Fulgent Genetics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2024. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2024. Internal Control over Financial Reporting Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during the year ended December 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting . Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024. Management reviewed the results of its assessment with our Audit and Compliance Committee. The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 8 of this Annual Report on Form 10-K. Inherent Limitations on Disclosure Controls and Procedures and Internal Control over Financial Reporting Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of these inherent limitations, our disclosure and internal controls may not prevent or detect all instances of fraud, misstatements or other control issues. In addition, projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks, including, among others, that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate. 89 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Fulgent Genetics, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Fulgent Genetics, Inc. 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, 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Los Angeles, California February 28, 2025 90 Item 9B. Other Information. Rule 10b5-1 trading arrangements 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. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 91 PART III Item 10. Directors, Executive Off icers and Corporate Governance. 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. Item 11. Executiv e Compensation. 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. Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters. 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. Item 13. Certain Relationships and Related Transactions, and Director Independence. 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. Item 14. Principal Accou ntant Fees and Services. 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. 92 PART IV Item 15. Exhibits and Financ ial Statement Schedules. (a)(1) Consolidated Financial Statements. The following financial statements are included immediately following the signature page hereof and are filed as part of this report: Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 5 Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023, and 2022 F- 6 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023, and 2022 F- 7 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023, and 2022 F- 8 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022 F- 9 Notes to Consolidated Financial Statements F- 10 (a)(2) Financial Statement Schedules. All financial statement schedules have been omitted, as they are not required, not applicable, or the required information is otherwise included. (a)(3) Exhibits. The information required by this Item 15(a)(3) is set forth on the Exhibit Index immediately preceding the signature page of this report and is incorporated herein by reference. Item 16. Form 10-K Summary. None. 93 EXHIBIT INDEX Exhibit Number Description Form File Number Incorporated by Reference Exhibit Filing Date Filed Herewith 2.1 Agreement and Plan of Merger, dated September 16, 2016, by and among the registrant, Fulgent MergerSub, LLC and Fulgent Therapeutics LLC. S-1/A 333-213469 2.1 9/19/2016 3.1 Certificate of Incorporation of the registrant, as amended . 10-Q 001-37894 3.1 8/14/2017 3.1.1 Certificate of Amendment to Certificate of Incorporation of the registrant, dated August 2, 2016. 10-Q 001-37894 3.1.1 8/14/2017 3.1.2 Certificate of Amendment to Certificate of Incorporation of the registrant, dated May 17, 2017. 10-Q 001-37894 3.1.2 8/14/2017 3.2 Amended and Restated Bylaws. 10-Q 001-37894 3.2 8/4/2023 4.1 Form of Certificate of Common Stock of the registrant. S-1/A 333-213469 4.1 9/19/2016 4.2 Description of the registrant’s securities. X 10.1# Form of Indemnification Agreement between the registrant and each of its officers and directors. S-1 333-213469 10.1 9/2/2016 10.2# Amended and Restated 2015 Equity Incentive Plan of Fulgent Therapeutics LLC. S-1 333-213469 10.2 9/2/2016 10.3# Form of Notice of Option Grant and Option Agreement under the Amended and Restated 2015 Equity Incentive Plan of Fulgent Therapeutics LLC. S-1 333-213469 10.3 9/2/2016 10.4# Form of Notice of Profits Interest Grant and Profits Interest Agreement under the Amended and Restated 2015 Equity Incentive Plan of Fulgent Therapeutics LLC. S-1 333-213469 10.4 9/2/2016 10.5# Form of Notice of Restricted Share Unit Grant and Restricted Share Unit Agreement under the Amended and Restated 2015 Equity Incentive Plan of Fulgent Therapeutics LLC. S-1 333-213469 10.5 9/2/2016 10.6# 2016 Omnibus Incentive Plan of the registrant. S-1/A 333-213469 10.6 9/26/2016 10.7# Form of Notice of Stock Option Award and Stock Option Award Agreement under the 2016 Omnibus Incentive Plan of the registrant. S-1 333-213469 10.7 9/2/2016 10.8# Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under the 2016 Omnibus Incentive Plan of the registrant. 10-K 001-37894 10.8 3/17/2017 10.9# Form of Option Substitution Award under the 2016 Omnibus Incentive Plan of the registrant. S-1 333-213469 10.9 9/2/2016 10.10# Form of Notice of Restricted Stock Unit Substitution Award and Restricted Stock Unit Agreement under the 2016 Omnibus Incentive Plan of the registrant. S-1 333-213469 10.10 9/2/2016 10.11# Employment Agreement, dated May 25, 2016, by and among Fulgent Therapeutics LLC, the registrant and Ming Hsieh. S-1 333-213469 10.11 9/2/2016 10.12# Employment Agreement, dated May 25, 2016, by and among Fulgent Therapeutics LLC, the registrant and Paul Kim. S-1 333-213469 10.12 9/2/2016 10.13# Amended and Restated Employment Agreement, dated May 25, 2016, by and among Fulgent Therapeutics LLC, the registrant and Han Lin Gao. S-1 333-213469 10.13 9/2/2016 10.14# Severance Agreement, dated July 7, 2016, by and among Fulgent Therapeutics LLC, the registrant and Ming Hsieh. S-1 333-213469 10.14 9/2/2016 10.15# Severance Agreement, dated July 7, 2016, by and among Fulgent Therapeutics LLC, the registrant and Paul Kim. S-1 333-213469 10.15 9/2/2016 10.16# Severance Agreement, dated July 7, 2016, by and among Fulgent Therapeutics LLC, the registrant and Han Lin Gao. S-1 333-213469 10.16 9/2/2016 10.17 Contribution and Allocation Agreement, dated May 19, 2016, by and among Fulgent Therapeutics LLC, Fulgent Pharma LLC and Ming Hsieh. S-1 333-213469 10.17 9/2/2016 10.18 Form of Fourth Amended and Restated Operating Agreement of Fulgent Therapeutics LLC, to be in effect upon completion of the Reorganization. S-1/A 333-213469 2.1 9/19/2016 10.19 Director Compensation Program of the registrant, effective as of September 28, 2016 and amended November 2, 2017. 10-K 001-37894 10.20 3/20/2018 94 Exhibit Number Description Form File Number Incorporated by Reference Exhibit Filing Date Filed Herewith 10.20§ Cooperation Agreement on the Establishment of Fujian Fujun Gene Biotech Co., Ltd., dated April 25, 2017, by and among Shenzhen Fujin Gene Science & Technology Co., Ltd., Xilong Scientific Co., Ltd. and Fuzhou Jinqiang Investment Partnership (LP). 10-Q 001-37894 10.1 8/14/2017 10.21 Fulgent Genetics, Inc. Amended and Restated 2016 Omnibus Incentive Plan . 8-K 001-37894 10.1 5/21/2018 10.22 Fulgent Genetics, Inc. Amended and Restated 2016 Omnibus Incentive Plan . 8-K 001-37894 10.1 9/18/2020 10.23^ Agreement for Purchase and Sale of Property, dated July 23, 2020, by and between the registrant and 4401 Santa Anita Corporation . 8-K 001-37894 2.1 10/21/2020 10.24# Employment Agreement, dated March 8, 2021, by and among Fulgent Therapeutics, LLC, Fulgent Genetics, Inc. and Jian Xie. 10-K 001-37894 10.37 3/8/2021 10.25# Severance Agreement, dated March 8, 2021, by and among Fulgent Therapeutics LLC, Fulgent Genetics, Inc. and Jian Xie. 10-K 001-37894 10.38 3/8/2021 10.26#^ Amended and Restated Non-Employee Director Compensation Policy. 10-Q 001-37894 10.1 5/7/2021 10.27§ Restructuring Agreement of Fujian Fujun Gene Biotech Co., Ltd. 10-Q 001-37894 10.1 8/10/2021 10.28# Fulgent Genetics, Inc. Incentive Compensation Recoupment Policy. 8-K 001-37894 10.1 3/29/2022 10.29 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 . 8-K 001-37894 2.1 4/26/2022 10.30# Amended and Restated Director Compensation Program of the registrant, dated as of August 1, 2022. 10-Q 001-37894 10.1 11/7/2022 10.31# Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under the Fulgent Pharma Holdings, Inc. 2022 Omnibus Incentive Plan. 10-Q 001-37894 10.2 11/7/2022 10.32^ 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 . 10-Q 001-37894 10.3 11/7/2022 10.33 Rule 10b5-1 Issuer Repurchase Plan, dated December 12, 2023, by and between Fulgent Genetics, Inc. and Piper Sandler & Co. 10-K 001-37894 10.41 2/28/2024 10.34^ 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. 10-K 001-37894 10.48 2/28/2023 10.35 Lease Agreement of Premises at 15-19 Crawford Street Needham, Massachusetts, by and between Inform Diagnostics and Crawford Street DE, LLC. 10-K 001-37894 10.51 2/28/2023 10.36# Fulgent Pharma Holdings, Inc. 2022 Omnibus Incentive Plan . 10-K 001-37894 10.52 2/28/2023 10.37*^# Amended and Restated Director Compensation Program of the registrant . 10-Q 001-37894 10.1 5/5/2023 10.38 Executive Officer Incentive Plan of the registrant . 10-Q 001-37894 10.3 5/5/2023 10.39 Amended and Restated 2016 Omnibus Incentive Plan of the registrant . 8-K 001-37894 10.1 5//18/2023 10.40^# Amended and Restated Executive Officer Incentive Plan of the registrant . 10-Q 001-37894 10.2 11/3/2023 19.1 Insider Trading Policy . X 21.1 Subsidiaries of the registrant. X 23.1 Consent of Deloitte & Touche LLP, independent registered public accounting firm, relating to the financial statements of the registrant. X 24.1 Power of Attorney (included on the signature page hereto). X 95 Exhibit Number Description Form File Number Incorporated by Reference Exhibit Filing Date Filed Herewith 31.1 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. X 31.2 Certification of Principal Financial 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. X 32.1* Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 97.1^# Amended and Restated Incentive Compensation Recoupment Policy of the registrant . 10-Q 001-37894 10.1 11/3/2023 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). X * This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing. # Management contract or compensatory plan, contract or arrangement. § Confidential treatment has been granted with respect to portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, and these confidential portions have been redacted from the version of this agreement that is incorporated by reference in this report. A complete copy of this exhibit, including the redacted portions, has been separately furnished to the SEC. ^ Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the SEC. 96 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FULGENT GENETICS, INC. Date: February 28, 2025 By: /s/ Ming Hsieh Ming Hsieh Chief Executive Officer POWER OF ATTORNEY IN WITNESS WHEREOF, each person whose signature appears below constitutes and appoints Ming Hsieh and Paul Kim as his or her true and lawful agent, proxy and attorney-in-fact, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on and sign any amendments to this report, with exhibits thereto and other documents in connection therewith, (ii) act on and sign such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and in each case file the same with the SEC, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Name and Signature Title Date /s/ Ming Hsieh Chief Executive Officer and Chairman of the Board February 28, 2025 Ming Hsieh (principal executive officer) /s/ Paul Kim Chief Financial Officer February 28, 2025 Paul Kim (principal financial and accounting officer) /s/ Michael Nohaile Director February 28, 2025 Michael Nohaile /s/ Regina Groves Director February 28, 2025 Regina Groves /s/ Linda Marsh Director February 28, 2025 Linda Marsh 97 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 34) F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 5 Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023, and 2022 F- 6 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023, and 2022 F- 7 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023, and 2022 F- 8 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022 F- 9 Notes to Consolidated Financial Statements F- 10 F- 1 REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Fulgent Genetics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Fulgent Genetics, Inc., and subsidiaries (the “Company”) as of December 31, 2024, and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 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 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 $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 the reporting unit. 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. F- 2 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 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. o Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies. 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) discount rate by: o Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation. o Developing a range of independent estimates and comparing those to the discount rate selected by management. Intangible Assets – IPR&D – Refer to Notes 2 and 17 to the financial statements Critical Audit Matter Description The Company has in-process research & development (“IPR&D”) that are indefinite-lived intangible assets. As of December 31, 2024, the carrying value of the IPR&D is $64.6 million. 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 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 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. 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. 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 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. F- 3 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. o Developing a range of independent estimates and comparing those to the discount rate selected by management. /s/ DELOITTE & TOUCHE LLP Los Angeles, California February 28, 2025 We have served as the Company’s auditor since 2016. F- 4 CONSOLIDATED FINANCIAL STATEMENTS FULGENT GENETICS, INC. Consolidated Balance Sheets (in thousands, except par value data) December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 55,144 $ 97,473 Marketable securities 202,962 326,681 Trade accounts receivable, net of allowance for credit losses of $ 20,458 and $ 25,226 69,021 51,132 Other current assets 26,444 32,559 Total current assets 353,571 507,845 Marketable securities, long-term 570,351 423,571 Intangible assets, net 134,978 143,053 Fixed assets, net 105,549 83,464 Goodwill 22,055 22,055 Redeemable preferred stock investment — 20,438 Other long-term assets 33,460 34,902 Total assets $ 1,219,964 $ 1,235,328 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 18,364 $ 15,360 Accrued liabilities 24,279 30,737 Customer deposit 27,610 22,700 Contract liabilities 2,234 2,874 Notes payable, current portion 412 1,183 Other current liabilities — 164 Total current liabilities 72,899 73,018 Deferred tax liabilities 6,370 7,962 Unrecognized tax benefits 4,563 5,978 Other long-term liabilities 6,973 15,084 Total liabilities 90,805 102,042 Commitments and contingencies (Note 8) Stockholders’ equity Common stock, $ 0.0001 par value per share, 50,000 shares authorized, 33,614 shares issued and 30,841 shares outstanding, and 32,416 shares issued and 29,653 shares outstanding 3 3 Preferred stock, $ 0.0001 par value per share, 1,000 shares authorized, no shares issued or outstanding — — Additional paid-in capital 543,126 501,718 Accumulated other comprehensive (loss) income ( 368 ) 1,205 Retained earnings 590,467 633,175 Total Fulgent stockholders’ equity 1,133,228 1,136,101 Noncontrolling interest ( 4,069 ) ( 2,815 ) Total stockholders’ equity 1,129,159 1,133,286 Total liabilities and stockholders’ equity $ 1,219,964 $ 1,235,328 The accompanying notes are an integral part of these consolidated financial statements. F- 5 CONSOLIDATED FINANCIAL STATEMENTS FULGENT GENETICS, INC. Consolidated Statem ents of Operations (in thousands, except per share) Year Ended December 31, 2024 2023 2022 Revenue $ 283,470 $ 289,213 $ 618,968 Cost of revenue 176,255 184,757 252,067 Gross profit 107,215 104,456 366,901 Operating expenses: Research and development 48,816 41,440 28,910 Selling and marketing 36,246 41,467 38,918 General and administrative 88,106 88,999 111,074 Amortization of intangible assets 7,965 7,845 6,497 Goodwill impairment loss — 120,234 — Restructuring costs — — 2,975 Total operating expenses 181,133 299,985 188,374 Operating (loss) income ( 73,918 ) ( 195,529 ) 178,527 Other income (expenses): Interest income 31,304 21,612 5,624 Interest expense 170 ( 488 ) ( 1,013 ) Impairment of available-for-sale debt securities ( 10,073 ) — — Other income, net 561 320 887 Total other income, net 21,962 21,444 5,498 (Loss) income before income taxes ( 51,956 ) ( 174,085 ) 184,025 (Benefit from) provision for income taxes ( 8,136 ) 1,154 42,102 Net (loss) income from consolidated operations ( 43,820 ) ( 175,239 ) 141,923 Net loss attributable to noncontrolling interests 1,112 7,414 1,480 Net (loss) income attributable to Fulgent $ ( 42,708 ) $ ( 167,825 ) $ 143,403 Net (loss) income per common share attributable to Fulgent: Basic $ ( 1.41 ) $ ( 5.63 ) $ 4.76 Diluted $ ( 1.41 ) $ ( 5.63 ) $ 4.63 Weighted-average common shares: Basic 30,235 29,784 30,097 Diluted 30,235 29,784 30,964 The accompanying notes are an integral part of these consolidated financial statements. F- 6 FULGENT GENETICS, INC. Consolidated Statements of Comprehensive Income (Loss) (in thousands) Year Ended December 31, 2024 2023 2022 Net (loss) income from consolidated operations $ ( 43,820 ) $ ( 175,239 ) $ 141,923 Other comprehensive (loss) income Foreign currency translation loss ( 511 ) ( 1,200 ) ( 2,665 ) Net (loss) income on available-for-sale debt securities, net of tax ( 1,204 ) 24,717 ( 19,940 ) Net comprehensive (loss) income from consolidated operations ( 45,535 ) ( 151,722 ) 119,318 Net loss attributable to noncontrolling interest 1,112 7,414 1,480 Foreign currency translation loss (gain) attributable to noncontrolling interest 142 ( 1,409 ) 2,461 Comprehensive loss attributable to noncontrolling interest 1,254 6,005 3,941 Comprehensive (loss) income attributable to Fulgent $ ( 44,281 ) $ ( 145,717 ) $ 123,259 The accompanying notes are an integral part of these consolidated financial statements. F- 7 FULGENT GENETICS, INC. Consolidated Statement s of Stockholders’ Equity (in thousands) Fulgent Stockholders’ Equity Shares Amount Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Fulgent Stockholders’ Equity Noncontrolling Interest Total Equity Balance at January 1, 2022 30,160 $ 3 $ 501,908 $ ( 759 ) $ 657,597 $ 1,158,749 $ 7,131 $ 1,165,880 Equity-based compensation — — 32,640 — — 32,640 — 32,640 Exercise of common stock options 5 — 31 — — 31 — 31 Restricted stock awards 699 — — — — — — — Common stock withholding for employee tax obligations ( 32 ) — ( 1,768 ) — — ( 1,768 ) — ( 1,768 ) Repurchase of common stock ( 1,810 ) — ( 74,337 ) — — ( 74,337 ) — ( 74,337 ) Common stock issued in a business combination (1) 416 — 28,111 — — 28,111 — 28,111 Other comprehensive loss, net — — — ( 20,144 ) — ( 20,144 ) ( 2,461 ) ( 22,605 ) Net income (loss) — — — — 143,403 143,403 ( 1,480 ) 141,923 Balance at December 31, 2022 29,438 $ 3 $ 486,585 $ ( 20,903 ) $ 801,000 $ 1,266,685 $ 3,190 $ 1,269,875 Equity-based compensation — — 42,922 — — 42,922 — 42,922 Exercise of common stock options 9 — 3 — — 3 — 3 Restricted stock awards 1,066 — — — — — — — Common stock withholding for employee tax obligations ( 93 ) — ( 2,732 ) — — ( 2,732 ) — ( 2,732 ) Repurchase of common stock ( 953 ) — ( 25,060 ) — — ( 25,060 ) — ( 25,060 ) Common stock issued in a business combination (1) 186 — — — — — — — Other comprehensive income, net — — — 22,108 — 22,108 1,409 23,517 Net loss — — — — ( 167,825 ) ( 167,825 ) ( 7,414 ) ( 175,239 ) Balance at December 31, 2023 29,653 $ 3 $ 501,718 $ 1,205 $ 633,175 $ 1,136,101 $ ( 2,815 ) $ 1,133,286 Equity-based compensation — — 44,481 — — 44,481 — 44,481 Exercise of common stock options 133 — 51 — — 51 — 51 Restricted stock awards 1,004 — — — — — — — Common stock withholding for employee tax obligations ( 125 ) — ( 2,899 ) — — ( 2,899 ) — ( 2,899 ) Repurchase of common stock ( 10 ) — ( 225 ) — — ( 225 ) — ( 225 ) Common stock issued in a business combination (1) 186 — — — — — — — Other comprehensive loss, net — — — ( 1,573 ) — ( 1,573 ) ( 142 ) ( 1,715 ) Net loss — — — — ( 42,708 ) ( 42,708 ) ( 1,112 ) ( 43,820 ) Balance at December 31, 2024 30,841 $ 3 $ 543,126 $ ( 368 ) $ 590,467 $ 1,133,228 $ ( 4,069 ) $ 1,129,159 (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. F- 8 FULGENT GENETICS, INC. Consolidated Statem ents of Cash Flows (in thousands) Year Ended December 31, 2024 2023 2022 Cash flow from operating activities Net (loss) income from consolidated operations $ ( 43,820 ) $ ( 175,239 ) $ 141,923 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Goodwill impairment loss — 120,234 — Equity-based compensation 44,481 42,922 32,640 Depreciation and amortization 24,928 26,143 32,662 (Adjustment) provision for credit losses ( 1,730 ) ( 880 ) 32,596 Noncash lease expense 3,760 6,412 4,913 Loss on disposal of fixed asset 320 305 502 Amortization of (discount) premium of marketable securities ( 5,550 ) ( 3,911 ) 4,767 Deferred taxes ( 3,736 ) 11,466 ( 8,280 ) Unrecognized tax benefits ( 1,414 ) ( 3,858 ) 9,111 Net realized loss on marketable securities 994 589 692 Impairment of available-for-sale debt securities 10,073 — — Other ( 7 ) ( 21 ) ( 11 ) Changes in operating assets and liabilities: Trade accounts receivable ( 16,303 ) 2,388 68,638 Income tax 9,253 2,759 ( 14,544 ) Other current and long-term assets 199 ( 3,331 ) 9,380 Accounts payable 3,066 ( 6,896 ) ( 25,339 ) Contract liabilities ( 639 ) ( 325 ) ( 11,497 ) Customer deposits 4,917 11,815 ( 8,887 ) Accrued liabilities and other liabilities ( 3,961 ) 2,718 ( 10,915 ) Operating lease liabilities ( 3,771 ) ( 6,287 ) ( 4,831 ) Net cash provided by operating activities 21,060 27,003 253,520 Cash flow from investing activities Purchase of marketable securities ( 472,415 ) ( 491,914 ) ( 417,982 ) Purchases of fixed assets ( 40,315 ) ( 22,207 ) ( 18,775 ) Purchase of preferred stock of privately held company — — ( 15,000 ) Contingent consideration payout related to a business acquisition — — ( 10,000 ) Maturities of marketable securities 349,795 508,558 232,534 Proceeds from sale of marketable securities 104,270 44,085 140,176 Proceeds from sale of fixed assets 313 775 412 Acquisition of businesses, net of cash acquired — ( 399 ) ( 172,679 ) Net cash (used in) provided by investing activities ( 58,352 ) 38,898 ( 261,314 ) Cash flow from financing activities Common stock withholding for employee tax obligations ( 2,899 ) ( 2,732 ) ( 1,768 ) Repayment of notes payable ( 1,230 ) ( 4,266 ) ( 367 ) Principal paid for finance lease ( 544 ) ( 730 ) ( 700 ) Repurchase of common stock ( 225 ) ( 25,060 ) ( 74,337 ) Repayment of investment margin loan — ( 15,000 ) — Proceeds from exercise of stock options 51 3 31 Net cash used in financing activities ( 4,847 ) ( 47,785 ) ( 77,141 ) Effect of exchange rate changes on cash and cash equivalents ( 55 ) ( 149 ) ( 453 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 42,194 ) 17,967 ( 85,388 ) Cash, cash equivalents, and restricted cash at beginning of period 97,473 79,506 164,894 Cash, cash equivalents, and restricted cash at end of period $ 55,279 $ 97,473 $ 79,506 Supplemental disclosures of cash flow information Cash and cash equivalents $ 55,144 $ 97,473 $ 79,506 Restricted cash 135 — — Total cash, cash equivalents, and restricted cash $ 55,279 $ 97,473 $ 79,506 Income taxes paid $ 27,588 $ 3,261 $ 56,193 Interest Paid $ 512 $ 960 $ — Supplemental disclosures of non-cash investing and financing activities Stock consideration in a business combination $ — $ — $ 28,111 Maturities of marketable securities in ither current assets $ — $ — $ 19,120 Purchases of fixed assets in notes payable $ — $ — $ 3,833 Purchases of fixed assets in accounts payable $ 1,806 $ 1,799 $ 2,989 Finance lease right-of-use assets obtained in exchange for lease liabilities $ — $ — $ 573 Operating lease right-of-use assets obtained in exchange for lease liabilities $ 1,158 $ 2,661 $ 52 Operating lease right-of-use assets reduced due to lease modification and termination $ 57 $ 142 $ 66 Operating lease liabilities removed due to purchasing underlying assets $ 2,799 $ — $ — Finance lease right-of-use assets reduced due to lease modification and termination $ — $ 696 $ — The accompanying notes are an integral part of these consolidated financial statements. F- 9 FULGENT GENETICS, INC. Notes to Consolidated Financial Statements Note 1. Overview and Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. 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. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (i) the power to direct the economically significant activities of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company uses the equity method to account for its investments in entities that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. All intercompany accounts and transactions are eliminated from the accompanying consolidated financial statements. Nature of the Business 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 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. The Company aims to transform from a genomic diagnostic business into a fully integrated precision medicine company. Note 2. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. These estimates, judgments, and assumptions are based on historical data and experience available at the date of the accompanying consolidated financial statements, as well as various other factors management believes to be reasonable under the circumstances. The Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from these estimates. On an on-going basis, management evaluates its estimates, primarily those related to: (i) revenue recognition criteria, (ii) accounts receivable and allowances for credit losses, (iii) the useful lives of fixed assets and intangible assets, (iv) estimates of tax liabilities, (v) valuation of goodwill and indefinite-lived intangible assets at time of acquisition and on a recurring basis, and (vi) valuation of investments. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company. All intercompany transactions and balances have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and money market accounts. 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 F- 10 12 months. 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 All marketable debt securities, which consist of U.S. government and agency debt securities, U.S. treasury bills, corporate debt securities, municipal bonds, and Yankee debt securities issued by foreign governments or entities and denominated in U.S. 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 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 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 income, in the accompanying Consolidated Statements of Operations. The cost of any marketable equity securities sold is based on the specific-identification method. For available-for-sale debt securities, in an unrealized loss, the Company determines whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectability of the security and information about past events, current conditions, and reasonable and supportable forecasts. The Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows to be collected is less than the amortized basis of the security, a credit loss exists, and an allowance for credit losses is recorded for the credit loss, limited by the amount of unrealized loss. 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 other income, net. Trade Accounts Receivable and Allowance for Credit Losses Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains an allowance for credit losses for expected uncollectible trade accounts receivable, which is recorded as an offset to trade accounts receivable, and changes in allowance for credit losses are classified as a general and administrative expense in the accompanying Consolidated Statements of Operations. The Company assesses collectability by reviewing trade accounts receivable on a collective basis where similar risk characteristics exist and on an individual basis when it identifies specific customers that have deterioration in credit quality such that they may no longer share similar risk characteristics with the other receivables. In determining the amount of the allowance for credit losses, the Company uses a loss rate model or probability-of-default and loss given default model. Following the loss rate method, expected credit losses are determined based on an estimated historical loss rate. The probability of default method allows the ability to define a point of default and measure credit losses for receivables that have reached the point of default for purposes of calculating the allowance for credit losses. Loss given default represents the likelihood that a receivable that has reached the point of default will not be collected in full. The Company updates its loss rate and factors annually to incorporate the most recent historical data and adjusts the quantitative portion of the reserve through its qualitative reserve overlay. The Company looks at qualitative factors such as general economic conditions in determining expected credit losses. A roll-forward of the activity in the Company’s allowance for credit losses is as follows: 2024 2023 2022 (in thousands) Allowance for credit losses at beginning of year $ 25,226 $ 41,205 $ 11,217 Current period (gain) provision ( 1,730 ) ( 880 ) 32,596 Write-downs ( 11,155 ) ( 15,099 ) ( 2,608 ) Recoveries of amounts previously charged off 8,117 — — Allowance for credit losses at end of year $ 20,458 $ 25,226 $ 41,205 F- 11 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: 2024 2023 2022 (in thousands) Allowance for credit losses at beginning of year $ — $ — $ — Current period provision 10,073 — — Write-downs ( 10,073 ) — — Allowance for credit losses at end of year $ — $ — $ — Business Combinations The Company uses the acquisition method of accounting and allocates the fair value of purchase consideration to the assets acquired and liabilities assumed from an acquiree based on their respective fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, expected cost and time to develop in-process research and development, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability. Fixed Assets Fixed assets are recorded at cost, net of accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized over the shorter of their expected lives or the applicable lease term, including renewal options, if available. Major replacements and improvements are capitalized, while general repairs and maintenance are expensed as incurred. See Note 5, Fixed Assets , for useful lives for each major class of fixed assets. F- 12 Finite-Lived Intangible assets 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 14 years . See Note 17, Goodwill and Intangible Assets , for details of intangible assets. Impairment of Long-Lived Assets The Company evaluates the carrying amount of its long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of an asset and its eventual disposition is less than the carrying amount of the asset. Goodwill and Indefinite-lived Intangibles 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. The Company assesses goodwill and indefinite-lived intangibles for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company may choose to bypass a qualitative assessment of impairment for any reporting unit and proceed directly to performing a quantitative assessment. An impairment loss would be recognized for the amount by which the reporting unit's carrying amount exceeds its fair value. The Company’s quantitative assessment includes estimating the fair value of each reporting unit and comparing it to its carrying value. The Company estimates the fair value of reporting units using both income-based and market-based valuation methods and typically engages a third-party appraisal firm to assist with the valuation. The estimated fair value for each reporting unit is determined based upon the range of estimated values developed from the income and market-based methods. If the estimated fair value of a reporting unit exceeds its carrying value, the goodwill is not impaired, and no further review is required. The income-based fair value methodology is based on a reporting unit’s forecasted future cash flows that are discounted to the present value using the reporting unit’s weighted-average cost of capital, or WACC. Under the income-based approach, it requires management’s assumptions and judgments regarding economic conditions in the markets in which the company operates and conditions in the capital markets, many of which are outside of management’s control. The market-based fair value methodology looks at the guideline public company valuation method to determine the prices of comparable public companies and looks at merger and acquisition methods, similar businesses that were sold recently, to estimate the value of the reporting units. 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, 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 The Company maintains reagents and other consumables primarily used in testing which are valued at the lower of cost or net realizable value. Cost is determined using actual costs on a first-in, first-out basis. The reagents and other consumables were included in other current assets in the accompanying Consolidated Balance Sheets. Fair Value of Financial Instruments 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. F- 13 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. 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. Management believes that the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which its cash and cash equivalents are held. 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 $ 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. for certain laboratory services, equipment, tools, and drug intermediates in connection with research and development efforts. The Company also relies on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into its processes, referred to as reagents, as well as for the sequencers and various other equipment and materials it uses in its laboratory operations. In particular, the Company relies on a sole supplier for the next generation sequencers and associated reagents it uses to perform its genetic tests and as the sole provider of maintenance and repair services for these sequencers. 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 it 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 sequencers and various associated reagents. Leases 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. Operating and finance lease right-of-use assets, or ROU assets, short-term lease liabilities, and long-term lease liabilities are included in other long-term assets, accrued liabilities, and other long-term liabilities, respectively, in the accompanying Consolidated Balance Sheets. Lease ROU assets represent the Company’s right to use an underlying asset for the lease term. Lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, including options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company uses its incremental borrowing rate based on the information available at the commencement date, including inquiries with its bank, in determining the present value of lease payments when its leases do not provide an implicit or explicit rate. Lease ROU assets consist of initial measurement of lease liabilities, any lease payments made to lessor on or before the lease commencement date, minus any lease incentive received, and any initial direct costs incurred by the Company. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance lease, ROU assets are amortized on a straight-line basis from the commencement date to the earlier of the end of useful life of the ROU assets or the end of the lease term. Amortization of ROU assets and interest on the lease liability for finance leases are included as charges to the accompanying Consolidated Statements of Operations. Lease ROU assets and liabilities arising from business combinations are recognized and measured at the acquisition dates as if an acquired lease were a new lease at the date of acquisition using the Company’s incremental borrowing rate unless the discount rate is implicit in the lease. The Company elects to not to recognize assets or liabilities as of the acquisition dates for leases that, on the acquisition dates, have a remaining lease term of 12 months or less. The Company also retains the acquirees’ classification of the leases if there are no modifications as part of the business combinations. 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 F- 14 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 The Company capitalizes certain costs incurred to purchase computer software for internal use. 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 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. Costs that do not meet that criteria and costs incurred on projects in the preliminary and post-implementation phases are expensed as incurred. Reportable Segment and Geographic Information Reporting segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company reports its business in two segments, a laboratory services business and a therapeutic development business. For further financial information about these segments, including information for each of the last three fiscal years regarding revenue, operating income (loss), and other important information, see Note 7, Reportable Segment and Geographic Information . Revenue Recognition The Company generates revenue from sales of its testing services. The Company currently receives payments from primarily three different customer types: insurance payors, institutional customers, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations, and patients who pay directly. The Company recognizes revenue in an amount that reflects the consideration to which it expects to be entitled in exchange for the transfer of promised goods or services to its customers. To determine revenue recognition for contracts with customers, the Company performs the following steps described in ASC 606: (1) identifies the contract with the customer, or Step 1, (2) identifies the performance obligations in the contract, or Step 2, (3) determines the transaction price, or Step 3, (4) allocates the transaction price to the performance obligations in the contract, or Step 4, and (5) recognizes revenue when (or as) the entity satisfies a performance obligation, or Step 5. The Company’s test results are primarily delivered electronically. The Company bills certain customers for shipping and handling fees incurred by the Company, and shipping and handling fees billed to customers are included in revenue, and such shipping and handling fees incurred are included in cost of revenue in the accompanying Consolidated Statements of Operations. Performance Obligations Institutional and Patient Direct Pay 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. 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. As these contracts typically have a single performance obligation, no allocation of the transaction price is required in Step 4. Control over testing services is transferred to the Company’s ordering facility at a point in time. 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. F- 15 Insurance 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 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. As these contracts typically have a single performance obligation, no allocation of the transaction price is required in Step 4. Control over testing services is transferred to the Company’s ordering parties at a point in time. Specifically, the Company determined the customer obtains control of the promised service upon delivery of the test results. Certain incremental costs pertaining to both insurance and institutional, such as commissions, are incurred in obtaining contracts. Contract costs are capitalized if the Company expects to recover them, and amortization of contract costs is classified in the general and administrative expense in the Consolidated Statements of Operations. Historically contract costs have not been significant to the financial statements. Significant Judgments and Contract Estimates 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 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 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 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. $ 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 Contract liabilities are recorded when the Company receives payment or bills prior to completing its obligation to transfer goods or services to a customer, and the Company subsequently recognizes contract liabilities as revenue in the period in which the applicable revenue recognition criteria, as described above, are met. Customer Deposit Customer deposit in the accompanying Consolidated Balance Sheets consists of payments received from customers in excess of their outstanding trade accounts receivable balances. These deposits will be offset against future testing receivables or refunded to the customers. Overhead Expenses 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. F- 16 Cost of Revenue Cost of revenue reflects the aggregate costs incurred in delivering test results and consists of: personnel costs, including salaries, employee benefit costs, bonuses, and equity-based compensation expenses; costs of laboratory supplies; depreciation of laboratory equipment; amortization of leasehold and building improvements and allocated overhead. Costs associated with performing tests are recorded as tests are processed. Research and Development Expenses Research and development expenses represent costs incurred to develop the Company’s technology and future tests. These costs consist of: personnel costs, including salaries, employee benefit costs, bonuses, and equity-based compensation expenses; laboratory supplies; consulting costs and allocated overhead. The Company expenses all research and development costs in the periods in which they are incurred. Selling and Marketing Expenses Selling and marketing expenses consist of: personnel costs, including salaries, employee benefit costs, bonuses, and equity-based compensation expenses; customer service expenses; direct marketing expenses; educational and promotional expenses; market research and analysis and allocated overhead. The Company expenses all selling and marketing costs as incurred. General and Administrative Expenses General and administrative expenses include executive, finance and accounting, legal, and human resources functions. These expenses consist of: personnel costs, including salaries, employee benefit costs, bonuses, and equity-based compensation expenses; audit and legal expenses; consulting costs and allocated overhead. The Company expenses all general and administrative expenses as incurred. Restructuring Costs 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. The plan identified specific employees to be terminated and established terms of benefits those employees would receive upon termination. No additional costs are expected to be incurred under the plan of termination post 2022, and the full amount was paid off by August 2023 . Income Taxes Income taxes are accounted for under the asset and liability method. The Company provides for federal, state and foreign income taxes currently payable, as well as for taxes deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount with a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. For income tax positions where it is not more likely than not that a tax benefit will be sustained, the Company does not recognize a tax benefit in its consolidated financial statements. 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). F- 17 Equity-Based Compensation The Company grants various types of equity-based awards to its employees, consultants, and non-employee directors. Equity-based compensation costs are reflected in the accompanying Consolidated Statements of Operations based upon each award recipient’s role with the Company. The Company primarily grants to its employees restricted stock unit awards, or RSU awards, that generally vest over a specified period of time upon the satisfaction of service-based conditions or performance conditions. Compensation expense for employee RSU awards with a service-based vesting condition is recognized ratably over the vesting period of the award. Compensation expense for employee RSU awards with a performance condition is based on the probable outcome of that performance condition. The Company measures compensation expense for equity-based awards granted to employees based on the fair value of the award on the grant date of the award. Foreign Currency Translation and Foreign Currency Transactions The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation gain (loss) included in the accompanying Consolidated Statements of Comprehensive Income (Loss). The Company and its subsidiaries that use the U.S. 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 other income, net, in the accompanying Consolidated Statements of Operations. Losses from foreign currency exchange were not significant in 2024, 2023, and 2022 . 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. 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 Basic net income or loss per common share is computed by dividing the net income or loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income or loss per common share is computed by dividing the net income or loss attributable to common stockholders by the weighted-average number of common shares and dilutive common share equivalents outstanding during the period. Disaggregation of Revenue The Company classifies its customers into three payor types: (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. Year Ended December 31, 2024 2023 2022 (in thousands) Revenue by payor Institutional $ 154,733 $ 134,191 $ 239,961 Insurance 123,924 151,946 377,873 Patient 4,813 3,076 1,134 Total revenue $ 283,470 $ 289,213 $ 618,968 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. F- 18 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. Any changes in variable consideration estimates that affect transactions are accounted for on a cumulative catch-up basis. Contract Balances Receivables from contracts with customers - Receivables from contracts with customers are included within trade accounts receivable on the Consolidated Balance Sheets. Receivables from Insurance and Institutional customers represented 44 % and 56 % , respectively, as of December 31, 2024 and 39 % and 61 % , respectively, as of December 31, 2023. Contracts assets and liabilities - Contract assets from contracts with customers associated with contract execution and certain costs to fulfill a contract are included in other current assets in the accompanying Consolidated Balance Sheets. Contract liabilities are recorded when the Company receives payment prior to completing its obligation to transfer goods or services to a customer. Contract liabilities are included in the Consolidated Balance Sheets. Revenues of $ 2.5 million , $ 2.2 million and $ 14.4 million for the years ended December 31, 2024, 2023, and 2022, respectively, related to contract liabilities at the beginning of the respective periods were recognized. 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 of December 31, 2024. 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 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 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. Adopted 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. Issued In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures . 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 F- 19 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. The Company does not expect that any other recently issued accounting guidance will have a significant effect on its consolidated financial statements. Note 3. Equity and Debt Securities The Company’s equity and debt securities consisted of the following: December 31, 2024 Amortized Cost Basis Unrealized Gains Unrealized Losses Aggregate Fair Value (in thousands) Equity securities Long-term Preferred stock of privately-held companies $ 24,927 $ — $ — $ 24,927 Total equity securities 24,927 — — 24,927 Available-for-sale debt securities Short-term U.S. government debt securities 75,054 136 ( 25 ) 75,165 U.S. agency debt securities 65,490 72 ( 23 ) 65,539 U.S. treasury bills 44,366 19 ( 2 ) 44,383 Corporate debt securities 19,177 12 ( 50 ) 19,139 Municipal bonds 3,719 1 ( 7 ) 3,713 Money market accounts 19,720 — — 19,720 Less: Cash equivalents ( 24,696 ) ( 1 ) — ( 24,697 ) Total debt securities due within 1 year 202,830 239 ( 107 ) 202,962 After 1 year through 5 years U.S. government debt securities 379,060 565 ( 2,283 ) 377,342 U.S. agency debt securities 144,398 57 ( 1,507 ) 142,948 Corporate debt securities 47,801 114 ( 150 ) 47,765 Municipal bonds 1,820 2 ( 4 ) 1,818 Yankee debt securities 501 — ( 23 ) 478 Total debt securities due after 1 year through 5 years 573,580 738 ( 3,967 ) 570,351 Total available-for-sale debt securities 776,410 977 ( 4,074 ) 773,313 Total equity and debt securities $ 801,337 $ 977 $ ( 4,074 ) $ 798,240 F- 20 December 31, 2023 Amortized Cost Basis Unrealized Gains Unrealized Losses Aggregate Fair Value (in thousands) Equity securities Long-term Preferred stock of privately-held company $ 15,000 $ — $ — $ 15,000 Total equity securities 15,000 — — 15,000 Available-for-sale debt securities Short-term U.S. government debt securities 119,739 8 ( 1,765 ) 117,982 U.S. agency debt securities 72,310 — ( 1,414 ) 70,896 U.S. treasury bills 69,214 36 — 69,250 Corporate debt securities 63,810 — ( 792 ) 63,018 Money market accounts 38,291 — — 38,291 Municipal bonds 5,557 1 ( 23 ) 5,535 Less: Cash equivalents ( 38,291 ) — — ( 38,291 ) Total debt securities due within 1 year 330,630 45 ( 3,994 ) 326,681 After 1 year through 5 years U.S. government debt securities 247,104 1,262 ( 578 ) 247,788 U.S. agency debt securities 156,150 161 ( 490 ) 155,821 Corporate debt securities 12,885 — ( 765 ) 12,120 Municipal bonds 6,337 2 ( 48 ) 6,291 Yankee debt securities 752 — ( 60 ) 692 Redeemable preferred stock investment 20,000 438 — 20,438 Total debt securities due after 1 year through 5 years 443,228 1,863 ( 1,941 ) 443,150 After 5 years through 10 years Municipal bonds 868 1 ( 10 ) 859 Total debt securities due after 5 years through 10 years 868 1 ( 10 ) 859 Total available-for-sale debt securities 774,726 1,909 ( 5,945 ) 770,690 Total equity and debt securities $ 789,726 $ 1,909 $ ( 5,945 ) $ 785,690 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. 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. F- 21 Note 4. Fair Value Measurements The authoritative guidance on fair value measurements establishes a framework with respect to measuring assets and liabilities at fair value on a recurring basis and non-recurring basis. Under the framework, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as of the measurement date. The framework also establishes a three-tier hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability and are developed based on the best information available in the circumstances. The hierarchy consists of the following three levels: Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs are unobservable for the asset or liability. The following tables present information about the Company’s financial assets measured at fair value on a recurring basis, based on the three-tier fair value hierarchy: December 31, 2024 Total Level 1 Level 2 Level 3 (in thousands) Equity securities, debt securities and cash equivalents U.S. government debt securities $ 452,507 $ — $ 452,507 $ — U.S. agency debt securities 208,487 — 208,487 — Corporate debt securities 66,904 — 66,904 — U.S. treasury bills 44,383 44,383 — — Preferred stock of privately-held companies 24,927 — — 24,927 Money market accounts 19,720 19,720 — — Municipal bonds 5,531 — 5,531 — Yankee debt securities 478 — 478 — Total equity securities, debt securities and cash equivalents $ 822,937 $ 64,103 $ 733,907 $ 24,927 December 31, 2023 Total Level 1 Level 2 Level 3 (in thousands) Equity securities, debt securities and cash equivalents U.S. government debt securities $ 365,770 $ — $ 365,770 $ — U.S. agency debt securities 226,717 — 226,717 — Corporate debt securities 75,138 — 75,138 — U.S. treasury bills 69,250 69,250 — — Money market accounts 38,291 38,291 — — Redeemable preferred stock investment 20,438 — — 20,438 Preferred stock of privately-held company 15,000 — — 15,000 Municipal bonds 12,685 — 12,685 — Yankee debt securities 692 — 692 — Total equity securities, debt securities and cash equivalents $ 823,981 $ 107,541 $ 681,002 $ 35,438 The Company’s Level 1 assets include U.S. treasury bills and money market instruments and are valued based upon observable market prices. Level 2 assets consist of U.S. government and U.S. agency debt securities, municipal bonds, corporate debt securities and Yankee debt securities. Level 2 securities are valued based upon observable inputs that include reported trades, broker/dealer quotes, bids and offers. 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 F- 22 (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 . Note 5. Fixed Assets Major classes of fixed assets consisted of the following: Useful Lives December 31, 2024 December 31, 2023 (in thousands) Medical lab equipment 1 to 13 Years $ 57,541 $ 56,025 Building improvements 6 months to 39 Years 27,924 7,748 Building 25 to 39 Years 21,689 9,781 Computer hardware 1 to 5 Years 7,328 6,805 Computer software 1 to 10 Years 7,214 7,982 Aircraft 7 Years 6,400 6,400 Furniture and fixtures 1 to 11 Years 4,109 3,860 Leasehold improvements Shorter of lease term or estimated useful life 3,323 11,222 Land improvements 15 Years 904 904 Automobile 3 to 8 Years 581 445 General equipment 5 Years 108 115 Land 17,347 8,800 Assets not yet placed in service 2,792 15,010 Total 157,260 135,097 Less: Accumulated depreciation ( 51,711 ) ( 51,633 ) Fixed assets, net $ 105,549 $ 83,464 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. Note 6. Other Significant Balance Sheet Accounts Other current assets consisted of the following: December 31, 2024 December 31, 2023 (in thousands) Reagents and supplies $ 8,384 $ 5,827 Prepaid expenses 6,629 7,744 Marketable securities interest receivable 6,241 4,994 Prepaid income taxes 3,422 12,675 Other receivable 1,768 1,319 Total $ 26,444 $ 32,559 F- 23 Accrued liabilities consisted of the following: December 31, 2024 December 31, 2023 (in thousands) Payroll liabilities $ 8,210 $ 5,741 Accrued bonus and commission 5,803 6,255 Vacation accrual 4,088 3,543 Operating lease liabilities - short term 1,443 3,957 Accrued legal liabilities 1,101 7,026 Other accrued liabilities 3,634 4,215 Total $ 24,279 $ 30,737 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 $ 4,120 $ 7,147 Notes payable, long term 2,493 2,964 Other long-term liabilities 360 4,973 Total $ 6,973 $ 15,084 Note 7. Reportable Segment and Geographic Information 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. GAAP. 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. 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: F- 24 Laboratory Services Therapeutic Development Total Fiscal year ended December 31, 2024 Revenue $ 283,470 $ — $ 283,470 Less: Adjusted cost of revenue 168,456 — 168,456 Adjusted research and development 18,213 15,632 33,845 Adjusted selling and marketing 32,339 — 32,339 Adjusted general and administrative 69,374 928 70,302 Total adjusted operating loss $ ( 4,912 ) $ ( 16,560 ) $ ( 21,472 ) Laboratory Services Therapeutic Development Total Fiscal year ended December 31, 2023 Revenue $ 289,213 $ — $ 289,213 Less: Adjusted cost of revenue 175,008 — 175,008 Adjusted research and development 19,577 6,990 26,567 Adjusted selling and marketing 36,503 — 36,503 Adjusted general and administrative 74,982 681 75,663 Total adjusted operating loss $ ( 16,857 ) $ ( 7,671 ) $ ( 24,528 ) Laboratory Services Therapeutic Development Total Fiscal year ended December 31, 2022 Revenue $ 618,968 $ — $ 618,968 Less: Adjusted cost of revenue 243,363 — 243,363 Adjusted research and development 17,715 746 18,461 Adjusted selling and marketing 34,545 — 34,545 Adjusted general and administrative 101,890 70 101,960 Total adjusted operating income (loss) $ 221,455 $ ( 816 ) $ 220,639 Year Ended December 31, 2024 2023 2022 Reconciliation of “adjusted operating (loss) income” to “(loss) income before income taxes” Adjusted operating (loss) income $ ( 21,472 ) $ ( 24,528 ) $ 220,639 Less (add): Equity-based compensation 44,481 42,922 32,640 Amortization of intangible assets 7,965 7,845 6,497 Goodwill impairment loss — 120,234 — Restructuring costs — — 2,975 Interest income ( 31,304 ) ( 21,612 ) ( 5,624 ) Interest expense ( 170 ) 488 1,013 Impairment of available-for-sale debt securities 10,073 — — Other income, net ( 561 ) ( 320 ) ( 887 ) Total (loss) income before income taxes $ ( 51,956 ) $ ( 174,085 ) $ 184,025 Significant items by segment excluded from the adjusted operating (loss) income: Year Ended December 31, 2024 2023 2022 Equity-based compensation Laboratory services $ 36,951 $ 35,649 $ 32,640 Therapeutic development 7,530 7,273 — Total $ 44,481 $ 42,922 $ 32,640 F- 25 Revenue by segment: Year Ended December 31, 2024 2023 2022 Revenue Laboratory services: Precision diagnostics $ 167,745 $ 131,990 $ 93,685 Anatomic pathology 97,080 104,655 74,799 BioPharma services 16,338 25,416 12,977 COVID-19 2,307 27,152 437,507 Total laboratory services 283,470 289,213 618,968 Therapeutic development — — — Total $ 283,470 $ 289,213 $ 618,968 Depreciation and amortization by segment: Year Ended December 31, 2024 2023 2022 Depreciation and amortization Laboratory services $ 24,240 $ 25,453 $ 32,557 Therapeutic development 688 690 105 Total $ 24,928 $ 26,143 $ 32,662 Interest income and expense by segment: Year Ended December 31, 2024 2023 2022 Interest income and expense Laboratory services Interest income $ 31,304 $ 21,612 $ 5,624 Interest expense 170 ( 488 ) ( 1,013 ) Therapeutic development Interest income — — — Interest expense — — — Total $ 31,474 $ 21,124 $ 4,611 Total assets by segment: December 31, 2024 December 31, 2023 December 31, 2022 Assets Laboratory services $ 1,131,117 $ 1,146,192 $ 1,292,821 Therapeutic development 88,847 89,136 93,232 Total $ 1,219,964 $ 1,235,328 $ 1,386,053 Geographic distribution of revenue: Year Ended December 31, 2024 2023 2022 Revenue United States $ 259,132 $ 268,977 $ 603,148 Foreign China 12,638 11,446 8,939 Other countries 11,700 8,790 6,881 Total foreign 24,338 20,236 15,820 Total $ 283,470 $ 289,213 $ 618,968 F- 26 Geographic distribution of property, plant and equipment, net: December 31, 2024 December 31, 2023 December 31, 2022 Fixed assets United States $ 98,992 $ 77,938 $ 72,617 Foreign China 4,616 5,526 8,736 Other countries 1,941 — — Total foreign 6,557 5,526 8,736 Total $ 105,549 $ 83,464 $ 81,353 Note 8. Debt, Commitments and Contingencies Debt 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 $ 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 See Note 9, Leases , for further information. Purchase Obligations 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, 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. 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 F- 27 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. Note 9. Leases Lessee 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. On a lease-by-lease basis, the Company considers such options, which may be elected at the Company’s sole discretion, in determining the lease term. The Company also has various finance leases for lab equipment with varying terms through December 2026 , of which, some were acquired in business combinations. The Company does not have any leases with variable lease payments. 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 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; Phoenix, Arizona; Alpharetta, Georgia. 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) Operating lease ROU asset, net $ 5,395 $ 10,838 Operating lease liabilities, short term $ 1,443 $ 3,957 Operating lease liabilities, long term $ 4,120 $ 7,147 Finance lease ROU asset, net $ 771 $ 1,316 Finance lease liabilities, short term $ 398 $ 544 Finance lease liabilities, long term $ 360 $ 760 F- 28 The following was operating and finance lease expense: Year Ended December 31, 2024 2023 2022 (in thousands) Operating lease cost $ 4,176 $ 6,875 $ 5,429 Finance lease cost: Amortization of ROU assets 539 758 683 Interest on lease liabilities 39 80 95 Short-term lease cost 1,346 1,758 1,528 Total lease cost $ 6,100 $ 9,471 $ 7,735 Supplemental information related to leases was the following: December 31, 2024 Weighted-average remaining lease term, operating leases 5.95 years Weighted-average discount rate, operating leases 5.27 % Weighted-average remaining lease term, finance lease 1.90 years Weighted-average discount rate, finance lease 3.39 % 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 Finance Lease (in thousands) Year ending December 31, 2025 $ 1,707 $ 417 2026 1,117 366 2027 1,011 — 2028 484 — 2029 500 — Thereafter 1,832 — Total lease payments 6,651 783 Less imputed interest ( 1,088 ) ( 25 ) Total $ 5,563 $ 758 Lessor 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 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 . F- 29 Note 10. Equity-Based Compensation The Company has included equity-based compensation expense as part of cost of revenue and operating expenses in the accompanying Consolidated Statements of Operations as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of revenue $ 7,799 $ 9,749 $ 8,704 Research and development 14,971 14,873 10,449 Selling and marketing 3,907 4,964 4,373 General and administrative 17,804 13,336 9,114 Total $ 44,481 $ 42,922 $ 32,640 The actual tax (expense) benefit realized from tax deductions related to awards vested or exercised were ($ 3.4 ) million , ($ 2.7 ) million and $ 2.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. Award Activity Option Awards The following table summarizes activity for options to acquire shares of the Company’s common stock in the years ended December 31, 2024, 2023, and 2022: Number of Shares Subject to Options (in thousands) Weighted- Average Exercise Price Weighted- Average Grant Date Fair Value Weighted- Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) (1) Balance at December 31, 2021 216 $ 3.42 4.6 $ 20,965 Granted 10 $ 59.54 $ 44.56 Exercised ( 5 ) $ 7.16 $ 7.41 Canceled ( 9 ) $ 43.30 $ 33.53 Balance at December 31, 2022 212 $ 4.21 3.7 $ 5,420 Granted 20 $ 33.14 $ 24.85 Exercised ( 9 ) $ 0.38 $ 10.76 Canceled — $ — $ — Balance at December 31, 2023 223 $ 6.96 3.3 $ 4,906 Granted 5 $ 22.50 $ 16.42 Exercised ( 133 ) $ 0.38 $ 2.58 Canceled — $ — $ — Balance at December 31, 2024 95 $ 17.07 4.7 $ 134 Exercisable as of December 31, 2024 74 $ 11.51 3.7 (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, 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. RSU Awards RSUs are awards that entitle the holder to receive shares of the Company’s common stock upon satisfaction of vesting conditions. Each RSU represents the contingent right to receive one share of the Company’s common stock upon vesting and settlement. F- 30 The following table summarizes activity for RSUs relating to shares of the Company’s common stock in the years ended December 31, 2024, 2023, and 2022: Number of Shares (in thousands) Weighted-Average Grant Date Fair Value Balance at December 31, 2021 1,619 $ 40.74 Granted 1,895 $ 49.98 Vested and settled ( 699 ) $ 34.01 Forfeited ( 184 ) $ 61.11 Balance at December 31, 2022 2,631 $ 47.76 Granted 853 $ 34.38 Vested and settled ( 1,066 ) $ 43.84 Forfeited ( 208 ) $ 54.72 Balance at December 31, 2023 2,210 $ 43.84 Granted 1,142 $ 23.47 Vested and settled ( 1,004 ) $ 43.66 Forfeited ( 142 ) $ 37.39 Balance at December 31, 2024 2,206 $ 33.85 The RSU awards granted in the years ended December 31, 2024, 2023, and 2022 will result in aggregate equity-based compensation expense of $ 26.9 million , $ 29.3 million and $ 94.8 million , respectively, to be recognized over the vesting periods from the grant date of each award granted in the period. As of December 31, 2024, the remaining unrecognized compensation expense related to all outstanding RSU awards was $ 64.4 million and is expected to be recognized over a weighted-average period of 2.2 years. Fair Value Assumptions for Option Awards The Company uses the Black-Scholes option-pricing model to measure the fair value of option awards. The Black-Scholes option-pricing model requires the input of various assumptions, each of which is subjective and requires significant judgment. These assumptions include the following: • Expected Term. The expected term represents the period that the Company’s equity-based awards are expected to be outstanding. The Company determines the expected term assumption based on the vesting terms, exercise terms and contractual terms of the options. • Risk-Free Interest Rate. The Company determines the risk-free interest rate by using the equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant. • Dividend Yield. The assumed dividend yield is based on the Company’s expectation that it will not pay dividends in the foreseeable future, which is consistent with its history of not paying dividends. • Expected Volatility. The Company calculates expected volatility based on historical volatility data of its stock that is publicly traded. • Forfeiture Rate. The Company accounts for forfeitures as they occur. Awards to Employees The table below sets forth the weighted-average assumptions used in the Black-Scholes option-pricing model to estimate the fair value of options to acquire shares of the Company’s common stock granted to employees during the years ended December 31, 2024, 2023, and 2022. Year Ended December 31, 2024 2023 2022 Expected term (in years) 6.1 6.1 6.1 Risk-free interest rates 4.3 % 3.8 % 2.6 % Dividend yield — — — Expected volatility 82.2 % 87.3 % 88.7 % F- 31 Determination of Fair Value on Grant Dates 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. Note 11. 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: Year Ended December 31, 2024 2023 2022 (in thousands) U.S. (loss) income before income taxes $ ( 46,813 ) $ ( 147,464 ) $ 189,406 Foreign loss before income taxes ( 5,143 ) ( 26,621 ) ( 5,381 ) (Loss) income before income taxes $ ( 51,956 ) $ ( 174,085 ) $ 184,025 (Benefit from) provision for income taxes consisted of the following: Year Ended December 31, 2024 2023 2022 (in thousands) Current Federal $ ( 2,441 ) $ ( 5,590 ) $ 31,140 State ( 2,107 ) ( 4,722 ) 19,242 Foreign 148 — — Total Current ( 4,400 ) ( 10,312 ) 50,382 Deferred Federal ( 10,313 ) ( 12,771 ) ( 3,763 ) State ( 734 ) 4,100 ( 4,517 ) Foreign 602 ( 188 ) 224 Change in valuation allowance 6,709 20,325 ( 224 ) Total Deferred ( 3,736 ) 11,466 ( 8,280 ) Total (benefit from) provision for income taxes $ ( 8,136 ) $ 1,154 $ 42,102 F- 32 Reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate is as follows: Year Ended December 31, 2024 2023 2022 Tax provision at federal statutory rate 21.00 % 21.00 % 21.00 % State taxes - 1.70 % 0.22 % 9.03 % Equity-based compensation - 6.79 % - 1.65 % - 1.12 % Nondeductible compensation - 162(m) - 2.10 % - 0.55 % 0.00 % Goodwill impairment 0.00 % - 10.62 % 0.00 % Amended state tax refunds 8.29 % 0.00 % 0.00 % Federal return to provision - 2.07 % - 0.21 % - 3.92 % State return to provision - 0.78 % 3.41 % - 2.02 % Other permanent differences 1.83 % - 1.15 % 1.33 % Uncertain tax positions - 1.14 % 0.18 % 0.92 % Research & development credit 6.95 % 3.19 % - 2.98 % IRA tax credit 4.82 % 0.00 % 0.00 % Foreign tax rate differential - 1.68 % - 2.42 % 0.00 % Stranded tax effect 4.25 % 0.00 % 0.00 % Foreign NOL carryforward - 1.19 % 0.11 % - 0.12 % Other - 0.29 % 0.00 % 0.46 % Change in valuation allowance - 13.29 % - 12.20 % 0.12 % Effective tax rate 16.11 % - 0.69 % 22.70 % The following table summarizes the elements of the deferred tax assets (liabilities). Net deferred tax assets are included in other long-term assets in the Consolidated Balance Sheets. As of December 31, 2024 2023 (in thousands) Deferred tax assets Accrued vacation and other accrued expenses $ 1,775 $ 807 Provision for credit losses 2,990 818 Net operating losses 11,875 17,496 Equity-based compensation 2,022 906 State income taxes 284 211 Excess tax basis in FF Gene Biotech net assets 1,527 2,256 Lease liability 789 2,345 Unrealized gain/loss on available-for-sale debt securities 757 406 Research and development credits 2,762 1,258 Section 174 research & experimental expenditures 25,626 18,606 Equity loss in investment 2,965 503 Other 74 107 Gross deferred tax assets 53,446 45,719 Less: Valuation allowance ( 22,702 ) ( 15,900 ) Net deferred tax assets 30,744 29,819 Deferred tax liabilities Intangible assets 29,540 30,558 Depreciation 6,198 3,901 Right of use asset 767 2,299 Other 609 1,023 Total deferred tax liabilities 37,114 37,781 Net deferred tax liabilities $ ( 6,370 ) $ ( 7,962 ) 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 F- 33 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 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. We are closely monitoring developments and are currently evaluating the potential impact in each jurisdiction in which we operate. Uncertain Tax Positions 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. The Company’s tax returns are subject to statutes of limitations that vary by jurisdiction. 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 . 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. The Company is under examination by certain tax authorities for the 2020 and 2021 tax years. While the timing of the conclusion of the examination is uncertain, the Company believes that adequate amounts have been reserved for adjustments that may result. A reconciliation of the Company’s gross unrecognized tax benefits is as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Balance at beginning of year $ 5,833 $ 9,742 $ 710 Increases to prior year positions ( 2,692 ) ( 3,845 ) 2,843 Increases for current year positions 1,035 ( 64 ) 6,189 Balance at end of year $ 4,176 $ 5,833 $ 9,742 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 $ 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 F- 34 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. Note 12. Income (Loss) per Share The following is a reconciliation of the basic and diluted income (loss) per share computations: Year Ended December 31, 2024 2023 2022 (in thousands) Net (loss) income attributable to Fulgent $ ( 42,708 ) $ ( 167,825 ) $ 143,403 Weighted-average common shares - outstanding, basic 30,235 29,784 30,097 Weighted-average effect of dilutive securities: Stock options — — 199 Restricted stock units — — 613 Contingently issuable shares — — 55 Weighted-average common shares - outstanding, diluted 30,235 29,784 30,964 (Loss) income per share: Basic $ ( 1.41 ) $ ( 5.63 ) $ 4.76 Diluted $ ( 1.41 ) $ ( 5.63 ) $ 4.63 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, 2024 2023 2022 (in thousands) Stock options 95 224 10 Restricted stock units 2,206 2,210 728 Contingently issuable shares — 186 — The anti-dilutive shares described above were calculated using the treasury stock method. 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. Note 13. Retirement Plans The Company offers a 401(k) retirement savings plan, or the 401 (k) Plan, for its employees, including its executive officers, who satisfy certain eligibility requirements. The Internal Revenue Code of 1986, as amended, allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) Plan. 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 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. Note 14. 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 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, F- 35 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, 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 $ 2.1 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. Note 15. Business Combinations Inform Diagnostics On April 26, 2022, the Company completed the acquisition of 100 % of the outstanding equity of Inform Diagnostics, a leading national independent pathology laboratory based in Irving, Texas. Under the terms of the Agreement and Plan of Merger, dated April 16, 2022, or the Inform Merger Agreement, the total purchase price payable to the securityholders of Inform Diagnostics was approximately $ 170 million, as adjusted for closing cash, closing indebtedness, closing working capital, closing transaction expenses and other transaction matters. With the addition of Inform Diagnostics, the Company will further expand the Company’s genomic testing footprint and extend its test menu into breast pathology, gastrointestinal pathology, dermatopathology, urologic pathology, neuropathology, and hematopathology. The financial results of Inform Diagnostics are included in the consolidated financial statements from the date of acquisition. 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 updated amounts of the assets acquired and liabilities assumed recognized at the acquisition date: Amounts (in thousands) Consideration Cash, net of cash received $ 137,755 Recognized amounts of identifiable assets acquired and liabilities assumed Net working capital $ ( 15,024 ) Fixed assets 20,242 ROU assets - operating 12,653 ROU assets - finance 1,183 Deferred tax assets 3,410 Other long-term assets 4,711 Identifiable intangible assets 57,060 Operating lease liabilities ( 12,653 ) Finance lease liabilities ( 1,183 ) Income tax payable ( 40 ) Other long-term liabilities ( 4,449 ) Recognized amounts of identifiable assets acquired and liabilities assumed, net 65,910 Goodwill 71,845 Total $ 137,755 F- 36 The goodwill of $ 71.8 million arising from the 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 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. 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. The fair value of the trade name was estimated using the relief from royalty, or RFR, method. The RFR method estimates the portion of the Company’s earnings attributable to an intangible asset based on the royalty rate the Company would have paid for the use of the asset if it did not own it. The fair value of in-place lease intangible asset was estimated using the discounted cash flow under the income approach. The useful lives of the intangible assets for amortization purposes were determined by considering the period of expected cash flows used to measure the fair values of the intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic and other factors that may limit the useful life. The customer relationships and trade name are amortized on a straight-line basis over their estimated useful lives. 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. These transaction costs were expensed as incurred as general and administrative expense in the respective period. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information summarizes the combined results of operations of Fulgent and Inform Diagnostics as if the companies had been combined as of the beginning of 2021. The pro forma financial information has been adjusted for the following: 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 $ 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 Revenue $ 659,386 Net income attributable to Fulgent $ 140,288 Basic earnings per common share attributable to Fulgent $ 4.66 Diluted earnings per common share attributable to Fulgent $ 4.53 Fulgent Pharma Holdings, Inc On November 7, 2022, the Company completed the acquisition of 100 % of the outstanding equity of Fulgent Pharma, a clinical-stage, therapeutic development company focused on perfecting drug candidates for treating a broad range of cancers. Under the terms of the Agreement and Plan of Merger, dated November 7, 2022, or the Pharma Merger Agreement, the total merger consideration was paid in a combination of cash, the Company’s common stock, or the Stock Consideration, and assumed RSUs subject to customary adjustments for closing cash, closing indebtedness, transaction expenses and other transaction matters. A portion of the Stock Consideration was held back for a duration of time after the closing of the transaction to satisfy certain indemnification obligations of the Pharma Stockholders as described in the Pharma Merger Agreement. 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 F- 37 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. 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 updated amounts of the assets acquired and liabilities assumed recognized at the acquisition date: The goodwill of $ 22.1 million arising from the acquisition is attributed to Fulgent Pharma ’s rights to intellectual property, expected synergies, assembled workforce, and other benefits that will potentially be generated from the combination and deferred tax. The goodwill recognized is not deductible for tax purposes. The identified intangible assets acquired consisted of $ 64.6 million in IPR&D. 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, 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. The method involves forecasting after-tax operating income from existing clients, subtracting the portions attributable to a contributory asset, and discounting the remaining earnings to present value. The useful life of IPR&D is indefinite. 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. These transaction costs were expensed as incurred as general and administrative expense in the respective period. 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, and the cash consideration was subsequently paid in 2023. Note 16. Stock Repurchase Program In March 2022, the Company’s Board authorized a $ 250.0 million stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. 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. Note 17. Goodwill and Intangible Assets Changes in the carrying amount of goodwill, net of impairment, by reporting unit for the years ended December 31, 2024 and 2023 are as follows: Laboratory Services Therapeutic Development December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 (in thousands) Balance at beginning of year $ — $ 120,972 $ 22,055 $ 22,055 Impairment — ( 120,234 ) — — Foreign currency impact — ( 738 ) — — Balance at the end of year $ — $ — $ 22,055 $ 22,055 F- 38 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. Laboratory Services 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, 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 %. There can be no assurance that the estimates and assumptions management made for the purposes of the goodwill or IPR&D impairment analysis will prove to be accurate predictions of future performance. 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 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. F- 39 Summaries of intangible assets balances as of December 31, 2024 and 2023 were as follows: Weighted-Average Amortization Period December 31, 2024 December 31, 2023 (in thousands) Laboratory Services Customer Relationships 13 Years $ 83,088 $ 83,119 Less: accumulated amortization ( 19,079 ) ( 12,586 ) Customer relationships, net 64,009 70,533 Royalty-free technology 10 Years 5,069 5,211 Less: accumulated amortization ( 1,859 ) ( 1,390 ) Royalty-free technology, net 3,210 3,821 Trade name 8 Years 3,790 3,790 Less: accumulated amortization ( 1,401 ) ( 906 ) Trade name, net 2,389 2,884 Laboratory information system platform 5 Years 1,860 1,860 Less: accumulated amortization ( 1,271 ) ( 899 ) Laboratory information system platform, net 589 961 In-place lease intangible assets 5 Years 360 360 Less: accumulated amortization ( 186 ) ( 116 ) In-place lease intangible assets, net 174 244 Purchased patent 10 Years 27 28 Less: accumulated amortization ( 10 ) ( 8 ) Purchased patent, net 17 20 Total 70,388 78,463 Therapeutic Development In-process research & development n/a 64,590 64,590 Total 64,590 64,590 Total intangible assets, net $ 134,978 $ 143,053 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 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: Amounts (in thousands) Year ending December 31, 2025 $ 7,955 2026 7,654 2027 7,196 2028 7,161 2029 6,904 Thereafter 33,518 Total $ 70,388 F- 40 Note 18. Subsequent Event 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. F- 41