What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-27 · 397 added, 335 removed, 1077 unchanged (40% 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 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.

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, 2023, 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 28, 2024, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.

Basis for Opinion

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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

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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Testing Services Revenue (non-Medicare) — Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

During the year ended December 31, 2022, the Company’s revenue from testing services was $263.7 million.

As discussed in Note 2, the Company’s testing services revenue is recognized upon the delivery of test results to the prescribing physician, at which time the Company bills for its services.

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 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.

The Company also considers whether historical collections per test are indicative of future collections or if there are any current or expected developments or changes that could affect reimbursement rates, which is an estimate that requires significant judgment by the Company.

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.

The Company’s testing services revenue is recognized when results of the test are provided to the healthcare provider, at which time the Company generally bills for its services.

The Company estimates revenue for non-Medicare payers using transaction prices determined for each financial class of payers using history of reimbursements.

The transaction price estimate includes analysis of an average reimbursement per test and a percentage of tests reimbursed.

This estimate requires significant judgement.

The Company monitors revenue estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required.

Changes in transaction price estimates are updated quarterly based on actual cash collected.

We identified management’s estimation of the transaction price for transaction services billed to non-Medicare payers as a critical audit matter due to the significant judgments required by management to estimate how coverage practices and policies of payers might affect amounts received.

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

Our audit procedures related to management judgments in the estimate of transaction prices for testing services revenue, included the following, among others:

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

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

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

Our audit procedures related to management’s estimation of transaction prices for testing services revenue, included the following, among others:

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

• Testing the mathematical accuracy of management’s calculation.

• Testing the historical cash receipts from payers used in the estimate of transaction prices, by making selections and agreeing the selected information to source documents.

• Testing the historical cash receipts from non-Medicare payers used in the estimate of transaction prices, by making selections and agreeing the selected information to source documents.

• Testing management’s ability to estimate transaction prices accurately by comparing recorded revenue to cash receipts received through December 2023.

• 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

• Evaluating trends in revenue and accounts receivable compared to previous periods to identify evidence inconsistent with management’s estimated transaction prices.

• We tested the accuracy and completeness of the lab billing report by tracing to source documents, including the test requisition form, fax support, proof of insurance, and payment support.

Testing Services Revenue (Medicare)— Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

Revenue recognized for tests billed to Medicare is based on the agreed current reimbursement rate per test adjusted for historical collection trends where applicable.

During 2023, new billing articles (the Billing Articles) issued by Palmetto MolDX, or MolDX, impacted Medicare coverage for certain of the Company’s tests, including AlloSure Kidney, AlloSure Heart and AlloMap Heart, and required the Company to implement new processes to address the requirements related to the Medicare claim submissions for reimbursement.

We identified management’s determination of whether the reimbursement claim submission for an AlloSure Kidney, AlloSure Heart, or AlloMap Heart test for which Medicare is the payer complied with the requirements of the Billing Articles, as a critical audit matter because of the challenging judgments required to determine if a reimbursement claim submission complied with the requirements of the Billing Articles.

This required a high degree of auditor judgment and increased extent of effort when performing audit procedures to determine if the reimbursement claim submission for the test met the new requirements of the Billing Articles.

How the Critical Audit Matter Was Addressed in the Audit

• We read the Billing Articles regarding the requirements for Medicare reimbursement for each type of testing service.

• We made inquiries of members of the Company’s accounting department, billing department, and legal department regarding the impact of the Billing Articles and the effects on revenue recognition.

• We tested the Company’s revised billing practices in response to the Billing Articles and evaluation of whether collection of consideration was probable when Medicare was identified as the payer, by making selections and agreeing required test information to source documents and tracing to cash receipts received from Medicare through December 31, 2023.

Impact on Audit of Financial Statements Because of Material Weaknesses in Internal Control Over Reporting - Refer to Management’s Annual 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.

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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.

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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;

(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.

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100,000,000 shares authorized at December 31, 2023 and 2022;

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

51,503,377 shares issued and outstanding at December 31, 2023;

53,583,301 shares issued and 53,533,250 shares outstanding at December 31, 2022

Additional paid-in capital 946,511 898,806

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General and administrative 117,868 100,397 74,964

Restructuring costs

Litigation expense (Note 17)

Total operating expenses 483,687 399,024 326,123

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Change in estimated fair value of common stock warrant liability

Other income (expense), net

1,343 ( 2,872 ) ( 2,628 )

CARES Act Provider Relief Fund — — 4,813

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

Total other income (expense)

13,220 997 ( 2,362 )

Loss before income taxes ( 190,143 ) ( 76,234 ) ( 32,088 )

Income tax (expense) benefit

( 141 ) ( 379 ) 1,426

Net loss $ ( 190,284 ) $ ( 76,613 ) $ ( 30,662 )

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2,211,538 2 188,853 — — 188,855

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

1,000,000 1 23,450 — — 23,451

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

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

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

Issuance of common shares through public equity offering, net of commissions and offering costs of $ 12,495

2,211,538 2 188,853 — — 188,855

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

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 )

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

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

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

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Issuance of common stock for cash upon exercise of stock options 27,903 — 120 — — 120

Issuance of common stock for cash upon exercise of warrants 3,132 — 26 — — 26

Employee stock-based compensation expense — — 48,907 — — 48,907

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Unrealized loss on long-term marketable equity securities — 1,181 1,743

Realized gain on sale of long-term marketable equity securities, net

Loss on disposal of asset 44 — —

Gain on settlement of obligation and recovery of written-off investment ( 2,109 ) — —

Revaluation of common stock warrant liability to estimated fair value ( 10 ) ( 107 ) ( 106 )

Revaluation of contingent consideration to estimated fair value 2,677 727 ( 609 )

Amortization of premium on short-term marketable securities, net 390 1,129 —

Accretion of discount and amortization of premium on short-term marketable securities, net

( 4,927 ) 390 1,129

Other non-cash items — — ( 222 )

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Accrued and other liabilities 89,608 11,327 10,690

Accrued royalties ( 1,557 ) — —

Operating lease liabilities, net ( 5,418 ) ( 3,456 ) ( 2,603 )

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Change in deferred taxes 566 ( 215 ) ( 1,379 )

Net cash (used in) provided by operating activities ( 25,239 ) ( 19,294 ) 33,431

Net cash used in operating activities

( 18,388 ) ( 25,239 ) ( 19,294 )

Investing activities:

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

Purchase of corporate equity securities ( 965 ) — —

Sale of corporate equity securities 2,460 — —

Additions of capital expenditures ( 8,344 ) ( 21,234 ) ( 13,559 )

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Acquisition of business, net of cash acquired ( 6,682 ) ( 610 ) ( 15,434 )

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

Net cash provided by (used in) investing activities

40,446 ( 228,502 ) 47,712

Financing activities:

Proceeds from issuance of common shares in public equity offering, net of issuance costs paid — — 188,855

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

Payment of contingent consideration ( 625 ) ( 2,625 ) —

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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 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 .

(“XynManagement”), as well as the acquisitions of TransChart LLC (“TransChart”), MedActionPlan.com, LLC (“MedActionPlan”) and The Transplant Pharmacy, LLC (“TTP”) in 2021, HLA Data Systems, LLC (“HLA Data Systems”) in January 2023 and MediGO, Inc.

(“MediGO”) in July 2023.

Testing Services

AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017.

AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017 through a Local Coverage Determination (“LCD”), first issued by Palmetto MolDX (“MolDX”), which was formed to identify and establish coverage and reimbursement for molecular diagnostics tests, and then adopted by Noridian Healthcare Solutions, the Company’s Medicare Administrative Contractor (“Noridian”).

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 .

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

The Medicare reimbursement rate for AlloMap Heart is currently $ 3,240 .

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

In November 2020, Noridian issued a parallel coverage policy granting coverage for AlloSure Heart when used in conjunction with AlloMap Heart, which became effective in December 2020.

In 2021, Palmetto and Noridian issued coverage policies written by MolDX to replace the former product-specific policies.

The foundational LCD is titled “MolDX:

Molecular Testing for Solid Organ Allograft Rejection” and the associated LCD numbers are L38568 (MolDX) and L38629 (Noridian).The Medicare reimbursement rate for AlloSure Heart is currently $ 2,753 .

Effective May 9, 2023, AlloSure Lung is covered for Medicare beneficiaries through the same MolDX LCD (Noridian L38629).

The Medicare reimbursement rate for AlloSure L ung is $ 2,753 .

Effective April 1, 2023, HeartCare, a multimodality testing service that includes both AlloMap Heart and AlloSure Heart provided in a single patient encounter for heart transplant surveillance, is covered, subject to certain limitations, for Medicare beneficiaries through the same MolDX LCD (Noridian L38629) .

The Medicare reimbursement rate for HeartCare is $ 5,993 .

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

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

private payers.

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 for $ 5.0 million, and the investment is marked to market.

In May 2021 and March 2023, the Company purchased a minority investment of common stock in the biotechnology company Miromatrix Medical, Inc.

(“Miromatrix”) for an aggregate amount of $ 5.1 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.

In December 2023, Miromatrix was acquired by United Therapeutics Corporation.

Clinical Studies

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HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure ® Heart in one surveillance solution.

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

In June 2020, the Company submitted an AlloSure Lung application to the Palmetto MolDx Technical Assessment program seeking coverage and reimbursement for Medicare beneficiaries.

In September 2019, the Company announced the commencement of the Outcomes of KidneyCare on Renal Allografts (“OKRA”) study, which is an extension of K-OAR.

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

In December 2021, the Company initiated the ALAMO study.

ALAMO is a multicenter observational study and focuses on surveillance in lung transplant recipients within the first post-transplant year.

Beyond demonstrating the clinical validity of AlloSure in detecting Acute Lung Allograft Dysfunction, a composite outcome of acute rejection and clinically meaningful infections, the study explores its clinical utility by capturing clinician decision-making processes to further demonstrate the practical clinical application of AlloSure.

In addition, the study will collect samples to enable development of AlloMap Lung.

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

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

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

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

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

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

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

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

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

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

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

Together, the Company and OrganX will develop advanced analytics that integrate AlloSure with large transplant databases to provide clinical data solutions.

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

The Company has agreed to potential future milestone payments.

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

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 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.

In the final weeks of March and during April 2020, with hospitals increasingly caring for COVID-19 patients, hospital administrators chose to limit or even defer, non-emergency procedures.

Immunosuppressed transplant patients either self-prescribed or were asked to avoid transplant centers and caregiver visits to reduce the risk of contracting COVID-19.

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.

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 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.

In January 2023, the Company acquired HLA Data Systems, a Texas-based company that provides software and interoperability solutions for the histocompatibility and immunogenetics community.

HLA Data Systems is a leader in the laboratory information management industry for human leukocyte antigen laboratories.

In July 2023, the Company acquired MediGO, an organ transplant supply chain and logistics company.

MediGO provides access to donated organs by digitally transforming donation and transplantation workflows to increase organ utilization.

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 $ 678.3 million at December 31, 2023.

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

On March 27, 2020 the U.S.

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

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

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

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

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

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

January 2021 Underwritten Public Offering of Common Stock

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

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

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

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

As of December 31, 2023, the Company had cash and cash equivalents and marketable securities of $ 235.4 million and no debt outstanding.

Shelf Registration Statement

On May 10, 2023, the Company filed a universal shelf registration statement (File No.

333-271814) (the “Registration Statement”), whereby the Company can sell from time to time up to $ 250.0 million of shares of its common stock, preferred stock, debt securities, warrants, units or rights comprised of any combination of these securities, for the Company’s own account in one or more offerings under the Registration Statement.

The terms of any offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Registration Statement filed with the Securities and Exchange Commission (the “SEC”) prior to the completion of any such offering.

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 of 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 Company's Board of Directors through open market purchase, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.

During the year ended December 31, 2023 , the Company purchased an a ggregate of 2,942,997 shares of its common stock under the Repurchase Program for an aggregate purchase price of $ 27.5 million.

As of December 31, 2023, $ 21.9 million remained available for future repurchase under the Repurchase Program.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and accompanying notes.

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

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

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

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inventory valuation;

the fair value of issued common stock warrants and embedded derivatives;

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

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

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 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, net on the consolidated statements of operations.

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.

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 i n interest income (expense), net, on the consolidated statements of operations.

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

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

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As of December 31, 2023, 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.

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.

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

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.

Unrealized gains and losses from the remeasurement of the long-term marketable equity securities to fair value are included in other income (expense), net, on 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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(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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Intangible assets not subject to amortization

The Company evaluates the carrying value of intangible assets not subject to amortization, related to acquired in-process technology assets, which are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

Accordingly, amortization of the acquired in-process technology assets will not occur until the products reach commercialization.

During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate that the fair value of the acquired in-process technology assets are less than their carrying amounts.

An impairment loss would be recorded when the fair value of an acquired in-process technology asset is less than its carrying value.

If and when development is complete, which generally occurs when the products are made commercially available, the associated acquired in-process technology asset will be deemed finite-lived and will then be amortized based on its estimated useful life.

As of December 31, 2022, no impairment of acquired in-process technology assets has been identified.

The Company evaluates the carrying value of intangible assets not subject to amortization, related to acquired in-process technology assets and a favorable license agreement, which are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

Accordingly, amortization of the acquired in-process technology assets and the favorable license agreement will not occur until the products reach commercialization.

An impairment loss would be recorded when the fair value of an acquired in-process technology asset and the favorable license agreement are less than the carrying value.

If and when development is complete, which generally occurs when the products are made commercially available, the associated acquired in-process technology asset and the favorable license agreement will be deemed finite-lived and will then be amortized based on the estimated useful life.

As of December 31, 2023, no impairment of acquired in-process technology assets and the favorable license agreement has been identified.

Intangible assets and long-lived assets subject to amortization

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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.

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.

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As of December 31, 2023, the Company’s leases had remaining terms of 0.42 years to 9.09 years, some of which include options to extend the lease term.

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

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

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Changes in transaction price estimates are updated quarterly based on actual cash collected or changes made to contracted rates.

In March and May 2023, MolDX issued new billing articles related to the LCD entitled Molecular Testing for Solid Organ Allograft Rejection.

The billing article issued in May 2023 (the “Revised Billing Article”) and together with the billing article issued in March 2023 (the “Billing Articles”) impacted Medicare coverage for AlloSure Kidney, AlloSure Heart, AlloMap Heart and AlloSure Lung, and required certain companies, including the Company, to implement new processes to address the requirements related to Medicare claim submissions.

Noridian adopted the Revised Billing Article on August 17, 2023, with a retroactive effective date of March 31, 2023.

Although the Company believes the Billing Articles are inconsistent with the LCDs, Noridian’s and MolDX’s responses to public comments explaining the intended scope of various LCDs, and medical necessity, the Company determined to pause its Medicare reimbursement submissions for AlloSure Kidney commencing on March 7, 2023 to allow the Company further time to evaluate the implications of the Billing Article and update the Company's billing processes for AlloSure Kidney tests by educating clinicians and working with centers to update the Company's test order forms to capture the new information required under the Billing Article.

Accordingly, the Company did not submit claims for approximately 3,200 AlloSure Kidney tests for Medicare reimbursement for the period from March 7, 2023 through March 31, 2023 and did not recognize revenue on these claims in the first quarter of 2023 aggregating to approximately $ 8.9 million (the “Impacted March Tests”).

On May 18, 2023, the Company submitted a letter to Noridian explaining, among other things, (i) its belief that the Billing Articles impose new restrictions on Medicare coverage for the CareDx tests from those contained in the existing LCDs, (ii) that the Company planned to submit claims for reimbursement for the Impacted March Tests for which it had not obtained additional information from the ordering physicians to be able to specifically determine whether these tests meet the new coverage restrictions contained in the Billing Articles, and (iii) that AlloSure Kidney orders with a date of service on or after March 31, 2023 for other indications outside the parameters of the Revised Billing Article, or where the reason for testing is not specified by the ordering physician, will either not be billed pending the receipt of additional information regarding whether the orders meet the coverage restrictions contained in the Revised Billing Article or be submitted with a test description that is intended to identify those tests as falling outside the parameters of the Revised Billing Article.

Following the submission of this letter to Noridian on May 18, 2023, the Company submitted claims for reimbursement for the Impacted March Tests for which the Company subsequently received payment from Noridian and recognized revenue totaling approximately $ 7.8 million in the second quarter of 2023.

The Company continued the Medicare reimbursement submissions for AlloMap Heart or AlloSure Heart following the issuance of the Billing Articles.

In addition, the Company informed Noridian on May 18, 2023 that until Noridian adopts the Revised Billing Article, the Company would continue to submit AlloSure Heart tests for reimbursement only when used in conjunction with AlloMap Heart according to requirements of the Billing Article currently effective at Noridian.

The Company also informed Noridian on May 18, 2023 that (i) until June 30, 2023, the Company plans to submit claims for reimbursement for AlloMap Heart and AlloSure Heart tests for which the Company has not obtained additional information from the ordering physicians to be able to specifically determine whether these tests meet the new coverage restrictions contained in the Billing

Articles, and (ii) AlloSure Heart and AlloMap Heart orders placed on or after June 30, 2023 for other indications outside the surveillance and for-cause parameters of the Revised Billing Article, or where the reason for testing is not specified by the ordering physician, will either not be billed pending the receipt of additional information regarding whether the orders meet the coverage restrictions contained in the Revised Billing Article or be submitted with a test description that is intended to identify those tests as falling outside the parameters of the Revised Billing Article.

On August 28, 2023, the Company submitted a subsequent letter to Noridian regarding its AlloSure Heart and AlloMap Heart testing submissions, explaining, among other things, that (i) prior to August 17, 2023, the Company submitted claims as outlined in its prior communications, including submitting AlloSure Heart and AlloMap Heart claims that were in compliance with the billing article in effect for Noridian (but that were not necessarily in compliance with the Revised Billing Article that had not yet been adopted by Noridian);

(ii) for claims with dates of service of August 17, 2023 or later, the Company is submitting AlloSure Heart and AlloMap Heart testing claims in compliance with the Revised Billing Article, including submitting AlloSure Heart claims when not used in conjunction with AlloMap Heart, and submitting HeartCare (AlloSure Heart and AlloMap Heart used together in a single patient encounter) claims for surveillance testing in lieu of a biopsy from 55 days to 370 days post-transplant;

and (iii) for AlloSure Heart and AlloMap Heart tests performed on or after August 17, 2023 that are outside the parameters of the Revised Billing Article, certain billing codes will be used to enable any additional review deemed appropriate by Noridian and potential appeal by the Company of the denied claims.

On August 10, 2023, MolDX and Noridian released a draft proposed revision to the LCD (DL38568, Palmetto;

DL38629, Noridian) that, if adopted, would revise the existing foundational LCD, MolDX:

Molecular Testing for Solid Organ Allograft Rejection (L38568 and L38629).

On August 14, 2023, MolDX released a draft billing article (DA58019) to accompany the proposed draft LCD, which generally reflected the changes in coverage included in the Revised Billing Article.

The comment period end date for this proposed LCD was September 23, 2023.

The Company presented at public meetings regarding the proposed draft LCD held on September 18, 2023 and September 20, 2023, with MolDX and Noridian respectively.

The Company also submitted written comments on the proposed draft LCD.

Product Revenue

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The Company generally has a contract or a purchase order from a customer with the specified required terms of order, including the number of products ordered.

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

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

Patient and Digital Solutions Revenue

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

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

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

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

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

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

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

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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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dollars at average exchange rates prevailing during the period.

Assets and liabilities have been translated at the rates of exchange on the balance sheet date.

Assets and liabilities have been translated at the rates of exchange on the

balance sheet date.

The resulting cumulative translation adjustments are reported in other comprehensive loss.

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Recent Accounting Pronouncements

There were no recently adopted accounting standards which would have a material effect on the Company’s consolidated financial statements and accompanying disclosures, and no recently issued accounting standards that are expected to have a material impact on the Company’s consolidated financial statements and accompanying disclosures.

Effective in Future Periods

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2021-10, Government Assistance (Topic 832):

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

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

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

Early application of the amendments in this ASU is permitted.

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

The Company 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.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

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

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

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

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires enhanced disclosure of significant segment expenses.

All current annual disclosures about a reportable segment’s profit or loss and assets will also be required in interim periods.

The new guidance also requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”) and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The amendments set forth in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption of the amendments is permitted.

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

The Company 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.

In May 2021, the FASB issued ASU No.

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

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

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

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

The amendments in this ASU should be applied prospectively.

The Company 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.

In October 2020, the FASB issued ASU No.

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

The FASB provided transition guidance for all the amendments in this ASU.

The amendments in Sections B and C (Section A has been removed) of this ASU are effective for annual periods beginning after December 15, 2020 for public business entities.

Early application of the amendments in this ASU is permitted for public business entities for any annual or interim period for which financial statements have not been issued.

The amendments in this ASU should be applied retrospectively.

The Company adopted the standard on January 1, 2021.

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

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

This ASU will be effective for the Company’s annual disclosures in fiscal year 2024 and interim-period disclosures in fiscal year 2025.

As the amendments only relate to disclosures, there will be no impact on the Company’s financial position or results of operations.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 340):

Improvements to Income Tax Disclosures , which requires annual disclosures in the rate reconciliation table to be presented using both percentages and reporting currency amounts, and this table must include disclosure of specific categories.

Additional information will also be required for reconciling items that meet a quantitative threshold.

The new guidance also requires enhanced disclosures of income taxes paid, including the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions that exceed a quantitative threshold.

The amendments should be applied on a prospective basis, but retrospective application is permitted.

The amendments set forth in this ASU are effective for annual periods beginning after December 15, 2024 for public entities.

This guidance will be effective for the Company’s annual disclosures in fiscal year 2025.

As the amendments only relate to disclosures, there will be no impact on the Company’s financial position or results of operations.

NET LOSS PER SHARE

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Total common stock equivalents 8,056,578 6,017,524 3,914,422

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

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

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

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Fair Value Measured Using

(Level 1) (Level 2) (Level 3) Total

(Level 1) (Level 2) (Level 3) Total Balance

Cash equivalents:

Money market funds $ 60,525 $ — $ — $ 60,525

Long-term marketable securities:

Corporate equity securities 2,076 — — 2,076

Total $ 60,525 $ — $ — $ 60,525

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Contingent consideration — — 2,461 2,461

Common stock warrant liability — — 32 32

Total $ — $ — $ 7,930 $ 7,930

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Fair Value Measured Using

(Level 1) (Level 2) (Level 3) Total

(Level 1) (Level 2) (Level 3) Total Balance

Cash equivalents:

Money market funds $ 66,594 $ — $ — $ 66,594

Marketable securities:

Long-term marketable securities:

Corporate equity securities 2,076 — — 2,076

Corporate debt securities — 500 — 500

Total $ 68,670 $ — $ — $ 68,670

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

Common Stock Warrant Liability and Contingent Consideration (Level 3)

Common Stock Warrant Liability and Contingent Consideration

Balance at December 31, 2021

Exercise of warrants ( 202 )

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

Change in estimated fair value of contingent consideration 5,341

Additions to contingent consideration 727

Payment related to contingent consideration ( 2,625 )

Balance at December 31, 2022

Exercise of warrants ( 22 )

Change in estimated fair value of common stock warrant liability ( 10 )

Change in estimated fair value of contingent consideration on business combination

Change in estimated fair value of contingent consideration on asset acquisition

Additions to contingent consideration 2,269

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Balance at December 31, 2023

As of December 31, 2022, the Company had one investment in convertible preferred shares carried at cost.

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

During March 2023, the Company wrote off $ 1.0 million of its investment in convertible preferred shares of Cibiltech SAS (“Cibiltech”), which was carried at cost.

Cibiltech’s operations have been liquidated.

The fair value of this investment was based on Level 3 inputs.

In July 2023, the Company entered into a Securities Holders’ Agreement (the “Agreement”) with a private entity based in France.

The private entity was established to continue Cibiltech's activity, which consists of designing, developing, publishing, promoting, distributing, and marketing of software related to predictive solutions, to monitoring and/or to remote monitoring in the field of human organ allotransplantation, allografting, and chronic organ diseases.

The private entity retained all assets of Cibiltech, including its licenses.

Pursuant to the Agreement, the Company agreed to invest a certain amount in the private entity, in order to continue the commercialization of the iBox technology.

The Company's investment is in the form of ordinary and Class B shares carried at cost.

This investment is not considered material to the Company's consolidated financial statements.

In December 2023, Miromatrix was acquired by United Therapeutics Corporation.

The Company tendered and sold all of its shares of Miromatrix to United Therapeutics Corporation for $ 2.5 million.

The Company recognized a $ 1.5 million gain from the disposal of its Miromatrix shares and recorded as other income (expense), net, on the consolidated statements of operations for the year ended December 31, 2023.

In determining fair value, the Company uses various valuation approaches within the fair value measurement framework.

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At December 31, 2023 and 2022, money market funds were included as cash and cash equivalents in the consolidated balance sheets.

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

The securities are valued using third-party pricing sources.

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

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

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

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

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

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

Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met multiplied by management’s estimate of the probability of success at a discounted rate of 12 % at December 31, 2022.

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

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

Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met based on management’s estimate of the probability of success and projected revenues for revenue-based considerations at discounted rates ranging from 6 % and 12 % at December 31, 2023 and 12 % at December 31, 2022.

The significant input in the Level 3

measurement that is not supported by market activity is the Company’s probability assessment of the achievement of the milestones.

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

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

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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.

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

Common Stock Warrant Liability Valuation Assumptions:

Private Placement Common Stock Warrant Liability

Stock Price $ 11.41 $ 45.48

Exercise Price $ 1.12 $ 1.12

Remaining term (in years) 0.28 1.28

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.

CASH AND MARKETABLE SECURITIES

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

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

Contractual maturities of the short-term marketable securities were within one year or less.

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, 2023.

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December 31, 2023

Amortized Cost Unrealized Holding Gains (Losses) Fair Value

Amortized Cost Unrealized Holding Gains

Short-term marketable securities:

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Total short-term marketable securities 153,221 2,749 155,970

Long-term marketable securities:

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

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

Total $ 153,221 $ 2,749 $ 155,970

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

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

December 31, 2022

Within one year $ 153,221 $ 203,168

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Total $ 153,221 $ 203,168

BUSINESS COMBINATIONS AND ASSET ACQUISITION

Business Combinations

The Transplant Pharmacy

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

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

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

HLA Data Systems

In January 2023, the Company acquired HLA Data Systems, a Texas-based company that provides software and interoperability solutions for the histocompatibility and immunogenetics community.

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

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

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

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

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

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

Acquisition-related costs of $ 0.4 million associated with the acquisition were expensed as incurred, and classified as part of general and administrative expenses in the consolidated statement of operations.

Goodwill of $ 2.1 million arising from the acquisition primarily consists of synergies from integrating HLA Data Systems’ technology with the current testing and digital solutions offered by the Company.

The acquisition of HLA Data Systems will provide a robust and comprehensive Laboratory Information Management System and support the laboratory workflows.

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

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

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

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

Estimated Fair Value

Estimated Useful Life (Years)

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

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

Estimated Useful Lives (Years)

Customer relationships $ 3,010 13

Developed technology 770 11

Trademarks 320 17

Total $ 4,100

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

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

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

The acquired developed technology represents the fair value of HLA Data Systems’ proprietary software.

The trademark acquired consists primarily of the HLA Data Systems brand and markings.

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

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

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

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

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

MedActionPlan

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

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

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

The royalty rates of 10 % and 2 % were used to estimate the fair value of the developed technology and the trademark, respectively.

A discount rate of 24 % was utilized in estimating the fair value of these three intangible assets.

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

In July 2023, the Company acquired MediGO, an organ transplant supply chain and logistics company.

MediGO provides access to donated organs by digitally transforming donation and transplantation workflows to increase organ utilization.

The Company acquired MediGO with a combination of cash consideration paid upfront and contingent consideration with a fair value of $ 0.3 million.

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

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

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

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

Goodwill of $ 0.6 million arising from the acquisition primarily consists of synergies from integrating MediGO’s technology with the current testing and digital solutions offered by the Company.

The acquisition of MediGO will provide a comprehensive software platform that optimizes complex logistics from referral to recovery and during the critical movement of organs and teams and gives organ procurement organizations and transplant centers the ability to unify decentralized stakeholders, coordinate resources and make vital decisions with the goal of increasing organ utilization and improving equity and access to transplantation .

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

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Total $ 2,020

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.

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

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

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

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

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

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

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

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A discount rate of 25 % was utilized in estimating the fair value of these three intangible assets.

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

TransChart LLC

In January 2021, the Company acquired TransChart for cash.

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

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

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

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

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

Combined Consideration Paid

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

The following table summarizes the consideration paid for HLA Data Systems and MediGO and the provisional amounts of the assets acquired and liabilities assumed recognized at their estimated fair value at the acquisition date (in thousands):

Consideration

Cash $ 17,166

Total consideration

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Current assets $ 1,413

Fixed assets 23

Identifiable intangible assets 6,120

Other assets 2

Current liabilities ( 1,060 )

Noncurrent liabilities ( 2,883 )

Other current liabilities ( 810 )

Contingent considerations ( 1,620 )

Other liabilities ( 7 )

Total identifiable net assets acquired 4,036

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Total consideration $ 6,682

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

The preliminary allocation of the purchase price to assets acquired and liabilities assumed was based on the fair value of such assets and liabilities as of the acquisition date.

Asset Acquisition

Effective as of August 9, 2023, the Company purchased an asset from a private entity.

The asset consists of a licensing agreement with a university institution.

See also Note 9.

The purchased asset did not meet the definition of a business under ASC Topic 805, Business Combinations, and therefore the Company accounted for the transaction as an asset acquisition.

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

Acquisition costs relating to the asset acquired were $ 2.6 million, comprised of base consideration of $ 1.8 million, contingent consideration at fair value of $ 0.5 million and associated transaction costs of $ 0.3 million.

There was only one asset acquired and the entire cost is assigned to the licensing agreement, which is recorded under Intangible assets, net, in the consolidated balance sheets and under the intangible assets with indefinite lives category.

GOODWILL AND INTANGIBLE ASSETS

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Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances.

There were no indicators of impairment in the year ended December 31, 2022.

The following table presents details of the Company’s goodwill as of December 31, 2022 and 2021 (in thousands):

Balance as of January 1, $ 36,983 $ 23,857

Goodwill acquired 540 13,126

Balance as of December 31, $ 37,523 $ 36,983

The Company identified an indicator of goodwill impairment during the quarter ended September 30, 2023 due to a sustained decrease in share price.

During the quarter ended September 30, 2023, the Company estimated the fair value of its reporting unit using a combination of the income and market approaches.

In performing the goodwill impairment test, the Company used an exit multiple given the development phase of the Company and a discount rate of 16.4 % in its estimation of fair value.

The evaluation performed resulted in no impairment as of September 30, 2023.

On December 1, 2023, the Company performed a qualitative assessment of its reporting unit taking into consideration past, current and projected future earnings, recent trends and market conditions, and its market capitalization.

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As of December 31, 2023, no impairment of goodwill has been identified.

The following table presents details of the Company’s goodwill as of December 31, 2023 and 2022 (in thousands):

Balance as of January 1, $ 37,523 $ 36,983

Goodwill acquired 2,646 540

Remeasurement adjustment

Balance as of December 31, $ 40,336 $ 37,523

Intangible Assets

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December 31, 2023

Gross Carrying Amount Accumulated

Amount Weighted

Amount Accumulated

Intangible assets with finite lives:

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Acquired in-process technology 1,250 — — 1,250

Favorable license agreement 2,726 — — 2,726

Total intangible assets with indefinite lives 3,976 — — 3,976

Total intangible assets $ 83,860 $ ( 33,643 ) $ ( 4,516 ) $ 45,701

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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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Acquisition of intangible assets

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.

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.

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.

In January and July 2023, the Company acquired the intangible assets of HLA Data Systems and MediGO, respectively.

The intangible assets are included in Acquired and developed technology, Customer relationships and Trademarks and tradenames as of December 31, 2023.

Amortization of Intangible Assets

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Accumulated depreciation was $ 0.6 million and $ 0.6 million at December 31, 2023 and 2022, 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.

Related amortization expense, included in depreciation and amortization expense, was $ 0.0 million, $ 0.1 million and $ 0.1 million for the three years ended December 31, 2023, 2022 and 2021, respectively.

Accrued and Other Liabilities

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Clinical studies $ 15,744 $ 14,816

Professional fees 6,115 5,780

Short-term lease liability 5,943 5,591

Professional fees 5,911 6,115

Contingent consideration 5,469 1,025

Deferred revenue 4,748 5,342

Accrued royalty 4,633 1,664

Laboratory processing fees and materials 2,890 2,189

Accrued royalty 348 4,633

Deferred payments for intangible assets 920 2,062

Capital expenditures 1,316 2,612

Contingent consideration 1,025 2,114

License and other collaboration fees 1,000 —

Accrued shipping expenses 335 489

License and other collaboration fees 250 1,000

Capital expenditures 151 1,316

Other accrued expenses 2,788 4,553

Total accrued and other liabilities $ 45,497 $ 49,131

CMS Accelerated and Advance Payment Program for Medicare Providers

On March 27, 2020, the U.S.

government enacted the CARES Act.

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

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

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

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

COMMITMENTS AND CONTINGENCIES

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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.

The following table summarizes the ROU assets and lease liabilities for certain lease agreements which commenced in July 2022 (in thousands):

ROU assets $ 12,073 $ 14,321

Lease liabilities $ 13,221 $ 15,302

The following table summarizes the ROU assets and lease liabilities for certain lease agreements which commenced in August 2022 (in thousands):

ROU assets $ 5,347 $ 5,814

Lease liabilities $ 5,627 $ 6,005

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

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The Board of Trustees of the Leland Stanford Junior University (“Stanford”)

In June 2014, the Company entered into a license agreement with Stanford (the “Stanford License”), which granted the

Company an exclusive license to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA.

Under the terms of the Stanford License, the Company is required to pay an annual license maintenance fee, six milestone

payments and royalties in the low single digits of net sales of products incorporating the licensed technology.

In June 2014, the Company entered into a license agreement with Stanford (the “Stanford License”), which granted the Company an exclusive license to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA.

Under the terms of the Stanford License, the Company is required to pay an annual license maintenance fee, six milestone payments and royalties in the low single digits of net sales of products incorporating the licensed technology.

In March 2023,

the Stanford License agreement was amended, which reduced the maximum royalty rate to a lower rate at which the Company may be liable to Stanford effective from April 2022 and also provided that the Company would seek a review from the U.S.

Supreme Court (the “Review”).

During the pendency of the Review, certain of the Company’s licensing payment and reporting obligations to Stanford with respect to licensed products sold in the U.S.

were suspended.

As a result, the Company reversed the excess liability in March 2023.

In May 2023, the Company submitted a petition of certiorari to the U.S.

Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S.

Supreme Court declined to hear this patent infringement suit.

As the Review is complete and the Company's petition for review was denied, the Stanford License automatically terminated, and in December 2023, the Company paid Stanford certain past royalties at a reduced rate that were previously suspended within 90 days of the termination.

There was no outstanding obligation with Stanford as of December 31, 2023.

On May 4, 2018, the Company entered into the License Agreement with Illumina (the “Illumina Agreement”).

The Illumina Agreement requires the Company to pay royalties in the mid-single to low-double digits on sales of products covered by the Illumina Agreement.

Other Royalty Commitment

Effective as of August 2023, the Company entered into a license agreement with a university institution (the "University Agreement").

The University Agreement requires the Company to pay royalties in the low single digits on sales of products covered by the University Agreement.

Cibiltech Commitments

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

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

In July 2023, the Company entered into a settlement agreement with Cibiltech (the “Settlement Agreement”), pursuant to which the Company agreed to pay a certain amount of its obligation owed to Cibiltech.

A judicial court in Paris, France, granted the liquidation of Cibiltech, which filed for bankruptcy.

In the Settlement Agreement, Cibiltech irrevocably waived and relinquished any and all claims, demands, grievances, proceeding, actions or other requests, whether judicial, administrative, arbitral or otherwise, against the Company.

The outstanding obligation of the Company with Cibiltech was waived and relinquished, except for $ 0.4 million, which was paid in July 2023, and represented the amount that the Company agreed to per the Settlement Agreement.

There was no outstanding obligation as of December 31, 2023.

Tax Commitments

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Other Commitments

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

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

Effective as of July 2023, the Company entered into a license and collaboration agreement with a private entity pursuant to which the Company was granted an irrevocable, non-transferable right to commercialize its proprietary software, iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation for a period of four years with exclusive rights in the United States.

The Company will share an agreed-upon percentage of revenue with the private entity, if and when revenues are generated from iBox.

Litigation and Indemnification Obligations

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The suit seeks injunctive relief and unspecified monetary relief.

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

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.

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 commenced on March 7, 2022 and concluded on March 14, 2022, with the jury finding that Natera violated the Lanham Act by falsely advertising the scientific performance of its Prospera transplant test and awarding the Company $ 44.9 million in damages, comprised of $ 21.2 million in compensatory damages and $ 23.7 million in punitive damages.

In July 2023, the Court upheld and reaffirmed the March 2022 jury verdict but did not uphold the monetary damages awarded by the jury, which the Company intends to appeal.

In August 2023, the Court issued an injunction prohibiting Natera from making the claims the jury previously found to be false advertising.

The case is now on appeal.

On July 19, 2022, the U.S.

Court of Appeals for the Federal Circuit affirmed the Court’s judgment dismissing the Company’s patent infringement suit against Natera.

In May 2023, the Company submitted a petition of certiorari to the U.S.

Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S.

Supreme Court declined to hear the suit.

In addition, 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.

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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.

The Company has not recorded any liabilities for these suits.

On December 11, 2023, the Court dismissed the case alleging infringement of Natera's U.S.

Patent 10,597,724.

Natera has appealed that decision.

See Note 17, Subsequent Events , for further information.

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

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

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

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.

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 and the request for information.

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.

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 (the “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.

By letter dated September 19, 2023, the Company was notified by the staff of the SEC that the SEC has concluded its investigation as to the Company and does not intend to recommend an enforcement action by the SEC against the Company.

The notice was provided under the guidelines set out in the final paragraph of Securities Act Release No.

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

The Company does not believe that the CID raises any issues regarding the safety or efficacy of any of the Company’s products or services and is cooperating fully with the DOJ investigation.

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

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

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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.

The complaint alleged 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.

Olymbios also sought 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.

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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.

On July 19, 2022, Dr.

Olymbios filed a motion to withdraw from arbitration before Judicial Arbitration and Mediation Services, Inc., which was denied on

August 18, 2022.

Both the arbitration and the San Mateo County Court matter were settled in the fourth quarter of 2023 and have been resolved.

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.

District Court for the Northern District of California against the Company, Reginald Seeto, its former 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 Company’s Board of Directors 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.

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and Robbins Geller Rudman & Dowd LLP as lead counsels.

Plaintiffs filed an amended complaints on November 28, 2022.

Plaintiffs filed an amended complaint 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.

On May 24, 2023, the court granted the Company’s motion to strike and motion to dismiss, dismissing all claims against defendants with leave to amend.

On June 28, 2023, plaintiffs filed a second amended complaint against the Company, Reginald Seeto, Ankur Dhingra, and Peter Maag.

Under a briefing schedule ordered by the court on June 12, 2023, defendants’ motion to dismiss and motion to strike the second amended complaint was filed on July 26, 2023, plaintiffs’ opposition was filed on August 30, 2023, and defendants’ reply was filed on September 22, 2023.

The court held oral argument on October 31, 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

See Note 17, Subsequent Events , for further information.

Derivative Actions

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 ” ).

District Court for the Northern District of California against the Company as nominal defendant and Drs.

Seeto and Maag and Mr.

Dhingra, 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.

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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:

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

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

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

On February 7, 2023, Jaysen Stevenson 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 Drs.

Seeto and Maag and Mr.

Dhingra and other current and former members of the Company’s Board of Directors (the “Stevenson Derivative Action”).

The claims and allegations in the Stevenson Derivative Action are substantially similar to those in the Edelman Derivative Action.

The suit seeks declaratory relief and to recover alleged 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 March 9, 2023, the court consolidated the Edelman Derivative Action and the Stevenson Derivative Action and stayed both actions pursuant to the terms of the stay order in the Edelman Derivative Action.

The consolidated derivative action remains stayed.

The parties in the Stevenson Derivative Action filed a joint status statement with the court on September 6, 2023.

See Note 17, Subsequent Events , for further information.

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

Insurance Matter

In December 2022, the Company filed a lawsuit against its directors and officers liability insurance carriers in San Mateo County Superior Court.

The Company seeks a declaration that costs and fees incurred by the Company in responding to governmental investigatory requests are covered under its policies.

The Company also asserts breach of contract against its primary insurer Great American Insurance Company for denying the claim.

The policies provide up to $ 15 million in coverage limits.

The Company intends to vigorously pursue its claims, and believes it has good and substantial support for its claims, but there is no guarantee that the Company will prevail in these claims.

The parties are presently briefing the Company's entitlement to coverage under the policies.

STOCKHOLDERS’ EQUITY

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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