What changed in this filing

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Item 1A. Risk Factors

2022-08-08 compared with 2022-05-09 · 155 added, 157 removed, 1075 unchanged (22% of the section changed)

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• 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 if these suppliers are unable or unwilling to continue providing these materials.

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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.

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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.

The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time.

time to time.

You should consider all of the factors described as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” when evaluating our business.

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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 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 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 (e.g., 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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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.

For the six months ended June 30, 2022, we had a net loss of $26.3 million.

As of June 30, 2022, we had an accumulated deficit of $120.0 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

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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.

Additionally, our performance could be affected by the impacts of the ongoing COVID-19 pandemic, the invasion of Ukraine by Russia, economic slowdowns, recessions or market corrections, inflation, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause.

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

We also expect that any acquisitions of businesses, assets, products or technologies will increase our expenses.

These increased expenses will make it harder for us to achieve future profitability.

We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in this Quarterly Report on Form 10‑Q, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities.

We may also incur significant losses in the future for a number of reasons, many

of which are beyond our control, including the other risks described in this Quarterly Report on Form 10‑Q, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities.

Our failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

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

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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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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 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;

• increase our sales and marketing efforts for the DecisionDx-Melanoma, DecisionDx-SCC, DiffDx-Melanoma, MyPath Melanoma, DecisionDx-UM, TissueCypher 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;

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• 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;

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• acquisitions of businesses, assets, products or technologies;

• the effects of the COVID-19 pandemic;

• the duration and effects of elevated inflation;

• the effects on our operations of general political and economic conditions, including the COVID-19 pandemic, the invasion of Ukraine by Russia, economic slowdowns, recessions or market corrections, the duration and effects of elevated inflation, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause;

• the effect of competing technological and market developments.

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If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or products, or grant licenses on terms that may not be favorable to us.

Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.

Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions, resulting from the pandemic, the conflict or another cause, may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our commercialization, research and development efforts or grant rights to third parties to market and/or develop products that we would otherwise prefer to market and develop ourselves.

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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.

While we also derive revenue from DecisionDx-UM, DecisionDx-SCC, our Diagnostic GEP offering (which consists of MyPath Melanoma and DiffDx-Melanoma), the TissueCypher Barrett’s Esophagus Assay 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.

Our ability to derive revenue from DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC, MyPath Melanoma, DiffDx-Melanoma, the TissueCypher Barrett’s Esophagus Assay, 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.

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

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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;

• 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, San Diego, California, 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;

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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 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.

Although state and local government restrictions put in place to slow the spread of the virus have been eased in most 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 diagnoses of the diseases covered by our diagnostic and prognostic tests 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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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.

The COVID-19 crisis continues to evolve.

The extent to which COVID-19 will further impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the crisis, resurgences of the virus, the emergence and spread of variants of the virus, vaccination rates, vaccination mandates, vaccination effectiveness, therapeutic treatments, the use of telemedicine, travel restrictions, stay-at-home or other similar orders and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus.

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

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

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

• risk of government audits related to billing;

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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.

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 billing system, there can be no assurances that any disruptions or deficiencies will not occur in the future.

Any significant disruption in our billing operations or the discovery of a 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 billing process or 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.

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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

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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.

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 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.

If we are unable to timely deliver test reports, physicians may be less likely to recommend and order our products.

If we are unable to timely deliver test reports, physicians may be less likely to

recommend and order our products.

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

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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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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.

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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.

In addition, all of our testing services are performed by our certified laboratories located in Phoenix, Arizona, San Diego, California and Pittsburgh, Pennsylvania, 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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If our testing volume decreases or we switch suppliers, we may hold excess supplies with expiration dates that occur before use which would adversely affect our losses and cash flow position.

As we introduce any new products, we may experience supply issues as we ramp test volume.

As we introduce any new products, we may experience supply issues as we ramp up test volume, or encounter additional disruptions to trade, commerce, pricing stability, credit availability and global supply chain continuity as a result of the invasion of Ukraine by Russia, particularly if we contract with suppliers with operations or commercial relationships in Eastern Europe or to the extent the conflict escalates to involve additional countries, further economic sanctions or wider military conflict.

If we should encounter delays or difficulties in securing, reconfiguring or revalidating the equipment, reagents or other materials we require for our products, our business, financial condition, results of operations and reputation could be adversely affected.

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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 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.

Our estimates of the total addressable markets for the DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-SCC, MyPath Melanoma, DiffDx-Melanoma, TissueCypher 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.

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.

In these situations, the third-party payor will typically notify us of their decision and then offset whatever amount they determine they overpaid against amounts they owe us on current claims.

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

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 (e.g., 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.

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 (“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.

In March 2020, OMHA issued a decision denying payment on all of these claims.

In accordance with ASC 606 and consistent with prior periods, we have not recognized (fully constrained the variable consideration) any revenues attributable to these claims in our consolidated financial statements pending the outcome of this matter.

We have appealed this decision, but there can be no assurances regarding the timing or the outcome of this or any other appeal decision.

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.

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The final expanded LCD also covers use of DecisionDx-Melanoma by physicians for assessment of appropriate treatment plans, regardless of the decision to undergo or avoid the SLNB surgery.

Similarly, Palmetto issued a final LCD for DecisionDx-UM effective July 10, 2017.

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.

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 included commentary about two publications regarding the clinical utility of GEP tests and included 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.

Palmetto issued a final LCD on May 19, 2022 with Noridian issuing the same on June 16, 2022.

The final LCDs did not result in any change in coverage.

Separately, Palmetto issued a final LCD for DecisionDx-UM effective July 10, 2017.

This LCD provides for coverage of DecisionDx-UM to determine metastatic risk in connection with the management of a patient’s newly diagnosed UM 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.

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

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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.

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

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.

In June 2022, Palmetto and Noridian each posted a draft LCD that would provide coverage criteria for DiffDx-Melanoma.

We believe the LCD for DiffDx-Melanoma will be finalized by the end of the second quarter of 2023.

However, 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.

Regarding DecisionDx-SCC, no draft LCD has been posted by Palmetto or Noridian to date.

In the second quarter of 2022, following the completion of a requested medical review and pricing of our DecisionDx-SCC test by Novitas, we have been receiving reimbursement from Novitas on DecisionDx-SCC at a rate of approximately $3,800 per test.

On June 9, 2022, Novitas posted a draft oncology biomarker LCD that proposes to rely upon evidentiary reviews sourced from three databases:

ClinGen, OncoKB and NCCN.

Two of the databases do not review gene expression profile tests and NCCN has not yet, to our knowledge, reviewed DecisionDx-SCC.

As such, if finalized as proposed, then DecisionDx-SCC would not be included as a covered test in the associated billing and coding article.

We cannot predict whether this draft LCD will be finalized as proposed or what the timing of any final LCD might be.

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

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If and when such changes to the regulatory framework occur, we could for the first time be subject to enforcement of regulatory requirements as a device manufacturer such as registration and listing requirements, medical device reporting requirements and the requirements of the FDA’s Quality System Regulation.

We may be required to conduct clinical trials prior to continuing to sell our existing products or launching any other products we may develop.

We may be required to conduct clinical trials prior to continuing to sell our existing

products or launching any other products we may develop.

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

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

• the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and similar state health 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

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distributed domestically are safe and effective for their intended uses.

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.

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

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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.

In April 2022, we acquired a laboratory in San Diego, California which is currently CLIA-certified and CAP accredited.

Additionally, our laboratory in Pittsburgh, Pennsylvania, which we acquired in December of 2021, is currently CLIA-certified and we are working through the application and inspection process toward CAP accreditation.

CAP maintains a clinical laboratory accreditation program.

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Moreover, CLIA inspectors may make random inspections of our laboratory from time to time.

Our most recent CAP inspection occurred in the fourth quarter of 2020 and our CLIA accreditation certificate expires on December 20, 2022.

Our most recent CAP inspection occurred in March 2022 for our Phoenix, Arizona laboratory.

Our CLIA accreditation certificate for our Pittsburgh, Pennsylvania laboratory expires on December 20, 2022, and the certificate for our San Diego, California laboratory expires in 2024.

In addition, certain states require our laboratory to be licensed in such states in order to test specimens from those states.

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

DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-SCC and DecisionDx DiffDx-Melanoma have each been formally approved.

DecisionDx-Melanoma, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-SCC, DiffDx-Melanoma and IDgenetix have each been formally approved.

In July 2022, we submitted TissueCypher for review by NYSDOH and expect a response in the first quarter of 2023.

Our laboratory director has been qualified by NYSDOH.

We are subject to periodic inspection by the NYSDOH and are required to demonstrate ongoing compliance with NYSDOH regulations and standards.

We are subject to periodic inspection by NYSDOH and are required to demonstrate ongoing compliance with NYSDOH regulations and standards.

To the extent NYSDOH identified any non-compliance and we are unable to remedy such non-compliance, the State of New York could withdraw approval for our products.

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Failure to comply with applicable clinical laboratory licensure requirements may result in a range of enforcement actions, including suspension, limitation or revocation of our CLIA accreditation and/or state licenses, imposition of a directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions and revocation of the laboratory’s approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity.

Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing clinical laboratory licensure or our failure to renew our CLIA accreditation, or a state or foreign license, could have a material adverse effect on our business, financial condition and results of operations.

and results of operations.

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

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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.

Such requirements may include 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.

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As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated.

Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, topline data should be viewed with caution until the final data are available.

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

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

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.

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.

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

• 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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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 (“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.

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.

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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

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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;

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;

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

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• 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.

• federal, state, local 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.

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The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform.

Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies, healthcare providers and other third parties, including charitable foundations, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Federal and state enforcement bodies have recently increased their scrutiny of interactions between

healthcare companies, healthcare providers and other third parties, including charitable foundations, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

It is possible that governmental authorities may conclude that our business practices, including our consulting arrangements with physicians, as well as our financial assistance programs, do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws.

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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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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.

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;

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

fines and penalties;

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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.

Our data processing activities may 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.

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, the California Rights Privacy Act of 2020 (“CPRA”), effective January 1, 2023, which will expand the CCPA, 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.

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”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

13,709/2018), and China’s Personal Information Protection Law (“PIPL”).

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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The more reliant our business is on the ability to effectuate cross-border data transfers, the more impact we may experience in light of any changes in the legal landscape.

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.

In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.

For example, we may also be subject to the Payment Card Industry Data Security Standard (“PCI DSS”).

The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.

Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.

We may also rely on vendors to process payment card data, and those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance

More generally, we may also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.

Additionally, we may publish privacy policies and other statements regarding data privacy and security, and, if these policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we could experience adverse consequences.

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.

These laws may be subject to varying interpretations, 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).

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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

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challenges made against our patents or patent applications.

We may not be successful in defending any such 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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The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and we may encounter difficulties in protecting and defending such rights in foreign jurisdictions.

The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to life science technologies, which could make it difficult for us to stop the infringement of our patents in such countries.

stop the infringement of our patents in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and 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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manufacturers.*

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

Intellectual property rights that have been in-licensed pursuant to a license agreement (the “License Agreement”) with The Washington University in St.

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

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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

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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.

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.

This preference for U.S.

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As a result, we may not be able to obtain or maintain protection for certain inventions.

No assurance can be given that other patent applications will not have priority over our patent applications.

No assurance can be

given that other patent applications will not have priority over our patent applications.

In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain.

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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.

Any failure of such systems or loss of licenses to the software that comprises an essential element of such systems could significantly harm our business.*

We depend on information technology systems for significant elements of our operations, such as our laboratory information management systems, including test validation, specimen tracking and quality control, our bioinformatics analytical software systems, our test report generating systems and billing systems.

We depend on information technology systems for significant elements of our operations, such as our Laboratory Information Management System, including test validation, specimen tracking and quality control, our bioinformatics analytical software systems, our test report generating systems and billing systems.

Essential elements of these systems depend on software that we license from third parties.

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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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In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and we may encounter difficulties in protecting and defending such rights in foreign jurisdictions.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Consequently, we may not be able to prevent third parties from practicing our inventions in all

countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own tests or products and may also export infringing tests or products to territories where we have patent protection, but enforcement is not as strong as in the United States.

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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

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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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While we may litigate to defend ourselves against these claims, even if we are successful, litigation could result in substantial costs and could be a distraction to management and other employees.

If our defenses to these claims fail, in addition to requiring us to pay monetary damages, a court could prohibit us from using technologies or features that are essential to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the current or former employers.

If our defenses to these claims fail, in addition to requiring us to pay monetary damages, a court could prohibit us from using technologies or features that are essential to our

products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the current or former employers.

Therefore, we could be required to obtain a license from such third-party employer to commercialize our products or technology.

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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, the DecisionDx DiffDx-Melanoma, DecisionDx-UM, DecisionDx-Melanoma, DecisionDx-SCC, myPath Melanoma, TissueCypher Barrett’s Esophagus and the IDgenetix tests 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 DiffDx-Melanoma, DecisionDx-UM, DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, TissueCypher and 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 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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We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules.

However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction, such as failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in

partial or complete loss of patent rights in the relevant jurisdiction, such as failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.

If we, or our licensors, fail to maintain the patents and patent applications covering our products and technologies, potential competitors may be able to enter the market without infringing our patents and this circumstance would have a material adverse effect on our business.

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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 and office spaces located in Phoenix, Arizona and Pittsburgh, Pennsylvania and our corporate headquarters in Friendswood, Texas.

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 and office spaces located in Phoenix, Arizona, Pittsburgh, Pennsylvania, San Diego, California and our corporate headquarters in Friendswood, Texas.

This competition has become exacerbated by the increase in employee resignations currently taking place throughout the United States as a result of the COVID-19 pandemic, which is commonly referred to as the “great resignation.” We may also experience employee turnover as a result of the ongoing “great resignation.” In response to competition, rising inflation rates and labor shortages, we may need to adjust employee cash compensation, which would affect our operating costs and our margins, or equity compensation, which would affect our outstanding share count and cause dilution to existing stockholders.

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

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

Recruiting and retention difficulties 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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We have adopted a code of conduct applicable to all of our employees, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.*

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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

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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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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.

For example, there can be no assurances regarding our ability to successfully scale and integrate the MyPath Melanoma, TissueCypher and 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.

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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 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.

We have experienced ownership 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.

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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.

Threat actors, personnel (such as through theft or misuse), hacktivist, 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.

In particular, 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.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

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.

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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.

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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.

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 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.

Some of these samples were used to develop and validate DecisionDx-Melanoma, and, of those, some are currently being used to improve upon 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.

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The marketing, sale and use of our products could lead to the filing of product liability claims were someone to allege that our products identified or reported inaccurate or incomplete information, or otherwise failed to perform as designed.

We may also be subject to liability for errors in, a misunderstanding of or inappropriate reliance upon, the information we provide in the ordinary course of our business activities.

We may also be subject to liability for errors

in, a misunderstanding of or inappropriate reliance upon, the information we provide in the ordinary course of our business activities.

If we cannot successfully defend ourselves against claims that our products caused injury or otherwise failed to function properly, we could incur substantial liabilities.

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

Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022.

In response to the invasion, the United States, United Kingdom and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.

The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain;

however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, and/or supply chain continuity, in both Europe and globally,

and has introduced significant uncertainty into global markets.

While we do not operate in Russia, Ukraine or Eastern Europe, as the adverse effects of this conflict continue to develop and potentially spread, both in Europe and throughout the rest of the world, our business and results of operations may be adversely affected, particularly to the extent this conflict escalates to involve additional countries, further economic sanctions or wider military conflict.

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

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We cannot assure you that we will satisfy our obligations as a public company on a timely basis.

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.

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.

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

We were previously afforded exemptions from certain public company reporting requirements as a result of our status as an emerging growth company.

Effective December 31, 2021, we ceased to be an emerging growth 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.

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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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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.

In 2021, the rate of inflation in the United States began to increase and has since risen to levels not experienced in over 40 years.

We are experiencing inflationary pressures, primarily in personnel costs, and we anticipate impacts on other cost areas within the next twelve months.

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 the extent to which the rate of inflation further increases, if at all, 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 diminished, 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.

As such, the effects of inflation may adversely impact our results of operations, financial condition and cash flows.

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

Although we maintain crisis management plans, our business operations are subject to interruption by natural disasters and other events and catastrophes beyond our control, including, but not limited to, earthquakes, floods, fires, tornadoes, hurricanes, power or other utility outages, telecommunications failures and public health crises.

Further, outbreaks of epidemic diseases, such as the COVID-19 pandemic discussed above, or the fear of such events, could provoke responses, including government-imposed travel restrictions that could impede the mobility and effectiveness of our sales force, disrupt our operations or those of our suppliers and service providers.

Further, outbreaks of epidemic diseases, such as the COVID-19 pandemic discussed above, or Russia’s invasion of Ukraine in February 2022, or the fear of such events, could provoke responses, including government-imposed travel restrictions that could impede the mobility and effectiveness of our sales force, disrupt our operations or those of our suppliers and service providers.

The ultimate impact of any of these or similar events is highly uncertain and could have a material adverse impact on our operations.

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• interest rates and the rate of inflation;

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

• the extent and duration of the impacts on our operations of general political and economic conditions, including the COVID-19 pandemic, the invasion of Ukraine by Russia, economic slowdowns, recessions or market corrections, the duration and effects of elevated inflation, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause;

• trading activity by a limited number of stockholders who together beneficially own a significant percentage of our outstanding common stock;

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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.

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.

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

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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.

In June 2022, we filed 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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research and development related to the continued support of our current products, as well as the development of our product pipeline;

and other general corporate purposes, including the additional costs associated with being a public company.

and other general corporate purposes, including acquisitions and the costs associated with being a public company.

The failure by our management to apply our working capital effectively could adversely affect our business and financial condition.

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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.

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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.*

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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.

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:

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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 are a smaller reporting company and we cannot be certain if the scaled disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.*

Effective as of June 30, 2022, we have requalified as a smaller reporting company as defined in the Exchange Act.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies beginning with this Quarterly Report on Form 10-Q and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

We cannot predict if investors will find our common stock less attractive because we will rely on these scaled disclosures.

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.

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 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.

Based upon shares outstanding as of June 30, 2022, our executive officers, directors and the known holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 27% 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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• 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;

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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.

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

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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