INTERPACE BIOSCIENCES, INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the Risk Factors sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See Forward-Looking Statement Information at the beginning of this Form 10-K. In this Annual Report on Form 10-K, we have restated our previously issued consolidated financial statements as of and for the year ended December 31, 2023. See the “Explanatory Note” preceding Forward Looking Statements for background on the restatement, the fiscal periods impacted, control considerations, and other information. As a result, we have also restated our previously issued financial information as of and for the year ended December 31, 2023 and the relevant unaudited interim financial information for the quarterly periods in 2023 and 2024 in this Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, including but not limited to information within the Results of Operations to conform the discussion with the appropriate restated amounts. See Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for additional information related to the 2023 Consolidated Financial Statements restatement including descriptions of the errors and the impact to our consolidated financial statements. See also Note 22 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report for our restatement of unaudited interim condensed consolidated financial statements for 2023 and 2024. As a result of the restatement, it was determined that the Company’s disclosure controls and procedures were not effective as of December 31, 2024, and that the Company had identified material weaknesses in its internal controls over financial reporting, as referenced in Item 9A. We have not amended and do not plan to amend our previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected by the restatement. The information that has been previously filed or otherwise reported for these periods is superseded by the information in this Form 10-K. Accordingly, the consolidated financial statements and related financial information contained in such previously filed or furnished reports should no longer be relied upon. 62 Company Overview We are a company that provides esoteric molecular diagnostic testing, and pathology services to aid physicians in their evaluation of cancer risk in patients with indeterminate biopsies and a perceived high risk of cancer from clinical features. We develop and commercialize genomic tests and related first-line assays that can personalize medicine to help improve patient diagnosis and management. Impact of Our Reliance on CMS and Novitas In January 2022, CMS stated they would no longer reimburse for the use of the Company’s ThyGeNEXT ® and ThyraMIR ® tests when billed together by the same provider/supplier for the same beneficiary on the same date of service. However, on February 28, 2022, the Company announced that the National Correct Coding Initiative (NCCI) program issued a response on behalf of CMS stating that the January 2022 billing policy reimbursement change for ThyGeNEXT ® (0245U) and ThyraMIR ® (0018U) tests has been retroactively reversed to January 1, 2022. In May 2022, the Company was notified by CMS/NCCI that processing of claims for dates of service after January 1, 2022 would be completed beginning July 1, 2022. However, on June 9, 2022, the Company was notified that Novitas re-priced ThyGeNEXT ® (0245U) from $2,919 to $806.59 retroactively effective to January 1, 2022. On July 20, 2022, the Clinical Diagnostic Laboratory Tests (CDLT) Advisory Panel affirmed a gapfill price of $806.59. As a result of the ThyGeNEXT ® pricing change, the Company reduced its NRV rates for ThyGeNEXT ® Medicare billing to reflect the $806.59 pricing for tests performed during the second quarter of 2022. In addition, in order to reflect the retroactive pricing change to January 1, 2022, the Company recorded an NRV adjustment of $0.7 million during the second quarter of 2022 to reduce revenue recorded during the first quarter of 2022. During July 2022, the Company began implementing cost-savings initiatives including a reduction in headcount and incidental expenses and a freeze on all non-essential travel and hiring. In August 2022, the Company sold its Pharma Solutions business. Effective January 1, 2023, the gapfill price for ThyGeNEXT ® was set at $1,266.07. On June 5, 2023 the Company announced that Novitas issued the final LCD of Genetic Testing for Oncology (L39365) which, if finalized, would have established non-coverage for the Company’s widely used PancraGEN ® test effective July 17, 2023. On July 6, 2023, Novitas announced that it would not be implementing the final Genetic Testing for Oncology LCD (L39365) as scheduled on July 17, 2023. Novitas then issued a new virtually identical proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. In response, the Company participated in a public meeting presentation and submitted detailed written comments supporting the use of PancraGEN ® . On July 29, 2024, the Company announced that CMS granted Novitas an undefined extension to the final decision for the LCD. As a result, the Company was able to continue offering PancraGEN ® and the related Point2 ® fluid chemistry tests for amylase, CEA, and glucose for all of 2024. On January 9, 2025, the Company announced the new LCD established non-coverage for its PancraGEN ® test, and it would stop offering the test and would not accept specimens for first-line fluid chemistry and PancraGEN ® testing after February 7, 2025. As a result of the established non-coverage for PancraGEN ® , the Company announced that its board of directors had approved a restructuring and cost-savings plan to reduce operating costs and better align its workforce with the loss of PancraGEN ® (the “Restructuring Plan”). For more information, please see Potential Restructuring below. On January 27, 2025, the Company announced that CMS had directed its Medicare Administrative Contractors, Novitas and First Coast Service Options, Inc., to delay implementation of the Genetic Testing for Oncology LCD (L39365), from February 23, 2025 until April 24, 2025. The Company stated that this change of effective date will allow the Trump administration time to fully review the proposed policy changes, re-evaluate for themselves the supporting clinical evidence for the PancraGEN ® assay, and fully assess the negative impact on patient care if the currently proposed LCD comes into effect. Potential Restructuring As discussed above in “Impact of Our Reliance on CMS and Novitas,” on January 14, 2025, the Board of Directors approved a Restructuring Plan and cost-savings to reduce and better align its workforce with the anticipated loss of PancraGEN ® coverage by CMS. However, due to the delay in the implementation of the new LCD from February 23, 2025 until April 24, 2025, the Company is re-evaluating certain parts of the Restructuring Plan and will determine what parts will or will not be postponed or cancelled. 63 Under the Restructuring Plan, if implemented, the Company would reduce its workforce and impacted employees would be eligible to receive severance benefits. The Company expects to incur severance costs in in the range of $0.8 million to $1.0 million. The Company expects that the loss of PancraGEN ® coverage, if it were to occur, and related restructuring activities would reduce its annual cost of revenue and operating expenses by approximately $12.5 million to $14.5 million which is expected to substantially offset the expected loss of its revenues from the sale of PancraGEN ® tests. The cost that the Company expects to incur in connection with the Restructuring Plan is subject to several assumptions, and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring Plan. In the event that CMS/Novitas does not remove coverage for PancraGEN ® , the Company anticipates that the Restructuring Plan will not be implemented in its current form. In the meantime, the Company is re-evaluating certain parts of the Restructuring Plan and will determine what parts will or will not be postponed, or cancelled. Clinical services Our clinical services business commercializes clinically useful molecular diagnostic tests and molecular pathology services. We commercialize genomic tests and related first-line assays principally focused on risk-stratification of cancer using the latest technology to help personalize medicine and improve patient diagnosis and management. Our tests and services provide mutational analysis of genomic material contained in suspicious cysts, nodules, and lesions with the goal of better informing surgery or surveillance treatment decisions in patients suspected of thyroid, pancreatic, and other cancers. The molecular diagnostic tests we offer enable healthcare providers to stratify cancer risk, helping to avoid unnecessary surgical treatment in patients at low risk, while also helping to identify patients that would benefit from increased surveillance or surgical intervention. Our mission is to assist healthcare providers in the diagnosis, triage, and treatment of patients through advanced diagnostics. Our laboratory is licensed pursuant to federal law under Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) and are accredited by College of American Pathologists (“CAP”) and our products are approved by New York State. We are leveraging our laboratory to refine and commercialize our assays and products. We aim to provide physicians and patients with diagnostic options for detecting genomic and other molecular alterations that are associated with gastrointestinal, endocrine, and other cancers. Our customers consist primarily of physicians, hospitals, and clinics. We currently have five commercialized molecular diagnostic tests in the marketplace: PancraGEN ® , a pancreatic cyst and pancreaticobiliary solid lesion genomic test that helps physicians better risk-stratify pancreaticobiliary cancers using our proprietary PathFinderTG ® platform and full integration of clinical factors; PanDNA ® , an alternate reporting option of the PathFinderTG platform, which provides physicians the “molecular only” information provided within PancraGEN; ThyGeNEXT ® , an expanded oncogenic mutation panel that helps “rule-in” and “rule-out” malignancy in thyroid nodules; ThyraMIR ® v2, used in combination with ThyGeNEXT ® , which further stratifies thyroid nodules for malignancy risk utilizing a proprietary microRNA gene expression classifier; and RespriDx ® a genomic test that also utilizes our PathFinderTG ® platform, to help physicians differentiate metastatic or recurrent lung cancer from the presence of newly formed primary lung cancer. The global esoteric molecular diagnostics market, valued at $29.9 billion (USD) in 2023 and is expected to grow to $48.3 billion (USD) by 2029 with a Compound Annual Growth rate or CAGR of 8.5% between 2023 and 2029, according to MarketsandMarkets™ (Report Code: MD5930, published June 2024). We believe that the molecular diagnostics market offers significant growth and strong patient value given the substantial opportunity it affords to lower healthcare costs by helping to reduce unnecessary surgeries and ensuring the appropriate frequency of monitoring. We are keenly focused on growing our test volumes, securing additional insurance coverage and reimbursement, maintaining and growing our current reimbursement and supporting revenue growth for our molecular diagnostic tests, introducing related first line product and service extensions, as well as expanding our business by developing and promoting synergistic products in our markets. 64 OTCQX On February 24, 2021, the Company was approved to have its common stock quoted on the OTCQX ® Best Market tier of the OTC Markets Group Inc. (the “OTCQX”), an electronic quotation service operated by OTC Markets Group Inc. The trading of the Company’s common stock commenced on OTCQX at the open of business on February 25, 2021 under the trading symbol IDXG. On December 28, 2023, we received notice from the OTCQX indicating that the Company’s market capitalization has stayed below the required $5 million for 30 consecutive calendar days preceding the date of such notice, and that the Company no longer meets the standards for continued qualification for the OTCQX U.S. tier under the OTCQX Rules for U.S. Companies section 3.2.b.2. On March 20, 2024 we received notice from the OTCQX indicating that the Company’s market capitalization has stayed above the required $5 million for ten consecutive trading days preceding the date of such notice, and that the Company currently satisfies the standards for continued qualification for the OTCQX U.S. tier under the OTCQX Rules for U.S. Companies. DESCRIPTION OF REPORTING SEGMENTS We operate under one segment which is the business of developing and selling diagnostic clinical services. CRITICAL ACCOUNTING POLICIES We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or (“GAAP”). The preparation of financial statements and related disclosures in conformity with GAAP requires management to make judgments, estimates and assumptions at a specific point in time that affect the amounts reported in our consolidated financial statements and disclosed in the accompanying notes. These assumptions and estimates are inherently uncertain. Outlined below are accounting policies, which are important to our financial position and results of operations and require our management to make significant judgments in their application. Some of those judgments can be subjective and complex. Management’s estimates are based on historical experience, information from third-party professionals, facts and circumstances available at the time and various other assumptions that are believed to be reasonable. Actual results could differ from those estimates. Additionally, changes in estimates could have a material impact on our consolidated results of operations in any one period. For a summary of all of our significant accounting policies, including the accounting policies discussed below, see Note 1, Nature of Business and Significant Accounting Policies , to our consolidated financial statements included in this Annual Report on Form 10-K. Revenue Recognition ASC 606 Revenue Recognition Clinical services derive their revenues from the performance of their proprietary assays or tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the tests performed. Revenue is recognized based on the estimated transaction price or net realizable value (“NRV”), which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. To the extent the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience. For our clinical services, we regularly review the ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates and adjust the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary significantly from our estimates, we adjust the estimates of contractual allowances, which would affect net revenue in the period such variances become known. 65 Income Taxes Income taxes are based on income for financial reporting purposes calculated using our expected annual effective rate and reflect a current tax liability or asset for the estimated taxes payable or recoverable on the current year tax return and expected annual changes in deferred taxes. We account for income taxes using the asset and liability method. This method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of our assets and liabilities based on enacted tax laws and rates. Deferred tax expense (benefit) is the result of changes in the deferred tax asset and liability. A valuation allowance is established, when necessary, to reduce the deferred income tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized. We operate in multiple tax jurisdictions and provide taxes in each jurisdiction where we conduct business and are subject to taxation. The breadth of our operations and the complexity of the various tax laws require assessments of uncertainties and judgments in estimating the ultimate taxes we will pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of proposed assessments arising from federal and state audits. We have established estimated liabilities for uncertain federal and state income tax positions. Uncertain tax positions are recognized in the financial statements when it is more likely than not (for example, a likelihood of more than fifty percent) that a position taken or expected to be taken in a tax return would be sustained upon examination by tax authorities that have full knowledge of all relevant information. A recognized tax position is then measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. We adjust our accruals for unrecognized tax benefits as facts and circumstances change, such as the progress of a tax audit. We believe that any potential audit adjustments will not have a material adverse effect on our financial condition or liquidity. However, any adjustments made may be material to our consolidated results of operations or cash flows for a reporting period. Penalties and interest, if incurred, would be recorded as a component of current income tax expense. Significant judgment is also required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. We currently have significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences. The realization of these assets is dependent on generating future taxable income. We perform an analysis quarterly to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets. Our recent operating results and projections of future income weighed heavily in our overall assessment. The existing and forecasted levels of pretax earnings for financial reporting purposes are not sufficient to generate future taxable income and realize our deferred tax assets and, as a result, we established a full federal and state valuation allowance for the net deferred tax assets at December 31, 2024 and 2023, as we determined that it was more likely than not that these assets would not be realized. The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL, and tax credit carry forwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Code as well as similar state tax provisions. The amount of the annual limitation, if any, will be determined based on the value of our company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. Additionally, U.S. tax laws limit the time during which these carry forwards may be applied against future taxes, therefore, we may not be able to take full advantage of these carry forwards for federal income tax purposes. During 2021, the Company completed a 382 assessment of the available NOLs under Section 382 and determined that the Company underwent an ownership change on September 30, 2017 and July 15, 2019, and as a result, NOLs attributable to the pre-ownership change are subject to a substantial annual limitation under Section 382 of the Code due to the multiple ownership changes. The Company has adjusted their NOL carryforwards to address the impact of the 382 ownership change. Stock Compensation Costs The compensation cost associated with the granting of stock-based awards is based on the grant date fair value of the stock award. We recognize the compensation cost, net of estimated forfeitures, over the shorter of the vesting period or the period from the grant date to the date when retirement eligibility is achieved. Forfeitures are initially estimated based on historical information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures. As a result, changes in forfeiture activity can influence the amount of stock compensation cost recognized from period-to-period. 66 We primarily use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards is made on the date of grant and is affected by our stock price as well as assumptions made regarding a number of complex and subjective variables. These assumptions include: our expected stock price volatility over the term of the awards; actual and projected employee stock option exercise behaviors; the risk-free interest rate; and expected dividend yield. Changes in the valuation assumptions could result in a significant change to the cost of an individual award. However, the total cost of an award is also a function of the number of awards granted, and as result, we have the ability to manage the cost and value of our equity awards by adjusting the number of awards granted. CONSOLIDATED RESULTS OF OPERATIONS The following table sets forth the selected statements of operations data ($ in thousands) as a percentage of revenue for the periods indicated. The trends illustrated in this table may not be indicative of future operating results. Years Ended December 31, 2024 2024 2023 2023 % to (as restated) % to revenue revenue Revenue, net $ 46,926 100.0 % $ 40,036 100.0 % Cost of revenue 17,001 36.2 % 14,980 37.4 % Gross profit 29,925 63.8 % 25,056 62.6 % Operating expenses: Sales and marketing 11,655 24.8 % 10,233 25.6 % Research and development 676 1.4 % 636 1.6 % General and administrative 9,486 20.2 % 9,363 23.4 % Acquisition related amortization expense - 0.0 % 861 2.2 % Change in fair value of contingent consideration - 0.0 % 7 0.0 % Total operating expenses 21,817 46.5 % 21,100 52.7 % Operating income 8,108 17.3 % 3,956 9.9 % Interest accretion expense (34 ) -0.1 % (112 ) -0.3 % Note payable interest expense (625 ) -1.3 % (896 ) -2.2 % Other expense, net (499 ) -1.1 % (667 ) -1.7 % Income from continuing operations before tax 6,950 14.8 % 2,281 5.7 % Provision for income taxes 4 0.0 % 17 0.0 % Income from continuing operations 6,946 14.8 % 2,264 5.7 % Loss from discontinued operations, net of tax (244 ) -0.5 % (310 ) -0.8 % Net income $ 6,702 14.3 % $ 1,954 4.9 % 67 Revenue, net Consolidated revenue for the year ended December 31, 2024 increased by $6.9 million, or 17%, to $46.9 million, compared to $40.0 million for the year ended December 31, 2023. The increase in net revenue was largely driven by increased test volumes as compared to the prior year. Cost of revenue Consolidated cost of revenue for the year ended December 31, 2024 increased by $2.0 million, or 14%, to $17.0 million, compared to $15.0 million for the year ended December 31, 2023. This increase was primarily driven by the increased test volumes discussed above. Gross Profit Consolidated gross profit for the year ended December 31, 2024 increased $4.8 million, or 19%, to $29.9 million, compared to $25.1 million for the year ended December 31, 2023. The increase can be attributed to the increase in revenue. Sales and marketing expense Sales and marketing expense was $11.7 million for the year ended December 31, 2024 and $10.2 million for the year ended December 31, 2023. The increase was primarily due to increased employee costs. As a percentage of revenue, sales and marketing expense was approximately 25% in both periods. Research and development Research and development expense was $0.7 million for the year ended December 31, 2024 and $0.6 million for the year ended December 31, 2023. As a percentage of revenue, research and development expense decreased to 1.4% from 1.6% in the prior year period due to the increase in revenue discussed above. General and administrative General and administrative expense was approximately $9.5 million for the year ended December 31, 2024 and $9.4 million for the year ended December 31, 2023. As a percentage of net revenue, general and administrative expense was 20% for the year ended December 31, 2024 as compared to 23% for the year ended December 31, 2023. Acquisition related amortization expense There was no amortization expense for the year ended December 31, 2024. During the year ended December 31, 2023, we recorded amortization expense of approximately $0.9 million which was related to intangible assets associated with our acquisitions. Operating income Operating income from continuing operations was $8.1 million for the year ended December 31, 2024 as compared to operating income of $4.0 million for the year ended December 31, 2023. The increase in operating income was primarily attributable to the increases in revenue and gross profit discussed above. 68 Note payable interest expense Note payable interest expense was $0.6 million for the year ended December 31, 2024 and $0.9 million for the year ended December 31, 2023. The interest expense was from the BroadOak loan. Other expense, net During the years ended December 31, 2024 and December 31, 2023, there were other expenses, net of approximately $0.5 million and $0.7 million, respectively. The amounts are primarily related to the fair value adjustments recorded on the note payable. Provision for income taxes Income tax expense was approximately $4,000 for the year ended December 31, 2024 and $17,000 for the year ended December 31, 2023. Income tax expense for both periods was primarily driven by Texas Gross Receipts Tax. Loss from discontinued operations, net of tax We had a loss from discontinued operations of approximately $0.2 million and $0.3 million for the years ended December 31, 2024 and December 31, 2023, respectively. Non-GAAP Financial Measures In addition to the United States generally accepted accounting principles, or GAAP, results provided throughout this document, we have provided certain non-GAAP financial measures to help evaluate the results of our performance. We believe that these non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to both management and investors in analyzing our ongoing business and operating performance. We believe that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view our financial results in the way that management views financial results. In this 10-K, we discuss Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is a metric used by management to measure cash flow of the ongoing business. Adjusted EBITDA is defined as income or loss from continuing operations, plus depreciation and amortization, acquisition related expenses, non-cash stock-based compensation, interest and taxes, and other non-cash expenses including asset impairment costs, change in fair value of contingent consideration, and change in fair value of notes payable. The table below includes a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure. Reconciliation of Adjusted EBITDA (Unaudited) ($ in thousands) Years Ended December 31, 2024 2023 (as restated) Income from continuing operations (GAAP Basis) $ 6,946 $ 2,264 Depreciation and amortization 300 1,026 Stock-based compensation 291 630 Tax expense 4 17 Interest accretion expense 34 112 Financing interest and related costs 625 896 Interest income (48 ) (53 ) Change in fair value of note payable 547 678 Change in fair value of contingent consideration - 7 Adjusted EBITDA $ 8,699 $ 5,577 69 LIQUIDITY AND CAPITAL RESOURCES In October 2021, the Company entered into the Term Loan with BroadOak, providing for a term loan in the aggregate principal amount of $8,000,000. Funding of the Term Loan took place on November 1, 2021. The Term Loan was scheduled to mature upon the earlier of (i) October 31, 2024 or (ii) the occurrence of a change in control, and bears interest at the rate of 9% per annum. The Term Loan is secured by a security interest in substantially all the Company’s and its subsidiaries’ assets and was subordinate to the Company’s former $7,500,000 revolving credit facility with Comerica Bank. The Term Loan has an origination fee of 3% of the Term Loan amount, and a terminal payment equal to (i) 15% of the original principal amount of the Term Loan if the change of control occurs on or prior to the first anniversary of the funding of the Term Loan, (ii) 20% of the original principal amount of the Term Loan if the change of control occurs after the first anniversary but on or prior to the second anniversary of the funding of the Term Loan and (iii) 30% of the original principal amount of the Term Loan if the change of control occurs after the second anniversary of the funding of the Term Loan, or if the Term Loan is repaid on its maturity date. Upon receipt of the term loan, the proceeds were used to repay in full at their maturity the notes extended by Ampersand and 1315 Capital discussed above. See Note 13, Notes Payable, for more details. In May 2022, the Company issued a Convertible Note to BroadOak, pursuant to which BroadOak funded a term loan in the aggregate principal amount of $2.0 million which was converted into a subordinated term loan and was added to the outstanding balance of the Term Loan. See Note 13, Notes Payable , for more details. On October 24, 2023, the Company entered into a Second Amendment to the Loan and Security Agreement with BroadOak (the “Second Amendment”). The primary changes to the Term Loan were as follows: ● The Company made a one-time payment in an aggregate amount equal to $2,500,000, on October 30, 2023 and applied the payment in full satisfaction of the $3,000,000 Terminal Payment (as defined in the Term Loan). See Note 13, Notes Payable , regarding the Terminal Payment. ● Effective November 1, 2023, the interest rate under the Term Loan was reduced from 9% to 8% through the maturity date of October 31, 2024 or earlier, upon the occurrence of a change in control (“Loan Maturity Date”). ● The Company has the option to request an extension of the Loan Maturity Date in writing no less than sixty days prior to the Loan Maturity Date. If BroadOak agreed to the extension, the Loan Maturity Date would automatically be extended. On March 29, 2024, the Company entered into a Third Amendment to the Loan and Security Agreement with BroadOak (the “Third Amendment”), extending the loan maturity date to June 30, 2025. The primary changes to the Second Amendment were as follows: ● The maturity date was extended to June 30, 2025. ● Beginning April 1, 2024, the Company will make $500,000 monthly payments with the remaining loan balance due on the new maturity date. On January 14, 2025, the Company entered into a Fourth Amendment to the Loan and Security Agreement with BroadOak (the “Fourth Amendment”), extending the loan maturity date to December 31, 2025. The primary changes to the Third Amendment were as follows: ● The maturity date was extended to December 31, 2025. ● Beginning July 1, 2025, and continuing through December 1, 2025, the Company will make monthly interest-only payments with the remaining loan balance due on the new maturity date. 70 The Term Loan contains affirmative and negative restrictive covenants, including restrictions on certain mergers, acquisitions, investments and encumbrances which could adversely affect our ability to conduct our business. The Term Loan also contains customary events of default. The balance of the loan at December 31, 2024 was $4.4 million. For the year ended December 31, 2024, we had operating income from continuing operations of $8.1 million. As of the year ended December 31, 2024, we had cash and cash equivalents of $1.5 million, total current assets of $11.8 million and current liabilities of $10.6 million. As of March 21, 2025, we had approximately $1.3 million of cash on hand, net of restricted cash. During the year ended December 31, 2024, net cash provided by operating activities was $4.6 million. The main component of cash provided by operating activities was net income of $6.7 million. During the year ended December 31, 2023, net cash provided by operating activities was $3.8 million. The main component of cash provided by operating activities was net income of $2.0 million, and non-cash expenses of $2.5 million. During the year ended December 31, 2024, there was net cash used in investing activities of $0.9 million which primarily pertained to capital expenditures associated with the lab. During the year ended December 31, 2023, there was net cash used in investing activities of $0.1 million. For the year ended December 31, 2024, cash used in financing activities was $5.8 million, of which $5.6 million was for principal repayments of the BroadOak loan. See Note 13, Notes Payable, for more details. For the year ended December 31, 2023, cash used in financing activities was $5.0 million, of which $2.5 million was from the repayment on the Revolving Line and $2.5 million was the terminal payment made to BroadOak. See Note 13, Notes Payable, for more details. We generated positive cash flows from operations for the year ending December 31, 2024. We intend to meet our ongoing capital needs by using our available cash as well as through targeted margin improvement; collection of accounts receivable; containment of costs; and the potential use of other financing options and other strategic alternatives. The Company continues to explore various strategic alternatives, dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources in order to provide additional liquidity. With the Company’s delisting of its common stock from Nasdaq in February 2021, our ability to raise additional capital on terms acceptable to the Company has been adversely impacted. There can be no assurance that the Company will be successful in obtaining such funding on terms acceptable to the Company. The Company may seek an uplisting of its common stock to Nasdaq, but no assurances can be given that a Nasdaq listing will be achieved. Further, along with many laboratories, we may be affected by the Proposed LCD DL39365, which is currently under consideration by our local Medicare Administrative Contractor, Novitas. If finalized, this Proposed LCD, which governs “Genetic Testing for Oncology,” could impact the existing Medicare coverage for one of our molecular tests, PancraGEN ® . On June 5, 2023 we announced that Novitas issued the final LCD of Genetic Testing for Oncology (L39365) which, if finalized, would have established non-coverage for the Company’s widely used PancraGEN ® test effective July 17, 2023. On July 6, 2023, Novitas announced that it would not be implementing the final Genetic Testing for Oncology LCD (L39365) as scheduled on July 17, 2023. Novitas then issued a new virtually identical proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. In response, the Company participated in a public meeting presentation and submitted detailed written comments supporting the use of PancraGEN ® . On July 29, 2024, the Company announced that CMS granted Novitas an undefined extension to the final decision for the LCD. As a result, we were able to continue offering PancraGEN ® and the related Point2 ® fluid chemistry tests for amylase, CEA, and glucose for all of 2024. On January 9, 2025, we announced that the new LCD established non-coverage for the Company’s PancraGEN ® test, and we would stop offering the test and would not accept specimens for first-line fluid chemistry and PancraGEN ® testing after February 7, 2025. As a result of the established non-coverage for PancraGEN ® . we announced that our board of directors had approved the Restructuring Plan to reduce operating costs and better align our workforce with the loss of PancraGEN ® . 71 On January 27, 2025, the Company announced that CMS had directed its Medicare Administrative Contractors, Novitas and First Coast Service Options, Inc., to delay implementation of the Genetic Testing for Oncology LCD (L39365), from February 23, 2025 until April 24, 2025. The Company stated that this change of effective date will allow the Trump administration time to fully review the proposed policy changes, re-evaluate for themselves the supporting clinical evidence for the PancraGEN ® assay, and fully assess the negative impact on patient care if the currently proposed LCD comes into effect. As a result of CMS’ determination to delay implementation of the Genetic Testing for Oncology LCD (L39365), the Company is re-evaluating certain parts of the Restructuring Plan and will determine what parts will or will not be postponed or cancelled. In the event Novitas ultimately restricts coverage for the PancraGEN ® test, the Company’s liquidity could be negatively impacted. As of December 31, 2024, contractual obligations with terms exceeding one year and estimated minimum future rental payments required by non-cancelable operating leases with initial or remaining lease terms exceeding one year are as follows: Less than 1 to 3 3 to 5 After Total 1 Year Years Years 5 Years Operating lease obligations $ 1,925 $ 550 $ 1,100 $ 275 $ - Total $ 1,925 $ 550 $ 1,100 $ 275 $ - GOVERNANCE OF THE COMPANY Corporate Governance; Code of Ethics; Insider Trading Policy Our Board has adopted a written Code of Business Conduct that applies to our directors, officers, and employees, as well as Corporate Governance Guidelines applicable specifically to our Board. You can find links to these documents in the “Investor Relations-Corporate Governance” section of our website page at www.interpace.com. The content contained in, or that can be accessed through, our website is not incorporated into this Annual Report on Form 10-K. Disclosure regarding any amendments to, or any waivers from, a provision of our Code of Business Conduct that applies to one or more of our directors, our principal executive officer, our principal financial or our principal accounting officer will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, or posted on our website (www.interpace.com). Our Insider Trading Policy, adopted in March 2025, expressly prohibits our, and our direct and indirect subsidiaries’, employees, directors, officers and designated contractors and consultants, who know or have access to material information regarding the Company that has not been fully disclosed to the public from (i) trading in Company securities or engaging in transactions in securities of another company with which the Company conducts business, such as a customer, partner, distributor or supplier, if they are in possession of or otherwise aware of material information relating to such other company obtained in course of employment with, or services performed on behalf of, the Company, (ii) pledging Company securities as collateral for a loan, (iii) engaging in hedging or monetization transactions with respect to Company securities, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds, and (iv) trading in derivative securities related to our Company securities, which includes publicly traded call and put options. Our Insider Trading Policy also provides that the Company will not effect transactions in respect of its securities, or adopt any securities repurchase plans, when it is in possession of material nonpublic information concerning the Company, other than in compliance with applicable law. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a “smaller reporting company” for purposes of the disclosure requirements of Item 305 of Regulation S-K and, therefore, we are not required to provide this information.