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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 254 added, 254 removed, 336 unchanged (60% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Castle Biosciences is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, BE, UM, and in the treatment of mental health conditions.

The following generally compares our results of operations for the years ended December 31, 2024 and 2023.

A detailed discussion comparing our results of operations for the years ended December 31, 2023 and 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024.

Castle Biosciences is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), uveal melanoma (“UM”), and in the treatment of mental health conditions.

Our Test Portfolio

We currently offer five commercially available proprietary MAAA tests for use in the dermatologic, gastroenterology and ocular fields.

We also offer a proprietary PGx test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions following our acquisition of AltheaDx in April 2022, as discussed below.

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma, which is supplemented by revenue generated from our DecisionDx-SCC risk stratification test for SCC, our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

All five of our MAAA tests have been granted ADLT test status by CMS which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies;

We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology.

We also offer a proprietary a pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

All five of our MAAA tests have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare and Medicaid (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies;

and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests.

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Test Overview

Our Dermatologic Tests

DecisionDx-Melanoma is our proprietary risk stratification GEP test that predicts the risk of metastasis or recurrence for patients diagnosed with invasive cutaneous melanoma.

In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive cutaneous melanoma in the United States, representing an estimated U.S.

TAM of approximately $540 million.

Our Dermatology Tests

DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test that predicts the risk of metastasis or recurrence, including a positive sentinel lymph node, for patients diagnosed with invasive CM.

In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States, representing an estimated U.S.

total addressable market (“TAM”) of approximately $540 million.

We estimate that approximately 50% of patients diagnosed with CM are 65 years of age or older.

DecisionDx‑SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC).

DecisionDx‑SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC) that both predicts the risk of metastasis as well as response to adjuvant radiation therapy.

We estimate 20% of SCC, or 200,000 annually in the United States, are classified as high risk, representing an estimated U.S.

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MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion.

We estimate approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S.

We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S.

TAM of approximately $600 million.

Initially, we offered both our MyPath Melanoma test and our DiffDx-Melanoma test under an offering that we referred to as our Diagnostic GEP offering.

We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory in May 2021 at which point we offered both our MyPath Melanoma test and our DiffDx-Melanoma test under an offering that we referred to as our Diagnostic GEP offering.

However, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023 and now the focus of this offering is MyPath Melanoma.

Our Gastroenterology Test

TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of HGD and/or esophageal cancer in patients with ND, IND or LGD BE.

TissueCypher is our proprietary risk stratification spatial-omics test designed to predict future development of progression of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE.

We estimate a U.S.

TAM of approximately $1 billion.

Our Uveal Melanoma Test

DecisionDx-UM is a proprietary, risk stratification GEP test that helps healthcare providers predict the risk of metastasis for patients with UM.

Our Ophthalmology Test

DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM.

We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States.

The Medicare eligible population represents close to 45% of the addressable market.

We estimate a U.S.

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IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions.

We estimate a U.S.

TAM of approximately $5 billion associated with this test.

We began offering the IDgenetix test following our acquisition of AltheaDx in April 2022.

Commercial Expansion Efforts

During the year ended December 31, 2022, we expanded our outside territories for our TissueCypher test to 16 sales territories.

In late April 2022, we acquired AltheaDx and established a dedicated IDgenetix commercial team covering approximately 20 outside territories.

In September 2022, we established a new commercial sales team

dedicated to our Diagnostic GEP offering and added additional outside territories for our TissueCypher test, which were fully integrated into our commercial operations by the end of the second quarter of 2023.

During the year ended December 31, 2023, we continued to expand our dermatologic and gastrointestinal commercial sales forces through territory and headcount expansions with focus being on our DecisionDx-Melanoma, DecisionDx-SCC, and TissueCypher tests.

During the year ended December 31, 2023, we expanded our dermatologic and gastrointestinal commercial sales forces through territory and headcount expansions with focus being on our dermatology and gastroenterology teams.

During the year ended December 31, 2024, we further expanded our dermatology and gastroenterology teams.

In late 2024, we changed our commercial strategy for our IDgenetix test, shifting resources to inside sales and non-personal promotion.

We will continue to assess market response in determining further commercial expansions and commercial team structure.

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We bill third-party payors and patients for the tests we perform.

We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, DecisionDx-UM, TissueCypher and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries, representing.

A ‘‘covered life’’ means a subscriber, or a dependent of a subscriber, who is insured under an insurance carrier’s policy.

We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries.

The Medicare rates discussed below are prior to giving effect to applicable sequestration in effect from time to time as described in further detail under "Government Regulation and Product Approval—Healthcare Reform" included in Item 1, Business, of this Annual Report on Form 10-K.

DecisionDx-Melanoma

DecisionDx-Melanoma tests are processed from our Phoenix laboratory and are covered under “foundational” LCDs finalized by MACs Palmetto and Noridian in the second quarter of 2022.

Previously, DecisionDx-Melanoma was covered under an expanded LCD form the same MACs from the fourth quarter of 2020 until the effective date of the current LCD.

DecisionDx-Melanoma tests are processed from our Phoenix laboratory and since the second quarter of 2022, have been covered under “foundational” local coverage determinations (“LCD” or “LCDs”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto and Noridian.

DecisionDx-Melanoma has met ADLT status, as determined by the CMS, since 2019.

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For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021.

Our rate for 2022 and 2023 was $7,193 per test and is $7,193 for 2024.

DecisionDx-UM

DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017.

DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019.

Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021.

Our rate for 2022 and 2023 was $7,776 per test and is $7,776 for 2024.

MyPath Melanoma and DiffDx-Melanoma

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019.

Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for both MyPath Melanoma and DiffDx-Melanoma.

MyPath Melanoma was approved as a “new ADLT” in September 2019.

Rates for our MyPath Melanoma test are set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Our rate for 2022 was $1,950 per test.

Our 2023 rate was set at $1,755 per test, based on data submitted by the predecessor owner of the Myriad MyPath Laboratory relating to the first half of 2021.

Our 2024 rate is set at $1,950 per test.

In the second quarter of 2022, we obtained a PLA code for DiffDx-Melanoma.

In 2023, DiffDx-Melanoma went through the CMS gapfill process which concluded in September 2023 with CMS posting a final MAC-specific gapfill rate of $1,950 per test.

Our rate for 2022, 2023 and 2024 was $7,193 per test.

Our rate for 2025 is $7,193 per test.

Diagnostic GEP Offering

Our Diagnostic GEP offering included MyPath Melanoma and DiffDx-Melanoma.

We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021.

Our internal data indicates that we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma.

As such, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023.

DecisionDx‑SCC

We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix labs, with a majority of tests being issued from our Pittsburgh lab.

Novitas is the MAC responsible for administering claims for test reports issued by our Pittsburgh laboratory.

We requested and received an evidentiary review of our DecisionDx-SCC by Novitas during the first quarter of 2022.

Based upon this review, DecisionDx-SCC test began receiving coverage in April 2022.

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

ClinGen, OncoKB and NCCN.

We believe the purpose of the proposals in this draft LCD were to streamline future reviews.

Two of the databases do not review GEP tests and NCCN did not, to our knowledge, review DecisionDx-SCC.

If finalized as proposed, then DecisionDx-SCC would not have been included as a covered test in the associated billing and coding article.

The comment period for the draft LCD ended on September 6, 2022.

On June 2, 2023, Novitas posted a finalized oncology biomarker LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023.

However, on July 6, 2023, Novitas suspended the final version of the LCD and announced its intent to post a new proposed LCD for comment and presentation at an open meeting.

On July 27, 2023, Novitas posted a nearly identical proposed oncology biomarker LCD that continues to intend to rely upon evidentiary reviews sourced from three databases:

ClinGen, OncoKB and NCCN.

The proposed LCD also recommends non-coverage for our DecisionDx-SCC test.

The comment period for the proposed LCD ended on September 9, 2023.

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

Palmetto MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering claims for test reports issued by our Phoenix laboratory.

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.

On June 8, 2023, both Palmetto and Noridian posted a preliminary draft LCD recommending no coverage for DecisionDx-SCC.

The comment period for the draft LCDs ended on July 22, 2023.

Decision-SCC was reimbursed at a rate of $3,873 per test under a PLA code from second quarter of 2022 through June 30, 2023 when CMS determined DecisionDx-SCC meet the criteria for “new ADLT” status.

Palmetto’s MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering claims for test reports issued by our Phoenix laboratory.

In the second quarter of 2022, following the completion of a requested medical review and pricing of our DecisionDx-SCC test by Novitas, we obtained a PLA code and began receiving reimbursement from Novitas for DecisionDx-SCC at a rate of $3,873 per test.

On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024.

On January 9, 2025, Novitas finalized an oncology biomarker LCD that will become effective on April 24, 2025.

If the LCD becomes effective as is, then we would anticipate not receiving Medicare reimbursement for DecisionDx-SCC tests performed on or after April 24, 2025.

DecisionDx-SCC was reimbursed at a rate of $3,873 per test under a Proprietary Laboratory Analyses (“PLA”) code from second quarter of 2022 through June 30, 2023 when CMS determined DecisionDx-SCC meets the criteria for “new ADLT” status.

ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage.

Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test.

Effective April 1, 2024 and through December 31, 2025, the published CLFS rate for DecisionDx-SCC will be based on the median private payor rates received between July 1, 2023 and November 30, 2023.

Effective April 1, 2024 and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will be based on the median private payor rates received between July 1, 2023 and November 30, 2023.

We submitted the median private payor data to CMS during the data reporting period in December 2023.

Effective April 1, 2024, the updated CLFS rate will continue at $8,500 through December 31, 2025.

Future rates will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage.

TissueCypher is processed in our Pittsburgh, Pennsylvania laboratory and falls under the Medicare jurisdiction managed by Novitas.

From January 1, 2022 through March 31, 2022, we received payments for claims according to the published CLFS rate at $2,513 per test.

Most of our TissueCypher tests are processed in our Pittsburgh laboratory under the Medicare jurisdiction managed by Novitas.

On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status.

ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients.

From April 1, 2022 through December 31, 2022, CMS set the initial period rate equal to the original list price of $2,350 per test.

Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test, which will remain effective through December 31, 2024.

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Thereafter, the rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Our 2025 rate will continue to be $4,950 per test based on the median private payor rate data from January 1, 2023 to June 30, 2023.

MyPath Melanoma and DiffDx-Melanoma

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019.

MyPath Melanoma was approved as a “new ADLT” in September 2019.

The rate for our MyPath Melanoma test is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022.

Our rates for 2022, 2023, and 2024 were $1,950 per test, $1,755 per test, and $1,950 per test, respectively.

Our rate for 2025 is $1,950 per test.

In the second quarter of 2022, we obtained a PLA code for DiffDx-Melanoma.

In 2023, DiffDx-Melanoma went through the CMS gapfill process which concluded in September 2023 with CMS posting a final MAC-specific gapfill rate of $1,950 per test.

Our rate for 2024 was $1,950 per test and will continue to be $1,950 per test in 2025.

Diagnostic GEP Offering

Our Diagnostic GEP offering included MyPath Melanoma and DiffDx-Melanoma.

We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021.

Our internal data indicates that we have improved the technical performance of MyPath Melanoma and that it is comparable to the technical performance of DiffDx-Melanoma.

As such, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023.

DecisionDx-UM

DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017.

DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019.

Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022.

Our rate for 2022, 2023 and 2024 was $7,776 per test.

Our 2025 rate is $7,776 per test.

IDgenetix is currently covered under a Noridian LCD policy and accompanying billing and coding article developed by MolDX.

Our IDgenetix multi-gene panel was reimbursed by Medicare at approximately $1,500 per test from the April 2022 acquisition date through February 2023, when MolDX notified us that as part of its annual CPT code updates, IDgenetix should shift billing to the New CPT Code and continue using the IDgenetix Z-Code beginning in March 2023.

Our IDgenetix multi-gene panel was reimbursed by Medicare at approximately $1,500 per test from April 2022 through February 2023, when MolDX notified us that as part of its annual Current Procedural Terminology (“CPT”) code updates, IDgenetix should shift billing to a different generic gene sequencing CPT code (the “New CPT Code”) and continue using the IDgenetix Z-Code beginning in March 2023.

The New CPT Code was set at $917 per test while the test went through CMS’s Gapfill pricing process.

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In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024.

Our reimbursement rate for 2024 was $1,336 per test, and our rate will continue to be $1,336 per test in 2025.

Government Regulation and Oversight of Laboratory Developed Tests

On May 6, 2024, the U.S.

Food and Drug Administration (“FDA”) published a final rule on the regulation of LDTs which amends the FDA's regulations to make explicit that LDT's are devices under the FD&C Act.

The FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs.

The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by NYSDOH.

Our proprietary tests, outlined above, are all NYSDOH approved.

We believe this final ruling will have no material impact on our existing test offerings given all of our tests were marketed before May 6, 2024.

Delivered Test Reports

The number of test reports we generate is a key indicator that we use to assess our business.

A test report is generated when we receive a sample in our laboratory, and then the relevant test information is entered into our Laboratory Information Management System, the laboratory portion of the test is performed, including proprietary algorithmic analysis of the combined biomarkers and a report is then generated which is sent to the clinician who ordered the test.

The number of test reports we deliver is a key indicator that we use to assess our business.

The number of test reports delivered by us during the years ended December 31, 2024 and 2023 are presented in the table below:

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For the year ended December 31, 2023 33,330 11,442 3,962 48,734 1,674 9,100 10,921 70,429

(1) Includes MyPath Melanoma and DiffDx-Melanoma.

We offered both MyPath Melanoma and DiffDx-Melanoma under our Diagnostic GEP offering until February 2023 when we suspended the offering of DiffDx-Melanoma, as discussed above.

(2) We began offering the IDgenetix test on April 26, 2022, following our acquisition of AltheaDx.

Includes both single-gene and multi-gene tests.

(1) Our GEP offering included our MyPath Melanoma and DiffDx-Melanoma until we suspended our DiffDx-Melanoma in February 2023.

We continue to offer our MyPath Melanoma test.

(2) We temporarily paused accepting additional orders in July 2023 and resumed accepting new orders in a phased approach in September 2023.

We completed processing of our pre-existing backlog orders in October 2023 and continue to accept new orders as of December 31, 2023.

(3) We began offering the IDgenetix test in April 2022, following our acquisition of AltheaDx.

For the years ended December 31, 2024 and 2023, our dermatologic test report volume increased by 15.5% and 30.5%, respectively, largely driven by continued growth from our DecisionDx-Melanoma and DecisionDx-SCC tests.

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For a discussion of how we recognize revenue derived from our tests, refer to “Net Revenues” under “Components of Results of Operations” below.

In developing our DecisionDx-SCC test, we believed that in addition to addressing significant unmet clinical needs, we would see opportunities for leverage, as many of the clinicians currently ordering DecisionDx-Melanoma would likely be the same clinicians who would find value in our DecisionDx-SCC test.

For example, we found that for the year ended December 31, 2023, approximately 78% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

In August 2024, we amended our Pittsburgh commercial real estate lease to add 23,821 square feet to our existing facilities, most of which will be used as dedicated lab space for processing our TissueCypher test.

As of December 31, 2024, substantially all leasehold improvements for this added space were complete and the added

lab space was ready for use.

We expect the additional space will allow us to continue developing our business through our TissueCypher product line.

For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test.

For both years ended December 31, 2024 and 2023, approximately 78% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Information About Certain Metrics

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Test Reports Delivered

Test reports delivered represents the number of completed test reports delivered by us during the reporting period indicated.

Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated.

The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (‘‘ASC’’) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives.

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Impact of Macroeconomic Conditions

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continued to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition.

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition.

We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows.

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Our Financial Results

Our net loss may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606.

Our net income (loss) may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606.

We expect our expenses will increase substantially over time as we:

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• add additional operational, financial and management information systems and personnel;

• make additional capital expenditures to support business growth and sustain existing operations.

Factors Affecting Our Performance

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Our revenue and costs are affected by the volume of testing and mix of customers.

Our performance depends on our ability to retain and broaden adoption with existing prescribing clinicians, as well as attract new clinicians.

Our performance depends on our ability to retain and broaden

adoption with existing prescribing clinicians, as well as attract new clinicians.

Our report volume could be negatively impacted by developments related to evolving macroeconomic developments, as discussed above.

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• Integrating acquisitions.

Revenue growth, operational results and advances to our business strategy depends on our ability to integrate any acquisitions into our existing business and effectively scale their operations.

Revenue growth, operational results and advances to our business strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations.

The integration of acquired assets may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.

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For tests with limited reimbursement experience or no coverage, we recognize revenues on the basis of actual cash collections.

Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed.

Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, maintain Medicare coverage for our currently marketed products , develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed.

Cost of Sales (exclusive of amortization of acquired intangible assets)

The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities.

Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test.

associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test.

As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred.

We expect cost of sales in absolute dollars to increase as the number of tests we perform

Additionally, we expect cost of sales to increase with the expansion of laboratory capacity and staffing in advance of the anticipated growth of our more recently launched tests and tests acquired through acquisitions.

For example, we commenced operations in a new expanded laboratory facility in Pittsburgh, Pennsylvania in the second quarter of 2023.

We expect cost of sales in absolute dollars to increase as the number of tests we perform increases.

Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth.

For example, prior to opening our new Pittsburgh facilities during the second quarter of 2023, we incurred additional rent expense as we readied the space for future use.

Gross margin and gross margin percentage are key indicators we use to assess our business.

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We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.

We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including important studies that are underway to support our DecisionDx-Melanoma test.

For instance, in February 2023, we announced the publication of data from the DECIDE study presenting DecisionDx-Melanoma test results influenced 85% of clinicians’ decisions regarding the SLNB surgical procedure.

Additionally, use of the tests’ results within current guideline recommendations led to a significant reduction in SLNB procedures performed, demonstrating the clinical value of the test to guide risk-aligned patient care.

Also, in 2021, we initiated our large prospective, multi-center clinical study to develop, validate and bring to market a pipeline genomic test, or tests, aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, atopic dermatitis and related inflammatory skin conditions.

As of December 31, 2023, there were more than 45 active clinical study sites and over 1,000 patients enrolled in this study.

Assuming we are successful in validating a genomic tests, or tests, for one or more of these uses, then we expect to launch this pipeline test by the end of 2025.

We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our ongoing and future clinical studies and pipeline initiatives.

Selling, General and Administrative

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Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of Cernostics in December 2021 and AltheaDx in April 2022.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration is associated with our acquisitions of Cernostics and AltheaDx and the related contingent consideration of up to $50.0 million and $75.0 million, respectively, payable based on the achievement of certain commercial milestones relating to the year ended December 31, 2022 in the case of Cernostics, and the years ending December 31, 2022, 2023 and 2024, in the case of AltheaDx (the “Earnout Payments”).

No Earnout Payments were paid relating to the year ended December 31, 2022 in connection with our acquisitions of Cernostics and AltheaDx since the applicable commercial milestones were not achieved.

As of December 31, 2023 and December 31, 2022, our contingent consideration liability for AltheaDx was zero.

Interest and Other Non-Operating Income

Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and marketable investment securities, primarily short-term U.S.

government obligations.

Interest Income

Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and our short-term U.S.

government obligations are a component of our marketable investment securities.

Change in Fair Value of Trading Securities

Change in fair value of trading securities is primarily attributable to unrealized gains and losses on our equity securities which we present as marketable investment securities.

Interest Expense

Interest expense is primarily attributable to finance leases.

Income Tax Expense (Benefit)

In connection with our acquisition of AltheaDx in April 2022, and taking into consideration the additional deferred tax liabilities resulting from such acquisition, we determined that a portion of our valuation allowance should be reduced, which was reflected in our income tax benefit for the year ended December 31, 2022.

Interest expense is primarily attributable to long term debt and finance leases.

Income Tax Expense

Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business.

We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and research and development credits and other tax credits.

Our consolidated financial statements do not reflect any federal or state income tax benefits attributable to the pre-tax losses we have incurred, due to the uncertainty of realizing a benefit from those items.

As of December 31, 2024, we had federal NOL carryforwards of $129.4 million, of which $52.9 million will begin to expire in 2031 if not utilized to offset federal taxable income, and $76.5 million may be carried forward indefinitely.

Also, as of December 31, 2023, we had state NOL carryforwards of $114.3 million, which begin to expire in 2028 if not utilized to offset state taxable income.

Also, as of December 31, 2024, we also had state NOL carryforwards of $86.5 million, which begin to expire in 2028 if not utilized to offset state taxable income.

Results of Operations

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Amortization of acquired intangible assets 11,106 9,013 2,093 23.2 %

Change in fair value of contingent consideration — (18,287) 18,287 100.0 %

Total operating expenses, net 323,399 287,765 35,634 12.4 %

Operating loss (67,977) (72,855) 4,878 6.7 %

Interest and other non-operating income 10,623 3,968 6,655 167.7 %

Operating income (loss) 8,670 (67,977) 76,647 112.8 %

Interest income 12,916 10,623 2,293 21.6 %

Changes in fair value of trading securities 555 — 555 NA

Interest expense (577) (11) (566) NM

Loss before income taxes (57,365) (68,904) 11,539 16.7 %

Income tax expense (benefit) 101 (1,766) 1,867 105.7 %

Net loss $ (57,466) $ (67,138) $ 9,672 14.4 %

Income (loss) before income taxes 21,564 (57,365) 78,929 137.6 %

Income tax expense 3,319 101 3,218 NM

Net income (loss) $ 18,245 $ (57,466) $ 75,711 131.7 %

(1) NA = Not applicable

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Total net revenues $ 332,069 $ 219,788 $ 112,281

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma).

(2) Consists of TissueCypher, DecisionDx-UM and IDgenetix.

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Net revenues for the year ended December 31, 2024 increased by $112.3 million, or 51.1%, to $332.1 million compared to the year ended December 31, 2023 due to a $73.6 million increase in revenue from our dermatologic tests and a $38.7 million increase in revenue from our non-dermatologic tests.

The increase from our dermatologic tests was primarily due to higher average selling price per unit for DecisionDx-SCC tests, where we began receiving Medicare reimbursement at a higher rate beginning in July 2023, increases in test report volume of 19.9%, for DecisionDx-Melanoma and 91.8%, for DecisionDx-SCC.

The increase in net revenue from our non-dermatologic tests of $24.1 million was primarily attributable to TissueCypher, due to a higher average selling price and higher test report volume, reflecting a higher 2023 reimbursement rate than our 2022 rates.

Our IDgenetix test, which we acquired in connection with our acquisition of AltheaDx in April 2022, also contributed to the increase in non-dermatologic revenues during the period.

The $73.6 million increase in net revenues for our dermatologic tests was primarily attributable to our DecisionDx-SCC test, which was due to higher test report volumes and a higher realized average selling price (“ASP”), as well as our DecisionDx-Melanoma test which had higher test report volumes and a slightly higher realized ASP.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, test report volumes for our DecisionDx-SCC and DecisionDx-Melanoma tests increased by 42.9% and 8.0%, respectively.

Increases in realized ASP for our DecisionDx-SCC test were primarily attributable to receiving Medicare reimbursement at a higher rate beginning in July 2023.

The $38.7 million increase in net revenues from our non-dermatologic tests was largely attributable to a 130.3% increase in test report volumes for our TissueCypher test, and, to a lesser extent, to our IDgenetix test which also had higher test report volumes.

Increases in our TissueCypher test report volumes reflect growth through our sales force efforts.

Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 16.6% for the year ended December 31, 2023 to 22.6% for the year ended December 31, 2024.

The increases in total net revenues were partially offset by the effect of variations in revenue adjustments related to tests delivered in previous periods, associated with changes in estimated variable consideration, which were $4.5 million of net negative revenue adjustments for the year ended December 31, 2023 compared to $2.0 million of net negative revenue adjustments for the year ended December 31, 2022.

These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Cost of Sales (exclusive of amortization of acquired intangible assets)

Cost of sales (exclusive of amortization of acquired intangible assets) for the year ended December 31, 2023 increased by $13.0 million, or 40.5%, compared to the year ended December 31, 2022, primarily due to increased expenditures on supplies, higher personnel costs, third-party services and rent.

Supply and service expenses have increased due to higher laboratory activity, which is attributable to higher test report volumes.

The increase in personnel costs primarily consist of higher salaries and wages, stock-based compensation expense and benefits expense, reflecting headcount additions made to support business growth as well as merit and annual inflationary wage adjustment for existing employees.

Increases in headcount, in addition to higher lab service expense and rent expense, have largely been attributable to commencement operations at our new Pittsburgh laboratory, which opened in the second quarter of 2023.

Cost of sales (exclusive of amortization of acquired intangible assets) for the year ended December 31, 2024 increased by $15.2 million, or 33.8%, compared to the year ended December 31, 2023, primarily due to higher personnel costs and higher expense for supplies and depreciation.

Increases in personnel costs reflect higher headcount to support business growth in response to growing test report volumes, commencement operations at our new Pittsburgh laboratory in the second quarter of 2023, as well as merit and annual inflationary wage adjustment for existing employees.

Higher expense for supplies and lab services also reflects higher test report volumes.

Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations.

Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period.

We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected growth in volume for our dermatologic, gastrointestinal, mental health and pipeline tests.

Our gross margin percentage was 75.4% for the year ended December 31, 2023, compared to 70.6% for the same period in 2022.

The increase was primarily due to higher net revenues, partially offset by higher supplies expenditures and higher laboratory personnel costs, higher laboratory overhead, to include lab service fees and rent, and variations in revenue adjustments related to tests delivered in previous periods.

We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support expected operational growth and higher test volumes.

Our gross margin percentage was 78.5% for the year ended December 31, 2024, compared to 75.4% the same period in 2023.

The increase was primarily due to higher revenues, partially offset by higher personnel costs, higher expense for supplies and depreciation and higher expense incurred through our expanded laboratory capacity and higher test report volumes.

Research and Development

Research and development expenses increased by $8.7 million, or 19.4%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily consisting of higher personnel costs and higher clinical studies expense partially offset by lower expense from advisory boards and consulting services.

Higher personnel costs are primarily a result of higher salaries and wages, stock-based compensation expense, bonuses and benefits expense.

Increases in salaries and wages, stock-based compensation expense, bonuses and benefit expenses were due to headcount expansions as well as merit and annual inflationary wage adjustment for existing employees.

Higher research and development expense is attributable to higher costs for clinical studies, most of which was attributable to our other inflammatory skin disease pipeline studies.

Advisory board and consulting costs decreased due to fewer conference and speaker events being held in 2023 than in 2022.

We expect research and development expense to increase as we continue to invest in ongoing pipeline initiatives as well as seek opportunities to branch out upstream, downstream and parallel to our existing commercial tests, within or adjacent to our established dermatology commercial call points.

Research and development expenses decreased by $1.6 million, or 2.9%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily reflecting lower clinical studies costs, lower organizational development costs, and lower expense for laboratory supplies, partially offset by higher personnel costs.

We expect to continue incurring research and development expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist.

Selling, General and Administrative

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Total selling, general and administrative expense $ 200,047 $ 180,152 $ 19,895

Sales and marketing expenses increased by $27.1 million, or 31.2%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to higher personnel costs, consisting of salaries, stock-based compensation, bonuses and employee benefits.

The remainder of the increase in sales and marketing expenses was primarily associated with training events, conference fees, travel and other marketing costs incurred through our ongoing sales and marketing operations.

In 2023, we continued to focus on the expansion and development of both our dermatology-facing and non-dermatology-facing commercial outside sales forces, and ancillary teams, as we seek to expand awareness of our test portfolio for patients new clinicians.

Salaries and stock-based compensation for our sales and marketing teams have increased through headcount expansions as well as through merit and annual inflationary wage adjustment for existing employees.

Bonuses have increased through expanded headcount and through individual and company performance.

Higher expense for travel, training events and conference fees were primarily attributable to our sales and marketing operations.

Sales and marketing expenses increased by $9.8 million, or 8.6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase is primarily due to higher personnel costs, higher sales related travel expense, and higher incurred organizational and business development activities.

Increases in personnel costs reflect a higher headcount as well as merit and annual inflationary wage adjustment for existing employees.

The higher test report volumes are a result of our continued investments in human capital for our sales organization.

Stock based compensation expense included in sales and marketing expense was $17.3 million for the year ended December 31, 2024, compared to $18.3 million for the year ended December 31, 2023.

We intend to continue developing and expanding our sales and marketing operations and expect increases in related expenditures to follow.

General and administrative expenses increased by $10.1 million, or 15.2%, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

The increase is primarily attributable to higher personnel costs and higher information technology and software-related costs.

Increases in personnel costs reflect higher stock-based compensation and salaries.

Personnel costs have increased through headcount expansions in our administrative support functions and through merit and annual inflationary wage adjustment for existing employees.

Increases in personnel costs and information technology and software-related costs were partially offset by a decrease in professional service fees, most of which related to costs incurred through our acquisition of AltheaDx during 2022.

The increase is primarily due to higher personnel costs, professional fees and information technology-related cost expenses.

Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees.

Stock-based compensation expense included in general and administrative expense was $17.8 million for the year ended December 31, 2024, compared to $17.9 million for the year ended December 31, 2023.

The remainder of the increase in general and administrative expenses was primarily associated with general increases across various categories.

We intend to continue developing our information technology, and other administrative supporting functions, and expect increases in related expenditures to follow.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets increased by $0.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.

The increase is primarily associated with amortization of developed technology attributable to the acquisition of AltheaDx in April 2022.

Amortization of acquired intangible assets is projected to be approximately $9.0 million for the year ending December 31, 2024.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration for the year ended December 31, 2022 of $18.3 million, a net gain, was primarily related to the remeasurement of the Earnout Payments associated with our acquisition of Cernostics.

There was no such activity for the year ended December 31, 2023.

Interest and Other Non-Operating Income

Interest income increased by $6.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily as a result of higher interest rates and our purchases of marketable investment securities beginning in the third quarter of 2022.

Income Tax Expense (Benefit)

We recorded a minimal amount in income tax expense for the year ended December 31, 2023.

Our income tax benefit was $1.8 million for the year ended December 31, 2022, and was primarily attributable to a reduction of $1.6 million in our valuation allowance on net deferred tax assets resulting from our acquisition of AltheaDx in April 2022.

Specifically, we took into consideration the additional deferred tax liabilities resulting from the acquisition and determined that a portion of our existing valuation allowance should be reduced.

Amortization expense increased by approximately $2.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, due primarily to our revision of the estimated useful life of our IDgenetix developed technology intangible assets in December 2024, where we determined the estimated remaining useful life was 13 months, with the useful life now expected to end on December 31, 2025.

We expect amortization expense will increase by approximately $24.3 million for the year ended December 31, 2025 due to this change in estimate.

Interest Income

Interest income increased by $2.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily as a result of higher balances held in marketable investment securities.

Changes in Fair Value of Trading Securities

The change in fair value of trading securities increased by $0.6 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, and was entirely associated with our investments in equity securities in October 2024 where we had no such investments during the comparative period.

Interest Expense

Interest expense increased by $0.6 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to interest incurred on our long-term debt where we had no debt outstanding during the comparative period.

Income Tax Expense

Income tax expense increased by $3.2 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily as a result of state income taxes and the realization of pre-tax income during the year ended December 31, 2024 and a net operating loss in the year ended December 31, 2023.

Stock-Based Compensation Expense

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $51.2 million for the year ended December 31, 2023 compared to $36.3 million for the year ended December 31, 2022.

The increase is primarily due to our annual grant of equity awards in December 2022, as well as new hire and merit based awards during 2023, partially offset by the impact of an annual grant of equity awards not being issued in December 2023.

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $50.3 million for the year ended December 31, 2024 compared to $51.2 million for the

year ended December 31, 2023.

We expect material increases in stock-based compensation expense in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees.

We expect to complete an annual grant of equity awards to our employees in March 2024.

As of December 31, 2023, we had 610 employees compared to 543 as of December 31, 2022.

As of December 31, 2023, the total unrecognized stock-based compensation cost related to outstanding awards was $85.5 million, which is expected to be recognized over a weighted-average period of 2.3 years.

We had 761 employees as of December 31, 2024, compared to 610 as of December 31, 2023.

As of December 31, 2024, total unrecognized stock-based compensation cost related to outstanding awards was $71.1 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities and cash generated from the sale of our products.

Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities, and cash generated from the sale of our products and our line-of-credit under the 2024 LSA.

All of our marketable investment securities are considered investment grade, are readily available for use in current operations and have contractual maturities of one year or less.

As of December 31, 2023 and December 31, 2022, we had marketable investment securities of $144.3 million and $135.7 million, respectively.

As of December 31, 2023 and 2022, we had cash and cash equivalents of $98.8 million and $122.9 million, respectively.

Since becoming a public company, our liquidity has been primarily derived from the revenue generated from the sale of our products, proceeds from our July 2019 IPO, follow-on public offerings of common stock in June 2020 and December 2020.

As of December 31, 2024 and 2023, we had marketable investment securities of $173.4 million and $144.3 million, respectively, and cash and cash equivalents of $119.7 million and $98.8 million, respectively.

Additionally, as of December 31, 2024, we had a $25.0 million credit line available under the 2024 LSA.

Our liquidity has been primarily derived from the revenue generated from the sale of our products, and proceeds from our IPO in July 2019 and our follow-on public offerings of common stock in June and December of 2020.

We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months.

However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected.

Concurrently with the filing of this Annual Report Form 10-K, we are filing a shelf registration statement on Form S-3 pursuant to which we will be allowed to issue up to $300.0 million of common stock, preferred stock, debt securities and warrants from time-to-time in one or more offerings.

As mentioned above, we expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including the clinical studies noted above in “—Components of the Results of Operations—Research and Development.”

Public Offerings of Common Stock

On June 29, 2020 and July 2, 2020, we issued and sold 2,000,000 and 300,000 shares of our common stock, respectively, of our common stock in a follow-on public offering at a price of $37.00 per share.

We received $79.5 million in aggregate net proceeds, after deducting underwriting discounts and commissions and offering costs.

On December 18, 2020, we issued and sold 4,600,000 shares of our common stock in a follow-on public offering at a price of $58.00 per share.

We received $250.5 million in aggregate net proceeds, after deducting underwriting discounts and commissions and offering costs.

As mentioned above, we expect to use a portion of these proceeds, as well as the approximately $65.9 million of net proceeds from our IPO in July 2019, to further support and accelerate our research and development activities, including the clinical studies noted above.

Material Cash Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical research and development services, laboratory operations, equipment and related supplies, legal and other regulatory expenses, general administrative costs and, from time to time, expansion of our laboratory and office facilities in support of our growth.

We anticipate that a substantial portion of our cash requirements in the foreseeable future will relate to the further commercialization of our currently marketed products, the development of our future product candidates in our pipeline and the potential commercialization of these pipeline products, should their development be successful.

In April 2022, we acquired AltheaDx, for $30.5 million in cash and $17.1 million in shares of our common stock.

We agreed to pay contingent consideration of up $75.0 million, 50% in cash and 50% in common stock, based on the achievement of certain commercial milestones relating to the years ending December 31, 2022, 2023 and 2024.

The portions associated with the commercial milestones for the years ended December 31, 2023 and 2022 were $37.5 million and $35.0 million, respectively, and were not paid since the applicable commercial milestones were not met.

The 2022 portion was exclusive of a catch-up payment in 2023 of $17.5 million if all 2023 commercial milestones had been fully met.

Therefore, a potential payment obligation of up to $20.0 million with respect to the remaining commercial 2024 milestone remains as of December 31, 2023.

In each case, the number of shares of our common stock that may be issued in connection with the commercial milestone payments is subject to limitations.

Our actual liability with respect to these commercial milestone payments from our acquisition will depend, in part, on our ability to successfully grow IDgenetix (acquired from AltheaDx) revenue and timing thereof.

See Note 6 of the consolidated financial statements for additional information on the acquisition of AltheaDx.

On July 10, 2023, following approval by our board of directors, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building which may be used as our future corporate headquarters.

Under the agreement, we had the option to terminate the contract within 90 days, for any reason.

On October 4, 2023, we amended the definitive agreement to extend the option period by an additional 30 days.

On January 9, 2024, we amended the definitive agreement to finalize easement right and related matters.

On February 9, 2024, we closed on the purchase of the land for cash consideration of $7.2 million.

Since our inception, we have generally incurred significant losses and negative operating cash flows.

For the year ended December 31, 2023 we had a net loss of $57.5 million and an accumulated deficit of $218.4 million as of December 31, 2023.

Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful commercialization of our currently marketed products and the products we plan to launch in the future as well as our spending on research and development activities.

We expect to incur additional expenses and losses in the future as we invest in the commercialization of our existing products and the development and commercialization of our current pipeline products and future product candidates.

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

We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from the sale of our commercial products will be sufficient to fund our operations for at least the next 12 months.

In July 2023, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building where our future corporate headquarters will be located.

In February 2024, we closed on the purchase of the land for cash consideration of $7.2 million.

The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space.

Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use.

Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis.

As of December 31, 2024, the development project is expected to cost a total of approximately $42.3 million.

During the year ended December 31, 2024, we made $9.3 million in capital expenditures for this development project.

We intend to use the proceeds from the 2024 Term Loan (as defined below), the 2024 Credit Line (as defined below) and our existing cash and cash equivalents to pay for this project.

Since our inception, we have generally incurred significant losses and negative operating cash flows, and we have relied heavily on proceeds from our financing activities to fund capital expenditures, business expansion campaigns, and to offset operating deficits.

For the year ended December 31, 2024, we recognized net income of $18.2 million and had positive operating cash flow of $64.9 million, though we may be unable to sustain profitability and positive cash flows in future periods.

Collections on Medicare claims for our DecisionDx-SCC test represented a significant portion of our 2024 operating cash flows.

We will lose Medicare coverage for our DecisionDx-SCC test in April 2025 and decreases in revenues and cash inflows from this test are expected to follow.

Our ability to maintain profitability will heavily depend on us maintaining Medicare coverage for our currently marketed products, on the successful commercialization of the products we plan to launch in the future, and our ability to manage operating expenses.

We expect to incur additional expenses in the future as we invest in the commercialization of our existing products and the development and commercialization of our current pipeline products and future product candidates.

believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from the sale of our commercial products will be sufficient to fund our operations for at least the next 12 months.

We believe we will meet longer-term expected cash requirements and obligations through a combination of existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products and issuances of equity securities or debt offerings.

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Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate our exact working capital requirements.

Our future funding requirements will depend on and could increase significantly as a result of, many factors, including those listed above as well as those listed in Part 1, Item 1A., “Risk Factors” in this Annual Report on Form 10-K.

Our future funding requirements will depend on and could increase significantly as a result of, many factors, including those listed above as well as those listed in Part I, Item 1A., “Risk Factors” in this Annual Report on Form 10-K and in our other filings with the SEC.

In the event additional funding is required, we expect that we would use a combination of equity and debt financings, which may not be available to us when needed, on terms that we deem to be favorable or at all.

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If we are unable to raise additional funds through debt or equity financing or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product discovery and development activities or future commercialization efforts.

Long-Term Debt

We had no debt as of December 31, 2023.

Our long-term debt as of December 31, 2024 is presented in the table below (in thousands):

As of December 31, 2024

Term debt $ 10,200

Unamortized discount (177)

Current portion of long-term debt (278)

Total long-term debt $ 9,745

2024 Loan and Security Agreement

On March 26, 2024 (the ‘‘Closing Date’’), we entered into the 2024 LSA, by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’).

The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the ‘‘2024 Term Loan’’ section below), and (ii) from the Closing Date until March 31, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in ‘‘2024 Credit Line’’ below) at our option.

The obligations under the 2024 LSA are secured by substantially all of our assets, excluding intellectual property, the real property held by the Company, and are subject to certain other exceptions and limitations.

We have the right to prepay the 2024 LSA in whole, subject to a prepayment fee of approximately 1.50% if paid prior to March 26, 2026.

Amounts repaid under the 2024 LSA may not be reborrowed.

In addition, the 2024 LSA contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock.

Should an event of default occur, including the occurrence of a

material adverse change, we could be liable for immediate repayment of all obligations under the 2024 LSA.

Should we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required.

As of December 31, 2024, we were in compliance with these covenants.

The 2024 LSA bears interest at a floating rate equal to the greater of (a) the WSJ Prime Rate plus 0.25% or (b) 6.00% per annum.

The Term Loans are interest only from the Closing Date through November 30, 2025, which may be extended at our option through November 30, 2026 as long as no event of default under the 2024 LSA has occurred.

After the end of the interest only period, we are required to pay equal monthly installments of principal through the maturity date of November 1, 2028.

We are also obligated to make an additional final payment of 2.00% of the aggregate original principal amounts of Term Loans advanced by the Lender, due at the earlier of the maturity date or date the Term Loans are repaid in full.

2024 Term Loan

On the Closing Date, we drew $10.0 million in Term Loans under the terms and provisions of the 2024 LSA.

We are obligated to make a final payment of $0.2 million under the terms of the 2024 LSA final payment provisions.

A discount on debt equal to this obligation was recorded on the draw date and is being amortized as additional interest expense using the effective interest method over the term of the debt.

As of December 31, 2024, the effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19%.

2024 Credit Line

We have a $25.0 million line of credit under the terms and provisions of the 2024 LSA available from the Closing Date until March 31, 2025.

Amounts repaid under the 2024 Credit Line may not be reborrowed.

As of December 31, 2024, no draws had been made on the 2024 Credit Line.

We have entered into various operating and finance leases, which are primarily associated with our laboratory facilities and office space.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of December 31, 2023 totaled approximately $24.4 million, of which $2.4 million is payable in 2024 and $22.0 million is payable through the end of 2033.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of December 31, 2024 totaled approximately $23.3 million, of which $3.1 million is payable in 2025 and $20.2 million is payable through early 2034.

The leases expire on various dates through 2034 and provide certain options to renew for additional periods.

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Years Ended December 31,

Net cash used in operating activities $ (5,626) $ (41,655)

Net cash provided by (used in) operating activities $ 64,866 $ (5,626)

Net cash used in investing activities (50,137) (16,183)

Net cash (used in) provided by financing activities (2,298) 1,515

Net cash provided by (used in) financing activities 6,139 (2,298)

Net change in cash and cash equivalents 20,868 (24,107)

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Operating Activities

Net cash provided by operating activities was $64.9 million for the year ended December 31, 2024, and was primarily attributable to the net income of $18.2 million, non-cash stock-based compensation expense of $50.3 million, depreciation and amortization of $16.0 million, increases in accrued compensation of $3.6 million, increases in deferred income taxes of $1.4 million, partially offset by increases in accounts receivable of $12.6 million, increases in accretion of discounts on marketable investment securities of $6.7 million, increases in accounts payable of $4.4 million and increases in prepaid expenses and other current assets of $1.1 million.

Net cash used in operating activities was $5.6 million for the year ended December 31, 2023, and was primarily attributable to the net loss of $57.5 million, increases in accounts receivable of $14.9 million, increases in accretion of discounts on marketable investment securities of $5.5 million and increases in inventory of $4.0 million, partially offset by non-cash stock-based compensation expense of $51.2 million, depreciation and amortization of $12.3 million, increases in accounts payable of $5.7 million, increases in accrued compensation of $4.6 million and increases in other accrued and current liabilities of $2.1 million.

Net cash used in operating activities was $41.7 million for the year ended December 31, 2022, and was primarily attributable to the net loss of $67.1 million, the change in fair value of contingent consideration of $18.3 million, increases in accounts receivable of $6.2 million, deferred income taxes of $1.9 million, increases in inventory of $1.7 million and increases in accretion of discounts on marketable investment securities of $1.4 million, partially offset by stock compensation expense of $36.3 million, depreciation and amortization of $10.5 million and increases in accrued compensation of $8.5 million.

The $36.0 million decrease in net cash used in operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 is primarily due to increases in collections from customers attributable to higher net revenues partially offset by increases in operating expenditures.

The $70.5 million increase in net cash provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 is primarily due to increases in collections from customers attributable to higher net revenues partially offset by increases in operating expenditures.

In part, the cash used during the year ended December 31, 2024 reflects the payment of annual cash bonuses to our employees as well as certain health care benefit payments totaling $20.8 million.

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Net cash used in investing activities was $50.1 million for the year ended December 31, 2024 and consisted primarily of purchases of marketable investment securities of $205.7 million, and purchases of property and equipment of $28.3 million, partially offset by the maturity of marketable investment securities of $183.9 million.

Net cash used in investing activities was $166.5 million for the year ended December 31, 2022 and consisted primarily of purchases of marketable investment securities of $134.7 million, the cash portion of the AltheaDx purchase consideration of $27.0 million (net of cash and cash equivalents acquired) and purchases of property and equipment of $5.6 million.

The $8.0 million increase in cash used for the purchase of property and equipment for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the build out and completion of our new laboratory and office facilities located in Pittsburgh, Pennsylvania.

Fixed asset purchases for this build out included those made for laboratory equipment, leasehold improvements, furniture and fixtures, and information technology infrastructure.

Net cash used in investing activities was $16.2 million for the year ended December 31, 2023 and consisted primarily of purchases of marketable investment securities of $189.1 million and purchases of property and equipment of $13.6 million, partially offset by the maturity of marketable investment securities of $186.5 million.

The $34.0 million increase in cash used in investing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to purchasing $16.7 million more in marketable investment securities and collecting $2.6 million fewer proceeds from maturing marketable investment securities.

We also increased our purchases of property and equipment by $14.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to our purchase of land for cash consideration of $7.2 million on February 9, 2024 and $6.8 million in cash payments relating to the development of our future corporate headquarters.

Financing Activities

Net cash used in financing activities was $2.3 million for the year ended December 31, 2023, and consisted primarily of payment of employees’ taxes on vested RSUs of $5.1 million, partially offset by $2.7 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”).

Net cash provided by financing activities was $1.5 million for the year ended December 31, 2022, and consisted primarily of $2.5 million of proceeds from contributions to the ESPP and $0.8 million of proceeds from exercise of common stock options, partially offset by payment of employees’ taxes on vested RSUs of $1.7 million.

In 2021, the rate of inflation in the United States increased, began subsiding in the second half of 2022 and has remained stable in 2023.

We do not believe that inflation has had a material impact on our financial results during the year ended December 31, 2023.

We are unable to predict if the rate of inflation will increase in future periods.

Net cash provided by financing activities was $6.1 million for the year ended December 31, 2024, and consisted primarily of $10.0 million of proceeds from issuance of long-term debt and $3.0 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”) and $2.0 million of proceeds from the exercise of stock options, partially offset by the $8.8 million payment of employee taxes attributable to the vesting of RSUs.

In 2021, the rate of inflation in the United States significantly increased until the second half of 2022 when the rate began to subside.

In 2023 and 2024, the inflation rate continued to subside but remained higher than rates experience between 2025 and 2020.

We continue to experience inflationary pressures, primarily in increased personnel costs and price increases for certain lab supplies.

We anticipate possible inflationary impacts on other cost areas in the future.

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 were to further increase, 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 and marketable investment securities may be further 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 have had, and may continue, to adversely impact our results of operations, financial condition and cash flows.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect

the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements.

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

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In accordance with ASC 606, we follow a five-step process to recognize revenues:

(1) identify the contract with the customer, (2) identify the performance obligations, (3)

determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied.

(1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied.

We have determined that we have a contract with the patient when the treating clinician orders the test.

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The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration.

All of our revenues from contracts with customers are associated with the provision of diagnostic and prognostic testing services.

Our revenues are primarily attributable to DecisionDx-Melanoma for cutaneous melanoma.

We also provide a test for UM, DecisionDx-UM.

We launched a test for patients with cutaneous SCC, DecisionDx-SCC in August 2020 and launched a test for use in patients with suspicious pigmented lesions, DiffDx-Melanoma in November 2020.

We began offering a test for difficult-to-diagnose melanocytic lesions, MyPath Melanoma, following an asset acquisition completed in May 2021.

We also provide a test for UM, DecisionDx-UM.

We began offering the TissueCypher test for patients with BE following an asset acquisition completed in December 2021.

We began offering a proprietary PGx test service focused on mental health IDgenetix, following a business combination completed in April 2022.

All of our revenues from contracts with customers are associated with the provision of diagnostic, prognostic and predictive testing services.

Our revenues are primarily attributable to DecisionDx-Melanoma for CM and our DecisionDx-SCC test for SCC.

We also provide a test for patients diagnosed with BE, the TissueCypher test, a test for patients with suspicious pigmented lesions, MyPath Melanoma and DiffDx-Melanoma, and a test for UM, DecisionDx-UM.

We also began offering a PGx testing service focused on mental health, IDgenetix, following a business combination completed in April 2022.

Once we satisfy our performance obligations and bill for the service, the timing of the collection of payments may vary based on the payment practices of the third-party payor and the existence of contractually established reimbursement rates.

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

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

Variable consideration 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 for which there are no existing positive coverage decisions, including those claims subject to approval by an ALJ at an appeal hearing, is deemed to be fully constrained due to factors outside our influence (i.e., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time.

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Included in revenues for the years ended December 31, 2024 and 2023 were $1.8 million of net negative revenue adjustments and $4.5 million of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.

These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the

related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Stock-Based Compensation

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The fair value of our common stock is also an assumption used to determine the fair value of stock options.

Prior to our IPO, the estimated fair value of our common stock had been determined by our board of directors as of the date of each award, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant, which intended all options granted to be exercisable at price per share not less than the per share fair value of our common stock underlying those options on the grant date.

were relevant and which may have changed from the date of the most recent valuation through the date of the grant, which intended all options granted to be exercisable at price per share not less than the per share fair value of our common stock underlying those options on the grant date.

Subsequent to our IPO, the fair value of our common stock is the closing selling price per share of our common stock as reported on the Nasdaq Global Market on the date of grant or other relevant determination date.

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Years Ended December 31,

2024 2023 2022

Average expected term (years) 5.0 5.0 5.8

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75.57% - 76.01%

68.3% - 75.0%

Risk-free interest rate 4.39% - 4.39%

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Years Ended December 31,

2024 2023 2022

Average expected term (years) 1.2 1.3 1.3

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72.80% - 130.95%

63.0% - 91.8%

Risk-free interest rate 3.82% - 5.14%

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If the revised useful lives are shorter than originally estimated, our future amortization expense will increase.

Our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that it may be impaired.

In late 2024, we revised our commercial strategy for the IDgenetix test, reallocating resources to inside sales and non-personal promotions.

In December 2024, we observed month-to-month decreases in IDgenetix test reports, which persisted through year-end.

We continue to offer the IDgenetix test and monitor its performance;

nevertheless, we anticipate that test report volumes and net revenues will decrease in 2025.

Long-term projections about the performance of this test remain uncertain.

We believe these factors indicated a need to revise the remaining useful life of our IDgenetix developed technology intangible asset.

On December 1, 2024, we adjusted the estimated remaining useful life from approximately 12 years to 13 months, with the useful life now expected to end on December 31, 2025.

Our goodwill is not amortized but is tested for impairment annually and whenever events or changes in circumstances indicate that it may be impaired.

We perform annual impairment reviews of our goodwill balance during the fourth quarter of each year, or more frequently if management believes indicators of impairment exist.

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We have concluded that our business is comprised of a single reporting unit.

For our annual impairment test for the year ended December 31, 2023, we elected to bypass the qualitative assessment and proceeded directly to the quantitative assessment by comparing our reporting unit’s fair value to its carrying value.

Since we have a single reporting unit, fair value of the reporting unit was measured at our total market capitalization on the impairment test date based on the closing price of our common stock.

For our annual impairment test for the year ended December 31, 2024, we elected to bypass the qualitative assessment and proceeded directly to the quantitative assessment by comparing our reporting unit’s fair value to its

carrying value.

Factors that could result in an impairment of goodwill in the future include declines in the price of our common stock, increased competition, changes in macroeconomic developments and unfavorable government or regulatory developments.

On June 2, 2023, a MAC finalized an LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023.

On June 5, 2023, our stock price decreased significantly and did not recover before June 30, 2023.

In response to this trigger, we tested goodwill for impairment at June 30, 2023.

We elected to bypass the optional qualitative assessment and proceeded directly to the quantitative assessment.

In conducting our interim test, we concluded that our business consists of a single reporting unit.

To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium.

We conducted annual impairment testing of goodwill in the fourth quarter which indicated that the fair value of our reporting unit exceeded its carrying value by 117% and therefore no impairment was indicated.

To measure the fair value of our single reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium.

The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us.

Our impairment test indicated that the fair value of

our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated.

In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective.

On October 1, 2023, we performed our annual impairment test which indicated that the fair value of our reporting unit exceeded its carrying value by 34% and therefore no impairment was indicated.

We continued to monitor for additional indicators of impairment through December 31, 2023 and did not observe any factors that could result in an impairment of goodwill.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

The guidance was effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption was permitted.

The guidance was applied retrospectively to all periods presented in the financial statements, unless it was impracticable.

We have adopted the guidance under this ASU 2023-07 on a retrospective basis with an effective date January 1, 2022.

Please refer to Note 17 - Segment and Related Information, to our Consolidated Financial Statements for details.

In December 2023, the FASB issued ASU No.

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Early adoption is permitted.

We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures.

We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU No.

The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40)—Expense Disaggregation Disclosures:

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which specifies additional disclosure requirements.

The amendments in ASU 2024-03 require disclosure about the composition of certain income expense line items, such as purchases of inventory, employee compensation, and other expenses, as well as disclosure about selling expenses.

The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable.

We are currently evaluating the impact this update will have on our consolidated financial statements and disclosures.

We are currently evaluating the impact this update will have on the consolidated financial statements and disclosures.

W e have evaluated all other recently issued, but not yet effective, accounting pronouncements and do not believe that these accounting pronouncements will have any material impact on our consolidated financial statements or disclosures upon adoption.

Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information required by this Item.

Financial Statements and Supplementary Data.

The financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1 .

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis