The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The 2019 balance sheet has been updated to reflect an increase in goodwill and a reduction in accumulated deficit of $3.4 million related to the correction of an immaterial error recorded as part of the acquisition of Integrated Diagnostics, Inc. in 2018. The Company determined that the reduction in the preexisting valuation allowance resulting from the acquisition should have been reflected as an income benefit within the tax provision rather than as a reduction in goodwill. The correction of the immaterial error had no impact on our 2020 or 2019 results of operations.

Certain prior period amounts have been reclassified to conform to the current period presentation.

The chief operating decision maker for the Company is the Chief Executive Officer, who reviews financial information for purposes of allocating resources and assessing financial performance. The Company has a single operating segment focused on providing diagnostic testing services to customers. Substantially all of the Company’s revenue and all long-lived assets were derived or located in the United States for the years ended December 31, 2020 and 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates include: revenue recognition; the useful lives of property and equipment; the recoverability of long-lived assets; the estimation of the fair value of intangible assets; the valuation of contingent consideration related to a business combination; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recognized revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.

The Company generates revenues from (i) diagnostic tests and (ii) assay development and testing services (services revenue).

Diagnostic test revenues consist of blood-based lung tests and COVID-19 tests, which are recognized in the amount expected to be received in exchange for diagnostic tests when the diagnostic tests are delivered. The Company determines the transaction price related to its blood-based lung diagnostic test contracts using a portfolio approach by considering the nature of the payer and historical price concessions granted to groups of customers. The transaction price associated with COVID-19 testing arrangements are determined on the basis of the individual contract with each customer.

Services revenue consists of various types of tests or other scientific services for a purpose as defined by any individual customer, which are often larger biopharmaceutical companies, as defined by a written agreement between the Company and the customer. These services are generally completed upon the delivery of testing results, or achievement of contractual milestone(s) as defined in the customer agreements. Revenue for these services is recognized upon delivery of the completed test results, or upon completion of the contractual milestone(s).

The Company recognizes revenues related to blood-based lung diagnostic billings based on estimates of the amounts ultimately expected to be collected from customers on a portfolio approach as discussed above. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement. Variable consideration, if any, is estimated based on an analysis of historical experience and adjusted as better estimates become available. These estimates require significant judgment by management.

The Company also provides services to patients with whom the Company does not have contracts as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC 606). The Company recognizes revenue for these patients when contracts as defined in ASC 606 are established at the amount of consideration to which it expects to be entitled, or when the Company receives substantially all of the consideration subsequent to satisfaction and delivery of the performance obligations.

Deferred revenue consists of payments received for research, development, and testing services fees received prior to the completion of performance of these tests and services. As of December 31, 2020, deferred revenue also includes $2.8 million in a Medicare advance payment on testing services which can either be paid back or earned back starting 1 year from receipt.

The components of our cost of diagnostic tests and testing services consist of cost of materials, direct labor, including bonus, benefit and stock-based compensation, depreciation of laboratory equipment, rent costs, amortization of leasehold improvements and information technology costs associated with acquiring and processing test samples, including sample accessioning, test performance, quality control analyses, charges to collect and transport samples; curation of test results for physicians; and in some cases, license or royalty fees due to third parties.

Royalties for licensed technology are calculated as a percentage of revenues generated using the associated technology and recorded as expense at the time the related revenue is recognized. One-time royalty payments related to signing of license agreements or other milestones, such as issuance of new patents, are amortized to expense over the expected useful life of the patents. Costs associated with performing tests are expensed as the test is processed regardless of whether and when revenue is recognized with respect to that test.

Research and development expenses include external and internal costs incurred to develop our technology, collect clinical samples, and conduct clinical studies to develop and support our products. External costs consist primarily of payments to clinical trial sites, sample acquisition costs and laboratory supplies purchased in connection with the Company’s discovery and preclinical activities, process development and clinical development activities. Internal costs consist primarily of salaries and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs.

The Company estimates and accrues its expenses resulting from its obligations under contracts with vendors and consultants in connection with conducting research and development activities. The financial terms of these contracts vary from contract to contract and may result in payments that do not match the periods over which materials or services are provided under such contracts. The Company’s estimates depend on the timeliness and accuracy of the data provided by consultants and vendors regarding the status of each activity. The Company periodically evaluates the estimates to determine if adjustments are necessary or appropriate based on information received. Research and development costs are expensed as incurred.

Selling expenses consist primarily of costs associated with our sales organization, including our direct sales force and sales management, client services, marketing, and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers. These expenses consist primarily of salaries, commissions, bonuses, employee benefits, travel, and stock-based compensation, as well as marketing and educational activities and allocated overhead expenses.

Sales, marketing, general and administrative expenses also include costs for our marketing and sales organizations, and other functions including finance, legal, human resources, and information technology.

These expenses consist principally of salaries, bonuses, employee benefits, travel, and stock-based compensation, as well as professional services fees such as consulting, audit, tax and legal fees, and general corporate costs and allocated overhead expenses.

Substantially all of the Company’s cash and cash equivalents are deposited with one major financial institution in the United States. The Company continually monitors its positions with, and the credit quality of, the financial institution with which it holds cash. Periodically throughout the year, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

Several of the components of the Company's sample collection kit and test reagents, and certain test systems and related test kits are obtained from single-source suppliers. If these single-source suppliers fail to satisfy the Company's requirements on a timely basis, it could suffer delays in being able to deliver its diagnostic solutions, a possible loss of revenue, or incur higher costs, any of which could adversely affect its operating results.

The Company’s customers in excess of 10% of total revenue, and their related revenue as a percentage of total revenue were as follows:

	Year Ended
	December 31, 2020
The Big Ten Conference		30	%
Centura Healthcare		17	%
Percent of total revenue		47	%

One customer, Covance, exceeded 10% of total revenue during 2019, representing 21% of total revenue. In addition to the above table, we collect reimbursement on behalf of customers covered by Medicare, which accounted for 17% and 36% of the Company’s total revenue for the years ended December 31, 2020 and 2019, respectively. The Company is subject to credit risk from its accounts receivable related to services provided to its customers. The Company does not perform evaluations of customers' financial condition and does not require collateral. The Company’s third-party payors and other customers in excess of 10% of accounts receivable, and their related accounts receivable as a percentage of total accounts receivable were as follows:

	As of December 31,
	2020			2019
The Big Ten Conference		35	%		—	%
Centura Healthcare		24	%		—	%
Medicare		6	%		18	%
Covance Central Laboratory Services		2	%		43	%
Janssen Research and Development, LLC		5	%		12	%
Pfizer, Inc		4	%		10	%
Percent of total accounts receivable		76	%		83	%

Cash equivalents consist of short-term, highly-liquid instruments with an original maturity of three months or less from the date of purchase.

Restricted cash consists of deposits related to the Company’s corporate credit card and a letter of credit related to an operating lease agreement. As of December 31, 2020 and 2019, the Company had $0.2 million restricted cash, respectively, which was included in ‘Other current assets’ in the accompanying balance sheets.

Accounts receivable are stated at the amount management expects to collect from customers based on their outstanding invoices. Management reviews accounts receivable quarterly to determine if any receivable will potentially be uncollectible and to estimate the amount of allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value based on historical experience, customer creditworthiness, facts, and circumstances specific to outstanding balances, and payment terms. The Company’s allowance for doubtful accounts was $0.2 million as of December 31, 2020 and 2019.

Inventory consists primarily of material supplies, which are consumed in the performance of testing services and charged to cost of sales. Inventory is stated at cost and reported within ‘Other current assets’ in the balance sheet and were $3.2 million and $0.8 million as of December 31, 2020 and 2019, respectively.

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.

Long-lived assets to be held and used are evaluated for impairment when events or circumstances indicate the carrying value of a long-lived asset or asset group is less than the undiscounted cash flows from the use and eventual disposition over its remaining useful life. The Company assesses recoverability by comparing the sum or projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to it carrying value, and records an impairment loss if the carrying value is greater than the undiscounted future cash flows. There were no impairments for the years ended December 31, 2020 or 2019.

Intangible assets primarily consist of intangible assets acquired as part of business combinations, external costs associated with patent applications that are expected to be successful, and trademark costs. Finite-lived intangibles are stated at cost, net of accumulated amortization. The Company amortizes finite-lived intangible assets using the straight-line method over their estimated useful lives of 9 to 10 years, based on management's estimate of the period over which their economic benefits will be realized, product life and patent life. Trademarks are considered indefinite lived and are not amortized.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate a reduction to fair value below their carrying amounts. There were no impairments for the years ended December 31, 2020 or 2019.

Goodwill represents the excess of purchase price over amounts allocated to acquired assets and liabilities assumed in business combinations. The carrying value of goodwill is evaluated for impairment at least annually or more frequently when events or circumstances occur indicate a potential for impairment. The annual impairment test is performed on the last day of our fourth quarter. Prior to performing a quantitative evaluation, an assessment of qualitative factors may be performed to determine whether it is more likely than not that the fair value of the reporting unit exceeds its carrying value. In the event the Company determines that it is more likely than not the carrying value of our single reporting unit is higher than its estimated fair value, quantitative testing is performed comparing recorded values to estimated fair values. If impairment is present, the impairment loss is measured as the excess of the recorded goodwill over its implied fair value. There were no impairments for the years ended December 31, 2020 or 2019.

U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). We utilize a combination of market and income approaches to value our financial instruments. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. Fair value measurements are categorized within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value. The three levels of the hierarchy and the related inputs are as follows:

Level		Inputs
1		Unadjusted quoted prices in active markets for identical assets and liabilities.
2		Unadjusted quoted prices in active markets for similar assets and liabilities;
		Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or
		Inputs other than quoted prices that are observable for the asset or liability.
3		Unobservable inputs for the asset or liability.

The carrying amounts of certain financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

See Note 5 — Fair Value for further discussion related to estimated fair value measurements.

In connection with the purchase transaction with Integrated Diagnostics, Inc. (Indi), the Company recorded contingent consideration for amounts potentially payable to Indi’s shareholder pursuant to the terms of the asset purchase agreement. The fair value of contingent consideration is assessed at each balance sheet date and changes, if any, to the fair value are recognized as operating expenses within the statements of operations. The estimated fair value of the contingent consideration is based upon significant assumptions including the probability of successful achievement of product gross margin targets included in the acquisition agreement, the estimated timing of achievement of the product gross margin targets, and discount rates. The estimated fair value could materially differ from actual values or fair values determined using different assumptions.

Prior to the completion of the Company’s initial public offering in October 2020, certain warrants issued to purchase convertible preferred stock were classified as liabilities with changes in the estimated fair value of these liabilities recognized in our results of operations. Upon completion of the Company’s initial public offering in October 2020, the warrants were automatically converted to warrants to purchase common stock. Accordingly, the warrants were remeasured to an estimate of fair value and recognized in our results of operations and then reclassified to additional paid-in capital.

During 2020 and 2019, the Company issued convertible debt with terms that provided for a conversion rate to the convertible debtholders that was more favorable than the price that other investors would pay for common stock in certain situations, including the completion of an initial public offering. As a result, the convertible debt is a financial instrument that was bifurcated into two instruments, a debt obligation and a put option liability, which represented the estimated fair value of the favorable conversion rate. The estimated fair value of the put option liability was separated from the convertible debt at inception and reported as a liability and debt discount, and amortized to interest expense. As a result of our initial public offering, the convertible debt was automatically converted to common stock and the put option liability was remeasured to an estimate of fair value and recognized in our results of operations and then reclassified to additional paid-in capital.

The Company grants service condition and performance condition stock options. Stock options are granted with exercise prices equal to the fair market value of our common stock on the date of grant. The grant date fair value of each employee stock option is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the use of assumptions, including the expected term of the option, expected volatility of our stock price, expected dividend yield, and the risk-free interest rate, among others. These assumptions involve inherent uncertainties including market conditions and employee behavior that are generally outside of the Company’s control. Service condition stock options are expensed based on the grant date fair value of the awards using the straight-line method over the requisite service period, adjusted for forfeitures as they occur. Performance-condition stock options vest based on achievement of multiple weighted performance goals, certification of performance achievement by the Compensation Committee of the Board of Directors, and continued service. For performance-condition stock options, compensation expense is updated for our expected performance level against performance goals at the end of each reporting period, which involves judgment as to achievement of certain performance metrics.

Prior to our initial public offering in October 2020, the fair value of our common stock was determined by the Board of Directors in accordance with the methodologies outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation Practice Aid (Practice Aid). In doing so, the Board of Directors determined the best estimate of fair value of our common stock, exercising reasonable judgment and considering numerous objective and subjective factors, by first determining the enterprise value of our business, and then allocating the value among the various classes of our equity securities to derive a per share value of our common stock. Subsequent to the Company’s initial public offering, the fair value of the Company’s common stock is determined based on its traded market price.

The Company grants service-condition RSUs. As a result of our initial public offering, the grant date fair values of these RSUs are based on the closing market price of our common stock on the grant date. The service-condition RSUs vest based on continued service with compensation expense, net of forfeitures, recognized on a straight-line basis over the requisite service period.

See Note 14 — Share-Based Compensation for additional information related to share-based compensation.

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the period, if dilutive, using the treasury stock method. Potentially dilutive securities consisting of options to purchase common stock, warrants to purchase common stock, restricted stock units and shares subject to purchase under our employee stock purchase plan were excluded from the calculation of diluted net loss per common share because their effect would be anti-dilutive for all periods presented.

Until the Company’s initial public offering in October 2020, basic and diluted net loss attributable to common stockholders per share was calculated using the two-class method. The net loss was attributable entirely to common stockholders because the participating securities did not have a contractual obligation to share in the Company’s losses. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for all periods presented.