What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-24 · 277 added, 218 removed, 1135 unchanged (30% of the section changed)

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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.

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, 2022, 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 27, 2023, expressed an adverse opinion on the Company's internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Testing Services Revenue — Refer to Note 2 to the consolidated financial statements

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The Company recognizes revenue related to billings based on transaction prices estimated as the amount that will ultimately be realized.

The transaction price estimate represents differences between amounts billed and the estimated consideration the Company expects to receive based on historical collection experience and other anticipated adjustments, including anticipated payer denials.

The transaction price estimate represents the estimated consideration the Company expects to receive based on historical collection experience and other anticipated adjustments, including anticipated payer denials.

In determining the amount to recognize for a delivered test, the Company considers factors such as payment history, amount collected per test, payer coverage, and whether there is a reimbursement contract between the payer and the Company.

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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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• Evaluating trends in revenue and accounts receivable compared to previous periods to identify any evidence that may contradict management’s assertion regarding estimated transaction price.

Impact on Financial Statements of Material Weaknesses in Internal Control Over Reporting - Refer to Management’s Report on Internal Control Over Financial Reporting

Critical Audit Matter Description

As discussed in Management’s Annual Report on Internal Control Over Financial Reporting, the Company identified material weaknesses across multiple components of the Internal Control – Integrated Framework (2013) issued by COSO.

Because these material weaknesses impact the Company’s controls over information technology (IT) systems and business processes, affect substantially all financial statement account balances and disclosures, and required us to increase the extent of our audit effort, including the need to modify the nature and extent of audit evidence obtained, we have identified the impact to our audit procedures as a result of the material weaknesses as a critical audit matter.

How the Critical Audit Matter Was Addressed in the Audit

As a result of the material weaknesses, in performing our audit procedures we lowered the threshold for investigating differences between recorded amounts and independent expectations developed by us that we would have otherwise used, and increased the number of selections we would have otherwise made if the Company’s controls were designed and operating effectively.

In addition, we performed additional procedures to test the completeness and accuracy of the information included in all system reports or information generated by the Company’s IT systems which were utilized for audit evidence.

/s/ Deloitte & Touche LLP

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and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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.

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, 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, 2022, of the Company and our report dated February 27, 2023, expressed an unqualified opinion on those financial statements.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's assessment:

General Information Technology Controls (GITCs)

The Company did not design and maintain effective general information technology controls (“GITCs”) for information systems and applications that are relevant to the preparation of the consolidated financial statements.

Specifically, the Company did not design and maintain:

(i) sufficient user access controls to ensure appropriate segregation of duties, logical access controls to prevent unauthorized user access and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel;

(ii) program change management controls to ensure that information technology (“IT”) program and data changes affecting financial IT

applications and underlying accounting records are identified, tested, authorized and implemented appropriately with appropriate segregation of duties;

and (iii) computer and network operations controls to ensure that batch and interface jobs are monitored and privileges are appropriately granted, authorized and monitored.

As a result, business process controls (automated and manual) that are dependent on the ineffective GITCs, or that rely on data produced from systems impacted by the ineffective GITCs, are also deemed ineffective, which affects substantially all financial statement accounts and disclosures.

Purchase Order Approval Workflow

The Company did not design and maintain effective process-level control activities related to procurement to ensure appropriate approval of purchase orders, which could affect the amount and classification of costs capitalized or expensed.

COSO Framework

The Company did not fully maintain components of the COSO framework, including elements of the control environment, information and communication, control activities and monitoring activities components, relating to:

(i) sufficiency of competent personnel to perform internal control activities and support the achievement of the Company’s internal control objectives (ii) enforcing accountability of personnel for the performance of their internal control responsibilities across the organization in the pursuit of objectives (iii) designing and maintaining general control activities over technology to support the achievement of the Company’s internal control objectives;(iv) performing control activities in accordance with established policies in a timely manner;

and (v) performing sufficient reviews of information to assess its relevance, accuracy, and completeness in supporting the internal control components.

As such, the Company’s management concluded that the Company did not have an adequate process in place to complete its assessment of the design and operating effectiveness of internal control over financial reporting in a timely manner.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

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Accrued and other liabilities 49,131 37,922

Refund liability - CMS advance payment (Note 1) — 20,496

Total current liabilities 75,975 77,301

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100,000,000 shares authorized at December 31, 2022 and 2021;

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

53,583,301 and 52,923,360 shares issued at December 31, 2022 and 2021, respectively;

53,533,250 and 52,923,360 shares outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital 898,806 853,683

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Other expense, net ( 2,872 ) ( 2,628 ) ( 811 )

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

Total other income (expense) 997 ( 2,362 ) 2,778

Loss before income taxes ( 76,234 ) ( 32,088 ) ( 19,750 )

Income tax benefit 1,426 1,036 1,979

Income tax (expense) benefit ( 379 ) 1,426 1,036

Net loss $ ( 76,613 ) $ ( 30,662 ) $ ( 18,714 )

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

Contingent consideration classified as equity — — 222 — — 222

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

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

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

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

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

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

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

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

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

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

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1,000,000 1 23,450 — — 23,451

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

Issuance of common stock under employee stock purchase plan 76,723 — 1,393 — — 1,393

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

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

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

Issuance of common stock under employee stock purchase plan 45,464 — 2,139 — — 2,139

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

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

Issuance of common stock under employee stock purchase plan 93,422 — 2,230 — — 2,230

Repurchase and retirement of common stock ( 50,051 ) — — — ( 642 ) ( 642 )

RSU settlements, net of shares withheld 411,176 — ( 6,067 ) — — ( 6,067 )

Issuance of common stock for services 12,764 — 319 — — 319

Issuance of common stock for cash upon exercise of stock options 142,579 — 2,435 — — 2,435

Employee stock-based compensation expense — — 46,206 — — 46,206

Foreign currency translation adjustment — — — ( 2,833 ) — ( 2,833 )

Net loss — — — — ( 76,613 ) ( 76,613 )

Balance at December 31, 2022 53,533,250 $ 52 $ 898,806 $ ( 7,503 ) $ ( 460,444 ) $ 430,911

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

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Net loss $ ( 76,613 ) $ ( 30,662 ) $ ( 18,714 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Stock-based compensation 46,553 36,081 23,401

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Maturities of short-term marketable securities 111,587 88,905 —

Purchases of short-term marketable securities ( 315,145 ) — —

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

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Acquisition of business, net of cash acquired ( 610 ) ( 15,434 ) —

Investment in equity securities — — ( 1,000 )

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

Net cash (used in) provided by investing activities ( 228,502 ) 47,712 ( 100,394 )

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

Payment of contingent consideration ( 2,625 ) — —

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

Contingent payments related to acquisition of Conexio Genomics Pty Ltd.

Repurchase and retirement of common stock ( 642 ) — —

Proceeds from exercise of warrants — 4 352

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Taxes paid related to net share settlement of restricted stock units ( 5,933 ) ( 18,065 ) ( 4,529 )

Net cash provided by (used in) financing activities 185,642 163,149 ( 132 )

Net cash (used in) provided by financing activities ( 4,535 ) 185,642 163,149

Effect of exchange rate changes on cash and cash equivalents 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, cash equivalents, and restricted cash at beginning of period 348,696 134,939 38,479

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Shares issued in lieu of payment $ 319 $ 296 $ 315

Deferred payments for intangible assets $ — $ — $ 7,207

Operating lease right-of-use assets $ 22,267 $ 6,079 $ 55

Purchases of capital expenditures in accounts payable and accrued liabilities $ 1,423 $ 3,953 $ 274

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

Employee stock purchase plan shares included in accrued compensation $ 686 $ 1,521 $ 800

Contingent consideration $ — $ 5,341 $ —

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(“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.

The Company’s headquarters are in Brisbane, California.

The primary operations are in Brisbane, California;

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and Stockholm, Sweden.

See also Note 16.

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.

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The Company also offers high-quality products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs.

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

The Company also provides digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management (“Ottr”) and XynManagement, Inc.

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

Testing Services

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private payers.

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

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

In November 2020, Noridian Healthcare Solutions, the Company's Medicare Administrative Contractor, issued a parallel coverage policy granting coverage when used in conjunction with AlloMap Heart, which became effective in December 2020.

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.

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

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The Company's other HLA typing products include:

TruSight HLA, a NGS-based high resolution typing solution;

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

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Patient and Digital Solutions

Following the acquisitions of both Ottr, Inc.

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.

Following the acquisitions of both Ottr 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.

XynManagement provides two unique solutions, XynQAPI software (“XynQAPI”) and XynCare.

XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients (“SRTR”) reporting.

XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients reporting.

XynCare includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility.

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COVID-19 Pandemic

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.

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 may 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 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.

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.

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.

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 the Company's testing volumes, as the Company saw in the early part of the first quarter of 2022.

The Company's product business experienced a reduction in 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 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 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.

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

In addition, the Company created, and continues 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.

Liquidity and Capital Resources

The Company has incurred significant losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 460.4 million at December 31, 2022.

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

As of December 31, 2022, the Company had cash and cash equivalents and marketable securities of $ 293.1 million.

CMS Accelerated and Advance Payment Program for Medicare Providers

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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.

Refer to Note 8, Balance Sheet Components, for further explanation.

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 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.

CARES Act Provider Relief Fund for Medicare Providers

Pursuant to the CARES Act, the U.S.

Department of Health & Human Services ( “HHS ”) distributed an initial tranche of $ 30.0 billion in funds to healthcare providers that received Medicare fee-for-service (“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 the Company continues to assess the impact on its 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 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 statements of operations.

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

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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;

the grant date

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

income taxes;

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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, 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.

As of December 31, 2022, 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.

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.

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, 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.

As of December 31, 2022, the Company's long-term marketable securities consisted of corporate equity securities.

The 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.

Unrealized gains and losses from the reevaluation of the long-term marketable debt securities, if any, are included in other comprehensive gain (loss) in the consolidated statement of comprehensive income (loss).

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.

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 income (expense), net, in the consolidated statements of operations.

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

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

Other inventories are stated at the lower of actual purchased cost, determined on a first-in, first-out basis, or net realizable value.

Inventories are stated at the lower of actual purchased cost, determined on an average cost basis, on a first-in, first-out basis, or at net realizable value.

Property and Equipment, net

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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 ten years .

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

Business Combinations

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(ii) recent trends and market conditions;

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

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 the Company decides to bypass this option, it proceeds to the quantitative assessment.

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If an impairment exists, the Company measures 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.

The Company has not identified any such impairment losses to date.

The Company has not identified any material impairment losses to date.

Fair Value of Financial Instruments

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For operating leases, expense is recognized on a straight-line basis over the lease term.

For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet.

For finance leases, interest expense on the lease liability is recognized using the effective interest

method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

The Company also has lease arrangements with lease and non-lease components.

The Company elected the practical expedient not to separate non-lease components from lease components for the Company's facility leases.

The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less.

The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;

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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.

The Company receives a test requisition form with payer information along with a collected patient blood sample.

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

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

Generally, the Company bills 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.

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

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.

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 patient and digital solutions revenue from software subscriptions and medication sales.

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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.

The Company recognizes revenue from medication sales when prescriptions are delivered.

Cost of Testing Services

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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.

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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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 Company adopted 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.

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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 Company adopted 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.

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The amendments in this ASU should be applied prospectively.

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

The Company adopted 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.

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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) , 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.

In addition, the ASU precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction.

The Company adopted the standard on January 1, 2020.

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

In August 2018, the FASB issued ASU No.

2018-15, Intangibles – Goodwill and Other – Internal – Use Software (ASC Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

ASU 2018-15 became effective for fiscal years beginning after December 15, 2019 and interim periods therein.

Early adoption of ASU 2018-15 is permitted, including adoption in any interim period.

The Company adopted the standard on January 1, 2020.

The adoption of the new standard did not have a significant impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (ASC Topic 820) (“ASU 2018-13”), which modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8:

Notes to Financial Statements.

ASU 2018-13 is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020, and all annual and interim reporting period thereafter.

The amendments on changes in unrealized gains and losses, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

Early adoption is permitted upon issuance of ASU 2018-13.

An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date.

The Company adopted the standard on January 1, 2020.

The adoption of the new standard did not have a significant impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments (ASC Topic 326) (“ASU 2016-13”), which amends the FASB’s guidance on the impairment of financial instruments.

The ASU adds to U.S.

GAAP an impairment model known as the current expected credit loss (“CECL”) model, which is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The new CECL standard is effective for public companies for annual reporting periods beginning after December 15, 2019, and interim periods therein.

ASU 2016-13 has a greater impact on banks.

However, nonbank entities that have financial instruments or other assets such as trade receivables, contract assets, lease receivables, financial guarantees, loans and loan commitments, and held-to-maturity debt securities are subject to the CECL model.

The Company adopted the standard on January 1, 2020.

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

NET LOSS PER SHARE

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3,132 3,132 6,264

Shares of common stock subject to contingent consideration

Restricted stock units 3,092,467 2,047,657 1,878,866

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Corporate equity securities 2,076 — — 2,076

Corporate debt securities — 500 — 500

Total $ 68,670 $ — $ — $ 68,670

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

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

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):

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

Change in estimated fair value of contingent consideration 5,341

Balance at December 31, 2021 5,480

Exercise of warrants ( 202 )

Change in estimated fair value of common stock warrant liability ( 107 )

Additions to contingent consideration 727

Payment related to contingent consideration ( 2,625 )

Balance at December 31, 2022 $ 3,475

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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.

The Company utilizes intrinsic value to estimate the fair value of the warrants.

The intrinsic value is computed as the difference between the fair value of the Company’s common stock on the valuation date and the exercise price of the warrants.

Increases (decreases) in the Company's stock price discussed above result in a directionally similar impact to the fair value of the common stock warrant liability.

Prior to fiscal year 2022, the Company utilized a binomial lattice pricing model (the “Monte Carlo Simulation Model”), which 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 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 the assumptions discussed above result in a directionally similar impact to the fair value of the common stock warrant liability.

The change in valuation method does not have material financial impact.

Common Stock Warrant Liability Valuation Assumptions:

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Remaining term (in years) 0.28 1.28

Volatility 66.00 % 73.00 %

Risk-free interest rate 0.49 % 0.14 %

Warrants liabilities exercised during 2021 and 2020 were remeasured at the exercise date.

Volatility N/A 66.00 %

Risk-free interest rate N/A 0.49 %

Warrant liabilities exercised during 2021 were remeasured at the exercise date.

Their fair value approximates their intrinsic value, which was recorded to additional paid in capital in the consolidated statements of stockholders’ equity.

There were no warrant liabilities exercised during 2022.

The Company’s liabilities classified as Level 3 were valued based on unobservable inputs and management’s judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of the financial instruments.

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Marketable Securities

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, 2022.

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Contractual maturities of the short-term marketable securities were within one year or less at December 31, 2022.

The long-term marketable equity securities were recorded in the consolidated balance sheets at fair market value with changes in the fair value recognized in earnings at December 31, 2022.

The long-term marketable debt securities were considered available-for-sale.

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

During 2022, the Company wrote off $ 0.5 million of long-term marketable debt securities.

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):

December 31, 2022

Amortized Cost Unrealized Holding Losses Fair Value

Amortized Cost Unrealized Holding Gains (Losses) Fair Value

Short-term marketable securities:

agency securities $ 79,347 $ 452 $ 79,799

Corporate debt securities 123,821 ( 220 ) 123,601

Total short-term marketable securities 203,168 232 203,400

Long-term marketable securities:

Corporate equity securities 5,000 ( 2,924 ) 2,076

Corporate debt securities 500 — 500

Total long-term marketable securities 5,000 ( 2,924 ) 2,076

Total $ 208,168 $ ( 2,692 ) $ 205,476

December 31, 2021

Amortized Cost Unrealized Holding Losses Fair Value

Short-term marketable securities:

Long-term marketable securities:

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

Corporate debt securities 500 — 500

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

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

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

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After one year through five years —

Total $ 203,168

BUSINESS COMBINATIONS

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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 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.

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TransChart LLC

In January 2021, the Company acquired TransChart.

In January 2021, the Company acquired TransChart for cash.

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

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Trademarks and tradenames 4,540 ( 1,345 ) ( 315 ) 2,880 8.5

Other 250 ( 188 ) — 62 0.2

Total intangible assets with finite lives 73,764 ( 27,175 ) ( 4,788 ) 41,801

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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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Acquisition of intangible assets

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

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.

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.

During the year ended December 31, 2022, the Company incurred additional costs related to this partnership of $ 1.0 million.

These are included within commercialization rights as of December 31, 2022.

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, 2022.

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

In the fourth quarter of 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

Effective April 30, 2019, the Company entered into a license and commercialization agreement (the “Cibiltech Agreement”) with Cibiltech SAS (“Cibiltech”).

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 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.

for a period of ten years .

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 iBox.

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

On July 26, 2019, pursuant to the Cibiltech Agreement, the Company purchased $ 1.0 million of convertible preferred shares of Cibiltech, which is recorded in other assets.

The Company does not have a significant influence on Cibiltech’s operations.

The net carrying amount of intangible assets and the related amortization expense of intangible assets may change due to the effects of foreign currency fluctuations as a result of acquiring an entity with a functional currency other than the U.S.

Amortization of Intangible Assets

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, 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 patient and digital solutions, and sales and marketing expenses in the consolidated statements of operations.

The following table summarizes the Company's amortization expense of intangible assets (in thousands):

Year Ended December 31,

2022 2021 2020

Cost of testing services $ 1,316 $ 1,316 $ 1,316

Cost of product 1,716 1,905 1,665

Cost of patient and digital solutions 945 684 345

Sales and marketing 2,252 1,891 1,472

Total $ 6,229 $ 5,796 $ 4,798

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2022 (in thousands):

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Property and equipment consisted of the following (in thousands):

Leasehold improvements $ 17,389 $ 8,466

Machinery and equipment 16,294 12,091

Internally developed software 10,893 3,746

Construction in progress 7,639 10,925

Leasehold improvements 8,466 8,096

Computer and office equipment 5,570 5,454

Internally developed software 3,746 2,312

Furniture and fixtures 2,168 943

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There were no assets purchased under finance leases during 2022.

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 $ 0.6 million and $ 0.5 million at December 31, 2022 and 2021, 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.

Related amortization expense, included in depreciation and amortization expense, was $ 0.1 million for each of the three years ended December 31, 2022, 2021 and 2020.

Accrued and Other Liabilities

2 unchanged sentences

Professional fees 6,115 5,780

Deferred revenue 4,208 3,530

Short-term lease liability 5,591 3,958

Deferred revenue 5,342 4,208

Accrued royalty 4,633 1,664

Laboratory processing fees and materials 2,189 1,664

Deferred payments for intangible assets 2,062 2,000

Capital expenditures 1,316 2,612

Contingent consideration 1,025 2,114

Deferred payments for intangible assets 2,000 2,000

Accrued royalty 1,664 1,072

Test sample processing fees 1,197 416

License and other collaboration fees 1,000 —

Accrued shipping expenses 489 668

Other accrued expenses 4,553 2,601

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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.

COMMITMENTS AND CONTINGENCIES

The Company leases its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements in South San Francisco, California;

Brisbane, California;

The Company leases its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements in Brisbane, California;

Columbus, Ohio;

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Flowood, Mississippi;

Gaithersburg, Maryland;

Omaha, Nebraska;

Fremantle, Australia;

and Stockholm, Sweden.

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 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.

The Company's facility leases expire at various dates through 2033.

I n the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties .

In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

As of December 31, 2022, the carrying value of the ROU asset was $ 34.7 million.

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Total lease cost $ 6,716 $ 5,187 $ 4,646

Finance lease cost includes interest from the lease liability and amortization of the ROU asset.

Finance lease cost included interest from the lease liability and amortization of the ROU asset.

Other information:

Weighted-average remaining lease term - Operating leases (in years) 6.26

Weighted-average remaining lease term - Finance leases (in years) 0.00

Weighted-average discount rate - Operating leases (%) 7.1 %

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

In February and June 2022, the Company entered into various lease agreements to lease office buildings in California, Nebraska, and Australia with lease terms ranging from 2 to 10.5 years.

Certain leases have options to renew the lease terms ranging from 5 to 10 years.

In June 2022, the Company modified the termination date of the lease agreement for its headquarters in South San Francisco, California from December 31, 2022 to July 15, 2022.

As a result, the Company remeasured its lease liability using the current incremental borrowing rate and made an adjustment by reducing the ROU asset and lease liability by $ 0.5 million.

Lease liabilities for the lease agreements made in February and June 2022 are recognized at the present value of the fixed lease payments using the current incremental borrowing rate at the lease commencement date.

ROU assets are recognized based on the initial present value of the fixed lease payments.

As of December 31, 2022, the ROU assets and lease liabilities for lease agreements which commenced in July 2022 aggregated to $ 14.3 million and $ 15.3 million, respectively.

As of December 31, 2022, the ROU assets and lease liabilities for lease agreements which commenced in August 2022, amounted to $ 5.8 million and $ 6.0 million, respectively.

Supplemental cash flow information related to leases for the years ended December 31, are as follows (in thousands) :

2022 2021 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows used for operating leases $ 3,665 $ 2,580 $ 934

Operating cash flows used for finance leases — 63 199

Total $ 3,665 $ 2,643 $ 1,133

Maturities of operating lease liabilities as of December 31, 2022, are as follows (in thousands):

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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.

The trial commenced on March 7, 2022 and concluded on March 14, 2022, with the jury awarding the Company $ 44.9 million in damages, comprised of $ 21.2 million in compensatory damages and $ 23.7 million in punitive damages.

Post-trial motion practice remains pending.

The Company will not record the award until cash is received or the matter is otherwise resolved.

On July 19, 2022, the United States Court of Appeals for the Federal Circuit affirmed the Court’s judgment dismissing the Company’s patent infringement suit against Natera.

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.

Patent 10,526,658.

This case was consolidated with the Company’s patent infringement suit on February 4, 2020.

On March 25, 2020, Natera filed an amendment to the suit alleging, among other things, that AlloSure also 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.

On May 13, 2022, Natera filed two new complaints alleging that AlloSure infringes Natera’s U.S.

Patents 10,655,180 and 11,111,544.

These two cases were consolidated with the patent infringement case on June 15, 2022.

On May 17, 2022, Natera agreed to dismiss the case alleging infringement of Natera’s U.S.

Patent 10,526,658.

On July 6, 2022, the Company moved to dismiss the rest of Natera’s claims.

On September 6, 2022, the Company withdrew its motion to dismiss.

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.

2 unchanged sentences

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.

The Company also received an information request from a state regulatory agency.

The state regulatory agency recently advised the Company that it has completed its review of the Company’s business practices and determined that no further information or action is required.

In late 2022, the Company received a request for information from a separate state regulatory agency concerning specimen collection by a vendor in the state.

The Company may receive additional requests for information from the DOJ, SEC, or other regulatory and governmental agencies regarding similar or related subject matters.

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.

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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.

Olymbios Matter

On April 15, 2022, a complaint was filed by Michael Olymbios against the Company in the Superior Court of the State of California for the County of San Mateo (the “San Mateo County Court”).

The complaint alleges that the Company failed to pay certain fees and costs required to continue an arbitration proceeding against Dr.

Olymbios, and that the Company has defamed Dr.

Olymbios also seeks to void restrictive covenants previously agreed to by him in favor of the Company and to recover damages purportedly incurred by Dr.

The Company filed a motion to compel arbitration and dismiss the case.

On April 25, 2022, the San Mateo County Court granted the Company’s ex parte application to stay the case and advance the hearing date to June 10, 2022 for the motion to compel arbitration and dismiss.

At the June 10, 2022 hearing, the San Mateo County Court found that the decision should be made by the arbitrator, and stayed the case.

On July 19, 2022, Olymbios filed a motion to withdraw from arbitration before JAMS, which was denied on August 18, 2022.

The arbitration hearing is currently set for June 26, 2023.

The Company intends to defend itself vigorously.

The Company believes it has good and substantial defenses to the claims alleged in the suit, but there is no guarantee that the Company will prevail if the case continues.

The Company has not recorded any liabilities for this suit.

Securities Class Action

On May 23, 2022, Plumbers & Pipefitters Local Union #295 Pension Fund filed a federal securities class action in the U.S.

District Court for the Northern District of California against the Company, Reginald Seeto, its President, Chief Executive

Officer and member of the Company’s Board of Directors, Ankur Dhingra, its former Chief Financial Officer, Marcel Konrad, its former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting, and Peter Maag, its former President, former Chief Executive Officer, former Chairman of the Board and current member of the Company’s Board of Directors.

The action alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder.

The action also alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company.

The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ costs incurred in the lawsuit, including their reasonable attorneys’ and experts’ witness fees and other costs.

On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A.

and Robbins Geller Rudman & Dowd LLP as lead counsels.

Plaintiffs filed an amended complaints on November 28, 2022.

On January 27, 2023, defendants moved to dismiss all claims and to strike certain allegations in the amended complaint.

Plaintiffs’ opposition to the motion to dismiss and motion to strike is due on March 13, 2023, and defendants' reply is due on April 13, 2023.

The Company intends to defend itself vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suit, but there is no guarantee that the Company will prevail.

The Company has not recorded any liabilities for this suit.

Derivative Action

On September 21, 2022, Jeffrey Edelman brought a stockholder derivative action complaint in the U.S.

District Court for the Northern District of California against the Company as nominal defendant and Reginald Seeto, its President, Chief Executive Officer and member of the Company’s Board of Directors, Ankur Dhingra, its former Chief Financial Officer, Peter Maag, its former President, former Chief Executive Officer, former Chairman of the Board and current member of the Company’s Board of Directors, and other current and former members of the Company’s Board of Directors (the “ Edelman Derivative Action ” ).

The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, waste of corporate assets, unjust enrichment and violations of Sections 14(a) and 20(a) of the Exchange Act.

The action alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company.

The suit seeks a declaration that the individual defendants breached their fiduciary duties to the Company, violated Sections 14(a) and 20(a) of the Exchange Act and were unjustly enriched, and also seeks to recover damages sustained by the Company as a result of the alleged violations, along with the plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’ and experts’ fees, costs and expenses.

On December 8, 2022, the court stayed the Edelman Derivative Action until twenty (20) days after the earlier of the following events:

(a) the securities class action is dismissed in its entirety with prejudice;

(b) the motion to dismiss in the securities class action is denied;

(d) notification that a related derivative action that has been filed is not stayed or is no longer stayed;

or (e) notification that there has been a settlement reached in the securities class action or any related derivative action.

STOCKHOLDERS’ EQUITY

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 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.

June 2020 Underwritten Public Offering of Common Stock

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

Stock Repurchase Program

On December 3, 2022, the Company's Board of Directors approved a Stock Repurchase Program (the "Repurchase Program"), whereby the Company may purchase up to $ 50 million in shares of its 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 the Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.

In 2022, the Company purchased an aggregate of 50,051 shares of its 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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data