IMDX US Equity☆

Item 1A. Risk Factors 20

Item 1B. Unresolved Staff Comments 44

Item 2. Properties 44

Item 3. Legal Proceedings 44

Item 4. Mine Safety Disclosures 44

Part II. Other Information

Item 6. Selected Financial Data 45

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 61

Item 8. Financial Statements and Supplementary Data 62

Item 9A. Controls and Procedures 115

Item 9B. Other Information 115

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 115

Part III.

Item 10. Directors, Executive Officers, and Corporate Governance 116

Item 11. Executive Compensation 116

Item 14. Principal Accounting Fees and Services 116

Part IV.

Item 15. Exhibits, Financial Statement Schedules 117

PART

I

Certain

statements contained herein are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995,

including, but not limited to, statements pertaining to future financial and/or operating results, future growth in research, technology,

clinical development, and potential opportunities for Oncocyte, along with other statements about the future expectations, beliefs, goals,

plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical fact (including,

but not limited to statements that contain words such as “anticipate,” “believe,” “can,” “continue,”

“could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,”

“seek,” “should,” “strategy,” “target,” “will,” “would”) should

also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation,

risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory

approvals, need and ability to obtain future capital, and maintenance of intellectual property rights. Actual results may differ materially

from the results anticipated in these forward-looking statements and as such should be evaluated together with the many uncertainties

that affect the businesses of Oncocyte, particularly those mentioned in this Report under “Risk Factors”. Except as required

by law, Oncocyte undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date

of such statements.

The

forward-looking statements include, among other things, statements about:

● the timing and potential achievement of future milestones;

● our plans to pursue research and development of diagnostic test candidates;

● the potential commercialization of diagnostic tests currently in development;

● our intellectual property position;

● the impact of government laws and regulations;

● our competitive position.

Unless

the context otherwise requires, all references to “Oncocyte,” “we,” “us,” “our,” “the

Company” or similar words refer to Oncocyte Corporation, together with our consolidated subsidiaries.

The

description or discussion, in this Form 10-K, of any contract or agreement is a summary only and is qualified in all respects by reference

to the full text of the applicable contract or agreement.

DetermaIOTM,

DetermaCNITM, and VitaGraftTM are trademarks of Oncocyte Corporation, regardless of whether the “TM” symbol accompanies

the use of or reference to the applicable trademark in this Report.

INDUSTRY

AND MARKET DATA

This

Annual Report (“Report”) on Form 10-K contains market data and industry forecasts that were obtained from industry publications,

third party market research and publicly available information. These publications generally state that the information contained therein

has been obtained from sources believed to be reliable. While we believe that the information from these publications is reliable, we

have not independently verified such information.

This

Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and

other data about our industry. We obtained the industry and market data in this Report from our own research as well as from industry

and general publications, surveys and studies conducted by third parties, some of which may not be publicly available. Such data involves

a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we

operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and

estimates.

Item

1. Business

Oncocyte

Corporation (referred to in this report as “Oncocyte,” “we,” “us,” and “our”) is a partner

in the healthcare and life science field to researchers and physicians through Oncocyte’s development and acquisitions of proprietary

molecular technologies in the fields of oncology and transplantation. Through a series of acquisitions, the Company has built a portfolio

of differentiated content with utility in well-established clinical and research markets.

With

the increased adoption of precision medicine, healthcare providers are relying on advanced testing to identify patients who will benefit

from new, targeted treatments and therapies that are more effective and often have fewer side effects than chemotherapy and other traditional

treatments. In addition to identifying these individualized treatment options, researchers and healthcare providers are looking to new

technologies to rapidly identify when medical or therapeutic interventions are necessary. The Company is leveraging its experience in

oncology and transplant to develop and commercialize diagnostic testing at its licensed and accredited laboratory as well as focusing

on the development of distributable kitted formats of these technologies to place in the hands of researchers to study how these tests

can be further utilized in other types of cancers in their local communities. Commercialization of these RUO products are expected to

occur through a mix of direct sales, partnering and distribution agreements, and licensing.

We

have a CLIA certified/ CAP accredited laboratory and Pharma Services lab in Nashville, Tennessee, and a research and development lab

in Göttingen, Germany. We may sometimes refer to our technologies as “diagnostic tests.” Oncocyte’s laboratory

developed tests are intended to help support and inform physician decision-making but are not themselves diagnostic or prescriptive of

treatment decisions. They are critical to the Company’s ability to carry out its mission to improve patient outcomes by providing personalized

insights that inform critical decisions throughout the patient care journey. We believe that if clinicians are given the right information

and educational tools, they will make the right choices with their patients.

The

Company believes that the experience of its team with diverse technologies through its pharma services activities (acquired through Insight

Genetics), strong scientific integrity regarding evidence generation and innovation mentality, alongside the company’s flexibility

in operations and regulatory strategy, will drive its success, differentiate the Company, and are foundational to its future.

The

Company is expanding its role in the rapidly evolving healthcare market by strengthening its positions across its portfolio of capabilities,

growing strategic opportunities that drive new business, and differentiating its unique offerings, capabilities, and financial performance.

To do so, the Company is focusing on executing the following technology priorities, which have evolved to reflect its operations and

strategic vision:

1.

Strategic Review of Priorities and Capital / Resource Allocation

Spin-off

of DetermaRx

As

part of our initial strategy on the broader diagnostic continuum, we launched the DetermaRx test via our acquisition of in Razor Genomics,

Inc. (“Razor”) in September 2019. During February 2021 we acquired all outstanding shares of Razor common stock which made

Razor a wholly owned subsidiary of Oncocyte.

In

February 2023, we sold approximately 70% of the issued and outstanding equity interests of Razor to buyers who are experienced in the

development of early-stage lung cancer diagnostics and the provision of gene-expression-based prognostic tests. As part of the same transaction

in February 2023, we transferred to Razor all of the assets and liabilities related to DetermaRx. We continue to retain approximately

30% of the issued and outstanding equity interests of Razor on a fully-diluted basis. For more information regarding this transaction,

see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Razor Genomics

Purchase Agreement.”

DetermaRx

–

DetermaRx

is the first and only test to predict patient’s risk of cancer recurrence following surgery and response to chemotherapy in early-stage

lung cancer, and was our first test to be commercialized and reimbursed by Medicare. DetermaRx serves an unmet clinical need by helping

to guide treatment decisions given the 30-50% mortality rate in patients in the absence of timely chemotherapy treatment. Prior to our

transfer to Razor of all of the assets and liabilities related to DetermaRx, in February 2023, we commercialized and performed DetermaRx

tests at a CLIA certified laboratory in Irvine.

2.

Expand Biomarker Technologies to Drive Advancements for Patient Management – Oncology

The

field of oncology receives significant investment in research, development, and treatment, yet it remains an area of great unmet medical

need. For patients diagnosed with cancer, immunotherapies, particularly immune checkpoint inhibitors (ICI’s) targeting PD-1 and

PD-L1, help recruit the body’s immune system to attack the growing tumor. Current predictive biomarkers, including PD-L1 and Tumor

Mutational Burden or TMB, have shown only limited ability to accurately predict which patients will respond to an immunotherapy.

According

to published literature, more than half of PD-L1 positive patients do not respond to immune-checkpoint inhibitors, and 1 in 6 patients

who will respond are missed. ICIs are approved in 16 different tumor types, and it is estimated that 4.1 million patients are eligible

for these drugs worldwide. Pharmaceutical companies are continuing to invest heavily in this space, with hundreds of clinical trials

ongoing, and a number of drugs approved by the FDA, including pembrolizumab (Keytruda), nivolumab (Opdivo), and atezolizumab (Tecentriq).

Although

ICI treatments can be highly effective in the right patients, ICI’s can also have significant side effects which include exacerbation

of latent autoimmune disorders, there is a compelling medical and health economic unmet need for a biomarker that can (1) identify responder

populations missed by current biomarkers, (2) inform the use of ICI’s in combination with traditional cytotoxic chemotherapy, (3)

support patient stratification clinical trials for next generation immunomodulating therapies, and (4) provide a reliable measurement

of the tumor immune microenvironment for researchers in biopharma and academia.

DetermaIO

–

Through

the acquisition of Insight in January 2020, Oncocyte has expanded its oncology portfolio to include a novel gene expression-based test

called DetermaIO, which assesses the tumor microenvironment and identifies patients whose immune system is poised to benefit from immunotherapy.

DetermaIO measures the expression level of twenty-seven selected genes which are interpreted through the use of a proprietary algorithm

(patent pending) which computes a quantitative score (“IO Score”) that incorporates information from the immune inflammatory

infiltrates within and around the tumor combined with information from the wound response surrounding the tumor.

Oncocyte

successfully completed the CLIA Validation of DetermaIO in April 2020. DetermaIO has demonstrated in multiple clinical studies, including

a gold-standard randomized clinical trial (RCT) to provide incremental utility beyond established biomarkers used to identify patients

who will have a response to ICIs. The test has been successfully validated in four tumor types and across all four major ICIs (Keytruda,

Opdivo, Tecentriq and Imfinizi).

As

of Q4 2021, this test is currently available as part of a non-clinical early access program with leaders in the immuno-oncology field.

A kitted research product format of the underlying technology began proof-of-concept development in the first quarter of 2023.

DetermaIO

as a Clinically Validated Laboratory Test

DetermaIO

incorporates measurement of activity of genes expressed in immune effector cells, genes expressed in activated wound response cells,

and in some cases, genes expressed by the tumor itself. It is the combination of measurement of these three signals that we believe distinguishes

DetermaIO from most other approaches. An established threshold is used to classify patients as likely responder or likely non-responder

whose association with response to immune therapy has now been validated in several independent clinical studies in multiple different

cancer types.

Based

on our projected reimbursable pricing model, that the clinical use of DetermaIO will address a potential $3 billion total addressable

market (“TAM”) opportunity. The actual TAM for DetermaIO in medical practice will depend upon a variety of factors including

our ability to demonstrate the efficacy and clinical utility of the test, the extent of physician acceptance of the test, whether the

test will be approved for Medicare reimbursement, and, if reimbursement is approved, the actual approved reimbursement price.

DetermaIO’s

“IO Score” as a Biomarker for Further Research

The

early success of ICIs has stimulated deeper investigation into the mechanism by which tumors evade the immune system which has revealed

a complex interplay between tumor evasion strategies, the activity of immune effector cells and the tissue repair mechanisms that modulate

anti-tumor activity. The balance between signal from the tumor, signals from the inflammatory cells invading the tumor, and signals from

the wound response are now understood to account for resistance to ICI’s and are the target of second-generation therapeutic strategies

to overcome resistance.

We

believe DetermaIO is a direct measure the status of the tumor immune microenvironment and as such identifies those tumors poised to respond

to the addition of ICI’s. We believe that the integration of the signal from the “Hot” component of the tumor with

the “Cold” immune repressive features, and in some cases the exclusion of immune cells altogether, an immune desert, is superior

to measuring any of these physiologies alone.

There

are approximately 3,000 PD-1/PD-L1 targeted therapy clinical trials ongoing that are expected to recruit over 500,000 patients. This

represents a potential $1 billion market opportunity for immune-therapy clinical trial services to pharma companies developing ICIs which

could be supported by our laboratory in Nashville and/or through a future kitted RUO product.

DetermaCNI

–

Therapy

response monitoring is an emerging estimated $6B clinical opportunity in the US. Current standard of care, CT/MRI imaging, can struggle

to differentiate between progression and pseudo-progression, where a tumor will appear larger but is a side-effect of the immunotherapy

working. Minimally invasive blood-based monitoring technology, like DetermaCNI, provides physicians a secondary data point to assess

the effectiveness of therapy.

The

test converts cell-free DNA (cfDNA) next-generation sequencing (NGS) results into a proprietary genome-wide copy number instability (CNI)

score which can be used to monitor and guide ongoing treatment decisions. This test is differentiated from other monitoring tests in

two ways; (1) it does not require tumor tissue upfront which can be hard or impossible to obtain, and (2) the test measures copy number

variation instead of mutations identified in a patient’s diagnostic biopsy specimen.

3.

Expand Biomarker Technologies to Drive Advancements for Patient Management – Transplant

Clinicians

have limited options in assessing graft health post-transplantation. Traditional methods to assess transplant organ damage are imprecise,

invasive, and/or inadequate. Donor-derived cell-free DNA (dd-cfDNA) is one of the best investigated biomarkers, with an increasing number

of clinical validation studies published. Most of these studies focused on the percentage of the total cfDNA in the patients’ plasma

[dd-cfDNA(%)], however, changes in host cfDNA, which represents the denominator in the percentage calculations, over time adds an additional

source of possible uncertainty. If the denominator (concentration of total cfDNA in plasma) is not constant, or at least does not have

a narrow window under all conceivable clinical conditions, dd-cfDNA(%) values can change without a change in the value of the analyte.

To remove this variable and cause of uncertainty, Oncocyte has introduced VitaGraft, a test to measure not only the percentage of dd-cfDNA,

but also the absolute quantification dd-cfDNA, expressed as copies/mL.

VitaGraft

–

Through

the acquisition of Chronix Biomedical, we gained access to two patents in the field of the detection and quantification of donor derived

cell-free DNA (dd-cfDNA) in patients after organ transplantation. The dd-cfDNA biomarker has been shown to be a very valuable tool to

the traditional surveillance of graft health after transplantation and is currently an estimated $2B reimbursed market in the United

States under a blanket LCD.

VitaGraft

as a Clinically Validated Laboratory Test

In

October 2021, our patent filing for the use of digital PCR for the quantification of dd-cfDNA was issued by the USPTO. Oncocyte successfully

completed the technology transfer to our laboratory in Nashville in Q2 2022. The assay is analytically and clinically validated in three

major solid organ transplant types (kidney, liver and heart) by peer reviewed international publications. Oncocyte has submitted to MolDx

for reimbursement for its kidney and liver tests. These tests are currently available as part of a non-clinical early access program

with leaders in the transplantation field.

VitaGraft’s

dd-cfDNA Quantification as a Biomarker for Further Research

Several

questions remain unanswered in transplant graft management and offer interesting areas for research. Among these are, immunosuppression

dosing optimization, the utility of absolute quantification in long-term management, and the viability of xenograft and 3-D printed organs.

To support these and other areas of groundbreaking research, we have initiated the development an RUO product and are planning to have

a prototype completed by the end of Q1 2023. In parallel, we are actively seeking discussions with potential platform partners to join

our development efforts.

4.

Billing, Coverage, and Reimbursement for our Laboratory Tests

As

of December 31, 2022, DetermaRx was Oncocyte’s only commercialized clinical test. We are currently in the process of developing

and commercializing DetermaIO, VitaGraft and DetermaCNI.

In

August 2020, Noridian Healthcare Solutions, LLC, CMS’ Medicare Administrative Contractor (“MAC”) for laboratories located

in California, delivered a final coverage and pricing decision. This decision and coverage by other MACs is important because approximately

70% of patients for whom the test is indicated are eligible for Medicare coverage. However, in the absence of reimbursement by a health

insurance plan or Medicare, patients who would be candidates for the use of our tests may decline to use our tests, and physicians may

be reluctant to prescribe our tests, due to the cost of the test to the patients. Because of this patient cost factor, revenues from

any new cancer test that we market may experience slow growth until the test is approved for reimbursement by larger payer plans which

cover many patients.

Medicare

For

diagnostics tests, Medicare or CMS reimbursement approval is critical. CMS relies on a network of Medicare Administrative Contractors

(“MACs”) to make Local Coverage Decisions approving a test for reimbursement. The Molecular Diagnostics Services (“MolDx”)

Program was developed by Palmetto GBA (the previous MAC for California) to identify and establish coverage and reimbursement for molecular

diagnostics tests. The program has developed guidelines for the level of evidence of efficacy required to be obtained through clinical

trials. Palmetto, which contracted with CMS to administer the MolDx, issues Local Coverage Determinations that affect coverage, coding,

and billing of many molecular tests and the current MAC for California, Noridian Healthcare Solutions, LLC, has adopted the coverage

policies from Palmetto. MACs also serve as the primary operational contact between the Medicare Fee-For-Service program, for paying Medicare

claims, and approximately 1.5 million health care providers enrolled in the program. Delays in obtaining MAC approval, or any changes

made related to any favorable Local Coverage Determinations, could have a material adverse impact on our business.

Private

Third-Party Payers

In

addition to seeking Medicare reimbursement approval, we will seek reimbursement approval from private payers such as health insurance

companies and HMOs. Private payers generally will determine whether to approve a diagnostic test for reimbursement based on the published

results of clinical validity and clinical utility studies, and may base their decision on whether to cover a test, and at what level

to reimburse, on the MAC’s local coverage determination. Obtaining private payer medical coverage generally takes twelve to twenty-four

months from the time that sufficient evidence is demonstrated. In the interim we will bill commercial payers and appeal any denials using

the published clinical evidence supporting the utility of the test.

Reimbursement

rates paid by private third-party payers can vary based on whether the provider is considered to be an “in-network” provider,

a participating provider, a covered provider, an “out-of-network” provider or a non-participating provider. Currently, we

are out-of-network with all commercial payers. These definitions can vary among payers. An in-network provider usually has a contract

with the payer or benefits provider. This contract governs, among other things, service-level agreements and reimbursement rates. In

certain instances, an insurance company may negotiate an in-network rate for our testing. An in-network provider may have rates that

are lower per test than those that are out-of-network, and that rate can vary widely. Rates vary based on the payer, the testing type

and often the specifics of the patient’s insurance plan. If a laboratory agrees to contract as an in-network provider, it generally

expects to receive quicker payment and access to additional covered patients. However, it is likely that we will initially be considered

an “out-of-network” or non-participating provider by payers who cover the vast majority of patients until we can negotiate

contracts with the payers.

We

cannot predict whether, or under what circumstances, payers will reimburse for patients for our tests or whether our efforts to appeal

denied claims will be successful. While we have a rigorous process for prior authorization and appeals to overturn denials and to get

contracted with commercial payers, full or partial denial of coverage by payers, or reimbursement at inadequate levels, would have a

material adverse impact on our business and on market acceptance of our tests.

Billing

and Collection

Where

there is a private or governmental third-party payer coverage policy in place, we will bill the payer and the patient in accordance with

the established policy. Our efforts in obtaining reimbursement based on individual claims, including pursuing appeals or reconsiderations

of claims denials, could take a substantial amount of time, and bills may not be paid for many months, if at all. Furthermore, if a third-party

payer denies coverage after final appeal, payment may not be received at all.

Where

there is no coverage policy in place, we will pursue reimbursement on a case-by-case basis. In some cases, if not prohibited by law or

regulation, we may bill physicians, hospitals and other laboratories directly for the services that they order. However, laws and regulations

in certain states prohibit laboratories from billing physicians or other purchasers for testing that they order. Some states may allow

laboratories to bill physicians directly but may prohibit the physician and, in some cases, other purchasers from charging more than

the purchase price for the services, or may allow only for the recovery of acquisition costs, or may require disclosure of certain information

on the invoice. An increase in the number of states that impose similar restrictions could adversely affect us by encouraging physicians

to perform laboratory services in-house or by causing physicians to refer services to other laboratories that are not subject to the

same restrictions. Adoption or expansion of laws and regulations that limit our ability to bill and obtain reimbursement for the full

costs of our services would have a material adverse impact on our business and on market acceptance of our tests.

Corporate

Information

We

were incorporated in September 2009 in the state of California. Our principal executive offices are located at 15 Cushing, Irvine, California

92618. Our telephone number is (949) 409-7600. Our website is www.Oncocyte.com. Information contained on, or that can be accessed

through, our website, is not, and shall not be deemed to be, incorporated into or be considered a part of this Report.

Competition

Our

industry is highly competitive and characterized by rapid technological change. Key competitive factors in our industry include, among

others, the ability to successfully complete clinical studies, the ability to obtain any required regulatory approval, average selling

prices of competing tests, CLIA laboratory capacity and costs, intellectual property and patent rights, and sales and marketing capabilities.

We are an early-stage company with a limited operating history and many of our competitors have substantially more resources than we

do, including financial, technical and sales resources. In addition, many of our competitors have more experience than we have in the

development and commercialization of diagnostics. We are also competing with academic institutions, governmental agencies and private

organizations that are conducting research in the field of diagnostics. Our competition will be determined in part by the potential indications

for which our lead test candidates are developed and ultimately marketed. Additionally, the timing of market introduction of our diagnostic

tests or of competitors’ tests may be an important competitive factor.

The

DetermaIO test competes with multiple biomarkers already in clinical use or in development for predicting response to immunotherapy.

The most commonly used clinical tests employed in the immunotherapy response market are PD-L1 expression testing and TMB. We believe,

however, the current standard of care for PD-L1 testing has important limitations. According to published literature, more than half

of PD-L1 positive patients do not respond to immune- checkpoint inhibitors, and 1 in 6 patients who will respond are missed (referred

to as a “false negative”). Furthermore, data presented at recent oncology medical conferences suggests that TMB is not a

reliable predictor of immunotherapy response. Further, data presented at SITC (discussed previously), suggested that DetermaIO outperformed

both PD-L1 and TMB in predicting response to checkpoint inhibitors in patients with NSCLC. In 2021, we presented data at four major scientific

conferences supporting the association of DetermaIO and response to checkpoint inhibitor therapy and comparing to PD-L1 and TMB. Notably

data presented at both ESMO and SABCS demonstrated the predictive value of the test.

DetermaCNI

competes with tumor-informed tests that are on market for treatment monitoring as well as blood-only targeted panels. We believe we are

differentiated from the former in that the test requires no tissue. DetermaCNI is differentiated from targeted approaches because it

assesses changes across the whole genome broadly as opposed to changes in a subset of genes and is applicable in both adjuvant and neo-adjuvant

patient scenarios versus tests that monitor Minimal Residual Disease (MRD) which are typically only used when the tumor is removed.

VitaGraft

competes with multiple other tests from competitors that measure donor derived cell-free DNA. While our competitors have an established

customer base, we believe that VitaGraft has a competitive advantage due to its ability to provide a faster turnaround time for results.

Based on our research of customer needs, we believe that this fast turnaround time is critical to inform timely, critical medical decisions.

Facilities

Oncocyte

leases a building located at 15 Cushing in Irvine, California that serves as Oncocyte’s principal executive and administrative

offices. Oncocyte operates a CLIA certified laboratory in Nashville, Tennessee. Through the acquisition of Chronix Biomedical,

Oncocyte also has a research and development facility in Göttingen, Germany, which serves as the center of excellence for the

company’s blood based monitoring program.

Materials

There

is a limited number of manufacturers of molecular testing equipment and related chemical reagents necessary for the provision of our

cancer tests. Additionally, the chemical reagents used with the testing equipment we chose are available only from the equipment manufacturer.

This situation poses a risk to us. After encountering inconsistent results using testing equipment and reagents from one manufacturer,

we switched to testing equipment from a different manufacturer. If issues were to arise with the testing equipment or with the reagents

we are using, causing us to acquire different testing equipment again, we would need to conduct additional laboratory studies to determine

whether our previous test results can be reproduced using the new equipment. If similar issues were to arise after commercialization

of a test, we could experience a disruption for a period of time in providing the tests to patients and we would lose revenues and potentially

market share as a result.

Patents

and Trade Secrets

We

rely primarily on patents and contractual obligations with employees and third parties to protect our proprietary rights. We have sought,

and intend to continue to seek, appropriate patent protection for important and strategic components of our proprietary technologies

by filing patent applications in the United States and certain foreign countries. There can be no assurance that any of our patents will

guarantee protection or market exclusivity for our diagnostic tests and diagnostic test candidates. We may also use license agreements

both to access technologies developed by other companies and universities and to convey certain intellectual property rights to others.

Our financial success will be dependent in part on our ability to obtain commercially valuable patent claims and to protect our intellectual

property rights and to operate without infringing upon the proprietary rights of others.

Through

our acquisition of Insight Genetics in January 2020 and Chronix in April 2021, we obtained exclusive rights to additional intellectual

property, including trade secrets, registered trademarks, domain names, copyrights, issued and reissued patents and pending applications,

and software material, and have since the Insight Genetics acquisition filed our own patents to protect DetermaIO.

Through

our acquisition of Chronix in April 2021, we obtained intellectual property rights to 10 patent families in the field of detection of

cell-free tumor DNA and quantification of donor derived cell-fee DNA, with numerous already issued patents in the United States and European

Union, expiring between April 2031 and October 2034. In addition, we obtained trade secrets, registered trademarks, domain names, copyrights

and proprietary software material.

In

addition to relying on patents, we will rely on trade secrets, know-how, continuing technological advancement, and licensing opportunities

to maintain our competitive position. The molecular diagnostics that we are developing use gene expression classifiers or algorithms,

which are mathematical models that weight the biomarkers to produce a score. We will treat the mathematical models as trade secrets.

We have entered into intellectual property, invention, and non-disclosure agreements with our employees, and it is our practice to enter

into confidentiality agreements with our consultants. There can be no assurance, however, that these measures will prevent the unauthorized

disclosure or use of our trade secrets and know-how, or that others may not independently develop similar trade secrets and know-how

or obtain access to our trade secrets, know-how, or proprietary technology.

General

Risks Related to Obtaining and Enforcing Patent Protection

Our

patents and patent applications are directed to compositions of matter, formulations, methods of use and/or methods of manufacturing.

The patent positions of pharmaceutical and biotechnology companies, including ours, are generally uncertain and involve complex legal

and factual questions. Our business could be negatively impacted by any of the following:

● Changes in government regulations or patent laws; and

In

addition, others may independently develop similar or alternative technologies, duplicate any of our technologies and, if patents are

licensed or issued to us, design around the patented technologies licensed to or developed by us. Moreover, we could incur substantial

costs in litigation if we have to defend ourselves in patent lawsuits brought by third parties or if we initiate such lawsuits.

The

United States Supreme Court’s decisions in Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Association

for Molecular Pathology v. Myriad Genetics may limit our ability to obtain patent protection on diagnostic methods that merely recite

a correlation between a naturally occurring event and a diagnostic outcome associated with that event. Our cancer diagnostic tests are

based on the presence of certain genetic markers for a variety of cancers. In Mayo Collaborative Services v. Prometheus Laboratories,

Inc., the Supreme Court ruled that patent protection is not available for simple the use of a mathematical correlation of the presence

of a well-known naturally occurring metabolite as a means of determining proper drug dosage. The claims in the contested patents that

were the subject of that decision were directed to measuring the serum level of a drug metabolite and adjusting the dosing regimen of

the drug based on the metabolite level. The Supreme Court said that a patent claim that merely claimed a correlation between the blood

levels of a drug metabolite and the best dosage of the drug was not patentable subject matter because it did no more than recite a correlation

that occurs in nature.

In

Association for Molecular Pathology v. Myriad Genetics, the Supreme Court ruled that the discovery of the precise location and

sequence of certain genes, mutations of which can dramatically increase the risk of breast and ovarian cancer, was not patentable. Knowledge

of the gene location and sequences was used to determine the genes’ typical nucleotide sequence, which, in turn, enabled the development

of medical tests useful for detecting mutations in these genes in a particular patient to assess the patient’s cancer risk. But

the mere discovery of an important and useful gene did not render the genes patentable as a new composition of matter.

Also,

in Ariosa Diagnostics, Inc. v. Sequenom, Inc., the Federal Circuit ruled that a method for detecting a paternally inherited nucleic

acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female was not patent eligible subject matter under

the framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc. The court examined the elements of the

claim to determine whether the claim contained an inventive concept sufficient to transform the claimed naturally occurring phenomenon

into a patent eligible application and found that the method steps did not support patentability because they used conventional amplification

and detection techniques. Although the claims can be distinguished from the claims at issue in Mayo Collaborative Services v. Prometheus

Laboratories, Inc., the court was bound by the language of the Supreme Court decision to hold Sequenom’s claims unpatentable.

In

Illumina, Inc. v. Ariosa Diagnostics, Inc., the Federal Circuit reversed and remanded the lower court and found that claims directed

to methods of preparing plasma to isolate extracellular fetal DNA, based on the inventors’ discovery that fetal DNA strands in

maternal plasma are relatively short compared to maternal DNA, were directed to patent-eligible subject matter. The majority reasoned

that the claimed methods include process steps that lead to a DNA fraction that is different from the naturally-occurring fraction present

in the mother’s blood due to enrichment of cell-free fetal DNA. Thus, the process achieves more than simply observing that fetal

DNA is shorter than maternal DNA or detecting the presence of that phenomenon. The majority noted that the inclusion of specific techniques

for carrying out the steps of the method, illustrated the concrete nature of the claimed process steps. These concrete process steps

were used, not merely to observe the presence of the phenomenon that fetal DNA is shorter than maternal DNA, but to exploit that discovery

in a method for preparation of a mixture enriched in fetal DNA and thus supported a finding of patent eligible subject matter.

While

the cases discussed above are instructive, the United States Patent and Trademark Office (the “USPTO”) has also issued guidelines

in light of the Supreme Court decisions indicating that process claims having a natural principle as a limiting step will be evaluated

to determine if the claim includes additional steps that practically apply the natural principle such that the claim amounts to significantly

more than the natural principle itself. Because the diagnostic tests that we are developing combine an innovative methodology with newly

discovered compositions of matter, we are hopeful that this Supreme Court decision will not preclude the availability of patent protection

for our diagnostic tests. However, there is no guarantee that such pending patent applications will issue nor that our existing patents

would survive a challenge in light of the above-referenced case law.

The

USPTO has also issued multiple Subject Matter Eligibility Updates to provide further guidance in determining subject matter eligibility.

The Subject Matter Eligibility Updates include new Subject Matter Eligibility Examples for the Life Sciences. These examples provide

favorable exemplary subject matter eligibility analysis of hypothetical claims covering diagnostic tests and claims drawn from case law.

This update from the USPTO does not change our opinion on our ability to obtain meaningful patent protection.

There

is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties

and declared invalid or infringing of third-party claims. A patent interference proceeding may be instituted with the USPTO when more

than one person files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued

patent filed before March 16, 2013. At the completion of the interference proceeding, the USPTO will determine which competing applicant

is entitled to the patent, or whether an issued patent is valid. Patent interference proceedings are complex, highly contested legal

proceedings, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect to

any of our patent applications, we may experience significant expenses and delay in obtaining a patent, and if the outcome of the proceeding

is unfavorable to us, the patent could be issued to a competitor rather than to us. In addition to interference proceedings, the USPTO

can review issued patents at the request of a third party seeking to have the patent invalidated. Currently an inter partes review proceeding

will allow third parties to challenge the validity, based on issues of novelty and non-obviousness, in view of patents and printed publications,

of an issued patent where there is a reasonable likelihood of invalidity. This means that patents owned or licensed by us may be lost

if the outcome of the review is unfavorable to us.

Post

Grant Review under the America Invents Act makes available opposition-like proceedings in the United States. As with the USPTO interference

proceedings, Post Grant Review proceedings will be very expensive to contest and can result in invalidation of a recently issued patent.

To invoke a post-grant review, a challenge must be filed within nine months of a patent’s issuance or reissuance. Post-grant review

can be sought based on any grounds that can be used to challenge the validity of a patent claim, with the exception of failure to disclose

the best mode. Also, a derivation proceeding may be instituted by the USPTO or an inventor alleging that a patent or application was

derived from the work of another inventor.

Oppositions

to the issuance of patents may be filed under European patent law and the patent laws of certain other countries. As with the USPTO interference

proceedings, these foreign proceedings can be very expensive to contest and can result in significant delays in obtaining a patent or

can result in a denial of a patent application.

The

enforcement of patent rights often requires litigation against third party infringers, and such litigation can be costly to pursue. Even

if we succeed in having new patents issued or in defending any challenge to issued patents, there is no assurance that our patents will

be comprehensive enough to provide us with meaningful patent protection against our competitors. Further, should we sue a third party

infringer for patent infringement, the infringer may assert counter claims and attempt to invalidate some or all of the asserted patent

claims. There is always some risk that such a counter claim could result in invalidation of one or more claims of an asserted patent.

Government

Regulation

CLIA—Clinical

Laboratory Improvement Amendments of 1988 and State Regulation

We

expect that DetermaIO, VitaGraft and DetermaCNI will be regulated under the Clinical Laboratory Improvements Amendment (“CLIA”)

as laboratory developed tests or “LDTs”. In 1988, Congress enacted CLIA, which established quality standards for all laboratories

that provide testing services to ensure the accuracy, reliability and timeliness of patient test results regardless of where the test

is performed.

Under

CLIA, a laboratory is defined as any facility that performs laboratory testing on specimens derived from humans for the purpose of providing

information for the diagnosis, prevention or treatment of disease, or the impairment of, or assessment of health of human beings. Because

we meet this definition, CLIA requires that we hold a certificate applicable to the complexity of the categories of testing we perform

and that we comply with certain standards. Laboratories performing high complexity testing are required to meet more stringent requirements

than laboratories performing less complex tests. CLIA regulations require clinical laboratories like ours to comply with various operational,

personnel, facilities administration, quality, and proficiency testing requirements intended to ensure that testing services are accurate,

reliable and timely. CLIA certification is a prerequisite for reimbursement eligibility for services provided to state and federal health

care program beneficiaries. CLIA is user-fee funded. Therefore, all costs of administering the program must be covered by the regulated

facilities, including certification and survey costs.

FDA

Regulation of Diagnostic Tests

We

have designed, developed, and are validating our tests as LDTs and consequently believe our tests are governed under the CLIA regulations,

as administered by CMS, as well as by applicable state laws.

Historically,

the FDA had exercised enforcement restraint with respect to most LDTs and had not required laboratories that offer LDTs to comply with

FDA requirements for medical devices, such as registration, device listing, quality systems regulations, premarket clearance or premarket

approval, and post-market controls.

In

recent years, the FDA has stated it intends to end its policy of enforcement restraint and begin regulating certain LDTs as medical devices.

In October 2014, the FDA issued two draft guidance documents, entitled “Framework for Regulatory Oversight of Laboratory Developed

Tests (LDTs)” and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs)”, respectively,

that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs.

The

FDA has indicated that it does not intend to modify its policy of enforcement restraint until the draft guidance documents are finalized.

Subsequently, in January 2017, the FDA issued a Discussion Paper on LDTs (“Discussion Paper”), in which it outlined a substantially

revised “possible approach” to the oversight of LTDs. The risk-based approach outlined focuses on new and significantly modified

high and moderate risk LDTs and low risk LDTs, LDTs for rare diseases, traditional LDTs, LDTs intended solely for public health surveillance,

certain LDTs used in CLIA certified labs, and LDTs intended solely for forensic use would not be expected to comply with premarket review,

quality systems, and registration and listing requirements unless necessary to protect public health. With respect to the post-market

surveillance of LDTs, the FDA’s Discussion Paper recommends that laboratories initially report serious adverse events for all tests

except the exempted categories of tests, which include LDTs intended for public health surveillance, some stem cell/tissue/organ transplantation

LDTs, and LDTs intended solely for forensic use. The Discussion Paper notes that it is not a final version of the 2014 draft guidance

and that it does not intend to represent the FDA’s formal position but rather describes the evolution of the agency’s thinking

about the regulatory framework for LDTs.

Responding

to the COVID-19 pandemic, in August, 2020, the Department of Health and Human Services (“HHS”), the parent agency for FDA,

formally rescinded FDA guidance and other informal statements concerning FDA’s premarket review of LDTs and announced that the

FDA “will not require premarket review of [LDTs] absent notice-and comment rulemaking, as opposed through guidance documents, compliance

manuals, website statements, or other informal issuances.” It is unclear at this time whether the Biden administration will revise

or rescind this policy.

It

is unclear at this time when or if the FDA will finalize its plans to end enforcement discretion, via notice and comment rulemaking or

otherwise, and even then, new regulatory requirements are expected to be phased-in over time. Nevertheless, the FDA may attempt to regulate

certain LDTs on a case-by-case basis at any time.

On

June 24, 2021, bi-partisan members of both the House and Senate re-introduced the Verifying Accurate, Leading-edge IVCT Development (“VALID”)

Act, which features a precertification program. The term IVCT refers to in vitro clinical tests, a category that w comprises both test

kits and lab-developed tests. The VALID Act includes precertification proposed by the FDA, a process through which diagnostic developers

could receive premarket approval or clearance for one test representative of a group of tests using the same technology and have other

elements in common. Approval of that representative test would precertify other tests in the group and allow the lab to launch them without

premarket review. The VALID Act would also create a new system for labs and hospitals to use to submit their tests electronically to

the FDA for approval, which is aimed at reducing the amount of time it takes for the agency to approve such tests, and establish a new

program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients. The introduced

Valid Act also includes specific language designed to address public health emergencies, including COVID-19. If enacted, the impact of

the VALID Act will be minimal for IVD manufacturers because of the alignment between the VALID Act and existing medical device statutory

and regulatory requirements and the fact that such requirements have been enforced for IVD manufacturers for decades; however, it will

have a significant impact on clinical laboratories as laboratories will need to comply with many new requirements, including: registration

and listing with the FDA; quality requirements; investigational studies; premarket review and approval; adverse event reporting; and

corrections and removals (recalls). While the VALID Act outlines a framework for these elements (among others), the law, if enacted,

would direct the FDA to promulgate regulations and issue guidance documents within two (2) years of its enactment, and establishes an

effective date for the new IVCT regulatory system as four (4) years after enactment, giving clinical laboratories and others ample opportunity

to participate in shaping and preparing for the new IVCT regulatory program.

On

May 18, 2021, Senator Rand Paul re-introduced a bill, called the Verified Innovative Testing in American Laboratories (“VITAL”)

Act of 2021, which strikes a counterpoint to the proposed VALID Act. VITAL seeks to update existing federal lab standards under the CLIA,

specifically stating that all aspects of lab-developed testing procedures would be regulated by the US Health and Human Services Secretary

under the Public Health Services Act, and that no aspects of lab-developed testing procedures would be regulated under the Federal Food,

Drug, and Cosmetic Act, including during a public health emergency.

While

we cannot predict whether the either VALID Act or the VITAL Act as proposed, or any modified version of either act will be enacted into

law, it is expected that some form of the acts will be incorporated into a broader health care legislative package. The likelihood that

Congress will pass legislation and the extent to which such legislation may affect the FDA’s plans to regulate certain LDTs as

medical devices is difficult to predict at this time. Until the VALID Act, VITAL Act, or other legislation is passed reforming the federal

government’s regulation of LDTs, it is unknown how the FDA may regulate our tests in the future and what testing and data may be

required to support any required clearance or approval.

If

the FDA ultimately regulates certain LDTs, whether via final guidance, final regulation, or as instructed by Congress, our tests may

be subject to certain additional regulatory requirements. Complying with the FDA’s requirements can be expensive, time-consuming,

and subject us to significant or unanticipated delays. Insofar as we may be required to obtain premarket clearance or approval to perform

or continue performing an LDT, we cannot assure that we will be able to obtain such authorization. Even if we obtain regulatory clearance

or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical

to the commercial success of our tests. As a result, the application of the FDA’s requirements to our tests could materially and

adversely affect our business, financial condition, and results of operations.

Notwithstanding

the FDA’s current position with respect to oversight of our tests, we may voluntarily decide to pursue FDA pre-market review for

our current tests and tests we may offer in the future if we determine that doing so would be appropriate from a strategic perspective.

Failure

to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters,

civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown

of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.

State

Laboratory Licensing

In

addition to federal certification requirements of laboratories under CLIA, we are required to maintain licensure under Tennessee law

for our laboratory in Nashville, Tennessee. State laws generally include standards for the day-to-day operation of a clinical reference

laboratory, including the training and skills required of personnel and quality control. In addition, those laws often mandate proficiency

testing, which involves testing of specimens that have been specifically prepared for the laboratory.

Some

states require licensure of out-of-state laboratories that accept specimens from those states. Our laboratories will need to pass various

state inspections in order to get licensed to provide LDTs in each of state that requires licensure. CLIA provides that a state may adopt

laboratory regulations that are more stringent than those under federal law, and two states, New York and Washington, have met that standard

and therefore substitute for the federal CLIA program. In addition, some, but not all, states require a separate state license or permit,

which must be obtained in addition to a CLIA certificate, and some states require a laboratory doing business in that state to be licensed

even if the laboratory is located in another state.

Our

laboratories are licensed by the appropriate state agencies in the states in which we do business, if such licensure is required. If

a laboratory is out of compliance with state laws or regulations governing licensed laboratories, a state may impose penalties, which

penalties vary from state to state but may include suspension, limitation, revocation or annulment of the license, assessment of financial

penalties or fines, or imprisonment. We believe that we are in material compliance with all applicable licensing laws and regulations.

We

may become aware from time to time of certain states that require out-of-state laboratories to obtain licensure to accept specimens from

patients within the state. If we identify any other state with such requirements, or if we are contacted by any other state advising

us of such requirements, we intend to follow all instructions from the state regulators regarding compliance with such requirements.

International

Laboratory Licensing

We

also maintain laboratory operations in Germany and could expand our laboratory operations to other foreign jurisdictions. Therefore,

we are subject to laboratory quality regulations and accreditation standards in Germany, and will be subject to such regulations and

standards in any other jurisdictions where we may operate. These requirements may vary by jurisdiction and differ from those in the United

States, and may require us to implement additional compliance measures.

In

Vitro Diagnostics

In

the future, we may elect to develop IVDs, which are regulated by the FDA as medical devices. Medical devices marketed in the United States