MYRIAD GENETICS INC 10-K

Item 9A. CONTROLS AND PROCEDURES 1. Disclosure Controls and Procedures We maintain disclosure controls and procedures ("Disclosure Controls") within the meaning of Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our Disclosure Controls are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily applied its judgment in evaluating and implementing possible controls and procedures. As of the end of the period covered by this Annual Report on Form 10-K, we evaluated the effectiveness of the design and operation of our Disclosure Controls, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on the evaluation of our Disclosure Controls, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our Disclosure Controls were not effective due to material weaknesses in the Company's internal control over financial reporting as disclosed below. 2. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act. Our internal control over financial reporting is designed to p rovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. During the preparation of the condensed consolidated quarterly financial statements as of September 30, 2021, management concluded that a material weakness in internal control over financial reporting existed related to our income tax provision process. Specifically, we did not provide adequate review and control with respect to the completeness and accuracy of inputs used in the income tax provision and related accrual. While the control deficiency did not result in a misstatement of previously issued consolidated financial statements, the control deficiency could have resulted in a misstatement of the income tax related accounts or disclosures that would have resulted in a material misstatement of our consolidated financial statements that would not have been prevented or detected on a timely basis. This material weakness has not been remediated as of December 31, 2021. Management also concluded that a material weakness in internal control over financial reporting exists related to general information technology controls for information systems that are relevant to the preparation of the financial statements. Specifically, the material weakness resulted from the aggregation of control deficiencies related to systems supporting the Company's internal control processes. Our IT-dependent business process controls were also deemed ineffective because they could have been adversely impacted. While the aggregation of these deficiencies did not result in any misstatement of the consolidated financial statements, the material weakness could have resulted in a misstatement impacting account balances or disclosures that would have resulted in a material misstatement to the consolidated financial statements that would not have been prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 may deteriorate. Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 using the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that evaluation, management believes that our internal control over financial reporting was not effective as of December 31, 2021. 101 Table of Contents The effectiveness of our internal control over fina ncial reporting as of December 31, 2021, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included elsewhere herein. 3. Plan to Remediate Material Weaknesses Management is committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal control over financial reporting. We have begun the process of, and we are focused on, designing and implementing effective internal control measures to improve our internal control over financial reporting and remediate the material weaknesses identified above. Our efforts include the following actions: Discrete Tax Transactions • We are continuing to take steps to design and implement enhanced controls over the review of information underlying discrete transactions in the income tax provision. Information Technology General Controls ("ITGCs") • We are implementing additional training to ensure a clear understanding of risk assessment, controls and monitoring activities related to automated processes and systems and ITGCs related to financial reporting. • We are implementing improved IT policies, procedures and control activities for key systems which impact our financial reporting. • We are increasing resources dedicated to monitoring ITGCs related to financial reporting, including additional personnel with the appropriate level of knowledge, experience and training, to ensure compliance with policies and procedures. While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting for that purpose. 4. Remediation of Previously Reported Material Weakness The material weakness identified in our internal control over financial reporting in connection with the preparation of our Consolidated Financial Statements as of and for the transition period ended December 31, 2020 (the "prior material weakness") has been remediated. The prior material weakness identified related to the accounting for intercompany transactions, foreign currency exchanges and foreign currency translation related to our international subsidiaries. Specifically, as part of our financial statement close process, certain of our control activities were not sufficiently designed or operating effectively to ensure all of our policies were in compliance with generally accepted accounting principles, consistent in their application, retained in appropriate documentation and communicated to relevant parties. As a result of the prior material weakness, we recorded certain immaterial corrections to intercompany accounts, as well as foreign currency exchange and translation gains and losses, in our Consolidated Financial Statements for the transition period ended December 31, 2020. We implemented control measures to improve our internal control over financial reporting and remediated the prior material weakness. We took the following actions to remediate the prior material weakness: • We designed additional control and review procedures needed to provide more robust and comprehensive internal controls over financial reporting that address the risks of material misstatement related to the accounting for intercompany transactions, foreign currency exchanges and foreign currency translation within our business processes. • We implemented additional application controls in our financial systems, implemented formal review procedures, and formally documented our newly designed processes for the identified areas. • We subjected the additional controls implemented to testing and concluded that the controls are operating effectively. 5. Change in Internal Control over Financial Reporting The Company has completed a multi-year transformation project to achieve better analytics and process efficiencies and other systematic and control improvements through the use of Oracle Fusion Cloud Services System. As of October 1, 2021, Oracle Cloud is now our primary accounting system. 102 Table of Contents Other than as described above, there were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 6. Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Myriad Genetics, Inc. Opinion on Internal Control over Financial Reporting We have audited Myriad Genetics, Inc. and subsidiaries’ 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, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Myriad Genetics, Inc. and subsidiaries (the Company) has not maintained effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management identified material weaknesses in controls over income taxes and information technology general controls. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Myriad Genetics, Inc. and subsidiaries as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the year ended December 31, 2021, the six month period ended December 31, 2020, and each of the two years in the period ended June 30, 2020, and the related notes. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report dated February 25, 2022, which 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. 103 Table of Contents 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 Salt Lake City, UT February 25, 2022 Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable . 104 Table of Contents PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Management and Corporate Governance,” "Delinquent Section 16(a) Reports" and “Corporate Code of Conduct” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be held on June 2, 2022. Item 11. EXECUTIVE COMPENSATION The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Executive Compensation,” “Management and Corporate Governance – Committees of the Board of Directors and Meetings – Compensation and Human Capital Committee Interlocks and Insider Participation,” “Compensation Committee Report ” and “Management and Corporate Governance – Board’s Role in the Oversight of Risk Management” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be held on June 2, 2022. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation - Equity Compensation Plan Information” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be held on June 2, 2022. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The response to this item is incorporated by reference from the discussion responsive thereto under the caption “Certain Relationships and Related Person Transactions” and “Management and Corporate Governance – Director Independence” in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be held on June 2 , 2022. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The response to this item is incorporated by reference from the discussion responsive thereto in the proposal entitled “Selection of Independent Registered Public Accounting Firm” in our Proxy Statement for the 2022 Annual Meeting of the Stockholders to be held on June 2, 2022. 105 Table of Contents PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are included as part of this Annual Report on Form 10-K. 1. Financial Statements See “Index to Consolidated Financial Statements” at Item 8 to this Annual Report on Form 10-K. 2. Financial Statement Schedules Financial statement schedules have not been included because they are not applicable, or the information is included in financial statements or notes thereto. 3. Exhibits Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File/ Registration Number 3.1 Restated Certificate of Incorporation, as amended 10-K (Exhibit 3.1) 8/15/2011 000-26642 3.2 Restated By-Laws 8-K (Exhibit 3.1) 10/15/2020 000-26642 4.1 Specimen common stock certificate 10-K (Exhibit 4.1) 8/15/2011 000-26642 4.2 Description of Securities 10-KT (Exhibit 4.2) 3/16/2021 000-26642 Lease Agreements 10.1 .1 Lease Agreement, dated October 12, 1995, between the Registrant and Boyer Research Park Associates V, by its general partner, the Boyer Company 10-Q (Exhibit 10.2) 11/8/1996 000-26642 .2 Amendment to Phase I Lease Agreement, dated February 3, 2016, between the Registrant and HCPI/UTAH II, LLC. 10-Q (Exhibit 10.1) 5/4/2016 000-26642 10.2 .1 Lease Agreement-Research Park Building Phase II, dated March 6, 1998, between the Registrant and Research Park Associated VI, by its general partner, the Boyer Company, L.C. 10-K (Exhibit 10.44) 9/24/1998 000-26642 .2 Amendment to Phase II Lease Agreement, dated February 3, 2016, between Myriad Genetics, Inc. and HCPI/UTAH II, LLC . 10-Q (Exhibit 10.2) 5/4/2016 000-26642 10.3 .1 Lease Agreement, dated March 31, 2001, between the Registrant and Boyer Research Park Associates VI, by its general partner, The Boyer Company, L.C. 10-Q (Exhibit 10.1) 5/15/2001 000-26642 .2 Amendment to Phase III Lease Agreement, dated February 3, 2016, between Myriad Genetics, Inc. and HCPI/UTAH II, LLC. 10-Q (Exhibit 10.3) 5/4/2016 000-26642 10.4 .1 Lease Agreement, dated March 11, 2008, between the Registrant and Boyer Research Park Associates IX, by its general partner, The Boyer Company, L.C. 10-K (Exhibit 10.32) 8/28/2008 000-26642 .2 Amendment to Lease Agreement, dated February 12, 2010 between the Registrant and Boyer Research Park Associates IX, L.C. 10-Q (Exhibit 10.4) 5/5/2010 000-26642 106 Table of Contents Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File/ Registration Number 10.5 Lease Agreement, dated January 31, 2019 between the Registrant and Boyer Research Park Associates X, L.C., by its Manager, The Boyer Company, L.C. 10-K (Exhibit 10.6) 8/13/2019 000-26642 Agreements with Executive Officers and Directors 10.6 Non-Employee Director Compensation Policy+ 10-KT (Exhibit 10.8) 3/16/2021 000-26642 10.7 Form of director and executive officer indemnification agreement+ 10-K (Exhibit 10.34) 8/25/2009 000-26642 10.8 Form of Severance and Change in Control Agreement+ 8-K (Exhibit 10.1) 10/15/2020 000-26642 10.9 Executive Employment Agreement between the Registrant and Paul J. Diaz dated July 24, 2020+ 10-Q (Exhibit 10.1) 11/9/2020 000-26642 10.10 Performance-Based Restricted Stock Unit Agreement between Registrant and Paul J. Diaz dated October 8, 2020+ 10-Q (Exhibit 10.2) 11/9/2020 000-26642 10.11 Restricted Stock Unit Agreement between the Registrant and Paul J. Diaz dated August 13, 2020+ 10-Q (Exhibit 10.3) 11/9/2020 000-26642 10.12 Performance-Based Non-Qualified Stock Option Agreement between the Registrant and Paul J. Diaz dated August 13, 2020+ 10-Q (Exhibit 10.4) 11/9/2020 000-26642 10.13 Non-Qualified Stock Option Agreement between the Registrant and Paul J. Diaz dated August 13, 2020+ 10-Q (Exhibit 10.5) 11/9/2020 000-26642 10.14 Form of Separation and Release Agreement between the Registrant and Paul J. Diaz+ 10-Q (Exhibit 10.6) 11/9/2020 000-26642 10.15 Separation and Consulting Agreement, dated February 7, 2022, by and between Myriad Genetics, Inc. and Jerry Lanchbury + 8-K (Exhibit 10.1) 2/9/2022 000-26642 Equity Compensation Plans 10.16 2010 Employee, Director and Consultant Equity Incentive Plan, as amended+ 8-K (Exhibit 10.1) 12/2/2016 000-26642 10.17 Form of Stock Option Agreement under the 2010 Equity Incentive Plan+ 10-Q (Exhibit 10.3) 2/1/2011 000-26642 10.18 Form of Director Stock Option Agreement under the 2010 Equity Incentive Plan+ 10-Q (Exhibit 10.4) 2/1/2011 000-26642 107 Table of Contents Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File/ Registration Number 10.19 2017 Employee, Director and Consultant Equity Incentive Plan, as amended+ 8-K (Exhibit 10.1) 12/7/2020 000-26642 10.20 Form of Restricted Stock Unit Agreement under the 2017 Equity Incentive Plan+ 10-K (Exhibit 10.11) 8/13/2020 000-26642 10.21 Amended and Restated 2012 Employee Stock Purchase Plan+ 10-Q (Exhibit 10.1) 11/4/2021 000-26642 10.22 2013 Executive Incentive Plan, as amended+ 8-K (Exhibit 10.2) 12/1/2017 000-26642 Credit Agreement 10.23 Amendment No. 3, dated February 22, 2021, to the Credit Agreement, dated December 23, 2016, among the Company, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as amended July 31, 2018 and May 1, 2020. 8-K (Exhibit 10.1) 2/23/2021 000-26642 Merger Agreements 10.24 Agreement and Plan of Merger among the Registrant, Myriad Merger Sub, Inc., Assurex Health, Inc. and Fortis Advisors LLC, dated as of August 3, 2016 . 10-Q (Exhibit 10.1) 11/2/2016 000-26642 10.25 Agreement and Plan of Merger among the Registrant, Cinnamon Merger Sub, Inc., a wholly owned subsidiary of Myriad, Inc., Counsyl, Inc, and Fortis Advisors, dated as of May 25, 2018. 10-K (Exhibit 10.18) 8/24/2018 000-26642 Other 21.1 List of Subsidiaries of the Registrant X 23.1 Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) X 24.1 Power of Attorney (included in the signature page hereto) X 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 108 Table of Contents Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File/ Registration Number 101 The following materials from Myriad Genetics, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. Inline XBRL Instance Document – Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X (+) Management contract or compensatory plan arrangement. Item 16. FORM 10-K SUMMARY None. 109 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of 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, on February 25, 2022 . MYRIAD GENETICS, INC. By: /s/ Paul J. Diaz Paul J. Diaz President and Chief Executive Officer Power of Attorney KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul J. Diaz and R. Bryan Riggsbee and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully 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 indicated below and on the dates indicated. 110 Table of Contents Signatures Title Date President, Chief Executive Officer and Director (Principal Executive Officer) By: /s/ Paul J. Diaz February 25, 2022 Paul J. Diaz Chief Financial Officer (Principal Financial and Accounting Officer) By: /s/ R. Bryan Riggsbee February 25, 2022 R. Bryan Riggsbee By: /s/ S. Louise Phanstiel Chair of the Board February 25, 2022 S. Louise Phanstiel By: /s/ Heiner Dreismann Director February 25, 2022 Heiner Dreismann, Ph.D. By: /s/ Rashmi Kumar Director February 25, 2022 Rashmi Kumar By: /s/ Dennis Langer Director February 25, 2022 Dennis Langer, M.D., J.D. By: /s/ Lee N. Newcomer Director February 25, 2022 Lee N. Newcomer, M.D. By: /s/ Colleen F. Reitan Director February 25, 2022 Colleen F. Reitan By: /s/ Daniel M. Skovronsky Director February 25, 2022 Daniel M. Skovronsky, M.D., Ph.D. By: /s/ Daniel K. Spiegelman Director February 25, 2022 Daniel K. Spiegelman 111