What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-02-24 · 93 added, 101 removed, 383 unchanged (34% of the section changed)

14 unchanged sentences

AlloSure Kidney has received positive coverage decisions for reimbursement from Medicare.

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

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

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

9 unchanged sentences

Multiple publications and abstracts have shown AlloSure Kidney’s value in the management of BK viremia, as well as numerous pathologies that cause molecular inflammation and injury such as DSAs and eGFR decline.

Most recently its utility in the assessment of T-cell mediated rejection (TCMR) 1A and borderline rejection was published in the American Journal of Transplant, or AJT, and the outcomes of 1,000 patients was published in Kidney International.

Most recently, its utility in the assessment of T-cell mediated rejection (TCMR) 1A and borderline rejection was published in the American Journal of Transplant, or AJT, and the outcomes of 1,000 patients were published in Kidney International.

The prospective multicenter trial, the K-OAR study, has enrolled over 1,700 patients, with plans to survey patients with AlloSure Kidney for 3 years and provide further clinical utility of AlloSure Kidney in the surveillance of kidney transplant recipients.

3 unchanged sentences

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

Combined with K-OAR, 3,000 patients will be enrolled into the study.

Combined with K-OAR, more than 3,000 patients have been enrolled into the study.

AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.

10 unchanged sentences

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

AlloSure Heart has received positive coverage decisions from several commercial payers.

AlloSure Heart has received a positive coverage decision from Geisinger Health and is covered for use throughout Kaiser.

We have also successfully completed several landmark clinical trials in the transplant field demonstrating the clinical utility of AlloMap Heart for surveillance of heart transplant recipients.

15 unchanged sentences

Patients enrolled in SHORE will be followed for 5 years with collection of clinical data and assessment of 5-year outcomes.

The most recent ISHLT guidelines published in 2022 reinforced their use of AlloMap Heart, and referenced the combined use of AlloSure Heart and AlloMap Heart for surveillance purposes.

In February 2019, AlloSure Lung became available for lung transplant patients through a compassionate use program while the test is undergoing further studies.

One of these studies, launched in April 2020, is the ALARM study, or AlloSure Lung Allograft Remote Monitoring, with Johns Hopkins University, where the impact of AlloSure Lung combined with RemoTraC will be measured.

AlloSure Lung applies proprietary NGS technology to measure dd-cfDNA from the donor lung in the

recipient bloodstream to monitor graft injury.

In June 2020, we submitted an application to the Palmetto MolDx Technology Assessment program seeking coverage and reimbursement for AlloSure Lung.

One of these studies, launched in April 2020, is the ALARM, or AlloSure Lung Allograft Remote Monitoring, study with Johns Hopkins University, where the impact of AlloSure Lung combined with RemoTraC is being measured.

AlloSure Lung applies proprietary NGS technology to measure dd-cfDNA from the donor lung in the recipient bloodstream to monitor graft injury.

In June 2020, we submitted an application to the Palmetto MolDx Technology Assessment program seeking coverage and reimbursement for AlloSure Lung and since then we have been in active discussions with Palmetto.

In October 2021, we launched AlloSure Lung as part of the CHEST 2021 Annual Meeting.

6 unchanged sentences

The ACROBAT study is a prospective, multicenter, observational cohort study to evaluate the use of AlloHeme, a microchimerism NGS tool to predict post-transplant relapse in patients with allogeneic hematopoietic cell transplants, or HCT.

This study is currently enrolling patients.

We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients.

Our historical product portfolio includes QTYPE and Olerup SSP.

QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology.

2 unchanged sentences

On June 1, 2018, we became the exclusive worldwide distributor of Illumina’s TruSight HLA product line.

TruSight HLA is a high-resolution solution that uses NGS methodology.

TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq.

In addition, we were granted the exclusive right to develop and commercialize other NGS product lines in the field of bone marrow and solid organ transplantation on diagnostic testing.

9 unchanged sentences

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

AlloSeq HCT received CE mark authorization in May 2022.

In March 2021, we acquired certain assets of BFS Molecular S.R.L., or 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.

In May 2022, we commercially launched Tx9, a high throughput version of Tx17 for HLA typing in high volume laboratories.

Tx9 received CE mark authorization in August 2022.

Patient and Digital Solutions

In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr, Inc.

and XynManagement.

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

was formed in 1993 and is a leading provider of transplant patient management software, or the Ottr software, which provides comprehensive solutions for transplant patient management.

In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr and XynManagement.

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

Ottr was formed in 1993 and is a leading provider of transplant patient management software, or the Ottr software, which provides comprehensive solutions for transplant patient management.

The Ottr software enables integration with electronic medical records, or EMR, systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.

4 unchanged sentences

In September 2020, we 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, we acquired TransChart LLC, or TransChart.

In January 2021, we acquired TransChart.

TransChart provides EMR software to hospitals throughout the United States to care for patients who have or may need an organ transplant.

2 unchanged sentences

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

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

In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey.

Together, we 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.

In November 2021, we acquired MedActionPlan.com LLC, or MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education.

In November 2021, we 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.

6 unchanged sentences

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, we 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, we have 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, our testing services volumes returned to levels consistent with those experienced immediately prior to the COVID-19 pandemic.

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

There continues to be uncertainty around the COVID-19 pandemic as the Omicron variant, including its sub-variants, has periodically caused increases in COVID-19 cases globally, which in turn impacted the availability of medical personnel in transplant centers and the volume of transplant procedures.

A sustained reduction in transplant volume can negatively impact our testing volumes, as we saw in the early part of the first quarter of 2022.

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

1 unchanged sentence

We are maintaining our testing, manufacturing, and distribution facilities while implementing specific protocols to reduce contact among our employees.

In areas where COVID-19 impacts healthcare operations, our 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 our 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 our county and state, as well as other factors.

In addition, we have 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 our offices for employees that do not work from home.

Due to COVID-19, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur or could impact personnel at third-party suppliers in the United States and other countries, or the availability or cost of materials, there may be disruptions in our supply chain.

manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future research and testing activities.

In areas where COVID-19 continues to impact healthcare operations, our field-based sales and clinical support teams are supporting providers through virtual platforms.

In addition, we created, and continue to have, a COVID-19 task force that is responsible for crisis decision making, employee communications, and enforcing all safety, monitoring and testing protocols in line with local regulations.

United States and other countries, or the availability or cost of materials, and there may be disruptions in our supply chain.

Any manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future research and testing activities.

In addition, our clinical studies may be affected by the COVID-19 pandemic.

Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic or reduced staffing due to staff members contracting COVID-19.

Some patients may not be able to comply with clinical study protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, the ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact our clinical trial operations.

Similarly, the ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to, or become infected with, COVID-19, may adversely impact our clinical trial operations.

Financial Operations Overview

2 unchanged sentences

Testing Services Revenue

Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart and AlloSure Heart tests, which represented 87%, 85% and 82% of our total revenues for the years ended December 31, 2021, 2020 and 2019, respectively.

Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests, which represented 82%, 87% and 85% of our total revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

Our testing services revenue depends on a number of factors, including (i) the number of tests performed;

16 unchanged sentences

Patient and Digital Solutions Revenue

Our patient and digital solutions revenue is mainly derived from sales of our Ottr software, XynQAPI, MedActionPlan, TTP, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio.

Our patient and digital solutions revenue is mainly derived from sales of our Ottr software, XynQAPI, MedActionPlan, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio, as well as our pharmacy sales at TTP.

Patient and digital solutions revenue represented 9%, 3% and 5% of total revenue for the years ended December 31, 2022, 2021 and 2020, respectively.

2 unchanged sentences

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our estimates are based on our historical experience and on

various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

6 unchanged sentences

Testing Services Revenue

AlloSure Kidney, AlloMap Heart, and AlloSure Heart patient tests are ordered by healthcare providers.

AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung patient tests are ordered by healthcare providers.

We receive a test requisition form with payer information along with a collected patient blood sample.

4 unchanged sentences

The first and second revenue recognition criteria are satisfied when we receive a test requisition form with payer information from the healthcare provider.

Generally, we bill third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart or AlloSure Heart test result to the healthcare provider.

Generally, we bill third-party payers upon delivery of an AlloSure Kidney, AlloMap Heart, AlloSure Heart or AlloSure Lung test result to the healthcare provider.

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

17 unchanged sentences

Perpetual software license agreements typically require advance payments from customers upon the achievement of certain milestones.

We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled.

We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued

in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled.

In addition, we derive patient and digital solutions revenue from software subscriptions and medication sales.

We generally bill software subscription fees in advance.

Revenue from software subscriptions is deferred and recognized ratably over the

subscription term.

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.

We recognize revenue from medication sales when prescriptions are delivered.

Stock-based Compensation

33 unchanged sentences

and (iii) valuation metrics involving similar companies that are publicly-traded and acquisitions of similar companies, if available.

If this qualitative assessment indicates that it is more

likely than not that an impairment exists, or if we decide to bypass this option, we proceed to perform the quantitative assessment.

If this qualitative assessment indicates that it is more likely than not that an impairment exists, or if we decide to bypass this option, we proceed to perform the quantitative assessment.

The quantitative assessment consists of a comparison between the estimated fair value of our reporting unit and its respective carrying amount including goodwill.

19 unchanged sentences

If an impairment exists, we measure the impairment based on the excess carrying value of the asset over the asset’s fair value determined using discounted estimates of future cash flows.

We have not identified any such impairment losses to date.

We have not identified any material impairment losses to date.

Recently Issued Accounting Standards

5 unchanged sentences

Clinical trials, clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Some patients may not be able to

comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

27 unchanged sentences

We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and solid organs.

QTYPE enables speed and precision in HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology.

Our historical product portfolio includes QTYPE and Olerup SSP.QTYPE enables speed and precision in HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology.

QTYPE received CE mark certification on April 10, 2018.

2 unchanged sentences

As a result, on June 1, 2018, we became the exclusive worldwide distributor of Illumina’s TruSight HLA product line.

TruSight HLA is a high-resolution solution that uses NGS methodology.

In addition, we were granted the exclusive right to develop and commercialize other NGS product lines for use in the field of bone marrow and solid organ transplantation diagnostic testing.

TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq.

In addition, we were granted the exclusive right to develop and commercialize other NGS product lines in the field of bone marrow and solid organ transplantation on diagnostic testing.

These NGS products include:

AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.

AlloSeq Tx, a high-resolution HLA

typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.

In September 2019, we commercially launched AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, which received CE mark authorization on January 20, 2020.

6 unchanged sentences

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

AlloSeq HCT received CE mark authorization in May 2022.

Continued Growth of Patient and Digital Sales

The growth of our patient and digital revenues is tied to the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing MedActionPlan, Ottr, Inc.

and XynManagement customers.

The Ottr software, TransChart, Tx Access and XynQAPI are currently implemented in multiple locations in the U.S.

The Ottr software implementation and XynQAPI implementation and support teams are based in Omaha, Nebraska.

In addition, patient solutions offered by TTP in Flowood, Mississippi include hospital-affiliated pharmacies located on-site at the transplant center and specialty pharmacies that provide transplant-specific care and dispensing services.

Development of Additional Services and Products

28 unchanged sentences

warrant liabilities 107 106 1

CARES Act Provider Relief Fund — 4,813 (4,813)

Other expense, net (2,872) (2,628) (244)

Total other (expense) income (2,362) 2,778 (5,140)

Total other income (expense) 997 (2,362) 3,359

Loss before income taxes (76,234) (32,088) (44,146)

Income tax benefit 1,426 1,036 390

Income tax (expense) benefit (379) 1,426 (1,805)

Net loss $ (76,613) $ (30,662) $ (45,951)

Testing Services Revenue

Testing services revenue increased by $95.7 million, or 58%, for the year ended December 31, 2021, compared to the same period in 2020.

This increase is primarily due to an increase of more than 74,000 AlloSure Kidney, AlloMap Heart and AlloSure Heart patient results provided during the year ended December 31, 2021, compared to the year ended December 31, 2020.

Testing services revenue increased by $4.5 million, or 2%, for the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in testing revenue was driven by the increase in patient results of 28,000 year over year, however majority of these tests were covered by commercial payers that have limited coverage resulting in lower revenue per test.

Product Revenue

Product revenue increased by $7.5 million, or 39%, for the year ended December 31, 2021, compared to the same period in 2020, primarily due to growth from the NGS typing products.

Product revenue increased by $2.4 million, or 9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to growth from the NGS typing products.

Patient and Digital Solutions Revenue

Patient and digital solutions revenue increased by $1.0 million, or 11%, during the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the acquisitions of TransChart in January 2021, MedActionPlan in November 2021 and TTP in December 2021.

Patient and digital solutions revenue increased by $18.5 million, or 180%, during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the acquisitions of TTP and MedActionPlan during the fourth quarter of 2021.

Cost of Testing Services

Cost of testing services increased by $1.0 million, or 1%, for the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase is primarily due to increased testing volume, the related increased reagents, consumables and shipping expenses, increased personnel-related costs and increased stock-based compensation expense.

The increase is primarily due to an increase in personnel-related costs of $1.7 million, partially offset by a decrease in stock-based compensation expense of $0.8 million.

Cost of Product

Cost of product increased by $5.1 million , or 37%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to increased product revenue, personnel-related costs and stock-based compensation expense.

Cost of product decreased by $1.3 million , or (7)%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower standard cost and decreased freight costs.

Cost of Patient and Digital Solutions

Cost of patient and digital solutions increased by $1.9 million, or 35%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the acquisitions of TransChart in January 2021, MedActionPlan in November 2021 and TTP in December 2021, and an increase in personnel-related costs and amortization of newly acquired intangibles.

Cost of patient and digital solutions increased by $15.1 million, or 209%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the acquisition of TTP and MedActionPlan during the fourth quarter of 2021.

Research and Development

Research and development expenses increased by $27.6 million, or 56%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in headcount and personnel-related costs of $9.8 million, an increase in consulting and professional fees of $3.9 million, an increase in clinical studies of $2.6 million, an increase in stock-based compensation expense of $2.5 million, an increase in software expense of $1.6 million and an increase in partnership and collaboration fees of $1.6 million.

Research and development expenses increased by $13.9 million, or 18%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in headcount and personnel-related costs of $4.5 million, an increase in consulting and professional fees of $5.6 million, an increase in stock-based compensation expense of $0.3 million and an increase in software expense of $2.1 million.

Sales and Marketing

Sales and marketing expenses increased by $23.4 million, or 43%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in headcount and personnel-related costs of $12.1 million, an increase in stock-based compensation expense of $5.5 million, an increase in travel costs of $1.9 million and an increase in consulting and professional fees of $1.9 million.

Sales and marketing expenses increased by $18.8 million, or 24%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in headcount and personnel-related costs of $10.9 million, an increase in stock-based compensation expense of $3.5 million, an increase in travel costs of $2.5 million and an increase in tradeshows and events of $1.3 million.

General and Administrative

General and administrative expenses increased by $26.2 million, or 54%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in legal expenses in connection with litigation related to intellectual property and false advertising matters as well as information requests from the Department of Justice and the SEC, of $10.3 million, an increase in consulting and professional fees of $4.0 million, an increase in stock-based compensation expense of $3.8 million, an increase in headcount and personnel-related costs of $2.4 million, an increase in software expense and IT infrastructure of $1.3 million and an increase in audit fees of $0.9 million.

Change in Estimated Fair Value of Common Stock Warrant Liability

The change in estimated fair value of common stock warrant liability increased from an expense of $1.5 million for the year ended December 31, 2020 to income of $0.1 million for the year ended December 31, 2021, resulting in a net change of $1.6 million.

The $0.1 million income in the year ended December 31, 2021 reflects a remeasurement gain of $0.3 million for the change in the fair value of our common stock warrant liability and a remeasurement charge of $0.2 million for warrants exercised during the year.

In the year ended December 31, 2021, warrants to purchase approximately 3,000 shares of common stock with an average exercise price of $1.12 per share were exercised for cash proceeds of $4 thousand.

The $1.5 million expense in the year ended December 31, 2020 reflects a remeasurement gain of $6.2 million for the change in the fair value of our common stock warrant liability and a remeasurement charge of $7.7 million for warrants exercised during the year.

In the year ended December 31, 2020, warrants to purchase approximately 314,000 shares of common stock with an average exercise price of $1.12 per share were exercised.

CARES Act Provider Relief Fund

The CARES Act Provider Relief Fund decreased by $4.8 million, or 100%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to the CARES Act payment we received in April 2020.

General and administrative expenses increased by $25.4 million, or 34%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in legal expenses of $11.8 million, an increase in consulting and professional fees of $4.0 million, an increase in stock-based compensation expense of $6.4 million, an increase in software expense of $1.7 million and an increase in travel expenses of $0.3 million, offset by a decrease in personnel-related costs of $1.2 million.

Interest Income, Net

Interest income, net, increased by $3.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to interest income earned on U.S.

agency securities and corporate debt securities.

Other Expense, Net

Other expense, net increased by $1.8 million, or 224%, for the year ended December 31, 2021, compared to the same period in 2020, primarily due to the unrealized loss on our minority investment in Miromatrix Medical, Inc.

and foreign currency exchange rate losses.

Income Tax Benefit

For the year ended December 31, 2021, we recorded an income tax benefit of $1.4 million on a loss before income taxes of $32.1 million, which was primarily attributable to the recognition of deferred tax assets from foreign losses and the income tax benefit related to the acquisition of TTP.

The effective tax rate for the year ended December 31, 2021 differs from the federal statutory tax rate as a result of the income tax expense related to non-deductible executive compensation and the decrease in valuation allowance.

Other expense, net, increased by $0.2 million, or 9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in other business expense of $0.9 million, partially offset by a decrease in unrealized loss on our investment in Miromatrix Medical, Inc., or Miromatrix, of $0.6 million.

Income Tax (Expense) Benefit

For the year ended December 31, 2022, we recorded an income tax expense of $0.4 million on a loss before income taxes of $76.2 million.

The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate mainly due to the state income tax expense per the new research and development regulations, whereas in prior years we only recognized the deferred tax assets from foreign losses with the full valuation allowance.

For the year ended December 31, 2021, we recorded an income tax benefit of $1.4 million on a loss before income taxes of $32.1 million, primarily attributable to the recognition of deferred tax assets from foreign losses and recognition of previous unrecognized tax benefits.

4 unchanged sentences

We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $460.4 million at December 31, 2022.

As of December 31, 2021, we had cash and cash equivalents of $348.5 million, and no debt outstanding.

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $293.1 million, and no debt outstanding.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically.

13 unchanged sentences

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

At-the-Market Equity Offering

On August 31, 2018, we entered into a sales agreement, or the Sales Agreement, with Jefferies, LLC, as sales agent, or Jefferies, pursuant to which we could offer and sell, from time to time, through Jefferies, up to $50.0 million in shares of our 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, we issued and sold 1,000,000 shares of our common stock under the Sales Agreement.

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

CARES Act Provider Relief Fund for Medicare Providers

Pursuant to the CARES Act, the U.S.

Department of Health & Human Services, or HHS, distributed an initial tranche of $30.0 billion in funds to healthcare providers that received Medicare fee-for-service, or FFS, reimbursements in 2019.

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.

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 we continue to assess the impact on our business.

Furthermore, HHS has indicated that it, along with the Office of Inspector General, will be closely monitoring and auditing providers to ensure that recipients comply with the terms and conditions of relief programs and to prevent fraud and abuse.

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

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

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

June 2020 Underwritten Public Offering of Common Stock

On June 15, 2020, we 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.

January 2021 Underwritten Public Offering of Common Stock

3 unchanged sentences

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

At-the-Market Equity Offering

On April 14, 2022, we entered into a sales agreement, or the Sales Agreement, with Jefferies, LLC as sales agent (“Jefferies”), pursuant to which we may offer and sell, from time to time, through Jefferies, up to $200.0 million in shares of our 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.

Jefferies is entitled to compensation for its services equal to 3% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement.

Any shares of common stock offered and sold pursuant to the Sales Agreement will be issued and sold pursuant to our Registration Statement on Form S-3ASR (File No.

333-239049), filed with the SEC on June 9, 2020, including a base prospectus dated June 9, 2020, and a prospectus supplement dated April 14, 2022.

Stock Repurchase Program

On December 3, 2022, our Board of Directors approved our Stock Repurchase Program, or the Repurchase Program, whereby we may purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on December 8, 2022.

The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

In 2022, we purchased an aggregate of 50,051 shares of our common stock under the Repurchase Program for an aggregate purchase price of $0.6 million.

As of December 31, 2022, $49.4 million remained available for future share repurchase under the Repurchase Program.

The following table summarizes our cash flows for the years ended December 31, 2022, 2021 and 2020:

7 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash 23 (303) 274

Net increase (decrease) in cash, cash equivalents and restricted cash $ 213,757 $ 96,460 $ (26,329)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (258,253) $ 213,757 $ 96,460

Cash Flows from Operating Activities

3 unchanged sentences

Our net loss also included the following noncash items:

$36.1 million in stock-based compensation expense, $8.8 million of depreciation and amortization expense, amortization of right-of-use assets of $3.1 million, loss on disposal of property and equipment of $2.4 million, unrealized loss on long-term marketable equity

securities of $1.7 million and amortization of premium on short-term marketable securities, net of $1.1 million.

Cash used in operating activities was also due to an increase in accounts receivable of $24.4 million and a decrease in Refund liability - CMS advance payment of $20.5 million.

$46.6 million in stock-based compensation expense, $11.6 million of depreciation and amortization expense, amortization of right-of-use assets of $4.4 million, asset impairments and write-downs of $0.8 million, unrealized loss on long-term marketable equity securities of $1.2 million and amortization of premium on short-term marketable securities, net of $0.4 million.

Cash used in operating activities was also due to an increase in accounts receivable of $6.7 million.

Cash used in operating activities was partially offset by an increase in net operating assets of $7.6 million.

Net cash provided by operating activities for the year ended December 31, 2020 was $33.4 million.

Our net loss of $18.7 million was our primary use of cash in operating activities and included $4.8 million of cash provided by the CARES Act Provider Relief Fund.

Net cash used in operating activities for the year ended December 31, 2021 was $19.3 million.

Our net loss of $30.7 million was our primary use of cash in operating activities.

Our net loss also included the following noncash items:

$23.4 million in stock-based compensation expense, $7.0 million of depreciation and amortization expense, amortization of right-of-use assets of $2.5 million and a $1.5 million loss on the revaluation of common stock warrant liability to estimated fair value.

Net operating assets decreased by $3.1 million, offset by an increase in Refund liability - CMS advance payment of $20.5 million.

Cash used in operating activities was also due to an increase in accounts receivable of $24.4 million and a decrease in Refund liability - CMS advance payment of $20.5 million.

Cash used in operating activities was partially offset by an increase in net operating assets of $3.9 million.

Cash Flows from Investing Activities

For the year ended December 31, 2022, net cash used in investing activities was $228.5 million and primarily related to the purchase of short-term marketable securities of $315.1 million, additions of capital expenditures, net of $21.2 million, payments for acquired intangibles of $3.1 million, and acquisition of business, net of cash acquired of $0.6 million.

These payments were partially offset by the proceeds of $111.6 million for the maturities of short-term marketable securities.

For the year ended December 31, 2021, net cash provided by investing activities was $47.7 million and primarily related to proceeds of $88.9 million for the maturities of short-term marketable securities.

These proceeds were partially offset by the acquisitions, net of cash acquired, for TransChart, MedActionPlan and TTP of $15.4 million, $5.5 million related to the purchase of long-term marketable securities, $13.6 million related to additions of capital expenditures, net and $6.7 million related to payments for acquired intangibles.

For the year ended December 31, 2020, net cash used in investing activities was $100.4 million and consisted of $90.0 million related to the purchase of marketable securities, $7.1 million related to additions of capital expenditures, net, $2.0 million related to payments for the license and commercialization agreement with Cibiltech and $1.3 million related to payments for acquired intangibles.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2022 was $4.5 million and primarily related to taxes paid related to net share settlements of restricted stock units of $5.9 million, payments of contingent consideration of $2.6 million, and repurchase and retirement of common stock of $0.6 million.

These payments were partially offset by the proceeds from exercises of stock options of $2.4 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $2.2 million.

Net cash provided by financing activities for the year ended December 31, 2021 was $185.6 million and primarily related to $188.9 million of proceeds from the issuance of shares of common stock in an underwritten offering, net of issuance costs, proceeds from exercises of stock options of $12.8 million and proceeds from issuances of shares of common stock under our employee stock purchase plan of $2.1 million.

These proceeds were partially offset by taxes paid related to net share settlements of restricted stock units of $18.1 million.

Net cash provided by financing activities for the year ended December 31, 2020 was $163.1 million and primarily related to $134.7 million of proceeds from the issuance of shares of common stock in an underwritten offering, net of issuance costs, $23.5 million of proceeds from the issuance of shares of common stock in an “at-the-market” equity offering, net of issuance costs, proceeds from exercises of stock options of $8.0 million, proceeds from issuances of shares of common stock under our employee stock purchase plan of $1.4 million and proceeds from exercises of warrants of $0.4 million.

These proceeds were partially offset by taxes paid related to net share settlements of restricted stock units of $4.5 million.

For a discussion regarding our cash flows for the year ended December 31, 2020, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.

7 unchanged sentences

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 7. Management’s Discussion and Analysis