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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
Commission file number 001-39482
https://cdn.kscope.io/54aa4b35a59d8b63ad692b64d33b4148-Blue Logo 600x208.jpg
GeneDx Holdings Corp.
(Exact name of registrant as specified in its charter)

Delaware
85-1966622
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
333 Ludlow Street, North Tower; 6th Floor
Stamford, Connecticut 06902
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (800) 298-6470
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A common stock, par value $0.0001 per shareWGSThe Nasdaq Stock Market LLC
Warrants to purchase one share of Class A common stock, each at an exercise price of $379.50 per shareWGSWWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The registrant had 25,884,279 shares of Class A common stock, par value $0.0001, outstanding at October 30, 2023.



Table of Contents
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Cautionary Note Regarding Forward Looking Statements



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “anticipate,” “believe,” “estimate,” “may,” “expect” and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (the “SEC”), or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about:
our estimates of the sufficiency of our existing capital resources combined with future anticipated cash flows and future capital requirements to finance our operating requirements, and capital expenditures;
our expectations for generating revenue, incurring losses, and becoming profitable on a sustained basis;
unforeseen circumstances or other disruptions to normal business operations, including supply chain interruptions and manufacturing constraints, arising from or related to public health emergencies such as but not limited to the COVID-19 pandemic, natural disasters, acts of terrorism or other uncontrollable events;
our expectations regarding our ability to scale to profitability, our plans to pursue a new strategic direction, and the cost savings and impact on our gross margins from exiting our reproductive and women’s business and our somatic tumor testing business;
our ability to successfully implement our business strategy;
our expectations or ability to enter into service, collaboration and other partnership agreements;
our expectations or ability to build our own commercial infrastructure to scale market and sell our products;
actions or authorizations by the U.S. Food and Drug Administration, or other regulatory authorities;
risks related to governmental regulation and other legal obligations, including privacy, data protection, information security, consumer protection, and anti-corruption and anti-bribery;
our ability to obtain and maintain intellectual property protection for our product candidates;
our ability to compete against existing and emerging technologies;
third-party payor reimbursement and coverage decisions, negotiations and settlements;
our reliance on third-party service providers for our data programs;
our accounting estimates and judgments, including our expectations regarding the adequacy of our reserves for third party payor claims, our estimates of the fair value of the second Milestone Payment (as defined below) related to our April 2022 acquisition (the “Acquisition”) of GeneDx, LLC (formerly, GeneDx, Inc.) (“Legacy GeneDx”) and our conclusions regarding the appropriateness of the carrying value of intangible assets and goodwill;
our stock price and its volatility; and
our ability to attract and retain key personnel.
The forward-looking statements contained in this report reflect our views and assumptions only as of the date that this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Unless otherwise stated herein or unless the context otherwise requires, references in this report to the “Company,” “GeneDx,” or “we,” “us” and “our” refer to (i) Mount Sinai Genomics, Inc. d/b/a as Sema4 (“Legacy Sema4”) prior to the consummation of the July 2021 business combination (the “Business Combination”) with CM Life Sciences, Inc.; and (ii) GeneDx Holdings Corp. and its subsidiaries following the consummation of the Business Combination (including, following the consummation of the Acquisition, Legacy GeneDx).
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Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
GeneDx Holdings Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
September 30, 2023
(Unaudited)
December 31, 2022
Assets
Current assets:
Cash and cash equivalents$87,387 $123,933 
Marketable securities26,910  
Accounts receivable31,908 42,634 
Due from related parties498 708 
Inventory, net9,349 13,665 
Prepaid expenses and other current assets15,761 31,682 
Total current assets171,813 212,622 
Operating lease right-of-use assets27,536 32,758 
Property and equipment, net35,746 51,527 
Intangible assets, net176,131 186,650 
Other assets6,059 7,385 
Total assets$417,285 $490,942 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses$38,873 $84,878 
Due to related parties3,970 3,593 
Short-term lease liabilities3,677 6,121 
Other current liabilities21,846 49,705 
Total current liabilities68,366 144,297 
Long-term debt, net of current portion6,052 6,250 
Long-term lease liabilities63,889 60,013 
Other liabilities22,660 24,018 
Deferred taxes2,060 2,659 
Total liabilities163,027 237,237 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred Stock, $0.0001 par value: 1,000,000 and 1,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
  
Class A common stock, $0.0001 par value: 1,000,000,000 and 1,000,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; 25,875,389 and 11,773,065 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
2 1 
Additional paid-in capital1,528,671 $1,378,125 
Accumulated deficit(1,274,415)(1,124,421)
Total stockholders’ equity254,258 253,705 
Total liabilities and stockholders’ equity
$417,285 $490,942 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GeneDx Holdings Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share amounts)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Revenue
Diagnostic test revenue$51,955 $81,490 $140,440 $167,989 
Other revenue1,348 1,744 4,708 5,355 
Total revenue53,303 83,234 145,148 173,344 
Cost of services    28,044 69,685 85,896 183,768 
Gross profit (loss)25,259 13,549 59,252 (10,424)
Research and development14,288 13,354 46,018 61,837 
Selling and marketing16,763 34,383 45,397 92,839 
General and administrative26,099 54,931 107,129 172,958 
Impairment loss8,282  10,402  
Other operating expenses, net2,794 1,697 5,259 4,712 
Loss from operations(42,967)(90,816)(154,953)(342,770)
Non-operating income (expenses), net
Change in fair market value of warrant and earn-out contingent liabilities 590 12,978 684 54,350 
Interest income (expense), net1,053 190 2,092 (999)
Other (expense) income, net(1,134)2 1,668 58 
Total non-operating income, net509 13,170 4,444 53,409 
Loss before income taxes$(42,458)$(77,646)$(150,509)$(289,361)
Income tax benefit172 65 515 49,142 
Net loss and comprehensive loss$(42,286)$(77,581)$(149,994)$(240,219)
Weighted average shares outstanding of Class A common stock25,788,747 11,538,308 23,777,327 9,741,250 
Basic and diluted net loss per share, Class A common stock$(1.64)$(6.72)$(6.31)$(24.66)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GeneDx Holdings Corp.
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
(in thousands, except share amounts)


Three months ended September 30, 2023
Class A Common StockAdditional paid-in capitalAccumulated deficitTotal stockholders' equity
SharesPar value
Balance at June 30, 2023 25,761,147$2 $1,528,240 $(1,232,129)$296,113 
Net loss— — — (42,286)(42,286)
Stock-based compensation expense — — 431 — 431 
Vested restricted stock units converted to common stock114,242 — — — — 
Balance at September 30, 2023
25,875,389$2 $1,528,671 $(1,274,415)$254,258 
Nine months ended September 30, 2023
Class A Common StockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity
SharesPar value
Balance at December 31, 2022
11,773,065$1 $1,378,125 $(1,124,421)$253,705 
Net loss— — — (149,994)(149,994)
Common stock issued pursuant to stock option exercises50,444— 266 — 266 
Stock-based compensation expense— — 586 — 586 
Vested restricted stock units converted to common stock328,197— — — — 
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 issued upon Reverse Stock Split
29,603 — — — — 
Issuance of Class A common shares in underwritten public offering, net of issuance costs12,315,752 1 135,438 — 135,439 
Balance at September 30, 2023
25,875,389$2 $1,528,671 $(1,274,415)$254,258 
Three months ended September 30, 2022
Class A Common StockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity
SharesPar value
Balances at June 30, 202211,512,026$1 $1,375,352 $(738,079)$637,274 
Net loss— — — (77,581)(77,581)
Common stock issued pursuant to stock option exercises18,646 — 329 — 329 
Stock based compensation expense— — 1,272 — 1,272 
Vested restricted stock units converted to common stock27,781 — — — — 
Balances at September 30, 2022
11,558,453$1 $1,376,953 $(815,660)$561,294 
Nine months ended September 30, 2022
Class A Common StockAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity
SharesPar value
Balances at December 31, 2021
7,352,958$1 $963,543 $(575,441)388,103 
Net loss— — — $(240,219)(240,219)
Common stock issued pursuant to stock option exercises210,318 — 2,198 — 2,198 
Stock based compensation expense— — 41,553 — 41,553 
Shares issued for PIPE, net of issuance costs1,515,152 — 197,659 — 197,659 
Shares issued for acquisition (1)
2,424,243 — 172,000 — 172,000 
Vested restricted stock units converted to common stock55,782 — — — — 
Balances at September 30, 2022
11,558,453$1 $1,376,953 $(815,660)$561,294 
(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.
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GeneDx Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine months ended September 30,
20232022
Operating activities
Net loss
$(149,994)$(240,219)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
27,640 25,269 
Impairment loss
10,402  
Gain on sale of assets(2,954) 
Stock-based compensation expense
586 41,553 
Gain on debt forgiveness(2,750) 
Change in fair value of warrant and earn-out contingent liabilities
(685)(54,350)
Deferred tax benefit(515)(49,176)
Provision for excess and obsolete inventory
3,634 732 
Third party payor reserve release(6,848) 
Non-cash lease expense
684 1,112 
Amortization of deferred debt issuance costs387 387 
Change in operating assets and liabilities:
Accounts receivable
10,726 5,491 
Inventory
682 (5,239)
Accounts payable and accrued expenses
(39,913)28,557 
Other assets and liabilities
(1,371)(8,618)
Net cash used in operating activities
(150,289)(254,501)
Investing activities
Consideration on escrow paid for GeneDx acquisition(12,144)(127,004)
Purchases of property and equipment
(2,874)(4,990)
Proceeds from sale of assets3,887  
Purchases of marketable securities(43,935) 
Proceeds from sales of marketable securities16,665  
Development of internal-use software assets
(461)(6,494)
Net cash used in investing activities
(38,862)(138,488)
Financing activities
Proceeds from PIPE issuance, net of issuance costs 197,659 
Proceeds from offerings, net of issuance costs143,002  
Finance lease payoff and principal payments(2,133)(2,632)
Long-term debt principal payments(2,000) 
Exercise of stock options266 2,223 
Net cash provided by financing activities
139,135 197,250 
Net decrease in cash, cash equivalents and restricted cash
(50,016)(195,739)
Cash, cash equivalents and restricted cash, at beginning of period
138,303 401,469 
Cash, cash equivalents and restricted cash, at end of period
$88,287 $205,730 
Supplemental disclosures of cash flow information
Cash paid for interest
$1,116 $1,795 
Cash paid for taxes
$1,178 $487 
Stock consideration paid for purchase of business$ $172,000 
Purchases of property and equipment in accounts payable and accrued expenses
$1,220 $1,546 
Software development costs in accounts payable and accrued expenses
$ $448 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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GeneDx Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization and Description of Business
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 January 9, 2023, Sema4 Holdings Corp. changed its name to GeneDx Holdings Corp. 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:
“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”); and
“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; and
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).
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. 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.
The Company will remain an emerging growth company until the earliest of (1) December 31, 2025, (2) the last day of the fiscal year in which total annual gross revenue are at least $1.235 billion, (3) the last day of the fiscal year in which the Company is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our Class A common stock held by non-affiliates exceeded $700.0 million at the last business day of the second fiscal quarter of such year or (4) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the condensed consolidated financial
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statements reflect all normal recurring adjustments considered necessary for a fair statement of the financial position and the results of operations of the Company for the interim periods presented. Interim results are not necessarily indicative of the results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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 condensed 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.
Certain reclassifications have been made to the prior year condensed consolidated financial statements in order to conform to the current year’s presentation.
Use of Estimates
The preparation of our condensed 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 condensed 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”). Actual results could differ materially from those estimates, judgments and assumptions.
Summary of Significant Accounting Policies
There have been no material changes to the Company’s critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the Company’s audited consolidated financial statements and notes thereto included within its Annual Report on Form 10-K for the year ended December 31, 2022, other than the Company’s policy for accounting for available-for-sale marketable securities discussed below.
Marketable Securities
The Company’s investments in marketable securities are classified as available-for-sale and are reported at fair value. These 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 classified in accumulated other comprehensive gain (loss) within stockholders’ equity. The unrealized gain at September 30, 2023 was nominal. 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. 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.
Concentration of Credit Risk and Other Risks and Uncertainties
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 the concentration of credit risk. Significant patients and payors are those that represent more than 10% of the Company’s total revenues for the period or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable at September 30, 2023 and December 31, 2022 were primarily from managed care insurance companies, institutional billed accounts, and data arrangements. There was no individual patient or client that accounted for 10% or more of the Company’s revenue or accounts receivable for any of the periods presented. The Company does not require collateral as a means to mitigate patient or payor credit risk.
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For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:
RevenueAccounts Receivable
Three months ended September 30,Nine months ended September 30,

September 30,

December 31,
202320222023202220232022
Payor B (1)
14%27%17%29%*14%
Payor E17%15%26%12%12%14%
* less than 10%
(1)This payor includes multiple individual plans and the Company calculates and presents the aggregated value from all plans, which is consistent with the Company’s portfolio approach used in accounting for diagnostic test revenue.
The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 4% and 16% of purchases for the three months ended September 30, 2023 and 2022, respectively, and 11% and 13% for the nine months ended September 30, 2023 and 2022, respectively. A separate supplier accounted for approximately 8% and 5% of purchases for the three months ended September 30, 2023 and 2022, respectively and 10% and 2% for the nine months ended September 30, 2023 and 2022. 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.
Warrant Liability (Legacy Sema4)
At the consummation of the Business Combination 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. At September 30, 2023, there were 666,515 warrants to purchase shares of Class A common stock outstanding, including 448,442 public warrants and 218,073 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; and
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 Class A 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; and
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
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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. 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 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 at each subsequent quarterly period end date while the warrants are outstanding.
Contingent Consideration (Legacy GeneDx)
In connection with the Acquisition, up to $150 million of contingent payments will be 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 (as defined below) (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 $160.38 per share for a maximum of 935,280 shares.
Subject to the terms and conditions of the Acquisition Merger Agreement, (a) the first Milestone Payment was paid out in full through the issuance of 701,460 shares valued at $112.5 million in April 2023 as the revenue of the Legacy GeneDx group for the fiscal year 2022 exceeded $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 second Milestone Payment will become payable in respect of the second milestone period if the Legacy GeneDx group achieves 90% of the Milestone Event revenue target for such period, which amount will scale on a linear basis up to 100% of the second Milestone Payment at 100% of the revenue target. The first Milestone Payment resulted in the issuance of 701,460 shares of the Company’s Class A common stock on April 14, 2023. If the Company elects to pay in shares of Class A common stock, the second Milestone Payment would require the issuance of up to 233,820 shares of the Company’s Class A common stock. The fair value of the second Milestone Payment was estimated using a Monte Carlo simulation valuation model and was determined to be zero at September 30, 2023.
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. 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. 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 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, in the condensed consolidated statements of operations and comprehensive loss.
The fair value of the earn-out shares issued to the Legacy Sema4 stockholders at September 30, 2023 was estimated using a Monte Carlo simulation valuation model and was determined to be zero.
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. Therefore, the Company accounted for this arrangement in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-based compensation expense was recognized over the
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longer of the expected achievement period for the market-based requirement and 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. The Company accounted for the re-allocations to Legacy Sema4 option holders as new grants. The Company 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 nine months ended September 30, 2023. No forfeitures were recorded for the three and nine months ended September 30, 2023 and the three and nine months ended September 30, 2022.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new credit losses standard changes the impairment model for most financial assets and certain other instruments. 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. The Company adopted ASU 2016-13 effective January 1, 2023 and the adoption did not have material impact in the condensed consolidated statements of operations and comprehensive loss.
Recently Issued Accounting Pronouncements Not Yet Adopted
The Company has reviewed the recently issued Accounting Standards Update accounting pronouncements and does not believe that the adoption of any such pronouncements will have a material impact on its financial statements or related disclosures.
3. Business Combinations
Legacy GeneDx Acquisition
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 will be payable if certain revenue-based milestones are achieved for the fiscal year ending December 31, 2023. During the nine months ended September 30, 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. 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 $200 million (the “Acquisition PIPE Investment”).
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The following table presents the net purchase price and the fair values of the assets and liabilities of Legacy GeneDx (in thousands):
Cash and cash equivalents$ 
Accounts receivables21,651 
Inventory6,210 
Prepaid expenses4,671 
Other current assets320 
Property and equipment29,509 
Other non-current assets6,464 
Trade names and trademarks50,000 
Developed technology48,000 
Customer relationships98,000 
Accounts payable and accrued expenses(12,862)
Other current liabilities(15,781)
Deferred tax liabilities(51,779)
Long-term lease liabilities(5,798)
Fair value of net assets acquired178,605 
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 9, “Goodwill and Intangible Assets” for more detail.
The amounts above represent the fair value estimates at the time of the Acquisition and adjustments during the measurement period which is complete.
4. Revenue Recognition
Disaggregated revenue
The following table summarizes the Company’s disaggregated revenue by payor category (in thousands):
Three months ended September 30,
20232022
GeneDxLegacy Sema4ConsolidatedConsolidated
Diagnostic test revenue:
Patients with third-party insurance$32,825 $2,950 $35,775 $64,391 
Institutional customers15,720  15,720 15,244 
Self-pay patients457 3 460 1,855 
Total diagnostic test revenue49,002 2,953 51,955 81,490 
Other revenue1,348  1,348 1,744 
Total$50,350 $2,953 $53,303 $83,234 
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Nine months ended September 30,
20232022
GeneDxLegacy Sema4ConsolidatedConsolidated
Diagnostic test revenue:
Patients with third-party insurance$82,801 $8,876 $91,677 $133,251 
Institutional customers47,528  47,528 30,395 
Self-pay patients1,232 3 1,235 4,343 
Total diagnostic test revenue131,561 8,879 140,440 167,989 
Other revenue4,708  4,708 5,355 
Total$136,269 $8,879 $145,148 $173,344 
Reassessment of variable consideration
Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates estimated variable consideration quarterly.
For the three months ended September 30, 2023, the quarterly change in estimate resulted in a net $3.0 million which included the partial release of a third party payor reserve established in prior periods. During the nine months ended September 30, 2022, the quarterly change in estimate resulted in a net $30.1 million decrease to revenue for tests in which the performance obligation of delivering the test results was met in prior periods, with $24.2 million of this decrease relating to fiscal years ended December 31, 2021 and prior. The changes in estimate are a result of 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 settlements with third party payors.
Certain payor matters
As noted above, third-party payors, including government programs, may decide to deny payment or seek to recoup payments for tests performed by the Company that they contend were improperly billed, not medically necessary or against their coverage determinations, or for which they believe they have otherwise overpaid, including as a result of their own error. As a result, the Company may be required to refund payments already received, and the Company’s revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance, and changes by government agencies and payors in interpretations, requirements, policies and/or “conditions of participation” in various programs. The Company processes requests for recoupment from third-party payors in the ordinary course of its business, and it is likely that the Company will continue to do so in the future. If a third-party payor denies payment for testing or recoups money from the Company in a later period, reimbursement and the associated recognition of revenue for the Company’s testing services could decline.
As an integral part of the Company’s billing compliance program, in the third quarter of 2022, 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 at Legacy Sema4. From time to time, the Company may have an obligation to reimburse Medicare, Medicaid, and third-party payors for overpayments regardless of fault. Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing services. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor, the Company’s historical settlement activity (if any), and the Company’s assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved. Estimated settlements are adjusted in future periods as such adjustments become known (that is, if new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.
Throughout 2022, the Company was engaged in discussions with one of its third-party payors (the “Payor”) regarding certain overpayments 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 to Legacy Sema4 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 made on or before June 30, 2026. The first installment payment of $15.0 million was made on December
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31, 2022 and the next installment of $5.0 million is due in December 2023. In consideration for these payments, the Payor has agreed to provide releases of the Disputed Claims, which releases became effective on or about 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. At September 30, 2023, the Company continued to carry liabilities that were initially established at June 30, 2022, as a result of this matter and other potential settlements with payors, as adjusted at September 30, 2023, based on the current facts and an evaluation of anticipated results that the Company believes reasonable for all potential recoupments for all third-party payors combined. At September 30, 2023 and December 31, 2022, $32.2 million and $39.0 million of liabilities were recorded in accounts payable and accrued expenses and other liabilities, respectively. See Note 15, “Supplemental Financial Information”. The Company uses estimates, judgments, and assumptions to assess whether it is probable that a significant reversal in the amount of cumulative revenue may occur in future periods, based upon information presently available. These estimates are subject to change. In addition, as discussed above, the Company has made certain adjustments to its estimated variable consideration as result of this matter and other potential settlements with payors.
Remaining performance obligations
For certain long-term collaboration service agreements with original expected durations of more than one year, the Company’s obligations pursuant to such agreement represents partially unsatisfied performance obligations at September 30, 2023. The revenues remaining under the agreements are estimated to be approximately $3.9 million. The Company expects to recognize the majority of this revenue over approximately the next 2 years.
Costs to fulfill contracts
Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to Icahn School of Medicine at Mount Sinai (“ISMMS”). Amounts prepaid are expensed in line with the pattern of revenue recognition. Prepayment of amounts prior to the costs being incurred are recognized in the condensed consolidated balance sheets as current or non-current based upon forecasted performance.
At September 30, 2023 and December 31, 2022, the Company had outstanding deferred costs to fulfill contracts of less than $0.4 million and $0.3 million, respectively, which were recorded as prepaid expenses and other current assets in the condensed consolidated balance sheets. The Company expect to make additional payments to ISMMS under an amended subcontract agreement with ISMMS.
Amortization of deferred costs was $0.4 million and $0.5 million for the three months ended and $1.5 million and $1.5 million for the nine months ended September 30, 2023 and 2022, respectively. The amortization costs were recorded in the cost of services in the condensed consolidated statements of operations and comprehensive loss.
5. Fair Value Measurements
Financial assets and liabilities are recorded at fair value. 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 our Annual Report on Form 10-K for the year ended December 31, 2022.
The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis (in thousands):
September 30, 2023
December 31, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial Liabilities:
Public warrant liability
$444 $444 $ $ $280 $280 $ $ 
Private warrant liability
216  216  138  138  
Contingent consideration based on milestone achievement    7,619   7,619 
Total financial liabilities
$660 $444 $216 $ $8,037 $280 $138 $7,619 
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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 September 30, 2023 with $0.2 million of recorded in other current liabilities on the consolidated balance sheets at September 30, 2023. The fair value was $4.8 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.
Of the $114.3 million cash, cash equivalents, and marketable securities presented in the condensed consolidated balance sheets at September 30, 2023, $80.1 million was in money market funds, $6.1 million in U.S. treasury bonds and $21.1 million in corporate and municipal bonds, all of which are classified within Level 1 of the fair value hierarchy as the fair value was based on quoted prices in active markets. The $26.9 million marketable securities presented in the condensed consolidated balance sheet at September 30, 2023 have maturity dates ranging from 2024 through 2026. All of these marketable securities are classified as current assets as these investments are intended to be available to the Company for use in funding current operations. Of the $123.9 million cash and cash equivalents presented on the consolidated balance sheets at December 31, 2022, $16.9 million was in money market funds and classified within Level 1 of the fair value hierarchy as the fair value was based on quoted prices in active markets.
The Company’s outstanding warrants include publicly traded warrants (the “Public Warrants”) which were originally issued in CMLS’s initial public offering (“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 non-operating income (expenses), net in the condensed consolidated statements of operations and comprehensive loss at each reporting date. At September 30, 2023, the Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets. The Private Warrants are classified within Level 2 of the fair value hierarchy as management determined the fair value of each Private Warrant is the same as that of a Public Warrant because the terms are substantially the same. A loss of $0.4 million and $0.2 million was recorded for the three and nine months ended September 30, 2023 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 remeasurement performed at the period end date.
The earn-out contingent liabilities include the Company’s contingent obligation to issue earn-out shares for Legacy Sema4 stockholders (which obligation expired in July 2023) (“Earn-out Shares”) as well as the Company’s obligation to pay out the first Milestone Payment of $112.5 million to OKPO and the contingent obligation to make an additional second Milestone Payment of up to $37.5 million to OPKO if a certain revenue-based milestone is achieved for the fiscal year ended December 31, 2023.
The fair value of the Earn-out Shares was determined based on a Monte Carlo simulation valuation model. At September 30, 2023 and December 31, 2022, the fair value was zero. During the nine months ended September 30, 2022, the Company recognized a $10.2 million gain reflecting the change in fair market value of warrant and earn-out contingent liabilities in the condensed consolidated statements of operations and comprehensive loss.
The Milestone Payment contingent liability represents additional acquisition consideration to pay up to $37.5 million based on the achievement of Legacy GeneDx revenue-based milestone in fiscal year 2023 and the obligation to payout the first milestone of $112.5 million in shares of the Company’s Class A common stock. Subject to the terms and conditions of the Acquisition Merger Agreement, (a) the first Milestone Payment of $112.5 million became due and payable in full as Legacy GeneDx revenue exceeded $163 million for the fiscal year 2022 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; provided that 80% of the second Milestone Payment will become payable in respect of the second milestone period if the Legacy GeneDx group achieves 90% of the Milestone Event revenue target for such period, which amount will scale on a linear basis up to 100% of the second Milestone Payment at 100% of the revenue target. The first Milestone Payment resulted in the issuance of 701,460 shares of the Company’s Class A common stock on April 14, 2023. The second 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 $160.38 per share), with such mix to be determined at the Company’s sole discretion.
The Company determined and recorded the fair value of the Milestone Payments as zero at September 30, 2023. For the three and nine months ended September 30, 2023, a gain of $1.0 million and a gain of $0.9 million was recorded in the
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change in fair market value of warrant and earn-out contingent liabilities, respectively, in the condensed consolidated statements of operations and comprehensive loss based on re-measurement performed at the period end date. The fair value of the second milestone was determined based on a Monte Carlo simulation valuation model and the key assumptions include revenue projections, revenue volatility of 18%. The fair value of the first milestone was determined based on the Company’s expectation to settle the liability in shares and share price of $5.96 per share.
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.
6. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
September 30, 2023December 31, 2022
Laboratory equipment$38,126 $41,255 
Equipment under finance leases
15,328 21,384 
Leasehold improvements
32,269 35,561 
Capitalized software
32,171 32,171 
Building under finance lease
4,530 6,276 
Construction in-progress
4,601 3,386 
Computer equipment
9,170 9,177 
Furniture, fixtures and other equipment
3,529 3,777 
Total property and equipment
139,724 152,987 
Less: accumulated depreciation and amortization
(103,978)(101,460)
Property and equipment, net
$35,746 $51,527 
For the three months ended September 30, 2023 and 2022, depreciation and amortization expense was $5.2 million and $7.0 million, respectively. For the nine months ended September 30, 2023 and 2022, depreciation and amortization expense was $17.1 million and $19.4 million, respectively. This included software amortization expense of $0.2 million and $1.7 million for the three months ended and $5.9 million and $5.0 million for the nine months ended September 30, 2023 and 2022, respectively. For intangible amortization, see Note 9, “Goodwill and Intangible Assets”.
For the nine months ended September 30, 2023, the Company recorded a $3.4 million charge to accelerate the amortization for certain capitalized software projects associated with Legacy Sema4 that are not expected to be utilized.
For the nine months ended September 30, 2023, the Company recorded a $3.0 million gain on sale of assets during the period associated with the closure of Legacy Sema4 facilities.
In March 2023, the Company entered into an agreement with ISMMS to use its commercially reasonable efforts to exercise the early termination option existing in the lease agreement between ISMMS and the lessor. This triggered lease modification accounting to shorten the total lease term, from a total of 23 years remaining to an estimated 13 years remaining, as the Company intends to exercise this option. The Company is required to make a payment of $8.4 million as an early termination fee if it chooses to exercise this option. This modification resulted in an increase in the operating lease liability by $2.0 million and an increase in the finance lease liability by $2.6 million, respectively, due to reassessment and reapplication of the incremental borrowing rate at the lease modification date.
During the third quarter of 2023, the Company identified additional indicators of impairment related to the ISMMS sublease agreements. As a result, the Company recorded an $8.3 million non-cash impairment charge in its condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2023, of which $4.8 million was allocated to the right-of-use asset associated with the sublease. For the nine months ended September 30, 2023, the Company recorded a $9.9 million non-cash impairment charge in its condensed consolidated statements of operations and comprehensive loss, of which $5.6 million was allocated to the right-of-use asset associated with the sublease, which included indicators of impairment related to the ISMMS sublease agreements during the first quarter of 2023.
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Depreciation and amortization expense is included within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cost of services$1,613 $5,203 $3,435 $11,335 
Research and development
283 1,973 5,791 5,811 
Selling and marketing
 1 2 3 
General and administrative
3,270 (182)7,894 2,276 
Total depreciation and amortization expenses
$5,166 $6,995 $17,122 $19,425 
7. Related Party Transactions
Related party revenues
Total related party revenues are included within diagnostic test revenue and other revenue in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Diagnostic test revenue$813 $809 $2,457 $1,392 
Other revenue
 149  296 
Total related party revenues
$813 $958 $2,457 $1,688 
Related party revenues primarily include diagnostic testing revenues generated by GeneDx from BioReference Laboratories, Inc., which is a subsidiary of OPKO. The prices charged represent market rates. Revenue recorded from this contract was $0.7 million and $0.6 million for the three months ended and $2.1 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively.
Related party costs
Total related party costs are included within cost of services and other, net in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cost of services$1,305 $1,103 $3,769 $3,507 
Other, net
1,782 1,697 4,581 4,712 
Total related party costs
$3,087 $2,800 $8,350 $8,219 
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 at December 31, 2019. Following the transaction, the Company commenced operations and began providing the services and performing research.
Expenses recognized pursuant to service arrangements with ISMMS, including certain sub-lease arrangements the Company has through ISMMS, totaled $2.1 million and $2.0 million for the three months ended and $5.4 million and $6.2 million for the nine months ended September 30, 2023 and 2022, respectively. These amounts include certain lease expenses the Company incurs and pay to ISMMS for certain sub-lease arrangements. They are included in either cost of services or related party expenses in the condensed 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 $3.8 million and $2.4 million at September 30, 2023 and December 31, 2022, respectively, these amounts include unpaid lease payments the Company accrued for. The payments to be made to ISMMS and are included within due to related parties on the Company’s condensed consolidated balance sheets.
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Additionally, the Company has purchased $2.2 million of diagnostic testing kits and materials and $0.6 million and $1.4 million was recorded in cost of services for the three and nine months ended September 30, 2023, 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 $0.1 million and $0.4 million at September 30, 2023 and December 31, 2022, respectively.
Legacy GeneDx and OPKO entered into a Transition Services Agreement dated at April 29, 2022 (the “OPKO TSA”) pursuant to which OPKO agreed to provide, at cost, certain services in support of the Acquisition of the Legacy 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 recorded $0.3 million and $0.5 million of expense for the three months ended and $1.1 million and $0.8 million for the nine months ended September 30, 2023 and 2022, respectively, related to the agreement. At September 30, 2023 there were less than $0.1 million of unpaid costs, and at December 31, 2022 $0.4 million was unpaid and included in due to related parties in condensed consolidated balance sheets.
During the nine months ended September 30, 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 at December 31, 2022. The amount was presented as prepaid expenses and other current assets in condensed consolidated balance sheets at December 31, 2022.
8. Long-Term Debt
At September 30, 2023, long-term debt matures as follows (in thousands):
2023 (remainder of year)
$ 
2024497 
20251,211 
20261,234 
20271,260 
Thereafter2,048 
Total debt
6,250 
Less: current portion of long-term debt
(198)
Total long-term debt, net of current maturities
$6,052 
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 million in forgiveness) and a final phase job milestone (eligible for $1 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 $2.75 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 condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2023. 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%. The other terms of the 2022 Amended DECD Loan Agreement remained the same.
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The outstanding loan balance from the 2022 Amended DECD Loan Agreement was $6.3 million at September 30, 2023.
Entry into Perceptive Term Loan Facility
Subsequent to September 30, 2023, on October 27, 2023, we 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 $75.0 million (the “Perceptive Term Loan Facility”). An initial tranche of $50.0 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 $25.0 million (the “Tranche B Loan,” and together with the Tranche A Loan, the “Term Loans”), which will be accessible by us so long as we satisfy 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 (the “Warrant”) to purchase up to 1,200,000 shares (the “Warrant 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 Warrant will be exercisable, in whole or in part, until the 10th anniversary of the applicable vesting date.
Termination of Loan and Security 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 $125.0 million, including a sublimit of $20.0 million for Letters of Credit (as such terms are defined in the SVB Agreement). No amounts had been drawn under the SVB Agreement at September 30, 2023.
Subsequent to September 30, 2023, in connection with the entry into the Credit Agreement, the SVB Agreement, dated as of November 15, 2021 (“SVB Loan and Security Agreement”), with SVB was terminated, effective as of the Closing Date, and SVB’s security interest in the Company’s assets and property was released.
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9. Goodwill and Intangible Assets
As discussed in Note 3, “Business Combinations”, upon the Acquisition of Legacy 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 the Company’s preliminary purchase accounting estimates. The Company is complete with measurement period adjustments at April 29, 2023.
The changes in the carrying amounts of goodwill were as follows (in thousands):
Balance at December 31, 2022
$ 
Additions 
Measurement period adjustments478 
Impairment charges(478)
Balance at September 30, 2023
$ 
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 at September 30, 2023 (in thousands):
Gross Carrying AmountAccumulated AmortizationNet Carrying Value
Tradenames and trademarks$50,000 $4,427 $45,573 
Developed technology48,000 8,500 39,500 
Customer relationships98,000 6,942 91,058 
$196,000 $19,869 $176,131 
Amortization expense for tradenames and trademarks of $0.7 million and $0.8 million was recorded in general and administrative for the three months ended and $2.3 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively, within the condensed consolidated statements of operations and comprehensive loss. Amortization expense for developed technology was $1.5 million and $1.5 million for the three months ended September 30, 2023 and 2022, respectively, and $4.5 million and $2.5 million for the nine months ended September 30, 2023 and 2022, respectively, and in each case, was recorded in general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss. Amortization expense for customer relationships of $1.3 million and $1.2 million for the three months ended and $3.7 million and $2.0 million for the nine months ended September 30, 2023 and 2022, respectively was recorded in selling and marketing within the condensed consolidated statements of operations and comprehensive loss.
10. Litigation and Contingencies
The Company is a party to various actions and claims arising in the normal course of business. The Company does not believe that the outcome of these matters will have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows. However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s condensed consolidated financial condition or results of operations.
Except as described below, the Company was not a party to any material legal proceedings at September 30, 2023, nor is it a party to any material legal proceedings at the date of issuance of these condensed consolidated financial statements; however, we may become involved in various claims and legal actions arising in the ordinary course of business.
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. Following the appointment of a lead plaintiff, an amended complaint was filed on January 30, 2023. As amended, the complaint purports to bring suit on behalf of stockholders who purchased the Company’s publicly traded securities between March 14, 2022 and August 15, 2022. 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 Exchange Act, and seeks unspecified compensatory damages, fees and costs. The defendants moved to dismiss the amended complaint on August 21, 2023. That motion is pending. The Company believes the allegations and claims made in the complaint are without merit.
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On February 7, 2023, a stockholder commenced a lawsuit in the Delaware Court of Chancery. The suit is brought as a class action on behalf of stockholders of CMLS who did not redeem their shares in connection with the Business Combination. The suit names as defendants all directors of CMLS at the time of the transaction, including directors who continue to serve on the Company’s board of directors, as well as CMLS Holdings LLC (the “Former Sponsor”). 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 the Former Sponsor 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. After defendants moved to dismiss the case, plaintiff filed an amended complaint on July 6, 2023, revising certain allegations and adding third parties as defendants. The defendants answered the amended complaint on September 15, 2023. The Company believes the allegations and claims made in the amended complaint are without merit. The Company is subject to certain claims for advancement and indemnification by the individual defendants in this proceeding.
11. 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 at the closing date of the Business Combination 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.
On July 22, 2021, in connection with the Business Combination, the 2021 Plan became effective and 991,970 authorized shares of Class A common stock were reserved for issuance thereunder. The 2021 Plan is 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 the 2021 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.
On April 14, 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 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.
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 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 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 immediately preceding December 31. The Company did not make any grants of purchase rights under the 2021 ESPP during the three and nine months ended September 30, 2023 and September 30, 2022. A total of 336,816 shares of Class A common stock have been reserved for future issuance under the 2021 ESPP.
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
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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 condensed consolidated financial statements at July 22, 2021.
All stock options granted under the 2021 Plan are accounted for as equity awards.
The following summarizes the stock option activity during the nine months ended September 30, 2023:

Stock Options Outstanding
Weighted Average Exercise Price
Balance at December 31, 2022
798,873$49.83 
Options granted44,080 $7.89 
Options exercised(50,444)$5.05 
Options forfeited or canceled(169,279)$78.82 
Balance at September 30, 2023
623,230 $11.00 
Options exercisable at September 30, 2023
769,312 $18.03 
At September 30, 2023, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $4.4 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.5 years.
The fair value of the stock option awards for the nine months ended September 30, 2023 were estimated using the Black-Scholes option pricing model with the following assumptions:
Nine months ended September 30, 2023
Expected volatility
105.00%
Expected term (in years)
5.5
Risk-free interest rate
4.03%
Dividend yield
Fair value of Class A common stock
$6.35
The Company estimated 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 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. The Company did not rely on the historical holding periods of the Company’s options due to the limited availability of exercise data. The Company 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 (RSUs)
The Company has issued time-based RSUs to employees under the 2021 Plan and the Equity Inducement Plan. The RSUs automatically convert to shares of Class A common stock on a one-for-one basis as the awards vest. The Company measures the value of RSUs at fair value based on the closing price of the underlying Class A common stock on the grant date. The RSUs granted generally vest over a four year vesting period from the grant date, however, certain grants include
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vesting term that begins vesting 12 months from the grant date. The following table summarizes the activity related to the Company's time-based RSUs:

Restricted Stock Units Outstanding
Weighted Average Grant Date Fair Value Per Unit
Balance at December 31, 2022
855,061$77.88 
Restricted Stock Units granted1,601,270$24.38 
Restricted Stock Units vested(328,242)$63.20 
Restricted Stock Units forfeited(430,308)$70.39 
Balance at September 30, 2023
1,697,781$18.14 
Additionally, the Company issued 18,794 RSUs subject to both service and performance based vesting conditions to the Executive Chairman of the Company. The grant date was established during the first quarter period and vesting of the RSUs will be based on the achievement of performance goals established for calendar year 2023.
Earn-out RSUs
The grant date fair value determined for Triggering Event I, II and III was $60.06, $45.87 and $31.02 per unit, respectively. Any re-allocated RSUs due to the Legacy Sema4 option holders’ forfeiture activities during the nine month period ended September 30, 2023 were accounted for as new grants and the fair value determined for Triggering Event I, II and III was $0.00, $0.00 and $0.00 per unit, respectively. Based on the grant date fair value, the Company recorded a reversal of stock-based compensation of $0.8 million for the nine months ended September 30, 2023 due to the Legacy Sema4 option holders’ forfeiture activities. The Company recognized the stock-compensation cost over the longer of the derived service period or service period. The earn-out RSUs expired in July 2023.
Stock Appreciation Rights (SAR) Activity
The Company historically granted SARs to one employee and one consultant with an 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 at September 30, 2023.
The Company recorded a reversal of stock-based compensation of $4.7 million and $17.3 million during the three months ended September 30, 2023 and 2022, respectively, and $20.3 million and $27.0 million during the nine months ended September 30, 2023 and 2022, respectively, due to forfeiture activities upon employee terminations. Stock-based compensation expense for all awards granted and outstanding is included within the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cost of services$75 $1,477 $(1,340)$4,668 
Research and development
(533)(8,164)(265)2,692 
Selling and marketing
(115)2,050 (195)5,714 
General and administrative
1,004 5,910 2,386 28,479 
Total stock-based compensation expense
$431 $1,273 $586 $41,553 
12. Income Taxes
Income tax benefit for the nine months ended September 30, 2023 and 2022 was $0.5 million and $49.1 million, respectively. Income taxes for these periods are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events should they occur. The Company’s estimated annual effective tax rate was 0.35% and 0.05% for the nine months ended September 30, 2023 and 2022, respectively.
The difference between the Company’s effective tax rates in 2023 and 2022 compared to the U.S. statutory tax rate of 21% is primarily due to changes in valuation allowances associated with the Company’s assessment of the likelihood of the recoverability of deferred tax assets. The Company currently has valuation allowances against a significant portion of its deferred tax assets primarily related to its net operating loss carryforwards and tax credit carryforwards.
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13. Net loss per Share
Basic and diluted loss per share attributable to common stockholders was calculated as follows (amounts in thousands, except for share and per share amounts):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Numerator:
Net loss attributable to common stockholders
$(42,286)$(77,581)$(149,994)$(240,219)
Denominator:
Denominator for basic and diluted earnings per share-weighted-average common shares
25,788,747 11,538,308 23,777,327 9,741,250 
Basic and diluted loss income per share$(1.64)$(6.72)$(6.31)$(24.66)
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:
September 30,
20232022
Outstanding options and RSUs to purchase Class A common stock2,321,011 1,699,949 
Outstanding warrants
666,515 666,515 
Outstanding earn-out shares
 532,367 
Outstanding earn-out RSUs 44,044 
Total
2,987,526 2,942,875 
14. Restructuring Costs
The table below provides certain information concerning restructuring activity during the nine months ended September 30, 2023:
Reserve Balance at December 31, 2022
Charged to Costs and Expenses Payments and Other
Reserve Balance at September 30, 2023
Severance$4,770 $4,530 $(7,810)$1,490 
Others253 18 (271) 
Total $5,023 $4,548 $(8,081)$1,490 
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. During 2023, the Company has continued to realign the organization and reduced its overall workforce. The Company expects that all remaining cash severance payments will be complete in less than one year.
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The restructuring costs for the three and nine months ended September 30, 2023 and 2022 were as follows:
Three months ended September 30,Nine months ended September 30,
2023202220232022
Severance$2,191 $7,297 $4,530 $12,532 
Others
 1,695 18 6,022 
Total
$2,191 $8,992 $4,548 $18,554 
Cost Saving Initiatives
Subsequent to September 30, 2023, 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 amount to approximately $40 million in annual cost reduction.
15. Supplemental Financial Information
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
September 30, 2023December 31, 2022
Cash and cash equivalents$87,387 $123,933 
Restricted cash900 14,370 
Total$88,287 $138,303 
Restricted cash at December 31, 2022 included $12.1 million held in escrow in connection with the closing of the Acquisition which was released upon expiration of the one year escrow period in May 2023. Restricted cash at September 30, 2023 consisted of money market deposit accounts that secure an irrevocable standby letter of credit that serves as collateral for security deposit operating leases.
Restricted cash at September 30, 2022 included $0.9 million money market deposit accounts that secure an irrevocable standby letter of credit that serves as collateral for security deposit operating leases. Restricted cash as of September 30, 2022 also included $13.5 million escrow fund related to the closing of the Acquisition of GeneDx as mentioned above and was recorded in non-current assets on the condensed consolidated balance sheets.
Prepaid expenses and other current assets consisted of the following (in thousands):
September 30, 2023December 31, 2022
Prepaid expenses$10,737 $11,822 
Other current assets5,024 6,390 
Restricted cash 13,470 
Total$15,761 $31,682 
Other assets consisted of the following (in thousands):
September 30, 2023December 31, 2022
Other assets$5,159 $6,485 
Long-term restricted cash