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

Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and our reputation.

We have a history of losses, and we may not be able to regain or sustain profitability.

We may not be successful in our efforts to integrate any acquired businesses and technologies, and this may adversely affect our business and results of operations. We may incur unexpected liabilities as a result of our acquisitions.acquisitions, including liabilities not reflected or contemplated in the financial statements of these acquired businesses.

If any of our laboratory facilities become inoperable,inoperable or inaccessible, if we are forced to vacate a facility, or if we are unable to obtain additional laboratory space as and when needed, we wouldmay be unable to perform our tests or maintain desired turnaround times, and our business wouldand results of operations could be harmed.

We depend on our information technology systemssystems, and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems and/or cybersecurity breaches,breaches or attacks, could materially harm our business.

Failure to comply with government laws and regulations related to submission of claims for our tests and testing services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs. We are also subject to governmental audits and investigations, such as the current HRSA Audit and CIDs, that could result in material refunds or settlements. Our business, prospectsprospects, and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.

Any changes in federal laws, regulations or the enforcement discretion of the FDApolicies with respect to the marketing of diagnosticclinical products,laboratory tests, or violations of laws or regulations by us, could materially and adversely affect our business, prospects, results of operations or financial condition.

We have and may again be required to modify our business practices, pay fines, incur significant expenses, or experience losses due to litigation orlitigation, governmental investigationsinvestigations, or as a result of voluntary disclosure processes.

RiskRisks Related to the Development of DrugProduct Candidates

Our drugproduct candidates are in early stages of development and may fail or suffer delays that materially and adversely affect their future commercial viability.

Any drugproduct candidate that we may attempt to develop, manufacture, or market in the United States will be subject to extensive regulation by the FDA, including regulations relating to development, preclinicalnon-clinical testing, performance of clinical trials, manufacturing, and post-approval commercialization and will also be subject to extensive regulations outside of the United States. Satisfaction of these and other regulatory requirements is costly, time-consuming, uncertain, and subject to unanticipated delays. The time required to obtain FDA approval, and any other required approvals for pharmaceutical products, including any accelerated approval, is unpredictable but typically requires yearsup to several years and may never be obtained.

If we are unable to obtain and maintain patent protection for any drugproduct candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any drugproduct candidate we may develop, and our technology, may be adversely affected.

We rely on trade secret protection, non-disclosure agreements, and invention assignment agreements to protect our proprietary information, which may not ultimately be effective.

Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation could require us to spend significant time and money and prevent us from selling our tests or developing drugproduct candidates.

Obtaining and maintaining our patent protection depends on compliance with various procedural,procedures, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Our future issued patents covering drugproduct candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.

Patent terms may be inadequate to protect ourthe competitive position onof our products and services for an adequate amount of time.

If we do not obtain patent term extension and/or data exclusivity for any drugproduct candidate that we may develop, our business may be materially harmed.

The price of our common stock may be volatile, and youstockholders could lose all or part of yourtheir investment.

Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and our reputation.

In the ordinary course of our business, we generate, collectcollect, and store sensitive data, including personal health information, or PHI; personally identifiable information; intellectual property; and proprietary and other business-critical information, such as research and development data, commercial data, and other business and financial information. We managemanage, andmaintain, maintain the data we generate and collectcollect, and store data utilizing a combination of on-site systems and managed data centercloud systems. We also communicate sensitive patient data when we deliver reports summarizing test results to our customers, which we deliver via our online encrypted web portal, encrypted email, or fax, or overnight courier. The secure processing, storage, maintenance, and transmission of this information is vital to our operations and business strategy, and we devote significant resources to protecting the confidentiality and integrity of this information. While we perform regular audits of our information systems security, we cannot audit our vendors, suppliers, and customers’ systems in the same way and cannot monitor containment or the spread of malware on those systems, with a potential resultingadverse impact on our systems.

On occasion, we do encounter attempted security incidents. To date, these incidents have not materially affected our business. While we are not currently aware of any cyber breaches, attacks, malicious software, or hardware that would materially and adversely affect our business, such a security incident could be present in any of our or our subsidiaries’ systems or in the systems of our suppliers, customers, vendors, or contractors. When discovered, these incidents could cause us to suffer a material data breach. A breach or interruption could result in material legal claims or proceedings and could result in material liability or penalties under federal, state, or foreign laws that protect the privacy of personal information, discussed below under “We are subject to broad legal requirements regarding the information we test and analyze, and any failure to comply with these requirements could result in materially significant penalties, materially damage our reputation and materially harm our business.” Additionally, unauthorized access, manipulation, loss, or dissemination could significantly damage our reputation and disrupt our operations, including our ability to perform our tests, analyze and provide test results, bill customers or other payors, process claims for reimbursement, provide customer service, conduct research and development activities, collect, process, and prepare company financial information, conduct education and outreach activities and manage the administrative aspects of our operations, as described further below under “We depend on our information technology systems and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems or cybersecurity breaches could materially harm our business.”

Our results of operations have experienced fluctuations from period to period, which we expect may continue in the future. These fluctuations can occur because of a variety of factors, including, among others, the amount and timing of sales of our tests and testing services,services; the prices we charge for our tests and testing services,services; customer or payor mix,mix; whether large customers continue to order our tests; general price degradation for our tests and testing services or other competitive factors,factors; the rate and timing of our billings and collections,collections; weather conditions; our ability to obtain reimbursement for our tests from insurance payors,payors; our ability to maintain a broad and flexible testing menu,menu; the timing and amount of our commitments and other payments,payments; and exchange rate fluctuations, as well as the other risk factors discussed in this report. Our results have been, and may in the future be, impacted by events that may not recur regularly, in the same amounts or at all in the future. For instance, in 2020, we developed and began offering a series of COVID-19 tests. We experienced substantial revenue growth in 2020 and 2021 due primarily to the sales of, and growing demand, for these COVID-19 tests, but we have seen a decrease in our COVID-19 revenue in recent years due to the decline in prevalence of COVID-19. The fluctuations in our operating results may render period-to-period comparisons less meaningful, and investors should not rely on the results of any one period as an indicator of future performance. These fluctuations in our operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock.

We have a history of losses, and we may not be able to regain or sustain profitability.

We have a history of losses. Although we achieved profitability for the year ended December 31, 2022, we were not profitable for the years ended December 31, 2023 and 2024,losses, and we may not again be profitable in any future periods. Further, our revenue levels may not grow at historical rates or at all. We may incur additional losses in the future. While we experienced significant profitability in connection with the sale of our COVID-19 tests in previous years, the demand for these tests has declined and, currently, we do not expect future material revenue from the sale of our COVID-19 tests and testing services. Even if there is a reoccurrence of demand for our COVID-19 tests or other substantial revenue growth, we may be unable to again manage our resources to effectively respond to this demand such that our revenues would again materially increase. Any losses would have an adverse effect on our stockholders’ equity and working capital, which could negatively impact our operations and yourstockholders’ investment in theour Company.company. A failure to sustain or grow our revenue levels andor to maintainregain profitability may negatively affect our business, financial condition, results of operations andoperations, cash flows, and the market price of our common stock may decline or continue to decline.stock.

We may not be successful in our efforts to integrate any acquired businesses and technologies, and this may adversely affect our business and results of operations. We may incur unexpected liabilities as a result of our acquisitions.acquisitions, including liabilities not reflected or contemplated in the financial statements of these acquired businesses.

increased demand on human resources and operating systems, proceduresprocedures, and controls; and reductions in future operating results as a result of the amortization of intangible assets.

In particular, we have based our revenue projections on the timely and successful completion of the Bako Diagnostics and StrataDx acquisitions (which is subject to the risks discussed above), and on these businesses performing as expected following closing. If we are unable to successfully integrate these businesses, for the reasons above or for any reason, our expectations and projections concerning these businesses could ultimately be wrong. Acquisitions are also accompanied by the risk that obligations and liabilities of an acquired business may not be adequately reflected in the historical financial statements of that business and the risk that historical financial statements may be based on assumptions, which are incorrect or inconsistent with our assumptions or approach to accounting policies. TheWe may also acquire contingent liabilities in connection with the acquisitions of a business, which may be material, and any estimates we might make regarding any acquired contingent liabilities and the likelihood that these liabilities will materialize could differ materially from the liabilities actually incurred. Further, the acquisition and integration of businesses may not be managed effectively, and any failure to manage the integration process could lead to disruptions in theour overall activities of the Company,activities, a loss of clients and revenue, and increased expenses. Further, integration of an acquired business or technology could involve significant difficulties and could require management and capital resources that otherwise would be available for ongoing development of our existing business or pursuit of other opportunities. We may also acquire contingent liabilities in connection with the acquisitions of a business, which may be material, and any estimates we might make regarding any acquired contingent liabilities and the likelihood that these liabilities will materialize could differ materially from the liabilities actually incurred. These circumstances could materially harm our business, results of operations, and prospects.

We have previously acquired, and may again in the future acquireacquire, businesses or assets, form joint ventures, make investments in other companies orand technologies, or establish other strategic relationships, any of which could harm our operating results or dilute our stockholders’ ownership. These transactions may be subject to federal and state anti-trust laws and regulations, and any failure to comply, or alleged failure to comply, with these laws and regulations, may adversely affect our business, operating results and prospects.

As part of our business strategy, we have previously and may again in the future pursue acquisitions of complementary businesses or assets (such as our acquisitions of Cytometry Specialist, Inc.Inc., or CSI; Fulgent Pharma; and Symphony Buyer, Inc., or Inform Diagnostics; and ANP), investments in other companies (such as our investment in Helio Health), technology licensing arrangements, joint ventures, or other strategic relationships. As an organization, we have relatively limited experience with respect to acquisitions, investments, or the formation of strategic relationships or joint ventures. If we pursue relationships with strategic partners or other strategic relationships, our ability to establish and maintain these relationships could be challenging due to several factors. Factors include competition with other testing companies and internal and external constraints placed on pharmaceutical and other organizations that limit the number and type of relationships they can establish with companies like ours. Moreover, we may not be able to identify or complete any future acquisition, investment, technology license, joint venture, or other strategic relationship in a timely manner, on a cost-effective basis, or at all; and we may not realize the anticipated benefits of any acquisition, investment, or joint venture as needed to recoup our costs.

To finance any acquisitions, investments, joint ventures, or other strategic relationships, we may seek to raise additional funds through securities offerings, credit facilities, asset sales orsales, collaborations, or licensing arrangements. To the extent these financing transactions call for the issuance of shares of our capital stock, our existing stockholderstockholders would experience dilution in their relative ownership of shares of our capital stock. Each of these methods of fundraising is subject to a variety of risks, including those discussed below under “Any inability to obtain additional capital when needed and on acceptable terms may limit our ability to execute our business plans, and our liquidity needs could be materially affected by market fluctuations and general economic conditions. If we raise funds by issuing equity securities, our stockholders may experience substantial dilution.” Further, additional funds from capital-raising transactions may not be available when needed, on acceptable terms or at all. Any inability to fund any acquisitions, investments, or strategic relationships we pursue could cause us to forfeit opportunities we believe are promising or valuable,valuable whichand that could harm our prospects. If we raise funds by issuing equity securities, our stockholders may experience substantial dilution.

Any acquisitions we may currently have in progress, including in our acquisition of Dermatopathology Experts, LLC (a.k.a. StrataDx) and of certain assets of Bako Pathology Holdings, Inc. and its affiliates (a.k.a. Bako Diagnostics), are subject to a number of closing conditions, which may not occur or be fulfilled. We may ultimately fail to close acquisitions in progress as of the date of this Annual Report, or these acquisitions may close later than we expect. Our acquisitions of laboratory and healthcare regulated entities and businesses, such as our anticipated acquisition of StrataDx and of certain assets of Bako Diagnostics, are subject to review by various state regulatory agencies and entities, and our consummation of future acquisitions may be delayed and may further encounter scrutiny under federal and state antitrust laws. ForIn example,particular, our future acquisitions may be subject to notification under the Hart-Scott Rodino Antitrust Improvements Act of 1976 and to a waiting period and possible review by the DOJ and the FTC.FTC or additional waiting periods mandated by various state regulatory agencies. Any delays, injunctions, conditions or modifications by any of these federal or state agencies could have a negative effect on us and result in the abandonment of all or part of these acquisitions or otherwise attractive acquisition opportunities. In recent years, a number of states have also adopted health care transaction review laws aimed at increased transparency and health care market oversight. When triggered, these laws require significant time and resources, which could further delay future acquisitions. There can be no assurance as to the cost, scope or impact on our business, results of operations, financial condition or prospects of the actions that may be required to obtain regulatory approvals. Further, even following completion of an acquisition, applicable government agencies may disagree with our interpretation of thesecomplicated complicatedapplicable statutes and regulations. These disagreements, violationsviolations, or alleged violations could result in significant civil or criminal penalties and/or equitable actions not in our favor. Any such circumstances, violationsdelayed closings, failures to close acquisitions in progress, violations, or alleged violations could have a material adverse effect on our business and substantially diminish the synergies and other advantages which we expect from such acquisition.

Our mix of customers fluctuates from period to period, and our revenue is often concentrated among onlya single large customer or a small number of customers, and the loss of or a reduction in sales to any of ourthese customers could materially harm our business.business and results of operations.

The composition and concentration of our customer base often fluctuates from period to period, and in certain prior periods, a small number of customerscustomers, or a single large customer has accounted for a significant portion of our revenue. When customers who, to our knowledge, are under common control or otherwise affiliated with each other are aggregated, one of our laboratory customers contributed $62.6$70.8 million or 22% of our total revenue during the year ended December 31, 2024.2025. We continue to see significant concentration in athis single large customer. For this customerlaboratory customer, and for our customers generally, tests are purchased on a test-by-test basis and not pursuant to any long-term purchasing arrangements. As a result, any or all of our customers, including affiliated customers or customers under common control who purchase large quantities of tests, could decide at any time to decrease, delay, or discontinue their orders from us, which could adversely affect our revenue. We believebegan someto see lower than anticipated testing volume from this large customer in the fourth quarter of these2025, fluctuationsand going forward, we expect reduced revenues from this large laboratory customer in 2026 (particularly through the second quarter of 2026) as this customer demandbegins performing certain tests and testing services internally, rather than purchasing these tests and testing services from us. We believe we may be attributable,able to offset, or partially offset, this decrease in part,revenues tofrom this laboratory customer through the naturedevelopment of ourexisting business.customers, or by capturing new customers (including through the Bako Diagnostics and Strata Dx acquisitions), but these efforts may not be successful. Our traditional laboratory and testing services customers can also experience significant volatility in their testing demand from period to period in the ordinary course of their operations andor certainin periods of these customers are experiencing significant financial distress. Demand fluctuations, particularly for any large customers, often have a significant impact on our period-to-period performance regardless of their cause.

ForAs instance,an example, during 2023 and 2024, several projects for our BioPharma services clients were scaled back or terminated.terminated; and during 2024 and 2025, some of our laboratory services customers went into bankruptcy. This was primarily due to those clients experiencing significant financial distress, undergoing restructuring, shifting their focus, reacting to changing market dynamics, or concluding large clinical trials. We have also experienced recent growth in demand from fertility clinics and other laboratory customers as a result of our Beacon Expanded Carrier, or Beacon screen. However, if demand for IVF or other assisted reproductive technologies declines, demand for our Beacon tests and services may also decline. In light of the overturning of Roe v. Wade, the recent political climate and state court decisions, there is uncertainty regarding the potential regulatory treatment of embryos, which may cause demand for IVF, or other assisted reproductive technologies, to decline or to decline in certain jurisdictions. Further,We ifbelieve some of these fluctuations in customer demand may be attributable, in part, to the nature of our laboratorybusiness. customersDemand decidedfluctuations, toparticularly performfor certainany testinglarge servicescustomers, internally,often have a significant impact on our businessperiod-to-period andperformance resultsregardless of operationstheir could be materially and adversely harmed.cause. Our ability to maintain or increase sales to our existing customers also depends on a variety of factors, including the other risk factors discussed in this report, many of which are beyond our control. Because of these and other factors, sales to any of our customers, including any key, affiliated, or commonly controlled customers, may not continue in the amounts or at the rates as they have in the past, and such sales may never reach or exceed historical levels in any future period. The loss of any of our customers, or a reduction in orders or difficulties collecting payments for tests ordered by any of them, could significantly reduce our revenue and adversely affect our operating results.

We operate our businesses in very competitive and evolving fields. While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, marketing, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance these advantages.

More specifically, many of our competitors have longer operating histories, larger customer bases, larger research and development staffs, more expansive brand recognition, established manufacturing capabilities and facilities, deeper market penetration, substantially greater financial, technological, and research and development resources and selling and marketing capabilities with established sales forces; and considerably more leverage and experience dealing with insurance payors. As a result, they may be able to respond more quickly to changes in customer requirements or preferences; develop faster and better advancements for their technologies, product candidates, and tests; create and implement more successful strategies for the promotion and sale of their tests; obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings; adopt more aggressive pricing policies for their tests; secure supplies from vendors on more favorable terms; or devote substantially more resources to infrastructure and systems development. In addition, competitors may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our laboratory services competitors include dozens of companies focused on pathology, genetic, and diagnostic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests. As such, we face intense competition from other life science, biotechnology, pharmaceutical, research and development, laboratory, and diagnostic companies. This competition is subject to rapid change, could be significantly affected by new product or testing introductions, and may intensify further in the future. With respect to our Fulgent Pharma research and development business, these competitors also compete with us in recruiting and retaining top qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercialCommercial opportunities for our product candidates could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe side effects than any products or product candidates that we may develop. Our competitors also may obtain FDA, European Medicines Agency, or EMA, or other regulatory approval for their products more rapidly than we may obtain approval for our products,products or product candidates, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if our drugproduct candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then. The key competitive factors affecting the success of our drugproduct candidates are likely to be their efficacy, safety, and availability of reimbursement, and drugsproducts or drugproduct candidates may compare more favorably than our drugproduct candidates. We may not be able to compete effectively against competitive organizations. If we are unable to compete effectively, this could have a material adverse effect on our business and results of operations.

If any of our laboratory facilities become inoperable, if we are forced to vacate a facility, or if we are unable to obtain additional laboratory space as and when needed, we wouldmay be unable to perform our tests, maintain desired turnaround times and our business wouldand results of operations could be harmed.

Further, if we need to relocate from one laboratory facility to another laboratory facility or obtain additional laboratory space, we may have difficulty locating suitable space in a timely manner, on reasonable termsterms, or at all. Even if acceptable space was available, it would be challenging, time-consuming, and expensive to obtain or transfer the licensure and accreditation required for a commercial laboratory like ours and the equipment used to perform our tests. These challenges are amplified as we maintain laboratory space outside the United States. If we are unable to obtain or are delayed in obtaining new laboratory space as needed, we may not be able to provide our existing tests, provide test results within acceptable turnaround times, or develop and launch new tests, which could result in harm to our business, reputation, financial conditioncondition, and results of operations.

Our business depends on our ability to quickly and reliably deliver test results to our customers. We typically receive specimens from customers within days of shipment from the United States and outside the United States, or in some cases overnight, for analysis at our laboratory facilities. Disruptions in delivery service, whether due to labor disruptions, bad weather or natural disasters (including severe weather, firesfires, or other natural eventsevents, which may be exacerbated by climate change), labor strikes, work stoppages, or boycotts, pandemics or epidemics, terrorist acts or threats, force majeure events, or for other reasons, could adversely affect specimen integrity and our ability to process specimens in a timely manner, provide test results within acceptable turnaround times and otherwise service our customers. These circumstances could ultimately materially and adversely affect our reputation and our business. In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be materially and adversely affected.

We depend on our information technology systemssystems, and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems and/or cybersecurity breaches,breaches or attacks, could materially harm our business.

Additionally, if and as our business grows, we will need to continually improve and expand the scope of our technology systems in order to maintain their adequacy for the scale of our operations. Any failure to make such improvements or any significant delay in the planned implementation of new or enhanced systems could render our systems obsolete or inadequate, in which case our service to our customers and our other business activities could materially suffer, and we could be more vulnerable to electronic breaches from outside sources.

We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations. In particular, we rely on Illumina as the sole supplier of the next generation sequencers and associated reagents we use to perform our genetic tests and as the sole provider of maintenance and repair services for these sequencers; on Roche Holdings AG for certain laboratory equipment, supplies and services for our immunohistochemistry services; on Beckman Coulter Diagnostics for certain laboratory equipment, supplies and services for our flow cytometry tests and testing services; on Leica Biosystems for an automated digital scanning solution to scale up the digital pathology operations; and on Abbott Laboratories for certain laboratory equipment, supplies and services for our FISH tests and testing services. Additionally, our therapeutic development business relies on ANP Technologies, Inc. for certain laboratory services, equipment, tools, and drug intermediates in connection with our research and development efforts. We do not have long-term agreements with most of our suppliers and, as a result, they could cease supplying these materials and equipment generally to us at any time due to an inability to reach agreement with us on supply terms, disruptions in their operations, a determination to pursue other activities or lines of business, or they could fail to provide us with sufficient quantities of materials that meet our specifications, among other reasons. These suppliers may also be affected by natural disasters such as extreme weather events, fires or flooding (which may be exacerbated as a result of climate change), pandemics and health events, and disruptions of the global supply chain. While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests. In addition, the use of equipment or materials provided by a replacement supplier could require us to alter our laboratory operations and procedures. Moreover, we believe there are currently only a few manufacturers that are capable of supplying and servicing certain equipment and other materials necessary for our laboratory operations, including sequencers and various associated reagents. As a result, replacement equipment and materials that meet our quality control and performance requirements may not be available on reasonable terms, in a timely manner or at all. If we encounter delays or difficulties securing, reconfiguring or revalidating the equipment, reagents and other materials required for our tests our operations could be materially disrupted; our anticipated turnaround times or ability to deliver our testing services in a timely manner could be adversely impacted; our development efforts may be delayed or interrupted; and our business, financial condition, results of operations and reputation could be adversely affected.

Our success depends in large part on the skill, experience, and performance of our executive management team and others in key leadership positions, especially Ming Hsieh, our founder, Chief Executive Officer and ChairmanChairperson of our board of directors; Paul Kim, our Chief Financial Officer; Dr. Hanlin Gao, our Chief Scientific Officer and Laboratory Director; and Jian Xie, our President and Chief Operating Officer. Additionally, the success of our Fulgent Pharma business depends in large part on the skill, experience, and performance of Dr. Ray Yin, its President and Chief Scientific Officer. The continued efforts of these persons will be critical to us as we continue to develop our technologies and focus on growing our business. If we lose one or more of these key executives, we could experience difficulties maintaining our operations, including our ability to compete effectively, advance our technologies, develop new tests, and implement our business strategies.strategies, and advance our research and development efforts with Fulgent Pharma. All of our executives and employees, including Messrs. Hsieh, Kim, and Xie; Dr. Yin; and Dr. Gao, are at-will, meaning either we or the executive may terminate his employment at any time. We do not carry key person insurance for any of our executives or other employees. In addition, we do not have long-term retention agreements in place with any of our executives or key employees.

We have been and may again be subject to negative publicity. Reputational risk, including as a result of negative publicity, is inherent in our business. Negative publicity can result from actual or alleged conduct in a number of areas, including legal and regulatory compliance, professional liability, malpractice, corporate governance, litigation, inadequate protection of health information, illegal or unauthorized acts taken by third parties that supply products or services to us, and the conduct of our employees or agents. In particular, COVID-19 and access to fertility services havehas been a politically controversial topics, and our provision of COVID-19 testing and related services has subjected us to negative publicitytopic, and we may again be subject to negative publicity in connection with our testing services provided to fertility clinics or provided in support of assisted reproductive technology. Negative publicity can damage our reputation and business even if these statements about us are untrue. Damage to our reputation could adversely impact our ability to attract new and to maintain existing customers, employees, and business relationships. This damage and these circumstances may have a material adverse effect on our financial condition, prospects, and results of operations.

We believe our future success will depend in part on our ability to continue to expand our testtest, diagnostic and testing service offerings and to develop and sell new teststests, diagnostic services and testing services and on our ability to expand our presence in new and existing markets, including our presence in the molecular diagnostic and cancer testing markets. We may not be successful in launching or marketing any new tests or services we may develop; in expanding into any new or existing markets; and, even if we are successful, the demand for our teststests, diagnostic or testing services could decrease or may not continue to increase at historical rates. Development of new teststests, diagnostic and testing services is time-consuming and costly, as development and marketing of new teststests, diagnostic and testing services often requires us to conduct research and development activities regarding the new teststests, diagnostic and testing services and to further scale our laboratory processes and infrastructure to be able to analyze increasing amounts of more diverse data. Further, we may be unable to discover or develop and launch new teststests, diagnostic or testing services for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test. Any new test we are able to discover and develop may not be launched in a timely manner, meet applicable regulatory standards, successfully compete with other technologies and available tests, avoid infringing the proprietary rights of others, achieve coverage and adequate reimbursement from insurance payors, be capable of performance at commercial levels and at reasonable costs, be successfully marketed, or achieve sufficient market acceptance for us to recoup our time and capital investment in the development of the test. Any failure to successfully develop, market, and sell new tests or testing services could negatively impact our ability to attract and retain customers, our revenue, and prospects.

TheOur development and use of AI presents risks and challenges that can impact our business, including by posing security risks to our confidential information, proprietary information, and personal data and could give rise to legal and/or regulatory actions, damage our reputation, or otherwise materially harm our business.

AI is increasingly being used in the biopharmaceutical, pharmaceutical, technology, and consumer health industries. We evaluate different AI technologies and identify areas where we can apply AI to improve our operations. We have developed and incorporated AI technology in certain of our productstesting and services, including for digital pathology. Issues relating to the use of new and evolving technologies such as AI, machine learning, generative AI, and large language models, may cause us to experience perceived or actual brand or reputational harm, technical harm, competitive harm, legal liability, cybersecurity risks, privacy risks, compliance risks, security risks, ethical issues, and new or enhanced governmental or regulatory scrutiny,scrutiny; and we may incur additional costs to resolve such issues. Litigation or government regulation related to the use of AI may also adversely impact our ability to develop and offer productstests and services that use AI, as well as increase the cost and complexity of doing so. In addition, uncertainties regarding developing legal and regulatory requirements and standards may require significant resources to modify and maintain business practices to comply with U.S. and non-U.S. laws concerning the use of AI, the nature of which cannot be determined at this time. In addition, the European UnionUnion’s recentlyAI passedAct theentered Artificialinto Intelligenceforce Act,in whoseAugust regulations2024 and, with some exceptions, will be developedfully overeffective theby comingAugust yearof and,2026, and in the United States, the recent2023 Executive Order concerning AI may result in extensive newinfluences federal rule-making.rule-making applicable regulations. Further, market demand and acceptance of AI technologies are uncertain, and we may be unsuccessful in our product development efforts.

As necessary, we planhave to developdeveloped policies governing the use of AI to encourage appropriate use of AI by our employees, contractors, and authorized agents and that our assets, including intellectual property, competitive information, personal information we may collect or process, and customer information, are protected. Any failure by our personnel, contractors, or other agents to adhere to any policies that we may establish could violate confidentiality obligations or applicable laws and regulations, jeopardize our intellectual property rights, cause or contribute to unlawful discrimination, or result in the misuse of personally identifiable information or the injection of malware into our systems, any of which could have a material adverse effect on our business, results of operations, and financial condition.

natural disasters; political and economic instability, including wars, terrorism and political unrest, such as conflicts in the Ukraine and the Middle East and tensions between China and Taiwan; outbreak of disease; boycotts; and other business restrictions; and regulatory and compliance risks related to applicable anti-bribery laws, including requirements to maintain accurate information and control over activities that may fall within the purview of these laws.

If we are sued for product or professional liability, weWe could face substantial liabilities that exceed our resources.resources for litigation relating to product or professional liability.

Our business depends on our ability to provide reliable and accurate test results, including tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with these variants or pathology services and testing that often rely on human interpretation. Substantial judgment is often required in order to interpret the results of each test we perform and to produce a report summarizing these results. This is particularly true for our pathology testing services. Errors, such as failures to detect genomic variants with high accuracy, or mistakes, such as failures to completely and correctly identify the significance of gene variants, abnormal cells or to detect disease, could subject us to product liability orand professional liability claims. AnyThese such claimclaims against us could result in substantial damages that materially and beadversely affect our results of operations and are costly and time-consuming to defend. Although we maintain liability insurance, including for errors and omissions, our insurance may not fully protect us from thea material and adverse financial impact arising out of defending against these types of claims or any judgments, fines, or settlement costs arising out of any such claims. Additionally,As anyan example, we recorded an accrual of $14.5 million in connection with the settlement of a professional liability matter further described in Note 8, Debt, Commitments and Contingencies of our consolidated financial statements included in this Annual Report for which we may receive partial coverage from our liability insurance, subject to customary retentions, exclusions and limits. Any liability claim brought against us, with or without merit, could materially increase our insurance rates or prevent us from securing adequate insurance coverage in the future. Moreover, any liability lawsuit could materially damage our reputation or force us to suspend sales of our tests. The occurrence of any of these events could have a material adverse effect on our business, reputationreputation, and results of operations.

Fulgent Pharma’s business involves the testing of newour drugsproduct candidates on patients in clinical trials and will continue to involve the additional testing of drugsour product candidates on patients in the future. Our involvement in the clinical trials and development process creates a risk of liability for personal injury to or death of patients, particularly those with life-threatening illnesses, resulting from adverse reactions to the drugs administered during testing or after product launch, respectively. Although we maintain the types and amounts of insurance we view as customary and appropriate in the industries and countries in which we operate, if we are required to pay significant damages or incur significant defense costs in connection with any personal injury claim that is outside the scope of indemnification agreements we have with our clients, if any indemnification agreement is not performed in accordance with its terms or if our liability exceeds the amount of any applicable indemnification limits or available insurance coverage, our financial condition, results of operationsoperations, and reputation could be materially and adversely affected.

In addition, insurance coverage is increasingly expensive and difficult to obtain. Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit customer relationships, the clinical development, commercial production, and sale of any of our products and drugproduct candidates, which could materially and adversely affect our business.

As of December 31, 2025, we had cash, cash equivalents, and marketable securities of approximately $705.5 million. We expect our capital expenditures and operating expenses to increase over the next several years as we seek to expand our infrastructure, other commercial operations, and research and development activities. As of December 31, 2024, we had cash, cash equivalents, and marketable securities of approximately $828.6 million. We may seek to fund future cash needs through securities offerings, credit facilities, or other debt financings, asset sales, collaborationscollaborations, or licensing arrangements. Additional funding may not be available to us when needed, on acceptable terms or at all. For example, the COVID-19 pandemic initially caused extreme disruption and volatility in the global capital markets followed by a period of high market demand for life science and diagnostic company equities and then a period of less demand for these equities in 2022, 2023, and 2024. These circumstances and high volatility in capital markets generally may reduce our ability to access capital and/or adversely affect the stability of the depository institutions maintaining our assets.

In recent years, inflation has increased throughout the United StatesU.S. economy. Inflation has adversely affected us and may again adversely affect us by materially increasing the costs of clinical trials and research, the development of our tests and drugproduct candidates, administration, and other costs of doing business. We have and may again experience material increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may materially outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted.

We are a technology-based company with a well-established laboratory services business and a therapeutic development business. Our laboratory services business includes technical laboratory and testing services and professional interpretation of laboratory results by licensed physicians. Our therapeutic development business is focused on developing drugproduct candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and PK profile of new and existing cancer drugs.

We currently classify our customers into three payor types: (i) Insurance, (ii) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations or (iii) Patients who pay directly. Typically, we bill our Institutional customers for our tests, and they are responsible for paying us directly and billing their patients separately or obtaining reimbursement from insurance payors in connection with a patient’s diagnosis related group. A small percentage of our customers are patients, who elect to pay for tests themselves with out-of-pocket payments after their physicians have ordered our tests.

We have developed various proprietary technologiestechnologies, including various AI tools, that improve our laboratory efficiency and reduce the costs we incur to perform our tests, including our proprietary gene probes, data algorithms, adaptive learning software and genetic reference library. This technology platform enables us to perform each test and deliver its results at a lower cost to us than many of our competitors, and this low cost allows us to maintain affordable and competitive pricing for our customers, which we believe encourages repeat ordering from existing customers and attracts new customers. We believe this low internal cost is a key factor in our ability to grow our business and obtain margins on our sales that allow us to drive toward sustained profitability.

Similar to other companies in our industry, we have and may again experience the effects of inflation in the costs of labor, materialsmaterials, and services in connection with the marketing of our tests and testing services and in connection with our research and development efforts.

Much of our revenue depends on receiving reimbursement for our tests from insurance payors, including our Insurance and Institutional customers. These payors have complicated rules and procedures regarding submissions for reimbursementreimbursement, and their reimbursement practices and procedures may vary from period to period. Reimbursed amounts are often subject to audit, and our ability to collect and retain reimbursement from these payors may vary from period to period. If we are unable to obtain or retain reimbursement during any period, our rate of reimbursement is lower than expected or if reimbursement is delayed, our results of operations may be correspondingly affected and fluctuate significantly from period to period. As part of our business plan for future growth, we intend to pursue coverage and reimbursement from insurance payors at a level adequate for us to again achieve and maintain profitability. However, we cannot predict whether, under what circumstances, or at what payment levels payors will cover and reimburse for our tests, and even if we are successful, we believe it could take several years to achieve coverage and adequate contracted reimbursement with insurance payors. To date, we have contracted directly with national health insurance companies to become an in-network provider and enrolled as a supplier with the Medicare program and some state Medicaid programs, which means that we have agreed with these payors to provide certain of our tests at negotiated rates. Although this does not guarantee that we will receive reimbursement for our tests from these or any other payors at adequate levels, we believe our low cost could enhance our ability to compete effectively in the insurance payor market and our flexibility in establishing relationships with additional insurance payors in the future. Our level of success in obtaining and maintaining adequate coverage and reimbursement from insurance payors for our testing services will, we believe, be a key factor in the rate and level of growth of our business over the long term.

These reimbursement activities also subject us to payor and government audits and investigations such as the HRSA audit and the CIDs discussed in Note 8, Debt, Commitments and Contingencies to theour Consolidatedconsolidated Financialfinancial Statements.statements. The results of these matters and the expenses and use of resources needed in connection with these and similar matters could materially affect our results of operations.

Our laboratory service segment generates revenue from molecular testing, including precision diagnostics and anatomic pathology, BioPharma services, and COVID-19 testing.testing (which is not expected to produce material revenue). We recognize revenue upon delivery of a report to the ordering physician or other customer based on the established billing rate, less contractual and other adjustments, to arrive at the amount we expect to collect. Our therapeutic development segment ishas stillstarted pre-revenue.producing BioPharma services revenue with the acquisition of ANP.

Cost of revenue reflects the aggregate costs incurred in delivering test results and consists of: costs of laboratory reagents and supplies; personnel costs, including salaries, employee benefit costs, bonuses and equity-based compensation expenses; depreciation of laboratory equipment; delivery and courier costs relating to the transportation of specimens to be tested; amortization of building or leasehold improvements; and allocated overhead expenses, including rent and utilities. Costs associated with performing tests are recorded as tests are processed.

Research and development expenses represent costs incurred to develop our technology and future tests and treatments and our drugproduct candidates. These costs consist of:

We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses will continue to increase in absolute dollars, as we expect to continue to invest in research and development activities and continue to innovate and expand the application of our testing platform. Furthermore, we expect our research and development expenses for our therapeutic development segment to increase as we incur incremental expenses associated with our drugproduct candidates that are currently under development and in clinical trials. DrugProduct candidates in later stages of clinical development generally have higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect to incur significant research and development expenses in connection with our Phase 2clinical trials for FID-007 and the initiation of clinical trials for FID-022.

General and administrative expenses include executive, finance, accounting, legallegal, and human resources functions. These expenses consist of personnel costs, audit and legal expenses, consulting costs and allocated overhead expenses, including rent and utilities. We expense all general and administrative costs as incurred. We expect our general and administrative expenses will continue to increase in absolute dollars as we seek to continue to scale our operations. We also expect to continue to incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, and Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.

(Benefit from) Provision for Income Taxes (Benefit from) provision for income taxes consists of U.S. federal and state income taxes. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences, operating losses and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

We believe the factors that will affect our ability to grow these revenue streams are 1) the average price point we offer and the reimbursement rate from insurance payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market. Estimated collection amounts from insurance payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs. Because our proprietary technology platform allows for repaidrapid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing. Going forward, we will strive to maintain this competitive advantage and emphasize this in our marketing efforts to grow our testing revenue.

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers. For the laboratory services segment, aggregating customers that are under common control, one customer comprised $70.8 million or 22% of our revenue in 2025 and $62.6 million or 22% of our revenue in 20242024. We began to see lower than anticipated testing volume from our largest customer in the fourth quarter of 2025, and $35.7we millionexpect orrevenues 12%for this customer to decline in 2026 (particularly through the second quarter of our2026) revenueas inthis 2023.customer begins to perform tests internally. The tests and testing services this customer has historically purchased were primarily precision diagnostic tests. To reduce this revenue risk, we will focus on developing existing customers and increasing the number of customers and thereby reducing the concentration.

Revenue from non-U.S. sources increased by $4.1$1.8 million, or 20%,7%, from $20.2 million in 2023 to $24.3 million in 2024.2024 to $26.1 million in 2025. The increase in revenue from non-U.S. sources between periods were primarily due to increased sales of our traditional genetic testing services to customers in China through our joint venture,China, which contributedincreased $11.8$0.3 million in 2025, as well as increases in total revenue into 2024.Australia of $0.7 million and Canada of $0.5 million.

Our consolidated cost of revenue decreasedincreased by $8.5$15.5 million, or 5%,9%, from $184.8 million in 2023 to $176.3 million in 2024.2024 to $191.8 million in 2025. The decreaseincrease was primarily due to decreasesincreases of $6.7$7.5 million in personnel costs, including equity-based compensation, $4.2 million in reagent and supplies cost, $1.7 million in consulting and outside labor costs for production, $1.7$1.1 million in depreciation expenses, $0.8 million in software and software licensing expenses, $1.4$0.7 million in personneloffice costs,expenses, includingand equity-based compensation, $0.8$0.7 million in shippingfacilities expenses, and $0.2 million in dues and subscriptions expense, related to efforts of optimizing cost structures including bringing certain operations in house, consolidating laboratory operations, and the cessation of our COVID-19 testing operations, and partially offset by ana increasedecrease of $1.8$1.1 million in reagentshipping and supplyhandling costs and $0.5 million in depreciation expenses.costs.

Our consolidated cost of revenues as a percentage of revenue decreased from 63.9% to 62.2%. Our gross profit increased by $2.8$23.7 million, or 3%,22%, from $104.5 million in 2023 to $107.2 million in 2024.the year ended December 31, 2024, to $130.9 million in the year ended December 31, 2025. Our gross profit as a percentage of revenue, or gross margin, increased from 36.1%38% in the year ended December 31, 2024, to 37.8%.41% in the year ended December 31, 2025. This iswas driven by the increased revenue, efforts of optimizing cost structures as discussed above.above, and efficiency as a result of our investments in scaling and centralizing lab operations.

For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services. The expenses decreasedincreased by $1.3$1.2 million, or 4%, from $29.7 million in 2023 to $28.4 million in 2024.2024 to $29.6 million in 2025. The decreaseincrease was primarily attributed to reductionsan increase of $0.6 million in facility expenses due to the consolidation of office and laboratory space, $0.3 million in depreciation expenses, $0.2$1.3 million in personnel expenses, and $0.1 million in consulting and external labor expenses.

ForIn the therapeutic development segment,2025, the research and development expenses inprimarily 2024consisted includedof $10.9 million in CRO costs, $8.6$26.6 million in personnel costs,expenses, including bonuses and equity-based compensation, $1.3 million in reagent and $0.7supply costs, $0.5 million in facility expenses, $0.4 million in depreciation expenses.expense, Inand 2023,$0.2 thesemillion in software and licensing fees. The 2024 expenses comprisedprimarily $6.4consisted of $25.3 million ofin personnel expenses, including bonuses and equity-based compensation, $4.5$1.4 million in CROreagent and supply costs, and$0.6 $0.7million in facility expenses, $0.4 million in depreciation expenses.expense, and $0.4 million in software and licensing fees.

Research and development expenses for the therapeutic development segment increased by $8.7$3.9 million, or 74%,19%, from $11.7 million in 2023 to $20.4 million in 2024.2024 to $24.3 million in 2025. The increase was primarily driven by increases of $6.4 million in CRO costs and $2.2$1.9 million in personnel costs, including equity-based compensation expense.expense, The$1.5 overallmillion increasein wasCRO attributed to the advancementcosts, and continuation of the clinical study of FID-007, along with the completion of preclinical work for FID-022. In 2024, approximately $2.1$0.5 million was incurred for the preclinical development of FID-022, whereas related costs in 2023facility were minimal.expenses.

Looking ahead, we expect research and development expenses to continue increasing as clinical trials progress for FID-007, FID-022, and other preclinicalpre-clinical studies.

Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2025, 2022 and 2021, and a patent purchased in 2021.

Other income,income net,(expense) is primarily comprised of interest income, which was $31.3$30.9 million and $21.6$31.3 million for 20242025 and 2023,2024, respectively, and impairment of available-for-sale debt and equity securities of $9.9 million and $10.1 million in 2024.2025 and 2024, respectively. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities. The increasedecrease in interest income was primarily due to increaseddecreased interest rates on marketable securities relative to the prior comparative period.

Net loss attributable to noncontrolling interest represents net loss attributable to minority shareholdersstockholders from entities not wholly owned.

Our primary uses of cash are for strategic acquisitions; capital expendituresexpenditures, mainly in buildings, building improvements, and equipment,equipment; torepurchases repurchaseof our stock,stock; fundthe funding of our operations,clinical trials; and tothe fundfunding strategicof acquisitionsour operations as we continue to invest in and seek to grow our business. Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses.

On March 17, 20262026, and as further described in Note 15,15. Business Combinations, to the condensed consolidated financial statements included in this report, we completed the acquisition of certain assets of Bako Diagnostics and acquired StrataDx, or collectively, the Bako Acquisition, which together provide dermatopathology, podiatric pathology, and molecular diagnostic services and therapeutic products. As the Bako Acquisition closed late in the first quarter, the results for the threesix months ended MarchJune 31,30, 2026, include only approximately twothree weeksand a half months of the acquired operations. We expect the additional impact of the Bako Acquisition on our consolidated results of operations, including revenue, cost of revenue, and operating expenses, to be reflected in the second quarter of 2026 and in future periods.

Our business and prospects are exposed to numerous risks and uncertainties, as described below and in our 2025 Annual Report. In particular, the Bako Acquisition is a major transaction involving the integration of significant operations into our existing laboratory business. As described in greater detail in the risk factors included in our 2025 Annual Report, these acquisitions involve inherent risks, including potential difficulties in integrating operations, personnel, and technologies, and the potential for higher than anticipated acquisition-related costs or integration expenses. Ultimately, we may not realize the anticipated benefits of this transaction. For more information, see “Item 1A. Risk Factors” in Part I of the 2025 Annual Report. In addition, our performance in any period is affected by a number of other factors. See the description of some of the material factors affecting our performance in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2025 Annual Report.

Revenue decreasedincreased by $2.3$3.6 million, or 3%,4%, from $73.5$81.8 million in the three months ended MarchJune 31,30, 2025, to $71.1$85.4 million in the three months ended MarchJune 31,30, 2026. The decreaseincrease in revenue between periods was driven by decreasesincreases of $3.9$9.4 million in precisionanatomic diagnosticspathology and $0.2 million in anatomicBioPharma pathology,services, partially offset by an increasedecreases of $1.7$6.0 million in BioPharmaprecision services from the laboratory services reportable segment and $0.1 million in BioPharma services from the therapeutic development segment.diagnostics.

The decrease in precision diagnostics revenue was driven by the decline in revenue from our largest customer as this customer begins to perform tests internally. As previously disclosed in our Form2025 10-K,Annual Report, we expect revenues for our largest customer to continue to decline in 2026 as this customer increasescontinues itsto increase the performance of tests internally. The tests and testing services this customer has historically purchased were primarily precision diagnostic tests. To reduce this revenue risk, we will focus on developing existing customers and increasing the number of customers and thereby reducing the concentration and on successfully integrating our acquired businesses. AnatomicThe increase in anatomic pathology services remained relatively consistent, with the decreasewas primarily due to a timing impact from claims that were delayed in release, partially offset by $2.6$12.9 million in revenue resulting from assets and the business acquired in the Bako AcquisitionAcquisition, duringpartially offset by decreases due to the firstimpact quarter.of the final phase of the transition of our billing and revenue cycle management system which has resulted in significant processing backlogs and collections delays. We are actively seeking to address these transition issues, but we may be unable to resolve these issues in a timely manner or as quickly as we presently expect. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions leading to temporary laboratory closures as experienced during 2026. The increase in BioPharma services revenue was primarily due to the timing of service projects, though this revenue is expected to remain variable due to the long sales cycle and fluctuations in project timing.

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers. For the laboratory services segment, aggregating customers that are under common control, ourno largestcustomer represented a significant concentration of revenue in the three months ended June 30, 2026, but one customer comprised $10.4$16.1 million, or 15%,10%, of total revenue in the six months ended June 30, 2026. The same customer contributed $17.6 million, or 22%, of our revenue in the three months ended MarchJune 31,30, 2026,2025, and $17.6contributed $35.2 million, or 24%,23%, of ourtotal revenue in the threesix months ended MarchJune 31,30, 2025. As previously disclosed, we expect revenues for this customer to continue to decline in 2026 as this customer transitionscontinues to transition the performance of tests internally.

Revenue from the therapeutic development segment includes amounts recognized by ANP Technologies, Inc., or ANP, from technologies licensed to pharmaceutical and biotechnology companies, as well as CROs. In addition, ANP has a manufacturing and supply agreement with a customer for specific COVID-19 testing kits, under which, ANP is entitled to participate in gross-margin sharing on the sale of those kits. The timing of the gross-margin sharing revenue is dependent on the customer’s downstream sales of the kits. An insignificant amount of gross-margin sharing revenue was recognized for the threesix months ended MarchJune 31,30, 2026. No further gross-margin sharing revenue is expected from this manufacturing and supply agreement.

Revenue from non-U.S. sources increased by $0.4$1.5 million, or 7%,27%, from $5.6 million in the three months ended MarchJune 31,30, 2025, to $6.0$7.1 million in the three months ended MarchJune 31,30, 2026. The increase in the three-month period was primarily due to increases in total revenue to China of $0.7 million, Australia of $0.4 million, and United Kingdom of $0.2 million. Revenue from non-U.S. sources increased by $1.9 million, or 17%, from $11.2 million in the six months ended June 30, 2025, to $13.2 million in the six months ended June 30, 2026. The increase in the six-month period was primarily due to increases in total revenue to Australia of $0.7 millionmillion, and CanadaChina of $0.3$0.6 million, partially offset by a decrease in total revenue to theand United Kingdom of $0.6$0.4 million.

Our consolidated cost of revenue as a percentage of revenue increased from 61%58% in the three months ended MarchJune 31,30, 2025, to 70% in the three months ended MarchJune 31,30, 2026. Our consolidated cost of revenues as a percentage of revenue increased from 60% in the six months ended June 30, 2025, to 70% in the six months ended June 30, 2026.

For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services. The expenses increased by $1.4$1.1 million, or 20%,15% from $7.1$7.5 million in 2025the three months ended June 30, 2025, to $8.5 million in the three months ended June 30, 2026. The increase was primarily attributed to increases of $0.8 million in personnel expenses and $0.7$1.0 million in reagents and supplies expenses, partially offset by a decrease of $0.1 million in facility expenses.

For the therapeutic development segment, the research and development expenses in the three months ended MarchJune 31,30, 2026, includedtotaled $2.9$6.0 million and consisted of $2.8 million in contract research organization, or CRO, costs, and $2.7 million in personnel costs, including equity-based compensation, $2.4 million in CRO costs, $0.2 million in facility expenses, and $0.1 million in depreciation expenses.compensation. In the three months ended MarchJune 31,30, 2025, these expenses totaled $6.0 million and comprised $2.6$3.0 million in CRO costs,costs $2.4and $2.6 million inof personnel costs, including equity-based compensation,compensation. Other expense categories including facilities and $0.2 million in depreciation expenses.are not individually significant and have remained stable.

Our consolidated selling and marketing expenses increased by $3.8$2.9 million, or 44%,24%, from $8.5$12.3 million in the three months ended MarchJune 31,30, 2025, to $12.2$15.2 million in the three months ended MarchJune 31,30, 2026. The increase in consolidated selling and marketing expenses was due to increasesincrease of $2.4$3.9 million inresulting personnelfrom expenses,assets $1.1and millionthe business acquired in softwarethe licensing,Bako $0.2 million in travel expenses, $0.1 million in trade show expenses, and $0.1 million in supply and material expenses,Acquisition, partially offset by a decreasedecreases of $0.1$1.8 million in consultingadvertising and marketing expenses.

Our consolidated general and administrative expenses increased by $2.4$0.8 million, or 9%,3%, from $25.3$26.4 million in the three months ended MarchJune 31,30, 2025, to $27.7$27.2 million in the three months ended MarchJune 31,30, 2026. The increase in consolidated general and administrative expenses was due to increases of $2.6$3.6 million resulting from assets and the business acquired in the Bako Acquisition and $0.7 million in acquisition-related costs primarily related to the Bako Acquisition, $0.8 million in legal fees, $0.2 million in personnel costs,software and $0.1millionsoftware inlicensing insurance expenses,costs, partially offset by decreases of $0.9$1.9 million in provisionlegal forexpense creditand losses, $0.3$0.7 million inof depreciationbonus expenses, and $0.3 million in accounting expenses.expense.

Other income (expensesexpense), is primarily comprised of interest income, which was $8.7$6.4 million and $15.1 million in the three and six months ended MarchJune 31,30, 2026, respectively, and $8.0$8.1 million and $16.1 million in the three and six months ended MarchJune 31,30, 2025.2025, respectively. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities, as well as interest accrued for outstanding federal tax refunds. The change in interest income was primarily due to the interest earned from the outstanding federal tax refunds, partially offset by lower overall marketable security balances. Other expenses primarily consisted of a one-time, non-cash impairment of a prior investment as discussed further in Note 4. Fair Value Measurements, of the financial statements included in this quarterly report.

(Benefit from) Provision for Income Taxes (Benefitbenefit from) provision for income taxes was $(0.7)$0.03 million and $0.2($0.7) million for the three and six months ended MarchJune 31,30, 2026, respectively, compared with ($2.3) million and ($2.1) million for the three and six months ended June 30, 2025, respectively. The Company’s effective tax rate was 3%(0.1%) and (2)%1% for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 11% and 6% for the three and six months ended June 30, 2025, respectively. The change in the effective tax rate compared to prior periods was primarily driven by a one-time tax benefit resulting from the Bako Acquisition completed during the quarter, which allowed the Company to recognize a portion of the tax benefit from its net operating losses that had previously been reserved.

We had $604.7$551.5 million and $705.5 million in cash, cash equivalents, restricted cash, and marketable securities as of MarchJune 31,30, 2026, and December 31, 2025, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, corporate bonds, and municipal bonds, and Yankee debt securitiesbonds as of MarchJune 31,30, 2026, and December 31, 2025.

If we raise additional funds by issuing equity securities, our existing stockholders could experience substantial dilution. Additionally, any preferred stock we issue could provide for rights, preferences or privileges senior to those of our common stock, and our issuance of any additional equity securities, or the possibility of such an issuance, could cause the market price of our common stock to decline. The terms of any debt securities we issue or borrowings we incur, if available, could impose significant restrictions on our operations, such as limitations on our ability to incur additional debt or issue additional equity or other restrictions that could adversely affect our ability to conduct our business, and would result in increased fixed payment obligations. If we seek to sell assets or enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms or relinquish or license to a third-partythird party our rights to important or valuable technologies or tests we may otherwise seek to develop ourselves. Moreover, we may incur substantial costs in pursuing future capital raises, including investment banking, legal and accounting fees, printing and distribution expenses and other similar costs. Additional funding may not be available to us when needed, on acceptable terms or at all. If we are not able to secure funding if and when needed and on reasonable terms, we may be forced to delay, reduce the scope of or eliminate one or more sales and marketing initiatives, research and development programs or other growth plans or strategies. In addition, we may be forced to work with a partner on one or more aspects of our tests or market development programs or initiatives, which could lower the economic value to us of these tests, programs or initiatives. Any such outcome could significantly harm our business, performance and prospects.

During the threesix months ended MarchJune 31,30, 2026, our operations providedused $7.1$16.7 million of cash, as compared to $4.4$34.6 million used in the threesix months ended MarchJune 31,30, 2025. The increasedecrease in cash providedused fromin operating activities in the threesix months ended MarchJune 31,30, 2026, as compared with the corresponding period in 20252025, was primarily due to the purchase of IRA tax credits of $33.8 million in 2025, partially offset by $13.5 million cash payment in connection with the settlement of a professional liability matter during the three months ended June 30, 2026. The remaining is related to the timing of cash receipts from customers and cash payments for operating expenses, including bonus expenses. We expect to incur more operating expenses and use more cash in operating activities in the coming quarters as a result of our planned and ongoing clinical trials for FID-007 and FID-022, and as we continue to invest resources to grow our laboratory services business.

The cash provided by or used in investing activities is impacted by capital expenditures for operationoperational needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.investments.

Cash provided by investing activities in the threesix months ended MarchJune 31,30, 2026,2026 was $10.9$61.7 million, which primarily representsrepresented $81.7$103.2 million in thematurities maturitiesof marketable securities, $33.1 million in proceeds from sale of marketable securities, partially offset by $55.6 million related to business acquisitions, $10.0 million related tofrom the purchase of marketable securities, and $5.2$9.1 million related to the purchase of fixed assets consisting mainly of building improvement,improvements, medical laboratory equipment, and computer hardware.

Cash provided by investing activities in the threesix months ended MarchJune 31,30, 2025, was $27.7$81.1 million, which primarily representsrepresented $32.4$92.7 million inrelated theto maturities of marketable securities, partially offset by $4.7$11.5 million related to the purchase of fixed assets consisting mainly of building improvement, medical laboratory equipment, and computer hardware.

Cash used in financing activities in the threesix months ended MarchJune 31,30, 2026, was $44.8$69.1 million, which primarily related to $40.1$63.9 million used in the repurchase of common stock and $4.2$4.5 million used in common stock withholding for employee tax obligations.

Cash used in financing activities in the threesix months ended MarchJune 31,30, 2025, was $11.2$13.8 million, which primarily related to $8.7$10.9 million used in thefor repurchase of common stock and $1.9$2.2 million used in common stock withholding for employee tax obligations.

We do not expect to use any credit facilities due to the strong cash position as of MarchJune 31,30, 2026.

During the three and six months ended MarchJune 31,30, 2026, we repurchased 2.61.5 million and 4.1 million shares of our common stockstock, respectively, at an aggregate cost of $40.1$23.8 million and $63.9 million, respectively, under the stock repurchase program. During the three and six months ended MarchJune 31,30, 2025, we repurchased 0.50.2 million and 0.6 million shares of our common stockstock, respectively, at an aggregate cost of $7.9$3.0 million and $10.9 million, respectively, under the stock repurchase program. As of MarchJune 31,30, 2026, a total of approximately $99.6$75.8 million remained available for future repurchases of our common stock under our stock repurchase program. From April 1, 2026, through May 1, 2026, we repurchased 0.5 million shares of our common stock for an aggregate cost of $8.7 million at an average price of $15.84 per share under our stock repurchase program. As of May 1, 2026, a total of $91.0 million remained available for future repurchases of our common stock under the stock repurchase program.