obligation based on relative stand-alone selling prices of each distinct performance obligation.

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The Company records deferred revenue in relation to these agreements when cash payments are received, or invoices are issued in advance of the Company’s performance, and generally recognizes revenue over the contractual term, as performance obligations are fulfilled.

In addition, the Company derives digital revenue from software subscriptions.

In addition, the Company derives patient and digital solutions revenue from software subscriptions and medication sales.

The Company generally bills software subscription fees in advance.

Revenue from software subscriptions is deferred and recognized ratably over the subscription term.

The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay.

Cost of Testing Services

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Cost of product also includes amortization of acquired developed technology and adjustments to inventory values, including write-downs of impaired, slow moving or obsolete inventory.

Cost of Digital and Other

Cost of digital and other primarily consists of personnel-related costs associated with developing, installing and maintaining software, depreciation of servers and equipment, amortization of acquired intangible assets, support of the functionality of the software's platforms, including stock-based compensation expenses, and allocated costs of facilities and information technology.

Cost of Patient and Digital Solutions

Cost of patient and digital solutions primarily consists of personnel-related costs associated with developing, installing and maintaining software, depreciation of servers and equipment, amortization of acquired intangible assets, support of the functionality of the software's platforms, including stock-based compensation expenses, cost of prescription drugs and allocated costs of facilities and information technology.

Research and Development Expenses

Research and development expenses, including clinical operations, represent costs incurred to develop diagnostic products and services, high quality evidence to support use of the Company’s tests, as well as continued efforts related to improving the Company’s existing products and digital solutions service lines.

These expenses include payroll and related expenses, consulting expenses, laboratory supplies, clinical studies and certain allocated expenses as well as amounts incurred under certain collaborative agreements.

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The Company uses the Black-Scholes Model, which requires the use of estimates such as stock price volatility and expected option lives, to value employee stock options.

The Company estimates the expected option lives using historical data, volatility using its own historical stock prices and stock prices of peer companies in the diagnostics industry, risk-free rates using the implied yield currently available in the U.S.

Treasury zero-coupon issues with a remaining term equal to the expected option lives, and dividend yield using the Company’s expectations and historical data.

The Company estimates the expected option lives using historical data, estimates volatility using its own historical stock prices, estimates risk-free rates using the implied yield currently available in the U.S.

Treasury zero-coupon issues with a remaining term equal to the expected option lives, and estimates dividend yield using the

Company’s expectations and historical data.

The fair value of each restricted stock unit is calculated based upon the closing price of the Company’s common stock on the date of the grant.

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Recent Accounting Pronouncements

In October 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , which contains amendments that require annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model.

The disclosures include (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.

The amendments set forth in this ASU are effective for all entities for annual periods beginning after December 15, 2021.

Early application of the amendments in this ASU is permitted.

The amendments in this ASU should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions.

The Company plans to adopt the standard prospectively on January 1, 2022.

The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

The amendments set forth in this ASU are effective for fiscal years beginning after December 15, 2022.

Early adoption of the amendments is permitted.

The amendments in this ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

The Company plans

to early adopt the standard prospectively on January 1, 2022.

The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.

In May 2021, the FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) , which contains amendments that clarify and reduce diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

The amendments set forth in this ASU are effective for all entities for annual periods beginning after December 15, 2021.

Early application of the amendments in this ASU is permitted for all entities.

The amendments in this ASU should be applied prospectively.

The Company plans to adopt the standard prospectively on January 1, 2022.

The adoption of this new standard had no impact on the Company's consolidated financial statements and disclosures.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements, which contains amendments that improve the consistency of the ASC by including all disclosure guidance in the appropriate Disclosure Section (Section 50).

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The amendments in this ASU should be applied retrospectively.

The Company plans to adopt this new standard on January 1, 2021.

The Company is in the process of assessing the impact that this new standard will have in its consolidated financial statements and disclosures.

The Company adopted the standard on January 1, 2021.

The adoption of the new standard did not have an impact on the Company's consolidated financial statements and disclosures.

In November 2018, the FASB issued ASU No.

2018-18 Collaborative Arrangements - Clarifying the Interaction between Topic 808 (Collaborative Arrangements) and Topic 606 (Revenue from Contracts with Customers) (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers (“ASC 606”).

2018-18 Collaborative Arrangements - Clarifying the Interaction between Topic 808 (Collaborative Arrangements) and Topic 606 (Revenue from Contracts with Customers) , which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606.

The ASU clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer.

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The adoption of the new standard did not have an impact on the Company’s consolidated financial statements.

NET LOSS PER SHARE ATTRIBUTABLE TO CAREDX, INC.

Basic and diluted net loss per share attributable to CareDx, Inc.

have been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common share equivalents as their effect would have been antidilutive.

NET LOSS PER SHARE

Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common share equivalents as their effect would have been antidilutive.

For the years ended December 31, 2021, 2020 and 2019, all common share equivalents have been excluded from the calculation of diluted net loss per share, as their effect would be antidilutive.

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2021 2020 2019

Net loss attributable to CareDx, Inc.

used to compute basic net loss per share

Net loss used to compute basic net loss per share

$ ( 30,662 ) $ ( 18,714 ) $ ( 21,968 )

Net loss attributable to CareDx, Inc.

used to compute diluted net loss per share

Net loss used to compute diluted net loss per share

$ ( 30,662 ) $ ( 18,714 ) $ ( 21,968 )

Weighted-average shares used to compute basic net loss per share attributable to CareDx, Inc.

Weighted-average shares used to compute basic net loss per share

52,241,076 46,481,772 42,151,617

Weighted-average shares used to compute diluted net loss per share attributable to CareDx, Inc.

Weighted-average shares used to compute diluted net loss per share

52,241,076 46,481,772 42,151,617

Net loss per share attributable to CareDx, Inc.:

Net loss per share:

Basic $ ( 0.59 ) $ ( 0.40 ) $ ( 0.52 )

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Total common stock equivalents 3,914,422 4,555,528 4,481,383

During 2017 and the three months ended March 31, 2018, 6,415,039 shares of common stock were issued due to the conversion of the JGB Debt (as defined below).

In the three months ended June 30, 2018, the Company achieved the milestone of performing 2,500 commercial AlloSure Kidney tests resulting in the issuance of 227,848 shares of common stock to the former owners of ImmuMetrix, Inc.

(“IMX”) that was accounted for as contingent consideration.

On November 13, 2018, the Company completed an underwritten public offering (the “2018 Public Offering”) pursuant to which the Company issued and sold an aggregate of 2,300,000 shares.

During April 2020, the Company issued and sold 1,000,000 shares of its common stock under the Sales Agreement pursuant to an “at-the-market” equity offering.

On June 15, 2020, the Company completed an underwritten public offering (the “2020 Public Offering”) pursuant to which the Company sold 4,492,187 shares of common stock.

On June 15, 2020, the Company completed an underwritten public offering pursuant to which the Company sold 4,492,187 shares of common stock.

On January 25, 2021 and February 11, 2021, the Company completed an underwritten public offering, including the sale of shares pursuant to the exercise of the underwriters' over-allotment option, pursuant to which the Company sold 1,923,077 and 288,461 shares of common stock, respectively.

FAIR VALUE MEASUREMENTS

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Money market funds $ 335,107 $ — $ — $ 335,107

Long-term marketable securities:

Corporate equity securities 3,257 — — 3,257

Corporate debt securities — 500 — 500

Total $ 338,364 $ 500 $ — $ 338,864

Short-term liabilities:

Contingent consideration $ — $ — $ 2,114 $ 2,114

Long-term liabilities:

Contingent consideration — — 3,227 3,227

Common stock warrant liability — — 139 139

Total $ — $ — $ 5,480 $ 5,480

December 31, 2020

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The following table presents the issuances, exercises, changes in fair value and reclassifications of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):

Common Stock Warrant Liability (Level 3)

Balance as December 31, 2018 $ 10,003

Common Stock Warrant Liability and Contingent Consideration (Level 3)

Balance at December 31, 2019 $ 6,607

Exercise of warrants ( 7,655 )

Change in estimated fair value ( 319 )

Balance as December 31, 2019 $ 6,607

Change in estimated fair value of common stock warrant liability 1,495

Balance at December 31, 2020 $ 447

Exercise of warrants ( 202 )

Change in estimated fair value 1,495

Balance as December 31, 2020 $ 447

Change in estimated fair value of common stock warrant liability ( 106 )

Additions to contingent consideration 5,341

Balance at December 31, 2021 $ 5,480

As of December 31, 2021, the Company had one investment in convertible preferred shares carried at cost.

See Note 7, "Goodwill and Intangible Assets”.

In the event the Company had to calculate the fair value of this investment, it would be based on Level 3 inputs.

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At December 31, 2021 and 2020, money market funds were included as cash and cash equivalents in the consolidated balance sheets.

• Marketable securities —Investments in marketable securities are classified within Level 2.

• Short-term marketable securities —Investments in short-term marketable securities are classified within Level 2.

The securities are valued using third-party pricing sources.

The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.

• Common stock warrant liability —The Company utilizes a binomial-lattice pricing model (the “Monte Carlo Simulation Model”) that involves a market condition simulation to estimate the fair value of the warrants.

The application of the Monte Carlo Simulation Model requires the use of a number of complex assumptions including the Company’s stock price, expected life of the warrants, stock price volatility determined from the Company’s historical stock prices and stock prices of peer companies in the diagnostics industry, and risk-free rates based on the implied yield currently available in the U.S.

• Long-term marketable equity and debt securities —Investments in long-term marketable equity securities are classified within Level 1.

The securities are recorded at fair value based on readily available quoted market prices in active markets.

Investments in long-term marketable debt securities are classified within Level 2.

The securities are recorded at fair value based on observable inputs for quoted prices for identical or similar assets in markets that are not active.

Long-term marketable securities are located within other assets on the consolidated balance sheets.

• Contingent consideration —Contingent consideration is classified within Level 3.

Contingent consideration relates to asset acquisitions and business combinations.

The Company recorded the estimate of the fair value of the contingent consideration based on its evaluation of the probability of the achievement of the contractual conditions that would result in the payment of the contingent consideration.

Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met multiplied by management’s estimate of the probability of success at a discounted rate of 12 % at December 31, 2021.

The significant input in the Level 3 measurement that is not supported by market activity is the Company’s probability assessment of the achievement of the milestones.

The value of the liability is subsequently remeasured to fair value at each reporting date, and the change in estimated fair value is recorded as a component of operating expenses until the milestones are paid, expire or are no longer achievable.

Increases or decreases in the estimation of the probability percentage result in a directionally similar impact to the fair value measurement of the contingent consideration liability.

The carrying amount of the contingent consideration liability represents its fair value.

For the year ended December 31, 2021, there was no fair value adjustment to the contingent consideration for MedActionPlan and TTP as these were acquired during the fourth quarter and no changes to the probabilities have occurred post acquisition.

• Common stock warrant liability —Common stock warrant liability is classified within Level 3.

The Company utilizes a binomial-lattice pricing model (the “Monte Carlo Simulation Model”) that involves a market condition simulation to estimate the fair value of the warrants.

The application of

the Monte Carlo Simulation Model requires the use of a number of complex assumptions, including the Company’s stock price, expected life of the warrants, stock price volatility determined from the Company’s historical stock prices and stock prices of peer companies in the diagnostics industry, and risk-free rates based on the implied yield currently available in the U.S.

Treasury zero-coupon issues with a remaining term equal to the expected life of the warrants.

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Marketable Securities

All marketable securities were considered held-to-maturity at December 31, 2020.

There were no marketable securities at December 31, 2019.

As of December 31, 2020 some of the Company’s marketable securities were in an unrealized loss position.

The Company determined that it had the positive intent and ability to hold until maturity all marketable securities that have been in a continuous loss position, thus there was no recognition of any other-than-temporary impairment as of December 31, 2020.

All marketable securities with unrealized losses as of each balance sheet date have been in a loss position for less than twelve months.

The long-term marketable equity securities were recorded at fair market value at December 31, 2021.

The long-term marketable debt securities were considered available-for-sale at December 31, 2021.

The contractual maturity of the long-term marketable debt securities are less than three years.

All short-term marketable securities were considered held-to-maturity at December 31, 2020.

At December 31, 2020, some of the Company’s short-term marketable securities were in an unrealized loss position.

The Company determined that it had the positive intent and ability to hold until maturity all short-term marketable securities that have been in a continuous loss position, thus there was no recognition of any other-than-temporary impairment at December 31, 2020.

All short-term marketable securities with unrealized losses as of the balance sheet date have been in a loss position for less than twelve months.

Contractual maturities of the short-term marketable securities were within one year or less at December 31, 2020.

The amortized cost, gross unrealized holding losses, and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the table below (in thousands):

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Amortized Cost Unrealized Holding Losses Fair Value

Long-term marketable securities:

Corporate equity securities $ 5,000 $ ( 1,743 ) $ 3,257

Corporate debt securities 500 — 500

Total long-term marketable securities $ 5,500 $ ( 1,743 ) $ 3,757

December 31, 2020

Amortized Cost Unrealized Holding Losses Fair Value

Short-term marketable securities:

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Total short-term marketable securities $ 90,034 $ ( 136 ) $ 89,898

Contractual maturities of the short-term marketable securities as of December 31, 2020 are as follows (in thousands):

Contractual maturities of the marketable securities at each balance sheet date are as follows (in thousands):

December 31, 2021

Within one year $ —

After one year through five years 500

After five years through ten years —

After ten years —

Total $ 90,034

BUSINESS COMBINATIONS

On May 7, 2019, the Company acquired 100 % of the outstanding common stock of Ottr, Inc.

for total consideration of $ 16.1 million.

was formed in 1993 and is a leading provider of organ transplant patient tracking software.

The Ottr software provides comprehensive solutions for transplant patient management and enables integration with EMR systems providing patient surveillance management tools and outcomes data to transplant centers.

The Transplant Pharmacy

In December 2021, the Company acquired TTP, a transplant focused pharmacy located in Mississippi.

The Company acquired TTP with a combination of cash consideration paid upfront and contingent consideration with a fair value of $ 1.3 million.

TTP provides individualized transplant pharmacy services for patients at multiple transplant centers located throughout the U.S.

The Company accounted for the transaction as a business combination using the acquisition method of accounting.

Results of operations of Ottr, Inc.

have been included with the Company’s results since the date of the acquisition.

Acquisition-related costs of $ 0.3 million were expensed as incurred, and classified as part of general and administrative expenses in the consolidated statements of operations.

Goodwill of $ 5.5 million arising from the acquisition primarily consists of additional growth opportunities within the pharmacy sector.

The integration of TTP into the Company’s portfolio is expected to continue to increase the transplant ecosystem for patients and make medication more accessible.

The Company estimated net deferred tax liabilities of approximately $ 0.6 million arising from temporary differences related to the assets acquired and liabilities assumed.

None of the goodwill is expected to be deductible for income tax purposes.

All of the goodwill has been assigned to the Company’s existing operating segment.

The following table summarizes the fair value of the intangible asset acquired as of the acquisition date ($ in thousands):

Estimated Fair Value

Estimated Useful Life (Years)

The trademark acquired consists primarily of the TTP brand and markings.

The fair value of the trademark was determined using the relief-from-royalty method under the income approach.

This method considers the value of the asset to be the value of the royalty payments from which the Company is relieved due to its ownership of the asset.

The royalty rate of 2 % was used to estimate the fair value of the trademark.

A discount rate of 13.5 % was utilized in estimating the fair value of the trademark.

The pro forma impact of the TTP acquisition is not material, and the results of operations of the acquisition have been included in the Company's consolidated statements of operations from the respective acquisition date.

MedActionPlan

In November 2021, the Company acquired MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education.

The Company acquired MedActionPlan with a combination of cash consideration paid upfront and contingent consideration with a fair value of $ 3.5 million.

MedActionPlan is a leader in patient medication management for transplant patients and beyond.

The Company accounted for the transaction as a business combination using the acquisition method of accounting.

Acquisition-related costs of $ 0.6 million associated with the acquisition were expensed as incurred, and classified as part of general and administrative expenses in the consolidated statement of operations.

Goodwill of $ 10.2 million arising from the acquisition primarily consists of synergies from integrating the Ottr software with transplant center EMR systems and the current testing solutions offered by the Company.

Goodwill synergies also arise from acquired workforce know-how of transplant centers workflow.

Goodwill of $ 4.9 million arising from the acquisition primarily consists of synergies from integrating the MedActionPlan technology with the current testing and digital solutions offered by the Company.

The integration of MedActionPlan into centers with the Company's other software platforms will continue to increase the standard of care for transplant patient safety, increase efficiency and facilitate medication compliance.

None of the goodwill is expected to be deductible for income tax purposes.

All of the goodwill has been assigned to the Company’s existing operating segment.

The following table summarizes the consideration paid for Ottr, Inc.

and the provisional amounts of the assets acquired and liabilities assumed recognized at their estimated fair value at the acquisition date (in thousands):

The following table summarizes the fair values of the intangible assets acquired as of the acquisition date ($ in thousands):

Estimated Fair Value

Estimated Useful Lives (Years)

Customer relationships $ 2,590 10

Developed technology 1,090 10

Trademarks 80 5

Total $ 3,760

Customer relationships acquired by the Company represent the fair value of future projected revenue that is expected to be derived from sales of MedActionPlan’s products to existing customers.

The customer relationships’ fair value has been estimated utilizing a multi-period excess earnings method under the income approach, which reflects the present value of the

projected cash flows that are expected to be generated by the customer relationships, less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place.

The economic useful life was determined based on the distribution of the present value of the cash flows attributable to the intangible asset.

The acquired developed technology represents the fair value of MedActionPlan’s proprietary software.

The trademark acquired consists primarily of the MedActionPlan brand and markings.

The fair value of both the developed technology and the trademark were determined using the relief-from-royalty method under the income approach.

This method considers the value of the asset to be the value of the royalty payments from which the Company is relieved due to its ownership of the asset.

The royalty rates of 15 % and 1 % were used to estimate the fair value of the developed technology and the trademark, respectively.

A discount rate of 40.0 % was utilized in estimating the fair value of these three intangible assets.

The pro forma impact of the MedActionPlan acquisition is not material, and the results of operations of the acquisition have been included in the Company's consolidated statements of operations from the respective acquisition date.

TransChart LLC

In January 2021, the Company acquired TransChart.

TransChart provides EMR software to hospitals throughout the U.S.

to care for patients who have or may need an organ transplant.

As a result of the acquisition, the Company recognized goodwill of $ 2.2 million and intangible assets of $ 2.0 million.

The pro forma impact of the TransChart acquisition is not material, and the results of operations of the acquisition have been included in the Company's consolidated statements of operations from the respective acquisition date.

Combined Consideration Paid

The following table summarizes the consideration paid for TransChart, TTP and MedActionPlan, and the provisional amounts of the assets acquired and liabilities assumed recognized at their estimated fair value at the acquisition date ($ in thousands):

Consideration

Cash $ 17,166

Accrued purchase consideration 111

Total consideration

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Identifiable intangible assets 7,860

Other assets 2

Current liabilities ( 3,915 )

Noncurrent liabilities ( 2,883 )

Total identifiable net assets acquired 4,531

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The allocation of the purchase price to assets acquired and liabilities assumed was based on the Company’s best estimate of the fair value of such assets and liabilities as of the acquisition date.

The fair value of the acquired current liabilities as of June 30, 2019 included a preliminary deferred revenue balance of $ 2.3 million.

During the three months ended September 30, 2019, the Company recorded an adjustment of $ 0.5 million to the initial valuation amount of deferred revenue, decreasing its balance to $ 1.8 million as of the acquisition date.

This change is a result of updated assumptions and methodologies for acquired software maintenance contracts.

As part of this adjustment, goodwill decreased by approximately $ 0.5 million.

At the acquisition date, the Company estimated net deferred tax assets of approximately $ 0.2 million arising from temporary differences related to assets acquired and liabilities assumed.

The Company estimated that Ottr, Inc.

had net operating losses (“NOLs”) carryforward of approximately $ 6.9 million, $ 4.3 million of which will begin to expire in 2033, and the remaining $ 2.6 million will be carried forward indefinitely.

A full valuation allowance of $ 0.2 million was recognized as of the acquisition date resulting in no impact from deferred taxes to Ottr, Inc.’s opening balance.

An Internal Revenue Code Section 382 study for NOLs was finalized during the third quarter of 2019 and deferred taxes acquired were finalized as of December 31, 2019.

The following table summarizes the fair values of the intangible assets acquired as of the acquisition date ($ in thousands):

Estimated Fair Value Estimated Useful Lives (Years)

Customer relationships $ 4,200 15

Developed technology 2,300 10

Trademark 100 2

Total $ 6,600

Customer relationships acquired by the Company represent the fair value of future projected revenue that is expected to be derived from sales of Ottr, Inc.’s products to existing customers.

The customer relationships’ fair value has been estimated utilizing a multi-period excess earnings method under the income approach, which reflects the present value of the projected cash flows that are expected to be generated by the customer relationships, less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place.

The economic useful life was determined based on the distribution of the present value of the cash flows attributable to the intangible asset.

The acquired developed technology represents the fair value of Ottr, Inc.’s proprietary software.

The trademark acquired consists primarily of the Ottr, Inc.

brand and markings.

The fair value of both the developed technology and the trademark were determined using the relief-from-royalty method under the income approach.

This method considers the value of the asset to be the value of the royalty payments from which the Company is relieved due to its ownership of the asset.

The royalty rates of 15.0 % and 1.0 % were used to estimate the fair value of the developed technology and the trademark, respectively.

The Company utilized a discount rate of 14.5 % in estimating the fair value of these three intangible assets.

Unaudited supplemental pro forma information is not disclosed because it is considered immaterial.

XynManagement

On August 26, 2019, the Company acquired 100 % of the outstanding common stock of XynManagement for total cash consideration of $ 2.0 million.

As a result of the acquisition, the Company recognized contingent consideration of $ 1.4 million, including liability and equity components, goodwill of $ 1.7 million and intangible assets of $ 2.1 million.

Goodwill synergies arise from acquired workforce know-how of transplant centers workflow.

The goodwill for this acquisition is not deductible for income tax purposes.

The contingent consideration relates to potential future cash payments upon reaching specified revenue and non-financial targets.

GOODWILL AND INTANGIBLE ASSETS

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Intangible Assets

The following tables present details of the Company’s intangible assets as of December 31, 2020 (dollar amounts in thousands):

The following table presents details of the Company’s intangible assets as of December 31, 2021 ($ in thousands):

December 31, 2021

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Trademarks and tradenames 4,540 ( 988 ) ( 155 ) 3,397 9.5

Other 250 ( 188 ) — 62 0.2

Total intangible assets with finite lives 73,141 ( 21,318 ) ( 2,878 ) 48,945

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Total intangible assets $ 74,391 $ ( 21,318 ) $ ( 2,878 ) $ 50,195

The following tables present details of the Company’s intangible assets as of December 31, 2019 (dollar amounts in thousands):

The following table presents details of the Company’s intangible assets as of December 31, 2020 ($ in thousands):

December 31, 2020

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In June 2020, the Company commercially launched AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.

This technology can provide better sensitivity and data analysis compared to current solutions on the market.

This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market.

AlloSeq HCT, previously included in Acquired in-process technology as of December 31, 2019, is included in Acquired and developed technology as of December 31, 2021.

Illumina License and Commercialization Agreement

On May 4, 2018, the Company entered into a license agreement with Illumina, which provides the Company with certain worldwide distribution, development and commercialization rights to Illumina’s NGS product line for use in the field of bone marrow and solid organ transplantation diagnostic testing (the “Field”).

As a result, from June 1, 2018, the Company is the exclusive worldwide distributor of Illumina’s TruSight HLA product line.

In addition, the Company was also granted the exclusive right to develop and commercialize other NGS product lines for use in the Field.

The License Agreement required the Company to make a $ 5.0 million initial cash payment to Illumina and further requires the Company to pay royalties in the mid-single to low-double digits on sales of future commercialized products.

Pursuant to the License Agreement, the Company is obligated to complete timely development and commercialization of other NGS product lines for use in the Field, and has agreed to minimum purchase commitments of finished products and raw materials from Illumina through 2023.

As the License Agreement did not meet the definition of a business combination under ASC Topic 805, Business Combinations, the Company accounted for the transaction as an asset acquisition.

In an asset acquisition goodwill is not recognized, but rather any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable assets acquired.

Costs relating to the assets acquired were $ 5.2 million, comprising of the cash consideration of $ 5.0 million and associated transaction costs of $ 0.2 million.

A deferred tax balance was not required to be established on the License Agreement date as the book and tax basis of the intangible assets was equivalent to the amount paid.

The allocation of the purchase price to identified intangible assets acquired was based on the Company’s best estimate of the fair value of such assets as of the acquisition date.

Significant assumptions utilized in the valuation of identified intangible assets were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by U.S.

The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management.

Customer relationships represent the fair value of future projected revenue that is expected to be derived from sales of TruSight HLA products to existing customers of Illumina.

The customer contracts and related relationships value has been estimated utilizing a multi-period excess earnings method under income approach, which reflects the present value of the projected cash flows that are expected to be generated by the customer relationships less charges representing the contribution of other assets to those cash flows that use projected cash flows with and without the intangible asset in place.

The economic useful life was determined based on the life of the products, assuming that the existing customers will remain with the Company until the products become obsolete.

The Company utilized a discount rate of 18 % in estimating the fair value of the customer relationships.

The acquired in-process technology represents the fair value of products in development that have not reached commercial production at the date of acquisition.

The fair value of the products was also determined using the multi-period excess earnings method under income approach.

A discount rate of 40 % for the AlloSeq HCT acquired in-process technology was utilized to discount the cash flows to the present value.

In November 2019, the acquired in-process technology intangible for AlloSeq Tx commenced commercial production.

As of December 31, 2019;

such acquired in-process technology has been classified as an intangible assets with finite live, and is being amortized over a useful life of 14 years.

The following table summarizes the fair values of the intangible assets acquired as of the closing date ($ in thousands):

Estimated Fair Value Estimated Useful Life (Years)

Customer relationships:

TruSight HLA $ 380 2.6

Acquired in-process technology:

AlloSeq HCT 2,103 —

Total $ 2,483

In June 2021, the Company acquired commercialization rights in an exclusive partnership for comprehensive data analytics in relation to NGS-based metagenomics testing for infectious diseases.

This is included within Commercialization rights as of December 31, 2021.

In June 2021, the Company acquired the Transplant Hero patient application.

The patient application is included in Acquired and developed technology as of December 31, 2021.

As of December 31, 2021, acquisition of intangible assets increased $ 13.4 million primarily from business combinations.

These acquisitions included $ 4.7 million of Acquired and developed technology, $ 2.5 million of Commercialization rights, $ 3.7 million of Customer relationships, $ 2.2 million of Trademarks and tradenames and $ 0.3 million of Other intangible assets.

Cibiltech License and Commercialization Agreement

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Cibiltech is a French company engaged in the development and support of predictive medicine and artificial intelligence software, services and technology, with an emphasis on personalized patient care and clinical research, including its proprietary software and service offering known in the U.S.

as KidneyCare iBox for the predictive analysis of post-transplantation kidney allograft loss.

as iBox for the predictive analysis of post-transplantation kidney allograft loss.

The Cibiltech Agreement provides the Company with an irrevocable, non-transferable right to commercialize Cibiltech’s proprietary software in the field of transplantation in the U.S.

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The Company estimated the fair value of the acquired commercialization rights intangible asset based on expected contractual payments discounted to present value using a discount rate of 6 %.

In September 2019, the Company initiated the OKRA clinical study, which incorporates KidneyCare iBox.

In September 2019, the Company initiated the OKRA clinical study, which incorporates iBox.

On such date, the Company commenced amortization of the acquired commercialization intangible asset.

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Amortization expense was $ 5.8 million, $ 4.8 million and $ 3.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For the year ended December 31, 2020, $ 1.3 million, $ 1.7 million, $ 0.3 million and $ 1.5 million were amortized to cost of testing services, cost of product, cost of digital and other and sales and marketing, respectively.

For the year ended December 31, 2019, $ 0.7 million, $ 1.4 million, $ 0.2 million and $ 1.3 million were amortized to cost of testing services, cost of product, cost of digital and other and sales and marketing, respectively.

For the year ended December 31, 2018, $ 0.5 million, $ 1.5 million, $ 0.0 million and $ 1.0 million were amortized to cost of testing services, cost of product, cost of digital and other and sales and marketing, respectively.

For the year ended December 31, 2021, $ 1.3 million, $ 1.9 million, $ 0.7 million and $ 1.9 million were amortized to cost of testing services, cost of product, cost of patient and digital solutions, and sales and marketing, respectively.

For the year ended December 31, 2020, $ 1.3 million, $ 1.7 million, $ 0.3 million and $ 1.5 million were amortized to cost of testing services, cost of product, cost of patient and digital solutions, and sales and marketing, respectively.

For the year ended December 31, 2019, $ 0.7 million, $ 1.4 million, $ 0.2 million and $ 1.3 million were amortized to cost of testing services, cost of product, cost of patient and digital solutions and sales and marketing, respectively.

Intangible assets are carried at cost less accumulated amortization.

Amortization expenses are recorded to cost of testing services, cost of product, cost of digital and other and sales and marketing expenses in the consolidated statements of operations.

Amortization expenses are recorded to cost of testing services, cost of product, cost of patient and digital solutions, and sales and marketing expenses in the consolidated statements of operations.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2021 (in thousands):

Years Ending December 31, Cost of Testing Services Cost of

Cost of Digital and Other Sales and

Cost of Patient and Digital Solutions Sales and

2022 $ 1,316 $ 1,855 $ 945 $ 2,261 $ 6,377

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Machinery and equipment $ 12,091 $ 9,325

Construction in progress 10,925 1,873

Leasehold improvements 8,466 8,096

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Furniture and fixtures 943 683

Construction in progress 1,873 840

Property and equipment 41,625 27,703

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Depreciation expense was $ 2.7 million, $ 1.9 million and $ 1.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Assets purchased under finance leases, included above in machinery and equipment, and computer and office equipment, were $ 0.6 million at each of December 31, 2020 and 2019.

Accumulated depreciation was $ 0.4 million at each of December 31, 2020 and 2019.

There were no assets purchased under finance leases during 2021.

Assets purchased under finance leases, included above in machinery and equipment, and computer and office equipment, were $ 0.6 million at December 31, 2020.

Accumulated depreciation was $ 0.5 million and $ 0.4 million at December 31, 2021 and 2020, respectively.

Related amortization expense, included in depreciation and amortization expense, was $ 0.1 million, $ 0.1 million and $ 0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Clinical studies $ 10,653 $ 6,733

Professional fees 5,780 1,529

Deferred revenue 4,208 3,530

Short-term lease liability 3,958 2,033

Capital expenditures 2,612 —

Contingent consideration 2,114 738

Deferred payments for intangible assets 2,000 2,000

Professional fees 1,529 766

Accrued royalty 1,664 1,072

Contingent consideration 738 810

Test sample processing fees 1,197 416

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government enacted the CARES Act.

Pursuant to the CARES Act, CMS expanded its current Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic.

CMS was authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submits a request to the appropriate Medicare Administrative Contractor and meets the required qualifications.

Pursuant to the CARES Act, CMS expanded its Accelerated and Advance Payment Program in order to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic.

CMS was authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider who submitted a request to the appropriate Medicare Administrative Contractor and met the required qualifications.

During April 2020, the Company received an advance payment from CMS of approximately $ 20.5 million and recorded the payment as Deferred revenue - CMS advance payment on the Company's consolidated balance sheet.

During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and determined to repay the entire amount in January 2021.

During December 2020, the Company reassessed the Deferred revenue - CMS advance payment and repaid the entire amount in January 2021.

The Company recorded the amount as Refund liability - CMS advance payment on the consolidated balance sheet as of December 31, 2020.

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Brisbane, California;

Columbus, Ohio;

West Chester, Pennsylvania;

Flowood, Mississippi;

Fremantle, Australia;

and Stockholm, Sweden.

and Vienna, Austria.

The Company also leases equipment under finance lease agreements.

On January 2, 2020, the Company executed the second amendment to the operating lease agreement for the building located at Brisbane, California.

The building is mainly utilized for laboratory operations and research and development.

The lease will be extended for a period of eight years and two months starting on January 1, 2021.

The Company has determined that the amendment constitutes a lease modification effective January 1, 2020.

The lease was extended for a period of eight years and two months starting on January 1, 2021.

The Company has determined that the amendment constituted a lease modification effective January 1, 2020.

At the inception of the lease modification, the ROU asset increased by $ 13.0 million.

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The current and non-current lease liabilities are included in accrued and other current liabilities and operating lease liability, less current portion, respectively, in the consolidated balance sheets.

The following table summarizes the lease cost for the year ended December 31, 2020 (in thousands):

The following table summarizes the lease cost for the years ended December 31, (in thousands):

2021 2020 2019

Operating lease cost $ 5,134 $ 4,441 $ 1,993

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Weighted-average discount rate - Finance leases (%) — %

Rent expense under the non-cancelable operating leases was $ 4.9 million, $ 2.3 million and $ 2.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Future minimum lease commitments under these operating and finance leases on December 31, 2020, are as follows (in thousands):

Years ending December 31, Finance

Leases Operating Leases

2021 $ 71 $ 4,562

Maturities of operating lease liabilities as of December 31, 2021, are as follows (in thousands):

Years ending December 31, Operating Leases

Thereafter 7,140

Total minimum lease payments $ 71 $ 31,530

The current portion of obligations under finance leases is included in accrued and other liabilities, and the long-term portion of finance leases are included in other liabilities within the consolidated balance sheets.

Total lease payments 28,737

Less imputed interest 7,385

Present value of future minimum lease payments 21,352

Less operating lease liability, current portion 3,958

Operating lease liability, long-term portion $ 17,394

Royalty Commitments

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Cibiltech Commitments

Pursuant to the Cibiltech Agreement, the Company will share an agreed-upon percentage of revenue with Cibiltech, if and when revenues are generated from KidneyCare iBox.

Pursuant to that certain license and commercialization agreement that the Company entered into with Cibiltech SAS (“Cibiltech”) effective April 30, 2019, the Company will share an agreed-upon percentage of revenue with Cibiltech, if and when revenues are generated from iBox.

Tax Commitments

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Pursuant to the Illumina Agreement, the Company has agreed to minimum purchase commitments of finished products and raw materials from Illumina through 2023.

The Company has also committed to make potential future payments to third parties as part of its collaboration and licensing agreements.

Payments under these agreements generally become due and payable only upon achievement of specific project milestones.

Litigation and Indemnification Obligations

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The suit seeks injunctive relief and unspecified monetary relief.

On September 30, 2020, Natera requested leave of Court to amend its counterclaims to include additional allegations regarding purportedly false claims the Company made with respect to AlloSure;

the Court granted Natera’s request.

Trial is currently scheduled to begin on July 26, 2021.

On September 30, 2020, Natera requested leave of Court to amend its counterclaims to include additional allegations regarding purportedly false claims the Company made with respect to AlloSure, and the Court granted Natera’s request.

The trial date is currently set to start March 7, 2022.

In addition, in response to the Company's patent infringement suit filed against Natera on March 26, 2019, Natera filed suit against the Company on January 13, 2020, in the Court alleging, among other things, that AlloSure infringes Natera’s U.S.

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The suit seeks a judgment that the Company has infringed Natera’s patents, an order preliminarily and permanently enjoining the Company from any further infringement of such patents and unspecified damages.

Trial is currently scheduled for July 24, 2023.

The Company intends to defend both of these matters vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail.

The Company has not recorded any liabilities for these suits.

United States Department of Justice and United States Securities and Exchange Commission Investigations

As previously disclosed, in 2021, the Company received a civil investigative demand (“CID”) from the United States Department of Justice (DOJ) requesting that the Company produce certain documents in connection with a False Claims Act investigation being conducted by the DOJ regarding certain business practices related to the Company's kidney testing and phlebotomy services, and a subpoena from the United States Securities and Exchange Commission (“SEC”) in relation to an investigation by the SEC in respect of matters similar to those identified in the CID, as well as certain of the Company's accounting and public reporting practices.

The Company also received an information request from a state regulatory agency and may receive additional requests for information from the DOJ, SEC, or other regulatory and governmental agencies regarding similar or related subject matters.

The Company does not believe that the CID, the SEC subpoena or the state regulatory agency information request raise any issues regarding the safety or efficacy of any of the Company's products or services and are cooperating fully with the investigations.

Although the Company remains committed to compliance with all applicable laws and regulations, it cannot predict the outcome of the DOJ or SEC investigations, the state regulatory agency information request, or any other requests or investigations that may arise in the future regarding these or other subject matters.

From time to time, the Company may become involved in litigation and other legal actions.

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(i) information available prior to issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements, and (ii) the range of loss can be reasonably estimated.

The Company did no t have any outstanding debt as of December 31, 2020.

Perceptive Credit Agreement

On April 17, 2018, the Company entered into a credit agreement with Perceptive Credit Holdings II, LP (the “Perceptive Credit Agreement”) for an initial term loan of $ 15.0 million.

On November 20, 2018, the Company paid off all obligations owing under, and terminated, the Perceptive Credit Agreement.

The Perceptive Credit Agreement debt extinguishment resulted in a $ 3.0 million loss that was included in debt extinguishment expenses, in the consolidated statements of operations.

In February and March 31, 2018, JGB Collateral LLC and certain of its affiliates (“JGB”) converted the remaining $ 26.7 million of principal and accrued interest of the Company’s convertible debt (the “JGB Debt”) into an aggregate of 6,161,331 shares of the Company’s common stock.

In connection with these conversions, the Company recognized $ 6,000 to common stock and $ 38.8 million to additional paid in capital;

the unamortized debt discount of $ 2.7 million was extinguished;

and the compound derivative liability of $ 12.1 million was also extinguished.

The JGB Debt conversion resulted in a $ 2.8 million loss on debt extinguishment that was included in debt extinguishment expenses in the consolidated statements of operations for the year ended December 31, 2018.

STOCKHOLDERS’ EQUITY

On October 5, 2017, JGB converted $ 1.3 million of outstanding principal under certain debentures into shares of common stock.

Accordingly, the Company issued 288,022 shares of common stock to JGB at a price per share of $ 4.34 .

In 2018, JGB converted the remaining $ 26.7 million of outstanding principal and accrued interest for a total issuance of 6,161,331 shares of the Company’s common stock at a price per share of $ 4.33 .

Contingent Consideration Liability

The Company had a contingent obligation to issue 227,845 shares of the Company’s common stock to the former owners of IMX, in conjunction with its acquisition of IMX in June 2014.

The shares were issuable upon the Company completing 2,500 commercial tests involving the measurement of dd-cfDNA in organ transplant recipients in the United States by June 10, 2020.

The Company achieved the contingent consideration milestone of 2,500 commercial tests and issued the 227,848 shares in May 2018.

2018 Public Offering

On November 16, 2018, the Company sold in the 2018 Public Offering an aggregate of 2,300,000 shares of its common stock, including 300,000 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares at a public offering price of $ 24.50 per share.

Total net proceeds received were $ 52.9 million net of underwriter’s fees and issuance costs.

At-the-Market Equity Offering

On August 31, 2018, the Company entered into the Sales Agreement with Jefferies, as sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, up to $ 50.0 million in shares of its common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

On August 31, 2018, the Company entered into the Sales Agreement with Jefferies, as sales agent, pursuant to which the Company could offer and sell, from time to time, through Jefferies, up to $ 50.0 million in shares of its common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

During April 2020, the Company issued and sold 1,000,000 shares of its common stock under the Sales Agreement.

The shares were sold at an average price of $ 24.24 per share for aggregate net proceeds to the Company of approximately $ 23.5 million, after deducting sales commissions and offering costs payable by the Company.

Underwritten Public Offering of Common Stock

On June 15, 2020, the Company sold in the 2020 Public Offering an aggregate of 4,492,187 shares of its common stock, including 585,937 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares at a public offering price of $ 32.00 per share.

June 2020 Underwritten Public Offering of Common Stock

Total net proceeds received were $ 134.6 million net of underwriter's fees and issuance costs.

January 2021 Underwritten Public Offering of Common Stock

On January 25, 2021, the Company sold 1,923,077 shares of its common stock through an underwritten public offering at a public offering price of $ 91.00 per share.

The net proceeds to the Company from the offering were approximately $ 164.0 million, after deducting underwriting discounts and commissions and offering expenses.

The net proceeds to the Company from the full exercise of the underwriters' overallotment option were approximately $ 24.7 million.

The Company did no t issue preferred stock during the years ended December 31, 2021, 2020 and 2019.

The Company sponsors a 401(k) defined contribution plan covering all U.S.

employees under the Internal Revenue Code of 1986, as amended.

employees under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations.

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Warrants that are classified as equity are valued at their relative fair value on the date of issuance, recorded in additional paid in capital and not remeasured.

During the year ended December 31, 2021, warrants to purchase approximately 3,000 shares of common stock were exercised for cash proceeds of $ 4 thousand.

During the year ended December 31, 2020, warrants to purchase approximately 314,000 shares of common stock were exercised for cash proceeds of $ 0.4 million.

During the year ended December 31, 2020, a warrant to purchase approximately 34,000 shares of common stock was exercised on a cashless basis and approximately 24,000 shares were issued pursuant to the exercise.

During the year ended December 31, 2019, warrants to purchase approximately 94,000 shares of common stock were exercised for cash proceeds of $ 0.1 million.

During the year ended December 31, 2019, approximately 207,400 warrants were exercised on a cashless basis and approximately 49,000 shares were issued pursuant to the exercises.

As of December 31, 2021, outstanding warrants to purchase common stock were:

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During the offering period in 2021 that ended on June 30, 2021, 21,412 shares were purchased for aggregate proceeds of $ 1.3 million from the issuance of shares, which occurred on July 2, 2021.

During the offering period in 2021 that ended on December 31, 2021, 25,852 shares were purchased for aggregate proceeds of $ 1.0 million from the issuance of shares, which occurred on January 6, 2022.

The Company issued 45,464 shares and 76,723 shares of common stock during the years ended December 31, 2021 and December 31, 2020, respectively, pursuant to the ESPP.

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Treasury securities with similar maturities as of the date of grant.

The Company used an average historical stock price volatility of its own stock and those comparable public companies that were deemed to be representative of future stock price trends.

The Company used an average historical stock price volatility of its own stock.

Expected Term:

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Cost of product 579 391 280

Cost of digital and other 449 152 —

Cost of patient and digital solutions 728 449 152

Research and development 7,126 4,676 4,422

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Foreign ( 139 ) 160 83

Total current income tax expense (income tax benefit) 103 ( 487 ) 163

Total current income tax expense (benefit) ( 48 ) 103 ( 487 )

Federal ( 409 ) 91 ( 558 )

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Effective income tax rate 4.4 % 5.2 % 8.3 %

Deferred income tax assets and liabilities consist of the following:

(in thousands):

Deferred income tax assets and liabilities consist of the following (in thousands):

As of December 31, 2021

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and Australia net deferred tax assets have been offset by a full valuation allowance.

The valuation allowance increased by $ 8.4 million and $ 4.1 million during the years ended December 31, 2020 and 2019, respectively.

The valuation allowance decreased by $ 27.2 million and increased by $ 8.4 million during the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company had domestic federal net operating loss carryforwards of $ 108.1 million, domestic state net operating loss carryforwards of $ 53.6 million, and foreign net operating loss carryforwards of $ 15.9 million that can reduce future taxable income.

Of the $ 239.0 million of federal net operating losses, $ 32.6 million is carried forward indefinitely.

The remaining domestic federal and state net operating loss carryforwards will begin to expire in 2021 and 2029, respectively.

The domestic federal and state net operating loss carryforwards will begin to expire in 2033 and 2030, respectively.

The foreign net operating loss carryforwards can be carried forward indefinitely.

As of December 31, 2021, the Company had credit carryforwards of approximately $ 4.3 million and $ 8.9 million available to reduce future taxable income, if any, for domestic federal and California state income tax purposes, respectively.

The domestic federal credit carryforwards begin to expire in 2021.

The domestic federal credit carryforwards will begin to expire in 2033.

California credits have no expiration date.

Utilization of the Company's net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions.

Based on a preliminary review of the Company's equity transactions since inception, the Company believes a portion of its net operating loss carryforwards and credit carryforwards may be limited due to equity financings which occurred in 2000, 2004, 2007, 2014 and through the current period.

The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2021 and 2020 because the Company's management believes that it is more likely than not that these assets will not be fully realized.

The decrease in the valuation allowance of approximately $ 27.2 million in the year ended December 31, 2021 primarily relates to the loss of net operating loss carryforwards and research and development (“R&D”) credits due to Section 382 of the Internal Revenue Code and similar provisions under state law.

Section 382 of the Internal Revenue Code and similar provisions under state law limit the utilization of U.S.

and state net operating loss carryforwards following certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%.

Based on the Company's analysis under Section 382, the Company believes that $ 158.4 million of its federal net operating loss carryforwards and $ 50.5 million of its state net operating loss carryforwards are limited by Section 382 and similar provisions under state law as of December 31, 2021 and have been written off in the year ended December 31, 2021.

Due to limitations under Section 382, the Company believes that $ 3.9 million of its R&D credits will be limited as of December 31, 2021.

The portion of R&D credits that were determined to be limited by Section 382 have been written off as of December 31, 2021.

The remaining unused carryforwards and credits remain available for future periods.

Due to the Company's full valuation allowance, the write off of net operating loss carryforwards and R&D credits did not have any impact to the statements of operations and comprehensive loss.

A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):

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Additions based on tax positions related to the current year 805 824 667

Additions based on tax positions related to prior years 130 — —

Decreases based on tax positions related to prior years ( 1,195 ) ( 58 ) ( 466 )

Balance at the end of the year $ 4,156 $ 4,416 $ 3,650

None of the $ 4.4 million net unrecognized tax benefit as of December 31, 2020, if recognized, would impact the Company's effective tax rate.

None of the $ 4.2 million of net unrecognized tax benefit as of December 31, 2021, if recognized, would impact the Company's effective tax rate.

During the year ended December 31, 2021, given the Company's valuation allowance, the uncertain tax benefits would not have impacted the effective tax rate.

4 unchanged sentences

Due to net operating loss and credit carryovers, the domestic federal and state income tax returns are subject to tax authority examination from inception.

In foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 3 to 6 years.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), was signed into law making significant changes to the Internal Revenue Code.

Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017.

The Company calculated the impact of the Tax Act in its year end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2017, which did not result in any additional income tax expense in the fourth quarter of 2017.

The enactment of the Tax Act also requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted.

Consequently, the Company accounted for a provisional estimated reduction of the U.S.

deferred tax assets from $ 72.5 million to approximately $ 45.9 million with a corresponding decrease of $ 27.0 million to the Company’s valuation allowance in 2018.

The Company completed its analysis of the impacts of the 2017 Tax Act in the fourth quarter of 2018 with no net change to its provisional estimates.

Starting in 2018, companies may be subject to global intangible low tax income (“GILTI”), which is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations as well as the new base erosion anti-abuse tax (“BEAT”) under the Tax Act.

GILTI will be effectively taxed at a tax rate of 10.5%.

Due to the complexity of the GILTI tax rules, companies are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S.

inclusions in taxable income related to GILTI as a current-period expense when incurred or (2) factoring such amounts into a company’s measurement of its deferred taxes.

The Company has not made an election with respect to GILTI and does not believe that GILTI will have a material impact on the Company’s 2020 taxes.

The Company will continue to review the GILTI and BEAT rules to determine their applicability to the Company and the impact that the rules may have on the Company's results of operations and financial condition.

In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 3 to 6 years.

SEGMENT REPORTING

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$ 26,832 $ 19,302 $ 18,279

Digital and other revenue

Patient and digital solutions revenue

United States $ 10,085 $ 9,063 $ 4,062

13 unchanged sentences

Total $ 22,044 $ 10,704

SUBSEQUENT EVENTS

CMS Accelerated and Advance Payment Program for Medicare Providers

As discussed in Note 8, on January 19, 2021, the Company repaid the $ 20.5 million Refund liability - CMS advance payment.

After repayment, the remaining balance was $ 0.0 million .

Underwritten Public Offering of Common Stock

On January 25, 2021, the Company sold 1,923,077 shares of its common stock through an underwritten public offering at a public offering price of $ 91.00 per share.

The net proceeds to the Company from the offering were approximately $ 164.0 million, after deducting underwriting discounts and commissions and estimated offering expenses.

On February 11, 2021, the Company sold 288,461 shares of its common stock pursuant to the underwriters' full exercise of an overallotment option granted to the underwriters in connection with the offering.

The net proceeds to the Company from the full exercise of the underwriters' overallotment option were approximately $ 24.7 million.

The aggregate net proceeds to the Company, including the shares sold pursuant to the underwriters' full exercise of the overallotment option, were approximately $ 188.7 million, after deducting underwriting discounts and commissions and estimated offering expenses.

TransChart LLC

In January 2021, the Company acquired TransChart LLC (“TransChart”) for cash.

TransChart provides EMR software to hospitals throughout the U.S.

to care for patients who have or may need an organ transplant.

TransChart builds on the Company's digital offerings, which include Ottr, Inc.

transplant electronic medical record software and XynQAPI transplant quality management solutions.

Given the timing of the closing of this transaction, the Company is currently in the process of valuing the assets acquired and liabilities assumed in the business combination.

As a result, the Company is not yet able to provide the amounts to be recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed and other related disclosures.

The Company will disclose this and other related information in the Company's Form 10-Q for the quarter ended March 31, 2021.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data