Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022 because of the material weaknesses in internal control over financial reporting discussed below.
Notwithstanding the material weaknesses in internal control over financial reporting described below, our management has concluded that our consolidated financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer and oversight of the board of directors, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO framework). Based on this evaluation, due to the material weaknesses described below, management concluded that the Company’s internal control over financial reporting were not effective.
As discussed elsewhere in this Annual Report on Form 10-K, we completed our acquisition of Legacy GeneDx on April 29, 2022. The SEC permits companies to exclude acquisitions from their assessment of internal control over financial reporting during the first year in which the acquisition was completed, and our management has elected to exclude Legacy GeneDx from our assessment as of December 31, 2022.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with the preparation of Legacy Sema4's audited financial statements as of December 31, 2020, we previously identified material weaknesses in our internal controls over financial reporting. Certain of these material weaknesses remain unremediated as of December 31, 2022.
Specifically, as of December 31, 2022, the material weaknesses that remain unremediated include the following:
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• We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to effectively maintain processes and controls that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations.
• We did not maintain formal processes and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries, classification of certain costs, non-recurring complex transactions and the accounting in accordance with U.S. GAAP.
• Our accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel, including consideration of the appropriate segregation of duties. As a result, it is possible that the Company’s business process controls that depend on the accuracy and completeness of data or financial reports generated by the Company's information technology system could be adversely affected due to the lack of operating effectiveness of the information technology general controls (“ITGCs”).
Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. The Company has continued to improve its organizational capabilities and continues to implement processes and controls to remediate the material weaknesses.
During 2021 and 2022, we made the following enhancements to our control environment:
• We have hired key personnel, obtained qualified accountants through the acquisition of Legacy GeneDx, and supplemented interim staffing needs with third-party consultants that have the appropriate technical accounting skills to enable us to achieve complete, accurate, and timely financial accounting and reporting. In addition, we have reallocated responsibilities across the organization to ensure that the appropriate level of knowledge and experience is applied based on risk and complexity of transactions.
• We added information technology employees with appropriate experience, certification, education and training to the organization to strengthen our IT team, to enable us to improve the ITGCs over our accounting and operating systems.
• We engaged outside consultants to assist in the design, implementation, documentation, and remediation of internal controls that address the relevant risks, and to assist us in the evaluation of our relevant accounting and operating systems, to enable us to improve our processes and controls over financial reporting.
• We provided training to internal control performers in order to enhance their level of understanding over the appropriate design, implementation and effectiveness of controls.
• We have strengthened and documented our internal accounting policies and procedures and communicated the policies to relevant personnel.
• We have completed the design of our internal controls, and have completed detailed remediation plans at the risk and control level.
Management has been actively engaged in remediation efforts to address the material weaknesses throughout 2022 and these efforts will continue into fiscal year 2023.
While we believe significant progress was made in 2022 to enhance and strengthen our internal control over financial reporting, material control weaknesses are not considered remediated until new internal controls have been operational for a sufficient period of time, are tested, and management concludes that these controls are operating effectively. As of December 31, 2022, there was not a sufficient period of time available to sufficiently test nor conclude that these controls are operating effectively. We will continue to monitor the effectiveness of our
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remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances.
Changes in Internal Control Over Financial Reporting
Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2022. Except as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than as described herein. We are continuing to take steps to remediate the material weakness in our internal control over financial reporting, as discussed above.
Inherent Limitation on the Effectiveness of Internal Control
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
Item 9B. Other Information
Other Events
As previously disclosed, we expect to call a special meeting of stockholders for the approval of the issuance of the additional 22,336,624 shares of Class A common stock in our registered direct offering for purposes of complying with Nasdaq listing rules. At the special meeting, we also intend to seek stockholder approval of a reverse stock split of our outstanding shares of Class A common stock at a ratio to be set by our board of directors within a range approved by our stockholders, an amendment to our certificate of incorporation to limit the liability of certain of our officers as permitted pursuant to recent amendments to the Delaware corporate law, and an amendment to our 2021 Equity Incentive Plan to increase the aggregate number of shares of Class A common stock authorized for issuance under the plan by 26,000,000 shares.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth below, the information required by this Item is incorporated by reference from our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated by reference from our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022.
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Part IV
Item 15. Exhibits, Financial Statement Schedules
a) The following documents are filed as a part of this Annual Report.
1. Consolidated financial statements: The consolidated financial statements are set forth under “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
2. Financial statement schedules: All schedules have been omitted because they are not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto.
3. Exhibits: The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.
Incorporated by Reference
No. Description of Exhibit Form Exhibit Filing Date Filed Herewith
2.1+ Agreement and Plan of Merger, dated February 9, 2021, by and among CMLS, Merger Sub and Legacy Sema4, as amended by Amendment to Agreement and Plan of Merger dated May 3, 2021.
DEF14M
Annex A
07/02/2021
2.2 Agreement and Plan of Merger and Reorganization, dated as of January 14, 2022, by and among, Orion Merger Sub I, Inc., Orion Merger Sub II, LLC, GeneDx, Inc., GeneDx Holding 2, Inc. and OPKO Health, Inc.
8-K 2.1 01/18/2022
2.3+ Amendment to Agreement and Plan of Merger and Reorganization, dated as of April 29, 2022, by and among, Sema4 Holdings Corp., Orion Merger Sub I, Inc., Orion Merger Sub II, LLC, GeneDx, Inc., GeneDx Holding 2, Inc. and OPKO Health, Inc.
8-K 99.2 05/02/2022
3.1 Third Amended and Restated Certificate of Incorporation of Sema4 Holdings Corp.
8-K 3.1 07/28/2021
3.2 Certificate of Amendment of Restated Certificate of Incorporation of Sema4 Holdings Corp.
8-K 3.1 01/09/2023
3.3 Amended and Restated Bylaws of GeneDx Holdings Corp.
8-K 3.2 01/09/2023
4.1 Specimen Class A Common Stock Certificate.
S-1/A 4.2 08/24/2020
4.2 Specimen Warrant Certificate.
S-1/A 4.3 08/24/2020
4.3 Warrant Agreement, dated as of September 1, 2020, by and between CM Life Sciences, Inc. and Continental Stock Transfer & Trust Company, as warrant agent.
8-K 10.1 09/04/2020
4.4 Description of Securities
X
10.1 Amended and Restated Registration Rights Agreement, dated as of July 22, 2021, by and among the Company, certain equity holders of the Company named therein and certain equity holders of Sema4 named therein.
8-K 10.2 07/28/2021
10.2 Form Director of and Officer Indemnification Agreement.
8-K 10.4 07/28/2021
10.3* 2021 Equity Incentive Plan.
8-K 10.5 07/28/2021
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10.4* Form of Stock Option Agreement under the 2021 Equity Incentive Plan.
8-K 10.6 07/28/2021
10.5* Form of RSU Agreement under the 2021 Equity Incentive Plan.
8-K 10.7 07/28/2021
10.6* Form of Earn-Out RSU Agreement.
8-K 10.8 07/28/2021
10.7* 2021 Employee Stock Purchase Plan.
8-K 10.9 07/28/2021
10.8* Amended and Restated Employment Agreement of Eric Schadt.
8-K 10.10 07/28/2021
10.9 Sub-Sublease, dated as of June 6, 2017, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended July 31, 2019.
8-K 10.17 07/28/2021
10.10 Sublease Agreement, dated as of November 8, 2019, by and between Marriott International, Inc. and the Company.
8-K 10.18 07/28/2021
10.11 Sublease, dated as of June 1, 2017, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended December 22, 2017.
8-K 10.19 07/28/2021
10.12 Sublease, dated as of April 23, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company.
8-K 10.20 07/28/2021
10.13 Lease Agreement, dated as of January 31, 2020, by and between 1 Commercial Street Associates, LLC and the Company.
8-K 10.21 07/28/2021
10.14# Master Services Agreement, dated as of April 2, 2018, by and among the Company, Icahn School of Medicine at Mount Sinai, The Mount Sinai Hospital, and the parties thereto, as amended July 31, 2019.
8-K 10.22 07/28/2021
10.15# Master Services Agreement, dated as of May 10, 2018, by and between the Company and Icahn School of Medicine at Mount Sinai, as amended July 31, 2019.
8-K 10.23 07/28/2021
10.16# Data Structuring and Curation Agreement, dated as of August 1, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended March 11, 2020.
8-K 10.24 07/28/2021
10.17# BioMe Biospecimen and Data Access Agreement, dated as of July 19, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company.
8-K 10.25 07/28/2021
10.18# Non-Exclusive Patent License Agreement, dated as of June 1, 2017, by and between the Company and Icahn School of Medicine at Mount Sinai.
8-K 10.26 07/28/2021
10.19# Supply Agreement, dated as of June 20, 2014, by and between the Company and Illumina, Inc., and amendments thereto.
8-K 10.27 07/28/2021
10.20* Mount Sinai Genomics, Inc. 2017 Equity Incentive Plan, as amended, and forms of equity agreements thereunder.
S-8 99.6 09/27/2021
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10.21 Loan and Security Agreement, dated as of November 15, 2021, between Silicon Valley Bank, the Company and Sema4 OpCo, Inc.
10-Q 10.26 11/15/2021
10.22 Lockup Agreement, dated as of February 9, 2021, by and among the Company and the stockholder parties identified therein.
8-K 10.2 02/11/2021
10.23 Subscription Agreement, dated as of February 9, 2021, by and among the Company and the subscriber parties thereto.
8-K 10.1 02/11/2021
10.24 Form of Subscription Agreement, dated as of January 14, 2022 by and among the Company and the subscriber parties thereto.
8-K 10.1 01/18/2022
10.25 Form of Shareholder Agreement, dated as of January 14, 2022 by and among the Company and the stockholder parties identified therein.
8-K 10.2 01/18/2022
10.26 Form of Support Agreement dated as of January 14, 2022 by and among the Company and the stockholder parties identified therein.
8-K 10.3 01/18/2022
10.27 Form of Lock-Up Agreement, by and among the Company and the stockholder parties identified therein.
8-K 10.4 01/18/2022
10.28* Executive Chairman Agreement, dated as of January 17, 2022, by and between the Company and Jason Ryan .
10-K 10.31 03/14/2022
10.29+ Transition Services Agreement, dated as of April 29, 2022, by and between GeneDx, Inc. and OPKO Health, Inc.
8-K 10.1 05/02/2022
10.30* Employment Agreement, dated as of January 14, 2022, as amended April 29, 2022, by and between Sema4 Holdings Corp. and Katherine Stueland.
8-K 10.2 05/02/2022
10.31* Amendment No.1 to the Amended and Restated Employment Agreement of Eric Schadt, dated June 14, 2022
8-K 10.1 06/14/2022
10.32* Employment Agreement of Kevin Feeley, dated January 14, 2022
X
10.33* Amendment No. 1 to the Employment Agreement of Kevin Feeley, dated August 25, 2022
8-K 10.1 08/26/2022
10.34# Amendment No. 1 to BioMe Biospecimen and Data Access Agreement, dated as of January 19, 2023, by and between Icahn School of Medicine at Mount Sinai and Sema4 OpCo, Inc.
X
10.35 2022 Replacement Promissory Note
X
10.36* Separation Agreement, dated as of August 12, 2022, by and between Sema4 Holdings Corp. and Eric Schadt
10-Q 10.6 08/15/2022
21.1 Subsidiaries of the Company.
X
23.1 Consent of Ernst & Young LLP, independent registered accounting firm for GeneDx Holdings Corp.
X
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24.1 Power of Attorney (included on signature page to this Annual Report on Form 10-K).
X
31.1 Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2 Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
X
101.INS XBRL Instance Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
X
101.SCH XBRL Taxonomy Extension Schema Document
X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Labels Linkbase Document
X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.)
X
*
Management Contract or Compensatory Plan
**
Furnished.
+ Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with
Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits
and schedules to the SEC upon its request.
# The Company has omitted portions of the exhibit as permitted under Regulation S-K Item 601(b)(10).
Item 16. Form 10-K Summary
We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENEDX HOLDINGS CORP.
Date: March 16, 2023 By: /s/ Katherine Stueland
Name: Katherine Stueland
Title: Chief Executive Officer and Director
(Principal Executive Officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Katherine Stueland, Jason Ryan and Kevin Feeley and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Katherine Stueland Chief Executive Officer and Director March 16, 2023
Katherine Stueland (Principal Executive Officer)
/s/ Kevin Feeley Chief Financial Officer March 16, 2023
Kevin Feeley (Principal Financial Officer)
/s/ Jason Ryan Executive Chairman and Director March 16, 2023
Jason Ryan
/s/ Eli D. Casdin Director March 16, 2023
Eli D. Casdin
/s/ Dennis Charney Director March 16, 2023
Dennis Charney
/s/ Emily Leproust Director March 16, 2023
Emily Leproust
/s/ Keith Meister Director March 16, 2023
Keith Meister
/s/ Joshua Ruch Director March 16, 2023
Joshua Ruch
/s/ Richard Pfenninger, Jr. Director March 16, 2023
Richard Pfenninger, Jr.
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/s/ Rachel Sherman Director March 16, 2023
Rachel Sherman
163