Guardant Health, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of disclosure controls and procedures Our management, with the participation of our co-chief executive officers, or Co-CEOs, and chief financial officer, or CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Co-CEOs and CFO have concluded that as of December 31, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such required information is accumulated and communicated to our management, including our Co-CEOs and CFO, as appropriate, to allow timely decisions regarding required disclosures. Management report on internal control over financial reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Co-CEOs and CFO, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of our assessment under the framework in the Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2021.The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by an independent registered public accounting firm, as stated in their report included in Part II, Item 8, “Financial Statements” of this Annual Report on Form 10-K. Changes in internal control There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations Over Internal Controls Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Management, including our Co-CEOs and CFO, do not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide 141 Table of Contents absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Guardant Health, Inc. Opinion on Internal Control Over Financial Reporting We have audited Guardant Health, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Guardant Health, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020 and consolidated statements of operations, comprehensive loss, redeemable noncontrolling interest and stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 24, 2022 expressed an unqualified opinion thereon. 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 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/ Ernst & Young LLP 142 Table of Contents Redwood City, California February 24, 2022 Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 143 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 of Form 10-K will be included in our 2022 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. The 2022 Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 11. Executive Compensation The information required by this Item 11 of Form 10-K will be included in our 2022 Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 of Form 10-K will be included in our 2022 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 of Form 10-K will be included in our 2022 Proxy Statement and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information required by this Item 14 of Form 10-K will be included in our 2022 Proxy Statement and is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules (a) Documents filed as part of this report (1) All financial statements See Index to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. (2) Financial Statement Schedules All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or the accompanying notes. (3) Exhibits required by Item 601 of Regulation S-K The exhibits listed in the following Index to Exhibits are filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K. 144 INDEX TO EXHIBITS Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed/Furnished Herewith 3.1 Amended and Restated Certificate of Incorporation 8-K 001-38683 3.1 10/9/2018 3.2 Amended and Restated Bylaws 8-K 001-38683 3.2 10/9/2018 4.1 Description of Registrant’s Securities Registered under Section 12 of the Exchange Act 10-K 001-38683 4.1 3/2/2020 4.2 Indenture, dated as of November 19, 2020, between Guardant Health, Inc. and U.S. Bank National Association, as trustee 8-K 001-38683 4.1 11/20/2020 10.1# Amended and Restated 2012 Stock Plan S-1 333-227206 10.3 9/6/2018 10.1(a)# Form of Notice of Stock Option Grant and Stock Option Agreement under the Amended and Restated 2012 Stock Plan S-1 333-227206 10.4 9/6/2018 10.2# 2018 Incentive Award Plan S-8 333-227762 99.2(a) 10/10/2018 10.2(a)# Form of Stock Option Agreement under the 2018 Incentive Award Plan S-1/A 333-227206 10.9(a) 9/21/2018 10.2(b)# Form of Restricted Stock Award Agreement under the 2018 Incentive Award Plan S-1/A 333-227206 10.9(b) 9/21/2018 10.2(c)# Form of Restricted Stock Unit Award Agreement under the 2018 Incentive Award Plan S-1/A 333-227206 10.9(c) 9/21/2018 10.2(d)# Forms of Performance-Based Restricted Stock Unit Award Agreement under the 2018 Incentive Award Plan 10-K 001-38683 10.3(d) 2/25/2021 10.3# 2018 Employee Stock Purchase Plan S-8 333-227762 99.3 10/10/2018 10.3(a)# First Amendment to 2018 Employee Stock Purchase Plan 10-K 001-38683 10.4(a) 3/29/2019 10.4# Executive Severance Plan S-1/A 333-227206 10.13 9/21/2018 10.4(a)# First Amendment to Executive Severance Plan 10-K 001-38683 10.5(a) 3/29/2019 10.5# Non-Employee Director Compensation Program, effective as of June 12, 2020 10-Q 001-38683 10.1 8/6/2020 10.6# Amended and Restated Offer Letter Agreement, dated September 16, 2018, by and between Guardant Health, Inc. and Ian Clark 10-Q 001-38683 10.9 11/19/2018 10.7# Amended and Restated Offer Letter Agreement, dated September 16, 2018, by and between Guardant Health, Inc. and Stanley Meresman 10-Q 001-38683 10.10 11/19/2018 10.8 Form of Indemnification Agreement between Guardant Health, Inc. and its directors and officers S-1/A 333-227206 10.8 9/18/2018 10.9 Lease, dated November 1, 2014, by and between the Registrant and Metropolitan Life Insurance Company S-1 333-227206 10.2 9/6/2018 10.10 First Amendment to Lease, dated October 17, 2017, by and between the Registrant and Metropolitan Life Insurance Company S-1 333-227206 10.2(a) 9/6/2018 10.11 Sublease Agreement, dated July 31, 2020, by and between Guardant Health, Inc. and 3000 Hanover, LLC 10-Q 001-38683 10.1 11/5/2020 10.12§ Joint Venture Agreement, dated May 9, 2017, by and between the Registrant and SoftBank Vision Fund (AIV M1) L.P., as assignee from SoftBank Group Capital Limited S-1 333-227206 10.5 9/6/2018 10.13§ Supply Agreement, dated September 15, 2014, by and between the Registrant and Illumina, Inc. S-1 333-227206 10.7 9/6/2018 145 10.14§ Amendment to Supply Agreement, dated August 11, 2015, by and between the Registrant and Illumina, Inc. S-1 333-227206 10.7(a) 9/6/2018 10.15§ Amendment #2 to Supply Agreement, dated December 24, 2016, by and between the Registrant and Illumina, Inc. S-1 333-227206 10.7(b) 9/6/2018 10.16§ Amendment #3 to Supply Agreement, dated August 14, 2017, by and between the Registrant and Illumina, Inc. S-1 333-227206 10.7(c) 9/6/2018 10.17§ Amendment #4 to Supply Agreement, dated June 26, 2018, by and between the Registrant and Illumina, Inc. S-1 333-227206 10.7(d) 9/6/2018 10.18§ Amendment #5 to Supply Agreement, dated January 1, 2021, by and between the Registrant and Illumina, Inc. 10-K 001-38683 10.19 2/25/2021 10.19# Form of letter agreement relating to certain time-based equity awards held by Helmy Eltoukhy and AmirAli Talasaz 10-K 001-38683 10.19 3/29/2019 10.20# Form of Waiver Letter Agreement 8-K 001-38683 10.2 5/27/2020 10.21# Offer Letter, dated December 4, 2020, by and between Guardant Health, Inc. and Michael Bell 8-K 001-38683 10.1 12/11/2020 10.22 Form of Capped Call Confirmation 8-K 001-38683 10.1 11/20/2020 21.1 List of Subsidiaries * 23.1 Consent of Independent Registered Public Accounting Firm * 24.1 Power of Attorney (included on the signatures page of this Annual Report on Form 10-K) * 31.1 Certification of the Co-Chief 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 * 31.2 Certification of the Co-Chief 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 * 31.3 Certification of the Chief 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 * 32.1 Certification of the Co- Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 32.2 Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 32.3 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 146 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) * ___________________________ * Filed herewith. ** Furnished herewith. # Indicates management contract or compensatory plan. § Portions of this exhibit (indicated by asterisks) have been omitted pursuant to, a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, or Item 601(a)(5) of Regulation S-K. Item 16. Form 10-K Summary None. 147 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GUARDANT HEALTH, INC. Dated: February 24, 2022 By: /s/ Helmy Eltoukhy Name: Helmy Eltoukhy Title: Co-Chief Executive Officer and Chairman of the Board By: /s/ AmirAli Talasaz Name: AmirAli Talasaz Title: Co-Chief Executive Officer and Director Power of Attorney KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Helmy Eltoukhy and AmirAli Talasaz, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: 148 Table of Contents Signature Title Date /s/ Helmy Eltoukhy Co-Chief Executive Officer and Chairman of the Board (Principal Executive Officer) February 24, 2022 Helmy Eltoukhy /s/ AmirAli Talasaz Co-Chief Executive Officer and Director (Principal Executive Officer) February 24, 2022 AmirAli Talasaz /s/ Michael Bell Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) February 24, 2022 Michael Bell /s/ Ian Clark Director February 24, 2022 Ian Clark /s/ Vijaya Gadde Director February 24, 2022 Vijaya Gadde /s/ Bahija Jallal Director February 24, 2022 Bahija Jallal /s/ Meghan Joyce Director February 24, 2022 Meghan Joyce /s/ Samir Kaul Director February 24, 2022 Samir Kaul /s/ Stanley Meresman Director February 24, 2022 Stanley Meresman /s/ Myrtle Potter Director February 24, 2022 Myrtle Potter 149