GeneDx Holdings Corp. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023 because of the material weaknesses in internal control over financial reporting discussed below. Notwithstanding the material weaknesses in internal control over financial reporting described below, our management has concluded that our consolidated financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer and oversight of the Board of Directors, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO framework). Based on this evaluation, due to the material weaknesses described below, management concluded that the Company’s internal control over financial reporting were not effective. Material Weaknesses A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of the Annual Report on Form 10-K as of December 31, 2022, we previously reported three material weaknesses in our internal controls over financial reporting, as follows: • We did not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to effectively maintain processes and controls that allow for the timely production of accurate financial information with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations. • We did not maintain formal processes and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries, classification of certain costs, non-recurring complex transactions and the accounting in accordance with U.S. GAAP. • Our accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel, including consideration of the appropriate segregation of duties. As a result, it is possible that the Company’s business process controls that depend on the accuracy and completeness of data or financial reports generated by the Company's information technology 107 Table of Contents system could be adversely affected due to the lack of operating effectiveness of the information technology general controls (“ITGCs”). Of the three previously reported material weaknesses noted above, the first two items have been remediated as of December 31, 2023 and due to significant enhancement during 2023, only portions of the third remains unremediated as of December 31, 2023. Specifically, our accounting and operating systems lacked controls over user access and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel, including consideration of the appropriate segregation of duties. Remediation Plan Our management is actively engaged and committed to taking the steps necessary to remediate the material weakness over user access and program change management in order to establish a strong internal control environment. During 2023, we designed and implemented the following measures as part of the remediation efforts over the lack of operating effectiveness of the information technology general controls (“ITGCs”): • We expanded the available resources with experience designing and implementing ITGCs, through hired information technology (“IT”) employees and use of outside consultants. • We implemented role redesign for certain systems, including rationalization user roles and permissions and establishing appropriate segregation of duties, where applicable. • We implemented process improvements and standardized certain practices across relevant systems, including access provisioning, deprovisioning and user access review (UAR) processes. • We conducted training for personnel responsible for internal control performers to deepen their comprehension of risk assessment concepts and to refine their execution of controls pertaining to financial reporting. • We strengthened and documented our accounting policies and procedures around ITGCs and communicated the policies to relevant personnel. • We have implemented action plans to address remaining issues that still exist within user access and change management, and continue to enforce consistent execution of key internal control procedures. While significant progress has been made to strengthen the design and operating effectiveness of our ITGCs, management has concluded that as of December 31, 2023, there was not a sufficient period of time available to sufficiently test nor conclude that enhanced internal controls were fully implemented and operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances. We will continue to monitor the effectiveness of ITGC remediation actions in connection with future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures. Assessment results will be used to validate the efficacy of our ITGC remediation efforts and identify any additional actions necessary to ensure ongoing design and operating effectiveness. Remediation of Previously-Reported Material Weaknesses As of December 31, 2023, management believes the following two previously reported material weaknesses have been remediated: • We did not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to effectively maintain processes and controls that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations. • We did not maintain formal processes and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries, classification of certain costs, non-recurring complex transactions and the accounting in accordance with U.S. GAAP. To remediate these material weaknesses, the Company documented and implemented the following actions: • We hired key personnel, obtained qualified accountants and retained additional resources with the appropriate technical accounting skills to achieve complete, accurate, and timely financial accounting and reporting. In addition, we formalized roles and review responsibilities to align the team’s skills and experience, including consideration related to the segregation of duties, to the risk and complexity of our transactions. 108 Table of Contents • We completed a gap analysis of the processes supporting our internal control over financial reporting to identify areas where new controls are needed and where existing controls required improvement. Based on that analysis, we formalized detailed remediation plans at the risk and control level to improve our internal control framework. • We strengthened and documented our internal accounting policies and procedures and communicated them to all relevant personnel. • We standardized business practices and implemented various improvements within financial functional areas, including account reconciliation reviews and automation of certain close processes. Management believes it has effectively designed and tested the operating effectiveness related to the previously-reported material weaknesses noted above. Accordingly, management has concluded that these material weaknesses have been remediated because each component of the material weakness has been operating effectively for a sufficient period of time. Changes in Internal Control Over Financial Reporting Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2023. Except as described above with respect to the remediation of certain previously-reported material weaknesses, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to take steps to remediate the material weakness in our information technology general controls over financial reporting, as discussed above. Inherent Limitation on the Effectiveness of Internal Control Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. Item 9B. Other Information Other Information Following the expiration of his employment agreement on December 31, 2023 in accordance with its terms, on February 23, 2024, Jason Ryan resigned from his officer position as the Executive Chairman of the Company, effective February 23, 2024. Mr. Ryan continues to serve as a member of and as the Chairman of the Board of Directors. Rule 10b5-1 Plan Adoptions and Modifications None . Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. 109 Table of Contents Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Except as set forth below, the information required by this Item is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023. 110 Table of Contents Part IV Item 15. Exhibits, Financial Statement Schedules a) The following documents are filed as a part of this Annual Report. 1. Consolidated financial statements: The consolidated financial statements are set forth under “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 2. Financial statement schedules: All schedules have been omitted because they are not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits: The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K. Incorporated by Reference No. Description of Exhibit Form Exhibit Filing Date Filed Herewith 1.1 Underwriting Agreement by and between GeneDx Holdings Corp. and Jefferies LLC, dated January 26, 2023. 8-K 1.1 01/30/2023 2.1+ Agreement and Plan of Merger, dated February 9, 2021, by and among CMLS, Merger Sub and Legacy Sema4, as amended by Amendment to Agreement and Plan of Merger dated May 3, 2021. DEF14M Annex A 07/02/2021 2.2 Agreement and Plan of Merger and Reorganization, dated as of January 14, 2022, by and among, Orion Merger Sub I, Inc., Orion Merger Sub II, LLC, GeneDx, Inc., GeneDx Holding 2, Inc. and OPKO Health, Inc. 8-K 2.1 01/18/2022 2.3+ Amendment to Agreement and Plan of Merger and Reorganization, dated as of April 29, 2022, by and among, Sema4 Holdings Corp., Orion Merger Sub I, Inc., Orion Merger Sub II, LLC, GeneDx, Inc., GeneDx Holding 2, Inc. and OPKO Health, Inc. 8-K 99.2 05/02/2022 3.1 Third Amended and Restated Certificate of Incorporation of Sema4 Holdings Corp. 8-K 3.1 07/28/2021 3.2 First Certificate of Amendment of Restated Certificate of Incorporation of Sema4 Holdings Corp. 8-K 3.1 01/09/2023 3.3 Second Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of GeneDx Holdings Corp. 8-K 3.1 04/17/2023 3.4 Third Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of GeneDx Holdings Corp. 8-K 3.1 04/28/2023 3.5 Amended and Restated Bylaws of GeneDx Holdings Corp. 8-K 3.2 01/09/2023 4.1 Specimen Class A Common Stock Certificate. S-1/A 4.2 08/24/2020 4.2 Specimen Warrant Certificate. S-1/A 4.3 08/24/2020 4.3 Warrant Agreement, dated as of September 1, 2020, by and between CM Life Sciences, Inc. and Continental Stock Transfer & Trust Company, as warrant agent. 8-K 10.1 09/04/2020 4.4 Warrant to Purchase Stock, dated October 27, 2023, by and among the Company and Perceptive Credit Holdings IV, LP. 8-K 4.1 10/30/2023 4.5 Description of Securities. X 10.1 Amended and Restated Registration Rights Agreement, dated as of July 22, 2021, by and among the Company, certain equity holders of the Company named therein and certain equity holders of Sema4 named therein. 8-K 10.2 07/28/2021 10.2 Form Director of and Officer Indemnification Agreement. 8-K 10.4 07/28/2021 10.3* GeneDx Holdings Corp. Amended and Restated 2021 Equity Incentive Plan . 8-K 10.1 04/17/2023 10.4* Form of Stock Option Agreement under the 2021 Equity Incentive Plan. 8-K 10.6 07/28/2021 111 Table of Contents 10.5* Form of RSU Agreement under the 2021 Equity Incentive Plan. 8-K 10.7 07/28/2021 10.6* Form of Earn-Out RSU Agreement. 8-K 10.8 07/28/2021 10.7* 2021 Employee Stock Purchase Plan. 8-K 10.9 07/28/2021 10.8* GeneDx Holdings Corp. 2023 Equity Inducement Plan. 8-K 10.1 07/24/2023 10.9* Form of Option Award Agreement under the 2023 Equity Inducement Plan. 8-K 10.2 07/24/2023 10.10* Form of Restricted Stock Unit Award Agreement under the 2023 Equity Inducement Plan. 8-K 10.3 07/24/2023 10.11 Sub-Sublease, dated as of June 6, 2017, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended July 31, 2019. 8-K 10.17 07/28/2021 10.12 Sublease Agreement, dated as of November 8, 2019, by and between Marriott International, Inc. and the Company. 8-K 10.18 07/28/2021 10.13 Sublease, dated as of June 1, 2017, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended December 22, 2017. 8-K 10.19 07/28/2021 10.14 Sublease, dated as of April 23, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company. 8-K 10.20 07/28/2021 10.15 Lease Agreement, dated as of January 31, 2020, by and between 1 Commercial Street Associates, LLC and the Company. 8-K 10.21 07/28/2021 10.16# Master Services Agreement, dated as of April 2, 2018, by and among the Company, Icahn School of Medicine at Mount Sinai, The Mount Sinai Hospital, and the parties thereto, as amended July 31, 2019. 8-K 10.22 07/28/2021 10.17# Master Services Agreement, dated as of May 10, 2018, by and between the Company and Icahn School of Medicine at Mount Sinai, as amended July 31, 2019. 8-K 10.23 07/28/2021 10.18# Data Structuring and Curation Agreement, dated as of August 1, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company, as amended March 11, 2020. 8-K 10.24 07/28/2021 10.19# BioMe Biospecimen and Data Access Agreement, dated as of July 19, 2019, by and between Icahn School of Medicine at Mount Sinai and the Company. 8-K 10.25 07/28/2021 10.20# Non-Exclusive Patent License Agreement, dated as of June 1, 2017, by and between the Company and Icahn School of Medicine at Mount Sinai. 8-K 10.26 07/28/2021 10.21# Supply Agreement, dated as of June 20, 2014, by and between the Company and Illumina, Inc., and amendments thereto. 8-K 10.27 07/28/2021 10.22* Mount Sinai Genomics, Inc. 2017 Equity Incentive Plan, as amended, and forms of equity agreements thereunder. S-8 99.6 09/27/2021 10.23 Loan and Security Agreement, dated as of November 15, 2021, between Silicon Valley Bank, the Company and Sema4 OpCo, Inc. 10-Q 10.26 11/15/2021 10.24 Subscription Agreement, dated as of February 9, 2021, by and among the Company and the subscriber parties thereto. 8-K 10.1 02/11/2021 10.25 Form of Subscription Agreement, dated as of January 14, 2022 by and among the Company and the subscriber parties thereto. 8-K 10.1 01/18/2022 10.26 Form of Shareholder Agreement, dated as of January 14, 2022 by and among the Company and the stockholder parties identified therein. 8-K 10.2 01/18/2022 10.27 Form of Support Agreement dated as of January 14, 2022 by and among the Company and the stockholder parties identified therein. 8-K 10.3 01/18/2022 10.28 Form of Lock-Up Agreement, by and among the Company and the stockholder parties identified therein. 8-K 10.4 01/18/2022 10.29* Executive Chairman Agreement, dated as of January 17, 2022, by and between the Company and Jason Ryan. 10-K 10.31 03/14/2022 112 Table of Contents 10.30* Amendment No. 1 to Executive Chairman Agreement. 8-K 10.1 04/14/2023 10.31+ Transition Services Agreement, dated as of April 29, 2022, by and between GeneDx, Inc. and OPKO Health, Inc. 8-K 10.1 05/02/2022 10.32* Employment Agreement, dated as of January 14, 2022, as amended April 29, 2022, by and between Sema4 Holdings Corp. and Katherine Stueland. 8-K 10.2 05/02/2022 10.33* Employment Agreement of Kevin Feeley, dated January 14, 2022. 10-K 10.32 03/16/2023 10.34* Amendment No. 1 to the Employment Agreement of Kevin Feeley, dated August 25, 2022. 8-K 10.1 08/26/2022 10.35# Amendment No. 1 to BioMe Biospecimen and Data Access Agreement, dated as of January 19, 2023, by and between Icahn School of Medicine at Mount Sinai and Sema4 OpCo, Inc. 10-K 10.34 03/16/2023 10.36 2022 Replacement Promissory Note. 10-K 10.35 03/16/2023 10.37 Credit Agreement and Guaranty, dated October 27, 2023, by and among the Company and Perceptive Credit Holdings IV, LP. 8-K 10.1 10/30/2023 10.38 Security Agreement, dated October 27, 2023, by and among the Company and Perceptive Credit Holdings IV, LP. 8-K 10.2 10/30/2023 10.39 Form of Subscription Agreement. 8-K 10.1 01/30/2023 10.40+ Letter Agreement, Amendment No. 2 to Sub-Sublease, dated as of March 20, 2023, by and between Icahn School of Medicine at Mount Sinai and the Company. 10-Q 10.3 05/09/2023 21.1 Subsidiaries of the Company. X 23.1 Consent of Ernst & Young LLP, independent registered accounting firm for GeneDx Holdings Corp. X 24.1 Power of Attorney (included on signature page to this Annual Report on Form 10-K). X 31.1 Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 97.1 Policy Relating to Recovery of Erroneously Awarded Compensation. X 101.INS Inline XBRL Instance Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.) X * Management Contract or Compensatory Plan ** Furnished. 113 Table of Contents + Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. # The Company has omitted portions of the exhibit as permitted under Regulation S-K Item 601(b)(10). Item 16. Form 10-K Summary We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information. 114 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENEDX HOLDINGS CORP. Date: February 23, 2024 By: /s/ Katherine Stueland Name: Katherine Stueland Title: Chief Executive Officer and Director (Principal Executive Officer) KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Katherine Stueland, Kevin Feeley and Devin Schaffer, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Katherine Stueland Chief Executive Officer and Director February 23, 2024 Katherine Stueland (Principal Executive Officer) /s/ Kevin Feeley Chief Financial Officer February 23, 2024 Kevin Feeley (Principal Financial Officer) /s/ Jason Ryan Chairman of the Board February 23, 2024 Jason Ryan /s/ Eli D. Casdin Director February 23, 2024 Eli D. Casdin /s/ Emily Leproust Director February 23, 2024 Emily Leproust /s/ Keith Meister Director February 23, 2024 Keith Meister /s/ Joshua Ruch Director February 23, 2024 Joshua Ruch /s/ Richard Pfenninger, Jr. Director February 23, 2024 Richard Pfenninger, Jr. 115