CSTL 10-K & 10-Q changes, risk factors and insider trading

We have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration attributable to these price concessions is measured at the expected value using the ‘‘“most likely amount’’amount” method under Accounting Standards Codification (‘‘ASC’’“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The amounts are estimated using historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties. Determining variable consideration through a consideration of these factors involves a significant level of estimation uncertainty, and our estimations may turn out to be incorrect. Such variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. Variable consideration may be constrained and excluded from the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor. Variable consideration for claims for which therethat are nonot existingcovered positiveby coverage decisions,Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. As a result of the timing and amount of adjustments for variable consideration, our operating results and comparisons of such results on a period-to-period basis may be difficult to understand and may not be meaningful. In addition, these fluctuations in revenue may make it difficult for us, for research analysts and for investors to accurately forecast our revenue and operating results. If our revenue or operating results fall below expectations, the price of our common stock would likely decline.

Since our inception, we have had a history of net losses. For the year ended December 31, 2024,2025, we had net incomeloss of $18.2$24.2 million, and as of December 31, 2024,2025, we had an accumulated deficit of $200.1$224.3 million. We cannot predict if we will continue to achieve profitability in the future. We may incur losses in the future as we plan to invest significant additional funds toward the expansion of our commercial organization, the conduct of clinical utility and validity studies to support adoption of our products and the development or acquisition of additional products. We also expect increases in our stock-based compensation expense in future periods due to additional awards outstanding, attributable to increased headcount. Additionally, our performance could be affected by the impacts of geopolitical and macroeconomic developments, such as the invasion of Ukraine by Russia and related sanctions orsanctions, the Israel-Hamasongoing war,conflicts in the Middle East, economic slowdowns, the recent shutdown of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns, bank failures or other disruptions in the banking system or financing markets, risinghigher interest rates and tighteningfinancial ofand credit marketsmarket resultingfluctuations, fromvolatility in the conflictcapital markets or other evolving macroeconomic developments.developments, among other things. Due to the requirements associated with being a public company, we expect to continue incurring significant additional legal, accounting and other expenses. We also expect that any acquisitions of businesses, assets, products or technologies will increase our expenses. These increased expenses will make it harder for us to achieve future profitability or generate positive cash flows. Furthermore, our revenues from our DecisionDx-SCC test represented a significantlesser portion of our 20242025 revenues,revenues but that is not expectedcompared to be2024 revenues following the casediscontinuance forof ourMedicare 2025reimbursement operatingas results.of April 24, 2025. See “—Risks Related to Our Business—Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, DecisionDx-SCCTissueCypher and TissueCypherDecisionDx-SCC tests, and we will need to generate sufficient revenue from these products and other products to grow our business.” We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in this Annual Report on Form 10‑K, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and developmentR&D activities. Our failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

We believe our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our planned operations for at least the next 12 months. If our available cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products are insufficient to satisfy our liquidity requirements including because of lower demand for our products, lower than currently expected rates of reimbursement from third-party payors or other risks described in this Annual Report on Form 10-K, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. On March 26, 2024 (the “Closing Date”), we entered into a loan and security agreementagreement, as amended in April 2025 (the “2024 LSA”), by and between us, our wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender”). The 2024 LSA provides for (i)a term loan in the principal amount of $10.0 million, which was drawn on the Closing Date,Date $10.0(the “2024 Term Loan”) and provided for a $25.0 million aggregate principal amountline of termcredit loansthat (“Termwas Loans”),available andat (ii)our option from the Closing Date untilthrough MarchSeptember 31,30, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term2024 debtTerm available at our optionLoan (the “2024 Credit Line”). WeOn drewSeptember $10.030, million2025, inthe Term2024 LoansCredit Line expired and no draws had been made on the Closing Date.it. We expect to useused the proceeds from the 2024 Term Loan for the purpose of developing a commercial office building to be used as our future corporate headquarters, and the remainder for working capital and other general corporate purposes.headquarters.

•our rate of progress in, and cost of the sales, marketing, coverage and reimbursement activities associated with, establishing adoption of our lead products, DecisionDx-Melanoma, DecisionDx-SCC,TissueCypher and TissueCypher,DecisionDx-SCC, among our other products;

•our rate of progress in, and cost of research and developmentR&D activities associated with, diagnostic products in research and early development;

•the effects on our operations of general political and economic conditions and evolving macroeconomic developments, including geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine by Russia and related sanctions or ongoing conflicts in the Israel-HamasMiddle war,East, public health crises, economic slowdowns, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, bank failures or other disruptions in the banking system or financing markets, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments; and

Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our commercialization, research and developmentR&D efforts or grant rights to third parties to market and/or develop products that we would otherwise prefer to market and develop ourselves.

In March 2024, we entered into the 2024 LSA with the Lender, which provides for (i) on the Closing Date,a $10.0 million aggregate2024 principalTerm amountLoan and provided for a $25.0 million 2024 Line of TermCredit Loans,that andwas (ii)available at our option from the Closing Date untilthrough MarchSeptember 31,30, 2025. On September 30, 2025, the 2024 Credit Line.Line expired and no draws had been made on it. The 2024 LSA includes customary affirmative and negative covenants, as well as standard events of default, including an event of default based on the occurrence of a material adverse event. The negative covenants include, among others, restrictions on us transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying cash dividends or making other distributions, making investments, creating liens, selling assets and making any payment on subordinated debt, in each case subject to certain exceptions. These restrictive covenants could limit our flexibility in operating our business and our ability to pursue business opportunities that we or our stockholders may consider beneficial. In addition, the Lender could declare a default upon the occurrence of any event that it interprets could have a material adverse effect, as defined in the 2024 LSA. Upon the occurrence and continuance of an event of default, the Lender may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the 2024 LSA. Any declaration by the Lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. We may not have enough available cash or be able to raise additional funds through equity or debt financing to repay these outstanding obligations at the time any event of default occurs. Further, if we raise any additional capital through debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, DecisionDx-SCCTissueCypher and TissueCypherDecisionDx-SCC tests, and we will need to generate sufficient revenue from these products and other products to grow our business.

Our revenue in 20242025 was primarily derived from the sale of our DecisionDx-Melanoma, DecisionDx-SCCTissueCypher and TissueCypherDecisionDx-SCC tests. While we also derive revenue from our other tests, we expect that the majority of our revenue for the next several years will be derived from sales of our DecisionDx-Melanoma and TissueCypher tests. Revenues from our DecisionDx-SCC test represented a significant portion of our 20242025 revenues but are not expected to be so in our 20252026 operating results. On January 9, 2025, Novitas finalized thean oncology biomarker LCD withthat an initialbecame effective date of February 23, 2025. Several days later, Novitas changed the effective date for this LCD, extending the effective date toon April 24, 2025.2025, Shouldat which time, the LCDNovitas becomeLCD, effectiveGenetic Testing for Oncology: Specific Tests, that includes DecisionDx-SCC as is,noncovered, thenbecame we would anticipate not receiving Medicare reimbursement for DecisionDx-SCC tests performed on or after April 24, 2025.effective.

Without positive coverage policies, our products may not be reimbursed and we may not be able to recognize revenue. If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, TissueCypher,TissueCypher and our other tests, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve profitability would be impaired, and the market price of our stock could decline substantially.

Our results of operations could be adversely affected by general conditions in the U.S. and global economies, the U.S. and global financial markets and adverse macroeconomic developments. U.S. and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, such as the Israel-Hamasinvasion war and the ongoing conflict betweenof Ukraine andby Russia and related sanctions, the ongoing conflicts in the Middle East, economic slowdowns, the recent shutdown of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns, at, andbank failures of, banks and other financial institutions or other disruptions in the banking system or financialfinancing markets, risinghigher interest rates and tighteningfinancial ofand credit marketsmarket resultingfluctuations, fromvolatility in the conflictcapital markets or other evolving macroeconomic developments, among others.other things. General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, changes in trade and tariff policies, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our collaborators, our manufacturers and our suppliers operate.

A severe or prolonged global economic downturn could result in a variety of risks to our business. For example, inflation rates, particularly in the United States,U.S., have increased recently to levels not seen in years, and increased inflation has resulted in increased personnel costs and increased prices for certain lab supplies and may result in additional increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all. In addition, the U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks. Furthermore, the closures of specific financial institutions, or the broader financial services industry, may lead to market-wide liquidity shortages that could materially harm our business and financial condition. For example, closures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023 resulted in broader financial institution liquidity risk and concerns. Additionally, rapid changes in U.S. trade policy, such as the imposition of additional tariffs and trade barriers, as well as potential retaliatory measures taken by other governments, could increase the price of and/or affect the availability of imported raw materials used in the production of our products.

Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022. In response to the invasion, the United States,U.S., UK and European Union (“EU”), along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and/or supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the Russia-Ukraine conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. More recently, the escalation of hostilities between Iran and Israel has introduced additional geopolitical instability and uncertainty, particularly in the Middle East. This conflict has the potential to disrupt global energy supplies, impact shipping routes, and lead to broader regional or international involvement, further straining global supply chains and financial markets. Further, a weak or declining economy could strain our suppliers, manufacturers and collaborators, possibly resulting in additional supply disruption for our product candidates. As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia,Russia and escalating tensions between Iran and Israel, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. If economic conditions in EuropeEurope, andthe Middle East, or other key markets for our business and the business of our suppliers, manufacturers and collaborators remain uncertain or deteriorate further, we could experience adverse effects on our business, financial condition, results of operations or cash flows.

The development and validation of accurate products is a complex process that requires access to tissue specimens and long-term outcomes data. Our research and developmentR&D efforts to improve our existing commercial products and develop new pipeline products may require the depletion of our existing database of samples. If our samples are lost or destroyed, or substantially depleted before we are able to generate meaningful data, we may be unable to improve our existing products, continue the development of pipeline products or validate product candidates. While we have historically been able to create and maintain a large sample bank to expand the clinical use of our products and develop new products, we may be unable to do so in the future. If we were unable to maintain or replenish our sample bank, we may be unable to improve our products or develop new products.

If one or more of our primary clinical laboratory facilities become damaged or inoperable or we are required to vacate our existing facilities, our ability to conduct our laboratory analysis and pursue our research and developmentR&D efforts may be jeopardized.

In addition, the loss of our tissue samples due to such events could limit or prevent our ability to conduct research and developmentR&D analysis on existing tests as well as tests in active pipeline development. Generators at our laboratory facilities and related equipment and contingent measures to be used in the event of a loss of power may not be sustainable for extended periods of time, or be sufficient to fully mitigate loss of tissue samples and inventory.

While we have a business continuity plan in place, and intentionally built out two clinical laboratories in adjacent buildings in Phoenix, Arizona to not only support our growth but to provide certain operational redundancy, our facilities and the equipment we use to perform our testing and research and developmentR&D could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify a new facility, replace certain pieces of equipment or license or transfer our proprietary technology to a third-party, particularly in light of licensure and accreditation requirements. Even in the unlikely event that we are able to find a third partythird-party with qualifications enabling us to resume our operations, we may be unable to negotiate commercially reasonable terms.

•the impact of our investments in research and developmentR&D and commercial growth;

We continually seek to develop new product offerings, which requires us to devote considerable resources to research and development.R&D. Before we can commercialize a new pipeline product, we will need to expend significant resources in order to conduct substantial research and development,R&D, including clinical utility and validity studies, and further develop and scale our laboratory processes and infrastructure to accommodate additional products. For example, in 2021, we launched oura innovativebroad pipelinemulti-center U.S. based study to discover, develop and validate a genomic test, or series of genomic tests, aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, AD and related inflammatory skin conditions. With this launch, we initiated a large prospective, multi-center clinical study to develop and validate this inflammatory skin disease pipeline program.disease. We announced early discovery data from this study in October 2023. On December 23, 2025,2024, we announced that preliminary data from our ongoing prospective development and validation study for our pipeline test has shown potential to identify a subset of patients with AD who have increased likelihood to achieve a super response to targeted therapies. AssumingWe successfulcommenced validation,a welimited access launch of the AdvanceAD-Tx test in November 2025 and are targetingplanning tophased, launchexpanded thisavailability pipelinethroughout test by the end of 2025.2026.

As we develop new products, we will have to make significant investments in research and development,R&D, marketing, selling, coverage and reimbursement activities. Typically, few research and developmentR&D projects result in a commercialized product, and there can be no assurance that we will be able to successfully develop new products that can be commercialized. At any point, we may abandon development of a product or we may be required to expend considerable resources conducting research, which would adversely affect the timing for generating potential revenue from a new product and our ability to invest in other products in our pipeline. If a clinical validation study fails to demonstrate the prospectively defined endpoints of the study or if we fail to sufficiently demonstrate analytical validity or clinical utility, we might choose to abandon the development of the product, which could harm our business. In addition, competitors may develop and commercialize competing products or technologies faster than us or at a lower cost.

Some potential competitors may have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and developmentR&D resources and selling and marketing capabilities, and more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their products than we do or sell their products at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations. Increased competition and cost-saving initiatives on the part of governmental entities and other third-party payors are likely to result in pricing pressures, which could harm our sales, profitability or ability to gain market share. In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Certain potential competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to test development than we can. In addition, companies or governments that control access to testing through umbrella contracts or regional preferences could promote our competitors or prevent us from performing certain services. If we are unable to compete successfully against current and future competitors, our business will suffer and we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or achieving profitability and could cause our stock price to decline. As we add new tests and services, we will face many of these same competitive risks for these new tests.

Our estimates of the TAM for DecisionDx-Melanoma, TissueCypher, AdvanceAD-Tx, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM and IDgenetixDecisionDx-UM tests are based on a number of internal and third-party estimates, including, without limitation, the annual rate of patients with the applicable indications, the list price of our products relative to the reimbursement we expect to receive from third-party payors and the assumed prices at which we can sell our products in markets that have not been established. While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the annual TAM for our current or future products may prove to be incorrect. If the actual number of patients who would benefit from our products, the price at which we can sell future products, or the annual TAM for our products is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business and results of operations.

From time to time, we may become involved in disputes, claims, government investigations and lawsuits relating to our business operations. In particular, we may face claims related to the safety of our products, intellectual property matters, financial arrangements with health care providers, regulatory compliance, product promotional practices,practices and documentation, coding and billing practices, employment matters, tax matters, commercial disputes, competition, sales and marketing practices, environmental matters, personal injury, insurance coverage,coverage and acquisition or divestiture-related matters. Any dispute, claim, government investigation or lawsuit may divert management’s attention away from our business, we may incur significant expenses in addressing or defending any dispute, claim or lawsuit, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results. For example, as described further in “Item 3. Legal Proceedings,” on February 1, 2024 we received a subpoena from United StatesU.S. Department of Health and Human Services Office of Inspector General. This inquiry, and any potential resulting claim asserted against us, with or without merit, could be time-consuming, expensive to address and divert management’s attention and other resources. These claims also could subject us to significant liability for damages and harm our reputation. Our insurance and indemnities may not cover all claims that may be asserted against us.

Under Medicare, payment for products like ours is generally made under the CLFS with payment amounts assigned to specific procedure billing codes. Medicare reimbursement rates for our tests are subject to change and may decrease from those currently in effect. For example, in February 2023, MolDX notified us that IDgenetix should shift billing to a different multi-test generic gene sequencing CPT code and continue using the IDgenetix Z-Code beginning in March 2023. As a result of this change, the Medicare reimbursement rate for the IDgenetix multi-gene panel decreased from approximately $1,500 to $917 per test. We subsequently obtained a test-specific PLA CPT code which became effective October 1, 2023. In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024. Our IDgenetix test was discontinued in May 2025.

In April 2014, Congress passed the PAMA which included substantial changes to the way in which clinical laboratory services are paid under Medicare. Under PAMA, certain laboratories are required to report to CMS commercial third-party payor payment rates and volumes for each test they perform. CMS uses this data to calculate a weighted median payment rate for each test, which will be used to establish revised Medicare CLFS reimbursement rates for the test. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties. On February 3, 2026, the Consolidated Appropriations Act of 2026 was enacted which, among other things, delayed the impositions of Medicare CLFS cuts until 2027 and updated PAMA reporting timelines and data requirements. We bill Medicare for our products, and therefore we are subject to reporting requirements under PAMA.

The diagnostics industry is highly regulated, and we cannot assure you that the regulatory environment in which we operate will not change significantly and adversely in the future. In addition to laws and regulations implemented by the FDA, we may be subject to other applicable laws including health care fraud and abuse, data privacy, and transparency reporting laws, among others. In many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Although the FDA has statutory authority to provide reasonable assurance that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics (“IVDIVDs”) that are intended for clinical use and are designed, manufactured and used within a single laboratory that is certified under CLIA and meets the regulatory requirements under CLIA to perform high-complexity testing. These tests are referred to as LDTs. We currently market our products as LDTs.LDTs which are subject to various coverage and reimbursement regulations and policies from governmental and commercial, third-party payors and are subject to change from time to time.

We may also be required to obtain marketing authorization under Section 510(k), 513(f)(2) or 515 of the FD&C Act for any future test we wish to offer. The process for submitting a premarket notification (501(k) and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed. Similarly, the process for submitting a de novo authorization request and receiving FDA’s granting of the request usually takes from 4 to 18 months, but it can take significantly longer and such granting of the request is never guaranteed. The process for submitting and obtaining FDA approval of a PMA is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer, and approval is not guaranteed. PMA approval typically requires extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process or de novo authorization process. Despite the time, effort and expense expended, there can be no assurance that a particular device ultimately will receive FDA’s marketing authorization through the 510(k) clearance process, de novo authorization process or the PMA process on a timely basis, or at all. Moreover, there can be no assurance that any FDA-authorized labeling claims will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products. If premarket review is required for some or all of our products, the FDA may require that we stop selling our products pending marketing authorization, which would negatively impact our business. Even if our products are allowed to remain on the market prior to marketing authorization, demand or reimbursement for our products may decline if there is uncertainty about our products, if we are required to label our products as investigational by the FDA, or if the FDA limits the labeling claims we are permitted to make for our products. As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other pipeline products. Furthermore, it could reduce our revenues or increase our operating costs and adversely affect our business, prospects, results of operations or financial condition.

•federal and state laws governing laboratory testing, including CLIA, and state licensing laws and accreditation requirements;

In particular, the FD&C Act defines a medical device to include any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component, part, or accessory, which is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, and which does not achieve its primary intended purposes via chemical action or metabolism. OurSome of our in vitro testing products are intended for clinical or diagnostic uses, such as the DecisionDx-Melanoma test, which is considered by the FDA to be subject to regulation as a medical devices,device and marketedhas underbeen FDA’sgranted policyBreakthrough ofDevice enforcementdesignation discretionby forthe LDTs.FDA. Among other things, pursuant to the FD&C Act and its implementing regulations, the FDA regulates the research, testing, manufacturing, safety, labeling, storage, recordkeeping, premarket review and marketing authorization, marketing and promotion, and sales and distribution of medical devices in the United StatesU.S. to provide reasonable assurance that medical products distributed domestically are safe and effective for their intended uses. In addition, the FDA regulates the import and export of medical devices manufactured between the United StatesU.S. and international markets.

CAP maintains a clinical laboratoryLaboratory accreditation program.can be acquired through CAP. While not required for the operation of a CLIA-certified laboratory, many private insurers require CAP accreditation as a condition to contracting with clinical laboratories to cover their tests. InWe addition,have chosen to use CAP accreditation to maintain our CLIA certification. Additionally, some countries outside the United StatesU.S. require CAP accreditation as a condition to permitting clinical laboratories to test samples taken from their citizens. CAP accredited laboratories are surveyed for compliance with CAP standards every two years in order to maintain accreditation. Failure to maintain CAP accreditation could have a material adverse effect on the sales of our products and the results of our operations. Therefore, to maintain our CLIA accreditation,certification, we have elected to be subject to survey and inspection every two years by CAP. Moreover, CLIA inspectors may make random inspections of our laboratory from time to time.

All of our laboratories undergo CAP accreditation to maintain CLIA accreditation under the CAP program.certification. The most recent CAP inspections for the Phoenix and Pittsburgh laboratories occurred in October 2024.

In order to test specimens from New York, LDTs must be approved by the NYSDOH on a test-by-test basis before they are offered. Our laboratory director and laboratory operations must also be separately qualified and approved through the state of New York. DecisionDx-Melanoma, DecisionDx-CMSeq, TissueCypher, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-UMSeq, IDgenetix and DiffDx-Melanoma have each been approved. New York State Laboratory Permits are held for both the Phoenix and Pittsburgh labs from NYSDOH. Our laboratory director has been qualified by the NYSDOH. We are subject to periodic inspection by the NYS CLEP and are required to demonstrate ongoing compliance with the NYSDOH regulations and standards. Our most recent inspections were in October 20222025 for Phoenix and October 2023 for Pittsburgh and were deemed to be compliant with the NYSDOH regulations and standards and both labs remain in good standing as of December 31, 2024.2025. To the extent the NYSDOH had identified any instances of non-compliance, and we were unable to remedy such non-compliance, the State of New York could withdraw approval for our products to test samples from New York state. We will need to seek the NYSDOH approval of any future LDTs we develop and want to offer for clinical testing to New York residents, and there can be no assurance that we will be able to obtain such approval.

We may also be subject to regulation in foreign jurisdictions as we seek to expand international utilization of our products or such jurisdictions adopt new licensure requirements, which may require review of our products in order to offer them or may have other limitations such as restrictions on the transport of human tissue samples necessary for us to perform our tests that may limit our ability to make our products available outside of the United States.U.S. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming and subject us to significant and unanticipated delays.

Failure to comply with applicable clinical laboratory licensure requirements may result in a range of enforcement actions, including suspension, limitation or revocation of our CLIA accreditationcertification and/or state licenses, imposition of a directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions and revocation of the laboratory’s approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing clinical laboratory licensure or our failure to renew our CLIA accreditation,certification, or a state or foreign license, could have a material adverse effect on our business, financial condition and results of operations. Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so.

On May 6, 2024, the FDA published a final rule which amendsamended 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act. InHowever, conjunctionon withMarch this31, 2025, the U.S. District Court for the Eastern District of Texas vacated the FDA’s LDT final rule,rule. The U.S. government did not appeal the ruling, and the FDA issued a policy to phaseout, overrescinded the courserule ofon fourSeptember years,19, its general enforcement discretion approach for LDTs so that IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs.2025.

IfDespite the FDA’s rescission of the LDT final rule, if the FDA changesimplements new policy that affects LDTs or endstheir its policy of enforcement discretion with respect to LDTs,components, and our products become subject to the FDA’s requirements for premarket review of medical devices, we may be required to cease commercial sales of our products and conduct clinical trials prior to making submissions to the FDA to obtain premarket authorization or approval. If we are required to conduct such clinical trials, delays in the commencement or completion of clinical trials could significantly increase our product development costs and delay commercialization of any currently marketed testing that we may be required to cease selling or the commercialization of any future tests that we may develop. Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of regulatorymarketing clearance or approval.authorization. The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial. Moreover, the FDA may request that we provide additional analyses and information beyond that which we intend to produce based on the designs of our current and planned validation studies or clinical trials, or that we modify or narrow our intended use or product claims. It is possible that the FDA, among other things, could disagree with our interpretation of data we have relied on to support certain intended uses. If we are required to provide additional analyses or additional data or perform additional clinical trials beyond those we currently contemplate to support the intended uses of our tests, our planned commercialization may be delayed and we may be required to cease commercialization of any tests we currently market as LDTs.

The FDA requires medical device manufacturers to comply with, among other things, current good manufacturing practices for medical devices, known as the Quality Management System Regulation,Regulation (“QMSR”), which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process; the medical device reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; labeling regulations, including the FDA’s general prohibition against promoting products for unapproved or ‘‘off-label’’“off-label” uses; and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act caused by the device which may present a risk to health.

Furthermore, government funding of the FDA and other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other government agencies may impact the ability of such agencies to timely review and process our regulatory and other submissions, which could have a material adverse effect on our business.

You should read the following discussion and analysis of financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results, performance or achievements could differ materially from any future results, performance or achievements discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Castle Biosciences is a molecular diagnostics company offering innovative test solutions to aid clinicians in the diagnosis and treatment of dermatologic cancers, Barrett’s esophagus (“BE”), atopic dermatitis (“AD”), and uveal melanoma (“UM”), and in the treatment of mental health conditions..

We currently offer fivesix commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology.ophthalmology, Weand alsomost offerrecently includes a proprietary a pharmacogenomic (“PGx”) test to guide optimal drugsystemic treatment fordecisions patientsin diagnosedmoderate-to-severe withatopic depression, anxiety and other mental health conditions.dermatitis.

Currently, ourOur revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”), andour TissueCypher risk stratification test for BE which is supplemented by revenue generated from our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

All five of our MAAA teststests, excluding our recently launched AdvanceAD-Tx test, have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare and Medicaid (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies; and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests. We believe this designation not only demonstrates our focus on developing and validating innovative tests but also enables our Medicare reimbursement rate to be set, over the long term,long-term, by the median private payor rate, which we believe provides a fair exchange of value. Further information about Medicare coverage and ADLT status with respect to each of our tests is set forth below.

DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test thatdesigned predictsto predict the likelihood of a positive sentinel lymph node and the risk of metastasis or recurrence, including a positive sentinel lymph node, for patients diagnosed with invasive CM. In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States,U.S., representing an estimated U.S. total addressable market (“TAM”) of approximately $540 million. We estimate that approximately 50% of patients diagnosed with CM are 65 years of age or older.

DecisionDx‑SCC is our proprietary GEP test for use in patients with SCC,SCC with one or more risk factors (also referred to as “high-risk” SCC) that both predicts the risk of metastasis as well as response to adjuvant radiation therapy. We estimate 20% of SCC,SCC patients, or approximately 200,000 annually in the United States,U.S., are classified as high risk, representing an estimated U.S. TAM of approximately $820 million.

TissueCypher is our proprietary risk stratification spatial-omicsspatialomics test designed to predict future development of progression of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE. We estimate a U.S. TAM of approximately $1 billion.

DecisionDx-UM is aour proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM. We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States. We estimate a U.S. TAM of approximately $10 million.

IDgenetix iswas a pharmacogenomic (“PGx”) test that guidesguided personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. We discontinued IDgenetix in May 2025 following further evaluation.

We bill third-party payors and patients for the tests we perform. We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries. DecisionDx-SCC previously received Medicare coverage, which was subsequently impacted by LCD changes finalized in 2025.

DecisionDx-Melanoma has met ADLT status, as determined by the CMS, since 2019. Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 20232025 was set using median private payor rate data from January 1, 20212023 to June 30, 2021.2023. Our rate for 2022, 2023 andthrough 20242025 was $7,193 per test.test Ourand rate for 2025 isremains $7,193 per test.test for 2026.

On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status. ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients. Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test,test whichand will remainremained effective through December 31, 2024. This rate is based on the median private payor rates received between April 1, 2022 and August 31, 2022. Thereafter,Beginning with 2025, the rate willfor beTissueCypher has been set annually based uponon the median private payor rate for the first half of the second preceding calendar year. Our 2025 rate will continue to bewas $4,950 per test based on the median private payor rate data from January 1, 2023 to June 30, 2023.2023 and remains $4,950 per test for 2026.

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019. Effective August 6, 2023, Palmetto and Noridian issued LCDs that converted the test-specific MyPath Melanoma LCD to a “foundational” LCD and provided coverage for bothMyPath Melanoma. We estimate that a significant majority of the MyPath Melanoma andtests DiffDx-Melanoma.performed for Medicare patients will meet the coverage criteria.

On September 6, 2019, MyPath Melanoma was approved as a “new ADLT”. in September 2019. TheOur rate for our MyPath Melanoma test is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 20242025 was set using median private payor rate data from January 1, 20222023 to June 30, 2022.2023. Our rates for 2022,2023, 2023,2024 and 20242025 were $1,755, $1,950 per test, $1,755 per test, and $1,950 per test, respectively. Our 2026 rate for 2025 isremains $1,950 per test.

DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017. We estimate that a significant majority of the DecisionDx-UM tests performed for Medicare patients will meet the coverage criteria.

On May 17, 2019, CMS determined that DecisionDx-UM has metmeets the criteria of “existing advanced diagnostic laboratory test” status, also referred to asfor “existing ADLT” status, as determined by the CMS, since May 2019.status. Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 20242025 was set using median private payor rate data from January 1, 20222023 to June 30, 2022.2023. Our rate for 2022, 2023 andthrough 20242025 was $7,776 per test.test Ourand 2025 rate isremains $7,776 per test.test for 2026.

The number of test reports delivered by us during the years ended December 31, 2024 and 2023 are presented in the table below:

For the years ended December 31, 20242025 and 2023,2024, our dermatologic test report volume increased by 15.5%7.8% and 30.5%,15.5%, respectively, largely driven by continued growth from our DecisionDx-Melanoma and DecisionDx-SCC tests. IncreasesTissueCypher fromincreased ourby other86.2% testsfor (non-dermatologic),the primarilyyear IDgenetixended andDecember TissueCypher,31, also2025, contributedfurther contributing to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “Net Revenues” under “—Components of Results of Operations—Net Revenues” below.

Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated. The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (‘‘ASC’’)ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).Customers. We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.

Macroeconomic conditions, including uncertainties associated with the Israel-Hamasongoing war,conflicts in the Middle East, the ongoing conflict between Ukraine and Russia, economic slowdowns, the recent shutdown of the federal government including regulatory agencies, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets orand other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Our net income (loss) income may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we:

•hire additional scientific and research and developmentR&D staff;

•Gross margin. We believe that our gross margin is an important indicator of the operating performance of our business. Higher gross margins reflect the average selling price (“ASP”) of our tests, as well as the operating efficiency of our laboratory operations.

•New product development. A significant aspect of our business is our investment in research and developmentR&D activities, including activities related to the development of new products. In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products.

We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, DecisionDx-SCC,TissueCypher, TissueCypherDecisionDx-SCC and DecisionDx-UM. We bill third-party payors and patients for the tests we perform.

Under ASC 606, we recognize revenue at the amount we expect to be entitled,entitled to receive, subject to a constraint for variable consideration, in the period in which our tests are delivered to the treating clinicians. We have determined that our contracts contain variable consideration under ASC 606 because the amounts paid by third-party payors may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration is recognized only to the extent it is probable that a significant reversal of revenue will not occur in future periods when the uncertainties are resolved. Variable consideration is evaluated and reassessed each reporting period and adjustments are recorded as increases or decreases in revenues.revenue. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and because the uncertainty of the amount to be received is not expected to be resolved for a long period of time. For these fully constrained claims, we generally recognize revenue in the period the uncertainty is favorably resolved, if at all. Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period. Our ability to recognize revenue for a test is dependent on the development of reimbursement experience and obtaining coverage decisions. For tests with limited reimbursement experience or no coverage, we recognize revenues based on the basis of actual cash collections.

Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, maintain Medicare coverage for our currently marketed products, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement raterates for tests performed.

Since our inception, we have had a history of net losses. For the year ended December 31, 2025, we had net loss of $24.2 million, and as of December 31, 2025, we had an accumulated deficit of $224.3 million. For the threesix months ended MarchJune 31,30, 2026, we had net loss of $14.5$16.6 million, and as of MarchJune 31,30, 2026, we had an accumulated deficit of $238.8$240.9 million. We cannot predict if we will continue to achieve profitability in the future. We may incur losses in the future as we plan to invest significant additional funds toward the expansion of our commercial organization, the conduct of clinical utility and validity studies to support adoption of our products and the development or acquisition of additional products. We also expect increases in our stock-based compensation expense in future periods due to additional awards outstanding, attributable to increased headcount. Additionally, our performance could be affected by the impacts of geopolitical and macroeconomic developments, such as the ongoing conflicts in the Middle East, including the conflict between the U.S.U.S., Iran, and Iran,Israel, the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, the recent shutdownshutdowns of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns, and the potential failures of bankbanks or other disruptions in the banking system or financial markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments. Due to the requirements associated with being a public company, we expect to continue incurring significant additional legal, accounting and other expenses. We also expect that any acquisitions of businesses, assets, products or technologies will increase our expenses. These increased expenses will make it harder for us to achieve future profitability or generate positive cash flows. Furthermore, our revenues from our DecisionDx-SCC test represented a lesser portion of our 2025 revenues compared to prior years following the discontinuance of Medicare reimbursement as of April 24, 2025, and we expect it will continue to be a smaller portion of our 2026 operating results. See “—Risks Related to Our Business—Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, TissueCypher, and DecisionDx-SCC tests, and we will need to generate sufficient revenue from these products and other products to grow our business.” We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in the 2025 10-K, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities. Our failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

Our revenue currently depends primarily on sales from our DecisionDx-Melanoma,TissueCypher, TissueCypherDecisionDx-Melanoma and DecisionDx-SCC tests, and we will need to generate sufficient revenue from these products and other products to grow our business.

In July 2025, we submitted reconsideration requests for both the Novitas and MolDX LCDs. Novitas subsequently confirmed that our request for DecisionDx-SCC was valid. MolDX also subsequently confirmed that our request for DecisionDx-SCC was valid and that the test has been placed on its waiting list, with an Open Meeting date to be determined. These confirmations represent anotheran important procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome.

Without positive coverage policies, our products may not be reimbursedreimbursed, and we may not be able to recognize revenue. If we are unable to increase sales and expand coverage and reimbursement for DecisionDx-Melanoma, TissueCypher, and our other tests, develop and commercialize other products, and successfully obtain coverage and adequate reimbursement for such products, our revenue and our ability to achieve profitability would be impaired, and the market price of our stock could decline substantially.

Our results of operations could be adversely affected by general conditions in the U.S. and global economies, the U.S. and global financial markets and adverse macroeconomic developments. U.S. and global marketeconomic and economicfinancial conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, the ongoing conflictconflicts in the Middle East, including therecent conflictactions betweenby Iran, Israel, and the U.S. and Iran,U.S., the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, the recent shutdownshutdowns of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns, and the potential failures of bank or other disruptions in the banking system or financial markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, among others. General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, foreign currency exchange rates, liquidity of the global financial markets, changes in trade and tariff policies, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our collaborators, our manufacturers and our suppliers operate.

Financial markets around the world are experiencing volatility following the conflict between the U.S. and Iran in February 2026 and the invasion of Ukraine by Russia in February 2022. As a result of the U.S.conflicts andin Iranthe conflictMiddle East, the U.S., UK, Canada, Australia, Japan, South Korea, Israel, and the European Union have placed sanctions and export controls on Iran. Due to the escalation of the ongoing conflictconflicts involvingin the U.S.Middle East, including the conflict between the U.S., Iran, and Iran,Israel, the closure and risk of closure of the Strait of Hormuz has imposed significant constraints on global oil and energy transportation and production. Additionally, in response to the invasion of Ukraine, the U.S., UK and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and/or supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the Russia-Ukraine conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. More recently, the escalation of hostilities between Iran and Israel has introduced additional geopolitical instability and uncertainty, particularly in the Middle East. This conflict has the potential to disrupt global energy supplies, impact shipping routes, and lead to broader regional or international involvement, further straining global supply chains and financial markets. Further, a weak or declining economy could strain our suppliers, manufacturers and collaborators, possibly resulting in additional supply disruption for our product candidates. As a result, our business and results of operations may be adversely affected by the ongoing conflict between the U.S. and Iran and the conflict between Ukraine and Russia, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. If economic conditions in Europe, the Middle East, or other key markets for our business and the business of our suppliers, manufacturers and collaborators remain uncertain or deteriorate further, we could experience adverse effects on our business, financial condition, results of operations or cash flows.

Our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our TissueCypher risk stratification test for BE which is supplemented by revenue generated from our DecisionDx-UM risk stratification test for UM.BE.

Our Gastroenterology TestTests

For the three and six months ended MarchJune 31,30, 2026, our test report volume increased by 10%16% and 13%, respectively, compared to the same periodperiods in 2025. OurThe dermatologicincrease primarily reflects continued growth in our core revenue drivers, TissueCypher and DecisionDx-Melanoma. TissueCypher test report volume increased by 6%63% and 61% for the three and six months ended June 30, 2026, respectively, reflecting continued commercial adoption. We continue to invest in expanding our Pittsburgh laboratory operations to increase TissueCypher testing capacity and support future growth. DecisionDx-Melanoma test report volume increased by 3% and 9% for the three and six months ended June 30, 2026, respectively. Dermatologic test report volume decreased by 4% for the three months endedJune March 31,30, 2026 comparedbut toincreased by 1% for the priorsix periodmonths inended 2025,June largely30, driven2026, primarily reflecting lower DecisionDx-SCC test report volume, partially offset by continued growth from our DecisionDx-Melanoma test. TissueCypher increased by 58% for the three months ended March 31, 2026, compared to the prior period in 2025, further contributing to the overall volume increase.DecisionDx-Melanoma. For a discussion of how we recognize revenue derived from our tests, refer to “Components of Results of Operations—Net Revenues” below.

For our AdvanceAD-Tx product line, we received approximately 6501,000 and 1,650 orders during the three and six months ended MarchJune 31,30, 2026, respectively, while still in the initial limited access phase. We believe early adoption reflects clinician interest in integrating AdvanceAD-Tx into existing AD treatment pathways. We plan to expand availability in a phased manner throughout the remainder of 2026.

For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test. During the threesix months ended MarchJune 31,30, 2026, approximately 54%68% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Macroeconomic conditions, including uncertainties associated with the ongoing conflicts in the Middle East, including the conflict between the U.S.U.S., Iran, and Iran,Israel, the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, the recent shutdownshutdowns of the federal government including regulatory agencies, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, current or proposed international tariffs, trade restrictions and retaliatory trade measures, cybersecurity threats, liquidity concerns at, and potential failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma,TissueCypher, TissueCypherDecisionDx-Melanoma and DecisionDx-UM.DecisionDx-SCC. We bill third-party payors and patients for the tests we perform.

Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “Results of Operations—Comparison of the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025” for details.

Net Gains (Losses) Gains on Equity Securities

Net gains (losses) gains on equity securities are primarily attributable to realized and unrealized gains and losses on our equity securities which we present as marketable investment securities.

Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business. Income tax benefit is primarily due to the revised estimated useful life of our intangible asset related to the discontinuation of our IDgenetix test offering in May 2025, which resulted in a temporary difference and a corresponding deferred tax asset. We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and R&D credits and other tax credits.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Net revenues for the threesix months ended MarchJune 31,30, 2026 decreasedincreased by $4.3$13.0 million, or 4.9%,7.5%, to $83.7$187.2 million compared to the threesix months ended MarchJune 31,30, 2025, dueprimarily todriven by a $21.9$42.5 million decreaseincrease in revenuesrevenue from our dermatologicnon-dermatologic tests, partially offset by a $17.5$29.5 million increasedecrease in revenuesrevenue from our non-dermatologicdermatologic tests.

The $17.5$42.5 million increase in revenues from our non-dermatologic tests was largelyprimarily attributable to a 58%61% increase in test report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP. The increase in TissueCypher test report volumes reflects continued growth driven by our sales force efforts. Net revenues from our non-dermatologic tests as a percentage of total net revenues increased from 28.4%31.5% for the threesix months ended MarchJune 31,30, 2025 to 50.9%52.0% for the threesix months ended MarchJune 31,30, 2026.

Cost of sales (exclusive of amortization of acquired intangible assets) for the threesix months ended MarchJune 31,30, 2026 increased by $4.2$10.2 million, or 25.3%,30.1%, compared to the threesix months ended MarchJune 31,30, 2025, primarily due to higher expenses for lab supplies, higher personnel costs, higher lab services cost, higher personnel costs, and higher depreciation expense. The increase in expenses for lab supplies and lab services expensecosts was driven by higher test report volumes.volumes reflecting the shift in the mix of reports issued. Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees. The higher depreciation expense reflects continued investment in and expansion of our laboratory facilities.

Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expenseexpenses will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected operational growth and higher test volumes.

Our gross margin percentage was 72.8%74.0% for the threesix months ended MarchJune 31,30, 2026, compared to 49.2%63.1% for the threesix months ended MarchJune 31,30, 2025. The increase was primarily driven by significantly lower amortization of acquired intangible assets. Amortization expense was elevated in the prior-year period due to accelerated amortization related to the IDgenetix test, which was fully amortized as of March 31, 2025 following the decision to discontinue IDgenetix, resulting in no amortization expense associated with this asset in the current period.

R&D expenses increased by $1.8$3.6 million, or 14.6%,14.2%, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth and increases in clinical studies costs reflect investment in our pipeline products.

Sales and marketing expenses increased by $4.2$10.0 million, or 11.5%,13.9%, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. The increase is primarily due to higher personnel costs and higher sales related travel expenses. Increases in personnel costs reflect a higher headcount driven by sales force expansion as well as merit and annual inflationary wage adjustment for existing employees. Higher sales related travel expenses reflect increased field activity to support growing test report volumes. Stock-based compensation expense included in sales and marketing expense was $3.5$7.4 million for the threesix months ended MarchJune 31,30, 2026, compared to $4.0$7.9 million for the threesix months ended MarchJune 31,30, 2025.

General and administrative expenses increased by $2.1$4.3 million, or 9.4%,9.6%, for the threesix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025. The increase is primarily due to higher personnel costs,costs and higher information technology-related costs, and higher travel costs partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Stock-based compensation expense included in general and administrative expense was $3.6$8.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $3.8$7.0 million for the threesix months ended MarchJune 31,30, 2025.