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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-03-16 · 549 added, 709 removed, 565 unchanged (69% of the section changed)

Financial Statements and Supplementary Data

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Report of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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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.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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

March 16, 2023

Auditor Firm Id:

Auditor Name:

Ernst & Young LLP

Auditor Location:

New York, New York, United States

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February 23, 2024

GeneDx Holdings Corp.

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Cash and cash equivalents $ 99,681 $ 123,933

Restricted cash 13,470 —

Accounts receivable, net 42,634 26,509

Marketable securities 30,467 —

Accounts receivable 32,371 42,634

Due from related parties 445 708

Inventory, net 8,777 13,665

Prepaid expenses 11,822 19,154

Other current assets 6,390 3,802

Prepaid expenses and other current assets 10,598 31,682

Total current assets 182,339 212,622

Operating lease right-of-use assets 26,900 32,758

Property and equipment, net 32,479 51,527

Intangible assets, net 172,625 186,650

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

Long-term restricted cash 900 900

Other assets 4,413 7,385

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Current liabilities:

Accounts payable $ 46,017 $ 44,693

Accrued expenses 38,861 20,108

Accounts payable and accrued expenses $ 37,456 $ 84,878

Due to related parties 1,379 3,593

Contract liabilities 40 473

Current portion of lease liabilities 6,121 —

Short-term lease liabilities 3,647 6,121

Other current liabilities 16,336 49,705

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Deferred taxes 1,560 2,659

Warrant liability 418 21,555

Earn-out contingent liability 1,600 10,244

Total liabilities 190,739 237,237

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Accumulated deficit ( 1,300,188 ) ( 1,124,421 )

Accumulated other comprehensive income 425 —

Total stockholders’ equity 228,017 253,705

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

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GeneDx Holdings Corp.

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Year Ended December 31,

2022 2021 2020

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

$ 227,334 $ 205,100 $ 175,351

Other revenue (including related party revenue of $ 353 , $ 232 and $ 3 for the years ended December 31, 2022, 2021, and 2020, respectively)

7,360 7,095 3,971

Diagnostic test revenue $ 195,654 $ 227,334

Other revenue 6,912 7,360

Total revenue 202,566 234,694

Cost of services (including related party expenses of $ 4,169 , $ 3,975 and $ 2,189 for the years ended December 31, 2022, 2021, and 2020, respectively)

261,444 228,797 175,296

Gross (loss) profit ( 26,750 ) ( 16,602 ) 4,026

Cost of services 112,560 261,444

Gross profit (loss) 90,006 ( 26,750 )

Research and development 58,266 86,203

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General and administrative 133,755 216,167

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

Impairment loss 10,402 210,145

Other operating expenses, net 7,223 6,312

Loss from operations ( 180,596 ) ( 667,652 )

Other income (expense):

Non-operating income (expenses), net

Change in fair market value of warrant and earn-out contingent liabilities 1,170 70,229

Interest income 2,541 79 506

Interest expense ( 3,207 ) ( 2,835 ) ( 2,474 )

Interest income (expense), net 1,114 ( 666 )

Other income, net 1,619 57

Total other income, net 69,620 200,759 654

Total non-operating income, net 3,903 69,620

Loss before income taxes ( 176,693 ) ( 598,032 )

Income tax benefit 926 49,052

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

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

Net loss $ ( 175,767 ) $ ( 548,980 )

Other comprehensive income, net of tax

Unrealized gain related to available for sale securities 425 —

Comprehensive loss $ ( 175,342 ) $ ( 548,980 )

Weighted average shares outstanding of Class A common stock 24,311,989 10,236,960

Basic and diluted net loss per share, Class A common stock $ ( 7.23 ) $ ( 53.63 )

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

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GeneDx Holdings Corp.

Consolidated Statement of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

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

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 )

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

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

Class A Common Stock

Shares Par Value Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Total stockholders’ equity

Balance at December 31, 2021 7,352,958 $ 1 $ 963,543 $ ( 575,441 ) — $ 388,103

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Common stock issued pursuant to stock option exercises 333,988 — 2,948 — — 2,948

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

Stock based compensation modification reclassification — — — — — — 304,837 — 304,837

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

Shares issued for PIPE, net of issuance costs 1,515,152 — 197,659 — — 197,659

Shares issued for acquisition (1)

2,424,243 — 172,000 — — 172,000

Vested restricted stock units converted to common stock 146,724 — — — — —

Balance at December 31, 2022 11,773,065 $ 1 $ 1,378,125 $ ( 1,124,421 ) $ — $ 253,705

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Net loss — — ( 175,767 ) — ( 175,767 )

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Stock-based compensation expense — — ( 326 ) — — ( 326 )

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

Other comprehensive income, net of tax — — — — 425 425

Vested restricted stock units converted to common stock 431,671 — — — — —

Issuance of Class A common shares in registered direct offering, net of issuance costs 676,868 — 7,564 — — 7,564

Issuance of Class A common shares for the first Milestone Payment 701,460 — 6,692 — — 6,692

Fractional shares adjustment

29,603 — — — — —

Issuance of Class A common shares in underwritten public offering, net of issuance costs 12,315,752 1 135,438 — — 135,439

Balance at December 31, 2023 25,978,863 $ 2 $ 1,527,778 $ ( 1,300,188 ) $ 425 $ 228,017

(1) Of the 2.4 million shares issued for acquisition, 251,965 shares were held by an escrow agent for a one year escrow period.

During this period, the seller retained all rights with respect to the escrow shares, including voting rights and rights to receive dividends and other distributions on such escrow shares .

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

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GeneDx Holdings Corp.

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Year Ended December 31,

2022 2021 2020

Operating activities

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Stock-based compensation expense ( 326 ) 41,975

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

Income tax benefit ( 49,124 ) — —

Change in fair value of warrants and contingent liabilities ( 1,170 ) ( 70,229 )

Deferred tax benefit ( 926 ) ( 49,124 )

Provision for excess and obsolete inventory 3,913 1,125

Non-cash lease expense 2,225 1,555 2,400

Loss on extinguishment of debt — 301 —

Third-party payor reserve release ( 9,745 ) —

Gain on sale of assets ( 1,677 ) —

Gain on debt forgiveness ( 2,750 ) —

Impairment loss 10,402 210,145

Amortization of debt issuance costs 518 66 —

Other 2,406 2,743

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

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Inventory 975 2,350

Prepaid expenses and other current assets 11,130 ( 14,250 ) 2,498

Due to/from related parties 317 1,433 ( 442 )

Other assets ( 2 ) ( 1,861 ) 1,175

Accounts payable and accrued expenses ( 46,953 ) 34,459

Contract liabilities ( 433 ) ( 1,310 ) ( 559 )

Other current liabilities ( 19,467 ) 3,239 15,960

Other assets and liabilities ( 2,526 ) ( 8,455 )

Net cash used in operating activities ( 180,147 ) ( 319,155 )

Investing activities

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

Consideration on escrow paid for GeneDx acquisition ( 12,144 ) ( 127,004 )

Purchases of property and equipment ( 5,250 ) ( 7,156 )

Proceeds from sale of assets 4,034 —

Purchases of marketable securities ( 47,670 ) —

Proceeds from maturities of marketable securities 17,765 —

Development of internal-use software assets ( 461 ) ( 7,166 )

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Financing activities

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

Proceeds from PIPE issuance 197,659 350,000 —

Proceeds from equity infusion from the merger, net of redemptions — 442,684 —

Legacy Sema4 Shareholder payout — ( 230,665 ) —

Payment of transaction costs — ( 51,760 ) —

Stock Appreciation Rights payout — ( 3,795 ) —

Repayment of long-term debt — ( 8,741 ) —

Proceeds from PIPE issuance, net of issuance costs — 197,659

Proceeds from offerings, net of issuance costs 143,002 —

Proceeds from long-term debt, net of issuance costs 48,549 —

Exercise of stock options 285 2,948

Proceeds from long-term debt — — 15,928

Long-term debt principal payments ( 2,000 ) —

Debt issuance costs — ( 537 ) —

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

Finance lease payoff and principal payments ( 3,598 ) ( 3,292 )

Net cash provided by financing activities 186,238 197,315

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

Net decrease in cash, cash equivalents and restricted cash ( 37,635 ) ( 263,166 )

Cash, cash equivalents and restricted cash, at beginning of year 138,303 401,469

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Cash, cash equivalents and restricted cash, at end of year $ 100,668 $ 138,303

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$ 1,465 $ 1,241

Lease liability from obtaining right-of-use asset $ 637 $ —

Stock consideration paid for first Milestone Payment $ 6,692 $ —

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

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Software development costs in accounts payable and accrued expenses $ — $ 461

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

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

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GeneDx Holdings Corp.

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Organization and Description of Business

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 Corp., through its subsidiaries GeneDx, LLC and Sema4 OpCo, Inc., 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, analyzes information about patient-specific genetic variation and generates test reports for clinicians and their patients.

GeneDx provides a variety of genetic diagnostic tests, 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 “Business Combination Merger Agreement”), dated February 9, 2021.

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

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.

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).

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

On January 31, 2023, the Company raised approximately $ 150.0 million in gross proceeds and announced the closing of an underwritten public offering of 9,962,316 shares of our Class A common stock and a concurrent registered direct offering of 2,353,436 shares of our Class A common stock.

The net offering proceeds received after deducting underwriters' discounts and commissions payable by the Company were approximately $ 135.4 million.

On April 17, 2023, following the Company’s receipt of stockholder approval for the issuance, the Company issued the remaining 676,868 shares of the Company’s Class A common stock to Corvex Select Equity Master Fund LP, Corvex Master Fund LP and Corvex Dynamic Equity Select Master Fund LP in its previously announced registered direct offering for gross proceeds of approximately $ 7.6 million.

Unless otherwise stated herein or unless the context otherwise requires, references in these notes to:

• “GeneDx Holdings” refer to GeneDx Holdings Corp., a Delaware corporation (f/k/a Sema4 Holdings Corp.

(“Sema4 Holdings”));

• “Legacy GeneDx” refer to GeneDx, LLC, a Delaware limited liability company (formerly, GeneDx, Inc., a New Jersey corporation), which we acquired on April 29, 2022 (the “Acquisition”);

• “Legacy Sema4” refer to Mount Sinai Genomics, Inc.

d/b/a as Sema4, a Delaware corporation, which consummated the business combination with CM Life Sciences, Inc.

(“CMLS”) on July 22, 2021 (the “Business Combination”);

• “we,” “us” and “our,” the “Company” and “GeneDx” refer, as the context requires, to:

◦ Legacy Sema4 prior to the Business Combination, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Business Combination;

◦ Legacy GeneDx prior to the Acquisition, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Acquisition.

• “Company,” or “GeneDx” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination;

and (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”).

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

All intercompany accounts and transactions have been eliminated.

Unless otherwise noted, all tabular dollars are in thousands, except per share amounts.

Certain reclassifications have been made to the prior year consolidated financial statements in order to conform to the current year’s presentation.

On May 4, 2023, at the commencement of trading, the Company effected a 1-for-33 reverse stock split (the “Reverse Stock Split”).

Accordingly, all share and per share amounts for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split.

No fractional shares were issued in connection with the reverse stock split.

Emerging Growth Company

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

In addition, the Company is a “smaller reporting company”, as defined in Item 10(f)(1) of the U.S.

Securities and Exchange Commission’s Regulation S-K.

As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting, including the reporting of two fiscal years of audited financial statements, and extended transition periods to comply with new or revised accounting standards for public business entities.

The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Use of Estimates

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 preparation of 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 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, 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”).

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 valuation of stock-based awards, the valuation of warrant liabilities, income taxes and intangible assets.

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

Concentration of Credit Risk and Other Risks and Uncertainties

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities 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.

The Company has balances in financial institutions that exceed federal depository insurance limits.

Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists.

The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash in excess of government insured limits and in the event of default by corporations and governments in which it holds investments in cash equivalents and short-term debt securities, to the extent recorded on the consolidated balance sheet.

The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company assesses both the customer and, if applicable, the third party payor that reimburses the Company on the customer’s behalf when evaluating concentration of credit risk.

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, 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 assesses both the self-pay patient and, if applicable, the third party payor that reimburses the Company on the patient’s behalf when evaluating concentration of credit risk.

Significant patients 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, 2023 and 2022 were primarily from large managed care insurance companies, institutional billed accounts, and data arrangements.

There was no individual patient or client 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.

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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:

For each significant payor, 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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2023 2022 2023 2022

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

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

Payor group D * * * * 15 %

Payor group E 15 % * * 14 % *

18 % 30 % * 14 %

Payor B 28 % 15 % 10 % 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.”

(1) 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.

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One supplier accounted for approximately 11 % and 4 % of purchases for the years ended December 31, 2023 and 2022, respectively.

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

Another supplier accounted for approximately 11 % and 12 % of purchases for the years ended

December 31, 2023 and 2022, 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

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.

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 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 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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Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which the Company expects to be entitled to in exchange for those goods or services.

If any changes in customer credit issues are identified which were not assessed at the date of service, provisions for credit losses are recognized and recorded.

Diagnostic test revenue

The Company’s diagnostic test revenue contracts typically consist of a single performance obligation to deliver diagnostic testing services to the ordering facility or patient and therefore allocation of the contract transaction price is not applicable.

Control over diagnostic testing services is generally transferred at a point in time when the customer obtains control of the promised service which is upon delivery of the test.

Diagnostic test revenues consist primarily of services reimbursed by third-party insurance payors.

Third-party insurance payors include managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges, and employers.

In arrangements with third-party insurance payors, the transaction price is stated within the contract, however, the Company accepts payments from third-party payors that are less than the contractually stated price and is therefore variable consideration and the transaction price is estimated.

When determining the transaction price, the Company uses a portfolio approach as a practical expedient to account for categories of diagnostic test contracts as collective groups rather than on an individual contract basis.

The portfolio consists of major payor classes based on third-party payors.

Based on historical collection trends and other analyses, the Company believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used.

Estimates of allowances for third-party insurance payors that impact the estimated transaction price are based upon the pricing and payment terms specified in the related contractual agreements.

Contractual pricing and payment terms in third-party insurance agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates.

In addition, for third-party payors in general, the estimated transaction price is impacted by factors such as historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios.

For institutional clients, the customer is the institution.

The Company determines the transaction price associated with services rendered in accordance with the contractual rates established with each customer.

Payment terms and conditions vary by contract and customer, however standard payment terms are generally less than 60 days from the invoice date.

In instances where the timing of the Company’s revenue recognition differs from the timing of its invoicing, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised services to the customer will be one year or less.

Other revenue

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

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.

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.

Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved.

For longer-term contracts,

the Company does not account for a significant financing component since a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of a future event that is not substantially within the control of either party.

The Company satisfies its performance obligation generally over time if the customer simultaneously receives and consumes the benefits provided by the Company’s services as the Company performs those services.

The Company recognizes revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer.

In some contracts, the Company subcontracts certain services to other parties for which the Company is ultimately responsible.

Costs incurred for such subcontracted services are included in the Company’s measure of progress for satisfying its performance obligation and are recorded in cost of services in the consolidated statements of operations and comprehensive loss.

Changes in the total estimated costs to be incurred in measuring the Company’s progress toward satisfying its performance obligation may result in adjustments to cumulative revenue recognized at the time the change in estimate occurs.

See Note 4, “ Revenue Recognition ” for more information.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.

Cash equivalents consist of amounts invested in money market funds.

Cash equivalents consist of amounts invested in money market funds and debt securities.

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 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

Restricted cash 14,370 900 10,828

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

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” ).

The current and long-term portions of restricted cash are included within prepaid expenses and other current assets and other assets.

Marketable Securities

Marketable securities are classified as current assets as these investments are intended to be available to the Company for use in funding current operations.

Unrealized gains and losses on available for sale securities are deemed temporary and are classified in accumulated other comprehensive income (loss) within stockholders’ equity.

Changes in the fair value of available for sale securities impact earnings only when such securities are sold, or an allowance for expected credit losses or impairment is recognized.

We regularly evaluate our portfolio of marketable securities for expected credit losses and impairment for any decline in fair value determined to be other-than-temporary.

In making this judgement, we evaluate, among other things, the extent to which the fair value of a security is less than its amortized cost;

the financial condition of the issuer, including the credit quality, and any changes thereto;

and our intent to sell, or whether we will more likely than not be required to sell, the security before recovery of its amortized cost basis.

Our assessment of whether a marketable security has a credit loss or is impaired could change in the future due to new developments or changes in assumptions related to any particular security.

See Note 5, “ Fair Value Measurements ” for more information.

Accounts Receivable

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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 years ended December 31, 2022 and 2021, and $ 0.2 million of accounts receivable was written off for the year ended December 31, 2020.

During the years ended December 31, 2023 and 2022, the Company did not record provisions for credit losses.

The Company did no t write off any accounts receivable balances for the years ended December 31, 2023 and 2022.

Inventory, net

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

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.

During the fourth quarter of 2022, the Company identified indicators of impairment for certain inventory testing supplies and reagents in connection with the planned exit of the Legacy Sema4 business and recorded a $ 22.5 million impairment charge in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

Property and Equipment, net

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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.

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

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.”

See Note 6, “ Property and Equipment, net ”.

Capitalized Software

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.

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.

See Note 6, “ Property and Equipment, net ” for more information.

Business Combinations

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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

See Note 3, “ Business Combinations ” for more information.

Intangible Assets, Net

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.

Intangible assets acquired through our business combinations in 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

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

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.

See Note 7, “ Goodwill and Intangible Assets ” for more information.

Cloud Computing

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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.

During the year ended December 31, 2022, $ 0.3 million of implementation costs were capitalized and recorded in prepaid expenses and other current assets.

There were no capitalized amounts for the year ended December 31, 2023.

Fair Value Measurements

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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, 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 loan from the Connecticut Department of Economic and Community Development is classified within level 2 of the fair value hierarchy.

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.

The Company’s financial assets and liabilities consist of cash and cash equivalents, marketable securities, accounts receivable, other current assets, accounts payable, and accrued expenses, other current liabilities, and long-term debt.

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

See Note 5, “ Fair Value Measurements ” for more information.

Warrant Liability

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, 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:

• in whole and not in part;

• at a price of $ 0.01 per public warrant;

• upon not less than 30 days’ prior written notice of redemption to each warrant holder;

• if, and only if, the closing price of the Class A common stock equals or exceeds $ 18.00 per share (as adjusted) for any 20 trading days within a 30 -trading day period ending three trading days before sending the notice of redemption to warrant holders.

The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $ 10.00 as described below:

• in whole and not in part;

• at $ 0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the common stock;

• if, and only if, the closing price of the Class A common stock equals or exceeds $ 10.00 per share (as adjusted) for any 20 trading days within the 30 -trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders;

• if the closing price of the common stock for any 20 trading days within a 30 -trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $ 18.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

The private placement warrants were issued to CMLS Holdings, LLC, Mr.

Munib Islam, Dr.

Emily Leproust and Mr.

Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock issuable upon the exercise of the private placement warrants would not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $ 10.00 ) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights.

If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

The Company’s outstanding warrants include the Public Warrants, the Private Warrants and the Perceptive Warrants.

The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant terms and applicable authoritative guidance in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815.

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

This assessment is conducted at the time of warrant issuance.

The warrant liabilities are recorded on the consolidated balance sheets at fair value on their respective issuance dates, with subsequent changes in respective fair values recognized on the consolidated statements of operations and comprehensive loss at each reporting date.

The Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets and the fair value is determined on the basis of quoted market prices.

Management has 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 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 Perceptive Warrants are classified within Level 3 of the fair value hierarchy.

The estimated fair value of the Perceptive Warrants is determined based on a Modified Black-Scholes valuation model.

Key assumptions include expected volatility, expected term, and risk-free interest rate.

See Note 5, “ Fair Value Measurements ” for more information.

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.

The Acquisition involved potential payment of future consideration payable to OPKO Health, Inc.

(“OPKO”) in cash and/or shares of Company’s Class A common stock with such mix to be determined in the Company’s sole discretion, based upon achievement of 2022 and 2023 revenue milestones, pursuant to the Acquisition Merger Agreement (the “Milestone Payments”).

The Company records contingent consideration at fair value at the date of acquisition based on the consideration

expected to be transferred, estimated using a Monte Carlo simulation valuation model.

Changes in assumptions may result in adjustments to the fair value measurements.

Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized as income or expense on the Company’s consolidated statements of operations.

Cash contingent consideration payments up to the acquisition date fair value of the contingent consideration liability are classified as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are classified as operating activities in the consolidated statements of cash flows.

See Note 5, “ Fair Value Measurements ” for more information.

Earn-out Contingent Liability

In connection with the Merger, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 19,021,576 earn-out shares and earn-out Restricted Stock Units (“RSUs”).

Based on an assessment of the earn-out shares for the Legacy Sema4 stockholders, the Company considered ASC 480 and ASC 815 and accounted for the earn-out shares as a liability.

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.

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.

The vesting of such arrangement is conditioned on the satisfaction of both a service requirement and on the satisfaction of a market-based requirement.

The market-based requirement would be achieved if the Company’s stock price is greater than or equal to $ 13 (Triggering Event I), $ 15 (Triggering Event II) and $ 18 (Triggering Event III) during the applicable performance period, based on the volume-weighted average price for a period of at least 20 days out of 30 consecutive trading days.

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 $ 0.9 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 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.

In connection with the Business Combination, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of earn-out shares and earn-out RSUs.

The Company accounted for the earn-out shares as a liability in accordance with ASC 480.

The Company subsequently measured the fair value of the liability at each reporting period and changes in fair value were recorded as a component of non-operating income (expenses), net, on the consolidated statements of operations and comprehensive loss.

In July 2023, the Company’s obligations to issue earn-out shares pursuant to that certain Agreement and Plan of Merger, dated February 9, 2021, and shares pursuant to the earn-out RSUs expired as a result of the vesting conditions not being achieved.

The Company accounted for the earn-out RSUs in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-based compensation expense was recognized over the longer of the expected achievement period for the market-based requirement or the service requirement.

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

Any re-allocations to Legacy Sema4 option holders were accounted for as new grants.

See Note 5, “ Fair Value Measurements ” for more information.

Stock-Based Compensation

The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period for each separate vesting portion of the award on a straight-line basis.

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

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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.

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

The Company estimates a volatility factor for the Company’s options based on analysis of historical share prices of a peer group of public companies, the historical share prices of the Company, and the implied volatility of the Company’s call options.

The Company estimates 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.

The Company does not rely on the historical holding periods of the Company’s options due to the limited availability of exercise data.

The Company uses a risk-free interest rate based on the U.S.

Treasury yield curve in effect for bonds with maturities consistent with the expected term of the option.

Expected dividend yield is based on the fact that the Company has never paid dividends.

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

The Company issues new shares upon share option exercise and vesting of a restricted share unit.

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

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.

See Note 12, “ Stock-Based Compensation ” for more information.

The Company accounts for income taxes using 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.

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

See Note 13, “ Income Taxes ” for more information.

The Company’s leases primarily consisted of office and lab space, and equipment for use in its operations.

Its leases generally have lease terms of 2024 to 2036 years, some with the option to extend.

The Company includes extension options that are reasonably certain to be exercised as part of the lease terms.

As of December 31, 2023, none of the Company’s lease terms included the extension option as the Company has determined that it is unlikely to exercise to extension option.

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

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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.

Operating and finance lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of remaining future minimum 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.

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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 lease liabilities are classified as current or non-current based on the expected timing of payments.

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.

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

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Revenue Recognition

The Company adopted Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers , on January 1, 2019 using the modified retrospective method applied to contracts which were not completed as of the adoption date.

If any changes in customer credit issues are identified which were not assessed at the date of service, provisions for doubtful accounts are recognized and recorded.

Diagnostic test revenue

Control over diagnostic testing services is generally transferred at a point in time when the customer obtains control of the promised service which is upon delivery of the test.

Diagnostic test revenues consist primarily of services reimbursed by third-party insurance payors.

Third-party insurance payors include managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges, and employers.

The portfolio consists of major payor classes based on third-party payors.

Estimates of allowances for third-party insurance payors that impact the estimated transaction price are based upon the pricing and payment terms specified in the related contractual agreements.

Contractual pricing and payment terms in third-party insurance agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates.

For institutional clients, the customer is the institution.

The Company determines the transaction price associated with services rendered in accordance with the contractual rates established with each customer.

Payment terms and conditions vary by contract and customer, however standard payment terms are generally less than 60 days from the invoice date.

Other revenue

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

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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.

For longer-term contracts, the Company does not account for a significant financing component since a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of a future event that is not substantially within the control of either party.

In some contracts, the Company subcontracts certain services to other parties for which the Company is ultimately responsible.

Segment Information

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

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities.

Recently Adopted Accounting Pronouncements

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.

See Note 10, “ Leases ” for more information.

Recently Issued Accounting Pronouncements Not Yet Adopted

Changes to U.S.

GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs.

ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

The standard requires enhanced segment reporting disclosures, including significant segment expenses and other segment items.

Additionally, the standard requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

ASU 2023-07 will be effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted.

The guidance will be applied retrospectively to all periods presented in financial statements unless it is impractical

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes – Improvements to Income Tax Disclosures (“ASU 2023-09”).

The standard requires additional disclosures around disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

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

Recently Adopted Accounting Pronouncements

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

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For trade and other receivables, contract assets recognized as a result of applying ASC 606, loans and certain other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in earlier recognition of credit losses than under today’s incurred loss model.

As an emerging growth company, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, with early adoption permitted.

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 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.

The Company adopted ASU 2016-13 effective January 1, 2023 and the adoption did not have material impact in the consolidated statements of operations and comprehensive loss.

Business Combination

As discussed in Note 1, on July 22, 2021, the Company consummated the Business Combination and received net cash proceeds of $ 510.0 million.

Pursuant to the Business Combination, the following occurred:

• Holders of 10,188 shares of CMLS’s Class A common stock sold in its initial public offering (the “public shares”) exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from CMLS’s initial public offering (the “IPO”), which was approximately $ 10.00 per share, or $ 101,880 in aggregate.

• Each share of CMLS’s Class B common stock was automatically converted into common stock of the Company.

• Each share of the Legacy Sema4 Class B common stock was converted into 1 /100th of a share of Legacy Sema4 Class A common stock and each share of Legacy Sema4 common stock and preferred stock was canceled and received a portion of the merger consideration, resulting in certain Legacy Sema4 stockholders receiving $ 230,665,220 of cash and the Legacy Sema4 stockholders receiving an aggregate of 178,336,298 shares of common stock of the Company.

• Pursuant to subscription agreements entered into on February 9, 2021, certain investors agreed to subscribe for an aggregate of 35,000,000 newly-issued shares of common stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 350,000,000 (the “PIPE Investment”).

Concurrently with the closing of the Business Combination, the Company consummated the PIPE Investment.

• After giving effect to the Merger, the redemption of public shares and the conversion of the CMLS Class B common stock as described above, and the consummation of the PIPE Investment, there were 240,190,402 shares of the Company’s common stock issued and outstanding.

The Company recorded $ 51.8 million of transaction costs which consist of direct, incremental legal, professional, accounting, and other third-party fees that were directly related to the execution of the Merger in additional paid-in capital.

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):

On April 29, 2022, the Company completed the Acquisition.

At the closing of the Acquisition, the Company paid OPKO gross cash consideration of $ 150 million (before deduction of transaction expenses and other customary purchase price adjustments) and issued to OPKO 2.4 million shares of the Company’s Class A common stock ($ 172 million based on the closing date share price of $ 70.95 per share).

A portion of this cash and stock consideration was held in escrow for a one year escrow period ending in May 2023.

On May 15, 2023, the Company completed the net working capital settlement with OPKO and released the remaining escrowed amount recorded in restricted cash.

In addition, a portion of the $ 150 million was payable following the closing of the Acquisition due to the achievement of the first revenue-based milestone for the fiscal year ended December 31, 2022 and the remaining Milestone Payment of up to $ 37.5 million would be payable if certain revenue-based milestones are achieved for the fiscal year ending December 31, 2023.

During the year ended December 31, 2023, the first Milestone Payment became due and payable in full and resulted in the issuance of 701,460 shares of the Company’s Class A common stock on April 14, 2023.

The remaining Milestone Payment, 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 $ 160.38 per share, subject to adjustment for stock splits and similar changes), with such mix to be determined in the Company’s sole discretion.

The second milestone payment was determined to be zero .

Concurrently with the closing of the Acquisition, the Company also issued and sold in a private placement 1,515,152 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 Legacy GeneDx on a preliminary basis:

Cash and cash equivalents $ —

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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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The amounts above represent the fair value estimates at the time of the Acquisition.

Revenue Recognition

Disaggregated revenue

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

The following table summarizes the Company’s disaggregated revenue by payor category:

Year ended December 31,

2022 2021 2020

GeneDx Legacy Sema4 Consolidated GeneDx Legacy Sema4 Consolidated

Diagnostic test revenue:

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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.

For the year ended December 31, 2023, the total change in estimate resulted in a net $ 8.8 million which included the partial release of a third party payor reserve established in prior periods for Legacy Sema4.

During the year ended December 31, 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.

Certain payor matters

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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.

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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.

Throughout 2022, the Company was engaged in discussions with one of its third-party payors (the “Payor”) regarding certain overpayments to Legacy Sema4.

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.

Under the settlement agreement, $ 42 million is to be paid by the Company to the Payor in a series of installments over four years with the final installment payment scheduled to be on or before June 30, 2026.

The first installment payment of $ 15 million was made on December 31, 2022 and the second installment of $ 5 million was made on December 27, 2023.

In consideration for these payments, the Payor agreed to provide releases of the Disputed Claims, which releases became effective on March 31, 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.

As of December 31, 2023 and December 31, 2022, $ 27.0 million and $ 39.0 million were recorded in accounts payable and accrued expenses and other liabilities, respectively.

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.

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Prepayment of amounts prior to the costs being incurred are recognized on the balance sheets as current or non-current asset based upon forecasted performance.

As of December 31, 2022 and 2021, the Company had outstanding deferred costs to fulfill contracts of $ 0.3 million and $ 1.8 million, respectively.

As of December 31, 2023 and December 31, 2022, the Company had outstanding deferred costs to fulfill contracts of zero and $ 0.3 million, respectively.

At each period, all outstanding deferred costs were recorded as other current assets.

Amortization of deferred costs was $ 1.5 million, $ 1.4 million and $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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The cost recognized was $ 2.1 million and $ 1.5 million for the years ended December 31, 2023 and 2022, respectively and are recorded in cost of services on the consolidated statements of operations and comprehensive loss.

Fair Value Measurements

The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis (in thousands):

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets on a recurring basis.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

For further information regarding the Company’s fair value measurements, see Note 2, “ Summary of Significant Accounting Policies ” included within this Annual Report.

The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis:

December 31, 2023

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Money market funds $ 92,702 $ 92,702 $ — $ —

treasury bonds 6,128 — 6,128 —

Corporate and municipal bonds 24,098 — 24,098 —

Total financial assets $ 122,928 $ 92,702 $ 30,226 $ —

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Public warrant liability $ 149 $ 149 $ — $ —

$ 280 $ 280 $ — $ —

Private warrant liability 71 — 71 —

Earn-out contingent liability — — — —

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

Perceptive warrant liability 2,515 — — 2,515

Total financial liabilities $ 2,735 $ 149 $ 71 $ 2,515

$ 8,037 $ 280 $ 138 $ 7,619

December 31, 2022

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Public warrant liability $ 280 $ 280 $ — $ —

$ 14,463 $ 14,463 $ — $ —

Private warrant liability 138 — 138 —

7,092 — 7,092 —

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

Contingent consideration 7,619 — — 7,619

Total financial liabilities $ 8,037 $ 280 $ 138 $ 7,619

$ 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.

The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were originally issued in the IPO and warrants sold in a private placement to CMLS Holdings LLC (the “Private Warrants”).

The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity.

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.

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

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 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

There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2023 or December 31, 2022.

The Company’s marketable securities presented in the consolidated balance sheet at December 31, 2023 have maturity dates ranging from 2024 through 2026 and are classified as current assets as these investments are intended to be readily available to fund current operations.

The differences between the fair value and amortized cost basis of each security are the unrealized gains or losses recorded in accumulated other comprehensive income.

As of December 31, 2023, the amortized cost for maturities less than one year and greater than one year were $ 17.2 million and $ 12.6 million, respectively.

Public and Private Warrants

As of the consummation of the Merger in July 2021, there were 666,516 warrants to purchase shares of Class A common stock outstanding, including 447,223 public warrants and 219,293 private placement warrants.

As of December 31, 2023, there were 666,515 warrants to purchase shares of Class A common stock outstanding, including 452,272 public warrants and 214,243 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 $ 379.50 per share, subject to adjustment, at any time commencing on September 4, 2021.

The Company may redeem the outstanding public warrants if the price per share of the Class A common stock equals or exceeds $ 594.00 as described below:

• in whole and not in part;

• at a price of $ 0.33 per public warrant;

• upon not less than 30 days’ prior written notice of redemption to each warrant holder;

• if, and only if, the closing price of the Class A common stock equals or exceeds $ 594.00 per share (as adjusted) for any 20 trading days within a 30 -trading day period ending three trading days before sending the notice of redemption to warrant holders.

The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $ 330.00 as described below:

• in whole and not in part;

• at $ 3.30 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the common stock;

• if, and only if, the closing price of the Class A common stock equals or exceeds $ 330.00 per share (as adjusted) for any 20 trading days within the 30 -trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders;

• if the closing price of the common stock for any 20 trading days within a 30 -trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $ 594.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

The private placement warrants were issued to CMLS Holdings, LLC, Mr.

Munib Islam, Dr.

Emily Leproust and Mr.

Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock issuable upon the exercise of the private placement warrants would not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $ 330.00 ) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights.

For the years ended December 31, 2023 and December 31, 2022 , a gain of $ 0.2 million and $ 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, respectively.

Perceptive Warrant

O n October 27, 2023, the Company entered into a Credit Agreement and Guaranty (the “Credit Agreement”) with Perceptive Credit Holdings IV, LP, as lender and administrative agent (“Perceptive”), which provides for a senior secured delayed draw term loan facility in an aggregate principal amount of up to $ 75 million (the “Perceptive Term Loan Facility”).

As consideration for the Credit Agreement, the Company issued to Perceptive a warrant to purchase up to 1,200,000 shares (the “Perceptive Warrants”) of its Class A common stock.

For further information regarding the Credit Agreement and Perceptive Warrants, see Note 9, “ Long Term Debt ” included within this Annual Report.

The Perceptive Warrants are classified within Level 3 of the fair value hierarchy.

The key assumptions utilized in determining the Perceptive Warrants valuation as of December 31, 2023 were as follows:

December 31, 2023

Stock price $ 2.75

Exercise price $ 3.18

Expected volatility 110.0 %

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Risk-free interest rate 3.88 %

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

Dividend yield —

The fair value determined and recorded as of December 31, 2023 was $ 2.5 million.

For the year ended December 31, 2023, a nominal gain 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.

Earn-out Contingent Liability

In connection with the Business Combination, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 576,412 earn-out shares and earn-out RSUs.

As for the earn-out RSUs for the Legacy Sema4 option holders, a total of 81,819 RSUs were granted on December 9, 2021.

The vesting of such arrangement was conditioned on the satisfaction of both a service requirement and on the satisfaction of a market-based requirement.

The market-based requirement would have been achieved if the Company’s stock price was greater than or equal to $ 429 (Triggering Event I), $ 495 (Triggering Event II) and $ 594 (Triggering Event III) during the applicable performance period, based on the volume-weighted average price for a period of at least 20 days out of 30 consecutive trading days.

In July 2023, the Company’s obligations to issue earn-out shares pursuant to that certain Agreement and Plan of Merger (as amended, the “Business Combination Merger Agreement”), dated February 9, 2021, and shares pursuant to the earn-out RSUs expired as a result of the vesting conditions not being achieved.

The fair value determined and recorded as of December 31, 2023 and December 31, 2022 was zero .

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.

The Company also recorded $ 0.8 million reduction in stock-based compensation expense in relation to the forfeiture of the earn-out RSUs by the Legacy Sema4 option holders for the year December 31, 2023.

Contingent Consideration (Legacy GeneDx)

In connection with the Acquisition, up to $ 150 million of contingent payments was to be payable to OPKO in cash and/or shares of Company’s Class A common stock with such mix to be determined in the Company’s sole discretion, based upon achievement of 2022 and 2023 revenue milestones, pursuant to the Acquisition Merger Agreement (the “Milestone Payments”).

Subject to the terms and conditions of the Acquisition Merger Agreement, the first Milestone Payment was paid out in full in April 2023 through the issuance of 701,460 shares of the Company’s Class A common stock (valued at $ 160.38 per share) for $ 112.5 million as the revenue of the Legacy GeneDx group for the fiscal year 2022 exceeded $ 163 million.

The second Milestone Payment of $ 37.5 million was valued at zero as the revenue target for the Legacy GeneDx group was not met during fiscal year 2023.

The second Milestone Payment would have become due and payable if the revenue of the Legacy GeneDx group for the fiscal year 2023 equaled or exceeded $ 219 million (each of clauses (a) and (b), a “Milestone Event”);

provided that 80 % of the second Milestone Payment would have become payable in respect of the second milestone period if the Legacy GeneDx group achieved 90 % of the Milestone Event revenue target for such period, which amount would have scaled on a linear basis up to 100 % of the second Milestone Payment at 100 % of the revenue target.

During the year ended December 31, 2023, a gain of $ 0.9 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.

Connecticut Department of Economic and Community Development Funding Commitment

The Company’s loan from the Connecticut Department of Economic and Community Development (“DECD”) is classified within Level 2 of the fair value hierarchy.

The loan was recorded at its carrying value of $ 6.3 million at December 31, 2022

and December 31, 2023, with $ 0.5 million of recorded in other current liabilities on the consolidated balance sheets at December 31, 2023.

The fair value was $ 5.0 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.

Property and Equipment

Property and equipment consisted of the following (in thousands):

Property and equipment consisted of the following:

As of December 31,

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Building under finance lease 4,529 6,276

Construction in-progress 3,386 940

Computer equipment 5,819 9,177

Furniture, fixtures and other equipment 550 3,777

Construction in-progress 3,106 3,386

Total property and equipment 78,931 152,987

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Property and equipment, net $ 32,479 $ 51,527

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 the years ended December 31, 2023 and 2022, depreciation and amortization expense was $ 19.7 million and $ 50.0 million, respectively, which included software amortization expense of $ 6.6 million and $ 15.4 million for the years ended December 31, 2023 and 2022, respectively.

For intangible amortization, see Note 7, “ 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):

For the year ended December 31, 2023, the Company recorded the following:

• $ 4.0 million charge to accelerate the amortization for certain capitalized software projects associated with Legacy Sema4 that were not expected to be utilized;

• $ 9.9 million non-cash impairment charges (of which $ 5.6 million was allocated to the right-of-use asset associated with the sublease), driven by indicators of impairment related to the ISMMS sublease agreements during the first and third quarters of 2023;

• $ 1.7 million net gain on sale of assets primarily associated with the closure of Legacy Sema4 facilities.

For the year ended December 31, 2022, the Company recorded the following:

• $ 24.0 million charge to accelerate depreciation and amortization due to the change in the Company’s useful lives on certain fixed assets that are related to the business exit activity;

• $ 8.7 million charge associated with the identification of indicators of impairment that the carrying value of the certain capitalized software may not be recoverable.

As a result, certain costs previously capitalized were written down within cost of services, research and development and general and administrative expenses.

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

Year Ended December 31,

2022 2021 2020

Cost of services $ 4,350 $ 31,328

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General and administrative 8,647 3,667

Total depreciation and amortization expenses $ 49,959 $ 21,807 $ 11,734

Total depreciation and amortization expense $ 19,709 $ 49,959

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 $ 185.9 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.

During 2022, the Company recorded measurement period adjustments to reduce goodwill by $ 11.4 million.

The measurement period closed on April 29, 2023.

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 included, but were not limited to, significant decline in the Company’s stock price coupled with lower than anticipated business financial performance of the Legacy Sema4 business.

Based on the quantitative analysis performed as of December 31, 2022, 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 carrying values and remaining useful lives of the acquired intangible assets identified based on the Company’s preliminary purchase accounting assessments for the GeneDx acquisition:

December 31, 2023 December 31, 2022 Weighted-Average

Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value

Tradenames and trademarks $ 50,000 $ ( 5,208 ) $ 44,792 $ 50,000 $ ( 2,083 ) $ 47,917 14.3

Developed Technology 48,000 ( 10,000 ) 38,000 48,000 ( 4,000 ) 44,000 6.3

Customer Relationships 98,000 ( 8,167 ) 89,833 98,000 ( 3,267 ) 94,733 18.3

$ 196,000 $ ( 23,375 ) $ 172,625 $ 196,000 $ ( 9,350 ) $ 186,650

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2023:

2024 $ 14,025

Thereafter 102,500

Total estimated future amortization expense $ 172,625

Amortization expense for tradenames and trademarks and developed technology of $ 9.1 million was recorded in general and administrative expenses for the year ended December 31, 2023 within the consolidated statements of operations and comprehensive loss.

Amortization expense for customer relationships of $ 4.9 million was recorded in selling and marketing expenses for the year ended December 31, 2023 within the consolidated statements of operations and comprehensive loss.

Related Party Transactions

Related party revenues

Total related party revenues are included within diagnostic test revenue and other revenue in the consolidated statements of operations and comprehensive loss as follows:

Year Ended December 31,

Diagnostic test revenue $ 3,199 $ 2,209

Other revenue

Total related party revenues

$ 3,199 $ 2,562

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

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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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Revenue recorded from this contract was $ 2.7 million and $ 1.7 million for the years ended December 31, 2023 and December 31, 2022, respectively.

Related party expenses

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:

Year Ended December 31,

Costs of services $ 4,338 $ 4,169

General and administrative 435 —

Other operating expenses, net 5,266 6,312

Total related party costs $ 10,039 $ 10,481

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 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.

Expenses recognized pursuant to other service arrangements with ISMMS totaled $ 6.8 million and $ 7.4 million for the years ended December 31, 2023 and 2022, respectively.

These amounts are included in either cost of services or related party expenses on the consolidated statements of operations and comprehensive loss depending on the particular activity to which the costs relate.

Payables due to ISMMS for the other service arrangements were $ 2.4 million and $ 2.6 million as of December 30, 2022 and 2021, respectively.

Payables due to ISMMS for the other service arrangements were $ 1.0 million and $ 2.4 million as of December 31, 2023 and December 31, 2022, respectively.

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

Additionally, the Company incurred $ 1.7 million in purchases of diagnostic testing kits and materials for the year ended December 31, 2022 from an affiliate of a member of the Board of Directors who has served in the role since July 2021.

Additionally, the Company incurred $ 3.4 million and $ 1.7 million in purchases of diagnostic testing kits and materials and $ 1.8 million and $ 1.4 million was recorded in cost of services for the year ended December 31, 2023 and 2022, respectively, from an affiliate of a member of the Board of Directors who has served in the role since July 2021.

The prices paid represent market rates.

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):

Year Ended December 31,

2022 2021 2020

Costs of services $ 4,169 $ 3,975 $ 2,189

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

Total related party costs $ 10,481 $ 9,634 $ 11,584

Payables due were $ 0.4 million as of December 31, 2023 and 2022.

Legacy 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, 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.

Services in connection with the OPKO TSA were fully completed in October 2023.

The Company recognized $ 1.6 million and $ 1.3 million in costs for the year ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, a nominal amount and $ 0.4 million was unpaid and included in due to related parties in consolidated balance sheets, respectively.

During the year ended December 31, 2023, the Company recorded a reduction of $ 1.3 million of receivables from OPKO related to the Acquisition closing working capital adjustment that was previously recorded as prepaid expenses and other current assets in consolidated balance sheets at December 31, 2022.

Long-Term Debt

Loan and Security Agreement (the “SVB Agreement”)

On November 15, 2021, the Company and Sema4 OpCo (together, the “Borrower”) entered into the SVB Agreement with Silicon Valley Bank (“SVB”).

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

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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.

The obligations under the SVB Agreement are secured by a first priority perfected security interest in substantially all of the Company’s assets except for (i) Governmental Collection Accounts (as defined in the SVB Agreement), (ii) more than 65 % of the presently existing and thereafter arising issued and outstanding shares of capital stock owned by Borrowers in a Foreign Subsidiary (as such term is defined in the SVB Agreement) and (iii) intellectual property pursuant to the terms of the SVB Agreement.

The SVB Agreement contains affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, and dividends and other distributions.

The SVB Agreement requires the Borrower to comply with certain financial covenants if Liquidity (as such term is defined in the SVB Agreement) falls below $ 135.0 million.

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.

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

The SVB Agreement also includes customary events of default, including failure to pay principal, interest or certain other amounts when due, material inaccuracy of representations and warranties, violation of covenants, certain bankruptcy and insolvency events, certain undischarged judgments, material invalidity of guarantees or grant of security interest, material adverse change, and involuntary delisting from the Nasdaq Stock Market, in certain cases subject to certain thresholds and grace periods.

If one or more events of default occurs and continues beyond any applicable cure period, SVB may, without notice or demand to the Borrower, terminate its commitment to make further loans and declare all of the obligations of the Borrowers under the SVB Agreement to be immediately due and payable.

The Company is in compliance with all covenants as of December 31, 2022.

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

In April 2016, ISMMS received a $ 5.0 million loan funding commitment (the “DECD Loan Agreement”) from the Connecticut Department of Economic and Community Development (“DECD”) to support the Genetic Sequencing Laboratory Project in Branford, Connecticut (the “Project”).

The DECD made a commitment to offer a total of $ 9.5 million in loan funding for leasehold improvements, construction, equipment, research and development, and administrative expenses over a period of ten years at an annual interest rate of 2.0 % (collectively, “Phase 1” and “Phase 2” of funding for the Project).

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 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.

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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):

As of December 31, 2023, long-term debt matures as follows:

Thereafter 762

Total maturities of long-term debt 11,000

Total debt 56,250

current portion of long-term debt ( 497 )

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 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.

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

The Company's operating lease arrangements are principally for office space and laboratory facilities.

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.

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.

The Company has the option to renew the lease at the end of the initial base term for either one period of 10 years, or two periods of 5 years.

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 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.

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

long-term debt issuance costs ( 3,065 )

Total long-term debt, net of current portion and debt issuance costs $ 52,688

Entry into Perceptive Term Loan Facility

O n October 27, 2023 (the “Closing Date”), the Company entered into a Credit Agreement and Guaranty (the “Credit Agreement”) with Perceptive Credit Holdings IV, LP, as lender and administrative agent (“Perceptive”), which provides for a senior secured delayed draw term loan facility in an aggregate principal amount of up to $ 75 million (the “Perceptive Term Loan Facility”).

An initial tranche of $ 50 million (the “Tranche A Loan”) was funded under the Perceptive Term Loan Facility on the Closing Date.

In addition to the Tranche A Loan, the Perceptive Term Loan Facility includes an additional tranche of $ 25 million (the “Tranche B Loan,” and together with the Tranche A Loan, the “Term Loans”), which will be accessible by the Company so long as the Company satisfies certain customary conditions precedent, including a specified revenue milestone (the funding date of the Tranche B Loan, the “Tranche B Borrowing Date”).

The Perceptive Term Loan Facility has a maturity date of October 27, 2028 (the “Maturity Date”) and provides for an interest-only period during the term of the loan with principal due at the maturity date.

Our net proceeds from the Tranche A Loan were approximately $ 49 million, after deducting estimated debt issuance costs and expenses.

Interest Rate

The Perceptive Term Loan Facility will accrue interest at an annual rate equal to the sum of (a) Term SOFR (as defined in the Credit Agreement) and (b) an applicable margin of 7.5 % (the “Applicable Margin”).

Accrued interest on the Term Loans is payable monthly in arrears.

Upon an Event of Default (as defined in the Credit Agreement), the Applicable Margin will automatically increase by an additional 4 % per annum.

Amortization and Prepayment

Prior to the Maturity Date, there will be no scheduled principal payments under the Perceptive Term Loan Facility.

On the Maturity Date, the Company is required to pay Perceptive the aggregate outstanding principal amount of the Term Loans and all accrued and unpaid interest thereon.

The Term Loans may be prepaid at any time, subject to a prepayment premium equal to 0 % to 10 % of the aggregate outstanding principal amount being prepaid, depending on the date of prepayment.

Security Instruments and Warrant

In connection with the Credit Agreement, the Company also entered into a Security Agreement (the “Security Agreement”), dated as of the Closing Date, with Perceptive, pursuant to which all of its obligations under the Credit Agreement are secured by a first lien perfected security interest on substantially all of its existing and after-acquired assets, subject to customary exceptions.

In addition, on the Closing Date, as consideration for the Credit Agreement, the Company issued to Perceptive a warrant to purchase up to 1,200,000 shares of its Class A common stock.

800,000 Warrant Shares (the “Initial Warrant Shares”) vested and became exercisable on the Closing Date and 400,000 Warrant Shares (the “Additional Warrant Shares”) will vest and become exercisable on the Tranche B Borrowing Date.

The per share exercise price for the Initial Warrant Shares is $ 3.1752 (the “Initial Warrant Exercise Price”), which is equal to the 10-day volume weighted average price (the “ 10-day VWAP”) of the Company’s Class A common stock at the end of the business day immediately prior to the Closing Date, and the per share exercise price for the Additional Warrant Shares will be equal to the lower of (a) the Initial Warrant Exercise Price or (b) the 10-day VWAP ending on the end of the business day immediately preceding the Tranche B Borrowing Date.

The Perceptive Warrant will be exercisable, in whole or in part, until the 10 th anniversary of the applicable vesting date.

information regarding the accounting treatment and subsequent fair value re-measurement of the Perceptive Warrant, see Note 5, “ Fair Value Measurement ” included within this Annual Report.

Termination of Loan and Security Agreement (the “SVB Agreement”)

On November 15, 2021, the Company and Sema4 OpCo, Inc.

(together, the “Borrower”) entered into a Loan and Security Agreement (the “SVB Agreement”) with Silicon Valley Bank (“SVB”) which provided for a revolving credit facility (the “Revolver”) up to an aggregate principal amount of $ 125 million, including a sublimit of $ 20 million for Letters of Credit (as such terms are defined in the SVB Agreement).

In connection with the entry into the Credit Agreement, the SVB Agreement was terminated, effective as of the Closing Date, and SVB’s security interest in the Company’s assets and property was released.

No amounts had been drawn under the SVB Agreement at the Closing Date.

The Company recorded $ 0.6 million of expenses related to the termination of the SVB Agreement during the fourth quarter of 2023.

Connecticut Department of Economic and Community Development Funding Commitment

In June 2017, ISMMS assigned a loan funding commitment from the DECD to the Company (the “DECD Loan Agreement”) to support the Genetic Sequencing Laboratory Project in Branford, Connecticut, with funding based on the achievement of certain project development phases.

The DECD Loan Agreement provided for a total loan commitment of $ 15.5 million at a fixed annual interest rate of 2.0 % for a term of 10 years.

The Company was required to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023.

The final payment of principal and interest was due in July 2028.

However, under the terms of the DECD Loan Agreement, the DECD granted a partial principal loan forgiveness of up to $ 12.3 million in the aggregate.

Such forgiveness was contingent upon the Company achieving certain job creation and retention milestones and $ 4.5 million had been forgiven at December 31, 2022.

This commitment was collateralized by a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement.

In January 2023, the Company amended the DECD Loan Agreement, which resulted in the Company agreeing to pay $ 2.0 million in principal, obtaining $ 2.8 million in debt forgiveness for achieving its Phase 2 job milestone, and agreeing to two new forgiveness milestone targets for its Phase 3 job milestone (eligible for $ 2.0 million in forgiveness) and a final phase job milestone (eligible for $ 1.0 million in forgiveness) (the “2022 Amended DECD Loan Agreement”).

Upon execution of this amendment, the Company paid the $ 2.0 million in principal and received $ 2.8 million in debt forgiveness, both of which were classified as current liabilities at December 31, 2022 and the Company recognized the debt forgiveness as other (expense) income, net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

The other terms of the 2022 Amended DECD Loan Agreement remained the same.

The outstanding loan balance from the 2022 Amended DECD Loan Agreement was $ 6.3 million at December 31, 2023.

The tables below present financial information associated with the Company’s leases as of, and for the year ended, December 31, 2023 and 2022:

Classification 2023 2022

Operating lease assets Operating lease right-of-use assets $ 26,900 $ 32,758

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Total lease liabilities $ 66,585 $ 66,134

Lease cost Year ended December 31, 2022

Year ended December 31,

Lease cost 2023 2022

Operating lease cost

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Total lease cost $ 10,221 $ 15,956

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Future minimum lease payments under non-cancellable leases as of December 31, 2023 are as follows:

Maturity of lease liabilities Operating leases Finance leases Total

Maturity of lease liabilities Operating lease Finance lease Total

2024 $ 4,388 $ 2,605 $ 6,993

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Present value of lease liabilities $ 46,759 $ 19,826 $ 66,585

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

December 31, 2022

Other information related to leases as of and for the year ended December 31, 2023 and 2022 and are as follows:

Weighted-average remaining lease term (years)

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Financing cash flows from finance lease 3,598 3,292

Commitments and Contingencies

Purchase Obligations

The following sets forth purchase obligations as of December 31, 2022 with a remaining term of at least one year (in thousands):

Contractual Obligations 2023 2024 2025 Total Commitments

Purchase Commitments and Contingencies

Purchase Commitments

The following sets forth purchase commitments as of December 31, 2023 with a remaining term of at least one year:

2024 2025 Total Commitments

Software provider $ 2,445 $ 1,199 $ 3,644

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

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Contingencies

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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.

Except as described below, the Company was not a party to any material legal proceedings as of December 31, 2023, nor is it a party to any material legal proceedings as of the date of issuance of these 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.

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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.

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, as amended (“Exchange Act”), and seeks unspecified compensatory damages, fees and costs.

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

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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.

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.

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

On November 28, 2023, a stockholder filed a derivative suit, allegedly on behalf of the Company, based largely on the same allegations in the securities class action referenced above.

The suit was filed in federal court in the District of Delaware, styled Ghazaleh v.

Schadt, et al, 23-cv-01357 (D.

Del.), and purports to assert claims against certain of the Company’s former and current officers and directors under Section 10(b) of the Exchange Act, and for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment and corporate waste.

The Company is named only as a nominal defendant.

The complaint seeks damages on the Company’s behalf, and seeks corporate governance and other relief.

The response to the complaint is not yet due.

Defined Contribution Plan

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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.

The Company contributed $ 6.5 million and $ 9.8 million for the years ended December 31, 2023 and 2022, respectively.

Stock-Based Compensation

Stock Incentive Plans

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”), as amended in February 2018, allowed the grant of options, restricted stock awards, stock appreciation rights and restricted stock units.

No options granted under the 2017 Plan are exercisable after 10 years from the date of grant, and option awards generally vest over a four-year period.

The 2017 Plan was terminated in connection with the adoption of the Company's 2021 Equity Incentive Plan (the "2021 Plan").

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.

On July 22, 2021, in connection with the Business Combination, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) became effective and 991,970 authorized shares of Class A common stock were reserved for issuance thereunder.

This Plan will be administered by the Compensation Committee of the Company’s Board of Directors, including determination of the vesting, exercisability and payment of the awards to be granted under this Plan.

No awards granted under the 2021 Plan are exercisable after 10 years from the date of grant, and the awards granted under the 2021 Plan generally vest over a four-year period on a graded vesting basis.

As of December 31, 2022, there was an aggregate of 9,648,510 shares available for grants of stock options or other awards under the 2021 Plan.

On April 13, 2023, the stockholders of the Company approved an amendment and restatement to the 2021 Plan to increase the aggregate number of shares of the Company’s Class A common stock authorized for issuance under the 2021 Plan by 787,879 shares and implement certain other clarifying changes.

On each January 1 of each of 2022 through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to 5 % of the total number of shares of all classes of common stock issued and outstanding immediately preceding December 31.

On July 21, 2023, the Company adopted the 2023 Equity Inducement Plan (the “Equity Inducement Plan”) and, subject to the adjustment provisions of the Equity Inducement Plan, reserved 500,000 shares of the Company’s Class A common stock for issuance pursuant to equity awards to be granted under the Equity Inducement Plan.

In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, the only persons eligible to receive grants of equity awards under the Equity Inducement Plan are individuals who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company.

As of December 31, 2023, there was an aggregate of 1,310,423 shares available for grants of stock options or other awards under the 2021 Plan and Equity Inducement Plan.

In January 2024, the number of Class A common stock reserved for future issuance under the 2021 Plan automatically increased by 1,298,943 shares.

Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) became effective in connection with the Business Combination.

The 2021 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees.

A total of 4,804,011 shares of common stock have been reserved for future issuance under the 2021 ESPP.

On each January 1 of each of 2022 through 2031, the aggregate number of shares of common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to one percent ( 1 %) of the total number of shares of all classes of common stock issued and outstanding on the immediately preceding December 31.

The Company did not make any grants of purchase rights under the 2021 ESPP during the year ended December 31, 2022.

The 2021 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees.

On each January 1 of each of 2022 through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the ESPP 2021 may be increased automatically by the number of shares equal to one percent ( 1 %) of the total number of shares of all classes of common stock issued and outstanding immediately preceding December 31.

The Company did not make any grants of purchase rights under the 2021 ESPP during the years ended December 31, 2023 and December 31, 2022.

A total of 336,816 shares of Class A common stock have been reserved for future issuance under the 2021 ESPP.

In January 2024, the number of Class A common stock reserved for future issuance under the 2021 ESPP automatically increased by 259,788 shares.

Stock Option Activity

Under the 2017 Plan, the Company had a call option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement (the “2017 Plan Call Option”).

The options granted under the 2017 plan were accounted for as liability awards due to the 2017 Plan Call Option.

The Company had a history of repurchase practice and the intention to repurchase the vested options.

Therefore, the fair value of the liability awards was remeasured at each reporting period until the stockholder bears the risks and rewards of equity ownership for a reasonable period of time, which the Company concludes is at least six months .

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.

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

The following summarizes the stock option activity:

Stock Options Outstanding

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Options exercisable at December 31, 2023 303,433 $ 37.27 4.52 $ —

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

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

Non-vested options outstanding at the end of the year were 194,543 with weighted average grant-date fair value of $ 28.24 .

The weighted-average grant-date fair value of options granted and total fair value of the options with tranches vested was $ 25.07 and $ 1.5 million for the year ended December 31, 2023, respectively.

The weighted-average grant-date fair value of options forfeited and canceled was $ 22.71 for the year ended December 31, 2023.

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 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:

The aggregate intrinsic value of exercised options was $ 0.3 million and $ 18.1 million in the years ended December 31, 2023 and 2022, 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 fair value of the stock option awards for the periods ended December 31, 2023 and 2022 were estimated using the Black-Scholes option pricing model with the following assumptions:

Expected volatility 105.00 %

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$ 32.67 - $ 113.85

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 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.

We did not rely on the historical holding periods of the Company’s options due to the limited availability of exercise data.

We used a risk-free interest rate based on the U.S.

Treasury yield curve in effect for bonds with maturities consistent with the expected term of the option.

Restricted Stock Units (RSU)

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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 with vesting term

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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 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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The total fair value of RSUs vested for the year ended December 31, 2023 was $ 6.6 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.

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.

The Company expects to recognize the stock-compensation cost over the longer of the derived service period or service period.

Stock Appreciation Rights (SAR) Activity

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.

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

In 2022 the Company issued 18,794 RSUs subject to both service and performance based vesting conditions to the Executive Chairman of the Company, and in 2023 the Company issued an additional 20,666 RSUs.

Vesting of the RSUs was based on the achievement of performance goals established for calendar year 2023.

As of December 31, 2023, the established performance measures were not achieved for these RSUs and no expense was recorded for the year.

Stock-Based Compensation Expense

Stock-based compensation expense is included within the consolidated statements of operations and comprehensive loss as follows (in thousands):

Stock-based compensation expense is included within the consolidated statements of operations and comprehensive loss as follows:

Year Ended December 31,

2022 2021 2020

Cost of services $ ( 1,217 ) $ 5,080

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Total stock-based compensation expense $ ( 326 ) $ 41,975

The Company recorded a reversal of stock-based compensation of $ 24.7 million and $ 38.2 million during the years ended December 31, 2023 and 2022, respectively, due to forfeiture activities upon employee terminations.

As of December 31, 2023, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $ 2.7 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.4 years.

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):

As of December 31, 2023, unrecognized stock-based compensation cost related to the Company’s RSUs was $ 10.6 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.7 years.

The components of income before incomes taxes consisted of the following:

Year Ended December 31,

2022 2021 2020

Foreign $ 623 $ 104

Domestic ( 177,316 ) ( 598,136 )

Total ( 598,032 ) ( 245,390 ) ( 241,340 )

Loss before income tax provision (benefit) ( 176,693 ) ( 598,032 )

Year Ended December 31,

2022 2021 2020

Federal $ — $ —

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State and Local ( 2,032 ) ( 8,296 )

Foreign — — —

Total Deferred ( 1,090 ) ( 49,124 )

Total Tax Expense $ ( 49,052 ) $ — $ —

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):

Total income tax provision (benefit) $ ( 926 ) $ ( 49,052 )

For the years ended December 31, 2023 and 2022, the Company recorded a total income tax benefit of $ 0.9 million and $ 49.1 million, respectively.

Accordingly, the effective tax rate for the Company for the years ended December 31, 2023 and 2022 was 0.5 % and 8.2 %, respectively.

A reconciliation of the anticipated income tax expense/(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:

Year Ended December 31,

2022 2021 2020

federal taxes at statutory rate 21.0 % 21.0 %

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Effective tax rate 0.5 % 8.2 %

The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets were as follows (in thousands):

The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets and liabilities were as follows:

As of December 31,

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Accrued compensation 1,269 2,233

Transaction costs — 416

Accrued expenses 3,470 —

Research and development credits 6,374 8,600

Leases 14,054 12,971

Unearned revenue 10 145

Deferred employer taxes 133 932

Interest expense 7 372

Property and equipment — 4,039

Obsolete inventory reserve 136 5,889

Accrued expenses 10,142 —

Third party liability 7,514 10,142

Section 174 amortization 25,993 23,193

Capitalized software 1,211 —

Other 814 1,091

Total deferred tax assets 326,485 280,963

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Deferred tax liabilities:

Property and equipment ( 1,279 ) —

ROU asset ( 7,353 ) ( 8,589 )

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Net deferred tax liability after valuation allowance $ ( 1,560 ) $ ( 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):

As of December 31, 2023, 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:

Amount Expiration period

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Connecticut research and development $ 381 No expiration

The Company had the following deferred tax valuation allowance balances (in thousands):

Year Balance at the Beginning of Period Additions Write-Offs/Other Balance at the End of Period

2022 $ 155,668 70,976 — $ 226,644

The Company had the following deferred tax valuation allowance balances:

Year Balance at the Beginning of Period Additions Balance at the End of Period

2023 $ 226,644 44,923 $ 271,567

2022 $ 155,668 70,976 $ 226,644

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act also provides for the elective deferral of the deposit and payment of the employer share of Social Security taxes for the period beginning March 27, 2020 and ending December 31, 2020.

Under the CARES Act, 50% percent of the employer portion of Social Security tax is to be remitted no later than December 31, 2021, with the remaining 50% to be remitted no later than December 31, 2022.

The Company has evaluated the effect of the elective deferral on its income tax positions and determined that the corresponding deduction related to the employer portion of Social Security tax is not deductible in the year ended December 31, 2020, resulting in a nominal deferred tax asset.

The Company continues to evaluate the potential effects the CARES Act may have on its operations and consolidated financial statements in future periods.

Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.

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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.

Accordingly, the Company maintained a full valuation allowance as of December 31, 2023 and 2022.

The valuation allowance increased by $ 44.9 million in 2023 and $ 71.0 million in 2022, primarily due to the increase in net operating loss carryforwards.

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

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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.

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).

Future changes in stock ownership, which may be outside of the Company’s control, may trigger an ownership change.

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If an ownership change has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited.

ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements by prescribing a model for recognizing, measuring, and disclosing uncertain tax positions.

Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements.

As of December 31, 2022, 2021 and 2020, the Company had nominal gross unrecognized tax benefits which, if recognized, would not impact the effective tax rate due to the Company’s valuation allowance position.

Due to the uncertainties associated with any examinations that may arise with the relevant tax authorities, it is not possible to reasonably estimate the impact of any significant increase or decrease to the unrecognized tax benefits within the next twelve months.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 is as follows (in thousands):

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2023 and 2022 is as follows:

As of December 31,

2022 2021 2020

Unrecognized tax benefits – January 1 $ 718 $ 537

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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, 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.

In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable.

There are currently no pending federal or state income tax examinations.

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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The Company had a nominal amount of accrued interest or penalties related to uncertain tax positions as of December 31, 2023 and 2022.

The Company files income tax returns for U.S federal jurisdiction, various state jurisdictions, and various foreign countries.

In the normal course of business, the Company is subject to examination by federal, state and foreign jurisdictions, where applicable.

There are currently no pending federal, state or foreign income tax examinations.

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.

Net Loss per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except for share and per share amounts):

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

Year Ended December 31,

2022 2021 2020

Net loss attributable to common stockholders $ ( 175,767 ) $ ( 548,980 )

Denominator for basic and diluted earnings per share-weighted-average common shares

Basic and diluted weighted-average common shares outstanding

24,311,989 10,236,960

Basic and diluted loss per share $ ( 7.23 ) $ ( 53.63 )

As a result of the Merger, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding prior to the Merger by multiplying them by the conversion ratio of 123.8339 used to determine the number of shares of common stock into which they converted.

The common stock issued as a result of the redeemable convertible preferred stock conversion upon closing of the Merger was included in the basic and diluted loss per share calculation on a prospective basis.

Prior to the consummation of the Merger, the Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as there were outstanding Class B common stock and redeemable convertible preferred stock that were participating securities.

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 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.

On May 4, 2023, the Company effected a reverse stock split of its Class A common stock at a ratio of 1-for-33.

As a result of the Reverse Stock Split, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding prior to the Reverse Stock Split by a ratio of 1-for-33 to determine the number of shares of common stock into which they converted.

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:

Year Ended December 31,

2022 2021 2020

Outstanding options and RSUs 54,579,805 35,519,867 32,339,971

Outstanding options and RSUs to purchase Class A common stock 2,005,853 1,653,934

Outstanding warrants

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Outstanding earn-out shares

18,228,934 16,351,897 —

Outstanding earn-out RSUs — 24,019

Redeemable convertible preferred stock (on an if-converted basis) — — 157,618,388

3,472,368 2,896,860

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

The table below provides certain information concerning restructuring activity during the year ended December 31, 2023 and December 31, 2022:

Reserve Balance at December 31, 2022

Charged to Costs and Expenses Payments and Other Reserve Balance at December 31, 2023

Severance $ 4,770 $ 6,514 $ ( 9,431 ) $ 1,853

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Total $ 5,023 $ 6,532 $ ( 9,702 ) $ 1,853

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 — 6,571 ( 6,318 ) 253

Total $ — $ 25,810 $ ( 20,787 ) $ 5,023

On October 30, 2023, the Company announced a continued strategic realignment of its organization to key priorities which includes the elimination of approximately 50 positions impacted on August 23, 2023, and approximately 35 positions impacted on October 30, 2023.

Together these actions reduced the size of the Company’s workforce by 10 % from the total number that existed at the time of the August reduction in force.

In total, the Company announced cost saving initiatives,

including but not limited to these reductions in force, that are expected to result in an excess of $ 40 million in annual cost reduction.

The Company expects that all remaining cash severance payments will be complete in less than one year.

These costs include severance packages offered to the employees impacted by the plan, third party consulting costs, and costs related to closing the Company’s laboratory in Branford, CT.

The plan resulted in the Company eliminating approximately 250 positions.

During the fourth quarter of 2022, the Company announced its strategic realignment resulting in the exit of 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.

As a result, the Company eliminated approximately 500 positions, and ceased operations at its Stamford, CT laboratory.

When combined with the Company’s prior reductions in workforce during 2022, the exit resulted in the elimination of approximately 32.5 % of the Company’s workforce which existed at the time of the announcement.

The Company may incur additional expenses not currently contemplated due to events associated with the reduction in force.

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Supplemental Financial Information

Accrued expenses consisted of the following (in thousands):

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

As of December 31,

Cash and cash equivalents $ 99,681 $ 123,933

Restricted cash (included in prepaid expenses and other current assets) — 13,470

Restricted cash (included in other assets) 987 900

Total $ 100,668 $ 138,303

Restricted cash included within prepaid expenses and other current assets as of December 31, 2022 includes $ 12.1 million held in escrow as restricted cash related to the closing of the Acquisition which was released upon expiration of the one year escrow period in May 2023.

Restricted cash included in other assets as of December 31, 2023 and 2022 primarily 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 10, “ Leases ” for further information.

Accounts payable and accrued expenses consisted of the following:

As of December 31,

Accounts payable $ 10,238 $ 46,017

Accrued purchases 12,154 20,314

1 unchanged sentence

Other 25 1,546

$ 38,861 $ 20,108

Other current liabilities consisted of the following (in thousands):

Total $ 37,456 $ 84,878

Other current liabilities consisted of the following:

As of December 31,

7 unchanged sentences

Current portion of the contingent consideration liabilities — 6,019

Current portion of debt issuance costs ( 802 ) —

Other 2,323 5,177

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.

Total $ 16,336 $ 49,705

Other liabilities consisted of the following:

As of December 31,

Warrant liability $ 2,735 $ 418

Earn-out contingent liability — 1,600

Third party payor reserve 12,000 22,000

Total $ 14,735 $ 24,018

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:

At December 31, 2023, 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.

The Legacy Sema4 diagnostics segment provided reproductive and women’s health and somatic oncology diagnostic testing and screening products and has been completely shut down.

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:

Year ended December 31,

GeneDx Legacy Sema4 Total GeneDx Legacy Sema4 Total

Revenue $ 194,376 $ 8,190 $ 202,566 $ 122,234 $ 112,460 $ 234,694

Adjusted cost of services 106,983 2,305 109,288 74,213 148,897 223,110

Adjusted gross margin (loss) 48,021 ( 36,437 ) 11,584

Adjusted gross profit (loss) (1)

87,393 5,885 93,278 48,021 ( 36,437 ) 11,584

Reconciliations:

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Restructuring charges 108 31 139 129 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

Gross profit (loss) $ 82,293 $ 7,713 $ 90,006 $ 44,772 $ ( 71,522 ) $ ( 26,750 )

(1) Adjusted Cost of Services and Adjusted Gross Profit exclude depreciation and amortization expense, stock-based compensation expense and restructuring costs.

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 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

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