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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-14 · 611 added, 453 removed, 663 unchanged (62% of the section changed)

Financial Statements and Supplementary Data

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Sema4 Holdings Corp.

To the Stockholders and the Board of Directors of GeneDx Holdings Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sema4 Holdings Corp.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of GeneDx Holdings Corp.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

Restatement of 2020 and 2019 Financial Statements

As discussed in Note 2 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct a misstatement.

Adoption of ASU 2016-02

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2022, the Company changed its method of accounting for leases due to the adoption of ASU 2016-02, Leases.

Basis for Opinion

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New York, New York, United States

Sema4 Holdings Corp.

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GeneDx Holdings Corp.

Consolidated Balance Sheets

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Cash and cash equivalents $ 123,933 $ 400,569

Restricted cash 13,470 —

Accounts receivable, net 42,634 26,509

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Property and equipment, net 51,527 62,719

Restricted cash 900 10,828

Intangible assets, net 186,650 —

Operating lease right-of-use assets 32,758 —

Long-term restricted cash 900 900

Other assets 6,485 6,930

Total assets $ 490,942 $ 554,093

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

2 unchanged sentences

Due to related parties 3,593 2,623

Current portion of capital lease obligations 3,419 3,506

Contract liabilities 40 473

Current portion of lease liabilities 6,121 —

Other current liabilities 49,665 33,387

1 unchanged sentence

Long-term debt, net of current portion 6,250 11,000

Stock-based compensation liabilities — 131,989

Capital lease obligations, net of current portion 18,427 20,778

Long-term lease liabilities 60,013 —

Other liabilities 22,000 21,907

Deferred taxes 2,659 —

Warrant liability 418 21,555

2 unchanged sentences

Commitments and contingencies (Note 10)

Redeemable convertible preferred stock:

Series A-1 redeemable convertible preferred stock, $ 0.00001 par value:

0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 0 and $ 55,000 at December 31, 2021 and December 31, 2020, respectively

Series A-2 redeemable convertible preferred stock, $ 0.00001 par value:

0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively;

0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 0 and $ 49,342 at December 31, 2021 and December 31, 2020, respectively

Series B redeemable convertible preferred stock, $ 0.00001 par value:

0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 0 and $ 204,302 at December 31, 2021and December 31, 2020, respectively

Series C redeemable convertible preferred stock, $ 0.00001 par value:

0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively;

0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively;

aggregate liquidation preference of $ 0 and $ 121,397 at December 31, 2021 and December 31, 2020, respectively

Redeemable convertible preferred stock — 334,439

Stockholders’ equity (deficit):

Stockholders’ Equity:

Preferred Stock, $ 0.0001 par value:

1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively;

1,000,000 shares authorized at December 31, 2022 and December 31, 2021;

0 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

2 unchanged sentences

380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021

Class B convertible common stock, $ 0.00001 par value:

0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively;

0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,378,088 963,520

Accumulated deficit ( 1,124,421 ) ( 575,441 )

Total stockholders’ equity (deficit) 388,103 ( 330,051 )

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 554,093 $ 251,642

Total stockholders’ equity 253,705 388,103

Total liabilities and stockholders’ equity $ 490,942 $ 554,093

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

Sema4 Holdings Corp.

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GeneDx Holdings Corp.

Consolidated Statements of Operations and Comprehensive Loss

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2022 2021 2020

Revenue (Restated) (1) (Restated) (1)

Diagnostic test revenue (including related party revenue of $ 2,209 , $ 90 and $ 285 for the years ended December 31, 2022, 2021, and 2020, respectively)

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Related party expenses 6,312 5,659 9,395

Impairment loss 210,145 — —

Loss from operations ( 667,652 ) ( 446,149 ) ( 241,994 )

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Loss before income taxes ( 598,032 ) ( 245,390 ) ( 241,340 )

Income tax provision — — —

Income tax benefit 49,052 — —

Net loss and comprehensive loss $ ( 548,980 ) $ ( 245,390 ) $ ( 241,340 )

Redeemable convertible preferred stock dividends — — 3,039

Net loss attributable to common stockholders $ ( 245,390 ) $ ( 241,340 ) $ ( 32,743 )

Weighted average shares outstanding, Class A common stock 337,819,680 108,077,439 5,131

Basic and diluted net loss per share, Class A common stock $ ( 1.63 ) $ ( 2.27 ) $ ( 47,036 )

(1) Certain expenses were previously misclassified as cost of services.

These expenses are now reported as selling and marketing.

This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or net loss per share.

Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information.

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

Sema4 Holdings Corp.

Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

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GeneDx Holdings Corp.

Consolidated Statement of Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

Redeemable Convertible Preferred Stock Class A Common Stock Class B Common Stock

Shares Amount Shares Per Value Shares Per Value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)

Balance at December 31, 2018 102,039,134 $ 64,355 124 $ — — $ — — $ ( 55,968 ) $ ( 55,968 )

Net loss — — — — — — — ( 29,704 ) ( 29,704 )

Preferred Series A dividend 3,061,173 3,039 — — — — — ( 3,039 ) ( 3,039 )

Capital contributions — 30,897 — — — — — — —

Issuance of Preferred Series B, net of issuance costs 41,937,960 $ 118,824 — — — — — — —

Shares Amount Shares Par Value Shares Par Value Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit)

Balance at December 31, 2019 147,038,267 $ 217,115 124 $ — — $ — $ — $ ( 88,711 ) $ ( 88,711 )

Net loss — — — — — — — ( 241,340 ) ( 241,340 )

Preferred Series A dividend — — — — 130,557 — — — —

Capital contributions 24,496,946 117,324 — — — — — — —

Common stock issued pursuant to stock option exercises — — — — 130,557 — — — —

Issuance of Preferred Series C, net of issuance costs 24,496,946 117,324 — — — — — — —

Balance at December 31, 2020 171,535,213 $ 334,439 124 $ — 130,557 $ — $ — $ ( 330,051 ) $ ( 330,051 )

Net loss — — — — — — — ( 245,390 ) ( 245,390 )

Stock option exercises — — 995,526 — 1,253,179 — 1,783 — 1,783

Conversion of Preferred Stock ( 171,535,213 ) ( 334,439 ) 148,543,062 15 — — 104,517 — 104,532

Conversion of Class B Common Stock — — 1,309,320 — ( 1,383,736 ) — ( 744 ) — ( 744 )

Common stock issued pursuant to stock option exercises — — 995,526 — 1,253,179 — 1,783 — 1,783

Conversion of Preferred into Common Stock ( 171,535,213 ) ( 334,439 ) 148,543,062 15 — — 104,517 — 104,532

Conversion of Class B Common Stock into Class A Common Stock — — 1,309,320 — ( 1,383,736 ) — ( 744 ) — ( 744 )

Net equity infusion from the Business Combination — — 90,333,562 9 — — 510,742 — 510,751

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Balance at December 31, 2021 — $ — 242,647,604 $ 24 — $ — $ 963,520 $ ( 575,441 ) $ 388,103

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Net loss — — — — — — — ( 548,980 ) $ ( 548,980 )

Common stock issued pursuant to stock option exercises — — 11,021,636 1 — — 2,947 — 2,948

Stock based compensation expense — — — — — — 41,975 — 41,975

Shares issued for PIPE, net of issuance costs — — 50,000,000 5 — — 197,654 — 197,659

Shares issued for acquisition (1) — — 80,000,000 8 — — 171,992 — 172,000

Vested restricted stock units converted to common stock — — 4,841,898 — — — — — —

Balance at December 31, 2022 — $ — 388,511,138 $ 38 — $ — $ 1,378,088 $ ( 1,124,421 ) $ 253,705

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

Sema4 Holdings Corp.

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GeneDx Holdings Corp.

Consolidated Statements of Cash Flows

8 unchanged sentences

Change in fair value of warrant and contingent liabilities ( 70,229 ) ( 198,401 ) —

Income tax benefit ( 49,124 ) — —

Provision for excess and obsolete inventory 1,125 2,129 —

1 unchanged sentence

Loss on extinguishment of debt — 301 —

Impairment loss 210,145 — —

Amortization of debt issuance costs 518 66 —

Change in operating assets and liabilities:

Change in operating assets and liabilities, net of effects from purchase of business:

Accounts receivable 5,527 5,535 ( 10,611 )

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Investing activities

Purchase of business, net of cash acquired $ ( 127,004 ) $ — $ —

Purchases of property and equipment ( 7,156 ) ( 9,400 ) ( 24,094 )

2 unchanged sentences

Financing activities

Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs — — 118,824

Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs $ — $ — $ 117,324

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Exercise of stock options 2,948 1,271 —

Capital contributions from ISMMS — — 30,897

Proceeds from long-term debt — — 15,928

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Debt issuance costs — ( 537 ) —

Capital lease principal payments ( 3,728 ) ( 4,010 ) ( 1,709 )

Finance lease principal payments ( 3,292 ) ( 3,728 ) ( 4,010 )

Net cash provided by financing activities $ 197,315 $ 493,729 $ 129,056

Net increase in cash, cash equivalents and restricted cash 282,509 3,954 113,828

Net (decrease) increase in cash, cash equivalents and restricted cash $ ( 263,166 ) $ 282,509 $ 3,954

Cash, cash equivalents and restricted cash, at beginning of year 401,469 118,960 115,006

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Cash, cash equivalents and restricted cash, at end of year $ 138,303 $ 401,469 $ 118,960

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$ 1,241 $ 349 $ —

Stock consideration paid for purchase of business $ 172,000 $ — $ —

Purchases of property and equipment in accounts payable and accrued expenses $ — $ 761 $ 447

Software development costs in accounts payable and accrued expenses $ 461 $ 1,149 $ 1,473

Non-cash Series A redeemable convertible preferred stock dividends declared and paid $ — $ — $ 3,039

Debt issuance costs incurred but unpaid $ — $ 1,000 $ —

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

Sema4 Holdings Corp.

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GeneDx Holdings Corp.

Notes to Consolidated Financial Statements

Organization and Description of Business

Sema4 Holdings Corp., formerly Mount Sinai Genomics Inc., a Delaware corporation (“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research.

Legacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients.

Legacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions.

In 2020, the Legacy Sema4 began to provide diagnostic testing services in response to the outbreak of the coronavirus (“COVID-19”) pandemic.

On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022.

Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in New York, California, Florida, Connecticut and New Jersey.

GeneDx Holdings Corp.

(“GeneDx Holdings”) (formerly, Sema4 Holdings Corp.

(“Sema4 Holdings”)) through its subsidiaries Sema4 OpCo, Inc., formerly Mount Sinai Genomics Inc., a Delaware corporation (“Legacy Sema4”) and GeneDx, LLC, provides genomics-related diagnostic and information services and pursues genomics medical research.

GeneDx utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients.

GeneDx provides a variety of genetic diagnostic tests, and screening solutions, and information with a focus on pediatrics, rare diseases for children and adults, and hereditary cancer screening.

GeneDx Holdings’ operating subsidiaries primarily serve healthcare professionals who work with their patients and bills third-party payors across the United States.

On July 22, 2021 (the “Closing Date”), CM Life Sciences, Inc.

(“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated February 9, 2021.

(“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Business Combination Merger Agreement”), dated February 9, 2021.

On the Closing Date, S-IV Sub, Inc.

(“Merger Sub”) merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”).

In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.

The Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes.

The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).

Prior to the Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively.

merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Business Combination Merger” and, together with the other transactions contemplated by the Business Combination Merger Agreement, the “Business Combination”).

In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.

The Business Combination Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes.

The shares and net loss per common share, prior to the Business Combination Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock (the “Class A common stock”) (the “Conversion Ratio”).

Prior to the Business Combination Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively.

On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively.

See Note 3, “Business Combination,” for additional details.

Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination;

and (ii) Sema4 Holdings and its subsidiary following the consummation of the Business Combination.

In addition, on April 29, 2022, the Company consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated as of January 14, 2022 (as amended, the “ Acquisition Merger Agreement”), by and among the Company and GeneDx, Inc.

(“Legacy GeneDx”), a New Jersey corporation and wholly-owned subsidiary of OPKO Health, Inc.

(“OPKO”), GeneDx Holding 2, Inc., which held 100 % of Legacy GeneDx (“Holdco2”), at the Effective Time (as defined in the Acquisition Merger Agreement) and OPKO, which provided for, among other things, the acquisition of Legacy GeneDx from OPKO.

After giving effect to the mergers and the other transactions contemplated by the Acquisition Merger Agreement (the “Acquisition”), Legacy GeneDx was converted into a Delaware limited liability company and became the Company’s wholly-owned indirect subsidiary.

See Note 3, “Business Combination,” for additional details regarding the Business Combination and Acquisition.

On January 9, 2023, Sema4 Holdings Corp.

changed its name to GeneDx Holdings Corp.

Upon the name change, the Company’s Class A common stock and public warrants are listed on the Nasdaq under the symbols “WGS” and “WGSWW,” respectively.

Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “GeneDx” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination;

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(ii) GeneDx Holdings and its subsidiaries following the consummation of the Business Combination (including, following the consummation of the Acquisition, Legacy GeneDx).

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

The Company’s historical financial

information includes costs of certain services historically provided by Icahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to the Transition Services Agreement ("TSA") and service.

Restatement – 2020 and 2019 annual statements of operations and comprehensive loss

The Company classifies expenses incurred that directly relate to the delivery of revenue as cost of services in its consolidated statements of operations and comprehensive loss.

As a result of expanded accounting resources, the Company identified the misclassification of certain expenses related to the genetic counseling department reported in cost of services that should have been reported in selling and marketing in the prior period financial statements.

The Company quantified the amount and determined it necessary to restate its previously reported balances as follows (in thousands):

December 31, 2020 December 31, 2019

As reported Misclass-

ification Restated As reported Misclass-

ification Restated

Total revenue 179,322 — 179,322 196,174 — 196,174

Cost of services 184,648 ( 9,352 ) 175,296 119,623 ( 6,234 ) 113,389

Gross (loss) profit ( 5,326 ) 9,352 4,026 76,551 6,234 82,785

Research and development 72,700 — 72,700 34,910 — 34,910

Selling and marketing 53,831 9,352 63,183 33,118 6,234 39,352

General and administrative 100,742 — 100,742 29,484 — 29,484

Related party expenses 9,395 — 9,395 9,452 — 9,452

Loss from operations ( 241,994 ) — ( 241,994 ) ( 30,413 ) — ( 30,413 )

Total other income, net 654 — 654 709 — 709

Net loss and comprehensive loss ( 241,340 ) — ( 241,340 ) ( 29,704 ) — ( 29,704 )

This misclassification did not have any impact to the Company's net loss or net loss per share as reported in the statements of operations and comprehensive loss in any interim or annual periods.

Included in the misclassification amount is stock-based compensation expense of $ 1 million for 2020.

There was no impact of misclassification for 2019 related to stock-based compensation expense.

Restatement – 2021 and 2020 interim financial statements (unaudited)

Additionally, the Company has identified quarterly out of period adjustments generally related to recognition of cost of services in the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021.

of the misclassification and quarterly out of period adjustments identified on each of the three months periods in the year ended December 31, 2021 and 2020 are disclosed as follows (in thousands):

2021 interim statements of operations and comprehensive loss (in thousands)

Quarter Second

reported Misclass-ification Adjustment Restated As

reported Misclass-ification Adjustment Restated

Total revenue 64,351 — ( 150 ) 64,201 46,865 — 150 47,015

Cost of services 71,812 ( 3,837 ) 549 68,524 49,631 ( 2,287 ) 835 48,179

Gross (loss) profit ( 7,461 ) 3,837 ( 699 ) ( 4,323 ) ( 2,766 ) 2,287 ( 685 ) ( 1,164 )

Research and development 53,131 — 2 53,133 11,954 — ( 2 ) 11,952

Selling and marketing 31,569 3,837 ( 40 ) 35,366 16,247 2,287 40 18,574

General and administrative 101,917 — 121 102,038 12,794 — 76 12,870

Related party expenses 1,797 — — 1,797 888 — — 888

Loss from operations ( 195,875 ) — ( 782 ) ( 196,657 ) ( 44,649 ) — ( 799 ) ( 45,448 )

Total other income, net 4,882 — — 4,882 ( 713 ) — — ( 713 )

Net (loss) income and comprehensive loss ( 190,993 ) — ( 782 ) ( 191,775 ) ( 45,362 ) — ( 799 ) ( 46,161 )

Quarter Fourth

reported Misclass-ification Adjustment Restated As

Total revenue 43,178 — — 43,178 57,801

Cost of services 58,752 ( 6,031 ) ( 1,234 ) 51,487 60,607

Gross (loss) profit ( 15,574 ) 6,031 1,234 ( 8,309 ) ( 2,806 )

Research and development 17,831 — — 17,831 22,246

Selling and marketing 22,121 6,031 — 28,152 30,646

General and administrative 33,230 — ( 105 ) 33,125 57,955

Related party expenses 847 — — 847 2,127

Loss from operations ( 89,603 ) — 1,339 ( 88,264 ) ( 115,780 )

Total other income, net 120,995 — — 120,995 75,595

Net (loss) income and comprehensive loss 31,392 — 1,339 32,731 ( 40,185 )

2020 interim statements of operations and comprehensive loss (in thousands)

Quarter Second

Quarter Third

Quarter Fourth

As reported Misclass-ification Restated As reported Misclass-ification Restated As reported Misclass-ification Restated As reported Misclass-ification Restated

Total revenue 46,655 — 46,655 30,102 30,102 38,608 38,608 63,957 63,957

Cost of services 39,239 ( 2,101 ) 37,138 35,985 ( 1,480 ) 34,505 36,530 ( 2,508 ) 34,022 72,894 ( 3,263 ) 69,631

Gross (loss) profit 7,416 2,101 9,517 ( 5,883 ) 1,480 ( 4,403 ) 2,078 2,508 4,586 ( 8,937 ) 3,263 ( 5,674 )

Research and development 13,096 — 13,096 9,361 — 9,361 19,083 — 19,083 31,160 — 31,160

Selling and marketing 11,733 2,101 13,834 8,686 1,480 10,166 12,735 2,508 15,243 20,677 3,263 23,940

General and administrative 7,164 — 7,164 8,121 — 8,121 24,342 — 24,342 61,115 — 61,115

Related party expenses 2,195 — 2,195 2,111 — 2,111 1,933 — 1,933 3,156 — 3,156

Loss from operations ( 26,772 ) — ( 26,772 ) ( 34,162 ) — ( 34,162 ) ( 56,015 ) — ( 56,015 ) ( 125,045 ) — ( 125,045 )

Total other income, net ( 218 ) — ( 218 ) 2,110 — 2,110 ( 600 ) — ( 600 ) ( 638 ) — ( 638 )

comprehensive loss ( 26,990 ) — ( 26,990 ) ( 32,052 ) — ( 32,052 ) ( 56,615 ) — ( 56,615 ) ( 125,683 ) — ( 125,683 )

The adjustments also affected certain current asset and liability accounts previously reported in the condensed balance sheets as of March 31, 2021 and June 30, 2021 and condensed consolidated balance sheets as of September 30, 2021 as follows (in thousands):

March 31, 2021

June 30, 2021 September 30, 2021

As reported Adjust-

ment Restated As reported Adjust-

ment Restated As reported Adjust-ment Restated

Current assets:

Cash and cash equivalents 58,652 — 58,652 26,501 — 26,501 461,276 — 461,276

Accounts receivable 33,490 ( 150 ) 33,340 24,568 — 24,568 21,257 — 21,257

Due from related parties 349 — 349 437 — 437 413 — 413

Inventory 32,969 — 32,969 29,128 — 29,128 31,174 — 31,174

Prepaid expenses and other current assets 15,070 ( 139 ) 14,931 18,378 — 18,378 24,391 — 24,391

Total current assets 140,530 ( 289 ) 140,241 99,012 — 99,012 538,511 — 538,511

Property and equipment, net 64,632 — 64,632 62,097 — 62,097 60,333 — 60,333

Restricted cash 10,828 — 10,828 10,828 — 10,828 900 — 900

Other assets 3,596 — 3,596 3,596 — 3,596 3,613 — 3,613

Total assets 219,586 ( 289 ) 219,297 175,533 — 175,533 603,357 — 603,357

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable and accrued expenses 41,609 493 42,102 43,650 1,581 45,231 43,079 242 43,321

Due to related parties 797 — 797 1,278 — 1,278 1,425 — 1,425

Current contract liabilities 2,810 — 2,810 1,341 — 1,341 493 — 493

Other current liabilities 22,991 — 22,991 24,764 — 24,764 26,369 — 26,369

Total current liabilities 68,207 493 68,700 71,033 1,581 72,614 71,366 242 71,608

Long-term debt, net of current portion 18,502 — 18,502 18,028 — 18,028 11,000 — 11,000

Stock-based compensation liabilities 296,952 — 296,952 295,049 — 295,049 — — —

Warrant liability — — — — — — 46,629 — 46,629

Earn-out contingent liability — — — — — — 61,400 — 61,400

Other liabilities 22,530 — 22,530 21,907 — 21,907 21,699 — 21,699

Total liabilities 406,191 493 406,684 406,017 1,581 407,598 212,094 242 212,336

Redeemable convertible preferred stock:

Series A-1 redeemable convertible preferred stock

51,811 — 51,811 51,811 — 51,811 — — —

Series A-2 redeemable convertible preferred stock

46,480 — 46,480 46,480 — 46,480 — — —

Series B redeemable convertible preferred stock

118,824 — 118,824 118,824 — 118,824 — — —

Series C redeemable convertible preferred stock

117,324 — 117,324 117,324 — 117,324 — — —

Redeemable convertible preferred stock

334,439 — 334,439 334,439 — 334,439 — — —

Stockholders’ equity (deficit):

Preferred Stock — — — — — — — — —

Class A common stock

— — — — — — 24 — 24

Class B convertible common stock

— — — — — — — — —

Additional paid-in capital

— — — 1,483 — 1,483 926,253 — 926,253

Accumulated deficit

( 521,044 ) ( 782 ) ( 521,826 ) ( 566,406 ) ( 1,581 ) ( 567,987 ) ( 535,014 ) ( 242 ) ( 535,256 )

Total stockholders’ (deficit) equity

( 521,044 ) ( 782 ) ( 521,826 ) ( 564,923 ) ( 1,581 ) ( 566,504 ) 391,263 ( 242 ) 391,021

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

219,586 ( 289 ) 219,297 175,533 — 175,533 603,357 — 603,357

The adjustments did not have any impact on the net cash used in operating or investing activities, or net cash used or provided by financing activities previously reported in the condensed statements of cash flows.

However, certain line items within the operating section of the condensed statements of cash flows would change by immaterial amounts.

The Company’s historical financial information includes costs of certain services historically provided by Icahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to the Transition Services Agreement (“TSA”).

These financial statements consolidate the operations and accounts of the Company and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented.

The preparation of audited 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 and the related disclosures at the date of the audited consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented.

The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events.

These estimates include, but are not limited to, the transaction price for certain contracts with customers, the capitalization of software costs and the valuation of stock-based awards, inventory, earn-out contingent liability and earn-out RSUs.

These estimates include, but are not limited to, the transaction price for certain contracts with customers, potential or actual claims for recoupment from third-party payors, the capitalization of software costs, the valuation of stock-based awards, inventory, earn-out contingent liabilities and earn-out Restricted Stock Units (“RSUs”).

Actual results could differ materially from those estimates, judgments and assumptions.

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Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

The majority of the Company’s cash, cash equivalents and restricted cash are uninsured with account balances in excess of the Federal Deposit Insurance Company limits.

On March 14, 2023, we announced full access to our capital with now 100% of the Company’s cash, cash equivalents and marketable securities held in institutions designated as systematically important financial institutions.

The Company’s cash and cash equivalents are deposited with high-quality financial institutions.

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Significant customers and payors are those that represent more than 10% of the Company’s total annual revenues or accounts receivable balance at each respective balance sheet date.

The significant concentrations of accounts receivable as of December 31, 2021 and 2020 were primarily from large managed care insurance companies and a reference laboratory.

The significant concentrations of accounts receivable as of December 31, 2022 and 2021 were primarily from large managed care insurance companies.

There was no individual customer that accounted for 10% or more of revenue or accounts receivable for any of the years presented.

The Company does not require collateral as a means to mitigate customer credit risk.

For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:

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For each significant payor group, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:

Revenue Accounts Receivable

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2022 2021 2020 2022 2021

Payor A 22 % 27 % 36 % 15 % 10 %

Payor B 13 % 14 % * * *

Payor C * * * * 20 %

Payor D * * 24 % 15 % *

Payor group A (1) * 22 % 27 % * 15 %

Payor group B (2) 30 % 13 % 14 % 14 % *

Payor group D * * * * 15 %

Payor group E 15 % * * 14 % *

__________________

* less than 10%

(1) This payor group represented less than 10% of the Company’s total revenues in 2022 due primarily to a reversal of revenue related to certain overpayments previously made by this payor.

Refer to Note 4, “Revenue Recognition.”

(2) This payor group includes multiple individual plans and the Company calculates and presents the aggregated value from all plans, which is consistent with the Company’s portfolio approach used in accounting for diagnostic test revenue.

The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies.

One supplier accounted for approximately 7 %, 11 % and 15 % for the years ended December 31, 2021, 2020 and 2019, respectively.

Another supplier accounted for approximately 11 %, 10 % and 12 % for the years ended December 31, 2021, 2020 and 2019, respectively.

One supplier accounted for approximately 5 %, 7 % and 11 % of purchases for the years ended December 31, 2022, 2021 and 2020, respectively.

Another supplier accounted for approximately 12 %, 11 % and 10 % of purchases for the years ended December 31, 2022, 2021 and 2020, respectively.

This risk is managed by maintaining a target quantity of surplus stock.

Alternative suppliers are available for some or all of these reagents and supplies.

Impact of COVID-19

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic.

The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on global health and economic conditions.

Many jurisdictions, including those in which the Company has current operations, have implemented measures to combat the spread and resurgence of COVID-19, such as travel restrictions and shelter in place orders.

In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.

Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system.

Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of the initial outbreak of the COVID-19 pandemic and the related limitations and priorities across the healthcare system.

In response, beginning in May 2020, the Company entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 variants.

While test volumes have since improved, the Company continues to experience changes in the mix of tests due to the impact of the COVID-19 pandemic.

COVID-19 could continue to have a material impact on the Company’s results of operations, cash flows and financial condition for the foreseeable future.

Test volumes have since improved to what would, at this time, be considered normalized market conditions.

A COVID-19 resurgence in the United States could however have a material impact on the Company’s consolidated results of operations, cash flows and financial condition.

In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system.

During 2020, as part of the stimulus provided by the CARES Act, the Company received $ 5.4 million, comprised of $ 2.6 million received under the Provider Relief Fund (“PRF”) distribution and $ 2.8 million received under the Employee Retention Credit (“ERC”) distribution which was recorded in other current liabilities and reflected in this balance as of December 31, 2020 and December 31, 2021.

During 2021, the Company received an additional $ 5.6 million during 2021 under the PRF distribution, which was recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss.

During 2020, as part of the stimulus provided by the CARES Act, the Company received $ 5.4 million, comprised of $ 2.6 million received under the Provider Relief Fund (“PRF”) distribution and $ 2.8 million received under the Employee Retention Credit (“ERC”) distribution which was recorded in other current liabilities within the consolidated balance sheets as of December 31, 2022 and December 31, 2021.

During 2021, the Company received an additional $ 5.6 million under the PRF distribution, which was recognized in other income in the consolidated statements of operations and comprehensive loss.

Additionally, under the CARES Act, the Company deferred payment of U.S.

social security taxes in 2020.

As a result, $ 3.8 million of employer payroll tax payments were deferred as of December 31, 2020 with $ 1.9 million paid in December 2021 and the remaining $ 1.9 million payment will be made in December 2022.

As of December 31, 2021, the remaining payable is recorded in other current liabilities.

On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022.

As a result, $ 3.8 million of employer payroll tax payments were initially deferred as of December 31, 2020 with $ 1.9 million paid in both December 2021 and December 2022 with no remaining liability as of December 31, 2022.

Following the Company’s announcement that it would discontinue COVID-19 testing services by March 31, 2022, the Company no longer provides COVID-19 testing services.

During the year ended December 31, 2022, the Company wrote off an accounts receivable balance of $ 0.4 million related to COVID-19 testing services.

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Cash, Cash Equivalents and Restricted Cash

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Carrying values of cash equivalents approximate fair value due to the short-term nature of these instruments.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the balance sheets that sum to the total of the same amounts shown on the statements of cash flows (in thousands):

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the total of the same amounts shown on the consolidated statements of cash flows (in thousands):

As of December 31,

2022 2021 2020

Cash and cash equivalents $ 123,933 $ 400,569 $ 108,132

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Total $ 138,303 $ 401,469 $ 118,960

Restricted cash as of December 31, 2021 consists of money market deposit accounts that secure an irrevocable standby letter of credit that serve as collateral for security deposits for operating leases (see Note 9).

Restricted cash as of December 31, 2022 includes $ 13.5 million held in escrow as restricted cash related to the closing of the Acquisition of Legacy GeneDx.

The escrow amount is to be held for a period of 12 months following the closing date of the Acquisition as a fund for OPKO’s indemnification obligations pursuant to the Acquisition Merger Agreement.

In addition, restricted cash, non-current, as of December 31, 2022 consists of money market deposit accounts that secure an irrevocable standby letter of credit that serves as collateral for security deposit operating leases (see Note 9, “Leases” ).

Accounts Receivable

Accounts receivable consists of amounts due from customers and third-party payors for services performed and reflect the consideration to which the Company expects to be entitled in exchange for providing those services.

Accounts receivable are estimated and recorded in the period the related revenue is recorded.

Accounts receivable is estimated and recorded in the period the related revenue is recorded.

During the years ended December 31, 2022 and 2021, the Company did not record provisions for doubtful accounts.

The Company did no t write off any accounts receivable balances for the year ended December 31, 2021 and $ 0.2 million of accounts receivable was written off for the year ended December 31, 2020.

The Company did no t write off any accounts receivable balances for the years ended December 31, 2022 and 2021, and $ 0.2 million of accounts receivable was written off for the year ended December 31, 2020.

Inventory, net

Inventory, net which primarily consists of testing supplies and reagents, is capitalized when purchased and expensed when used in performing services.

Inventory, net, which primarily consists of finished goods such as testing supplies and reagents, is capitalized when purchased and expensed when used in performing services.

Inventory is stated at the lower of cost or net realizable value.

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Any write-down of inventory to net realizable value creates a new cost basis.

The Company recorded a reserve for excess and obsolete inventory of $ 2.1 million as of December 31, 2021.

There was no reserve recorded as of December 31, 2020.

During the fourth quarter of 2022, the Company identified indicators of impairment specifically with the planned exit and discontinuance of testing for Legacy Sema4.

Certain inventory testing supplies and reagents have been or are being liquidated or disposed of rather than used to produce revenue.

As a result, the Company recorded a $ 22.5 million impairment charge within impairment loss in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

There was no impairment loss recorded for the years ended December 31, 2021 and December 31, 2020.

Additionally, in the normal course of business the Company recorded a reserve offsetting inventory in the consolidated balance sheets, for excess and obsolete inventory of $ 1.1 million and $ 2.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.

Property and Equipment, net

Property and equipment, net are stated at cost less accumulated depreciation and amortization.

Equipment includes assets under capital lease.

Equipment includes assets under finance lease.

Improvements are capitalized, while maintenance and repairs are expensed as incurred.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the balance sheets and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.

Capital leases and leasehold improvements are amortized straight-line over the shorter of the term of the lease or the estimated useful life.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.

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Finance leases and leasehold improvements are amortized straight-line over the shorter of the term of the lease or the estimated useful life.

All other property and equipment assets are depreciated using the straight-line method over the estimated useful life of the asset, which ranges from three to five years .

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Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value.

There were no long-lived asset impairment losses recorded for any periods presented.

During the fourth quarter of 2022, the Company identified indicators that it is more likely than not that the fair value of certain asset groups was less than their carrying value, see Note 6, “Property and Equipment, net.”

Business Combinations

The Company accounts for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill.

The Company bases the estimated fair value of identifiable intangible assets acquired in a business combination on third-party valuations that use information and assumptions provided by the Company’s management, which consider estimates of inputs and assumptions that a market participant would use.

Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded as goodwill.

The use of alternative valuation assumptions, including estimated revenue projections, growth rates, estimated cost savings, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Under ASC 350, the Company will perform annual impairment reviews of goodwill during the fourth fiscal quarter or more frequently if business factors indicate.

In the fourth quarter of 2022, the Company identified indicators of impairment that indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value and as a result goodwill was fully written off with $ 174.5 million recorded within impairment loss in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2022, see Note 18, “Goodwill and Intangible Assets.” There was no goodwill for the years ended December 31, 2021 and December 31, 2020.

Intangible Assets

Amortizable intangible assets include trade names and trademarks, developed technology and customer relationships acquired as part of business combinations.

Intangible assets acquired through our business combinations in the second quarter of 2022 are amortized on a straight line basis.

All intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

There were no impairment losses recorded on intangible assets for any periods presented.

Capitalized Software

We capitalize certain costs incurred related to the development of our software applications for internal use during the application development state.

If a project constitutes an enhancement to existing software, we assess whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for capitalization.

The Company capitalizes certain costs incurred related to the development of our software applications for internal use during the application development state.

If a project constitutes an enhancement to existing software, the Company assesses whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for capitalization.

Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred.

Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization.

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Capitalized software costs are amortized using the straight-line method over an estimated useful life of three years .

Capitalized software is reviewed for impairment whenever events or changes in circumstances may indicate that the carrying amount of an asset may not be recoverable.

In the fourth quarter of 2022, the Company identified indicators of impairment that the carrying value of the capitalized software may not be recoverable.

As a result, certain costs previously capitalized were written down with $ 8.7 million recorded within cost of services, research and development and general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.

Cloud Computing

The Company capitalizes certain costs incurred during the application development stage and all costs incurred during the preliminary project and post-implementation stages are expensed as incurred.

Amortization begins when the cloud computing arrangement is ready for its intended use and is calculated on a straight-line basis over the fixed noncancellable periods plus renewal periods the Company deems it reasonably certain to exercise.

During the year ended December 31, 2022, $ 0.3 million of implementation costs are capitalized and recorded in other current and non-current assets for amortization.

Fair Value Measurements

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The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

The following

hierarchy lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market:

The following hierarchy lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market:

Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

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Unobservable inputs that are significant to the measurement of fair value but are supported by little to no market data.

The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, capital leases and long-term debt.

The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and long-term debt.

The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short-term nature of these accounts.

The Company’s capital leases are classified within level 1 of the fair value hierarchy because such agreements bear interest at rates for instruments with similar characteristics;

accordingly, the carrying value of these liabilities approximate their fair values.

The Company’s loan from the Connecticut Department of Economic and Community Development is classified within level 2 of the fair value hierarchy.

As of December 31, 2021, the long-term debt is recorded at its carrying value of $ 11.0 million in the consolidated balance sheet.

As of December 31, 2022, this loan is recorded at its carrying value of $ 11.0 million in the consolidated balance sheet.

The fair value is $ 4.9 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.

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As of the consummation of the Merger in July 2021, there were 21,995,000 warrants to purchase shares of Class A common stock outstanding, including 14,758,333 public warrants and 7,236,667 private placement warrants.

As of December 31, 2021, there were 21,994,972 warrants to purchase shares of Class A common stock outstanding, including 14,758,305 public warrants and 7,236,667 private placement warrants outstanding.

As of December 31, 2022 and 2021, there were 21,994,972 warrants to purchase shares of Class A common stock outstanding, including 14,758,305 public warrants and 7,236,667 private placement warrants outstanding.

Each warrant expires five years after the Business Combination or earlier upon redemption or liquidation, and entitles the holder to purchase one share of Class A common stock at an exercise price of $ 11.50 per share, subject to adjustment, at any time commencing on September 4, 2021.

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The Company may redeem the outstanding public warrants if the price per share of the Class A common stock equals or exceeds $ 18.00 as described below:

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This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Contingent Consideration (Legacy GeneDx)

In connection with the Acquisition of Legacy GeneDx, up to $ 150 million of contingent payments will be payable to OPKO in cash and/or shares of Company’s Class A common stock with such mix to be determined in the

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Company’s sole discretion, based upon achievement of 2022 and 2023 revenue milestones, pursuant to the Acquisition Merger Agreement (the “Milestone Payments”).

If the Company elects to pay in shares of Class A common stock, the Acquisition Merger Agreement provides that the shares issues are to be valued at a fixed $ 4.86 per share for a maximum of 30.9 million shares.

Subject to the terms and conditions of the Acquisition Merger Agreement, (a) the first Milestone Payment of $ 112.5 million will become due and payable if the revenue of the Legacy GeneDx group for the fiscal year 2022 equals or exceeds $ 163 million and (b) the second Milestone Payment of $ 37.5 million will become due and payable if the revenue of the Legacy GeneDx group for the fiscal year 2023 equals or exceeds $ 219 million (each of clauses (a) and (b), a “Milestone Event”);

provided that 80 % of the Milestone Payment for the first milestone period or the second milestone period, as applicable, will become payable in respect of such period if the Legacy GeneDx group achieves 90 % of the applicable Milestone Event revenue target for such period, which amount will scale on a linear basis up to 100 % of the applicable Milestone Payment at 100 % of the applicable revenue target.

The milestone payments would require issuance of shares of Company’s Class A common stock up to 23.2 million shares and 7.7 million shares for the first Milestone Payment and second Milestone Payment, respectively.

The fair value of the Milestone Payment is classified within level 3 of the fair value hierarchy.

As of December 31, 2022, the fair value of the second Milestone Payment was determined to be $ 1.6 million, which is estimated using a Monte Carlo simulation valuation model and assuming the Company will pay the earn-out in shares.

The total liability as of December 31, 2022, is $ 7.6 million, $ 6.0 million of which represents the fair value of the first Milestone Payment which was already earned and is expected to be paid via issuance of shares of Company’s Class A common stock based on the results of 2022.

Earn-out contingent liability

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The Company subsequently measures the fair value of the liability at each reporting period and reports the changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company determined the fair value of the earn-out shares issued to the Legacy Sema4 stockholders as of December 31, 2021 was $ 10.2 million.

As for the earn-out RSUs for the Legacy Sema4 option holders, a total of 2.7 million RSUs were granted on December 9, 2021.

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Therefore, the Company accounts for this arrangement in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-compensation expense is recognized over the longer of the expected achievement period for the market-based requirement and the service requirement.

The Company recorded $ 0.2 million in relation to the earn-out RSU for the year ended December 31,

The Company recorded $ 0.9 million and $ 0.2 million in relation to the earn-out RSU for the years ended December 31, 2022 and 2021, respectively.

In the event that any earn-out RSUs that are forfeited as a result of a failure to achieve the service requirement, the underlying shares will be reallocated on an annual basis to the Legacy Sema4 stockholders and to the Legacy Sema4 option holders who remain employed as of the date of such reallocation.

The Company accounts for the re-allocations to Legacy Sema4 option holders as new grants.

The estimated fair value of the earn-out is determined using a Monte Carlo valuation analysis.

The fair value of the earn-out RSUs are classified within level 3 of the fair value hierarchy and the estimated fair value is determined using a Monte Carlo valuation analysis.

Stock-based Compensation

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Determining the fair value of stock option awards requires judgment, including estimating stock price volatility and expected option life.

Restricted stock awards are valued based on the fair value of the stock on the grant date.

Restricted stock awards are valued based on the fair value

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of the stock on the grant date.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards.

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Forfeitures of stock-based compensation are recognized as they occur.

Income taxes are accounted for under the asset and liability method.

The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.

Current and deferred income taxes are measured based on the tax laws that are enacted as of the balance sheet date of the relevant reporting period.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases using tax rates in effect for the year in which the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations and comprehensive loss in the period when the change is enacted.

Income taxes are accounted for under the asset and liability method and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Based on the Company’s historical operating losses, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company recognizes the effect of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination by the appropriate taxing authorities.

The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit with a greater than 50 percent likelihood of being realized.

Unrecognized tax benefits are included within other liabilities if recognized and are charged to earnings in the period that such determination is made.

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

The Company categorizes lease agreements at their inception as either operating or capital leases.

For operating leases, the Company recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement.

Certain lease agreements contain rent holidays, scheduled rent increases and lease incentives.

Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term.

Any lease incentives reduce rent expense the Company records on a straight-line basis over the term of the lease.

The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.

For capital leases, the Company records a leased asset with a corresponding liability.

Payments are recorded as reductions to the liability with an interest charge recorded based on the remaining liability.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not, based on technical merits, that the position will be sustained upon examination by the appropriate taxing authorities.

The amount of tax benefit recognized for an uncertain tax position is the largest that is more than 50 percent likelihood to be realized upon ultimate settlement.

The Company records interest and penalties related to tax uncertainties, where appropriate, in income tax expense.

Under ASU 2016-02, Leases (ASC 842), the Company determines if an arrangement is or contains a lease at inception.

A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease:

(i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that the Company is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, or (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term.

All other leases are classified as operating leases.

Right-of-use assets (ROU assets) represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating and finance lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The Company does not recognize a ROU asset or lease liability for leases with a term of 12 months or less and does not include variable costs, which are based on actual usage, in the measurement of ROU assets and lease liabilities.

The ROU assets include any lease payments made prior to the commencement date and initial direct costs incurred and excludes lease incentives received.

ROU assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for long-lived assets.

All lease liabilities are measured at the present value of the associated payments, discounted using the Company’s incremental borrowing rate determined based on the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for similar term and in a similar economic environment on a collateralized basis, unless there is a rate implicit in the lease that is readily determinable.

The Company recognizes lease expense for operating leases on a straight-line basis over the lease term, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Variable costs are expensed when the event determining the amount of variable consideration to be paid occurs.

Interest expense for finance leases is recognized based on the accretion of the lease liability.

The Company has operating and finance lease arrangements with lease and non-lease components.

The Company accounts for lease and non-lease components as a single lease component for all leases.

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Revenue Recognition

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The Company enters into both short-term and long-term project-based collaboration and service agreements with customers.

Certain of these contracts include the transfer of a license to the Company’s intellectual property or participation by the Company on joint steering committees with the customer, which was considered to be immaterial in the context of the contract.

Certain of these contracts include a license to directly access the Company’s intellectual property or participation by the Company on joint steering committees with the customer, which was considered to be immaterial in the context of the contract.

The Company concludes that the goods and services transferred to our customers pursuant to these agreements generally comprise a single performance obligation on the basis that such goods and services are not distinct within the context of the contract.

This is because the goods and services are highly interdependent and interrelated such that the Company would not be able to fulfill its underlying promise to our customers by transferring each good or service independently.

The consideration generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones or fixed monthly payments during the contract term.

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Certain of these contracts include non-refundable upfront payments and variable payments based upon the achievement of certain milestones or fixed monthly payments during the contract term.

Non-refundable upfront payments received prior to the Company performing performance obligation are recorded as a contract liability upon receipt.

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Segment Information

The Company operates and manages its business as one reportable operating segment based on how the Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), assesses performance and allocates resources across the business.

Historically, the Company operated in one segment.

During 2022, with the Acquisition of Legacy GeneDx, the change in Chief Operating Decision Maker (“CODM”) and the announced exit from the majority of the Legacy Sema4 diagnostics operations, the Company’s CODM began to evaluate the Company’s business separately for GeneDx, inclusive of Legacy GeneDx and Legacy Sema4 data revenues and associated costs and corporate support costs, and the existing Legacy Sema4 diagnostics business during the fourth quarter of 2022.

As a result, the Company has concluded that two reportable segments exist and have been presented for 2022.

The majority of the Company’s operations for 2021 and 2022 are included in the Legacy Sema4 segment and the majority of the GeneDx segment for 2022 was resultant from the 2022 Acquisition, and thus did not exist within the Company’s consolidated results for 2021 and 2020.

As a result, the Company has not presented segments for 2021 and 2020.

See Note 17, “ Segment Reporting ”, for 2022 segment disclosures.

Emerging Growth Company

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Recently Adopted Accounting Pronouncements

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2018-18, Collaborative Arrangements:

Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when the counterparty is a customer.

In addition, ASC Topic 808 (“ASC 808”), Collaborative Arrangements precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

Adoption of ASU 2018-18 did not have an impact on the Company’s consolidated financial statements as the Company is not currently a participant in any such collaborative arrangements.

The Company adopted ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) for the annual period ended December 31, 2021.

ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

The Company adopted and applied this update prospectively to all implementation costs incurred during the year ended December 31, 2021, $ 2.3 million of implementation costs are capitalized and recorded in other current and non-current assets.

Company capitalizes certain costs incurred during the application development stage and all costs incurred during the preliminary project and post-implementation stages are expensed as incurred.

The Company adopted ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 updates specific areas of ASC 740, Income Taxes, to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements.

The Company has adopted the new standard in the fourth quarter of 2021 and upon adoption we did not have a material impact on our consolidated financial position and results of operations.

The Company adopted ASU No.

2016-02, Leases (ASC 842) on January 1, 2022 using the modified retrospective method.

The Company also elected to use the package of practical expedients permitted under the transition guidance which allows for the carry forward of historical lease classification for existing leases on the adoption date and does not require the assessment of existing lease contracts to determine whether the contracts contain a lease or initial direct costs.

Prior periods were not retrospectively adjusted.

The adoption of this standard as of January 1, 2022, resulted in the recognition of operating lease ROU assets in the amount of $ 39.2 million and operating lease liabilities in the amount of $ 42.2 million.

The adoption did not have material impact on finance leases.

The adoption did not have material impact on the consolidated statements of operations and comprehensive loss or cash flows.

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In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods.

The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies.

The Company adopted ASU 2021-10 effective January 1, 2022.

The Company did not receive any such grants during the year ended December 31, 2022.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which requires lessees to recognize right-of-use assets and lease liabilities for most leases on their balance sheets.

Expense recognition for lessees under Topic 842 is similar to current lease accounting and once adopted, it will require enhanced disclosures to help the financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

The recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend on its classification as a finance or operating lease.

As an emerging growth company, the Company elected to adopt the Topic 842 under the extended transition period available to entities in the “all other” category, which would be effective for the annual period beginning on January 1, 2022 and all interim periods within the year ended December 31, 2023.

Early adoption is permitted.

The Company has selected an information system application to centralize the tracking and accounting for the Company’s leases and is currently in the process of completing implementation of that application.

The Company plans to adopt the Topic 842 using the modified retrospective transition method and will not restate comparative periods.

The modified retrospective transition method requires the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of that adoption date.

The Company plans to elect the package of practical expedients permitted under the transition guidance within the Topic 842, which allows the Company to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of the Topic 842.

Additionally, the Company plans to not separate lease and non-lease components of the leases.

For leases with a term of 12 months or less, the Company plans to elect the short-term lease exemption, which allows it to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future.

The Company is currently in the process of quantifying the impact, but is currently unable to estimate the impact on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

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Application of the amendments is through a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period in which the guidance is effective.

The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.

The new standard is effective for the Company on January 1, 2022 and only impacts annual financial statement footnote disclosures.

The Company does not expect the impact of adopting this new accounting guidance to have a material effect on its consolidated financial statements and related disclosures.

The guidance was adopted by the Company as of January 1, 2023.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

Business Combination

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Upon consummation of the Merger, $ 9.0 million of the transaction costs relates to costs incurred by Legacy Sema4 and reclassed to offset against equity from prepaid expense and other current assets.

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Legacy GeneDx Acquisition

As discussed in Note 1, on April 29, 2022, the Company completed the Acquisition of Legacy GeneDx.

At the closing of the Acquisition, the Company paid OPKO cash consideration of $ 140.5 million (net of transaction expenses and other customary purchase price adjustments) and issued to OPKO 80 million shares of the Company’s Class A common stock ($ 172 million based on the closing date share price of $ 2.15 per share).

A portion of this cash ($ 13.4 million) and share consideration ( 8.3 million shares) will be held in escrow for 12 months following the closing date of the Acquisition.

In addition, up to $ 150 million is payable following the closing of the Acquisition, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023.

These milestone payments, if and to the extent earned under the terms of the Acquisition Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of the Company’s Class A common stock (valued at a fixed $ 4.86 per share, subject to adjustment for stock splits and similar changes), with such mix to be determined in the Company’s sole discretion.

As of the acquisition date, the fair value of the earn-out was determined to be $ 52.0 million and was included in the aggregate purchase price of $ 364.5 million.

Concurrently with the closing of the Acquisition, the Company also issued and sold in private placement 50,000,000 shares of the Company’s Class A common stock to certain institutional investors for aggregate gross proceeds of $ 200 million (the “Acquisition PIPE Investment”).

The following table presents the net purchase price and the fair values of the assets and liabilities of GeneDx on a preliminary basis (in thousands):

Cash and cash equivalents $ —

Accounts receivables 21,651

Inventory 6,210

Prepaid expenses 4,671

Other current assets 320

Property and equipment 29,509

Other non-current assets 6,464

Trade names and trademarks 50,000

Developed technology 48,000

Customer relationships 98,000

Accounts payable and accrued expenses ( 12,862 )

Other current liabilities ( 15,781 )

Deferred tax liabilities ( 51,779 )

Long-term lease liabilities ( 5,798 )

Fair value of net assets acquired 178,605

Goodwill (1) 185,871

Aggregate purchase price $ 364,476

(1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

see Note 18, “Goodwill and Intangible Assets” for more detail.

The amounts above represent the preliminary fair value estimates and the Company has identified certain adjustments during the measurement period that are primarily related to the Legacy GeneDx accrued expenses that do not represent GeneDx’s assumed liabilities.

These measurement period adjustments are reflected in the goodwill balance and shown in Note 18, “Goodwill and Intangible Assets.” Further adjustments may be made as the Company obtains additional information during the remaining measurement period and finalizes its fair value

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Specifically, the Company is still in the process of reviewing and finalizing the net working capital adjustment with OPKO.

Upon final agreement, the Company may have further adjustments.

Increases or decreases in the estimated fair values of the net assets acquired may impact the Company’s consolidated statements of operations and comprehensive loss in future periods.

The Company expects that the values assigned to the assets acquired and liabilities assumed will be finalized during the one-year measurement period following the Acquisition closing date.

For the year ended December 31, 2022, $ 12.1 million of Legacy GeneDx Acquisition-related costs are reflected within general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.

These costs include third-party professional firms’ services related to due diligence, advisory and legal services.

The Company’s consolidated results include $ 116.4 million of revenue and $( 25.9 ) million of pretax loss for the year ended December 31, 2022 from Legacy GeneDx.

Pro forma financial information

The pro forma information below gives effect to the Acquisition as if it had been completed on January 1, 2021 (“the pro forma acquisition date”).

The pro forma information is not necessarily indicative of the Company’s revenue results had the Acquisition been completed on the pro forma acquisition date, nor is it necessarily indicative of the Company’s future results.

The pro forma revenue information reflects Legacy GeneDx’s historic revenue and does not include any additional revenue opportunities following the Acquisition.

The purchase price allocations for the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as the Company obtains additional information during the acquisition measurement period.

Increases or decreases in the estimated fair values of the net assets acquired may impact the Company’s consolidated statements of operations and comprehensive loss in future periods.

The Company expects that the values assigned to the assets acquired and liabilities assumed will be finalized during the one-year measurement period following the Acquisition closing date.

The pro forma revenues and net loss include the following adjustments based on the Company’s preliminary analysis and are subject to change as additional analysis is performed:

• revised amortization expense resulting from the acquired intangible assets,

• historical intercompany revenue recognized by Legacy GeneDx with OPKO or other related parties,

• income tax benefits resulting from the deferred tax liabilities acquired, and

• revised stock based compensation reflecting the inducement awards issued to the Legacy GeneDx employees.

2022 (in thousands) 2021 (in thousands)

Pro forma revenues $ 282,959 $ 326,720

Pro forma net loss $ ( 613,199 ) $ ( 252,506 )

For year ended December 31, 2022 and 2021 pro forma revenues combine the Company and Legacy GeneDx and included Legacy GeneDx revenue of $ 165.2 million and $ 118.3 million, respectively.

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Revenue Recognition

Disaggregated revenue

The following table summarizes the Company’s disaggregated revenue (in thousands):

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Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change.

The Company updates variable

consideration estimated quarterly.

Our assessment performed at year-end did not result in material adjustments to the Company’s previously reported revenue or accounts receivable amounts.

The Company updates estimated variable consideration quarterly.

For the year ended December 31, 2022, a change in estimate included a decrease in revenue related to a payor, as further disclosed in the “—Certain payor matters” below, for tests in which the performance obligation of delivering the test results was met in prior periods.

The decrease was further offset by other upward adjustments made for tests in which the performance obligation of delivering the test results was met in prior periods related to other payors.

During 2022, the Company recorded $ 54.0 million to decrease revenue resulting from changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met and potential and actual settlements with third party payors.

As described in more detail below, third-party payors may decide to deny payment or seek to recoup payments for tests performed by the Company for a number of reasons and, as a result, the Company may be required to refund payments previously received, and the Company’s revenues may be subject to retroactive adjustment as a result.

The Company processes requests for recoupment from third-party payors in the ordinary course of its business and reflects in the Company’s transaction price estimations.

See “—Certain payor matters” below for further details regarding an ongoing matter related to certain overpayments the Company allegedly received from a third-party payor;

the Company has established certain liabilities and reversed certain of its previously recorded revenue as a result of this matter and other potential settlements with payors.

Certain payor matters

As noted above, third-party payors, including government programs, may decide to deny payment or seek to recoup payments for tests performed by the Company that they contend were improperly billed, not medically necessary or against their coverage determinations, or for which they believe they have otherwise overpaid, including as a result of their own error.

As a result, the Company may be required to refund payments already received, and the Company’s revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance, and changes by government agencies and payors in interpretations, requirements, policies and/or “conditions of participation” in various programs.

The Company processes requests for recoupment from third-party payors in the ordinary course of its business, and it is likely that the Company will continue to do so in the future.

If a third-party payor denies payment for testing or recoups money from the Company in a later period, reimbursement and the associated recognition of revenue for the Company’s testing services could decline.

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As an integral part of the Company’s billing compliance program the Company instituted a third-party review of billing claims and compliance practices, and initiated improvements including implementing a package of new billing compliance policies and procedures and strengthening the Company’s billing compliance team.

From time to time, the Company may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault.

Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing services.

These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor, the Company’s historical settlement activity (if any), and the Company’s assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved.

Estimated settlements are adjusted in future periods as such adjustments become known (that is, if new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.

Throughout 2022, the Company was engaged in discussions with one of its third-party payors (the “Payor”) regarding certain overpayments.

On December 30, 2022, the Company entered into a settlement agreement with the Payor in order to settle the claims related to coverage and billing matters allegedly resulting in the overpayments by the Payor to the Company (the “Disputed Claims”).

Under the settlement agreement, $ 42.0 million is to be paid by the Company to the Payor in a series of installments over the next four years with the final installment payment scheduled to be on or before June 30, 2026.

The first installment payment of $ 15.0 million was made on December 31, 2022.

In consideration for these payments, the Payor has agreed to provide releases of the Disputed Claims, which releases become effective on or about April 1, 2023.

As a result of this matter, and in connection with a review of certain billing policies and procedures undertaken by management, the Company considered the need to establish reserves for potential recoupments of payments previously made by third-party payors.

As of December 31, 2022, $ 39.0 million has been accrued.

See Note 16, “Supplemental Financial Information.” The Company uses estimates, judgments, and assumptions to assess whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods, based upon information presently available.

These estimates are subject to change.

In addition, as discussed above, the Company has made certain adjustments to its estimated variable consideration as result of this matter and other potential settlements with payors.

Remaining performance obligations

Due to the long-term nature of the collaboration service agreement, the Company’s obligations pursuant to such agreements represent partially unsatisfied performance obligations as of December 31, 2021.

Due to the long-term nature of collaboration service agreements, the Company’s obligations pursuant to such agreements represent partially unsatisfied performance obligations as of December 31, 2022.

The revenues under existing service agreements with original expected durations of more than one year are estimated to be approximately $ 6.8 million.

The Company expects to recognize the majority of this revenue over the next 2.5 years.

Contract assets and liabilities

Contract assets consist of the Company’s right to consideration that is conditional upon its future performance.

Contract assets arise in collaboration service agreements for which revenue is recognized over time but the Company’s right to bill the customer is contingent upon the achievement of contractually-defined milestones.

Contract liabilities consist of customer payments in excess of revenues recognized.

For collaboration service agreements, the Company assesses the performance obligations and recognizes contract liabilities as current or non-current based upon forecasted performance.

A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shown in the table below (in thousands):

Assets Contract Liabilities

December 31, 2020 $ 2,028 $ 3,811

Contract asset additions 1,163 —

Customer prepayments — 2,223

Revenue recognized 105 ( 2,265 )

December 31, 2021 $ 3,296 $ 3,769

The increase in contract assets as of December 31, 2021 is primarily due to the execution of a service agreement with a customer during the year.

The Company presents contracts assets and contract liabilities arising from this customer contract on a net basis on its balance sheets.

As of December 31, 2021 and December 31, 2020, $ 0.5 million and $ 1.8 million are recorded as current contract liabilities, respectively.

Costs to fulfill contracts

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The amortization of these costs is recorded in cost of services of the consolidated statements of operations and comprehensive loss.

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Fair Value Measurements

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Private warrant liability

7,092 — 7,092 —

Earn-out contingent liability — — — —

Contingent consideration based on milestone achievement 7,619 — — 7,619

Total financial liabilities

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Total financial assets $ 385,370 $ 385,370 $ — $ —

Financial Liabilities:

Public warrant liability

$ 14,463 $ 14,463 $ — $ —

Private warrant liability

7,092 — 7,092 —

Earn-out contingent liability 10,244 — — 10,244

Total financial liabilities

$ 31,799 $ 14,463 $ 7,092 $ 10,244

Of the $ 123.9 million cash and cash equivalents presented on the consolidated balance sheets, $ 16.9 million is in money market funds and is classified within Level 1 of the fair value hierarchy as the fair value is based on quoted prices in active markets.

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Since the Public Warrants and Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as non-current liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in other income (expense), net on the consolidated statements of operations and comprehensive loss at each reporting date.

As of December 31, 2021, the Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets.

The Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets.

The Private Warrants are classified within Level 2 of the fair value hierarchy as management determined the fair value of each Private Warrant is the same as that of a Public Warrant because the terms are substantially the same.

The contingent obligation to issue earn-out shares for Legacy Sema4 stockholders is accounted for as a liability and required remeasurement at each reporting date.

For the year ended December 31, 2022, a gain of $ 21.1 million was recorded within the change in the change in fair market value of warrant and earn-out contingent liabilities in the consolidated statements of operations and comprehensive loss based on re-measurement performed as of the period end date.

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The earn-out contingent liabilities include the Company’s contingent obligation to issue earn-out shares for Legacy Sema4 stockholders (“Earn-out Shares”) as well as the Company’s contingent obligation to make an additional Milestone Payment of up to $ 150 million, up to 30.9 million shares of its Class A common stock, or a combination of cash and shares at our discretion, to OPKO if certain revenue-based milestones are achieved for each of the fiscal years ended December 31, 2022 and December 31, 2023.

As of December 31, 2022, the first milestone was met and is anticipated to be paid by the Company issuing approximately 23.2 million shares of Class A common stock, which is determined to be approximately $ 6 million in fair value as of December 31, 2022.

The Earn-out Shares are accounted for as a liability and required remeasurement at each reporting date.

The estimated fair value of the total Earn-out Shares as of December 31, 2022 is determined based on a Monte Carlo simulation valuation model.

The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and Company’s common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics.

The key assumptions utilized in determining the valuation as of December 31, 2021 and Closing Date were the following:

December 31, 2021 Closing Date

The fair value of the earn-out contingent liability is sensitive to the expected volatility for the Company and the Company’s Class A common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics.

The expected volatility for the Company is based on the historical volatility of selected guideline companies, the historical volatility of the Company, and the implied volatility of the Company’s call options .

The key assumptions utilized in determining the Earn-out Shares valuation as of December 31, 2022 and December 31, 2021 were as follows:

December 31, 2022 December 31, 2021

Stock price $ 0.26 $ 4.46

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Risk-free interest rate 4.76 % 0.58 %

The earn-out contingent liability is categorized as Level 3 of the fair value hierarchy as the Company utilizes unobservable inputs in estimating volatility rate.

Initial fair value determined and recorded at the Closing Date was $ 143.1 million and a gain of $ 132.9 million was recorded in the change in fair market value of warrant and earn-out contingent liability in the consolidated statements of operations and comprehensive loss based on re-measurement performed as of December 31, 2021.

The fair value determined and recorded as of December 31, 2022 and December 31, 2021 was zero and $ 10.2 million, respectively.

During the year ended December 31, 2022 a gain of $ 10.2 million was recorded within the change in fair market value of warrant and earn-out contingent liabilities in the consolidated statements of operations and comprehensive loss based on re-measurement performed as of the period end date.

The Milestone Payments contingent liability represents additional acquisition consideration to pay up to $ 150 million, up to 30.9 million shares of the Company’s Class A common stock or a combination of cash and shares at the Company’s discretion based on the achievement of Legacy GeneDx revenue-based milestones in fiscal years 2022 and 2023.

Subject to the terms and conditions of the Acquisition Merger Agreement, (a) the first Milestone Payment representing 75 % of the aggregate became due as the Legacy GeneDx group’s revenue exceeded $ 163 million for the year ended December 31, 2022 and (b) the second Milestone Payment representing the final 25 % will become due and payable if the revenue of the Legacy GeneDx group for the fiscal year 2023 equals or exceeds $ 219 million;

provided that 80 % of the Milestone Payment will become payable in respect of such period if the Legacy GeneDx group achieves 90 % of the applicable Milestone Event revenue target, which amount will scale on a linear basis up to 100 % of the applicable Milestone Payment at 100 % of the applicable revenue target.

Each Milestone Payment will be satisfied through the payment and/or issuance of a combination of cash and shares of the Company’s Class A common stock (valued at a fixed $ 4.86 per share), with such mix to be determined at the Company’s sole discretion.

Settlement of the first Milestone Payment is expected to be paid via issuance of shares of Company’s Class A common stock based on the results of 2022.

The Company recorded the fair value of the Milestone Payments for $ 7.6 million as of December 31, 2022, of which $ 6.0 million has been earned and is presented as current liabilities in the consolidated balance sheets.

For the year ended December 31, 2022, a gain of $ 38.9 million was recorded in the change in fair market value of warrant and earn-out contingent liabilities in the consolidated statements of operations and comprehensive loss based on re-measurement performed as of the period end date.

The fair value of the remaining earn-out was determined based on a Monte Carlo simulation valuation model and the key assumptions include revenue projections, revenue volatility of 25 %, the Company’s expectation to settle the liability in shares and share price of $ 0.26 per share.

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The earn-out contingent liabilities are categorized as Level 3 of the fair value hierarchy as the Company utilizes unobservable inputs in estimating the fair value.

There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.

Property and Equipment

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Laboratory equipment $ 41,255 $ 28,552

Equipment under capital leases 21,384 20,743

Equipment under finance leases 21,384 21,384

Leasehold improvements 35,561 21,905

Capitalized software 32,171 25,693

Building under capital lease 6,276 6,276

Building under finance lease 6,276 6,276

Construction in-progress 3,386 940

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For the years ended December 31, 2022, 2021 and 2020, depreciation and amortization expense was $ 50.0 million, $ 21.8 million and $ 11.7 million, respectively, which included software amortization expense of $ 15.4 million, $ 5.6 million and $ 3.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

For intangible amortization, see Note 18, “Goodwill and Intangible Assets.”

For the year ended December 31, 2022, the Company accelerated depreciation and amortization charge of $ 24.0 million due to the change in the Company’s useful lives on certain fixed assets that are related to the business exit activity.

Depreciation and amortization expense is included within the statements of operations and comprehensive loss as follows (in thousands):

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Related Party Transactions

certain services to the Company, and also committed to funding the Company up to $ 55.0 million in future capital contributions in exchange for equity in the Company, of which $ 55.0 million was drawn as of December 31, 2019.

Related party revenues

Related party revenues primarily include diagnostic testing revenues generated by GeneDx from BioReference Laboratories, Inc.

(“BRLI”), which is a subsidiary of OPKO.

The prices charged represent market rates.

Revenue recorded from this contract was $ 1.7 million for the year ended December 31, 2022.

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Related party expenses

On June 1, 2017, the Company signed a contribution and funding agreement and other agreements with ISMMS, whereby ISMMS contributed certain assets and liabilities related to the Company’s operations, provided certain services to the Company, and also committed to funding the Company up to $ 55.0 million in future capital contributions in exchange for equity in the Company, of which $ 55.0 million was drawn as of December 31, 2019.

Following the transaction, the Company commenced operations and began providing the services and performing research.

For years ended December 31, 2021 and 2020, the Company incurred certain costs with ISMMS.

Expenses recognized under the TSA totaled $ 1.4 million, $ 7.2 million and $ 7.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are presented within related party expenses in the consolidated statements of operations and comprehensive loss.

The Company had TSA payables due to ISMMS of $ 0 and $ 0.6 million as of December 31, 2021 and 2020, respectively.

These amounts are included within due to related parties on the Company’s consolidated balance sheets.

Expenses recognized under the TSA totaled $ 1.4 million and $ 7.2 million for the years ended December 31, 2021 and 2020, respectively, and are presented within related party expenses in the consolidated statements of operations and comprehensive loss.

The Company did not incur any costs under the TSA in the year ended December 31, 2022.

The Company did not have any TSA payables due to ISMMS of as of December 31, 2022 and 2021.

The ISMMS TSA expired on March 28, 2021.

Expenses recognized pursuant to other service arrangements with ISMMS totaled $ 7.4 million, $ 7.0 million and $ 4.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Payables due were $ 0.4 million as of December 31, 2022.

GeneDx and OPKO entered into a Transition Services Agreement dated as of April 29, 2022 (the “OPKO TSA”) pursuant to which OPKO has agreed to provide, at cost, certain services in support of the Acquisition of the GeneDx business through December 31, 2022, subject to certain limited exceptions, in order to facilitate the transactions contemplated by the Acquisition Merger Agreement, including human resources, information technology support, and finance and accounting.

The Company recognized $ 1.3 million and in costs for the year ended December 31, 2022, respectively.

As of December 31, 2022, $ 0.4 million was unpaid and included in due to related parties in consolidated balance sheets.

The Company also recorded $ 1.3 million of receivables from OPKO related to the Acquisition closing working capital adjustment.

This amount is presented as other current assets in consolidated balance sheets as of December 31, 2022.

Total related party costs are included within cost of services and related party expenses in the consolidated statements of operations and comprehensive loss as follows (in thousands):

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The SVB Agreement provides for a Revolver up to an aggregate principal amount of $ 125.0 million, including a sublimit of $ 20.0 million for Letters of Credit (as such terms are defined in the SVB Agreement).

The outstanding principal amount of any Advance (as such term is defined in the SVB Agreement) will bear interest at a floating rate per annum equal to the greater of (1) 4.00 % and (2) the Prime Rate plus the Prime Rate Margin.

The outstanding principal amount of any Advance (as such term is defined in the

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SVB Agreement) will bear interest at a floating rate per annum equal to the greater of (1) 4.00 % and (2) the Prime Rate plus the Prime Rate Margin.

The Revolver will mature on November 15, 2024.

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These financial covenants include (i) a minimum Adjusted Quick Ratio (as such term is defined in the SVB Agreement) and (ii) the achievement of certain minimum revenue targets.

On a monthly basis, the Borrowers would be required to maintain a minimum Adjusted Quick Ratio

of greater than or equal to 1.25 to 1.0.

On a monthly basis, the Borrowers would be required to maintain a minimum Adjusted Quick Ratio of greater than or equal to 1.25 to 1.0.

The Borrower must also maintain certain trailing six-month minimum revenue targets through maturity if outstanding borrowings under the Revolver exceed $ 50.0 million.

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No amounts have been drawn under the SVB Agreement as of December 31, 2022.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver.

On March 14, 2023, Silicon Valley Bridge Bank, N.A., a new bank that is regulated by the Office of the Comptroller of the Currency, announced that it had assumed all loan positions, including as lender, issuing bank, administrative and any other function that was formerly performed by SVB, and that all commitments to advance under existing credit agreements will be honored in accordance with and pursuant to the terms thereof.

2016 Funding Commitment

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On June 1, 2017, as part of the Spin-out, ISMMS assigned both the agreement underlying the Project and the DECD Loan Agreement to Sema4 OpCo, Inc.

ISMMS guaranteed and continues to guarantee’s obligation to repay the DECD.

Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement (the “DECD Security Agreement”).

The DECD Security Agreement provides a security for the payment and performance of meeting the Company’s obligations to the DECD until the obligations have been fully satisfied.

ISMMS guaranteed the Company’s obligation to repay the DECD.

In June 2018, the Company amended the existing $ 9.5 million DECD Loan Agreement (the “2018 Amended DECD Loan Agreement”) with the DECD by increasing the total loan commitment to $ 15.5 million at the same fixed annual interest rate of 2.0 % for a term of 10 years from the date the new funds are disbursed (“Phase 3” of funding for the Project).

The terms of the Amended DECD Loan Agreement require the Company to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023 through July 2028.

In addition, under the terms of the Amended DECD Loan Agreement, the DECD may grant partial principal loan forgiveness of up to $ 12.3 million in the aggregate.

Such forgiveness is contingent upon the Company achieving job creation and retention milestones, specifically:

– $ 4.5 million of Phase 1 funding ($ 5.0 million) was forgiven in September 2018 based on creating and maintaining 35 new full-time positions in Connecticut, with a combined annual average compensation of $ 70,000 for a period of 24 continuous months by December 31, 2017;

– $ 2.8 million of Phase 2 funding ($ 4.5 million) will be forgiven based on creating 228 new full-time positions in Connecticut, with a combined annual average compensation of $ 83,000 , and maintaining an average of 269 full-time positions for a period of 24 continuous months by December 31, 2021;

– $ 3.0 million of Phase 3 funding ($ 6.0 million) will be forgiven based on creating an additional 181 full-time positions in Connecticut, with a combined annual average compensation of $ 83,000 , and maintaining an average of 450 full-time positions for a period of 24 continuous months by December 31, 2022;

– An additional $ 2.0 million of funding will be forgiven based on creating an additional 103 full-time positions in Connecticut, with a combined annual average compensation of $ 83,000 , and maintaining an average of 553 full-time positions for a period of 24 continuous months by December 31, 2023.

The outstanding loan balance from the DECD was $ 11.0 million at December 31, 2021 and 2020.

As of December 31, 2021, long-term debt matures as follows (in thousands):

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In addition, under the terms of the 2018 Amended DECD Loan Agreement, the DECD provided the Company with the ability to seek partial principal loan forgiveness of up to $ 12.3 million in the aggregate, contingent upon the Company achieving job creation and retention milestones.

The outstanding loan balance from the DECD was $ 11.0 million at December 31, 2021, following the achievement of the Phase 1 funding milestone.

In January 2023, the Company amended the 2018 Amended DECD Loan Agreement, which resulted in agreeing to pay $ 2.0 million in principal, obtaining $ 2.75 million in debt forgiveness for achieving its Phase 2 job milestone, and agreeing to two new forgiveness milestone targets for Phase 3 (eligible for $ 2 million in forgiveness) and the Final Phase (eligible for $ 1 million in forgiveness) (the “2022 Amended DECD Loan Agreement”).

Upon execution of this amendment in January 2023, we have paid the $ 2.0 million in principal and received $ 2.75 million in debt forgiveness, both of which were classified as current liabilities as of December.

The terms of the 2022 Amended DECD Loan Agreement require the Company to make interest-only payments through July 2024 and principal and interest payments commencing in August 2024 through July 2029 at the same fixed annual interest rate of 2.0 %.

As of December 31, 2022, the long-term debt matures as follows (in thousands):

Thereafter 2,048

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Total long-term debt, net of current portion $ 6,250

Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement.

Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company holds at its Stamford headquarters, as defined in a separate security agreement.

The DECD Security Agreement provides a security for the payment and performance of meeting the Company’s obligations to the DECD until the obligations have been fully satisfied.

2020 Master Loan Agreement

In August 2020, the Company entered into a loan and security agreement with a bank (the “Master Loan Agreement”), in which the Company received a loan of $ 6.3 million and deposited the proceeds into a deposit account held by the bank.

The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $ 0.1 million beginning in November 2020.

Interest payments were fixed at an annual interest rate of 4.75 %.

The Company recorded the $ 6.3 million proceeds as restricted cash on the consolidated balance sheets at December 31, 2020.

The outstanding loan balance was $ 6.1 million at December 31, 2020.

In July 2021, the Company terminated the Master Loan Agreement by paying off the full amount, including $ 5.4 million principal and interest and $ 0.1 million in early payment penalties assessed pursuant to the terms of the agreement which is included in other income, net in the consolidated statements of operations and comprehensive loss.

2020 Master Lease Agreement

In December 2020, the Company entered into a lease agreement with a lender whereby the Company agreed to sell certain equipment and immediately lease back the equipment, resulting in proceeds of $ 3.6 million.

Per the terms of the agreement, a financial institution issued an irrevocable standby letter of credit to the lender for $ 3.6 million.

The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $ 0.1 million beginning in February 2021.

Interest payments were fixed at an annual interest rate of 3.54 %.

The Company was required to maintain an aggregate amount on deposit equal to at least 105 % of the value of any outstanding letters of credit issued by the financial institution on the Company’s behalf.

The letter of credit was required to be in place until all obligations had been paid in full.

Further, the Company was required to furnish annual audited financial statements and other financial information to the lender on a regular basis.

The Company was in compliance with the covenants as of December 31, 2020.

The Company recorded the $ 3.6 million proceeds as restricted cash on the consolidated balance sheets at December 31, 2020.

The outstanding loan balance was $ 3.6 million at December 31, 2020.

In July 2021, the Company terminated the Master Lease Agreement by paying off the full amount, including $ 3.3 million principal and interest and early payment penalties of $ 0.2 million assessed pursuant to the terms of the agreement which is included in other income, net in the consolidated statements of operations and comprehensive loss.

Commitments and Contingencies

Lease Accounting

The Company adopted ASC 842 on January 1, 2022 on a modified retrospective basis.

As a result, the Company’s lease disclosures as of and for the year ended December 31, 2022 are reported under ASC 842.

Comparative financial information as of and for the years ended December 31, 2021 and 2022 have not been restated and continues to be reported under ASC 840, the lease accounting standard in effect for that period.

The Company enters into contracts in the normal course of business and assesses whether any such contracts contain a lease.

The Company determines if an arrangement is a lease at inception if it conveys the right to control the identified asset for a period of time in exchange for consideration.

The Company classifies leases as operating or financing in nature.

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economic environment on a collateralized basis, unless there is a rate implicit in the lease that is readily determinable.

Operating Leases

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The Company’s headquarter lease was initially entered into via sub-lease agreements with ISMMS and a third party and they will expire in 2034.

We also entered into a separate lease with a third party for space in the same building as our headquarters and that lease expires in 2029.

The agreements include escalating rent and rent-free period provisions.

The third-party sub-lease agreement required the Company to deliver a letter of credit from a financial institution equal to the amount of the security deposit on the office space.

Accordingly, in February 2020, a financial institution issued an irrevocable standby letter of credit to the third party for $ 0.9 million, which is recorded as restricted cash on the consolidated balance sheets as of December 31, 2021.

Pursuant to the terms of the lease agreement, the Company was required to have issued an irrevocable standby letter of credit to the lessor for $ 0.9 million, which was included in restricted cash, non-current on the consolidated balance sheets as of December 31, 2021 and 2022.

The Company identified impairment indicators with respect to certain office space which was determined to be excess.

The Company performed quantitative analysis as of December 31, 2022.

The fair value was determined primarily based on estimating sublease income for the lease and discount rate.

The Company utilized third party information in the estimation process.

Based on the analysis, the Company recorded an impairment charge of $ 10.0 million.

In April 2019, the Company entered into a sublease agreement to rent a building to be used for office and laboratory facility (the “Stamford Lease”) for a base term of 325 months, expiring in October 2046.

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There is also an early termination option in which the Company may cancel the lease after the 196 th month with cancellation fees.

At inception of the Stamford Lease, the value of the land was determined to be more than 25 % of the total value and therefore the building is accounted for as a capital lease and the land as an operating lease.

In January 2020, the Company entered into a lease agreement which expanded our existing laboratory facility in Branford, Connecticut.

At inception of the Stamford Lease, the value of the land was determined to be more than 25 % of the total value and therefore the building is accounted for as a finance lease and the land as an operating lease.

In January 2020, the Company entered into a lease agreement which expanded the Company’s existing laboratory facility in Branford, Connecticut.

The lease commenced in February 2020 with a 10 year term.

The lease includes escalating rent fees over the lease term.

Future minimum payments under non-cancelable operating leases as of December 31, 2021 are as follows (in thousands):

Thereafter 45,463

Total operating lease obligations $ 68,341

Rent expense is recognized on a straight-line basis over the lease term and the Company recorded rent expense related to non-cancelable operating leases of $ 5.7 million, $ 5.3 million and $ 0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Rent expense related to month-to-month operating leases was $ 1.2 million, $ 3.2 million, and $ 2.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Capital Leases

The Company entered into various capital lease agreements to obtain laboratory equipment which contain bargain purchase commitments at the end of the lease term.

The terms of the capital leases range from 3 to 5 years with interest rates ranging from 3.7 % to 12.0 % The leases are secured by the underlying equipment.

Interest rate for the Stamford Lease is 13.1 %.

Property and equipment under capital leases was $ 27.7 million and $ 27.0 million as of December 31, 2021 and 2020, respectively.

Accumulated amortization on capital lease assets was $ 13.6 million and $ 9.7 million at December 31, 2021 and 2020, respectively.

For all capital leases, the portion of the future payments designated as principal repayment is recorded as a capital lease obligation on the Company’s consolidated balance sheets in accordance with repayment terms.

Future payments under capital leases at December 31, 2021, are as follows (in thousands):

In April 2022, the Company acquired an operating lease for office space and laboratory operations in Gaithersburg, Maryland, in connection with the Acquisition.

The lease includes a base term of 9 years remaining from the date of acquisition and an escalating rent provision.

In July 2022, the Company executed a lease agreement to extend the lease term of existing office spaces in New York, New York, commencing in September 2022 for a period of 13 months.

Finance Leases

The Company enters into various finance lease agreements to obtain laboratory equipment that contain bargain purchase commitments at the end of the lease term.

The leases are secured by the underlying equipment.

As discussed above, the Company also leases a building used for office and laboratory space in which the building is accounted for as a finance lease and the land is as an operating lease.

The interest rate used for the Stamford Lease is 13.1 %, which is used to measure the operating and finance lease liability.

During the prior year, the Company accounted for finance leases under ASC 840 as capital leases.

As of December 31, 2021, the finance lease obligations of $ 3.4 million and $ 18.4 million were included in other current liabilities and other liabilities, respectively on the consolidated balance sheets.

The tables below present financial information associated with the Company’s leases.

This information is presented as of, and for the year ended, December 31, 2022 because, the Company adopted the ASC 842 using a transition method that does not require application to periods prior to adoption (in thousands).

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Classification December 31, 2022

Operating lease assets Operating lease right-of-use assets $ 32,758

Finance lease assets Property and Equipment, net 8,604

Total lease assets $ 41,362

Operating Short-term lease liabilities $ 2,409

Finance Short-term lease liabilities 3,712

Operating Long-term lease liabilities $ 44,468

Finance Long-term lease liabilities 15,545

Total lease liabilities $ 66,134

Lease cost Year ended December 31, 2022

Operating lease cost

Operating lease cost $ 6,044

Short-term lease cost 1,131

Variable lease cost 1,111

Total operating lease cost $ 8,286

Finance lease cost

Depreciation and amortization of leased assets $ 5,518

Interest on lease liabilities $ 2,152

Total finance lease cost $ 7,670

Total lease cost $ 15,956

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Future minimum lease payments under non-cancellable leases as of December 31, 2022 are as follows:

Maturity of lease liabilities Operating leases Finance leases Total

2023 $ 4,597 $ 3,729 8,326

2024 5,521 2,763 8,284

2025 5,952 2,451 8,403

2026 6,103 2,003 8,106

2027 6,251 2,045 8,296

Thereafter 51,640 47,839 99,479

Total capital lease obligations 65,574

amounts representing interest ( 43,728 )

Present value of net minimum capital lease payments 21,846

current portion ( 3,419 )

Capital lease obligations, net of current portion $ 18,427

Assets acquired under capital leases was $ 0.6 million, $ 7.5 million and $ 9.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Interest expense related to capital leases was $ 2.3 million, $ 2.2 million and $ 0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Total 80,064 60,830 $ 140,894

imputed interest ( 33,187 ) ( 41,573 ) $ ( 74,760 )

Present value of lease liabilities $ 46,877 $ 19,257 $ 66,134

Other information related to leases as of and for the year ended December 31, 2022 are as follows:

December 31, 2022

Weighted-average remaining lease term (years)

Operating leases 12.2

Finance leases 19.0

Weighted-average discount rate

Operating leases 6.9 %

Finance leases 11.2 %

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 4,183

Operating cash flows from finance leases 2,225

Financing cash flows from finance lease 3,292

Commitments and Contingencies

Purchase Obligations

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Contractual Obligations 2023 2024 2025 Total Commitments

Materials, services and reagents provider $ 11,184 $ 663 $ — $ 11,847

Software provider $ 5,561 $ 2,436 $ 257 $ 8,254

Research and development 1,910 1,010 64 $ 2,984

Equipment provider 179 182 139 $ 500

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The Company enters into contracts with suppliers to purchase materials needed for diagnostic testing.

These contracts generally do not require multiple-year purchase commitments.

These contracts generally do not require multi-year purchase commitments.

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Contingencies

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

However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s financial condition or results of operations.

The Company was not a party to any material legal proceedings as of December 31, 2021, nor is it a party to any legal proceedings as of the date of issuance of these consolidated financial statements.

However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s consolidated financial condition or results of operations.

Except as described below, the Company was not a party to any material legal proceedings as of December 31, 2022, nor is it a party to any material legal proceedings as of the date of issuance of these audited consolidated financial statements.

On September 7, 2022, a shareholder class action lawsuit was filed in the United States District Court for the District of Connecticut against the Company and certain of the Company’s current and former officers.

The complaint purports to bring suit on behalf of stockholders who purchased the Company’s publicly traded securities between March 14, 2022 and August 15, 2022.

Following the appointment of a lead plaintiff, an amended complaint was filed on January 30, 2023.

As amended, the complaint purports to allege that defendants made false and misleading statements about the Company’s business, operations and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seeks unspecified compensatory damages, fees and costs.

The Company believes the allegations and claims made in the complaint are without merit.

On February 7, 2023, a stockholder commenced a lawsuit in the Delaware Court of Chancery.

The suit is brought as a class action on behalf of stockholders of CMLS who did not redeem their shares in connection with the Business Combination.

The suit names as defendants all directors of CMLS at the time of the transaction, including directors who continue to serve on the Company’s Board of Directors, as well as CMLS Holdings LLC.

The Company is not named as a defendant.

The complaint alleges that the July 2, 2021 proxy statement mailed to CMLS stockholders in connection with the transaction contained false and misleading statements, and purports to assert a claim of breach of fiduciary duty against all individual defendants, and a similar claim against CMLS Holdings LLC and certain individuals for breach of fiduciary duty as control persons.

The suit seeks to recover unspecified damages on behalf of the alleged class, among other relief.

The Company believes the allegations and claims made in the complaint are without merit.

The Company is subject to certain claims for advancement and indemnification by the individual defendants in this proceeding.

Defined Contribution Plan

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The defined contribution plan allows employees to contribute a portion of their compensation in accordance with specified guidelines.

The Company, at its discretion, makes matching

contributions.

The Company, at its discretion, makes matching contributions.

The Company contributed $ 9.8 million, $ 8.0 million and $ 5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Any awards granted under the 2017 Plan that remained outstanding as of the Closing Date and were converted into awards with respect to the Company’s Class A common stock in connection with the consummation of the Business Combination continue to be subject to the terms of the 2017 Plan and applicable award agreements, except for a modification of the repurchase provision, which is discussed further below.

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On July 22, 2021, in connection with the Business Combination, the 2021 Plan became effective and 32,734,983 authorized shares of common stock were reserved for issuance thereunder.

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Upon consummation of the Business Combination, the Company’s Board of Directors waived the Company’s right under the 2017 Plan Call Option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement.

As such, the Company modified the liability awards to equity awards and reclassified the modification date fair value of the awards to stockholders’ equity in the consolidated

financial statements as of July 22, 2021.

An incremental expense of $ 0.4 million resulting from the modification event was recorded in the year ended December 31, 2021.

As such, the Company modified the liability awards to equity awards and reclassified the modification date fair value of the awards to stockholders’ equity in the consolidated financial statements as of July 22, 2021.

All stock options granted under the 2021 Plan are accounted for as equity awards.

The following summarizes the stock option activity, which reflects the conversion of the options granted under the 2017 Plan into awards with respect to the Company Class A common stock in connection with the consummation of the Business Combination (in thousands, except share and per share amounts):

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Stock Options Outstanding

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15,157,018 $ 1.02 4.02 $ 803,370

Nonvested options outstanding at the end of the year was 7,975,234 with weighted average grant-date fair value of $ 8.38 .

Non-vested options outstanding at the end of the year was 11,205,789 with weighted average grant-date fair value of $ 2.17 .

The weighted-average grant-date fair value of options granted and total fair value of the options with tranches vested was $ 1.55 and $ 24.5 million for the year ended December 31, 2022, respectively.

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The aggregate intrinsic value of exercised options was $ 18.1 million, $ 17.1 million and $ 0.6 million in the years ended December 31, 2022, 2021 and 2020, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

The total payments for share-based liabilities were $ 0.1 million, $ 0.3 million and $ 1.0 million in the years ended December 31, 2021, 2020 and 2019, respectively.

Due to the historical accounting under the liability awards and modification accounting applied upon consummation of the Business Combination, as described above, the Company used the fair value determined on the modification date when calculating the grant-date and total fair value disclosed.

The total payments for share-based liabilities were $ 0.1 million and $ 0.3 million in the years ended December 31, 2021 and 2020, respectively, while no payments were made in the year ended December 31, 2022.

The fair value of the stock option awards for the period ended December 31, 2022, and as of December 31, 2021, and 2020 were estimated using the Black-Scholes option pricing model with the following assumptions:

2021 2020 2019

Expected volatility 65.20 %- 90.00 %

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We estimated a volatility factor for the Company’s options based on analysis of historical share prices of a peer group of public companies.

We did not rely on the volatility of the Company’s common stock because its limited trading history.

We did not rely on the volatility of the Company’s common stock because of its limited trading history.

We estimated the expected term of options granted using the “simplified method,” which is the mid-point between the vesting date and the ending date of the contractual term.

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The Company measures the value of RSUs at fair value based on the closing price of the underlying common stock on the grant date.

The RSUs granted generally vest over a four year vesting period from the grant date, however, the Company also granted certain RSUs during the three months ended December 31, 2021, which were vesting beginning 12 months from the grant date and vesting immediately on the grant date.

The RSUs granted generally vest over a four year vesting period from the grant date, however, the Company also granted certain RSUs with vesting term

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beginning 12 months from the grant date and vesting immediately on the grant date.

The following table summarizes the activity related to the Company's time-based RSUs:

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Balance at December 31, 2022 28,216,998 $ 2.36

Nonvested RSUs outstanding at the end of the year was 12,589,558 with weighted average grant-date fair value of $ 7.64 .

The total fair value of RSUs vested for the year ended December 31, 2022 was $ 33.7 million.

Additionally, the Company issued 126,980 RSUs subject to both service and performance based vesting conditions to the Executive Chairman of the Company.

The grant date was established during the second quarter period and vesting of the RSUs will be based on the achievement of performance goals established for calendar year 2022.

As of December 31, 2022, these RSUs were all forfeited due to the established performance goals not being achieved.

Earn-out RSUs

The grant date fair value determined for Triggering Event I, II and III was $ 1.82 , $ 1.39 and $ 0.94 per unit, respectively.

Any re-allocated RSUs due to the Sema4 Legacy option holders’ forfeiture activities were accounted for as new grants and the fair value determined for Triggering Event I, II and III was $ 0.86 , $ 0.61 and $ 0.41 per unit, respectively.

At year-end, any re-allocated RSUs due to the Legacy Sema4 option holders’ forfeiture activities were accounted for as new grants and the fair value determined for Triggering Event I, II and III was $ 0 , $ 0 and $ 0 per unit, respectively.

Based on the grant date fair value, the Company expects to record total expense related to the Earn-out RSU Awards of $ 3.5 million.

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The Company historically granted SAR to one employee and one consultant with exercise condition of a liquidation event.

As a result of the Business Combination, settlement of the outstanding vested SARs in exchange for a cash payment and to cancel the outstanding unvested SARs was agreed upon and an expense of $ 3.8 million related to the vested SAR was recognized by the Company during the year ended December 31, 2021.

There were no outstanding SARs as of December 31, 2022.

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2022 2021 2020

(Restated) (1)

Cost of services $ 5,080 $ 22,567 $ 12,942

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Total stock-based compensation expense $ 41,975 $ 219,421 $ 120,231

(1) Refer to Note 2, “Summary of Significant Accounting Policies.” for further details and discussions.

As of December 31, 2022, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $ 12.7 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.7 years.

As of December 31, 2021, unrecognized stock-based compensation cost related to the Company’s RSUs was $ 78.4 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.7 years.

Redeemable Convertible Preferred Stock

There were no shares of Redeemable Convertible Preferred Stock outstanding as of December 31, 2021.

Redeemable Convertible Preferred Stock as of December 31, 2020 consisted of the following (in thousands, except share data):

Redeemable Convertible Preferred Stock Shares Authorized Shares Issued and Outstanding Amount Aggregate Liquidation Preference

Series A-1 55,399,943 55,399,943 $ 51,811 $ 55,000

64,718,940 49,700,364 46,480 49,342

41,937,960 41,937,960 118,824 204,302

24,497,317 24,496,946 117,324 121,397

Total Redeemable Convertible Preferred Stock 186,554,160 171,535,213 $ 334,439 $ 430,041

Prior to the completion of the Business Combination, there were no significant changes to the terms of the Convertible Preferred Stock.

Upon closing of the Merger, each share Preferred Stock (as defined in the Proxy Statement) was cancelled and received a portion of the merger consideration, resulting in certain Legacy Sema4 preferred stockholders receiving $ 230.0 million of cash and an aggregate of 148,543,062 shares of common stock.

The Company recorded the conversion at the carrying value of the Redeemable Convertible Preferred Stock at the time of Closing.

There were 242,647,604 shares of Sema4 Holdings Class A common stock and 124 shares of Legacy Sema4 Class A common stock issued and outstanding as of December 31, 2021 and 2020, respectively.

There were 0 and 130,557 shares of Class B common stock issued and outstanding as of December 31, 2021 and 2020, respectively.

As of December 31, 2022, unrecognized stock-based compensation cost

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related to the Company’s RSUs was $ 34.5 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.7 years.

There were 388,511,138 shares and 242,647,604 shares of GeneDx Holdings Class A common stock issued and outstanding as of December 31, 2022 and 2021, respectively.

Each share of common stock entitles the holder to one vote and to receive dividends when and if declared by the board of directors of the Company.

No dividends have been declared through December 31, 2022.

The components of income before incomes taxes consisted of the following (in thousands):

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2022 2021 2020

Current $ — — % $ — $ —

Federal $ — $ — $ —

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Total Tax Expense $ ( 49,052 ) $ — $ —

For the years ended December 31, 2021, 2020 and 2019, the Company did not have a current or deferred income tax expense or (benefit).

Accordingly, the effective tax rate for the Company for the years ended December 31, 2021, 2020 and 2019 was zero percent.

A reconciliation of the anticipated income tax expense/(benefit) computed by applying the statutory federal income tax rate of 21% to income before taxes to the amount reported in the statement of operations and comprehensive loss is as follows (in thousands):

For the years ended December 31, 2022, 2021 and 2020, the Company recorded a total income tax benefit of $ 49,052 , $ 0 , $ 0 , respectively.

Accordingly, the effective tax rate for the Company for the years ended December 31, 2022, 2021 and 2020 was 8.2 %, 0 %, 0 %, respectively.

A reconciliation of the anticipated income tax expense/

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(benefit) computed by applying the statutory federal income tax rate of 21% to loss before income taxes to the amount reported in the statement of operations and comprehensive loss is as follows (in thousands):

Year Ended December 31,

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Unrealized fair market value gain on warrants

Goodwill Impairment ( 6.1 ) — —

Change in valuation allowance ( 9.6 ) ( 32.0 ) ( 15.9 )

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Research and development credits 8,600 7,285

Deferred rent 1,443 493

Leases 12,971 1,443

Unearned revenue 10 145

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Obsolete inventory reserve 5,889 655

Gross deferred tax assets 160,463 61,356

Valuation allowance ( 155,668 ) ( 58,264 )

Accrued expenses 10,142 —

Section 174 amortization 23,193 —

Total deferred tax assets 280,963 160,463

Valuation allowance ( 226,644 ) ( 155,668 )

Deferred tax assets, net of valuation allowance 54,319 4,795

Deferred tax liabilities:

Property and equipment — ( 685 )

ROU asset ( 8,589 ) —

Capitalized software ( 141 ) ( 4,795 )

Intangible amortization ( 48,248 ) —

Total deferred tax liabilities ( 56,978 ) ( 4,795 )

Net deferred tax assets $ — $ —

Net deferred tax liability after valuation allowance $ ( 2,659 ) $ —

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As of December 31, 2022, the Company had the following tax net operating loss carryforwards available to reduce future federal and state taxable income, and tax credit carryforwards available to offset future federal and Connecticut income taxes (in thousands):

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As of December 31, 2022, 2021, and 2020 the Company performed an evaluation to determine whether a valuation allowance was needed.

Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that its net deferred tax assets will not be realized.

Accordingly, the Company maintained a full valuation allowance as of December 31, 2021, 2020 and 2019.

The valuation allowance increased by $ 97.4 million in 2021, $ 38.1 million in 2020 and $ 7.1 million in 2019 primarily due to the increase in net operating loss carryforwards, research and development tax credits, accrued compensation expenses, stock-based compensation and deferred rent expense.

Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that a significant portion of its deferred tax assets will not be realized.

Accordingly, the Company maintained a partial valuation allowance as of December 31, 2022 and a full valuation allowance as of December 31, 2021 and 2020.

The valuation allowance increased by $ 71.0 million in 2022, $ 97.4 million in 2021 and $ 38.1 million in 2020 primarily due to the increase in net operating loss carryforwards, research and development tax credits, accrued compensation expenses, stock-based compensation, lease liability, Section 174 amortization and accrued expenses.

Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

Generally, an ownership change occurs when certain shareholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years).

Generally, an ownership change occurs when certain shareholders increase their aggregated

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ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years).

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since becoming a “loss corporation” as defined in Section 382.

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To the extent penalties and interest would be assessed on any underpayment of income tax, the Company’s policy is that such amounts would be accrued and classified as a component of income tax expense in the financial statements.

As of December 31, 2021, 2020 and 2019, the Company has not accrued interest or penalties related to uncertain tax positions.

As of December 31, 2022, 2021 and 2020, the Company has accrued interest or penalties related to uncertain tax positions of less than $ 0.1 million, $ 0 , and $ 0 respectively.

The Company files U.S federal and multiple state income tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

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As a result of the Company’s net operating loss carryforwards, the Company’s federal and state statutes of limitations remain open from 2016 and forward until the net operating loss carryforwards are utilized or expire prior to utilization.

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Net Loss per Share

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The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders.

As the securities were all converted into Sema4 Holdings Class A common stock upon consummation of the Merger, all outstanding Legacy Sema4 Class B common stock has been retroactively converted to the Sema4 Holdings Class A common stock.

The following tables summarize the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because

including them would have been anti-dilutive:

As the securities were all converted into the Company’s Class A common stock upon consummation of the Merger, all outstanding Legacy Sema4 Class B common stock has been retroactively converted to the Company’s Class A common stock.

Year Ended December 31,

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95,596,353 76,536,415 189,958,359

Restructuring Costs

During the year ended December 31, 2022, the Company’s Compensation Committee of the Board of Directors approved by written consents, dated February 17, 2022, May 2, 2022 and August 11, 2022, a restructuring plan which was fully executed by management and restructuring charges were incurred and recorded in connection therewith, including an exit of the Company’s somatic tumor testing business.

These costs include severance packages offered to the employees impacted by the plan, third party consulting costs, and costs related to closing

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the Company’s laboratory in Branford, CT.

The plan resulted in the Company eliminating approximately 250 positions.

Additionally, on November 14, 2022, the Company announced its plan to pursue a new strategic direction focused on the Company’s pediatric and rare disease testing business coupled with the Company’s Centrellis data platform.

The Company’s strategic realignment was unanimously approved by the board of directors on November 11, 2022 included exiting its reproductive and women’s health testing business, which included carrier screening, noninvasive prenatal, and other ancillary reproductive testing offerings.

The Company ceased accepting samples for these tests on December 14, 2022 and notified its customers impacted by the decision immediately.

The Company expects to exit the operations of the reproductive and women’s health testing services by the end of the first quarter of 2023.

As a result of this announcement, the Company expects to eliminate approximately 500 positions, and to cease operations at its Stamford, CT laboratory.

When combined with the Company’s prior reductions in force during 2022, the exit will result in the elimination of approximately 32.5 % of its workforce.

The table below provides certain information concerning restructuring activity during the year ended December 31, 2022 (in thousands):

Reserve Balance at December 31, 2021 Charged to Costs and Expenses Payments and Other Reserve Balance at December 31, 2022

Severance $ — $ 19,239 $ ( 14,469 ) $ 4,770

Others — 4,922 ( 4,669 ) 253

Total $ — $ 24,161 $ ( 19,138 ) $ 5,023

The Company may incur additional expenses not currently contemplated due to events associated with the reduction in force.

The charges that the Company expects to incur in connection with the reduction in force are estimates and subject to a number of assumptions, and actual results may differ materially.

Supplemental Financial Information

Accrued expenses consisted of the following (in thousands):

As of December 31,

Accrued purchases $ 20,314 19,758

Reserves for refunds to insurance carriers 17,001 —

Other 1,546 350

$ 38,861 $ 20,108

Other current liabilities consisted of the following (in thousands):

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Accrued commissions 1,656 2,826

Accrued Severance 4,770 —

Current portion of long-term debt 4,750 —

Indemnification liabilities 13,470 —

Current portion of the contingent consideration liabilities 6,019 —

Other (1) 5,137 8,930

Total current other liabilities $ 49,665 $ 33,387

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(1) The 2021 amount includes $ 3.4 million that was separately disclosed under current portion of capital lease obligations on the consolidated balance sheets in the prior year.

Segment Reporting

The Company’s business is aligned with how the chief operating decision maker ("CODM") reviews performance and makes decisions in managing the Company.

As of December 31, 2022, the Company has identified two reportable segments:

(i) GeneDx inclusive of Legacy GeneDx and Legacy Sema4 data revenues and associated costs and (ii) Legacy Sema4 diagnostics.

The GeneDx segment primarily provides pediatric and rare disease diagnostics with a focus on whole exome and genome sequencing and, to a lesser extent data and information services.

The Legacy Sema4 diagnostics segment provided reproductive and women’s health and somatic oncology diagnostic testing and screening products.

Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance.

The CODM evaluates segment performance based on revenue and adjusted gross margin.

Prior to the acquisition of Legacy GeneDx in April 2022, the Company had one segment which is characterized as “Legacy Sema4” in the table below.

Prior to the date of the acquisition, consolidated results were the same as the results of this segment and therefore 2021 and 2020 have not been presented below.

(in thousands) GeneDx Legacy Sema4 Total

Fiscal Year Ended December 31, 2022:

Revenue $ 122,234 $ 112,460 $ 234,694

Adjusted cost of services 74,213 148,897 223,110

Adjusted gross margin (loss) 48,021 ( 36,437 ) 11,584

Reconciliations:

Depreciation and amortization 2,440 28,888 31,328

Stock-based compensation 680 4,400 5,080

Restructuring charges 129 1,797 1,926

Gross margin (loss) $ 44,772 $ ( 71,522 ) $ ( 26,750 )

The following table summarizes the Company’s disaggregated revenue (in thousands):

Year Ended December 31, 2022

GeneDx Legacy Sema4 Consolidated

Diagnostic test revenue:

Patients with third-party insurance $ 72,890 $ 100,734 $ 173,624

Institutional customers 40,754 5,370 $ 46,124

Self-pay patients 1,230 6,356 7,586

Total diagnostic test revenue 114,874 112,460 227,334

Other revenue 7,360 — 7,360

Total $ 122,234 $ 112,460 $ 234,694

Management manages assets on a total company basis, not by reporting segment.

The CODM does not regularly review any asset information by reporting segment and, accordingly, the Company does not report asset information by reporting segment.

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Goodwill and Intangible Assets

As discussed in Note 3, Business Combinations, upon the acquisition of GeneDx in April 2022, the Company recorded initial goodwill of $181.5 million through its preliminary purchase allocation.

The purchase price allocation for acquired businesses may be modified for up to one year from the date of acquisition if additional facts or circumstances lead to changes in our preliminary purchase accounting estimates.

The measurement period is still open as of December 31, 2022.

The changes in the carrying amounts of goodwill were as follows (in thousands):

December 31, 2022

Balance as of December 31, 2021 $ —

Additions 185,871

Measurement period adjustments ( 11,412 )

Impairment charges ( 174,459 )

Balance as of December 31, 2022 $ —

During the fourth quarter of 2022, the Company identified indicators that it was more likely than not that the fair value of the GeneDx reporting unit was less than its carrying value.

The factors contributing to the indicators include, but are not limited to, significant decline in the Company’s stock price coupled with lower than anticipated business financial performance of the Legacy Sema4 business.

The Company performed quantitative analysis as of December 31, 2022 to determine the fair value of the GeneDx reporting unit.

The fair value was determined through estimating the Company’s discounted future cash flows expected to be generated.

Significant assumptions inherent in the valuation are employed and include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry.

Based on the analysis, the Company concluded that the reporting unit’s carrying value was greater than the fair value.

Accordingly, an impairment charge totaling $ 174.5 million was recognized.

The following table reflects the fair values and remaining useful lives of the acquired intangible assets identified based on the Company’s preliminary purchase accounting assessments for the GeneDx acquisition (in thousands):

Gross Carrying Amount Accumulated Amortization Net Carrying Value Weighted-Average

Tradenames and trademarks $ 50,000 $ ( 2,083 ) $ 47,917 15.3

Developed Technology 48,000 ( 4,000 ) 44,000 7.3

Customer Relationships 98,000 ( 3,267 ) 94,733 19.3

$ 196,000 $ ( 9,350 ) $ 186,650

Amortization expense for tradenames and trademarks and developed technology of $ 6.1 million was recorded in general and administrative for the year ended December 31, 2022 within the consolidated statements of operations and comprehensive loss.

Amortization expense for customer relationships of $ 3.3 million was recorded in selling and marketing for the year ended December 31, 2022 within the consolidated statements of operations and comprehensive loss.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2022 (in thousands):

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2023 $ 14,025

Thereafter 116,525

Total estimated future amortization expense $ 186,650

Subsequent Events

GeneDx Acquisition

On January 14, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with GeneDx, Inc., a New Jersey corporation (“GeneDx”) and a wholly-owned subsidiary of OPKO Health, inc, and the other parties thereto.

Subject to the terms and conditions of the Merger Agreement, the Company agreed to pay to OPKO Health Inc., of (i) $ 150 million in cash at the closing of the acquisition (the “Closing”), subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of the Company’s Class A common stock, to be issued at the Closing and (iii) up to $ 150 million payable following the Closing, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023 (the “Milestone Payments”).

Each Milestone Payment, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of Company Class A common stock (valued at $ 4.86 per share based on the average of the daily volume average weighted price of Company Class A common stock over the period of 30 trading days ended January 12, 2022), with such mix to be determined in Sema4’s sole discretion.

The acquisition is expected to close in the first half of 2022, subject to the receipt of the required approval by the Company’s stockholders and the satisfaction of the closing conditions set forth in the Merger Agreement.

Subscription Agreements and PIPE Investment (Private Placement)

On January 14, 2022, concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements for a private placement financing to issue and sell $ 200 million in Class A common stock at a price of $ 4.00 per share to a syndicate of institutional investors.

Effective January 2023, the Company changed its name from “Sema4 Holdings Corp.” to “GeneDx Holdings Corp.”

In January 2023, the Company raised approximately $ 150.0 million in gross proceeds from the sale of an aggregate 328,571,429 shares of its Class A common stock in an underwritten public offering and the sale of 100,000,000 shares of its Class A common stock shares directly to institutional investors affiliated with a member of our board of directors, in a concurrent registered direct offering.

Both transactions were executed at $ 0.35 per share.

77,663,376 shares in the direct offering were issued and the remaining 22,336,624 shares are subject to stockholder approval to satisfy Nasdaq requirements with respect to the issuance of such shares of Class A common stock.

The net offering proceeds received after deducting underwriters' discounts and commissions payable by the Company were approximately $ 137.6 million.

As part of the underwritten offering, the Company granted the underwriter a 30 -day option to purchase up to an additional 49,285,714 shares of Class A common stock at the same price.

On January 27, 2023, the underwriter partially exercised the option to purchase an additional 185,000 shares of Class A common stock.

Additional net proceeds of $ 7.6 million are expected to be received during the second quarter of 2023 once the issuance of the remaining 22,336,624 shares receives stockholder approval and the Company issues such shares.

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data