What changed in this filing

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Item 1A. Risk Factors

2022-05-09 compared with 2021-11-08 · 333 added, 281 removed, 899 unchanged (41% of the section changed)

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Risks Related to our Business

• We have been, and may continue to be, adversely impacted by the COVID-19 pandemic, which has caused decreased test report volume.

• Our revenue heavily relies upon the sale of a single product and our current or future products may not achieve or maintain significant commercial market acceptance.

• We have been, and may continue to be, adversely impacted by the COVID-19 pandemic, which has, at times, caused decreased test report volume.

• Billing for our products is complex and we require substantial time and resources to collect payment.

• We rely on third parties for tumor sample collection, preparation and delivery.

• A depletion or loss of our tumor sample database could significantly harm our business.

• If our primary clinical laboratory facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to conduct our laboratory analysis and pursue our research and development efforts may be jeopardized.

• Our current or future products may not achieve or maintain significant commercial market acceptance.

• New product development is lengthy and complex and our revenues could be limited if we are unable to increase and support adoption of our products by healthcare providers.

• We may experience limits on our revenue if we are unable to increase and support adoption of our products by both physicians and other healthcare providers.

• We rely on limited or sole suppliers for some of the reagents, equipment, chips and other materials used by our products, and we may not be able to find replacements or transition to alternative suppliers.

• The sizes of the markets for our current and future products have not been established with precision and may be smaller than we estimate.

• We rely on third parties for sample collection, preparation and delivery.

• A depletion or loss of our sample database could significantly harm our business.

• If our primary clinical laboratory facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to conduct our laboratory work for our commercial products and pursue our research and development efforts may be jeopardized.

• New product development is lengthy and complex, and our revenues could be limited if we are unable to increase and support adoption of our products by both physicians and other healthcare providers.

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• The sizes of the addressable markets for our current and future products have not been established with precision and may be smaller than we estimate.

• The diagnostic testing industry is subject to rapid change, which could make our current or future products obsolete.

Risks Related to Reimbursement and Government Regulation

• We currently have limited reimbursement coverage for our lead product, DecisionDx-Melanoma, and if third-party payors, including government and commercial payors, do not provide sufficient coverage of, or adequate reimbursement for, our products, our commercial success will be negatively affected.

• We conduct business in a heavily regulated industry and failure to comply with regulatory requirements, including those established by the U.S.

Food and Drug Administration or any other regulatory authority, or changes in enforcement discretion for laboratory developed tests could harm our business.

• We conduct business in a heavily regulated industry and failure to comply with regulatory requirements, including those established by the CMS, and the U.S.

Food and Drug Administration (“FDA”) or changes in enforcement discretion for laboratory developed tests could harm our business.

• Data from our clinical studies may change materially, which could harm our business.

• Changes in health care policy or healthcare statutes and regulations or our ability to comply with applicable requirements could cause a material adverse effect to our business and operations.

• Changes in healthcare policy, statutes or regulations, or our ability to comply with applicable healthcare requirements, could have a material adverse effect on our business and operations.

Risks Related to Intellectual Property

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• Our employees and any current or potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

• We may engage in strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.

• Our business may be negatively impacted by cyber security threats, natural disasters and public health crises.

• We have, and may continue to, engage in strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.

• Our business may be negatively impacted by cybersecurity threats, natural disasters and public health crises.

• Product or professional liability lawsuits against us could cause us to incur substantial liabilities and could limit our commercialization of our products.

Risks Related to Ownership of Our Common Stock.

• The stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may lose all or part of your investment.

• The price of our common stock may be volatile or may decline regardless of our operating performance, and you may lose all or part of your investment.

• We have broad discretion in the use of working capital and may not use it effectively or in ways that increase our share price.

• Related party transactions that create conflicts of interest, or the appearances of conflicts of interest, may harm our business and cause our stock price to decline.

• The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

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• Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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You should consider carefully the risks described below, as well as the other information in this Quarterly Report on Form 10‑Q, before deciding whether to purchase, hold or sell shares of our common stock.

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We receive a substantial portion of our revenue from a small number of third-party payors, primarily Medicare.

Our revenue for our test reports provided for patients covered by Medicare as a percentage of total revenue, was 58% for the year ended December 31, 2020 and 49% for the year ended December 31, 2019.

Our revenue for our test reports provided for patients covered by Medicare and Medicare Advantage plans as a percentage of total revenue, was 57% and 28%, respectively, for the year ended December 31, 2021 and 58% and 29%, respectively, for the year ended December 31, 2020.

If our largest current payors were to significantly reduce, or cease to pay, the amount they reimburse for our products, or if they do not reach favorable coverage and reimbursement decisions for our products, or attempt to recover amounts they had already paid, it could have a material adverse effect on our business, financial condition and results of operations and cause significant fluctuations in our results of operations.

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The amounts are determined by historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties.

Determining variable consideration through a consideration of these factors involves a significant level of estimation uncertainty, and our estimations may turn out to be incorrect.

Such variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved.

Variable consideration may be constrained and excluded from the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor.

Variable consideration for Medicare claims that are not covered by an LCD, including those claims subject to approval by an ALJ at an appeal hearing, is deemed to be fully constrained due to factors outside our influence (i.e., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time.

Variable consideration for Medicare claims that are not covered by an LCD or otherwise, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (i.e., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time.

Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues.

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Since our inception, we have had a history of net losses.

As of September 30, 2021, we had cash and cash equivalents of $363.2 million and an accumulated deficit of $87.4 million.

For the year ended December 31, 2021 we had a net loss of $31.3 million and an accumulated deficit of $93.8 million as of December 31, 2021.

For the three months ended March 31, 2022, we had a net loss of $24.6 million.

As of March 31, 2022, we had an accumulated deficit of $118.4 million.

We cannot predict if we will achieve profitability in the near future or at all.

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We also expect significant increases in our stock-based compensation expense in future periods, reflecting higher stock option valuations as a public company and additional awards outstanding due to increased headcount.

Additionally, our performance could be affected by the ongoing impacts of COVID-19.

Additionally, our performance could be affected by the

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ongoing impacts of the ongoing COVID-19 pandemic.

Due to the requirements associated with being a public company, including those associated with no longer qualifying as an emerging growth company and a smaller reporting company and becoming a large accelerated filer, we expect to continue incur significant additional legal, accounting and other expenses.

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In particular, we intend to use a portion of our working capital to increase our headcount, including through the expansion of our sales and marketing and research and development teams, which will increase our operating costs in a manner not historically reflected in our consolidated financial statements.

In combination with our other anticipated increased operating

expenses in connection with the ongoing demands of a public company, these anticipated changes in our operating expenses may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.

In combination with our other anticipated increased operating expenses in connection with the ongoing demands of a public company, these anticipated changes in our operating expenses may make it difficult to evaluate our current business, assess our future performance relative to prior performance and accurately predict our future performance.

We will continue to encounter risks and difficulties frequently experienced by early commercial-stage companies, including those associated with increasing the size of our organization and the prioritization of our commercial, research and business development activities.

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Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

As of December 31, 2021, we are no longer an emerging growth company and now apply public company adoption dates for new or revised accounting standards.

Our quarterly and annual operating results and cash flows may fluctuate in the future, which could cause the market price of our stock to decline substantially.

Numerous factors, many of which are outside our control, such as the COVID-19 pandemic, may cause or contribute to significant fluctuations in our quarterly and annual operating results.

Numerous factors, many of which are outside our control may cause or contribute to significant fluctuations in our quarterly and annual operating results.

For example, following the onset of the COVID-19 pandemic in 2020 we experienced decreases in revenue and test report volumes.

These fluctuations may make financial planning and forecasting uncertain.

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Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.

We previously identified material weaknesses in our internal control over financial reporting.

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If our internal control over financial reporting is not effective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause adverse effects on our business and may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

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

In connection with the audits of our financial statements for the years ended December 31, 2018 and 2017, we concluded that there were material weaknesses in our internal control over financial reporting.

However, in connection with audit of our financial statements for the year ended December 31, 2019, we concluded these material weaknesses had been remediated.

These prior material weaknesses related to a lack of (i) appropriately designed and implemented controls over the review and approval of manual journal entries and the related supporting journal entry calculations, (ii) personnel with appropriate knowledge, experience and training commensurate with accounting and reporting requirements and (iii) appropriately designed and implemented controls to evaluate variable consideration and the related constraint in accordance with ASC 606, and resulted in certain material corrections to the consolidated financial statements.

To remediate these weaknesses, during 2019 we augmented our accounting staff to provide more resources for complex accounting matters and financial reporting.

Further, we engaged a third party to assist us with formalizing our internal control documentation and the implementation of enhancements to our internal control over financial reporting.

Subsequently, we have continued to increase the headcount of our accounting and finance functions to further support the demands placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley.

We expect to continue expending significant time and resources related to our internal control over financial reporting, including by further expanding our finance and accounting staff over time, but there can be no assurance our efforts will be effective.

If we fail to adequately staff our accounting and finance function or fail to maintain adequate internal control over financial reporting, any new or recurring material weaknesses could prevent our management from concluding our internal control over financial reporting is effective and could result in our auditor issuing an adverse opinion on our internal control over financial reporting.

If we identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, our ability to prevent material misstatements in our consolidated financial statements could be impaired, a material misstatement in our consolidated financial statements could occur and we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, which could cause our business to suffer and our stock price to decline.

If we identify any future significant deficiencies or material weaknesses, the accuracy and timeliness of our financial reporting may be adversely affected, our ability to prevent material misstatements in our consolidated financial statements could be impaired, a material misstatement in our consolidated financial statements could occur and we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, which could cause our business to suffer and our stock price to decline.

Since becoming a publicly traded company in 2019, we have increased the headcount of our accounting and finance functions to further support the demands placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).

We may need to raise additional capital to fund our existing operations, commercialize new products or expand our operations.*

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We may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including to:

• increase our sales and marketing efforts for DecisionDx-Melanoma, DecisionDx-SCC, DecisionDx DiffDx-Melanoma, myPath Melanoma and DecisionDx-UM and address competitive developments;

• increase our sales and marketing efforts for the DecisionDx-Melanoma, DecisionDx-SCC, DecisionDx DiffDx-Melanoma, myPath Melanoma, DecisionDx-UM, TissueCypher Barrett’s Esophagus and IDgenetix tests and address competitive developments among these or future commercial products;

• fund ongoing evidence development for our existing products as well as additional pipeline programs;

• expand our laboratory testing facility and related testing capacity;

• expand our technologies into other types of skin cancer management and detection products;

• expand our technologies into other types of skin cancer, ocular cancer, gastrointestinal or mental health management and detection products;

• acquire, license or invest in technologies;

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• our rate of progress in establishing payor coverage and reimbursement arrangements with third-party payors;

• our rate of progress in, and cost of the sales, marketing, coverage and reimbursement activities associated with, establishing adoption of DecisionDx-Melanoma, among our other products;

• our rate of progress in, and cost of the sales, marketing, coverage and reimbursement activities associated with, establishing adoption of our lead product, DecisionDx-Melanoma, among our other products;

• the cost of expanding our laboratory operations and offerings, including our sales, marketing, coverage and reimbursement efforts;

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• our rate of progress in, and cost of research and development activities associated with, diagnostic products in research and early development;

• the potential cost of, and delays in, the development of new products as a result of changes in regulatory oversight applicable to our products;

• acquisitions of businesses, assets, products or technologies;

• the effects of the COVID-19 pandemic;

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Risks Related to Our Business

Our revenue currently depends primarily on sales of DecisionDx-Melanoma, and we will need to generate sufficient revenue from this and other products to grow our business.

Most of our revenue in 2021 and 2020 was derived from the sale of our lead product, DecisionDx-Melanoma.

While we also derive revenue from DecisionDx-UM, DecisionDx-SCC, our CDO (which consists of myPath Melanoma and DecisionDx DiffDx-Melanoma), the TissueCypher Barrett’s Esophagus test and the IDgenetix test, we expect that the majority of our revenue for the foreseeable future will be derived from sales of DecisionDx-Melanoma.

Further, we believe that our long-term commercial success will depend on our ability to develop and market additional products.

Our ability to derive revenue from DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC, our CDO, the TissueCypher Barrett’s Esophagus test, the IDgenetix test and any future products that we commercialize or acquire is uncertain and depends on favorable coverage and reimbursement policies from government payors, such as Medicare, and from private payors, such as insurance companies.

Without positive coverage policies, our products may not be reimbursed and we may not be able to recognize revenue.

If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve profitability would be impaired, and the market price of our stock could decline substantially.

The COVID-19 pandemic has adversely impacted and could continue to adversely impact our business, including the demand for our test reports, as well as the business or operations of physicians and other healthcare providers who order our test reports and the third-party payors responsible for reimbursement for our tests, customers and other third parties with whom we conduct business.*

Public health crises such as pandemics or similar outbreaks have adversely impacted and could continue to adversely impact our business.

In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, surfaced in Wuhan, China.

Since then, COVID-19 has spread to multiple countries, including the United States.

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.

As a result of the COVID-19 outbreak, or similar pandemics, and federal, state and local government responses to pandemics, we have and/or may in the future experience disruptions that could adversely impact our business, including, but not limited to:

As a result of the ongoing COVID-19 pandemic, or public health crises, and federal, state and local government responses to these events, we have and/or may in the future experience disruptions that could adversely impact our business, including, but not limited to:

• decreased test report volume due to a decline in orders of DecisionDx-Melanoma and DecisionDx-UM tests as patient visits for routine examinations and biopsies have been, and may continue to be, delayed and/or canceled;

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• delays or disruptions by third parties in the collection, preparation or delivery of the tumor samples that we test;

• delays or difficulties in delivering test reports, interruptions in research and development and other limitations of key business activities due to members of our workforce becoming ill, compliance with applicable vaccination mandates and/or stay-at-home or other similar orders imposed by or that may be imposed by state and local governments, including at our Phoenix, Arizona and Friendswood, Texas locations;

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and/or stay-at-home or other similar orders imposed by or that may be imposed by state and local governments, including at our Phoenix, Arizona, Pittsburgh, Pennsylvania and Friendswood, Texas locations;

• delayed reimbursement from third party payors, disruption in our supply channel and other adverse impacts on our business resulting from the negative effects of the COVID-19 pandemic on our suppliers, service providers and other third parties on whom we rely;

• delayed or postponed interactions with regulators and other important agencies and contractors, due to limitations in employee resources, travel restrictions or forced furlough of government employees.

Following the onset of the COVID-19 pandemic, we began experiencing declines in orders and test report volume.

Following the onset of the COVID-19 pandemic, we experienced declines in orders and test report volume in certain periods.

For example, in the second quarter of 2020, test reports delivered for our lead product, DecisionDx-Melanoma, decreased 18.5% compared to the second quarter of 2019.

For the year ended December 31, 2020, our growth in DecisionDx-Melanoma test report volume was 4.5%, compared to year-over-year growth of 29.1% for the year ended December 31, 2019.

quarter of 2021, test reports delivered for DecisionDx-Melanoma decreased by 11.2% compared to the first quarter of 2020.

We believe the adverse impacts to our test report volume growth are linked to delays in the diagnoses as well as the cumulative impact on promotional responsiveness as a result of reduced sales calls per day and in-person sales calls during the COVID-19 pandemic.

Our future results will be dependent upon the extent and duration of the COVID-19 crisis, including the emergence and spread of variants of the virus, such as the Delta variant, and government restrictions, which are beyond our control.

We believe these decreases in our test report volume were linked to delays and/or cancellations in patient visits, resulting in fewer diagnostic biopsies and thus a reduction in the number of diagnoses of cutaneous melanoma in response, as well as the cumulative impact on promotional responsiveness as a result of reduced sales calls per day and in-person sales calls during the ongoing COVID-19 pandemic.

Our future results will be dependent upon the extent and duration of the COVID-19 crisis, including the emergence and spread of variants of the virus, and government restrictions, which are beyond our control.

Although state and local government restrictions put in place to slow the spread of the virus have been eased in certain locations, restrictions may be reinstated from time to time in various regions depending on the circumstances, potentially impacting the flow of future patient visits as well as access to our sales targets.

Even with the easing of state and local restrictions and the availability of vaccinations, patient visits and diagnosis of cutaneous melanoma may be impacted by continued apprehension regarding possible exposure to the virus.

For example, our analysis of third-party data indicates that cutaneous melanoma diagnoses during the three months ended September 30, 2021 remain approximately 16% below historical 2019 levels.

As conditions are continuously evolving, we are unable to predict how our future test report volume will be impacted or the extent to which our results of operations, financial condition or cash flows will be impacted by the COVID-19 pandemic, or other future public health crises.

Accordingly, the test report data presented above and elsewhere in this Quarterly Report on Form 10-Q is not necessarily indicative of our results of operations that can be expected in future periods.

Even with the easing of state and local restrictions and the availability of vaccinations, patient visits and diagnoses of the diseases covered by our diagnostic and prognostic test may be impacted by continued apprehension regarding possible exposure to the virus as well as a general shift from in-person clinical visits to telehealth approaches, which may result in missed or delayed diagnoses of skin cancer and other diseases.

Under legislation enacted (or that may be enacted) by the United States federal government to respond to COVID-19, we have received and may receive in the future, cash payments or other forms of assistance allocated to healthcare and other companies.

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The receipt of government payments or other assistance during the COVID-19 crisis has generated negative publicity for some companies and may continue to generate negative publicity for companies in the future.

If we receive any negative publicity as a result of receiving or accepting a government payment or other assistance, it could harm our reputation, trigger a review or audit by applicable government agencies and/or adversely impact our stock price.

If we receive any negative publicity as a result of receiving or accepting a government payment or other assistance, such as the $1.9 million in provider relief funds we received from The U.S.

Department of Health and Human Services (“HHS”) on April 16, 2020, it could harm our reputation, trigger a review or audit by applicable government agencies and/or adversely impact our stock price.

The COVID-19 crisis continues to rapidly evolve.

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In addition, the current and potential adverse impacts of the COVID-19 crisis on our business, financial condition, results of operations and growth prospects, may also have the effect of heightening many of the other risks and uncertainties described elsewhere in this “Risk Factors” section.

Our revenue currently depends primarily on sales of DecisionDx-Melanoma, and we will need to generate sufficient revenue from this and other products to grow our business.*

Most of our revenue in 2020 and 2019 was derived from the sale of our lead product, DecisionDx-Melanoma.

While we also derive revenue from DecisionDx-UM, DecisionDx-SCC and our CDO (which consists of DecisionDx DiffDx-Melanoma and myPath Melanoma) , we expect that the majority of our revenue for the foreseeable future will be derived from sales of DecisionDx-Melanoma.

Further, we believe that our long-term commercial success will depend on our ability to develop and market additional products.

Our ability to derive revenue from DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC and our CDO and any future products that we commercialize or acquire is uncertain and depends on favorable coverage and reimbursement policies from government payors, like Medicare, and from private payors, like insurance companies.

Without positive coverage policies, our products may not be reimbursed and we may not be able to recognize revenue.

Billing for our products is complex and requires substantial time and resources to collect payment.*

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Depending on the billing arrangement and applicable law, we bill various payors, including Medicare, Medicaid, private insurance companies, private healthcare institutions, and patients, all of which have different billing requirements.

We generally bill third-party payors for

products and pursue reimbursement on a case-by-case basis where pricing contracts are not in place.

We generally bill third-party payors for products and pursue reimbursement on a case-by-case basis where pricing contracts are not in place.

To the extent laws or contracts require us to bill patient co-payments or co-insurance, we must also comply with these requirements.

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• differences between the billing rates and reimbursement rates for our products;

• compliance with complex federal and state regulations related to billing government healthcare programs, including Medicare, Medicaid and TRICARE;

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• compliance with complex federal and state regulations related to billing government healthcare programs, including Medicare, Medicaid, Veterans Administration and TRICARE;

• risk of government audits related to billing;

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• the resources required to manage the billing and claims appeals process.

We use standard industry billing codes, known as Current Procedural Terminology, or CPT, codes, to bill for our products.

We use standard industry billing codes, known as Current Procedural Terminology, codes, to bill for our products.

If these codes were to change, there is a risk of an error being made in the claim adjudication process.

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In addition to the complexities noted above, we rely upon a third-party software application in the administration of our billing and collection process.

We transitioned from a third-party billing service provider and added additional headcount to move our billing process in-house using a third-party software application starting January 1, 2021.

Any significant disruption or deficiency in the design of our billing process could adversely impact our ability to generate and send invoices, calculate revenues, track payments and collect our accounts receivable.

Although to date we have not experienced any disruptions or identified any deficiencies with our new billing system, there can be no assurances that any disruptions or deficiencies will not occur in the future.

Additionally, any failure in the design or operation of our internal controls related to our billing and

collection processes could adversely impact our ability to conclude on the effectiveness of our internal control over financial reporting and could cause our auditor to issue an adverse opinion on our internal control over financial reporting.

We rely on third parties for tumor sample collection, preparation and delivery.

Although to date we have not experienced any disruptions or identified any deficiencies with our billing system, there can be no assurances that any disruptions or deficiencies will not occur in the future.

Additionally, any failure in the design or operation of our internal controls related to our billing and collection processes could adversely impact our ability to conclude on the effectiveness of our internal control over financial reporting and could cause our auditor to issue an adverse opinion on our internal control over financial reporting.

We rely on third parties for tissue sample collection, preparation and delivery.

Any defects in sample collection or preparation by such third parties and any delays in delivery of such samples could cause errors in our test reports and delay our ability to deliver test reports in a timely manner, which could significantly harm our business.*

The tumor tissue samples that we test are biopsied, preserved, prepared and delivered to us by third parties, including dermatopathologists and laboratory facilities.

The tissue samples that we test are biopsied, preserved, prepared and delivered to us by third parties, including dermatopathologists and laboratory facilities.

As such, we rely on these third parties to prepare, label and deliver the tissue samples that we test in compliance with applicable laws and guidelines, and in a timely manner.

Therefore, the accuracy and correctness of the test reports that we deliver are dependent on proper chain of custody and appropriate methods of sample collection or preparation utilized by these third parties, and our ability to timely deliver reports is dependent upon the ability of these third parties to provide these samples to us in a timely manner.

The ability of these third parties to provide these samples to us in a timely manner could be delayed by events beyond our control, including but not limited to natural disasters and public health epidemics, such as the COVID-19 crisis.

The ability of these third parties to provide these samples

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to us in a timely manner could be delayed by events beyond our control, including but not limited to natural disasters and public health epidemics, such as the COVID-19 pandemic.

Any errors in any part of the sample collection or preparation process could cause us to deliver incorrect test reports, potentially resulting in harm to patients whose physicians implement a change in treatment decisions based upon our test report.

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The occurrence of any of the foregoing could significantly harm our reputation and our results of operations, causing significant harm to our business.

We rely on our database of tumor samples for the development and improvement of our products.

Depletion or loss of our tumor samples could significantly harm our business.

The development and validation of accurate products is a complex process that requires access to tumor tissue specimens and long-term outcomes data.

Our research and development efforts to improve our existing products and develop new products may require the depletion of our existing database of tumor samples.

If our tumor samples are lost or destroyed, or substantially depleted before we are able to generate meaningful data, we may be unable to improve our existing products, continue the development of pipeline products or validate product candidates.

We rely on our database of samples for the development and improvement of our products.

Depletion or loss of our samples could significantly harm our business.

The development and validation of accurate products is a complex process that requires access to tissue specimens and long-term outcomes data.

Our research and development efforts to improve our existing commercial products and develop new pipeline products may require the depletion of our existing database of samples.

If our samples are lost or destroyed, or substantially depleted before we are able to generate meaningful data, we may be unable to improve our existing products, continue the development of pipeline products or validate product candidates.

While we have historically been able to create and maintain a large sample bank to expand the clinical use of our products and develop new products, we may be unable to do so in the future.

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If our primary clinical laboratory facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to conduct our laboratory analysis and pursue our research and development efforts may be jeopardized.*

We currently perform all of our testing and store our database of tumor samples at our primary clinical laboratory facility in Phoenix, Arizona.

We currently perform most of our testing and store our database of tumor samples at our primary clinical laboratory facility in Phoenix, Arizona.

Our facility and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure, terrorism, burglary, public health crises (including restrictions that may be imposed on businesses by state and local governments under stay-at-home or similar orders and mandates) or other events, which may make it difficult or impossible for us to perform our testing services for some period of time or to receive and store samples.

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Furthermore, integral parties in our supply chain are operating from single sites, increasing their vulnerability to natural disasters and man-made disasters or other sudden, unforeseen and severe adverse events.

In addition, the loss of our tumor samples due to such events could limit or prevent our ability to conduct research and development analysis on existing tests as well as tests in active pipeline development.

While we have a business continuity plan in place, and have completed the build out of an additional laboratory facility in close proximity to our primary facility to support our growth and provide certain operational redundancy, our facilities and the equipment we use to perform our testing and research and development could be unavailable or costly and time-consuming to repair or replace.

In addition, the loss of our tissue samples due to such events could limit or prevent our ability to conduct research and development analysis on existing tests as well as tests in active pipeline development.

While we have a business continuity plan in place, and have an additional laboratory facility in close proximity to our primary facility to support our growth and provide certain operational redundancy, our facilities and the equipment we use to perform our testing and research and development could be unavailable or costly and time-consuming to repair or replace.

It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify a new facility, replace certain pieces of equipment or license or transfer our proprietary technology to a third-party, particularly in light of licensure and accreditation requirements.

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• the timing and scope of any regulatory approval for our products, if such approvals become required, and maintaining ongoing compliance with regulatory requirements;

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• our ability to obtain and maintain positive coverage decisions for our products from government and commercial payors;

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We continually seek to develop new product offerings, which requires us to devote considerable resources to research and development.

For example, before we can commercialize a new pipeline product, we will need to expend significant resources in order to conduct substantial research and development, including clinical utility and validity studies, and further develop and scale our laboratory processes and infrastructure to accommodate additional products.

Before we can commercialize a new pipeline product, we will need to expend significant resources in order to conduct substantial research and development, including clinical utility and validity studies, and further develop and scale our laboratory processes and infrastructure to accommodate additional products.

For example, in 2021, we launched our innovative pipeline to develop a genomic test aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, atopic dermatitis and related inflammatory skin conditions.

We have initiated a 4,800 patient, prospective, multi-center clinical study to develop and validate this inflammatory skin disease pipeline test with the expectation of having initial validation and development data in 2023 and in launching this pipeline test by the end of 2025.

Our product development process takes time and involves a high degree of risk, and such development efforts may fail for many reasons, including failure of the product to perform as expected, failure to successfully complete analytic and clinical validation, or failure to demonstrate the clinical utility of the product.

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We may experience limits on our revenue if we are unable to increase and support adoption of our products by physicians and other healthcare providers.*

we were unable to educate physicians, healthcare providers, patients and third-party payors about the benefits and advantages of our products.

Physicians and other healthcare providers may be unwilling to adopt our products due to their reliance on existing traditional clinical and pathology staging criteria and our ability to generate revenue from our products would be significantly impaired if we were unable to educate physicians, healthcare providers, patients and third-party payors about the benefits and advantages of our products.

The COVID-19 crisis has impacted our in-person healthcare interactions, such as field-based sales and medical affairs, and we have had to convert visits, programs and projects to be performed online and by telephone.

Although our in-person healthcare interactions have recently increased, they may become subject to restrictions or cancellations from time to time, due to the uncertainties surrounding the duration, extent and ongoing impacts of the COVID-19 crisis, possibly impacting the effectiveness of our efforts.

Although our in-person healthcare interactions have returned to more normal levels, they may become subject to restrictions or cancellations from time to time, due to the uncertainties surrounding the duration, extent and ongoing impacts of the COVID-19 crisis, possibly impacting the effectiveness of our efforts.

We will need to continue to educate physicians and pathologists about the benefits and cost-effectiveness of our products through published papers, presentations at scientific conferences, one-on-one marketing efforts by our sales force and one-on-one education by our medical affairs team.

However, physicians and other healthcare providers may be reluctant to adopt our products in circumstances where our products are not incorporated into the current standard of care or practice guidelines.

For example, while clinical utility of DecisionDx-Melanoma has been demonstrated in peer reviewed publications, the sentinel lymph node biopsy, or SLNB, surgery is the most widely used staging tool for determining a cutaneous melanoma patient’s metastatic risk.

For example, while clinical utility of DecisionDx-Melanoma has been demonstrated in peer-reviewed publications, the SLNB surgery is the most widely used staging tool for determining a cutaneous melanoma patient’s metastatic risk.

Whether healthcare providers adopt DecisionDx-Melanoma as a complementary or triage diagnostic method relative to the SLNB surgery will depend on our ability to increase awareness of DecisionDx-Melanoma and its clinical validation.

In addition, all of our testing services are performed by our certified laboratory located in Phoenix, Arizona, under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, rather than by local laboratory or pathology practices.

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In addition, all of our testing services are performed by our certified laboratory located in Phoenix, Arizona, under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) rather than by local laboratory or pathology practices.

Accordingly, it may be difficult for us to collect samples from pathologists, and pathologists may be reluctant to support our testing services.

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In addition, competitors may develop their own versions of our solutions in countries where we do not have patents or where our intellectual property rights are not recognized and compete with us in those countries, including encouraging the use of their solutions by physicians in other countries.

Some potential competitors may have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing

capabilities, and more experience dealing with third-party payors.

As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their products than we do or sell their products at prices designed to win significant levels of market share.

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As we add new tests and services, we will face many of these same competitive risks for these new tests.

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The sizes of the markets for our current and future products have not been established with precision and may be smaller than we estimate.*

Our estimates of the total addressable markets for DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC, DecisionDx DiffDx-Melanoma and myPath Melanoma are based on a number of internal and third-party estimates, including, without limitation, the annual rate of patients with the applicable form of skin cancer, the list price of our products relative to the reimbursement we expect to receive from third-party payors and the assumed prices at which we can sell our products in markets that have not been established.

Our estimates of the total addressable markets for the DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC, myPath Melanoma, DecisionDx DiffDx-Melanoma, TissueCypher for BE and IDgenetix tests are based on a number of internal and third-party estimates, including, without limitation, the annual rate of patients with the applicable indications, the list price of our products relative to the reimbursement we expect to receive from third-party payors and the assumed prices at which we can sell our products in markets that have not been established.

For example, we estimate that the total addressable market for DecisionDx-Melanoma is approximately $540 million, which is based, in part, on our review of multiple publications which show that diagnosis of melanoma is underreported by 30% to 72%.

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If a third-party payor audits our claims and issues a negative audit finding, and we are not able to overturn the audit findings through appeal, the recoupment may result in a material adverse effect on our revenue.

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Additionally, in some cases commercial third-party payors for whom we are not a participating provider may elect at any time to review claims previously paid and determine the amount they paid was too much.

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Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues.

For these fully constrained claims, we generally recognize revenue in the period the uncertainties are resolved, if favorable.

In June 2017 we submitted to the Office of Medicare Hearings and Appeals, or OMHA, a request to participate in an appeal program developed with the intent of providing appellants a means to have large volumes of claim disputes adjudicated at an accelerated rate.

In June 2017 we submitted to the Office of Medicare Hearings and Appeals (“OMHA”) a request to participate in an appeal program developed with the intent of providing appellants a means to have large volumes of claim disputes adjudicated at an accelerated rate.

We submitted 2,698 DecisionDx-Melanoma claims dating from 2013 through spring 2017 for adjudication on a consolidated basis.

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Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period.

Although we are an in-network participating provider with some commercial third-party payors, including several Blue Cross Blue Shield plans, and certain large, national commercial third-party payors, including Aetna, other commercial third-party payors have issued non-coverage policies that currently categorize DecisionDx-UM and DecisionDx-Melanoma as experimental or investigational.

If we are not successful in obtaining coverage from third-party payors, in reversing existing non-coverage policies, or if other third-party payors issue similar non-coverage policies, this could have a material adverse effect on our business and operations.

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This LCD provides for coverage of DecisionDx-UM to determine metastatic risk in connection with the management of a patient’s newly diagnosed uveal melanoma and to guide surveillance and referral to medical oncology for those patients.

We worked with Palmetto to obtain these positive coverage decisions through the submission of a detailed dossier of analytical and clinical data to substantiate that the tests meet

Medicare’s medical necessity requirements.

We worked with Palmetto to obtain these positive coverage decisions through the submission of a detailed dossier of analytical and clinical data to substantiate that the tests meet Medicare’s medical necessity requirements.

Per their joint operating agreement, Noridian, the MAC responsible for administering claims for laboratory services performed in Arizona, has adopted the same coverage policy as Palmetto for DecisionDx-UM and DecisionDx-Melanoma.

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A change in our MAC, or future changes in the MolDX program, the elimination of the program, or a change in the administrator of that program, may affect our ability to obtain Medicare coverage and reimbursement for products for which we have coverage, for products for which we do not yet have coverage, or for any products we may launch in the future, or delay payments for our tests.

Under Medicare, payment for products like ours is generally made under the Clinical Laboratory Fee Schedule, or CLFS, with payment amounts assigned to specific procedure billing codes.

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services are paid under Medicare.

Under Medicare, payment for products like ours is generally made under the CLFS with payment amounts assigned to specific procedure billing codes.

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014 (“PAMA”) which included substantial changes to the way in which clinical laboratory services are paid under Medicare.

Under PAMA, certain laboratories are required to report to CMS commercial third-party payor payment rates and volumes for each test they perform.

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We bill Medicare for our products, and therefore we are subject to reporting requirements under PAMA.

On May 17, 2019, CMS determined that DecisionDx-UM meets the criteria for “existing ADLT” status.

This means that beginning in 2021, the DecisionDx-UM Medicare rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Note that our rate for 2020 was set by Noridian, our local MAC, but our rate for 2021 for DecisionDx-UM is $7,776 based on the median private payor rate.

Also, on May 17, 2019, CMS determined that DecisionDx-Melanoma meets the criteria for ‘‘new ADLT’’ status.

Accordingly, from July 1, 2019 through March 31, 2020 the Medicare reimbursement rate was equal to the initial list price of $7,193 .

From April 1, 2020 through December 31, 2021, CMS notified us that the rate will also be $7,193, which was calculated based upon the median private payor rate for DecisionDx-Melanoma from July 1, 2019 to November 30, 2019.

Beginning in 2022, the rate for both DecisionDx-Melanoma and DecisionDx-UM will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2022 will be set using median private payor rate data from January 1, 2020 to June 30, 2020.

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In the second quarter of 2020, we submitted our technical assessment dossier for DecisionDx-SCC to Palmetto and Noridian.

The dossier was accepted as complete in the third quarter of 2020.

In early 2021, we submitted our technical assessment dossier for DecisionDx DiffDx-Melanoma.

As of today, the Palmetto MolDx program has not posted a second open comment period for 2021.

Accordingly, given the proximity to year end, we believe that the next open comment period for MolDx LCDs will be in the first quarter of 2022.

However, there is no assurance that the timing of any draft LCD or final LCD will match our expectations or our historical experience with LCDs for our other tests.

In the second quarter of 2021, Noridian and certain other MACs posted a draft revised LCD for DecisionDx-Melanoma.

The draft LCD includes commentary about certain recent publications regarding the clinical utility of GEP tests and was posted to give providers an opportunity to comment.

Each of the draft LCDs include an assessment stating that the MAC does not believe that the new data are sufficient to change the coverage criteria.

We have submitted comments on the draft LCD.

The comment period on the last of these draft LCDs closed on August 8, 2021.

We are unable to predict any future developments related to this matter.

The dossier was accepted as complete in the first quarter of 2021.

We are unable to predict when draft LCDs for DecisionDx-SCC and DecisionDx DiffDx-Melanoma will be posted and there is no assurance that any draft or final LCD will match our expectations, be posted in a timeframe consistent with our historical experience or will be posted at all.

In the second quarter of 2021, Palmetto and the other MACs that participate in the MolDX program each released a revised draft LCD for DecisionDx-Melanoma.

The draft LCD includes commentary about two publications regarding the clinical utility of GEP tests and includes an assessment stating that the new data is not sufficient to change the coverage criteria.

There was an open public comment period, and we submitted comments in support of Medicare coverage.

The comment period ended on August 8, 2021.

Potential outcomes following the public comment period include the posting of a final LCD consistent with the draft LCD, issuing a final LCD with coverage changes or not issuing a final LCD at all.

We are unable to predict the ultimate outcome of this matter.

If we are unable to obtain and maintain adequate reimbursement rates from commercial third-party payors, this may adversely affect our Medicare rate.

It is unclear what impact new pricing structures, such as those adopted under PAMA, may have on our business, financial condition, results of operations or cash flows.

federal government continues to show significant interest in pursuing health care reform and reducing health care costs.

federal government continues to show significant interest in pursuing healthcare reform and reducing healthcare costs.

Similarly, commercial third-party payors may seek to reduce costs by limiting coverage or reducing reimbursement for our products.

Any government-adopted reform measures or changes to commercial third-party payor coverage and reimbursement policies could cause significant pressure on the pricing of, and reimbursement for, health care products and services, including our products, which could decrease demand for our products, and adversely affect our sales and revenue.

Any government-adopted reform measures or changes to commercial third-party payor coverage and reimbursement policies could cause significant pressure on the pricing of, and reimbursement for, healthcare products and services, including our products, which could decrease demand for our products, and adversely affect our sales and revenue.

In addition, some third-party payors have implemented, or are in the process of implementing, laboratory benefit management programs, often using third-party benefit managers to manage these programs.

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The impact on laboratories, such as ours, of active laboratory benefit management by third parties is unclear, and we expect that it could have a negative impact on our revenue in the short term.

It is possible that third-party payors will resist reimbursement for

the products that we offer, in favor of less expensive products, may require pre-approval for our products or may impose additional pricing pressure on and substantial administrative burden for reimbursement for our products.

It is possible that third-party payors will resist reimbursement for the products that we offer, in favor of less expensive products, may require pre-approval for our products or may impose additional pricing pressure on and substantial administrative burden for reimbursement for our products.

We expect to continue to focus substantial resources on increasing coverage and reimbursement for our current products and any future products we may develop.

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If we fail to establish and maintain broad adoption of, and coverage and reimbursement for, our products, our ability to generate revenue could be harmed and our future prospects and our business could suffer.

Our products are currently marketed as laboratory developed tests, and any changes in regulations or the U.S.

Food and Drug Administration’s enforcement discretion for laboratory developed tests, or violations of regulations by us, could adversely affect our business, prospects, results of operations or financial condition.

Our products are currently marketed as laboratory developed tests, and any changes in regulations or the FDA’s enforcement discretion for laboratory developed tests, or violations of regulations by us, could adversely affect our business, prospects, results of operations or financial condition.*

The diagnostics industry is highly regulated, and we cannot assure you that the regulatory environment in which we operate will not change significantly and adversely in the future.

In many instances, there are no significant regulatory or judicial interpretations of these laws and regulations.

Although the U.S.

Food and Drug Administration, or FDA, has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics that are designed, manufactured and used within a single laboratory.

These tests are referred to as laboratory developed tests, or LDTs.

Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics that are designed, manufactured and used within a single laboratory.

These tests are referred to as laboratory developed tests (“LDTs”).

We currently market our products as LDTs.

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This may increase the cost of conducting, or otherwise harm, our business.

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Moreover, even if the FDA does not modify its policy of enforcement discretion, the FDA may disagree that we are marketing our LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements.

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If the FDA begins to actively regulate our diagnostic products, we may be required to obtain premarket clearance under Section 510(k) of the U.S.

Federal Food, Drug and Cosmetic Act, or FDCA, or a premarket approval, or PMA.

Federal Food, Drug and Cosmetic Act (“FDCA”) or a premarket approval (“PMA”).

The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed.

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Even if our products are allowed to remain on the market prior to clearance or approval, demand or reimbursement for our products may decline if there is uncertainty about our products, if we are required to label our products as investigational by the FDA, or if the FDA limits the labeling claims we are permitted to make for our products.

As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other products now in development.

As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other pipeline products.

If the FDA imposes significant changes to the regulation of LDTs it could reduce our revenues or increase our costs and adversely affect our business, prospects, results of operations or financial condition.

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• federal and state Occupational Safety and Health Administration rules and regulations;

• the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and similar state data privacy laws.

• the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and similar state data privacy laws.

In particular, the FDCA defines a medical device to include any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component, part, or accessory, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals.

Our products are considered by the FDA to be subject to regulation as medical devices, and marketed under FDA’s policy of enforcement discretion for LDTs.

Among other things, pursuant to the FDCA and its implementing regulations, the FDA regulates the research, testing, manufacturing, safety, labeling, storage, recordkeeping, premarket clearance or approval, marketing and promotion, and sales and distribution of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses.

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distributed domestically are safe and effective for their intended uses.

In addition, the FDA regulates the import and export of medical devices manufactured between the United States and international markets.

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CLIA certification or accreditation is also required in order for us to be eligible to bill state and federal healthcare programs, as well as commercial third-party payors, for our products.

We have a current CLIA accreditation under the College of American Pathologists, or CAP, program to conduct our tests at our clinical reference laboratory in Phoenix, Arizona.

We have a current CLIA accreditation under the College of American Pathologists (“CAP”) program to conduct our tests at our clinical reference laboratory in Phoenix, Arizona.

CAP maintains a clinical laboratory accreditation program.

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Although we have obtained licenses from states where we believe we are required to be licensed, we may become aware of other states that require out-of-state laboratories to obtain licensure in order to accept specimens from the state, and it is possible that other states currently have such requirements or will have such requirements in the future.

In order to test specimens from New York, LDTs must be approved by the New York State Department of Health, or NYSDOH, on a test-by-test basis before they are offered.

In order to test specimens from New York, LDTs must be approved by the New York State Department of Health (“NYSDOH”) on a test-by-test basis before they are offered.

Our laboratory director must also be separately qualified to be a laboratory director in New York.

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Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so.

Doing business with the public sector, including the U.S.

government, subjects us to risk of audits, investigations, sanctions and penalties.*

We have entered into, and may enter into in the future, contracts with the U.S.

government or other governmental entities, and this subjects us to statutes and regulations applicable to companies doing business with the government.

Government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits (or increase our losses) and expose us to liability for failure to comply with these terms and conditions.

Such requirements may include

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mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.

Being a government contractor also subjects us to reviews, audits and investigations regarding our compliance.

If we fail to comply with our obligations associated with being a government contractor, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts, which could adversely affect our results of operations.

The FDA may modify its enforcement discretion policy with respect to LDTs in a risk-based manner, and we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.

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labeling regulations, including the FDA’s general prohibition against promoting products for unapproved or ‘‘off-label’’ uses;

and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction

or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA caused by the device which may present a risk to health.

and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA caused by the device which may present a risk to health.

Even if we were able to obtain FDA clearance or approval for one or more of our products, if required, a diagnostic test may be subject to limitations on the indications for which it may be marketed or to other regulatory conditions.

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Adverse differences between preliminary or interim data and final data could significantly harm our reputation and marketing efforts.

Further, others, including healthcare providers or payors, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

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particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding our business.

If the topline or interim data that we report differ from actual results, or if others, including healthcare providers or payors, disagree with the conclusions reached, our ability to commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our products.*

Changes in healthcare policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our products.

In March 2010, the ACA became law.

This law substantially changed the way health care is financed by both government and commercial third-party payors, and significantly impacted our industry.

The ACA contains a number of provisions that are expected to impact our business and operations, some of which in ways we cannot currently predict, including those governing enrollment in state and federal health care programs, reimbursement changes and fraud and abuse, which impact existing state and federal health care programs and will result in the development of new programs.

This law substantially changed the way healthcare is financed by both government and commercial third-party payors, and significantly impacted our industry.

The ACA contains a number of provisions that are expected to impact our business and operations, some of which in ways we cannot currently predict, including those governing enrollment in state and federal healthcare programs, reimbursement changes and fraud and abuse, which impact existing state and federal healthcare programs and will result in the development of new programs.

Among other things, the ACA required medical device manufacturers to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices, and began to apply to sales of taxable medical devices after December 31, 2012, but was suspended in 2016.

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Congress have taken action to roll back certain provisions of the ACA.

Additionally, on June 17, 2021 the U.S.

For example, on June 17, 2021, the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the ACA will remain in effect

in its current form.

Thus, the ACA will remain in effect in its current form.

Further, prior to the U.S.

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It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA and our business.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, unless additional Congressional action is taken.

The Coronavirus Aid, Relief and Economic Security Act enacted on March 27, 2020, also known as the CARES Act, which is designed to provide financial support and resources to individuals and business affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020.

The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, extended the suspension of the 2% Medicare sequester through March 31, 2021 and An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, which was signed into law on April 14, 2021, extended the sequester through December 31, 2021.

Further, Congress is considering additional health reform measures as part of the budget reconciliation process.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect through 2031, unless additional Congressional action is taken.

The CARES Act and other COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020, through March 31, 2022.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.

Further, Congress is considering additional health reform measures as part of other reform initiatives.

We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial third-party payors to reduce costs while expanding individual healthcare benefits.

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The laws that affect our ability to operate include, but are not limited to:

• the federal Anti-Kickback Statute, or the AKS, which prohibits, among other things, any person or entity from knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.

• the federal Anti-Kickback Statute (“AKS”), which prohibits, among other things, any person or entity from knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and

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Medicaid programs.

The term ‘‘remuneration’’ has been broadly interpreted to include anything of value, such as specimen collection materials or test kits.

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Violations are subject to civil and criminal fines and monetary penalties of up to $100,000 for each violation, plus up to three times the remuneration involved, imprisonment of up to ten years and exclusion from government healthcare programs.

In addition, the ACA codified case law that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or the FCA;

• the Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including laboratory and pathology services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services and prohibits that entity from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies.

Sanctions for violating the Stark Law include denial of payment, civil monetary penalties and exclusion from the federal health care programs.

Sanctions for violating the Stark Law include denial of payment, civil monetary penalties and exclusion from the federal healthcare programs.

Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the FCA;

and reimbursement information, false, fictitious or fraudulent claims for payment or approval by the federal government, including federal health care programs, such as Medicare and Medicaid, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government.

• federal civil and criminal false claims laws, such as the FCA, which can be enforced by private citizens through civil qui tam action, and civil monetary penalty laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented through distribution of template medical necessity language or other coverage and reimbursement information, false, fictitious or fraudulent claims for payment or approval by the federal government, including federal healthcare programs, such as Medicare and Medicaid, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government.

In addition, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA.

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When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

• the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.

EKRA’s reach extends beyond federal health care programs to include private insurance (i.e., it is an “all payor” statute).

• the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.

EKRA’s reach extends beyond federal healthcare programs to include private insurance (i.e., it is an “all payor” statute).

For purposes of EKRA, the term “laboratory” is defined broadly and without reference to any connection to substance use disorder treatment.

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Like the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform services for them that involve individually identifiable health information as well as their covered subcontractors.

Failure to comply with the HIPAA privacy and security standards can result in civil monetary penalties, and, in certain circumstances, criminal penalties.

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their implementing regulations, which imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform services for them that involve individually identifiable health information as well as their covered subcontractors.

Failure to comply with the HIPAA’s obligations can result in civil monetary penalties, and, in certain circumstances, criminal penalties.

HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S.

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waiving coinsurance, copayments, deductibles, and other amounts owed by patients;

billing a state Medicaid program at a price that is higher than what is charged to one or more other third-party payors employing, exercising control over or splitting professional fees with licensed professionals in violation of state laws prohibiting fee splitting or the corporate practice of medicine and other professions;

billing a state Medicaid program at a price that is higher than what is

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charged to one or more other third-party payors employing, exercising control over or splitting professional fees with licensed professionals in violation of state laws prohibiting fee splitting or the corporate practice of medicine and other professions;

• federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

• the federal transparency requirements under the Physician Payments Sunshine Act, created under the ACA, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding their relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year.

• the federal transparency requirements under the Physician Payments Sunshine Act, created under the ACA, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals and information regarding physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.

Failure to submit required information may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission, and may result in liability under other federal laws or regulations.

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• the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other part;

• state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers;

• federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

• state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers;

• federal, state and foreign laws that govern the privacy and security of health information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

As a clinical laboratory, our business practices may face additional scrutiny from government regulatory agencies such as the Department of Justice, the U.S.

Department of Health and Human Services Office of Inspector General, or OIG, and CMS.

Department of Health and Human Services Office of Inspector General (“OIG”) and CMS.

Certain arrangements between clinical laboratories and referring physicians have been identified in fraud alerts issued by the OIG as implicating the AKS.

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Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

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Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations is costly.

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We can face serious consequences for violations.

and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, or collectively, Trade Laws, prohibit, among other things, companies and their employees, agents, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector.

Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals,

universities, and other organizations.

and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations prohibit, among other things, companies and their employees, agents, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector.

Violations of these trade laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations.

We also expect that we may engage in non-U.S.

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Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

Our collection, use and disclosure of individually identifiable information, including health and/or employee information, is subject to stringent and changing state, federal and foreign privacy and security obligations, and our failure to comply or perceived failure to comply with those obligations or to adequately secure the information we hold could result in significant liability or reputational harm.*

We and any potential collaborators are subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security), as well as external and internal privacy and security policies, contracts and other obligations that apply to the processing of personal data by us and on our behalf.

In the United States, numerous federal and state laws and regulations, including federal health information privacy laws and the California Consumer Privacy Act (“CCPA”), state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our collaborators.

Outside the United States, there are also an increasing number of laws, regulations and industry standards concerning privacy, data protection and information security, including for example the European Union’s (“EU”) General Data Protection Regulation (EU) 2016/679 (“GDPR”).

In the ordinary course of our business, we collect and store sensitive data, including protected health information, or PHI, personally identifiable information, or PII, credit card and other financial information, intellectual property and proprietary business information owned or controlled by ourselves or our customers, payors and other parties.

We manage and maintain our applications and data utilizing a combination of on-site systems, managed data centers, and cloud-based data centers.

We utilize external security and infrastructure vendors to manage parts of our data centers.

The secure processing, storage, maintenance and transmission of this sensitive data is vital to our operations and business strategy, and we devote significant resources to protecting such information.

Although we take measures to protect sensitive data from unauthorized access, use or disclosure, our information technology and infrastructure, and that of our third-party vendors, may be vulnerable to attacks by hackers or other threat actors or viruses or breached due to employee error, malfeasance, or other malicious or inadvertent disruptions.

Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, disclosed, lost, or stolen.

Any such access, breach, or other loss of information could result in legal claims or proceedings, liability under federal or state laws that protect the privacy of personal information, such as HIPAA, as amended by HITECH, regulatory penalties, or other consequences.

Notice of breaches must be made to affected individuals, the Secretary of the Department of Health and Human Services, and for certain breaches, notice may need to be made to the media or State Attorneys General.

Such a notice could harm our reputation and our ability to compete.

Although we have implemented security measures and a formal, dedicated enterprise security program to prevent unauthorized access to patient data, such data is currently accessible through multiple channels, and there is no guarantee we can protect our data from breach.

Unauthorized access, loss or dissemination could also disrupt our operations (including our ability to conduct our analyses, provide test results, bill payers or patients, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company financial information, provide information about our products and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business) and damage our reputation, any of which could adversely affect our business.

In addition, we may obtain health information from third parties that are also subject to privacy and security requirements under HIPAA, as amended by HITECH.

Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other PII.

These laws and regulations are not necessarily preempted by HIPAA, particularly if a state affords greater protection to individuals than HIPAA.

Where state laws are more protective, we have to comply with the stricter provisions.

In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.

California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages.

The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional expense, adverse publicity and liability.

Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand or are proposed and become more complex, these potential risks to our business could intensify.

Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such PHI or PII along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our services, decrease demand for our services, reduce our revenue and/or subject us to additional liabilities.

Compliance with U.S.

and foreign data protection laws, regulations and other obligations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions.

Failure or perceived failure to comply with U.S.

and foreign data protection laws and regulations could result in government enforcement actions (which could include significant civil, criminal, and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

We are subject to stringent and changing state, federal, local, foreign, and other privacy and security obligations, and our failure to comply or perceived failure to comply with those obligations could result in regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse business consequences.

In the ordinary course of our business, we collect, store, use, transmit, disclose, or otherwise process (“Process”) confidential, proprietary, and sensitive data, including PHI, personal information, credit card and other financial information, intellectual property and proprietary business information owned or controlled by ourselves or our customers, payors and other parties.

Our data processing activities subject us to numerous data privacy and security obligations, such as laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts and other obligations that govern the Processing of personal information by us and on our behalf.

In the United States, numerous federal, state, and local governments have enacted data privacy and security laws, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act).

For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information.

Additionally, California has enacted several laws governing the Processing of personal information, such as the California Consumer Privacy Act of 2018 (“CCPA”), which provides California residents certain rights relate to their personal information, and the California Confidentiality of Medical Information Act, which restricts the use and disclosure of health information and other personal information.

Although the CCPA exempts some personal information processed in the context of clinical trials, the CCPA, to the extent applicable to our business and operations, may increase compliance costs and potential liability with respect to other personal information we maintain about California residents.

In addition, other states have enacted or proposed privacy laws, further complicating compliance efforts.

Outside the United States, there are also an increasing number of laws, regulations, industry standards and other obligations concerning privacy and security, including for example the European Union’s (“EU”) General Data Protection Regulation (EU) 2016/679 (“GDPR”).

In addition, privacy advocates and industry groups have proposed, and may in the future propose, standards with which we are legally or contractually bound to comply.

Moreover, certain jurisdictions have enacted data localization laws and cross-border personal information transfer laws, which could make it more difficult to transfer personal information across jurisdictions (such as transferring or receiving personal information that originates in the EU).

Existing mechanisms that may facilitate cross-border personal information transfers may change or be invalidated.

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Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework.

These laws may be subject to varying interpretations by courts and government stakeholders, creating complex compliance issues for us and our clients.

Preparing for and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).

These obligations may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal information on our behalf.

In addition, these obligations may require us to change our business model or to take on more onerous obligations in our contracts.

Although we endeavor to comply with all applicable obligations, we may, at times, fail or be perceived to have failed to do so.

Moreover, despite our efforts, our personnel or third parties upon whom we rely on may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.

Failure or perceived failure to comply with these obligations could result in significant consequences, including but not limited to government enforcement actions (which could include civil, criminal, and administrative penalties), private litigation, additional reporting requirements and/or oversight, bans on processing personal information, and orders to destroy or not use personal information.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:

increase our cost of providing our services, decrease demand for our services, reduce our revenue, interrupt our business operations, limit our ability to develop our services, expenditure of time and resources to defend any claim or inquiry, and adverse publicity.

Ethical, legal and social concerns related to the use of genetic information could reduce demand for our products.

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Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

Our patent portfolio includes seven issued U.S.

patents and seven pending U.S.

Our patent portfolio as of December 31, 2021 includes 12 issued U.S.

patents and ten pending U.S.

patent applications, with foreign counterparts.

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It is possible that others will design around our future patented technologies.

We may not be successful in defending any such challenges made against our patents or patent applications.

We may not be successful in defending any such

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challenges made against our patents or patent applications.

Any successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents and increased competition to our business.

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Even if we prevail against an infringer in a U.S.

district court or foreign trial-level court,

there is always the risk that the infringer will file an appeal and the initial court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents.

district court or foreign trial-level court, there is always the risk that the infringer will file an appeal and the initial court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents.

The outcome of patent litigation or other proceeding can be uncertain, and any attempt by us to enforce our patent rights against others or to challenge the patent rights of others may not be successful, or, if successful, may take substantial time and result in substantial cost, and may divert our efforts and attention from other aspects of our business.

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• third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;

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• parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;

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Obtaining and enforcing patents in the life sciences industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain.

Changes in either the patent laws or interpretation of the patent laws in the United States or the United States Patent and Trademark Office, or the USPTO, rules and regulations could increase these uncertainties and costs.

Patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the AIA, signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Changes in either the patent laws or interpretation of the patent laws in the United States or the United States Patent and Trademark Office (“USPTO”) rules and regulations could increase these uncertainties and costs.

Patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (“AIA”), signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

The AIA includes a number of significant changes to U.S.

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manufacturers.*

Intellectual property rights that have been in-licensed pursuant to our license agreement, or the License Agreement, with The Washington University in St.

Louis, Missouri, or WUSTL, have been generated through the use of U.S.

Intellectual property rights that have been in-licensed pursuant to the License Agreement, with The Washington University in St.

Louis, Missouri (“WUSTL”) have been generated through the use of U.S.

government funding, and are therefore subject to certain federal regulations.

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This preference for U.S.

industry may be waived by the federal agency that provided the funding if the owner or assignee of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture

substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.

industry may be waived by the federal agency that provided the funding if the owner or assignee of the intellectual property can show that reasonable but

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unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.

This preference for U.S.

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• we may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our products or technologies do not infringe those third parties’ patents;

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• we may participate at substantial cost in International Trade Commission proceedings to abate importation of products that would compete unfairly with our products or technologies;

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The occurrence of any of these events may have a material adverse effect on our business, results of operation, financial condition or cash flows.

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We depend on information technology systems that we license from third parties.

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For example, we license certain intellectual property from WUSTL that is incorporated into DecisionDx-UM.

In 2020, we provided nearly 1,400 test reports for DecisionDx-UM.

In 2021, we provided over 1,600 test reports for DecisionDx-UM.

If this license agreement were terminated, we would be unable to continue to issue test reports and thus sales of DecisionDx-UM.

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If we do not prevail in such disputes, we may lose any of such license agreements.

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In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.

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Litigation could result in substantial costs and be a distraction to management.

If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees, costs and expenses, royalties or, be enjoined from selling our products or services, including DecisionDx-UM and DecisionDx-Melanoma, which could adversely affect our ability to offer our products or services, our ability to continue operations and our financial condition.

If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees, costs and expenses, royalties or, be enjoined from selling our products or services, including DecisionDx-Melanoma and DecisionDx-UM, which could adversely affect our ability to offer our products or services, our ability to continue operations and our financial condition.

We may not be able to protect our intellectual property rights throughout the world.

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For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and once disclosed, we are likely to lose trade secret protection and may not be able to obtain adequate remedies for such breaches.

Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure.

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prevent such unauthorized disclosure.

If we are required to assert our rights against such party, it could result in significant cost and distraction.

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If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.*

We have not yet registered certain of our trademarks in all of our potential markets, although we have registrations for, among others, DecisionDx, DecisionDx-UM, DecisionDx-Melanoma, DecisionDx-SCC and myPath Melanoma in the United States.

We have not yet registered certain of our trademarks in all of our potential markets, although we have registrations for, among others, the DecisionDx DiffDx-Melanoma, DecisionDx-UM, DecisionDx-Melanoma, DecisionDx-SCC, myPath Melanoma, TissueCypher Barrett’s Esophagus and the IDgenetix tests in the United States.

Our current or future registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or descriptive determined to be infringing on other marks.

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Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections.

In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to

oppose pending trademark applications and to seek to cancel registered trademarks.

In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks.

Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings.

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Although these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.

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We may be subject to claims challenging the inventorship of our patents and other intellectual property.

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Maetzold, our President and Chief Executive Officer.

Although we have entered into agreements with them regarding their employment, they are not for a specific term and each of may terminate their employment with us at any time though we are not aware of any present intention of any of these individuals to leave us, except that as previously disclosed in August 2021, our Chief Business Officer has notified us of his intention to resign effective December 31, 2021.

Although we have entered into agreements with our key personnel regarding their employment, they are not for a specific term and each of may terminate their employment with us at any time, though we are not aware of any present intention of any of these individuals to leave us.

Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians.

We may not be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life science businesses, particularly near our laboratory facilities located in Phoenix, Arizona.

We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel.

We may have difficulties locating, recruiting or retaining qualified salespeople.

Recruiting and retention difficulties can limit our ability to support our research and development and sales programs.

Recruiting and retention difficulties

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can limit our ability to support our research and development and sales programs.

All of our employees are at-will, which means that either we or the employee may terminate their employment at any time.

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You should not rely on our operating results for any prior periods as an indication of our future operating performance.

To effectively manage our anticipated future growth, we must continue to maintain and enhance our financial, accounting, laboratory operations, customer support and sales administration systems, processes and controls.

To effectively manage our anticipated future growth, we must continue to maintain and enhance our financial, accounting, human resources, laboratory operations, customer support and sales administration systems, processes and controls.

Failure to effectively manage our anticipated growth could lead us to over-invest or under-invest in development, operational and administrative infrastructure, result in weaknesses in our infrastructure, systems, or internal controls, give rise to operational mistakes, losses, loss of customers, productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees.

We also anticipate further growth in our business operations.

This future growth could create strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service and sales organization management.

We expect to increase headcount and to hire more specialized personnel in the future as we grow our business.

We will need to continue to hire, train and manage additional qualified scientists, laboratory personnel, client and account services personnel, and sales and marketing staff and improve and maintain our technology to properly manage our growth.

For example, since May 2021, we have completed the acquisitions of Myriad myPath Laboratory, Cernostics and AltheaDx, each of which we expect will contribute to our future growth.

These acquisitions and other future growth could create strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service and sales organization management.

We expect to continue increasing our headcount and hire more specialized personnel in the future as we grow our business and expand our product offerings.

If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees or if we are not successful in retaining our existing employees, our business may be harmed.

In addition, our anticipated growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new diagnostic tests and services.

As we commercialize additional diagnostic tests, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications.

As we commercialize additional diagnostic and prognostic tests, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications.

Failure to manage this growth or transition could result in turnaround time delays, higher costs, declining quality, deteriorating customer service, and slower responses to competitive challenges.

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The time and resources required to implement these new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations.

If our management is unable to effectively manage our anticipated growth, our expenses may increase more than expected, our revenue could decline or grow more slowly than expected and we may be unable to implement our business strategy.

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The quality of our products and services may suffer, which could negatively affect our reputation and harm our ability to retain and attract customers.

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From time to time, we may consider strategic opportunities and engage in transactions such as acquisitions of businesses, assets, products or technologies, as well as technology licenses or investments in complementary businesses.

For example, in May 2021, we completed the acquisition of Myriad myPath Laboratory and in October 2021 we signed a definitive agreement to acquire Cernostics.

Any such transactions may entail numerous operational and financial risks, including:

For example, in May 2021, December 2021 and April 2022, we completed the acquisitions of the Myriad myPath Laboratory, Cernostics and AltheaDx, respectively.

These and any other strategic acquisition transactions may entail numerous operational and financial risks, including:

• delays, difficulties and higher than expected costs associated with integration activities, such as those involving operational processes, regulatory and licensure compliance, personnel and information technology systems;

• disruption of our existing business operations and diversion of management’s time, focus and attention;

• decreases in our liquidity and operating cash flows, increases in our overall operating costs, substantial amounts of amortization expense, increased capital expenditure requirements and non-recurring charges, including possible impairments of acquired assets;

• incurrence of substantial debt or dilutive issuances of equity securities, the assumption of additional liabilities and exposure to unknown liabilities;

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• failure to realize any of the anticipated revenues, synergies, efficiencies or other benefits of a transaction within our estimated time frame or at all.

With regard to the acquisition of Myriad myPath Laboratory, there can be no assurances regarding our ability to successfully integrate myPath Melanoma into our commercial offerings or whether myPath Melanoma will complement our existing offerings and enable us to provide a comprehensive molecular testing solution for difficult-to-diagnose melanocytic lesions.

With regard to the acquisition of Cernostics, t he closing of the transaction is subject to the delivery of certain financial statements to us by Cernostics, the continued employment of certain Cernostics personnel and satisfaction of other customary conditions.

Due to the risk that one or more of the closing conditions may not be met satisfactorily, there can be no assurances that the transaction will close prior to year-end 2021 or at all.

Assuming the transaction is consummated, actual results may differ materially from our plans and expectations.

For example, there can be no assurances regarding our ability to successfully integrate the TissueCypher Barrett’s Esophagus Assay into our commercial offerings, the ability of the Cernostics and Castle teams to complement each other and the ability of the combined strengths of Castle and Cernostics to position us for continued growth and success as a leader in the diagnostics space.

With regard to our acquisitions of the Myriad myPath Laboratory, Cernostics and AltheaDx, actual results may differ materially from our plans and expectations.

For example, there can be no assurances regarding our ability to successfully scale and integrate the myPath Melanoma, TissueCypher Barrett’s Esophagus and the IDgenetix tests into our commercial offerings and the ability of the combined strengths of Castle, the Myriad myPath Laboratory, Cernostics or AltheaDx to position us for continued growth and success as a leader in the diagnostics space.

Further, there are inherent execution and business risks associated with managing the integration and growth objectives of more than one acquisition at the same time and such circumstances may have the effect of heightening the operational and financial risks related to acquisitions noted above and the other risks described in this “Risk Factors” section.

We are unable to predict the timing, size or nature of any future transactions, whether they will be completed or financed on favorable terms, if at all, or what the impact of those transactions might be on our financial results, including if such transactions are not effectively and profitably integrated into our business.

Our failure to successfully complete the integration of any business that we acquire could have an adverse effect on our prospects, business activities, cash flows, financial

condition, results of operations and stock price.

Our failure to successfully complete the integration of any business that we acquire could have an adverse effect on our prospects, business activities, cash flows, financial condition, results of operations and stock price.

Additionally, our ability to successfully integrate, manage and derive financial and other benefits from any acquired business, asset, product or technology is unproven.

Our ability to use net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to limitations.

At December 31, 2020, we had federal net operating loss, NOL, carryforwards of approximately $55.9 million, of which $42.0 million will begin to expire in 2033 if not utilized to offset taxable income, and $13.9 million may be carried forward indefinitely.

Under the Tax Cuts and Jobs Act of 2017, or the TCJA, as modified by the CARES Act, federal NOL carryforwards generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2020 is limited to 80% of taxable income.

As of December 31, 2021, we had federal net operating loss (“NOL”) carryforwards of approximately $99.4 million, of which $43.5 million will begin to expire in 2030 if not utilized to offset taxable income, and $55.9 million may be carried forward indefinitely.

Also, as of December 31, 2021, we had state net operating loss carryforwards of $67.5 million, which begin to expire in 2028 if not utilized to offset state taxable income.

Under the legislation known as the Tax Cuts and Jobs Act of 2017 (“TCJA”), as modified by the CARES Act, federal NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2020 is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the TCJA or the CARES Act.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an ‘‘ownership change’’ (which is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.

We have experienced an ownership change in the past and we may also experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

We have experienced ownership

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changes in the past and we may also experience additional ownership changes in the future as a result of subsequent shifts in o ur stock ownership, some of which may be outside of our control.

If an ownership change occurs and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Our business could be negatively impacted by cyber security threats.*

We are increasingly dependent upon information technology systems, infrastructure and data to operate our business.

In the ordinary course of business, we collect, store and transmit confidential information (including but not limited to intellectual property, proprietary business information and personal information).

It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.

We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidential information.

Despite the implementation of security measures designed to protect against a security incident, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war, public health crises and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure or lead to data leakage.

Ransomware and supply chain attacks have become increasingly prevalent and severe.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage and the further development and commercialization of our products could be delayed.

While we have not experienced any such system failure, accident or material security breach to date, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition.

For example, we maintain a tumor specimen database comprised of over 60,000 samples some of which were used to develop and validate DecisionDx-Melanoma, some of which are currently being used to improve on the test and some of which will be used in the future.

If we were to lose this database, our ability to further validate, improve and therefore maintain and grow sales of DecisionDx-Melanoma could be significant impaired.

Furthermore, significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information related to our patient samples or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to temporary or permanent bans on all or some processing of personal data, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal

information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

Our contracts may not contain limitations of liability, and there can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages if we fail to comply with applicable data protection laws, privacy policies or data protection obligations related to information security or security incidents.

We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or material adverse impacts arising out of our privacy and security practices, processing or security incidents we may experience, or that such coverage will continue to be available on commercially reasonable terms or at all.

If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse consequences.

In the ordinary course of business, we process proprietary, confidential, and sensitive information (including but not limited to intellectual property, proprietary business information and personal information).

We manage and maintain our applications and information utilizing a combination of on-site systems, managed data centers, and cloud-based data centers, and we are increasingly dependent upon information technology systems, infrastructure and information to operate our business.

It is critical that we do so in a secure manner to maintain the confidentiality, availability and integrity of such information.

We also have outsourced elements of our operations to third parties, including third-party service providers and technologies to help operate critical business systems to Process proprietary, confidential and sensitive information, and as a result we manage a number of third-party contractors who have access to our proprietary, confidential and sensitive information.

Our ability to monitor these third parties’ cybersecurity information security practices is limited, and these third parties may not have adequate information security measures in place.

Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent, continue to increase, and are becoming increasingly difficult to detect.

Threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

Despite the implementation of security measures designed to protect against a security incident, we and our contractors and consultants are vulnerable to a variety of evolving threats including but not limited to service interruptions, system malfunction, natural disasters, terrorism, war, public health crises, telecommunication and electrical failures, malware (including as a result of advanced persistent threat intrusions), malicious code, ransomware, supply chain attacks, denial-of-service attacks (such as credential stuffing), social engineering and other attempts to affect service reliability and threaten the confidentiality, integrity and availability of information.

Ransomware attacks have become increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Supply-chain attacks have also increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our services) or the third-party information technology systems that support us and our services.

Any of the previously identified or similar threats could cause a disruption or security incident, which could result in unauthorized, unlawful, or accidental loss of, damage to, modification of, destruction of, alteration of, encryption of, disclosure of, access to, or acquisition of our information and could interrupt our ability to provide our services.

While we have not experienced any such system failure, accident or material security incident to date, we cannot assur e you that our data protection efforts and our investment in information technology have or will prevent security incidents, and we may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents, including affected individuals, the Secretary of the HHS, states Attorneys General and others.

Such disclosures are costly, and the disclosures or failure to comply could lead to adverse consequences.

If we or a third party upon whom we rely experience a security incident or are perceived to have experienced a security incident, we may experience government enforcement actions, additional reporting requirements and/or oversight, restrictions on processing data (including personal information), litigation, indemnification obligations, negative publicity, reputational harm, monetary fund diversions, interruptions in our operations, and other harms.

Such consequences may disrupt our operations (including our ability to conduct our analyses, provide test results, bill payors or patients, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company

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financial information, provide information about our products and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business), damage our reputation, negatively impact our ability to grow our business, and others.

For example, we maintain a tumor specimen database comprised of over 60,000 samples.

Some of these samples were used to develop and validate DecisionDx-Melanoma, and, of those, some are currently being used to improve on the test and some will be used in the future.

If we were to lose this database, our ability to further validate, improve and therefore maintain and grow sales of DecisionDx-Melanoma could be significantly impaired.

We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, information loss, regulatory actions or material adverse impacts arising out of our privacy and security practices, Processing or security incidents we may experience, or that such coverage will continue to be available on commercially reasonable terms or at all.

Product or professional liability lawsuits against us could cause us to incur substantial liabilities and could limit our commercialization of our products.

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• complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property;

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• complexities associated with managing multiple payor reimbursement regimes, government payors, or patient self-pay systems;

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• regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S.

Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions.

Foreign Corrupt Practices Act (“FCPA”) its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations.

Requirements associated with being a public company, including those associated with no longer qualifying as an emerging growth company and a smaller reporting company and becoming a large accelerated filer, will continue to increase our costs as well as divert significant company resources and management attention.*

Requirements associated with being a public company will continue to increase our costs as well as divert significant company resources and management attention.*

We are subject to the reporting requirements of the Exchange Act or the other rules and regulations of the SEC and any securities exchange relating to public companies.

Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and The Nasdaq Stock Market LLC, or Nasdaq, to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory ‘‘say on pay’’ voting requirements that will apply to us when we cease to be an emerging growth company.

Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory ‘‘say on pay’’ voting requirements that now apply to us since we are no longer an emerging growth company effective December 31, 2021.

Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

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We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

Since our IPO, we have been afforded exemptions from certain public company reporting requirements and have been permitted to apply scaled disclosure requirements as a result of our status as an emerging growth company and a smaller reporting company.

However, effective December 31, 2021, we will cease to be an emerging growth company and will no longer be permitted to apply the related exemptions.

For example, in connection with this change, beginning with our Annual Report on Form 10-K for the year ending December 31, 2021 we will be required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting and be required to apply public company adoption dates to new and revised accounting standards.

Further, we will be subject to the reporting deadlines of a large accelerated filer effective December 31, 2021.

Beginning with our first Quarterly Report on Form 10-Q for the fiscal year ending December 31, 2022, we will no longer qualify as a smaller reporting company and we will be unable to take advantage of scaled disclosure requirements.

We were previously afforded exemptions from certain public company reporting requirements and were permitted to apply scaled disclosure requirements as a result of our status as an emerging growth company and a smaller reporting company, respectively.

Effective December 31, 2021, we ceased to be an emerging growth company and beginning with this Quarterly Report on Form 10-Q are no longer permitted to take advantage of the scaled disclosures available to a smaller reporting company.

If we are unable to comply with these requirements on a timely basis or if the attention of our management and personnel is diverted from other business concerns, it could have a material adverse effect on our business, financial condition and results of operations.

The increased costs will increase our net loss or decrease our net income, and may require us to reduce costs in other areas of our business or increase the prices of our products.

In addition, as a larger public company, it may be more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

In addition, as we expand, it may be more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

The impact of these events could also make it more difficult for us to attract and retain qualified personnel to serve on our board of directors, our board committees or as executive officers.

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We, and the third parties with whom we share our facilities, are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.

Each of our operations involve the use of hazardous and flammable materials, including

chemicals and biological and radioactive materials.

Each of our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials.

Our operations also produce hazardous waste.

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We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

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In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

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Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Our business could be adversely impacted by inflation.

Recently, the rate of inflation in the U.S.

has risen to levels not experienced in decades.

We have begun to see some inflationary pressures, primarily in personnel and related costs.

The extent of any future impacts from inflation on our business and our results of operations will be dependent upon how long the elevated inflation levels persist and if the rate of inflation were to further increase, neither of which we are able to predict.

If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, the purchasing power of our cash and cash equivalents may be eroded, our expenses could increase faster than anticipated and we may utilize our capital resources sooner than expected.

Further, given the complexities of the reimbursement landscape in which we operate, our payors may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts.

Our business could be adversely affected by natural disasters, public health epidemics and other events beyond our control.

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Risks Related to Ownership of Our Common Stock

The stock price of our common stock may be volatile or may decline regardless of our operating performance, and you may lose all or part of your investment.

The price of our common stock may be volatile or may decline regardless of our operating performance, and you may lose all or part of your investment.*

The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

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• the level of expenses related to product development and clinical studies for our products;

• our ability to achieve product development goals in the timeframe we announce;

• our ability to achieve product development goals in the timeframes we announce;

• announcements of clinical study results, regulatory developments, acquisitions, strategic alliances or significant agreements by us or by our competitors;

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• recruitment or departure of key personnel;

• the economy as a whole and market conditions in our industry;

• general economic conditions and market conditions specific to our industry;

• interest rates and the rate of inflation;

• the extent and duration of the impacts from the COVID-19 pandemic;

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• any other factors discussed in this Quarterly Report on Form 10-Q.

In addition, the stock market in general, and diagnostic and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

For example, following our April 4, 2022 announcement of our entry into a definitive agreement to acquire AltheaDx, our stock price decreased 16.5% the next day and experienced further declines in the days that followed.

In addition, the stock market in

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general, and diagnostic and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

Broad market and industry factors may negatively affect the market price of our securities, regardless of our actual operating performance.

In the past, stockholders have filed securities class action litigation following periods of market volatility.

In the past, stockholders of other companies have filed securities class action litigation following periods of market volatility.

If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business.

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Certain of our stockholders have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders.

We filed such a registration statement in January 2022 to register the resale of shares of our common stock issuable in connection with our acquisition of Cernostics in December 2021.

We also expect to file a registration statement to register the resale of shares of our common stock that were issued and that may be issuable in connection with our acquisition of AltheaDx in April 2022.

We have registered shares of common stock that we have issued and may issue under our employee equity incentive plans.

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In addition, we do not have a risk management program or processes or procedures for identifying and addressing risks to our business in other areas.

We are currently an emerging growth company and a smaller reporting company and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.*

As an emerging growth company as defined in the JOBS ACT, we have taken advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including:

• being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ disclosure;

• not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

• not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

• reduced disclosure obligations regarding executive compensation;

• not being required to hold a non-binding advisory vote on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved.

In addition, being an emerging growth company the JOBS Act has allowed us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

We have elected to use this extended transition period under the JOBS Act.

As a smaller reporting company as defined in the Exchange Act, we have taken advantage of certain of the scaled disclosures available to smaller reporting companies.

The market value of our common stock held by non-affiliates exceeded $700 million as of June 30, 2021.

Therefore, effective December 31, 2021, we will cease to be an emerging growth company and will no longer be permitted to rely upon the exemptions afforded to emerging growth companies.

Additionally, effective with our first Quarterly Report on Form 10-Q for the fiscal year ending December 31, 2022, we will no longer qualify as a smaller reporting company and will not be permitted to take advantage of the scaled disclosures.

Until then, we cannot predict if investors will find our common stock less attractive because of these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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We have and may continue to enter into related party transactions that create conflicts of interest, or the appearances of conflicts of interest, which may harm our business and cause our stock price to decline.*

We have entered into related party transactions that create conflicts of interest between our interests and the interests of our directors and executive officers.

For example, we employ three children and a brother-in-law of Derek J.

Maetzold, our President and Chief Executive Officer, three children and a son-in-law of Kristen M.

Oelschlager, our Chief Operating Officer, and the son of Tobin W.

Juvenal, our Chief Commercial Officer, in each case in non-officer positions.

Additionally, Derek J.

Maetzold and Daniel M.

Bradbury, the chairperson of our board of directors, each served on the board of directors of AltheaDx, a commercial-stage molecular diagnostics company that we acquired in April 2022.

Further, each of the following individuals was a direct or indirect beneficial owner of AltheaDx securities and received consideration in the transaction:

Thomas Sullivan, John Maetzold and Peter Maetzold, immediate family members of Mr.

Frank Stokes, our Chief Financial Officer;

Tobin Juvenal, our Chief Commercial Officer;

Kristen Oelschlager, our Chief Operating Officer;

and Joshua Albers and Allysa Topel, immediate family members of Ms.

These types of related party arrangements are required to be disclosed in our annual proxy statement and/or in the notes to our consolidated financial statements based on certain criteria.

We may engage in other transactions in the future involving our executive officers, directors and their family members and/or entities which they control or are affiliated, which could cause individuals in our management to seek to advance their economic interests or the economic interests of certain related parties above ours.

Although we have a written policy on related party transactions that involves independent review and oversight by the audit committee of our board of directors, there can be no assurances that conflicts of interest will not exist, or that we will be able to adequately address or mitigate any actual or perceived conflicts of interest, and stockholders, analysts, proxy advisory firms, the news media and other parties may view these transactions as representing conflicts of interest or as otherwise inappropriate, which may result in negative public perception and reputational harm, and could impair our ability to enter into new customer relationships or attract and retain employees.

Potential, perceived and actual conflicts of interest could cause investors to question the independence of our management, the adequacy and effectiveness of our disclosure controls and procedures or the integrity of our corporate governance procedures and compensation practices, which could have a material adverse effect on the trading price of our common stock and our business, financial condition and results of operations.

We do not intend to pay dividends for the foreseeable future.

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The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.*

Based upon shares outstanding as of September 30, 2021, our executive officers, directors and the known holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 26% of our common stock.

Based upon shares outstanding as of March 31, 2022, our executive officers, directors and the known holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 26% of our common stock.

As a result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.

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Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise

deem to be in their best interests.

Therefore, these provisions could adversely affect the price of our common stock.

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• provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

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• divide our board of directors into three classes;

• require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

• require that any action to be taken by our stockholders must be effected at a duly called annual or special meetings of stockholders and not be taken by written consent;

• provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;

• do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

• provide that special meetings of our stockholders may be called only by the chairman of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors;

• provide that special meetings of our stockholders may be called only by the chairperson of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors;

• provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

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These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.

A Delaware corporation may opt out of this provision by express

provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders.

A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders.

However, we have not opted out of this provision.

These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving our company.

These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving our company.

The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

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forum for the following types of actions or proceedings under Delaware statutory or common law:

(i) any derivative action or proceeding brought on our behalf;

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

What changed 10-Q

Item 1A. Risk Factors