What changed in this filing

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Item 9A. Controls and Procedures

2025-02-28 compared with 2024-02-28 · 468 added, 444 removed, 1039 unchanged (47% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Fulgent Genetics, Inc.

To the shareholders and the Board of Directors of Fulgent Genetics, Inc.

Opinion on Internal Control over Financial Reporting

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and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects,

effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 28, 2025, expressed an unqualified opinion on those financial statements.

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Rule 10b5-1 trading arrangements

During the three months ended December 31, 2023, none of our directors or officers adopted or terminated “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

During the year ended December 31, 2024, none of our directors or officers adopted or terminated “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 annual meeting of stockholders or an amendment to this report, in either case to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2024.

Principal Accou nting Fees and Services.

Principal Accou ntant Fees and Services.

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Agreement and Plan of Merger, dated September 16, 2016, by and among the registrant, Fulgent MergerSub, LLC and Fulgent Therapeutics LLC.

Certificate of Incorporation of the registrant, dated May 13, 2016.

Certificate of Incorporation of the registrant, as amended .

Certificate of Amendment to Certificate of Incorporation of the registrant, dated August 2, 2016.

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and Fuzhou Jinqiang Investment Partnership (LP).

Equity Distribution Agreement, dated August 30, 2019, by and between Fulgent Genetics, Inc.

and Piper Jaffray & Co.

Purchase Agreement, dated as of November 13, 2019, by and between Fulgent Genetics, Inc.

and Piper Jaffray & Co.

Amendment No.

1 to Equity Distribution Agreement, dated August 4, 2020, by and between Fulgent Genetics, Inc.

and Piper Sandler & Co.

Equity Distribution Agreement, dated as of September 24, 2020, by and between Fulgent Genetics, Inc.

and Piper Sandler & Co.

Equity Distribution Agreement, dated as of November 20, 2020, by and between Fulgent Genetics, Inc.

and Piper Sandler & Co., BTIG, LLC, and Oppenheimer & Co.

Fulgent Genetics, Inc.

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Amended and Restated 2016 Omnibus Incentive Plan .

Agreement for Purchase and Sale of Property, dated July 23, 2020

Aircraft Purchase Agreement, dated August 18, 2020, by and between ServiceMaster Acceptance Corporation and the Company

Agreement for Purchase and Sale of Property, dated July 23, 2020, by and between the registrant and 4401 Santa Anita Corporation .

Employment Agreement, dated March 8, 2021, by and among Fulgent Therapeutics, LLC, Fulgent Genetics, Inc.

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Restructuring Agreement of Fujian Fujun Gene Biotech Co., Ltd.

Amended and Restated Commercial Lease Agreement, dated May 6, 2016, by and between Store Master Funding IX, LLC and Cytometry Specialists, Inc.

Fulgent Genetics, Inc.

Incentive Compensation Recoupment Policy.

Agreement and Plan of Merger by and among Fulgent Therapeutics LLC, solely for purpose of Section 6.20, Fulgent Genetics, Inc., Ducks Acquisition Sub, Inc., Symphony Buyer, Inc., solely in its capacity as the representative of Symphony’s securityholders, Avista Capital Partners IV GP, L.P.

and solely for purposes of Section 6.21, Article VIII and Section 10.14, those company stockholders set forth on the signature page thereto, dated as of April 16, 2022.

Amended and Restated Non-Employee Director Compensation Policy, dated as of August 1, 2022.

Agreement and Plan of Merger, dated as of April 16, 2022, by and among Fulgent Therapeutics LLC, solely for purpose of Section 6.20, Fulgent Genetics, Inc., Ducks Acquisition Sub, Inc., Symphony Buyer, Inc., solely in its capacity as the representative of Symphony’s securityholders, Avista Capital Partners IV GP, L.P.

and solely for purposes of Section 6.21, Article VIII and Section 10.14, those company stockholders set forth on the signature page thereto .

Amended and Restated Director Compensation Program of the registrant, dated as of August 1, 2022.

Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under the Fulgent Pharma Holdings, Inc.

2022 Omnibus Incentive Plan.

Agreement and Plan of Merger, by and among Fulgent Genetics, FG Merger Sub, Inc., Fulgent Pharma Holdings, Inc.

and solely for purposes of Section 2.4, Section 5.5, Article VI, Section 7.8 and Section 7.14, those company stockholders set forth on the signature page thereto, dated November 7, 2022

Incorporated by

Reference Exhibit

Rule 10b5-1 Issuer Repurchase Plan, by and between Fulgent Genetics, Inc.

and Piper Sandler & Co., dated December 12, 2023

Commercial Lease Agreement, dated October 20, 2008, by and between Inform Diagnostics, Inc.

and iSTAR CTL I, L.P.

Commercial Lease Amendment (I), dated December 30, 2013, by and between Inform Diagnostics, Inc.

and LC Med Property TT, LLC

Commercial Lease Amendment (II), dated February 3, 2014, by and between Inform Diagnostics, Inc.

and LC Med Property TT, LLC

Commercial Lease Agreement by and between Inform Diagnostics and Crawford Street DE, LLC

Agreement and Plan of Merger, dated November 7, 2022 by and among Fulgent Genetics, FG Merger Sub, Inc., Fulgent Pharma Holdings, Inc.

and solely for purposes of Section 2.4, Section 5.5, Article VI, Section 7.8 and Section 7.14, those company stockholders set forth on the signature page thereto .

Rule 10b5-1 Issuer Repurchase Plan, dated December 12, 2023, by and between Fulgent Genetics, Inc.

and Piper Sandler & Co.

Second Amendment to Lease Agreement, July 1, 2020 by and between Inform Diagnostics, Inc., p/k/a/ Miraca Life Sciences, Inc.

and WPT Land 2 LP.

Lease Agreement of Premises at 15-19 Crawford Street Needham, Massachusetts, by and between Inform Diagnostics and Crawford Street DE, LLC.

Fulgent Pharma Holdings, Inc.

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10.37*^#

Amended and Restated Non-Employee Director Compensation Policy, dated as of February 23, 2023.

Executive Officer Incentive Plan

Amended and Restated Director Compensation Program of the registrant .

Executive Officer Incentive Plan of the registrant .

Amended and Restated 2016 Omnibus Incentive Plan of the registrant .

Amended and Restated Executive Officer Incentive Plan

Amended and Restated Executive Officer Incentive Plan of the registrant .

Insider Trading Policy .

Subsidiaries of the registrant.

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Power of Attorney (included on the signature page hereto).

Incorporated by

Reference Exhibit

Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Amended and Restated Incentive Compensation Recoupment Policy

Amended and Restated Incentive Compensation Recoupment Policy of the registrant .

Inline XBRL Instance Document – the instance document does not appear in

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Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (embedded within the Inline XBRL

Cover Page Interactive Data File (embedded within the Inline XBRL document).

* This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.

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

Goodwill—Laboratory Services and Therapeutic Development Reporting Units—Refer to Notes 2 and 17 to the financial statements

Goodwill – Therapeutic Development Reporting Unit – Refer to Notes 2 and 17 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company used the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenues and EBITDA (defined as earnings before interest, income taxes, depreciation and amortization) margin, as well as timing of commercial success for the Therapeutic Development Reporting Unit.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value.

The Company used the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates, forecasts of future revenues and EBITDA (defined as earnings before interest, income taxes, depreciation and amortization) margin, as well as probability and timing of commercial success.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The goodwill balance was $142.3 million as of December 31, 2023, of which $120.2 million was allocated to the Laboratory Services Reporting Unit and $22.1 million was allocated to the Therapeutic Development Reporting Unit.

The carrying value of the Laboratory Services Reporting Unit exceeded its fair value as of the measurement date, resulting in a full impairment of goodwill as of December 31, 2023.

The goodwill balance was $22.1 million as of December 31, 2024.

The fair value of the Therapeutic Development Reporting Unit exceeded its carrying value by 268% as of the measurement date and, therefore, no impairment was recognized as of December 31, 2024.

We identified goodwill as a critical audit matter because of the significant judgments made by management to estimate the fair value of each reporting unit and the difference between its fair value and carrying value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having fair value expertise when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and EBITDA margin for the Laboratory Services Reporting Unit and assumptions related to selection of the discount rate and forecasts of future revenue and timing of commercial success for the Therapeutic Development Reporting Unit.

We identified goodwill as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rate and forecasts used by management to estimate the fair value of the Laboratory Services and Therapeutic Development Reporting Unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Laboratory Services and Therapeutic Development Reporting Unit, such as controls related to management’s selection of the discount rate and forecasts of future revenue, EBITDA margin, and the timing of commercial success.

• We evaluated management’s ability to accurately forecast future revenues, EBITDA margin, and timing of commercial success by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s revenue, EBITDA margin, and the timing of commercial success forecasts by comparing the forecasts to:

o Historical revenues, EBITDA margin, and previous assumptions related to timing of commercial success.

Our audit procedures related to the discount rate and forecasts used by management to estimate the fair value of the Therapeutic Development Reporting Unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the reporting unit, such as controls related to management’s selection of the discount rate, forecasts of future revenue and EBITDA margin, and the probability and timing of commercial success.

• We evaluated management’s ability to accurately forecast timing of commercial success by comparing actual milestones achieved to milestone assumptions in management’s historical forecast.

• We evaluated the reasonableness of management’s forecasts of future revenue and EBITDA margin, including the probability and timing of commercial success by comparing the forecasts with:

o Internal communications to management and the Board of Directors.

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Management estimates the fair value of IPR&D annually on its elected assessment date of December 31, 2024, using a multi-period excess earnings method, which is a specific discounted cash flow method.

The determination of the fair value requires management to make significant estimates and assumptions related to forecasts of future revenues, timing of commercial success and discount rates to estimate the net present value of revenues.

The determination of the fair value requires management to make significant estimates and assumptions related to discount rates, forecasts of future revenues and EBITDA margin, as well as probability and timing of commercial success.

Changes in these assumptions could have a significant impact on the fair value of IPR&D and a significant change in fair value could cause a significant impairment.

The fair value of the IPR&D exceeded its carrying value by 11% as of the measurement date and therefore, no impairment was recognized.

Given the determination of fair value of IPR&D requires management to make significant estimates and assumptions relating to the forecasts of future revenues, timing of commercial success, and the selection of the discount rates, performing audit procedures to evaluate the reasonableness of such estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals in our firm having fair value expertise.

The fair value of the IPR&D exceeded its carrying value by 214% as of the measurement date and therefore, no impairment was recognized as of December 31, 2024.

We identified the IPR&D as a critical audit matter because of the significant judgments made by management to estimate its fair value.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenues, timing of commercial success, and selection of the discount rates for IPR&D included the following, among others:

• We tested the effectiveness of controls over management’s intangible asset impairment evaluation, including those over the determination of the IPR&D, such as controls related to management’s forecasts of future revenues, timing of commercial success, and selection of the discount rates.

• We evaluated the reasonableness of management’s forecasts of future revenues and timing of commercial success by:

o Comparing management’s forecasts with:

Our audit procedures related to the discount rate and forecasts used by management to estimate the fair value of IPR&D included the following, among others:

• We tested the effectiveness of controls over management’s intangible asset impairment evaluation, including those over the determination of the IPR&D, such as controls related to management’s selection of the discount rate, forecasts of future revenue, EBITDA margin, and the probability and timing of commercial success.

• We evaluated management’s ability to accurately forecast timing of commercial success by comparing actual milestones achieved to milestone assumptions in management’s historical forecast.

• We evaluated the reasonableness of management’s forecasts of future revenue and EBITDA margin, including the probability and timing of commercial success by comparing the forecasts with:

o Internal communications to management and the Board of Directors.

o Forecasted information included in Company press releases as well as in industry reports and external studies.

o Relevant regulatory approvals.

• With the assistance of professionals in our firm having fair value expertise, we evaluated the reasonableness of the discount rates by:

o Relevant regulatory approvals supporting timing of commercial success.

• With the assistance of professionals in our firm having fair value expertise, we evaluated the reasonableness of the (1) valuation methodology and (2) of the discount rates by:

o Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

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February 28, 2025

We have served as the Company’s auditor since 2016.

CONSOLIDATED FINANCIAL STATEMENTS

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(in thousands, except par value data)

December 31, 2024

December 31, 2023

Current assets

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Marketable securities, long-term

Redeemable preferred stock investment

Fixed assets, net

Intangible assets, net

Goodwill, net

Fixed assets, net

Redeemable preferred stock investment

Other long-term assets

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Accrued liabilities

Contract liabilities

Customer deposit

Investment margin loan

Contract liabilities

Notes payable, current portion

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Total current liabilities

Unrecognized tax benefits

Deferred tax liabilities

Unrecognized tax benefits

Other long-term liabilities

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Retained earnings

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Operating (loss) income

Interest and other income, net

(Loss) income before income taxes and gain on equity-method investments

Provision for income taxes

(Loss) income before gain on equity-method investments

Gain on equity-method investments

Other income (expenses):

Interest income

Interest expense

Impairment of available-for-sale debt securities

Other income, net

Total other income, net

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income from consolidated operations

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Net (loss) income from consolidated operations

Other comprehensive income (loss):

Foreign currency translation (loss) gain

Net gain (loss) on available-for-sale debt securities, net of tax

Comprehensive (loss) income from consolidated operations

Other comprehensive (loss) income

Foreign currency translation loss

Net (loss) income on available-for-sale debt securities, net of tax

Net comprehensive (loss) income from consolidated operations

Net loss attributable to noncontrolling interest

Foreign currency translation (gain) loss attributable to noncontrolling interest

Foreign currency translation loss (gain) attributable to noncontrolling interest

Comprehensive loss attributable to noncontrolling interest

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Other Comprehensive

Income (Loss)

Retained Earnings (Accumulated

(Loss) Income

Retained Earnings

Fulgent Stockholders’ Equity

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Restricted stock awards

Issuance of common stock at an average of $ 64.83 per share, net

Common stock withholding for employee tax obligations

Cumulative effect of accounting change

Cumulative tax effect of accounting change

Noncontrolling interest assumed related to acquisitions

Other comprehensive income (loss), net

Repurchase of common stock

Common stock issued in a business combination (1)

Other comprehensive loss, net

Net income (loss)

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Common stock issued in a business combination (1)

Other comprehensive loss, net

Net income (loss)

Other comprehensive income, net

Balance at December 31, 2023

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Common stock issued in a business combination (1)

Other comprehensive income, net

Other comprehensive loss, net

Balance at December 31, 2024

(1) 185,503 and 371,006 shares of the Company's common stock were not issued and heldback by the Company as partial security for the indemnification obligations in connection with the business combination of Fulgent Pharma a s of December 31, 2023, and 2022, respectively.

(1) As of December 31, 2022, 371,000 shares of the Company’s common stock were not issued and heldback by the Company as partial security for the indemnification obligations in connection with the business combination of Fulgent Pharma Holdings, Inc., or Fulgent Pharma, in 2022 .

186,000 shares were issued in November 2023, and the remainder were issued in May 2024 by the Company upon expiration of hold back provisions.

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

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Net (loss) income from consolidated operations

Adjustments to reconcile net income to net cash provided by operating activities:

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

Goodwill impairment loss

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Depreciation and amortization

Provision (gain) for credit losses

(Adjustment) provision for credit losses

Noncash lease expense

Loss on disposal of fixed asset

Amortization (Discount) of premium of marketable securities

Amortization of (discount) premium of marketable securities

Deferred taxes

Unrecognized tax benefits

Net loss on marketable securities

Gain in equity-method investments

Net realized loss on marketable securities

Impairment of available-for-sale debt securities

Changes in operating assets and liabilities:

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Accounts payable

Contract liabilities

Customer deposits

Accrued liabilities and other liabilities

Income tax payable

Operating and finance lease liabilities

Operating lease liabilities

Net cash provided by operating activities

Cash flow from investing activities

Purchases of fixed assets

Purchases of intangible assets

Proceeds from sale of fixed assets

Purchase of marketable securities

Purchases of fixed assets

Purchase of preferred stock of privately held company

Contingent consideration payout related to a business acquisition

Purchase of redeemable preferred stock

Maturities of marketable securities

Proceeds from sale of marketable securities

Proceeds from sale of fixed assets

Acquisition of businesses, net of cash acquired

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flow from financing activities

Repurchase of common stock

Common stock withholding for employee tax obligations

Proceeds from public offerings of common stock, net of issuance costs

Proceeds from noncontrolling interest

Proceeds from exercise of stock options

Principal paid for finance leases

Repayment of notes payable

Re-payment for the margin account

Net cash (used in) provided by financing activities

Principal paid for finance lease

Repurchase of common stock

Repayment of investment margin loan

Proceeds from exercise of stock options

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Supplemental disclosures of cash flow information

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash

Income taxes paid

Cash paid for interest

Interest Paid

Supplemental disclosures of non-cash investing and financing activities

Stock consideration in a business combination

Maturities of marketable securities in other current assets

Maturities of marketable securities in ither current assets

Purchases of fixed assets in notes payable

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Finance lease right-of-use assets obtained in exchange for lease liabilities

Operating lease right-of-use assets reduced due to lease modification or termination

Operating lease right-of-use assets obtained in exchange for lease liabilities

Finance lease right-of-use assets reduced due to lease modification or termination

Contingent consideration for business acquisition included in current liabilities

Public offerings costs included in accounts payable

Operating lease right-of-use assets reduced due to lease modification and termination

Operating lease liabilities removed due to purchasing underlying assets

Finance lease right-of-use assets reduced due to lease modification and termination

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

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Overview and Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S.

These financial statements include the assets, liabilities, revenues and expenses of all subsidiaries and entities in which the Company has a controlling financial interest or is deemed to be the primary beneficiary.

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Fulgent Genetics, Inc., together with its subsidiaries and affiliated professional corporations, or PCs (collectively referred to as the Company, unless otherwise noted or the context otherwise requires), is a technology-based company with a well-established laboratory services business and a therapeutic development business.

Its laboratory services business – to which the Company formerly referred as its clinical diagnostic business, includes technical laboratory services and professional interpretation of laboratory results by licensed physicians.

Its laboratory services business includes technical laboratory and testing services and professional interpretation of laboratory results by licensed physicians.

Its therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and pharmacokinetic profile of new and existing cancer drugs.

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Cash equivalents are stated at fair value.

Restricted Cash

Restricted cash consists of legally restricted deposits held in conjunction with a lease contract the Company entered into with a third-party landlord.

A bank guarantee equivalent to six months of gross rent plus tax with an expiry date three months post the lease expiry is required under the lease contract, and the lease contract will expire in March 2034.

Restricted deposit is recorded in other long-term assets in the Company’s Consolidated Balance Sheets as the balance is not expected to be released to cash within the next

As of December 31, 2024, the Company had restricted cash of $ 0.1 million .

The Company did no t have restricted cash as of December 31, 2023 .

Marketable Securities

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dollars have been classified as “available-for-sale,” and are carried at fair value.

Net unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of

stockholders’ equity until realized.

Realized gains and losses on marketable debt securities are included in interest and other income, net, in the accompanying Consolidated Statements of Operations.

Net unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity until realized.

Realized gains and losses on marketable debt securities are included in interest income, in the accompanying Consolidated Statements of Operations.

The cost of any marketable debt securities sold is based on the specific-identification method.

The amortized cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Interest on marketable debt securities is included in interest and other income, net.

Interest on marketable debt securities is included in interest income.

In accordance with the Company’s investment policy, management invests to diversify credit risk and only invests in securities with high credit quality, including U.S.

government securities.

The Company’s investments in marketable equity securities are measured at fair value with the related gains and losses, realized and unrealized, recognized in interest and other income, net, in the accompanying Consolidated Statements of Operations.

The Company’s investments in marketable equity securities are measured at fair value with the related gains and losses, realized and unrealized, recognized in interest income, in the accompanying Consolidated Statements of Operations.

The cost of any marketable equity securities sold is based on the specific-identification method.

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Changes in the allowance are recorded in the period of changes as credit loss expense.

If the Company has an intent to sell, or if it is more likely than not that the Company will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, the Company will write down the security to its fair value and record the corresponding charge as a component of interest and other income, net.

Trade Accounts Receivable and Allowance for Credit Losses

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Allowance for credit losses at beginning of year

Impact of ASU 2016-13 adoption

Current period (gain) provision

Recoveries of amounts previously charged off

Allowance for credit losses at end of year

Redeemable Preferred Stock Investment

The redeemable preferred stock investment of $ 20.4 million as of December 31, 2023 represents the fair value of redeemable preferred stock of a private company that the Company purchased in July 2021.

The investment is classified as available-for-sale debt securities.

The fair value of available-for-sale debt security is included in the Consolidated Statement of Balance Sheets.

Unrealized gain of $ 8.1 million were excluded from earnings and reported in other comprehensive income (loss) for the year ended December 31, 2023.

Unrealized losses of $ 9.6 million are excluded from earnings and reported in other comprehensive income (loss) for the year ended December 31, 2022.

Since the Company intends on holding the preferred stock, and the preferred stock is not redeemable until July 2027 , the investment is recorded as a long-term investment.

Preferred Stock Investment

The redeemable preferred stock investment of $ 20.4 million as of December 31, 2023, represents the fair value of the 7.3 million shares of preferred stock of a privately-held, Cayman Islands company, Laboratory for Advanced Medicine, Inc., or LAMH, doing business as “Helio Health” that the Company purchased in July 2021.

Helio Health is an AI-biotechnology company developing blood-based early cancer detection tests, and the Company expected to gain access to an emerging liquid biopsy testing technology, through this strategic partnership.

As the preferred stock had the option to be redeemed, the investment was initially recorded as available-for-sale debt securities with changes in fair value recorded in other comprehensive income (loss).

On June 19, 2024, the Board of Directors of LAMH approved to spin out certain U.S.-based laboratory and development operations into a separate, privately-held Delaware corporation, Helio Genomics, Inc., or Helio Genomics.

The Company received 7.3 million shares of preferred stock of Helio Genomics in connection with this spin-out.

Post spin-out, Helio Genomics amended and restated its certificate of incorporation on July 25, 2024, which resulted in a change in stockholder’s rights where the Company no longer holds the right to redeem its preferred stock of Helio Genomics.

As a result, the Company reclassified $ 0.4 million unrealized gain out of accumulated other comprehensive income (loss) to net income (loss) in the consolidated financial statements.

The Company elected to record its preferred stock investment in Helio Genomics under the measurement alternative in accordance with ASC 321, defined as cost less impairment, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred.

As of July 25, 2024, the preferred stock investment carrying value of $ 9.9 million was recorded as other long-term assets in the Consolidated Balance Sheets.

No impairment loss was recorded as of December 31, 2024.

Post spin-out, the Company retained the original right to redeem its LAMH preferred stock.

As the preferred stock had the option to be redeemed, the investment was recorded as available-for-sale debt securities with changes in fair value recorded in other comprehensive income (loss).

The Company considered a number of factors including, but not limited to:

(i) the extent to which the fair value of the investment is less than its amortized cost;

(ii) the financial condition and near-term prospects of the investee, and (iii) general market conditions.

As a result, the Company recognized a $ 10.1 million credit loss during the year ended December 31, 2024, recorded as impairment of available-for-sale debt securities in the Consolidated Statements of Operations.

The roll-forward for the allowance for credit losses related to the available-for-sale debt securities is as follows:

(in thousands)

Allowance for credit losses at beginning of year

Current period provision

Allowance for credit losses at end of year

Business Combinations

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Intangible assets, unless determined to be indefinite-lived, are amortized over their estimated useful lives.

The Company amortizes intangible assets on a straight-line basis with definite lives generally over periods ranging from three to fourteen years .

The Company amortizes intangible assets on a straight-line basis with definite lives generally over periods ranging from three to 14 years .

See Note 17, Goodwill and Intangible Assets , for details of intangible assets.

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Goodwill and Indefinite-lived Intangibles

In-process research & development costs, or IPR&D, are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

In-process research & development, or IPR&D, costs are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.

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Under the market-based approach, judgment is required in evaluating market multiples and recent transactions.

The Company performed an annual goodwill and intangible asset impairment test on December 31, 2023, and elected to bypass the optional qualitative test and perform the quantitative assessments for both the laboratory services and therapeutic development reporting units, which includes an indefinite-lived intangible asset.

The Company performed an annual goodwill and intangible asset impairment test on December 31, 2024, and elected to bypass the optional qualitative test and perform the quantitative assessments for its therapeutic development reporting units, which includes an indefinite-lived intangible asset.

Reagents and Supplies

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Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, trade accounts receivable, redeemable preferred stock investment, accounts payable, accrued liabilities, investment margin loan, and contingent consideration.

The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, investment margin loan, and contingent consideration approximate fair value due to their short maturities.

Fair value of marketable securities and redeemable preferred stock investment is disclosed in Note 4, Fair Value Measurement s, to the accompanying consolidated financial statements.

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, trade accounts receivable, restricted cash, a redeemable preferred stock investment, preferred stock investments, accounts payable, and accrued liabilities.

The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

Fair value of marketable securities, the redeemable preferred stock investment, and the preferred stock investments is disclosed in Note 4, Fair Value Measurement s, to the accompanying consolidated financial statements.

Concentrations of Credit Risk, Customers and Suppliers

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, trade accounts receivable, and marketable securities, which consist of debt securities and equity securities.

As of December 31, 2024, substantially all of the Company’s cash and cash equivalents were deposited in accounts at financial institutions, and amounts may exceed federally insured limits.

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In certain periods, a small number of customers has accounted for a significant portion of the Company’s revenue.

For the laboratory services segment, aggregating customers under common control, one customer comprised of $ 35.7 million or 12 % of total revenue in the years ended December 31, 2023, and a different customer comprised of $ 115.6 million or 19 % and $ 260.2 million or 26 % of total revenue in the year ended December 31, 2022 and 2021, respectively.

One customer comprised 13 % of total accounts receivable, net, as of December 31, 2023, and a different customer comprised 17 % of total accounts receivable, net, as of December 31, 2022.

For the therapeutic development segment, the Company doesn't have customers or revenue as it does not have any commercialized or approved product candidates.

For the laboratory services segment, aggregating customers under common control, one customer comprised of $ 62.6 million or 22 % of total revenue in the year ended December 31, 2024, and the same customer comprised of $ 35.7 million or 12 % of total revenue in the year ended December 31, 2023.

A different customer comprised of $ 115.6 million or 19 % of total revenue in the year ended December 31, 2022.

One customer comprised 15 % of total accounts receivable, net, as of December 31, 2024, and the same customer comprised 13 % of total accounts receivable, net, as of December 31, 2023.

For the therapeutic development segment, the Company doesn't have customers or revenue as it does not have any commercialized or approved drug candidates.

The Company’s therapeutic development business relies on ANP Technologies, Inc.

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The Company’s laboratory operations would be interrupted if it encountered delays or difficulties securing these reagents, sequencers, other equipment or materials or maintenance and repair services, which could occur for a variety of reasons, including if the Company needs a replacement or temporary substitute for any of its limited or sole suppliers and is not able to locate and make arrangements with an acceptable replacement or temporary substitute.

The Company's development efforts could also be delayed or interrupted if is unable to procure items needed for its therapeutic development activities.

The Company believes there are currently only a few other manufacturers that are capable of supplying and servicing some of the equipment and other materials necessary for its laboratory operations, including collection kits, sequencers and various associated reagents.

Equity Method Investments

The Company uses the equity method to account for investments in entities that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies.

Judgments regarding the level of influence over each equity method investment include consideration of key factors such as the Company’s ownership interest, representation on the board of directors or other management body and participation in policy-making decisions.

The Company recognizes its share of the earnings or losses of an investee in net earnings or loss in the periods for which they are reported by the investee.

The Company evaluates any equity method investments for impairment whenever events or changes in circumstances would indicate that a decline in value has occurred that is other than temporary.

Evidence considered in this evaluation would include, but would not necessarily be limited to, the financial condition and near-term prospects of the investee, recent operating trends and forecasted performance of the investee,

market conditions in the geographic area or industry in which the investee operates and the Company’s strategic plans for holding the investment in relation to the period of time expected for an anticipated recovery of its carrying value.

If the investments were determined to have a decline in value deemed to be other than temporary it is written down to estimated fair value.

The Company’s 25 % interest in Boston Molecules was originally accounted for using the equity method, and the Company discontinued applying the equity method since the investment was reduced to zero in 2020 due to the full impairment loss recorded.

The Company did not record any additional losses.

The Company’s development efforts could also be delayed or interrupted if it is unable to procure items needed for its therapeutic development activities.

The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset.

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The Company also retains the acquirees’ classification of the leases if there are no modifications as part of the business combinations.

The Company leases out space in buildings it owns to third-party tenants or subtenants under noncancelable operating leases.

The Company recognizes lease payments as income over the lease terms on a straight-line basis and recognizes variable lease payments as income in the period in which the changes in facts and circumstances on which the variable lease payments are based occur.

The net rental income is included in the interest and other income, net, in the accompanying Consolidated Statements of Operations.

The Company leased out space in buildings it owns to third-party tenants under noncancelable operating leases.

The Company recognized lease payments as income over the lease terms on a straight-line basis and recognized variable lease payments as income in

the period in which the changes in facts and circumstances on which the variable lease payments were based occurred.

The net rental income was included in the other income, net, in the accompanying Consolidated Statements of Operations.

Software for Internal Use

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These costs include purchased software packages for Company use.

Capitalized computer software costs are amortized over the estimated useful life of the computer software, which is generally one to five years .

Capitalized computer software costs are amortized over the estimated useful life of the computer software, which is generally one to 10 years .

Internally developed software costs are capitalized after management has committed to funding the project, it is probable that the project will be completed and the software will be used for its intended function.

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The Company’s institutional contracts for its testing services typically have a single performance obligation to deliver testing services to the ordering facility or patient.

Some arrangements involve the delivery of testing services to research institutions, which the Company refers to as “sequencing as a service.” In arrangements with institutions, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities and large corporations, and patients who pay directly, the transaction price is stated within the contract and is therefore fixed consideration.

In arrangements with institutions, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations, and patients who pay directly, the transaction price is stated within the contract and is therefore fixed consideration.

For most of the Company’s testing, the Company identified the institutions, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations, and patients as the customer in Step 1 and have determined a contract exists with those customers in Step 1.

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Specifically, the Company determined the customer obtains control of the promised service upon delivery of test results.

The Company enters into contracts with research institutions to perform testing and research services.

Revenue is recognized as each individual test is completed, as the Company has a right to payment upon completion of each test.

While the contract represents a single performance obligation to provide testing and research services, the revenue is recognized as the individual tests are completed and the results are delivered to the customer.

Each completed test is considered a measurable event that indicates the transfer of control to the customer, at which point revenue is recognized.

The Company regularly reviews its contracts and recognizes revenue in accordance with the completion of each test, based on the right to payment and the transfer of control.

The Company’s insurance contracts for testing services typically have a single performance obligation to deliver testing services to the ordering facility or patient.

For most of the Company’s insurance revenue, the Company identified the patient as the customer in Step 1 and determined a contract exists with the patient in Step 1.

In arrangements with insurance patients, the transaction price is typically stated within the contract, however, the Company may accept payments from third-party payors that are less than the contractually stated price, therefore estimation of the transaction price is considered variable consideration.

In arrangements with insurance patients, the transaction price is typically stated within the contract, however, the Company may accept payments from insurance payors that are less than the contractually stated price, therefore estimation of the transaction price is considered variable consideration.

In developing the estimate of variable consideration, the Company utilizes the expected value method under a portfolio approach.

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Accounting for insurance contracts includes estimation of the transaction price, defined as the amount the Company expects to be entitled to receive in exchange for providing the services under the contract.

Due to the Company’s out-of-network status with the majority of insurance payors for COVID-19 tests, estimation of the transaction price represents variable consideration.

Due to the Company’s out-of-network status with various insurance payors, estimation of the transaction price represents variable consideration.

In the absence of Medicare coverage, contractually established reimbursement rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions.

Variable consideration attributable to these price concessions measured at the expected value using the “most likely amount” method under ASC 606.

The amounts are determined by the historical average collection rates by test type and payor category taking into

consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties.

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

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 form 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.

The Company re-assesses its estimated transaction price at the end of each reporting period, including an assessment of whether the estimate variable consideration is constrained to the extent that is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.

The Company records any necessary adjustments in the current period’s revenue.

$ 23.0 million variable consideration was recognized as additional revenue in the year ended December 31, 2023 that related to collections for COVID-19 tests completed in the prior period.

$ 1.8 million and $ 23.0 million variable consideration was recognized as additional revenue in the years ended December 31, 2024 and 2023 , respectively, that related to collections for COVID-19 tests completed in the prior period.

Contract Liabilities

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Overhead Expenses

The Company allocates overhead expenses, such as facility, rent, and utilities, to cost of revenue and operating expense categories based on headcount or square footage.

The Company allocates overhead expenses, such as facility, rent, and utilities, to cost of revenue and operating expense categories based on square footage.

As a result, an overhead expense allocation is reflected in cost of revenue and each operating expense category.

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Restructuring Costs

Restructuring costs represent one-time employee termination benefits provided to employees associated with a newly acquired entity that were involuntarily terminated.

Restructuring costs represent one-time employee termination benefits provided to employees associated with an acquired entity that were involuntarily terminated.

A plan of termination was approved and authorized by management in the second quarter of 2022.

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The Company records interest and penalties related to uncertain tax positions, if applicable, as a component of income tax expense.

The Company releases income tax effects from other comprehensive income (loss) under the portfolio method.

In 2024, the Company reclassified certain investments out of the available-for-sale debt security category.

This reclassification resulted in the removal of unrealized gains or losses previously recorded in other comprehensive income (loss).

The tax effects of these adjustments have been recognized, as a benefit of $ 2.1 million, in net loss to avoid stranded tax effects in other comprehensive income (loss).

Equity-Based Compensation

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dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and nonmonetary assets and liabilities at historical rates.

Gains and losses from these measurements are included in interest and other income, net, in the accompanying Consolidated Statements of Operations.

Gains and losses from these measurements are included in other income, net, in the accompanying Consolidated Statements of Operations.

Losses from foreign currency exchange were not significant in 2024, 2023, and 2022 .

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) consists of net unrealized gain or loss on available-for-sale debt securities, net of tax, and foreign currency translation adjustments from its subsidiaries not using the U.S.

Comprehensive (Loss) Income

Comprehensive (loss) income is comprised of net (loss) income and other comprehensive (loss) income.

Other comprehensive (loss) income consists of net unrealized gain or loss on available-for-sale debt securities, net of tax, and foreign currency translation adjustments from its subsidiaries not using the U.S.

dollar as their functional currency.

Reclassification from other comprehensive (loss) income to net loss, which includes reclassification of stranded tax effects, was $ 3.6 million in 2024.

Reclassifications from other comprehensive income (loss) to net earnings were not significant in 2023 or 2022.

The Company did not have reclassifications from other comprehensive income (loss) to net loss in 2021.

The tax effects related to net unrealized gain or loss on available-for-sale debt securities were zero , $ 7.2 million, and $ 437,000 in 2023, 2022, and 2021, respectively.

Th e tax effects related to net unrealized gain or loss on available-for-sale debt securities were zero in 2024 and 2023, due to the valuation allowance in the current period that precludes the Company from recognizing the deferred tax benefit, and $ 7.2 million in 2022 .

Basic and Diluted Net Income or Loss per Share

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The Company classifies its customers into three payor types:

(i) Insurance, including claim reimbursement from HRSA for uninsured individuals, (ii) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities and large corporations, or (iii) Patients who pay directly, as the Company believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

(i) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations, (ii) Insurance, including claim reimbursement from HRSA for uninsured individuals, or (iii) Patients who pay directly, as the Company believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

The following table summarizes revenue from contracts with customers by payor type for the years ended December 31, 2024, 2023, and 2022.

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(in thousands)

Testing Services by payor

Revenue by payor

Institutional

Total revenue

The insurance revenue category above includes zero , $ 83.1 million, and $ 310.4 million for the years ended December 31, 2023, 2022, and 2021, respectively, for services related to claims covered by the HRSA COVID-19 Uninsured Program.

$ 23.0 million variable consideration was recognized in the year ended December 31, 2023 that related to COVID-19 tests completed in the prior periods due to the recent collection efforts, which was included as revenue from insurance in the table above.

During the year ended December 31, 2023, the Company experienced a change in estimate related to variable consideration.

This change resulted in a cumulative catch-up adjustment of $ 23.0 million.

The insurance revenue category above includes zero for the years ended December 31, 2024 and 2023, and $ 83.1 million for the year ended December 31, 2022 for services related to claims covered by the HRSA COVID-19 Uninsured Program.

During the years ended December 31, 2024 and 2023, the Company experienced a change in estimate related to variable consideration.

$ 1.8 million and $ 23.0 million variable consideration were recognized in the years ended December 31, 2024 and 2023, respectively, related to COVID-19 test services completed in the prior periods due to collection efforts, which was included as revenue from insurance in the table above.

The Company estimates variable consideration using the expected value method.

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Transaction Price Allocated to Future Performance Obligations

ASC 606 issued by the Financial Accounting Standards Board, or FASB, requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as December 31, 2023.

ASC 606 provides certain practical expedients that limit the requirement to disclose the aggregate amount of transaction price allocated to unsatisfied performance obligations.

The Company applied the practical expedient to no t disclose the amount of transaction price allocated to unsatisfied performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less.

The Company does not have material future obligations associated with COVID-19, molecular diagnostic or genetic testing services that extend beyond one year.

The Company does not have material future obligations associated with its testing services that extend beyond one year.

Prior Period Reclassifications

Certain amounts reported in the prior periods have been reclassified to conform with the current period presentation.

In the Consolidated Statements of Cash Flow, the Company has separated prepaid income taxes from its previous inclusion in other current and long-term assets and separated customer deposits, and contract liabilities from its previous inclusion in accrued liabilities and other liabilities.

In the Consolidated Statements of Operations, the Company has also separated interest income, and interest expenses from its previous inclusion in other income, net.

Recent Accounting Pronouncements

The Company evaluates all ASUs issued by FASB for consideration of their applicability.

The Company evaluates all Accounting Standards Updates, or ASUs, issued by the Financial Accounting Standards Board, or FASB, for consideration of their applicability.

ASUs not included in the Company’s disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements or disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segments .

This update improves reportable segment disclosure requirements and requires enhanced disclosures related to significant segment expenses regularly provided to CODM, the amount for other segment items with descriptions of the composition, segment profit or loss, and clarification on if the CODM uses more than one measurement of a segment's profit or loss in assessing segment performance and deciding how to allocate resources.

Amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impacts of this amendment on the consolidated financial statements and related disclosure.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segments .

This update improves reportable segment disclosure requirements and requires enhanced disclosures related to significant segment expenses regularly provided to the CODM, the amount for other segment items with descriptions of the composition, segment profit or loss, and clarification on if the CODM uses more than one measurement of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

We adopted the guidance effective January 1, 2024 for annual reporting, and January 1, 2025 for interim reporting.

Adoption of the guidance has affected the disclosures related to reportable segments, and have been applied retrospectively to all prior periods presented in the financial statements.

For further information, refer to Note 7.

Reportable Segment and Geographic Information for the presentation of the additional required disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures .

The update requires more detailed information on certain income tax disclosures including the income tax rate reconciliation and income taxes paid.

Amendments in this update are effective for annual periods beginning December 15, 2024 for public entities, and early adoption is permitted.

This update requires more detailed information on certain income tax disclosures including the income tax rate reconciliation and income taxes paid.

Amendments in this update are effective for annual periods beginning December 15, 2024 for public entities, and early

adoption is permitted.

This update will result in enhanced income tax disclosures, and the Company does not expect any impact to income tax expense.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This update requires disclosure in the notes to financial statements, of specified information about certain costs and expenses.

Amendments in this update are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impacts of this amendment on the consolidated financial statements and related disclosure.

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Equity securities

Preferred stock of privately held company

Preferred stock of privately-held companies

Total equity securities

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Corporate debt securities

Money market accounts

Municipal bonds

Money market accounts

Cash equivalents

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Yankee debt securities

Redeemable preferred stock investment

Total debt securities due after 1 year through 5 years

After 5 years through 10 years

Municipal bonds

Total debt securities due after 5 years through 10 years

Total available-for-sale debt securities

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government debt securities

Corporate debt securities

treasury bills

agency debt securities

treasury bills

Corporate debt securities

Money market accounts

Municipal bonds

Yankee debt securities

Cash equivalents

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Gross unrealized losses on the Company’s equity and debt securities were $ 4.1 million and $ 5.9 million as of December 31, 2024 and 2023, respectively.

The Company did not recognize any credit losses for its available-for-sale debt securities in 2023 and 2022.

Proceeds from sale of available-for-sale securities were $ 104.3 million , $ 44.1 million , and $ 140.2 million in 2024, 2023, and 2022, respectively.

Gross realized losses on the Company’s available-for-sale securities were $ 1.1 million , $ 0.6 million , and $ 1.4 million in 2024, 2023, and 2022, respectively, and the gross realized income was insignificant in 2024, 2023, and 2022.

The cost of any marketable securities sold is based on the specific-identification method.

The Company did not recognize any credit losses for its marketable available-for sale debt securities in 2024, 2023, and 2022.

See Note 2, Summary of Significant Accounting Policies , for the reclassification of available-for-sale securities to equity securities and a credit loss of $ 10.1 million recorded in 2024 related to Helio Health.

Fair Value Measurements

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Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Inputs are unobservable for the asset or liability.

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treasury bills

Preferred stock of privately-held companies

Money market accounts

Redeemable preferred stock investment

Preferred stock of privately held company

Municipal bonds

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government debt securities

Corporate debt securities

agency debt securities

Corporate debt securities

treasury bills

Money market accounts

Municipal bonds

Preferred stock of privately held company

Redeemable preferred stock investment

Preferred stock of privately-held company

Municipal bonds

Yankee debt securities

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Level 2 securities are valued based upon observable inputs that include reported trades, broker/dealer quotes, bids and offers.

As of December 31, 2023 and 2022, the Company had preferred stock of a privately held company, which was included in other long-term assets in the accompanying Consolidated Balance Sheets, and redeemable preferred stock of a private company that were measured using unobservable (Level 3) inputs.

The fair value of redeemable preferred stock as of December 31, 2023 and 2022 was based on valuation performed by a third-party valuation company utilizing the guideline public company method under market approach and the discounted cash flow method under income approach.

For the value of the investment in private equity securities, the Company elected to measure it at cost minus impairment, as the preferred stock of the privately held company did not have a readily determinable fair value, and no impairment loss was recorded as of December 31, 2023.

There were no transfers between fair value measurement levels in 2023, 2022, and 2021.

As of December 31, 2024 and 2023, the Company had preferred stock of two privately held companies, which were included in other long-term assets in the accompanying Consolidated Balance Sheets that were measured using unobservable

(Level 3) inputs.

For the value of the investments in private equity securities, the Company elected to measure them at cost minus impairment, as the preferred stock of the privately-held companies did not have a readily determinable fair value, and no impairment loss was recorded as of December 31, 2024.

As of December 31, 2023, the Company also had redeemable preferred stock, and the fair value of redeemable preferred stock was based on valuation performed by a third-party valuation company utilizing the guideline public company method under market approach and the discounted cash flow method under income approach.

The redeemable preferred stock has been fully impaired as of December 31, 2024, see Note 2, Summary of Significant Accounting Policies , for more details.

There were no transfers between fair value measurement lev els in 2024, 2023, and 2022 .

Major classes of fixed assets consisted of the following:

December 31, 2024

December 31, 2023

(in thousands)

Medical lab equipment

5 months to 10 Years

Leasehold improvements

Shorter of lease term or estimated useful life

Computer software

1 to 13 Years

Building improvements

6 months to 39 Years

25 to 39 Years

Computer hardware

Computer software

1 to 10 Years

Furniture and fixtures

Land improvements

1 to 11 Years

Leasehold improvements

Shorter of lease term or estimated useful life

Land improvements

General equipment

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Fixed assets, net

Depreciation expense on fixed assets totaled $ 17.5 million , $ 25.5 million and $ 9.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Depreciation expense on fixed assets totaled $ 16.4 million , $ 17.5 million and $ 25.5 million for the years ended December 31, 2024, 2023, and 2022, respective ly.

Other Significant Balance Sheet Accounts

Other current assets consisted of the following:

December 31, 2024

December 31, 2023

(in thousands)

Prepaid income taxes

Prepaid expenses

Reagents and supplies

Prepaid expenses

Marketable securities interest receivable

Prepaid income taxes

Other receivable

Other receivables as of December 31, 2022 included $ 19.1 million of maturities of marketable securities that did not settle until after period-end.

Accrued liabilities consisted of the following:

December 31, 2024

December 31, 2023

(in thousands)

Accrued legal liabilities

Accrued bonus and commission

Payroll liabilities

Other accrued liabilities

Operating lease liabilities - short term

Accrued bonus and commission

Vacation accrual

Accrued legal liabilities included $ 6.9 million in connection with the Company’s voluntary disclosure process as described in Note 8, Debt, Commitments and Contingencies .

Other accrued liabilities included short term fina nce lease liabilities, health insurance liabilities, and third-party billing services.

Operating lease liabilities - short term

Accrued legal liabilities

Other accrued liabilities

Accrued legal liabilities as of December 31, 2024 included $ 1.0 million in connection with the SEC investigation as further described in Note 8, Debt, Commitments, and Contingencies.

Accrued legal liabilities as of December 31, 2023 included a previously estimated $ 6.9 million in connection with the Company’s voluntary disclosure process, which was settled at approximately $ 3.0 million and paid in 2024.

Other accrued liabilities included short-term finance lease liabilities, health insurance liabilities, and third-party billing services.

Other long-term liabilities consisted of the following:

December 31, 2024

December 31, 2023

(in thousands)

Operating lease liabilities, long term

Other long-term liabilities

Notes payable, long term

Other long-term liabilities included long term finance lease liabilities and long-term liabilities assumed from a business combination in 2022.

Other long-term liabilities

Reportable Segment and Geographic Information

In the 2022 financial statements, the Company viewed and managed its operations in one reportable segment.

Given the advancement of the therapeutic development business, the Company made certain changes, including the bifurcation of financial information for the Company’s budget and forecast planning process in December 2023.

The chief operating decision maker, or CODM, manages the operations of the Company and reviews discrete financial information to make resource decisions for its two operating segments separately.

These are laboratory services and therapeutic development.

The laboratory services operating segment offers technical laboratory services and professional interpretation of laboratory results by licensed physicians who specialize in pathology and oncology.

The therapeutic development operating segment is a pharmaceutical research and development entity that the Company acquired in November 2022.

These operating segments do not meet the aggregation criteria and therefore represent the Company’s reportable segments.

The Company has two distinct reportable segments.

The laboratory services operating segment offers technical laboratory and testing services and professional interpretation of laboratory results by licensed physicians who specialize in pathology and oncology.

The therapeutic development operating segment is a pharmaceutical research and development entity.

The Company’s Chief Executive Officer serves as its Chief Operating Decision Maker , or CODM.

The CODM oversees the Company’s operations and evaluates financial data for its two operating segments separately to make resource allocation decisions.

The financial information regularly provided to the CODM includes various performance metrics by reporting segment, such as gross profit, operating income or loss, income or loss before income taxes, net income or loss from consolidated operations, and net income or loss attributable to Fulgent, all presented in accordance with U.S.

Additionally, the CODM receives these metrics on a non-GAAP basis, which excludes the impact of equity-based compensation expenses, goodwill impairment losses, amortization of intangible assets, and restructuring costs, if applicable.

Although multiple financial metrics are provided, the CODM primarily relies on adjusted operating income or loss to evaluate segment performance and allocate resources.

The balance sheet is presented on a consolidated basis, as the CODM does not use asset or liability information, including fixed assets, to assess segment performance.

As a result, segment asset and liability details are not disclosed.

There is no inter-segment allocation of interest expense and income taxes.

There is no inter-segment revenue and operating income or loss.

Information regarding the Company’s operations and assets for its reporting segments as well as geographic information are as follows:

The Company did not allocate income tax by segment.

Information regarding the Company’s operations and assets for its reporting segments as well as geographic information are as follows, all dollars are in thousands:

Laboratory Services

Therapeutic Development

Fiscal year ended December 31, 2024

Adjusted cost of revenue

Adjusted research and development

Adjusted selling and marketing

Adjusted general and administrative

Total adjusted operating loss

Laboratory Services

Therapeutic Development

Fiscal year ended December 31, 2023

Adjusted cost of revenue

Adjusted research and development

Adjusted selling and marketing

Adjusted general and administrative

Total adjusted operating loss

Laboratory Services

Therapeutic Development

Fiscal year ended December 31, 2022

Adjusted cost of revenue

Adjusted research and development

Adjusted selling and marketing

Adjusted general and administrative

Total adjusted operating income (loss)

Year Ended December 31,

(in thousands)

Revenue from services:

Reconciliation of “adjusted operating (loss) income” to “(loss) income before income taxes”

Adjusted operating (loss) income

Equity-based compensation

Amortization of intangible assets

Goodwill impairment loss

Restructuring costs

Interest income

Interest expense

Impairment of available-for-sale debt securities

Other income, net

Total (loss) income before income taxes

Significant items by segment excluded from the adjusted operating (loss) income:

Year Ended December 31,

Equity-based compensation

Laboratory services

Therapeutic development

Revenue by segment:

Year Ended December 31,

Laboratory services:

Precision diagnostics

3 unchanged sentences

Therapeutic development

Depreciation and amortization by segment:

Year Ended December 31,

(in thousands)

Operating (loss) income:

Depreciation and amortization

Laboratory services

Therapeutic development

Interest income and expense by segment:

Year Ended December 31,

(in thousands)

Depreciation and amortization:

Interest income and expense

Laboratory services

Interest income

Interest expense

Therapeutic development

(in thousands)

Interest income

Interest expense

Total assets by segment:

December 31, 2024

December 31, 2023

December 31, 2022

Laboratory services

2 unchanged sentences

Year Ended December 31,

(in thousands)

United States

Other countries

Total foreign

Geographic distribution of property, plant and equipment, net:

(in thousands)

Fixed assets:

Unites States

December 31, 2024

December 31, 2023

December 31, 2022

United States

Other countries

Total foreign

Debt, Commitments and Contingencies

Notes payable as of December 31, 2023, consisted of $ 3.4 million of notes payable related to an installment sale contract the Company entered in February 2022 for a building and $ 775,000 of notes payable to Xilong Scientific Co., or Xilong Scientific, by Fujian Fujun Gene Biotech Co., Ltd., or FF Gene Biotech.

Notes payable as of December 31, 2024, consisted of $ 2.9 million of notes payable related to an installment sale contract the Company entered in February 2022 for a building.

The notes payable related to the installment sale are due in February 2030, and the interest rate is 1.08 %.

The current portion and noncurrent portion are $ 408,000 and $ 3.0 million , respectively, and the noncurrent portion is included in the other long-term liabilities in the accompanying Consolidated Balance Sheets.

The notes payable to Xilong Scientific is due on March 31, 2024, and the interest rate on the loan is 4.97 %.

The related interest expenses in 2023, 2022 and 2021 were $ 37,000 , $ 304,000 , and $ 177,000 , respectively.

The Company did no t have the installment sale contract in 2021.

The current portion and noncurrent portion are $ 0.4 million and $ 2.5 million , respectively, and the noncurrent portion is included in the other long-term liabilities in the accompanying Consolidated Balance Sheets.

The Company also had notes payable to Xilong Scientific Co., which were paid off in 2024, and had an interest rate of 4.97 %.

The interest expenses in 2024 and 2023 were not significant, and was $ 0.3 million in 2022.

Operating and Finance Leases

2 unchanged sentences

The Company entered certain purchase commitments with its vendors, which primarily consist of services, reagent and supplies, computer software, and medical lab equipment.

As of December 31, 2023, the Company had purchase obligations of $ 51.9 million , of which $ 29.7 million is payable within twelve months, and the remainder, $ 22.2 million , is payable within the next five years.

As of December 31, 2024, the Company had purchase obligations of $ 40.6 million , of which $ 31.6 million is payable within 12 months, and the remainder, $ 9.0 million , is payable within the next five years.

Contingencies

From time to time, the Company may be subject to legal proceedings and claims arising in the ordinary course of business.

Management does not believe that the outcome of any of these matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company has received a Civil Investigative Demand, or CID, issued by the U.S.

Department of Justice pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.

Among other things, this CID requests information and records relating to certain of the Company’s customers named in the CID, which represent a small portion of the Company’s revenues.

As disclosed in the Company’s prior filings, the U.S.

Securities and Exchange Commission, or the SEC is also conducting a non-public formal investigation, which appears to relate to the matters raised in the CID requests and our Exchange Act reports filed for 2018 through 2020.

The Company is fully cooperating with the U.S.

Department of Justice and the SEC to promptly respond to the requests for information in this CID and investigation.

The Company cannot predict when these matters will be resolved, the outcome of these matters, or their potential impact, which may ultimately be greater than what the Company currently expects.

Similar to other laboratories in the industry, the Company is currently being audited by HRSA with respect to its reimbursement for COVID-19 tests furnished to patients believed to be uninsured.

The Company recorded approximately $ 548.9 million of reimbursements from HRSA under the Uninsured Program during the years ending December 31, 2022, 2021, and 2020.

The Company is fully cooperating and working with HRSA’s auditors to resolve any issues, including any reimbursed amounts that may need to be returned to HRSA.

There is uncertainty with respect to the methodology HRSA will use and whether and how they will extrapolate audit results.

The results of the HRSA audit may materially and adversely affect the Company’s business, prospects, and financial condition.

The Company cannot reasonably estimate the loss or range of loss, if any, that may result from any material government investigations, audits and reviews in which it is currently involved given the inherent difficulty in predicting regulatory action, fines and penalties, if any, and the various remedies and levels of judicial review available to the Company in the event of an adverse finding.

As a result, the Company has not recorded any liability related to these matters.

In relation to a recent advisory opinion issued by the Office of Inspector General of the Department of Health and Human Services (the “OIG”), the Company’s subsidiary, Symphony Buyer, Inc., or Inform Diagnostics, initiated a voluntary disclosure process with the appropriate government contact.

The Company currently has estimated and recorded $ 6.9 million as a liability in its financial statements in connection with this voluntary disclosure.

This estimate may be incorrect, and the actual amount of liability may be lower or may materially exceed this estimate.

The Company is party as a lessee to various non-cancelable operating leases with varying terms through April 2033 primarily for laboratory and office space and equipment.

As previously disclosed in the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Company has received a Civil Investigative Demand, or CID, issued by the U.S.

Department of Justice, or the DOJ, pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.

Among other things, this CID requests information and records relating to certain of the Company’s customers named in this CID.

Similar to other laboratories in the industry, the Company is currently being audited by the U.S.

Health Resources and Services Administration, or HRSA, with respect to its reimbursement for COVID-19 tests furnished to patients believed to be uninsured.

The Company recorded approximately $ 548.9 million of reimbursements from HRSA under the Uninsured Program during the years ended December 31, 2022, 2021, and 2020.

There is uncertainty with respect to the methodology HRSA will use in its audit and whether and how HRSA will extrapolate audit results.

The Company is working with HRSA’s auditors to resolve any issues related to its audit, including any reimbursed amounts that may need to be returned to HRSA.

The Company has also received a CID issued by the DOJ pursuant to the False Claims Act related to the DOJ’s investigation as to whether the Company submitted or caused to be submitted false claims to the Uninsured Program.

The Company is fully cooperating with the DOJ in connection with the CIDs that it has received, and in connection with the HRSA audit.

The Company cannot currently predict when these CIDs and HRSA audit matters will be resolved, the reasonable or likely outcome of these matters, or their potential impact, which may materially and adversely affect the Company’s business, prospects, and financial condition.

These matters are not formal claims, and discussions and investigations remain ongoing.

As such, the Company cannot reasonably estimate the loss or range of loss, if any, that may result from any material government investigations, audits, and reviews in which it is currently involved, given the inherent difficulty in predicting regulatory action, fines and penalties, if

any, and the various remedies and levels of judicial review available to the Company in the event of an adverse finding.

As a result, the Company has not recorded any liability related to these CIDs or audit matters.

In addition, and as previously disclosed, the SEC is conducting a non-public formal investigation, which relates to (i) the matters raised in the requests for the CID regarding allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law and (ii) the Company’s Exchange Act reports filed for 2018 through 2020.

On May 6, 2024, the SEC staff advised the Company that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against the Company based on a corporate negligence theory, which, if authorized, would allege violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 13a-1, 13a-13, and 12b-20 thereunder.

The Company has fully cooperated with the SEC and its requests, and the SEC are continuing to communicate regarding this matter.

While the Company does not believe that any enforcement recommendation is warranted and denies all liability, the Company has recorded a $ 1.0 million potential liability with respect to this matter.

While the Company believes this amount is a reasonable and probable estimate, the actual amount of liability, if any, may be materially higher than this estimate, as discussions are ongoing, and there is no formal settlement or final resolution of this matter at this time.

In relation to a recent advisory opinion issued by the Office of Inspector General of the Department of Health and Human Services, or the OIG, the Company’s subsidiary, Symphony Buyer, Inc., or Inform Diagnostics, initiated a voluntary disclosure process with the appropriate government contact.

The Company had previously estimated and recorded $ 6.9 million as a liability in its financial statements in connection with this voluntary disclosure.

In December 2024, the Company entered into a settlement agreement with the DOJ pursuant to which it agreed to pay and paid $ 3.0 million in resolution of the matters directly related to this voluntary disclosure.

The Company is party as a lessee to various non-cancelable operating leases with varying terms through March 2034 primarily for laboratory and office space and equipment.

The Company has options to renew some of these leases after their expirations.

3 unchanged sentences

The Company’s operating lease agreements do not contain any residual value guarantees, material restrictive covenants, bargain purchase options or asset retirement obligations.

The Company’s headquarters are located in El Monte, California, which is comprised of various corporate offices and two laboratories certified under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, and licensed by the State of California Department of Public Health.

Other CLIA-certified laboratories are located in Irving, Texas;

The Company’s headquarters are located in El Monte, California, which is comprised of various corporate offices and a laboratory certified under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, and licensed by the State of California Department of Public Health.

Other CLIA-certified laboratories are located in Coppell, Texas;

Needham, Massachusetts;

1 unchanged sentence

Alpharetta, Georgia.

and New York, New York.

The Company is also in the process of obtaining NATA accreditation in Dulwich, Australia.

The operating and finance lease right-of-use asset, short-term lease liabilities, and long-term lease liabilities as of December 31, 2024 and 2023 were as follows:

December 31, 2024

December 31, 2023

(in thousands)

18 unchanged sentences

Weighted-average discount rate, operating leases

Weighted average remaining lease term -finance leases

Weighted average discount rate - finance leases

Weighted-average remaining lease term, finance lease

Weighted-average discount rate, finance lease

The following is a maturity analysis of operating and finance lease liabilities using undiscounted cash flows on an annual basis with renewal periods included:

Operating Leases

Financing Leases

Finance Lease

(in thousands)

2 unchanged sentences

Less imputed interest

The Company leases out space in buildings it owns to third-party tenants under noncancelable operating leases.

As of December 31, 2023, the remaining lease term is 1 year, including renewal options and may include rent escalation clauses.

primarily represents fixed lease payments from tenants recognized on a straight-line basis over the application lease term.

The Company previously leased out space in buildings it owns to third-party tenants under noncancelable operating leases.

As of December 31, 2024, there were no noncancelable operating leases remaining.

Lease income primarily represents fixed lease payments from tenants recognized on a straight-line basis over the application lease term.

Variable lease income represents tenant payments for real estate taxes, insurance and maintenance.

The lease income was included in interest and other income, net, in the accompanying Consolidated Statements of Operations.

Total lease income was as follows:

Year Ended December 31,

(in thousands)

Variable lease income

Total lease income

Future fixed lease payments from tenants for all noncancelable operating leases as of December 31, 2023 are as follows:

Lease Payments

(in thousands)

Year Ending December 31,

The lease income was included in other income, net, in the accompanying Consolidated Statements of Operations.

An insignificant amount was recognized in the year ended December 31, 2024.

For years ended December 31, 2023 and 2022, $ 0.2 million and $ 0.3 million were recognized, respectively.

There are no future fixed lease payments from tenants expected, as there were no remaining noncancelable operating leases as of December 31, 2024 .

Equity-Based Compensation

21 unchanged sentences

(1) Aggregate intrinsic value is calculated as the difference between (i) the exercise price of options and (ii) the market value of the Company’s common stock as of the applicable date.

The total fair value of options that vested during the years ended December 31, 2023, 2022 and 2021 was $ 172,000 , $ 126,000 and $ 76,000 , respectively.

As of December 31, 2023, the remaining unrecognized compensation expense related to all outstanding option awards was $ 695,000 and is expected to be recognized over a weighted-average period of 2.9 years.

The total fair value of options that vested during the years ended December 31, 2024, 2023, and 2022 was $ 0.3 million , $ 0.2 million and $ 0.1 million , respectively.

As of December 31, 2024, the remaining unrecognized compensation expense related to all outstanding option awards was $ 0.5 million and is expected to be recognized over a weighted-average period of 2.2 years.

RSUs are awards that entitle the holder to receive shares of the Company’s common stock upon satisfaction of vesting conditions.

37 unchanged sentences

The fair value of the shares of the Company’s common stock underlying option and RSU awards is determined by the Company’s board of directors or the compensation committee thereof based on the closing sales price of the Company’s common stock on the date of grant as reported by the Nasdaq Global Market.

Provision for income taxes consists of United States federal and state income taxes.

(Benefit from) provision for income taxes consists of United States federal and state income taxes.

A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences, operating losses and tax credit carryforwards.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The following table summarizes income (loss) before income taxes and gain on equity-method investments:

The following table summarizes income (loss) before income taxes:

Year Ended December 31,

(in thousands)

(loss) income before income taxes and gain on equity-method investments

Foreign loss before income taxes and gain on equity-method investments

(Loss) income before income taxes and gain on equity-method investments

Income tax expense consisted of the following:

(loss) income before income taxes

Foreign loss before income taxes

(Loss) income before income taxes

(Benefit from) provision for income taxes consisted of the following:

Year Ended December 31,

3 unchanged sentences

Total Deferred

Total income tax expense

Total (benefit from) provision for income taxes

Reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate is as follows:

1 unchanged sentence

Tax provision at federal statutory rate

Uncertain tax positions

Stock based compensation

Equity-based compensation

Nondeductible compensation - 162(m)

Goodwill impairment

Amended state tax refunds

Federal return to provision

1 unchanged sentence

Other permanent differences

Uncertain tax positions

Research & development credit

IRA tax credit

Foreign tax rate differential

Stranded tax effect

Foreign NOL carryforward

Change in valuation allowance

8 unchanged sentences

Net operating losses

Stock based compensation

Equity-based compensation

State income taxes

12 unchanged sentences

Total deferred tax liabilities

Net deferred tax assets

Net deferred tax liabilities

As of December 31, 2024, the Company has $ 31.5 million estimated federal net operating loss, or NOL, carryforwards and estimated state NOL carryforwards of $ 82.6 million .

The Company’s state NOLs are scheduled to begin expiring in 2025 .

The Company also has foreign NOL carryforwards of $ 13.6 million which are scheduled to expire from 2024 through 2028 .

Company also has foreign NOL carryforwards of $ 11.0 million which are scheduled to expire from 2025 through 2029 .

Utilization of our net operating loss carryforwards may be subject to annual limitations due to ownership changes as imposed by the Internal Revenue Code and similar state provisions.

ASC 740-10-30-5 requires that deferred income tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred income tax assets will not be realized.

The Company has evaluated the realizability of its deferred tax assets and has concluded that it is more likely than not that the Company may not realize the benefit of certain deferred tax assets and, accordingly, has established a full valuation allowance of $ 22.7 million on its deferred tax assets as of December 31, 2024.

The Company maintained a valuation allowance of $ 2.8 million on certain deferred tax assets related to equity losses in joint ventures and

foreign net operating loss carryforwards as of December 31, 2022.

The increase in the valuation allowance of $ 13.1 million for the year ended December 31, 2023 was primarily due to the establishment of a full valuation allowance on the Company’s deferred tax assets.

The Organization for Economic Cooperation and Development, or OECD, has enacted model rules for a new global minimum tax framework, or BEPS Pillar II.

The Company maintained a full valuation allowance of $ 15.9 million on its deferred tax assets as of December 31, 2023.

The increase in the valuation allowance of $ 6.8 million for the year ended December 31, 2024 was primarily due to the increase in capitalized Section 174 expenditures.

The Organization for Economic Cooperation and Development (OECD) has enacted model rules for a new global minimum tax framework (“BEPS Pillar II”).

Various jurisdictions have enacted, or are in the process of enacting, legislation on these rules.

1 unchanged sentence

Uncertain Tax Positions

The Company is subject to income taxation by the U.S.

government and certain states in which the Company’s activities give rise to an income tax filing requirement.

The Company is subject to income taxation by the United States government and certain states in which the Company’s activities give rise to an income tax filing requirement.

The Company does not have any significant income tax filing requirements in any foreign jurisdiction.

1 unchanged sentence

As of December 31, 2024 , the Company remains subject to income tax examinations in the United States, and various states for tax years 2020 through 2024 .

certain other states remain subject to examination for tax years 2018 through 2023 .

However, due to the Company’s NOL carryforwards in various jurisdictions, tax authorities have the ability to adjust carryforwards related to closed years until the statute expires on the year(s) in which the NOL carryforwards are utilized.

9 unchanged sentences

As of December 31, 2024, the Company has $ 4.2 million of gross unrecognized tax benefits, of which, $ 2.5 million of unrecognized tax benefits would affect the effective tax rate if recognized.

The Company has accrued $ 145,000 and $ 94,000 for interest at December 31, 2023 and 2022, respectively, and has recognized interest expense of $ 145,000 and $ 94,000 for the years ended December 31, 2023 and 2022, respectively.

Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next twelve months, the Company does not expect material changes.

The Company has accrued $ 0.4 million and $ 0.1 million for interest at December 31, 2024 and 2023, respectively.

Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not expect material changes.

While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued positions.

Accordingly, additional provisions on federal, state and foreign tax-related matters could be recorded in future periods as revised estimates are settled or otherwise resolved.

The Company received $ 40.0 million, $ 12.5 million, and $ 0.3 million in income tax refunds in 2024, 2023, and 2022, respectively.

The income tax refunds received, which were due to overpayment in prior years, were not netted in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows.

In 2024, the Company purchased $ 27.1 million worth of Investment Tax Credits, or ITCs, under the transferability provisions of the Inflation Reduction Act of 2022 for $ 24.6 million in cash.

The $ 2.5 million difference between the purchase price and the face value of the credits has been recorded as an increase to the Company’s income tax benefit for the period.

The $ 24.6 million cash payment was included in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows.

The Company has utilized $ 0.4 million of the acquired credits on its 2023 tax return and carried back the

remainder of $ 26.7 million to its 2020 tax year and filed a request for a refund.

T he Company has received the full amount of $ 26.7 million of ITCs that were carried back to the 2020 tax year in cash in 2024.

Income (Loss) per Share

1 unchanged sentence

Year Ended December 31,

(in thousands, except per share data)

Net (loss) income attributable to common shareholders

(in thousands)

Net (loss) income attributable to Fulgent

Weighted-average common shares - outstanding, basic

4 unchanged sentences

Weighted-average common shares - outstanding, diluted

(Loss) earnings per share:

The following securities have been excluded from the calculation of diluted income per share because their effect would have been anti-dilutive:

(Loss) income per share:

The following securities have been excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive:

Year Ended December 31,

4 unchanged sentences

The anti-dilutive shares described above were calculated using the treasury stock method.

In the year ended December 31, 2023, the Company had outstanding stock options, restricted stock units, and contingently issuable shares for held back related shares to the business combination of Fulgent Pharma that were excluded from the weighted-average share calculation for continuing operations due to the Company’s net loss positions.

In the years ended December 31, 2024 and 2023, the Company had outstanding stock options and restricted stock units that were excluded from the weighted-average share calculation for continuing operations due to the Company’s net loss positions.

In the year ended December 31, 2023, the Company also had contingently issuable shares for shares held back in connection with the business combination of Fulgent Pharma, or Pharma Hold Back Shares.

In May 2024, the Company released the remaining Pharma Hold Back Shares such that no shares remain contingently issuable in connection with the business combination of Fulgent Pharma.

Retirement Plans

2 unchanged sentences

The Company matches contributions to the 401(k) Plan based on the amount of salary deferral contributions the participant makes to the 401(k) Plan.

The Company will match up to 3 % of an employee’s compensation that the employee contributes to his or her 401(k) Plan account.

Total Company matching contributions to the 401(k) Plan were $ 3.2 million , $ 2.5 million and $ 697,000 in the years ended December 31, 2023, 2022 and 2021, respectively.

The Company will match up to 4 % of a n employee’s compensation that the employee contributes to their 401(k) Plan account.

Total Company matching contributions to the 401(k) Plan were $ 3.8 million , $ 3.2 million and $ 2.5 million in the years ended December 31, 2024, 2023, and 2022, respectiv ely.

Related Party

Linda Marsh, who is a member of the Company’s board of directors, is currently the Senior Executive Vice President of AHMC Healthcare Inc., or AHMC.

The Company performs genetic testing and other testing services, on an arms-length basis, for AHMC , and the Company recognized $ 125,000 , $ 1.5 million and $ 3.4 million in revenue in the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023 and 2022, $ 13,000 and $ 93,000 , respectively, was owed to the Company by AHMC , which is included in trade accounts receivable, net, in the accompanying Consolidated Balance Sheets, in connection with this relationship.

The Company performs genetic testing and other testing services, on an arms-length basis, for AHMC , and the Company recognized an insignificant amount, $ 0.1 million and $ 1.5 million in revenue in the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024 and 2023, insignificant amounts were owed to the Company by AHMC,

which is included in trade accounts receivable, net, in the accompanying Consolidated Balance Sheets, in connection with this relationship.

Ming Hsieh, is the owner of PTJ Associates Inc., or PTJ.

PTJ provides flight services to the Company on an arms-length basis.

In the years ended December 31, 2023, 2022, and 2021 the Company incurred zero , $ 235,000 and $ 142,000 , respectively, in expenses for flights between California and Texas to transport employees and supplies.

As of December 31, 2023 and 2022, no amount was owed to PTJ by the Company.

Ming Hsieh is also on the board of directors and an approximately 20 % owner of ANP Technologies, Inc., or ANP, from which the Company purchased COVID-19 antigen rapid test kits and entered into certain drug-related licensing and development service agreements.

In the years ended December 31, 2024, 2023, and 2022 the Company incurred zero , zero and $ 0.2 million , respectively, in expenses for flights between California and Texas to transport employees and supplies.

As of December 31, 2024 and 2023 , no amount wa s owed to PTJ by the Company.

Ming Hsieh is also on the board of directors and an approximately 20 % owner of ANP Technologies, Inc., or ANP, from which the Company entered into certain drug-related licensing and development service agreements.

The President and Chief Scientific Officer of Fulgent Pharma, Ray Yin, is the Founder, President, and Chief Technology Officer of ANP.

The Company incurred $ 2.4 million and $ 1.2 million, in 2023 and 2022, respectively, related to the licensing and development services and purchase of equipment.

No costs were incurred in the year ended December 31, 2021.

As of December 31, 2023 and 2022, zero and $ 607,000 , respectively, were owed to ANP by the Company in connection with these relationships.

The Company also entered into an employee service agreement with ANP in April 2023, $ 115,000 was recognized in 2023, and $ 29,000 was owed by ANP in connection with the employee service agreement as of December 31, 2023.

The Company incurred $ 2.1 million , $ 2.4 million and $ 1.2 million , in expenses in the years ended December 31, 2024, 2023, and 2022, respectively, related to the licensing and development services and purchase of equipment.

As of December 31, 2024 and 2023, $ 0.2 million and zero , respectively, were owed to ANP by the Company in connection with these relationships.

The Company also entered into an employee service agreement with ANP in April 2023, $ 0.1 million was recognized in revenue in each of the years ended December 31, 2024 and 2023, and insignificant amounts were owed by ANP in connection with the employee service agreement as of December 31, 2024 and 2023, respectively.

Business Combinations

23 unchanged sentences

The goodwill recognized is not deductible for tax purposes.

The identifiable intangible assets acquired consisted of $ 54.0 million customer relationships with an estimated amortization life of 14 years, $ 2.7 million trade name with an estimated amortization life of 7 years, and $ 360,000 in-place lease intangible asset to be amortized over the remaining lease term of 5 years.

The goodwill was subsequently fully impaired in December 2023.

Refer to Note 17.

Goodwill and Intangible Assets for more information .

The identifiable intangible assets acquired consisted of $ 54.0 million customer relationships with an estimated amortization life of 14 years, $ 2.7 million trade name with an estimated amortization life of seven years , and $ 0.4 million in-place lease intangible asset to be amortized over the remaining lease term of five years .

The fair value of the customer relationship was estimated using the Multiperiod Excess Earnings Method, or MPEEM, of the income approach.

Under the MPEEM, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash

flows attributable only to the subject intangible asset after deducting contributory asset charges.

Under the MPEEM, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable only to the subject intangible asset after deducting contributory asset charges.

The incremental after-tax cash flows attributable to the customer relationships are then discounted to their present value at a risk-adjusted rate of return.

5 unchanged sentences

Revenue and operating loss from the Inform Diagnostics acquisition since the acquisition date were $ 83.6 million and $ 17.0 million, respectively, for year ended December 31, 2022, which are included in the accompanying Consolidated Statements of Operating.

The transaction costs associated with the acquisition of Inform Diagnostics consisted primarily of legal, regulatory and financial advisory fees of approximately $ 6.6 million for the year ended December 31, 2022, respectively.

These transaction costs were expensed as incurred as general and administrative expense in the respective period.

3 unchanged sentences

Acquisition-related costs - Acquisition-related costs incurred by both Fulgent and Inform Diagnostics were excluded from the net income attributable to Fulgent, and total costs were $ 9.6 million for the year ended December 31, 2022.

Other adjustments to the net income attributable to Fulgent were $ 772,000 and $ 2.3 million for the year ended December 31, 2022 and 2021, respectively.

Other adjustments to revenue were $ 962,000 and $ 3.9 million for or the year ended December 31, 2022 and 2021, respectively.

Other adjustments to the net income attributable to Fulgent were $ 0.8 million for the year ended December 31, 2022 .

Other adjustments to revenue were $ 1.0 million for or the year ended December 31, 2022.

Year Ended December 31, 2022

7 unchanged sentences

The RSUs are subject to vesting over the four-year period immediately following the date of their original grant, subject to the holder’s continuing service.

The integrated companies plan to offer a vertically integrated solution to combat cancer with the potential to unlock significant long-term upsides for both the therapeutic and diagnostic businesses, while effectively managing risk.

The integrated companies plan to

offer a vertically integrated solution to combat cancer with the potential to unlock significant long-term upsides for both the therapeutic and diagnostic businesses, while effectively managing risk.

The financial results of Fulgent Pharma are included in the consolidated financial statements from the date of acquisition.

5 unchanged sentences

Fulgent Pharma has developed a novel nanoencapsulation and targeted therapy platform, which is designed to improve the therapeutic window and pharmacokinetic profile of new and existing cancer drugs.

The lead drug candidate, FID-007, has achieved proof-of-concept in preliminary human clinical trials for the treatment of various cancer types, including head and neck, ampullary, pancreatic, non-small cell lung cancer, and breast.

The lead drug candidate, FID-007, is currently being investigated in the United States to treat patients diagnosed with various cancers including H&N, ampullary, and pancreatic cancer.

The Company has released preliminary data and completed enrollment for a Phase 1/1b dose escalation/expansion clinical trial for evaluation of FID-007 in treating patients diagnosed with advanced solid tumors.

In this trial and to date, the Company has observed FID-007 to have a manageable safety profile and observed preliminary evidence of anti-tumor activity in heavily pre-treated patients across various tumor types.

The fair value of the IPR&D was estimated using MPEEM.

1 unchanged sentence

The useful life of IPR&D is indefinite.

Revenue and operating loss from the Fulgent Pharma acquisition since the acquisition date are zero and $ 816,000 , respectively, which are included in the accompanying Consolidated Statements of Operations, for the year ended December 31, 2022.

Revenue and operating loss from the Fulgent Pharma acquisition since the acquisition date are zero and $ 0.8 million, respectively, which are included in the accompanying Consolidated Statements of Operations, for the year ended December 31, 2022.

The transaction costs associated with the acquisition of Fulgent Pharma consisted primarily of legal, regulatory and financial advisory fees of approximately $ 1.4 million for the year ended December 31, 2022.

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The $ 5.0 million restricted cash received represents cash consideration payable pursuant to the share transfer agreement Fulgent Pharma entered prior to Fulgent Pharma acquisition date.

The cash consideration was not paid as of Fulgent Pharma acquisition date and was included in noncurrent or non-operating liabilities in above table.

FF Gene Biotech

In April 2017, the Company acquired a 30 % equity interest in FF Gene Biotech, a newly formed a joint venture with Xilong Scientific and Fuzhou Jinqiang Investment Partnership (LP), or FJIP.

The joint venture was formed under the laws of China to offer genetic testing services to customers in China.

In May 2021, we entered into a restructuring agreement with Xilong Scientific and FJIP, resulting in the Company indirectly acquiring a controlling financial interest of 72 %in FF Gene Biotech.

FF Gene Biotech was founded to bring the Company’s next generation sequencing, or NGS, capabilities to the Chinese genetic testing market through entities separate from the Company’s U.S.

operations, and FF Gene Biotech is pursuing this separate from the Company’s business elsewhere.

As a result of the acquisition of FF Gene Biotech, or the FF Gene Biotech Acquisition, the Company seeks to be more strategically aligned with its geographic expansion strategy.

It also expects to reduce costs through economies of scale.

The Company allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on estimated fair values.

As additional information becomes available, such as the finalization of the estimated fair value of tax-related items, the Company may further update the preliminary purchase price allocation during the remainder of the measurement period (up to one year from the FF Gene Biotech Acquisition date).

The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed re cognized at the FF Gene Biotech Acquisition date, as well as the fair value of the noncontrolling interest at the FF Gene Biotech Acquisition date.

(in thousands)

Considerations

Fair value of the Company’s 30 % equity interest held before the business combination

Recognized amounts of identifiable assets acquired and liabilities assumed

Financial assets

Reagents and supplies

Other tangible assets

Identifiable intangible assets

Other current liabilities

Notes payable

Recognized amounts of identifiable assets acquired and liabilities assumed, net

Noncontrolling interest

The fair value of the noncontrolling interest, or NCI, in FF Gene Biotech, a private entity, $ 8.1 million, was estimated by applying the income approach and market approach.

The fair value measurement was based on significant inputs that are not observable in the market and thus represents a fair value categorized within Level 3 of the three-tier fair value hierarchy .

The NCI represents a minority interest of 28 % in the post-restructuring FF Gene Biotech.

Since the NCI is the result of the restructuring, the implied value was utilized to value the NCI based on the 42 % effective investment.

After determining the implied value, a discount for lack of marketability was applied to the 28 % interest representing lack of marketability related to the holding period to monetize the NCI in a future initial public offering, or IPO, or sale, and marketability related to market participant acquisition premiums implied in the value of the $ 19.0 million purchase price for a 42 % interest.

The resultant total discount applied was 35 %, which is supported both by the put option analyses related to the potential holding period, and a 10 % discount owed to a market participant acquisition premium.

The Company recognized a gain of $ 3.7 million as a result of remeasuring to fair value its 30 % equity interest held before the FF Gene Biotech Acquisition.

The fair value of the preexisting equity interest was determined based on the characteristics before consummating the FF Gene Biotech Acquisition and estimated by applying income approach and utilized the discounted cash flow method.

The Company did not apply the market approach based on its characteristics before consummating the restructuring.

The gain on the equity-method investment is included in the Company’s Consolidated Statements of Operations for the year ended December 31, 2021.

The goodwill of $ 23.1 million arising from the FF Gene Biotech Acquisition is attributed to the expected synergies and other benefits that will be potentially generated from the combination of the Company and FF Gene Biotech.

The goodwill recognized is not deductible for tax purposes.

The identifiable intangible assets acquired in the FF Gene Biotech Acquisition consisted of a $ 5.7 million royalty-free technology with an estimated amortization life of 10 years and $ 1.2 million customer relationships with an estimated amortization life of 5 years.

The value of these assets was based upon the preliminary fair values as of the closing date of the FF Gene Biotech Acquisition.

The Company concluded FF Gene Biotech is a variable interest entity as FF Gene Biotech lacks sufficient capital to operate independently.

The Company concluded that it alone has the power to direct the most significant activities of FF Gene Biotech and therefore is the primary beneficiary of the entity post the FF Gene Biotech Acquisition.

Judgment regarding the level of influence over FF Gene Biotech includes consideration of key factors such as the Company’s ownership interest, representation on the board of directors or other management body and participation in policy-making decisions.

CSI Acquisition

In August 2021, the Company acquired 100 % of the outstanding equity of Cytometry Specialist, Inc, or CSI, a multi-site reference laboratory business in the United States.

This acquisition of CSI, or the CSI Acquisition, expands the Company’s national reference laboratory presence in the United States.

The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on estimated fair values.

The following tables summarizes the consideration paid and the amounts of the assets acquired and liabilities assum ed recognized at the CSI Acquisition date:

(in thousands)

Considerations

Contingent consideration

Recognized amounts of identifiable assets acquired and liabilities assumed

Debt-free net working capital

ROU assets - operating

ROU assets - finance

Identifiable intangible assets

Deferred tax liability

Operating lease liabilities

Finance lease liabilities

Other liabilities

Recognized amounts of identifiable assets acquired and liabilities assumed, net

The CSI Acquisition includes a contingent consideration arrangement that requires additional consideration to be paid by the Company based on CSI’s achievement of a minimum level of earnings, for the year ending December 31, 2021, as described in the acquisition agreement.

The range of undiscounted amounts the Company may be required to pay under the contingent consideration agreement is between zero and $ 10.0 million.

The fair value of the contingent consideration recognized on the CSI Acquisition date of $ 10.0 million was estimated by applying the income approach using discounted cash flows.

Given the short-term nature of the contingent consideration, the most significant assumption is the probability weighted cash flow.

The actual contingent consideration paid in 2022 was $ 10.0 million.

The goodwill of $ 27.5 million arising from the CSI Acquisition is attributed to the expected synergies, assembled workforce, other benefits that will be potentially generated from the combination and deferred tax.

The goodwill recognized is not deductible for tax purposes.

The identifiable intangible assets acquired in the CSI Acquisition consisted of $ 27.6 million customer relationships with an estimated amortization life of 12 years, $ 1.9 million laboratory information system platform with an estimated amortization life of 5 years, and $ 1.1 million trade name with an estimated amortization life of 10 years.

Prior to the acquisitions, the financial results for FF Gene Biotech and CSI were not significant for pro forma financial information.

Post the acquisitions, the financial results for FF Gene Biotech and CSI are included in the Company’s consolidated financial statements.

Revenue and operating income or loss from both acquisitions since the respective 2021 acquisition dates are included in the accompanying Consolidated Statements of Operations as follows, in thousands, for the year ended December 31, 2021:

Operating Income (Loss)

FF Gene Biotech

The cash consideration was not paid as of Fulgent Pharma acquisition date and was included in noncurrent or non-operating liabilities in above table, and the cash consideration was subsequently paid in 2023.

Stock Repurchase Program

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Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions.

repurchase program has no expiration from the date of authorization.

The stock repurchase program has no expiration from the date of authorization.

During the year ended December 31, 2024, the Company repurchased 10,000 shares of its common stock at an aggregate cost of $ 0.2 million under the stock repurchase program.

During the year ended December 31, 2023, the Company repurchased 1.0 million shares of its common stock at an aggregate cost of $ 25.1 million under the stock repurchase program.

During the year ended December 31, 2022, the Company repurchased 1.8 million shares of its common stock at an aggregate cost of $ 74.3 million under the stock repurchase program.

As of December 31, 2024, a total of approximately $ 150.5 million remained available for future repurchases of its common stock under the stock repurchase program.

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(in thousands)

Balance as of January 1

Goodwill acquired during year

Balance at beginning of year

Foreign currency impact

Balance at the end of year

As of September 30, 2023, the Company had a single reporting unit.

The Company monitors changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis.

During the third quarter, the Company evaluated the significant decrease in its share price which had occurred over a period of about three months, and also performed a market approach supplemental qualitative analysis.

Based on the short duration of the share price decline and the analysis performed, the Company did no t recognize a goodwill impairment charge during the third quarter of 2023.

As of December 1, 2023, the Company has identified its laboratory services business and its therapeutic development business as its two operating segments and the Company determined that the operating segments represented the two reporting units.

The Company has reassigned goodwill to its two reporting units using the relative fair value approach.

The Company has identified its laboratory services business and its therapeutic development business as its two operating segments, and the Company determined that the operating segments represented the two reporting units.

The Company tests for goodwill impairment at the reporting unit level on December 31st of each year and more frequently if events or circumstances indicate a potential impairment.

During the fourth quarter of 2023, the Company witnessed a continued decline in its share price and market capitalization which prompted a quantitative impairment analysis as of December 31, 2023.

Laboratory Services

As of December 31, 2023, the fair value for the laboratory services reporting unit was calculated using the (i) income approach (discounted cash flows) weighted at 50 % with an assumed weighted average cost of capital, or WACC, of 13 % and assumed residual revenue growth rate of 2.5 %, and (ii) a market approach weighted at 50 %.

Within the market approach, the Company used two methods, the guideline public company method weighted at 25 % and the merger & acquisition method also weighted at 25 %.

Based on the quantitative results of the impairment analysis, the carrying value exceeded the fair value on the laboratory services reporting unit.

The Company recognized a full goodwill impairment loss and recorded a pre-tax impairment loss of $ 120.2 million in the Consolidated Statements of Operations.

In 2023, the Company witnessed a continued decline in its share price and market capitalization which prompted a quantitative impairment analysis as of December 31, 2023, which led to the full impairment of the laboratory services goodwill.

Therapeutic Development

As of December 31, 2023 the fair value for the therapeutic development reporting unit was calculated using the income approach weighted at 100 % with a WACC of 36 %.

This reporting unit includes IPR&D, an intangible asset with an indefinite life that was initially recognized as part of the Fulgent Pharma acquisition in 2022 and which the Company appraised using the income approach known as multi-period excess earnings method.

Based upon the results of the quantitative assessments, the Company concluded that the fair values of the therapeutic development reporting unit and the IPR&D asset, at December 31, 2023, were greater than the carrying values and that there was no impairment.

As of December 31, 2024, the Company performed an updated valuation for the fair values of its therapeutic development reporting unit and IPR&D due to significant developments in its clinical pipeline.

FID-007 was previously in clinical Phase 1/1b as of the prior reporting period.

The Company has released preliminary results for a Phase 1/1b clinical trial of FID-007 in patients diagnosed with advanced solid tumors and has begun enrollment of a Phase 2 clinical trial evaluating FID-007 in patients diagnosed with recurrent or metastatic H&N squamous cell carcinoma.

The Company has also received clearance from the FDA to commence a Phase 1/1b clinical trial evaluating FID-022, a candidate using the same nano-drug delivery platform, in patients diagnosed with certain cancers.

These advancements led to a revised assessment of the probability of success for each molecule, and resulted in an increase to estimated revenue projections.

The fair value of the Company’s therapeutic development reporting unit was calculated using the income approach weighted at 100 % with a WACC of 36 %.

The fair value of the IPR&D was appraised using the income approach known as multi-period excess earnings method with a WACC of 36 %.

Due to these changes, the fair values of the Company’s therapeutic development reporting unit and IPR&D increased significantly, and are now substantially higher than the carrying value recorded.

The fair value of this reporting unit was $ 201.4 million and exceeded the carrying value of $ 54.8 million by approximately 268 %, and the fair value of IPR&D was $ 202.7 million and exceeded the carrying value of $ 64.6 million by approximately 214 %.

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It is possible that the conclusions regarding impairment or recoverability of goodwill or intangible assets could change in future periods.

Management will continue to monitor the

therapeutic development reporting unit.

For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these product candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.

The Company is not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a product candidate is safe and effective.

In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans, impact the revenues a product can generate.

Management will continue to monitor the therapeutic development reporting unit.

For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these drug candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.

The Company is not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a drug candidate is safe and effective.

In addition, the availability and extent of coverage and reimbursement from insurance payors, including government healthcare programs and private insurance plans, impact the revenues a product can generate.

Consequently, the eventual realized value, if any, of these acquired IPR&D projects may vary from their estimated fair values.

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Weighted-Average Amortization Period

December 31, 2024

December 31, 2023

(in thousands)

Laboratory Services

Royalty-free technology

accumulated amortization

Royalty-free technology, net

Customer Relationships

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Customer relationships, net

Royalty-free technology

accumulated amortization

Trade name, net

In-place lease intangible assets

Royalty-free technology, net

accumulated amortization

In-place lease intangible assets, net

Trade name, net

Laboratory information system platform

1 unchanged sentence

Laboratory information system platform, net

In-place lease intangible assets

accumulated amortization

In-place lease intangible assets, net

Purchased patent

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Acquisition-related intangibles included in the above tables are generally finite-lived and are carried at cost less accumulated amortization, except for IPR&D, which is related to the acquisition of Fulgent Pharma in 2022 and has an indefinite life until research and development efforts are completed or abandoned.

All other finite-lived acquisition-related intangibles related to the business

combinations in 2022 and 2021 are amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized.

Amortization of intangible assets was $ 7.8 million and $ 6.5 million in 2023 and 2022, respectively.

All other finite-lived acquisition-related intangibles related to the business combinations are amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized.

Amortization of intangible assets was $ 8.0 million , $ 7.8 million and $ 6.5 million in 2024, 2023, and 2022, respectively.

Based on the carrying value of intangible assets recorded as of December 31, 2024, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for intangible assets is expected to be as follows:

(in thousands)

Year ending December 31,

Subsequent Event

As of February 28, 2024, no subsequent events are being reported.

Stock Repurchase Program

From January 1, 2025 through February 28, 2025, the Company repurchased 0.2 million shares of its common stock for an aggregate cost of $ 3.1 million at an average price of $ 16.61 per share under the stock repurchase program approved in March 2022.

See Note 16, Stock Repurchase Program .

As of February 28, 2025, a total of $ 147.4 million remained available for future repurchases of its common stock under the stock repurchase program.

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 9A. Controls and Procedures