10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________

FORM 10-Q

________________________

Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-38118

________________________

DERMTECH, INC.

(Exact Name of Registrant as Specified in its Charter)

________________________

Delaware	84-2870849
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12340 El Camino Real, San Diego ,CA	92130
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (858) 450-4222

11099 N. Torrey Pines Road, Suite 100, La Jolla, CA 92037

(Former name, former address and former fiscal year, if changed since last report)

________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DMTK	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of April 28, 2023, the registrant had 31,089,911 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 6.	Exhibits	23
	Signatures	24

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DERMTECH, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	48,438	$	77,757
Short-term marketable securities	56,340		48,411
Accounts receivable	3,690		4,172
Inventory	1,574		1,757
Prepaid expenses and other current assets	2,348		3,940
Total current assets	112,390		136,037
Property and equipment, net	6,262		6,375
Operating lease right-of-use assets	54,800		56,007
Restricted cash	3,501		3,488
Other assets	168		168
Total assets	$	177,121	$	202,075
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,680	$	2,419
Accrued compensation	7,556		7,894
Accrued liabilities	4,807		3,464
Short-term deferred revenue	242		109
Current portion of operating lease liabilities	1,756		1,634
Current portion of finance lease obligations	97		116
Total current liabilities	16,138		15,636
Warrant liability	12		5
Long-term finance lease obligations, less current portion	49		53
Operating lease liabilities, long-term	53,680		54,028
Total liabilities	69,879		69,722
Stockholders’ equity:
Common stock, $0.0001 par value per share; 50,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 31,088,911 and 30,297,408 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	461,845		456,171
Accumulated other comprehensive loss	(289)		(774)
Accumulated deficit	(354,317)		(323,047)
Total stockholders’ equity	107,242		132,353
Total liabilities and stockholders’ equity	$	177,121	$	202,075

See accompanying notes to unaudited condensed consolidated financial statements.

1

DERMTECH, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Revenues:
Test revenue	$	3,425	$	3,518
Contract revenue	52		200
Total revenues	3,477		3,718
Cost of revenues:
Cost of test revenue	3,791		3,530
Cost of contract revenue	30		24
Total cost of revenues	3,821		3,554
Gross (loss) profit	(344)		164
Operating expenses:
Sales and marketing	15,417		15,443
Research and development	4,409		6,338
General and administrative	11,875		8,574
Total operating expenses	31,701		30,355
Loss from operations	(32,045)		(30,191)
Other income/(expense):
Interest income, net	782		66
Change in fair value of warrant liability	(7)		17
Total other income	775		83
Net loss	$	(31,270)	$	(30,108)
Weighted average shares outstanding used in computing net loss per share, basic and diluted	30,557,216		29,836,072
Net loss per share of common stock outstanding, basic and diluted	$	(1.02)	$	(1.01)

See accompanying notes to unaudited condensed consolidated financial statements.

2

DERMTECH, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Net loss	$	(31,270)	$	(30,108)
Unrealized net gain/(loss) on marketable securities and cash equivalents	485		(570)
Comprehensive loss	$	(30,785)	$	(30,678)

See accompanying notes to unaudited condensed consolidated financial statements.

3

DERMTECH, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)

(Unaudited)

	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount
Balance, December 31, 2022	30,297,408	$	3	$	456,171	$	(774)	$	(323,047)	$	132,353
Issuance of common stock at a weighted average price of $3.68 through at-the-market offering, net of $0.1 million issuance costs	107,451	—		270		—		—		270
Issuance of common stock from option exercises and RSU releases	510,027	—		92		—		—		92
Issuance of common stock from Employee Stock Purchase Plan	174,025	—		576		—		—		576
Unrealized net gain on available-for-sale marketable securities and cash equivalents	—	—		—		485		—		485
Stock-based compensation	—	—		4,736		—		—		4,736
Net loss	—	—		—		—		(31,270)		(31,270)
Balance, March 31, 2023	31,088,911	$	3	$	461,845	$	(289)	$	(354,317)	$	107,242

	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount
Balance, December 31, 2021	29,772,922	$	3	$	436,183	$	(124)	$	(206,364)	$	229,698
Issuance of common stock from option exercises and RSU releases	109,275	—		40		—		—		40
Issuance of common stock from warrant exercises	11,101	—		12		—		—		12
Issuance of common stock from Employee Stock Purchase Plan	47,339	—		515		—		—		515
Unrealized net loss on available-for-sale marketable securities	—	—		—		(570)		—		(570)
Stock-based compensation	—	—		3,894		—		—		3,894
Net loss	—	—		—		—		(30,108)		(30,108)
Balance, March 31, 2022	29,940,637	$	3	$	440,644	$	(694)	$	(236,472)	$	203,481

See accompanying notes to unaudited condensed consolidated financial statements.

4

DERMTECH, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(31,270)	$	(30,108)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	466		372
Change in fair value of warrant liability	7		(17)
Amortization of operating lease right-of-use assets	1,207		435
Stock-based compensation	4,736		3,894
Amortization of premiums, net of accretion of discounts on marketable securities	(6)		713
Gain on disposal of equipment	(29)		—
Changes in operating assets and liabilities:
Accounts receivable	482		(1,148)
Inventory	183		(283)
Prepaid expenses and other current assets	1,592		(94)
Operating lease liabilities	(227)		(271)
Accounts payable, accrued liabilities and deferred revenue	1,169		161
Accrued compensation	(338)		1,523
Net cash used in operating activities	(22,028)		(24,823)
Cash flows from investing activities:
Purchases of marketable securities	(16,481)		(13,656)
Sales and maturities of marketable securities	9,044		6,769
Purchases of property and equipment	(757)		(646)
Net cash used in investing activities	(8,194)		(7,533)
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with at-the-market offering, net	270		—
Proceeds from exercise of common stock warrants	—		12
Proceeds from exercise of stock options	92		40
Proceeds from contributions to the Employee Stock Purchase Plan	576		515
Principal repayments of finance lease obligations	(22)		(40)
Net cash provided by financing activities	916		527
Net decrease in cash, cash equivalents and restricted cash	(29,306)		(31,829)
Cash, cash equivalents and restricted cash, beginning of period	81,245		179,907
Cash, cash equivalents and restricted cash, end of period	$	51,939	$	148,078
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	$	48,438	$	145,053
Restricted cash	3,501		3,025
Total cash, cash equivalents and restricted cash	$	51,939	$	148,078
Supplemental cash flow information:
Cash paid for interest on finance lease obligations	$	1	$	3
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment recorded in accounts payable	$	16	$	318
Right-of-use assets obtained in exchange for lease obligations	$	—	$	15,755
Change in unrealized net gains/(losses) on available-for-sale marketable securities and cash equivalents	$	485	$	(570)

See accompanying notes to unaudited condensed consolidated financial statements.

5

DERMTECH, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.    The Company and a Summary of its Significant Accounting Policies

(a)    Nature of Operations

On August 29, 2019, DermTech, Inc., formerly known as Constellation Alpha Capital Corp, (the “Company”), and DermTech Operations, Inc., formerly known as DermTech, Inc., (“DermTech Operations”), consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of May 29, 2019, by and among the Company, DT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and DermTech Operations. The Company refers to this agreement, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of August 1, 2019, as the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into DermTech Operations, with DermTech Operations surviving as a wholly-owned subsidiary of the Company. The Company refers to this transaction as the Business Combination. In connection with and two days prior to the completion of the Business Combination, the Company domesticated from the British Virgin Islands to Delaware. DermTech Operations changed its name from DermTech, Inc. to DermTech Operations, Inc. shortly before the completion of the Business Combination. On August 29, 2019, immediately following the completion of the Business Combination, the Company changed its name from Constellation Alpha Capital Corp. to DermTech, Inc., and then effected a one-for-two reverse stock split of its common stock.

The Company is a molecular diagnostic company developing and marketing its Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) laboratory services including molecular pathology tests to facilitate the diagnosis of dermatologic conditions including melanoma. The Company has developed a proprietary, non-invasive technique for sampling the surface layers of the skin using an adhesive patch called the DermTech Smart Sticker™ (the “Smart Sticker”) in order to collect individual biological information for commercial applications in the medical diagnostic field.

The Company has incurred operating losses since inception and has an accumulated deficit of $354.3 million at March 31, 2023. As of March 31, 2023, cash and cash equivalents totaled approximately $48.4 million and short-term marketable securities totaled approximately $56.3 million. The Company's transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. If events or circumstances occur such that change operating plans, the Company may be required to reduce operating expenses, which could have an adverse impact its ability to achieve intended business objectives. The Company's management believes that currently available resources will provide sufficient funds to meet operating plans for at least the next twelve months from the issuance of our unaudited condensed consolidated financial statements. While we believe we have enough capital to fund anticipated operating costs for at least the next twelve months, we anticipate that we will need to raise additional capital in order to support our planned operations and to continue developing and commercializing genomic tests.

(b)    Basis of Presentation

The condensed consolidated financial statements include the accounts of DermTech, Inc. and its subsidiary. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements and accompanying notes do not include all the information and disclosures required by U.S. GAAP for complete financial statements and should be read together with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2023, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

6

(c)    Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the amounts of revenues and expenses reported during the period. On an ongoing basis, management evaluates these estimates and judgments, including but not limited to those related to test revenue, stock-based compensation, short-term marketable securities, accounts receivable, accrued bonus, warrant liability, right-of-use (“ROU”) assets and the realization of deferred tax assets. Actual results may differ from those estimates.

(d)    Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and available-for-sale marketable securities. The Company invests its cash balances in major financial institutions that it believes have high credit quality and are insured with the Federal Deposit Insurance Corporation (“FDIC”). At times throughout the year, cash deposits might exceed FDIC insurance limits. The Company has not experienced any losses and does not believe it is exposed to any significant credit risk.

(e)    Revenue Recognition

The Company’s revenue is generated from two revenue streams: contract revenue and test revenue. The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue from its test and contract services in accordance with the core principles and key aspects considered by the Company. These considerations are described in detail below, first for test revenue and then for contract revenue.

Test Revenue

The Company generates revenues from its DermTech Melanoma Test or “DMT” which may consist at the option of the ordering clinician of either (i) the DMT or (ii) the DMT with TERT test, which assists a clinician’s diagnosis of melanoma in patients. The Company provides prescribing clinicians with its Smart Sticker to perform non-invasive skin biopsies of clinically ambiguous pigmented skin lesions on patients. The Company also offers clinicians a telemedicine solution where they can request the Smart Sticker collection kit be sent to the patient’s home for a clinician-guided remote sample collection of ambiguous pigmented skin lesions. A patient can also initiate the process by downloading the Company’s telemedicine app, DermTech Connect, which uses store-and-forward technology to allow the patient to take a picture of a suspicious lesion with their phone and have the picture reviewed by an independent clinician who is subscribing to the DermTech Connect platform to assess the suspicious lesion, and if medically necessary, order a DMT and send a collection kit to the patient. The DermTech Connect app and telemedicine service is currently available in most states where permitted by law and applicable standards of practice guidelines. Once the sample is collected by the patient via the telemedicine solution or by a healthcare clinician in person, it is returned to the Company’s CLIA laboratory for analysis. The patient’s ribonucleic acid (“RNA”) and deoxyribonucleic acid (“DNA”) are extracted from the Smart Sticker and analyzed using gene expression and sequencing technology to determine if the pigmented skin lesion contains certain genomic features indicative of melanoma. Upon completion of the gene expression analysis, test results are provided to the clinician indicating whether the sample collected is indicative of melanoma or not.

7

The Company periodically updates its estimate of the variable consideration recognized for previously delivered performance obligations. These updates resulted in a decrease of $0.5 million for the three months ended March 31, 2023 and a decrease of $0.1 million for the three months ended March 31, 2022. These amounts included (i) adjustments for actual collections versus estimated variable consideration as of the beginning of the reporting period and (ii) cash collections and the related recognition of revenue in the current period for tests delivered in prior periods due to the release of the constraint on variable consideration, offset by (iii) reductions in revenue for the accrual for reimbursement claims and settlements.

Contract Revenue

Contract revenue is generated from the sale of laboratory services and Smart Stickers to third-party companies through contract research agreements. Revenues are generated from providing gene expression tests to facilitate the development of drugs designed to treat dermatologic conditions. The provision of gene expression services may include sample collection using the Company’s Smart Sticker, assay development for research partners and RNA extraction, isolation, expression, amplification and detection, including data analysis and reporting. Contract revenue can be highly variable in any period as it is closely linked to the clinical trial progress of the Company’s biopharma customers.

(a) Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by revenue source during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
	2023		2022
Test Revenue
DermTech Melanoma Test	$	3,425	$	3,518
Contract Revenue
Adhesive patch kits	36		66
RNA extractions	2		110
Project management fees	14		24
Total revenues	$	3,477	$	3,718

(b) Deferred Revenue and Remaining Performance Obligations

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets.

In a majority of historical agreements that produced contract revenue, the Company received a substantial up-front payment and additional payments upon the achievement of various milestones over the life of the agreement. This results in deferred revenue and is relieved upon delivery of the applicable Smart Stickers or RNA extraction results. Changes in accounts receivable and deferred revenue were not materially impacted by any other factors.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents upfront milestone payments, for which consideration is received prior to when goods/services are completed or delivered. Upfront fees that are estimated to be recognized as revenue more than one year from the date of collection are classified as long-term deferred revenue. Short-term deferred revenue as of March 31, 2023 and December 31, 2022 was $0.2 million and $0.1 million, respectively. As of December 31, 2022, the Company reclassified $1.0 million of short-term deferred revenue to accrued liabilities for a customer refund obligation in connection with cancellation of future services.

Remaining performance obligations include deferred revenue and amounts the Company expects to receive for goods and services that have not yet been delivered or provided under existing agreements. For agreements that have an original duration of one year or less, the Company has elected the practical expedient applicable to such agreements and does not disclose the remaining performance obligations at the end of each reporting period. As of March 31, 2023, the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied for executed agreements with an original duration of one year or more was immaterial.

8

(f)    Accounts Receivable

Test Accounts Receivable

Due to the nature of the Company’s test revenue, it can take a significant amount of time to collect upon billed tests. The Company prepares an analysis on reimbursement collections and data obtained for each financial reporting period to determine the amount of receivables to be recorded relating to tests performed in the applicable period. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. Accounts receivable are written off when all efforts to collect the balance have been exhausted. Adjustments for implicit price concessions attributable to variable consideration are incorporated into the measurement of the accounts receivable balances. The Company recorded $3.6 million and $4.1 million of net test accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

Contract Accounts Receivable

Contract accounts receivable are recorded at the net invoice value and are not interest bearing. The Company reserves specific receivables if collectability is no longer reasonably assured, and, as of March 31, 2023, the Company did not maintain any reserves over contract receivables as they relate to large established credit worthy customers. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The Company recorded $0.1 million and $0.1 million of contract accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

(g)    Net Loss Per Share

Basic and diluted net loss per share of common stock is determined by dividing net loss applicable to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Because there is a net loss attributable to holders of common stock during the periods presented, the outstanding common stock warrants, stock options and restricted stock units (“RSUs”) have been excluded from the calculation of diluted loss per share of common stock because their effect would be anti-dilutive. Therefore, the weighted average shares used to calculate both basic and diluted loss per share are the same.

Outstanding anti-dilutive securities not included in diluted net loss per share (in thousands):

	March 31,
	2023	2022
Shares issuable upon exercise of common stock warrants	709	724
Shares issuable upon exercise of stock options	1,523	1,654
Shares issuable upon the release of restricted stock units	4,011	2,333
	6,243	4,711

(h)    Accounting Pronouncements Issued But Not Yet Effective

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03“). Under the guidance of ASU 2022-03, a contractual restriction on the sale of an equity security is not considered in measuring the security’s fair value. ASU 2022-03 also requires certain disclosures for equity securities that are subject to contractual restrictions. For public business entities, the provisions of ASU 2022-03 are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024 and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on its condensed consolidated financial statements or disclosures.

9

2.    Balance Sheet Details

Short-Term Marketable Securities

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of March 31, 2023 were as follows (in thousands):

	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	11,028	$	3	$	(150)	$	10,881
U.S. government debt securities	45,644		119		(304)		45,459
Total short-term marketable securities, available-for-sale	$	56,672	$	122	$	(454)	$	56,340

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of December 31, 2022 were as follows (in thousands):

	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	13,535	$	2	$	(236)	$	13,301
Municipal debt securities	1,001		—		(8)		993
U.S. government debt securities	34,675		10		(568)		34,117
Total short-term marketable securities, available-for-sale	$	49,211	$	12	$	(812)	$	48,411

As of March 31, 2023, the estimated market value of debt securities with contractual maturities of less than twelve months was $49.0 million; the remaining debt securities that the Company held at that date had an estimated market value of $7.3 million and contractual maturities of up to 21 months. As of December 31, 2022, the estimated market value of debt securities with contractual maturities of less than twelve months was $40.2 million; the remaining debt securities that the Company held at that date had an estimated market value of $8.2 million and contractual maturities of up to 23 months.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. It was determined that no credit losses existed as of March 31, 2023 or December 31, 2022, because the change in market value for those securities in an unrealized loss position has resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. Gross realized gains and losses on the Company’s debt securities for the three months ended March 31, 2023 and 2022 were not significant.

10

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2023 aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	March 31, 2023
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	9,050	$	(150)	$	—	$	—	$	9,050	$	(150)
U.S. government debt securities	19,043		(235)		5,767		(69)		24,810		(304)
Total short-term marketable securities, available-for-sale	$	28,093	$	(385)	$	5,767	$	(69)	$	33,860	$	(454)

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	6,533	$	(105)	$	5,503	$	(131)	$	12,036	$	(236)
Municipal securities	—		—		992		(8)		992		(8)
U.S. government debt securities	10,907		(196)		19,026		(372)		29,933		(568)
Total short-term marketable securities, available-for-sale	$	17,440	$	(301)	$	25,521	$	(511)	$	42,961	$	(812)

Prepaid Expenses and Property and Equipment, Net

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Prepaid expenses and other current assets:
Prepaid expenses	$	1,688	$	3,207
Other current assets	660		733
Total prepaid expenses and other current assets	$	2,348	$	3,940
Property and equipment, gross:
Laboratory equipment	$	5,147	$	6,250
Computer equipment	894		872
Furniture and fixtures	1,102		913
Leasehold improvements	2,549		1,344
Total property and equipment, gross	9,692		9,379
Less accumulated depreciation	(3,430)		(3,004)
Total property and equipment, net	$	6,262	$	6,375

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Accrued Compensation and Accrued Liabilities

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Accrued compensation:
Accrued bonus and commissions	$	3,168	$	3,257
Accrued salaries and wages	4,388		4,637
Total accrued compensation	$	7,556	$	7,894
Accrued liabilities:
Accrued consulting services	$	2,145	$	894
Customer refund liability	1,505		980
Other accrued expenses	1,157		1,590
Total accrued liabilities	$	4,807	$	3,464

3. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 (in thousands):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	20,747	$	—	$	—	$	20,747
Corporate debt securities	—		529		—		529
U.S. government debt securities	—		5,979		—		5,979
Total cash equivalents	20,747		6,508		—		27,255
Marketable securities, available for sale:
Corporate debt securities	—		10,881		—		10,881
U.S. government debt securities	—		45,459		—		45,459
Total marketable securities, available for sale	—		56,340		—		56,340
Total assets measured at fair value on a recurring basis	$	20,747	$	62,848	$	—	$	83,595
Liabilities:
Warrant liability	$	—	$	—	$	12	$	12
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	12	$	12

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The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money Market	$	9,365	$	—	$	—	$	9,365
Corporate debt securities	—		7,374		—		7,374
U.S. government debt securities	—		18,396		—		18,396
Total cash equivalents	9,365		25,770		—		35,135
Marketable securities, available for sale:
Corporate debt	—		13,301		—		13,301
Municipal debt securities	—		993		—		993
U.S. government debt securities	—		34,117		—		34,117
Total marketable securities, available for sale	—		48,411		—		48,411
Total assets measured at fair value on a recurring basis	$	9,365	$	74,181	$	—	$	83,546
Liabilities:
Warrant liability	$	—	$	—	$	5	$	5
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	5	$	5

The Company’s marketable debt securities are classified as available-for-sale securities based on management's intentions and are at Level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active. The Company has classified marketable securities with original maturities of greater than one year as short-term investments based upon the Company’s ability to use all of those marketable securities to satisfy the liquidity needs of the Company’s current operations.

The fair value of the Private SPAC Warrants was determined using the Black-Scholes-Merton valuation model and included an unobservable input: expected volatility. Expected volatility is considered by the Company to be an unobservable input and is calculated using a weighted average of historical volatilities of a combination of the Company and peer companies, due to the lack of sufficient historical data of the Company’s own stock price. The model also incorporated several observable assumptions at each valuation date, including the price of the Company’s common stock on the date of valuation, the remaining contractual term of the warrant and the risk-free interest rate over the remaining term.

The following assumptions were used to calculate the fair value of the Company’s warrant liability using the Black-Scholes-Merton valuation model:

	Three Months Ended March 31,
	2023	2022
Assumed risk-free interest rate	4.35%	2.37%
Assumed volatility	123.28%	92.77%
Expected term	1.42 years	2.42 years
Expected dividend yield	—	—

The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities (in thousands):

Balance as of December 31, 2022	$	5
Change in fair value of warrant liability	7
Balance as of March 31, 2023	$	12

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As of March 31, 2023 and December 31, 2022, the Company maintains letters of credit of $3.5 million and $3.5 million, respectively, related to its lease arrangements, which are secured by money market accounts in accordance with certain of its lease agreements. The amounts are recorded at fair value using Level 1 inputs and included as restricted cash in the condensed consolidated balance sheets.

The Company believes the carrying amount of cash and cash equivalents, accounts payable and accrued expenses approximate their estimated fair values due to the short-term nature of these accounts

4.    Stockholders’ Equity

(a)    At-The-Market Offering

On November 10, 2020, the Company entered into a sales agreement (the “2020 Sales Agreement”) with Cowen and Company, LLC (“Cowen”) relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $50.0 million. Through December 31, 2021, the Company issued an aggregate of 1,482,343 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $30.05, net of $1.6 million in issuance costs resulting in net proceeds to the Company of approximately $42.9 million. During 2022, the Company did not issue or sell any shares of common stock pursuant to the 2020 Sales Agreement. For the three months ended March 31, 2023, the Company issued an aggregate of 107,451 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $3.68 resulting in aggregate gross proceeds of approximately $0.4 million, reduced by $0.1 million in issuance costs, resulting in net proceeds to the Company of approximately $0.3 million. As of March 31, 2023, $5.1 million is available pursuant to the 2020 Sales Agreement.

On August 8, 2022, the Company entered into a second sales agreement (the “2022 Sales Agreement”) with Cowen relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $75.0 million under a second at-the-market offering program. For the three months ended March 31, 2023, the Company did not issue any shares pursuant to the 2022 Sales Agreement.

(b)    Warrants

SPAC Warrants

The Company previously issued a total of 14,936,250 SPAC warrants (the "SPAC Warrants") to purchase common stock in public and private placement offerings, which were consummated on June 23, 2017. As part of the public offering, the Company issued 14,375,000 warrants (the "Public SPAC Warrants") and, as part of the private placement offering, the Company issued 561,250 warrants (the "Private SPAC Warrants"). The SPAC Warrants have a five-year life from the date the Business Combination was consummated, and every four SPAC Warrants entitle the holder to purchase one whole share of common stock at an exercise price of $23.00 per whole share.

The Private SPAC Warrants are identical to the Public SPAC Warrants, but they (i) are exercisable either for cash or on a cashless basis at the holder’s option, (ii) are not redeemable by the Company as long as such warrants are held by the initial purchasers or their affiliates and permitted transferees, and (iii) may be subject to the limitations on exercise as specified in the warrant agreement. As a result of these difference in features between the Public SPAC Warrants and Private SPAC Warrants, the Company concluded that the Private SPAC Warrants should be classified as a liability, if still held by the original Private SPAC Warrant holder, and marked to market each financial reporting period in the Company’s statement of operations.

In 2021, a total of 12,120,397 SPAC Warrants were exercised, resulting in the Company’s issuance of 3,030,092 shares of common stock and the receipt of $69.7 million in gross proceeds. Outstanding SPAC Warrants totaled 2,815,853 as of March 31, 2023 and December 31, 2022. Private SPAC Warrants that were still owned by the original holder totaled 80,350 as of March 31, 2023 and December 31, 2022.

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Placement Agent Warrants

In connection with several of DermTech Operations’ financings that took place between 2015 and 2018, DermTech Operations engaged a registered placement agent to assist in marketing and selling common and preferred units. From 2015 to 2016, DermTech Operations issued 168,522 seven-year warrants to purchase one share of common stock each at an exercise price of $8.68 per share. From 2016 to 2018, DermTech Operations issued 72,658 seven-year warrants to purchase one share of common stock at an exercise price of $9.54 per share. In 2020, the Company issued 15,724 seven-year warrants to purchase one share of common stock at an exercise price of $9.54 per share in connection with the Company’s 2018 bridge note financing. Outstanding placement agent warrants totaled 4,510 as of March 31, 2023 and December 31, 2022.

(c)    Stock-Based Compensation

Stock-based compensation expense for employee options, RSUs, the purchase rights issued under the DermTech, Inc. 2020 Employee Stock Purchase Plan, as amended (the “2020 ESPP”), and consultant options was recorded in the condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	412	$	335
Sales and marketing	1,508		1,188
Research and development	561		768
General and administrative	2,255		1,603
Total stock-based compensation	$	4,736	$	3,894

The total compensation cost related to non-vested awards not yet recognized as of March 31, 2023 was $31.7 million, which is expected to be recognized over a weighted average term of 2.18 years.

5.    Contingencies

Legal Proceedings

From time to time, the Company may be subject to legal proceedings and claims arising in the ordinary course of business. Management does not believe that the outcome of any of these matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

6.    Related Party Transactions

During 2022 and 2023, the Company engaged EVERSANA Life Science Services, LLC and its subsidiary Intouch Group, LLC (collectively, “EVERSANA”) to provide certain marketing services to the Company. Leana Wood, the spouse of Todd Wood, the Company’s Chief Commercial Officer, is an employee of EVERSANA. The Company incurred $0.5 million and $0.7 million in costs for the three months ended March 31, 2023 and 2022, respectively. Amounts due to EVERSANA were $0.5 million and $0.3 million as of March 31, 2023 and December 31, 2022, respectively.

There were no other related party transactions identified during the three months ended March 31, 2023 and 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Discussion and Analysis of Financial Condition and Results of Operations of DermTech, Inc. (together with its subsidiaries, “DermTech,” “we,” “us,” “our” or the “Company”) should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited condensed consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, (the “SEC”) on March 2, 2023.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, including the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are intended to be covered by the “safe harbor” created by those sections. All statements, other than statements of historical facts, contained in this report, including statements regarding DermTech’s or its management’s intentions, beliefs, expectations and strategies for the future, are forward looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” "might," “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “potential,” “could,” “would,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements are made as of the date of this report, deal with future events, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in those forward-looking statements. The risks and uncertainties that could cause actual results to differ materially are more fully described under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC. We assume no obligation to update any of the forward-looking statements after the date of this report or to conform these forward-looking statements to actual results.

Overview

We are a molecular diagnostic company developing and marketing novel non-invasive genomics tests to aid in the diagnosis and management of skin cancer, inflammatory skin diseases, and aging-related skin conditions. Our technology enhances early melanoma detection by non-invasively detecting genomic markers associated with melanoma to identify higher risk lesions at their earliest stages to rule out melanoma with a greater than 99% negative predictive value ("NPV") (Gerami et al. J Am Acad Dermatol. 2017; Skelsey et al. SKIN. 2021). Our scalable genomics assays have been designed to work with our adhesive patch, the DermTech Smart StickerTM (the “Smart Sticker”) which is used to non-invasively collect skin tissue samples for analysis.

We are initially commercializing tests that will address unmet needs in the diagnostic pathway of pigmented skin lesions, such as moles or dark colored skin spots. The DMT facilitates the clinical assessment of pigmented skin lesions for melanoma. We initially marketed this test directly to a concentrated group of dermatologists and are currently expanding marketing efforts to a broader group of clinicians and to a small group of primary care providers. The application of our Smart Sticker to collect samples non-invasively may allow us to eventually market the DMT to primary care physicians more broadly, beyond integrated primary care networks, and expand our efforts through telemedicine channels. We process our tests in our high complexity molecular laboratory that is certified under CLIA, College of American Pathologists accredited and New York licensed. We also provide laboratory services to several pharmaceutical companies that access our technology on a contract basis for their clinical trials or other studies to advance new drugs.

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Events, Trends and Uncertainties

The DMT without the additional test for the presence of telomerase reverse transcriptase gene driver mutations (“TERT”) (formerly known as PLAplus) became eligible for Medicare reimbursement on February 10, 2020. Each reference to the DMT in this paragraph refers only to the DMT without the add-on test for TERT. In late October 2019, the American Medical Association provided us with a Proprietary Laboratory Analyses Code (“PLA Code”). Pricing of $760 for the PLA Code was published on December 24, 2019 as part of the Clinical Laboratory Fee Schedule for 2020. The final Local Coverage Determination (“LCD”) expanded the coverage proposal in the draft LCD from one to two tests per date of service, and it allows clinicians to order the DMT if they have sufficient skill and experience to decide whether a pigmented lesion should be biopsied. Our local Medicare Administrative Contractor, Noridian, has issued its own LCD (“Noridian’s LCD”) announcing coverage of the DMT. Even though the effective date of Noridian’s LCD was June 7, 2020, Noridian began reimbursing us for the DMT as of February 10, 2020. With Medicare coverage granted, we have the opportunity to approach commercial payors, and, as a result, we believe that the DMT may generate significant revenues in the future. No LCD currently covers the optional add-on test for TERT available to those ordering the DMT.

Despite the grant of Medicare coverage for the DMT (without the add-on test for TERT), uncertainty surrounds commercial payor reimbursement, including governmental and commercial payors, of any test incorporating new technology, including tests developed using our technologies. Because each payor generally determines for its own enrollees or insured patients whether to cover or otherwise establish a policy to reimburse our tests, seeking payor approvals is a time-consuming and costly process. We cannot be certain that coverage for our current tests and our planned tests will be provided in the future by additional commercial payors or that existing policy decisions or reimbursement levels will remain in place or be fulfilled under existing terms and provisions. If we cannot obtain or maintain coverage and reimbursement from private and governmental payors, such as Medicare and Medicaid, for our current tests, or new tests or test enhancements, our ability to generate revenues could be limited. This may have a material adverse effect on our business, financial condition, results of operation and cash flows.

Contract Revenue

Contract revenues with pharmaceutical companies relate to ongoing clinical trial contracts and new contracts. Contract revenue can be highly variable as it is dependent on the pharmaceutical customers’ clinical trial progress, which can be difficult to forecast due to variability of patient enrollment, drug safety and efficacy and other factors. Many of our historical contracts with third parties were structured to contain milestone billing payments, which typically are advance payments on work yet to be performed. These advanced payments are structured to help fund operations and are included in deferred revenue as the work has not yet been performed. These advance payments will remain in deferred revenue until we process the laboratory portion of the contracts allowing us to recognize the revenue.

Supply Chain and Inflationary Environment

Global supply chain disruptions and the higher inflationary environment have resulted in higher prices, which could impact our liquidity, business, financial condition and results of operations.

Financial Overview

Revenue

We generate revenue through laboratory services that are billed to Medicare, private medical insurance companies and pharmaceutical companies who order our laboratory services, which can include sample collection kits, test development, patient segmentation and stratification, genomic analysis, data analysis and reporting. Our revenue is generated from two revenue streams: test revenue and contract revenue. Test revenue can be highly variable as it is based on payments received by government and private insurance payors that are and are not under contract and can vary based on patient insurance coverage, deductibles and co-pays. As much of our test revenue is driven by the samples that are sent by physicians to our central lab for testing, a key performance measure for us is samples that are received and processed by our central lab successfully, also known as billable samples. We are currently prioritizing volume in geographies where we have payer coverage versus overall volume growth as one factor to potentially increase average selling price and help preserve our cash runway. We recently stopped testing samples from pediatric patients and certain Fitzpatrick skin types based on guidance from our lab accrediting organization. We are working on a plan to reintroduce testing for these cohorts with extremely low prevalence of melanoma. Based on these factors, we expect test volumes in 2023 to be affected.

17

Our laboratory services are ordered by customers on projects that may span over several years, which makes our contract revenue highly variable. Segments of these contracts may be increased, delayed or eliminated based on the success of our customers’ clinical trials or other factors.

Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses are primarily related to our specialty field sales force, market research, reimbursement efforts, conference attendance, public relations, advertising and general marketing.

Research and Development Expenses

Our research and development ("R&D") expenses consist primarily of salaries and fringe benefits, clinical trials, consulting costs, facilities costs, laboratory costs, equipment expense and depreciation. We also conduct clinical trials to validate the performance characteristics of our tests and to show medical cost benefit in support of our reimbursement efforts.

General and Administrative Expenses

Our general and administrative expenses consist of senior management compensation, consulting, legal, billing and collections, human resources, information technology, accounting, insurance, and general business expenses.

Financing Activities

2020 At-The-Market Offering

On November 10, 2020, the Company entered into a sales agreement with Cowen and Company, LLC ("Cowen") relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $50.0 million (the "2020 Sales Agreement"). Through December 31, 2021, the Company issued an aggregate of 1,482,343 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $30.05, net of $1.6 million in issuance costs resulting in net proceeds to the Company of approximately $42.9 million. During 2022, the Company did not issue or sell any shares of common stock pursuant to the 2020 Sales Agreement. For the three months ended March 31, 2023, the Company issued an aggregate of 107,451 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $3.68 resulting in net proceeds of approximately $0.3 million. As of March 31, 2023, $5.1 million is available pursuant to the 2020 Sales Agreement.

2022 At-The-Market Offering

On August 8, 2022, the Company entered into a sales agreement with Cowen relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $75.0 million (the "2022 Sales Agreement"). The Company did not issue or sell any shares of common stock pursuant to the 2022 Sales Agreement during 2022 nor the first quarter of 2023.

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Results of Operations

Three Months Ended March 31, 2023 and March 31, 2022

(In thousands, except per share amounts and billable test revenue samples)	Three Months Ended March 31,
	2023			2022			$ Change		% Change
Revenues:
Test revenue	$	3,425		$	3,518		$	(93)	(3)	%
Contract revenue	52			200			(148)		(74)	%
Total revenues	3,477			3,718			(241)		(6)	%
Cost of revenues:
Cost of test revenue	3,791			3,530			261		7	%
Cost of contract revenue	30			24			6		25	%
Total cost of revenues	3,821			3,554			267		8	%
Gross (loss) profit	(344)			164			(508)		*
Gross (loss) profit as a percent of total revenue	(10)		%	4		%
Operating expenses:
Sales and marketing	15,417			15,443			(26)		—	%
Research and development	4,409			6,338			(1,929)		(30)	%
General and administrative	11,875			8,574			3,301		39	%
Total operating expenses	31,701			30,355			1,346		4	%
Loss from operations	(32,045)			(30,191)			(1,854)		6	%
Other income/(expense):
Interest income, net	782			66			716		*
Change in fair value of warrant liability	(7)			17			(24)		*
Total other income	775			83			692		*
Net loss	$	(31,270)		$	(30,108)		$	(1,162)	4	%
Basic and diluted net loss per share	$	(1.02)		$	(1.01)		$	(0.01)	1	%
Other Operating Data:
Billable test revenue samples	17,800			14,370			3,430		24	%

* Absolute value percentage change greater than 100

Revenue

Test Revenue

Test revenues decreased $0.1 million, or 3%, to $3.4 million for the three months ended March 31, 2023 compared to $3.5 million for the three months ended March 31, 2022. The decrease in test revenues was primarily driven by a decrease in average selling price, partially offset by increased billable sample volume. Billable samples increased to approximately 17,800 for the three months ended March 31, 2023 compared to approximately 14,370 for the three months ended March 31, 2022. Sample volume is dependent on two major factors: the number of clinicians who order a test in any given quarter and the number of tests ordered by each clinician during the period. The number of ordering clinicians and the utilization per clinician can vary based on a number of factors, including the types of skin cancer conditions presented to clinicians, clinician reimbursement, office workflow, market awareness, clinician education and other factors.

Contract Revenue

Contract revenues with pharmaceutical companies decreased $0.1 million, or 74%, to $0.1 million for the three months ended March 31, 2023, compared to $0.2 million for the three months ended March 31, 2022. Contract revenues can be highly variable as it is dependent on the pharmaceutical customers’ clinical trial progress, which can be difficult to forecast due to variability of patient enrollment, drug safety and efficacy and other factors.

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Cost of Revenue

Cost of revenues increased $0.3 million, or 8%, to $3.8 million for the three months ended March 31, 2023 compared to $3.6 million for the three months ended March 31, 2022. The increase was largely attributable to a higher billable sample volume in 2023, higher overhead costs, one-time moving costs pertaining to our new facility, partially offset by streamlined laboratory processes. As of March 31, 2023, a large portion of the costs of revenue are fixed, and these costs include the CLIA facility, quality assurance, management and supervision and equipment calibration and depreciation. The variable cost of revenue expenses incurred primarily relate to compensation-related costs for our laboratory scientists and technicians, laboratory supplies, shipping costs and Smart Sticker collection kits. We remain committed to continuing the automation of our laboratory processes in order to become more cost efficient and productive.

Operating Expenses

Sales and Marketing

Sales and marketing expenses were flat at $15.4 million for the three months ended March 31, 2023 and $15.4 million for the three months ended March 31, 2022.

Research and Development

R&D expenses decreased $1.9 million, or 30%, to $4.4 million for the three months ended March 31, 2023 compared to $6.3 million for the three months ended March 31, 2022. The decrease was due to lower compensation costs from reduced headcount, lower lab supply spending and lower clinical study costs.

General and Administrative

General and administrative expenses increased $3.3 million, or 39%, to $11.9 million for the three months ended March 31, 2023 compared to $8.6 million for the three months ended March 31, 2022. The increase was primarily due to higher overhead from our new facility and higher employee compensation related costs as we added infrastructure such as information technology, legal and billing resources throughout 2022.

Interest Income, net

Interest income, net of $0.8 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively, consists primarily of interest earned on our short-term marketable securities.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability for the three months ended March 31, 2023 was a loss of $7,000 compared to a gain of $17,000 for the three months ended March 31, 2022. The change in fair value of warrant liability is calculated by adjusting the value of the outstanding Private SPAC Warrants held by original holders to the current market value at each reporting period.

Liquidity and Capital Resources

We have never been profitable and have historically incurred substantial net losses, including net losses of $116.7 million for the twelve months ended December 31, 2022 and $31.3 million for the three months ended March 31, 2023. As of March 31, 2023, our accumulated deficit was $354.3 million. At the end of 2020, throughout 2021 and the first quarter of 2023, we raised approximately $44.9 million in gross proceeds facilitated through our at-the-market offering. In addition, we completed an underwritten public offering in January 2021, which raised a total of $143.7 million in gross proceeds. We have historically financed operations through private placement and public equity offerings.

We expect our losses to continue as a result of costs relating to ongoing R&D expenses, general and administrative expenses and sales and marketing costs for existing and planned products. These losses have had, and will continue to have, an adverse effect on our working capital. Because of the numerous risks and uncertainties associated with our commercialization and development efforts, we are unable to predict when we will become profitable, and we may never become profitable. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows.

20

As of March 31, 2023, our cash and cash equivalents totaled approximately $48.4 million and short-term marketable securities totaled approximately $56.3 million. Based on our current business operations, we believe our current cash, cash equivalents and short-term marketable securities will be sufficient to meet our anticipated cash requirements for at least the next 12 months. While we believe we have enough capital to fund anticipated operating costs for at least the next 12 months, we expect to incur significant additional operating losses over at least the next several years. We anticipate that we will raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements in order to support our planned operations and to continue developing and commercializing genomic tests. We may also consider raising additional capital in the future to expand our business and to pursue strategic investments. Our present and future funding requirements will depend on many factors, including:

•our revenue growth rate and ability to generate cash flows from operating activities;

•our sales and marketing and R&D activities;

•effects of competing technological and market developments;

•costs of and potential delays in product development;

•changes in regulatory oversight applicable to our tests; and

•timing of and costs related to future international expansion.

There can be no assurances as to the availability of additional financing or the terms upon which additional financing may be available to us. If we are unable to obtain sufficient funding at acceptable terms, we may be forced to significantly curtail our operations, and lack of sufficient funding may have a material adverse impact on our ability to continue as a going concern.

Cash Flow Analysis

(amounts in thousands)	Three Months Ended March 31,
	2023		2022
Net cash used in operating activities	$	(22,028)	$	(24,823)
Net cash used in investing activities	(8,194)		(7,533)
Net cash provided by financing activities	916		527

Net cash used in operating activities for the three months ended March 31, 2023 totaled $22.0 million, primarily driven by the $31.3 million net loss, offset partially by non-cash related items, including $4.7 million in stock-based compensation, $1.2 million in amortization of operating lease ROU assets and $0.5 million in depreciation. In addition, we had a net cash inflow of $2.9 million through net changes in working capital balances driven primarily by cash inflows of $0.5 million due to decreases in accounts receivable, $1.6 million through the decrease of prepaid expenses and other current assets and $1.3 million through the increase accrued liabilities, partially offset by cash outflows of $0.3 million from the increase in accrued compensation and $0.7 million from the increase in accounts payable.

Net cash used in investing activities for the three months ended March 31, 2023 totaled $8.2 million, which related to the outflow from the purchase of $16.5 million of marketable securities and $0.8 million from the purchase of equipment offset by the inflow from the sales and maturities of marketable securities of $9.0 million. Additional laboratory equipment investment will be needed to install complex automation systems and other genomic testing equipment needed to expand testing capacity.

Net cash provided by financing activities for the three months ended March 31, 2023 totaled $0.9 million, which was driven primarily by $0.6 million in proceeds from contributions to the 2020 ESPP.

Off-Balance Sheet Arrangements

As of March 31, 2023, we did not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

21

Critical Accounting Policies and Significant Judgments and Estimates

Critical accounting policies, significant judgments and estimates are those that we believe are most important for the portrayal of the Company’s financial condition and results and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Recent Accounting Pronouncements

See Item 1 of Part I, Note 1(h) of the condensed consolidated financial statements herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Disclosure controls and procedures enable us to record, process, summarize and report information required to be included in our Exchange Act filings within the required time period. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the periodic reports filed with the SEC is accumulated and communicated to our management, including our principal executive, financial and accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2023, the Company’s disclosure controls and procedures were effective as of such date for this purpose.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitation on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

22

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors.

There have not been any material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 6. Exhibits.

The following documents are filed as part of this Form 10-Q.

Exhibit No.	Description	Filed Herewith	Form	Incorporated by Reference File No.	Date Filed
3.1	Amended and Restated Certificate of Incorporation of the Company, as amended		10-Q	001-38118	11/10/20
3.2	Bylaws of the Company		10-K	001-38118	3/11/20
10.1*	Transition Agreement, by and between the Company and John Dobak, dated March 1, 2023	X
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1**	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS	Inline XBRL Instance Document	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 has been formatted in Inline XBRL.	X
*Management contract or compensatory plan or arrangement
** This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing.

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DermTech, Inc.
Date: May 4, 2023	By:	/s/ John Dobak
		John Dobak, M.D.
		Chief Executive Officer (Principal Executive Officer)
Date: May 4, 2023	By:	/s/ Kevin Sun
		Kevin Sun
		Chief Financial Officer (Principal Financial and Accounting Officer)

24

EX-10.1

Exhibit 10.1

DermTech, Inc.

March 1, 2023

PERSONAL AND CONFIDENTIAL

BY HAND

John Dobak, M.D.

Dear John:

The purpose of this letter (the “Transition Agreement”) is to set forth our agreements concerning your anticipated transition from DermTech, Inc. (the “Company”).

1.Employment through Transition Period. You and the Company have agreed that you will remain employed as the Company’s President and Chief Executive Officer (“CEO”) until the earliest to occur of (a) the Company’s retention of a new CEO; and (b) September 30, 2023 (the “Separation Date”), subject to the terms and conditions of this Transition Agreement and your agreement to deliver, as set forth in paragraph 9 of this Transition Agreement, a supplemental waiver and release (the “Supplemental Release”) as a condition of the receipt of benefits as outlined herein. The period between your signing this Transition Agreement and the Separation Date is the “Transition Period.” During the Transition Period, you will continue to receive your usual salary and benefits, a grant of 56,407 RSUs as your 2023 stock grant (subject to quarterly vesting), and you shall continue to vest in Company equity and you shall be eligible to receive a bonus as outlined in this Transition Agreement.

2.Key Objectives During Transition Period. During the Transition Period, the Company expects that you will fully perform all of your existing job duties, and you will cooperate in all respects as requested by the Company with the Company’s efforts to recruit and engage a new CEO. You will at all times comply with all Company policies and procedures and you will continue reporting to the Company’s Board of Directors (the “Board”).

3.Resignations on the Separation Date. You agree that, as additional consideration for this Transition Agreement, and as a material covenant thereof, you shall resign your positions as President and CEO and your position as a Director of the Board, on the Separation Date and you shall resign any other positions you hold with the Company and any Company affiliates. The Company shall provide you with at least five (5) days advance notice of your Separation Date.

4.Agreements Concerning the Separation Date and Severance. If you sign (and do not revoke) this Transition Agreement, and sign but do not revoke the Supplemental Release provided for in paragraph 9 of this Transition Agreement, in addition to employing you until the Separation Date, and paying your salary, benefits and the continued vesting of your equity through the Separation Date:

(a) The Company will make a severance payment to you in accordance with the Participation Agreement under the DermTech, Inc. Change in Control and Severance Plan (the “Plan”) in an amount equivalent to 12 months of your current base salary, or a total of $597,400 less applicable payroll withholdings, in a single lump sum payment within thirty (30) days following the effective date of the Supplemental Release (subject to the provisions of IRC§ 409a).

(b)Pursuant to the Plan, the Company will pay the Company portion of your premiums to participate in its group health insurance program pursuant to COBRA (if you elect COBRA) for a maximum period of 12 months following the Separation Date, provided, however, that you continue to pay the employee portion of such premiums and further, such payments shall cease if you become eligible for similar coverage under another group health insurance program.

John Dobak, M.D.

Page 2

(c)Pursuant to the Plan, the Company may pay to you a bonus, in the event the Board determines you have met your objectives for the period you continue to be employed as the Company’s President and CEO (the “Bonus Payment”), which determination shall be solely at the discretion of the Company’s Board. Such Bonus Payment, if any, will be made less applicable payroll withholdings, and shall be paid if at all within thirty days of the effective date of the Supplemental Release.

(d)The Company will pay up to $5,000 to reimburse you for reasonable legal fees incurred in connection with your counsel’s review and advice concerning this Transition Agreement.

5.Equity/No other Compensation Due. You will continue to vest in your equity as provided on Schedule A annexed hereto. You shall receive accelerated vesting and an extension of the time to exercise your vested equity as set forth on Schedule A. Other than the agreements concerning equity as set forth on Schedule A, you agree and acknowledge that you have no right to, nor do you own, any other equity interest in the Company or its affiliates, and you will make no claim to such equity in the future. You understand that other than the compensation specifically set forth in this Transition Agreement, you will not be eligible for any other compensation from the Company.

6.Covenant of Cooperation/Consultant Services. Immediately following the Separation Date, you shall transition to the status of a Consultant to the Company, as such term is defined in the Company’s 2020 Equity Plan. You shall continue as a Consultant until January 1, 2024 (the “Consultant Services Period”). In connection therewith, you agree that you shall fully cooperate with the Company as requested during the Consultant Services Period, which cooperation shall include responding to inquiries from the Company’s Board or management team, being reasonably available to participate in meetings (telephonic, in person and virtual) regarding Company matters, and cooperating in any litigation or witness-related matters, or investigative matters, upon reasonable advance notice. You shall receive no additional compensation for such services. For avoidance of doubt, you shall continue to vest in any equity as set forth on Schedule A. Your relationship with the Company shall terminate at the conclusion of the Consultant Services Period.

7.Other Agreements.

(a)You agree that no later than two business days after the Separation Date you will return to the Company all Company documents (whether in hard copy or electronic form and any copies thereof) and property (including, without limitation, all cell phones, laptops and other company equipment), and that you shall abide by the provisions of the Confidential Information and Invention Assignment Agreement you executed (the “Confidentiality Agreement”), the terms of which shall survive the signing of this Transition Agreement. Further, you agree that you will abide by any and all common law and/or statutory obligations relating to protection and non-disclosure of the Company’s trade secrets and/or confidential and proprietary documents and information.

(b)You agree that, to the extent permitted by law (and subject to S.B. 331), and unless otherwise publicly disclosed pursuant to law, all information relating in any way to this Transition Agreement, including the terms and amount of financial consideration provided for in this Transition Agreement, shall be held confidential by you and shall not be publicized or disclosed to any person (other than an immediate family member, legal counsel or financial advisor, provided that any such individual to whom disclosure is made agrees to be bound by these confidentiality obligations), business entity or government agency (except as mandated by state or federal law), except that nothing in this paragraph shall prohibit you from participating in an investigation with a state or federal agency if requested by the agency to do so.

(c)You will not make any statements that are professionally or personally disparaging about, or adverse to, the interests of the Company (including its former or current officers, directors, employees and consultants) including, but not limited to, any statements that disparage any person, product, service, finances, financial condition, capability or any other aspect of the business of the Company, and that you will not engage in any conduct which could reasonably be expected to harm professionally or personally the reputation of the Company (including its former or current officers, directors, employees and consultants) (except pursuant to S.B. 311 or as otherwise mandated by state or federal law).

John Dobak, M.D.

Page 3

(d)The Board agrees that it will not make any statements that are professionally or personally disparaging about or adverse to you.

8.Your Release of Claims. You hereby agree and acknowledge that by signing this Transition Agreement and accepting the benefits hereunder, and for other good and valuable consideration, you are waiving your right to assert any and all forms of legal claims against the Company1/ of any kind whatsoever, whether known or unknown, arising from the beginning of time through the date you execute this Transition Agreement (the “Execution Date”). Except as set forth below, your waiver and release herein is intended to bar any form of legal claim, complaint or any other form of action by you, including but not limited to a class or collective action, whether you seek to participate as a party plaintiff or as a class member (each a “Claim” and jointly referred to as “Claims”) against the Company seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys’ fees and any other costs) against the Company, for any alleged action, inaction or circumstance existing or arising through the Execution Date.

Without limiting the foregoing general waiver and release, you specifically waive and release the Company from any Claim arising from or related to your prior employment relationship with the Company or the termination thereof, including, without limitation:

**    Claims under any local, state or federal discrimination, fair employment practices or other employment-related statute, regulation or executive order (as they may have been amended through the Execution Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, national origin, age, gender, marital status, disability, veteran status or sexual orientation. Without limitation, specifically included in this paragraph are any Claims arising under the federal Age Discrimination in Employment Act, the Civil Rights Acts of 1866 and 1871, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Federal Worker Adjustment and Retraining Notification Act; and any similar California, or other state, federal, or local statutes.

**    Claims under any other local, state or federal employment related statute, regulation or executive order (as they may have been amended through the Execution Date) relating to any other terms and conditions of employment.

**    Claims under any state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence.

**    Any other Claim arising under local, state or federal law.

Notwithstanding the foregoing, this section does not release the Company from any obligation expressly set forth in this Transition Agreement or any claim that cannot be released as a matter of law and claims for indemnity under any indemnification agreements or rights to indemnity under any Company bylaws or corporate charter. You acknowledge and agree that, but for providing this waiver and release, you would not be receiving the economic benefits being provided to you under the terms of this Transition Agreement.

**Unknown Claims, Waiver of California Civil Code Section 1542. You understand and expressly agree that this Transition Agreement extends to all claims of every nature and kind, known or

1/    For purposes of this release, the “Company” includes DermTech, Inc. and any of its divisions, affiliates (which means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company), parents, subsidiaries and all other related entities, and its and their former and current directors, officers, employees, trustees, agents, successors and assigns.

John Dobak, M.D.

Page 4

unknown, suspected or unsuspected, past, present, or future, arising from or attributable to any conduct of the Company, whether set forth in any claim or demand referred to in this Transition Agreement or not, and that any and all rights granted to you under Section 1542 of the California Civil Code or any analogous state law or federal law or regulation, are expressly WAIVED. Section 1542 of the California Civil Code reads as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASING PARTY.

In waiving the provisions of Section 1542 of the California Civil Code, you acknowledge you may later discover facts in addition to or different from those you now believe to be true with respect to the matters released in this Transition Agreement. You, however, agree you have taken that possibility into account in reaching this Transition Agreement, and that the release in this Transition Agreement will remain in effect as a full and complete release notwithstanding the discovery or existence of additional or different facts

It is the Company’s desire and intent to make certain that you fully understand the provisions and effects of this Transition Agreement. To that end, you have been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Also, because you are over the age of 40, and consistent with the provisions of the Age Discrimination in Employment Act, which prohibits discrimination on the basis of age, the Company is providing you with twenty-one (21) days in which to consider and accept the terms of this Transition Agreement by signing below and returning it to the undersigned. In addition, you may rescind your assent to this Transition Agreement if, within seven (7) days after you sign this Agreement, you deliver by hand or send by confirmed electronic mail a notice of rescission to the undersigned. The eighth day following your signing of this Agreement without rescission is the “Effective Date” of this Transition Agreement.

Also, consistent with the provisions of local, state and federal discrimination laws, nothing in this release shall be deemed to prohibit you from challenging the validity of this release under such discrimination laws (the “Discrimination Laws”) or from filing a charge or complaint of age or other employment related discrimination with the Equal Employment Opportunity Commission (“EEOC”) or state or local equivalent, or from participating in any investigation or proceeding conducted by the EEOC or state or local equivalent (or seeking the recovery of any governmental bounty). Further, nothing in this release or Transition Agreement shall be deemed to limit the Company’s right to seek immediate dismissal of such charge or complaint on the basis that your signing of this Transition Agreement constitutes a full release of any individual rights under the Discrimination Laws, or to seek restitution to the extent permitted by law of the economic benefits provided to you under this Transition Agreement in the event that you successfully challenge the validity of this release and prevail in any claim under the Discrimination Laws.

9.Supplemental Release. You hereby agree that, as a condition to the receipt of the benefits outlined in this Transition Agreement, you will execute and deliver a Supplemental Release of claims, which shall substantially reflect paragraph 8 of this Transition Agreement, and you must not revoke such Supplemental Release, as you are entitled to do. The Company will supply the Supplemental Release to you on or immediately after the Separation Date.

10.Entire Agreement/Modification/Waiver/Choice of Law/Enforceability. You acknowledge and agree that this Transition Agreement supersedes any and all prior or contemporaneous oral and/or written agreements between you and the Company, and sets forth the entire agreement between you and the Company, except for the Confidentiality Agreement, which will survive by its terms. The failure of the Company to seek enforcement of any provision of this Transition Agreement in any instance or for any period of time shall not be construed as a waiver of such provision or of the Company’s right to seek enforcement of such provision in the future. This Transition Agreement shall be deemed to have been made in the State of California and shall be construed in accordance with the laws

John Dobak, M.D.

Page 5

of California without giving effect to conflict of law principles. The provisions of this Transition Agreement are severable, and if for any reason any part hereof shall be found to be unenforceable, the remaining provisions shall be enforced in full, provided, however, that if any or all of the release is held unenforceable, this Transition Agreement shall be deemed null and void.

By executing this Transition Agreement, you are acknowledging that: (1) you have carefully read and understand the terms and effects of this Transition Agreement, including the Section entitled Your Release of Claims; (2) you understand that the Your Release of Claims is legally binding and by signing this Transition Agreement, you give up certain rights; (3) you have been afforded sufficient time to understand the terms and effects of this Transition Agreement; (4) your agreements and obligations hereunder are made voluntarily, knowingly and without duress; and (5) neither the Company nor its agents or representatives have made any representations inconsistent with the provisions of this Transition Agreement.

This Transition Agreement shall remain open for acceptance until 21 days after delivery, at which time the offers in this Transition Agreement will expire.

DermTech, Inc.

By: /s/ Matthew Posard        

Its: Chairman of the Board

Confirmed, Agreed and Acknowledged:

/s/ John Dobak            

John Dobak, M.D.

Dated:    March 1, 2023            

John Dobak, M.D.

Page 6

Schedule A

A	B	C	D	E	F	G	H	I
Equity Award Type	Grant Number	Grant Date	Number of Shares Underlying Original Grant	Number of Underlying Shares Vested as of 3/2/23	Number of Underlying Shares Unvested as of 3/2/23	Number of Underlying Shares to be Vested as of 01/01/2024	Number of additional Underlying Shares to be Vested with 10 Months of Vesting Acceleration	Total Underlying Shares to be Vested
RSU	Tbd	Tbd	56,407	0	0	56,407	0	56,407
RSU	1059	03/25/2022	209,527	0	209,527	122,224	52,381	174,605
NQ	000513	03/29/2021	41,207	20,821	20,386	29,875	9,053	38,928
RSU	541	03/29/2021	29,195	12,772	16,423	20,071	5,474	25,545
ISO	512	03/29/2021	2,248	0	2,248	0	0	0
NQ	000411	06/25/2020	80,371	56,936	23,435	73,680	6,691	80,371
RSU	395	06/25/2020	60,916	38,072	22,844	53,301	7,615	60,916
ISO	410	06/25/2020	26,844	14,540	12,304	20,133	6,711	26,844

As set forth in column H above, upon the conclusion of the Consultant Services Period, each of Executive’s then-outstanding unvested equity awards shall accelerate and become vested and exercisable or settled with respect to 10 months of additional vesting. Any vested equity must be exercised no later than the last day of the twelfth (12th) month following the conclusion of the Consultant Services Period. In the event the Company effects a Change of Control prior to or during the Consultant Services Period, Executive shall be entitled to full acceleration of all outstanding equity awards.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Dobak, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 of DermTech, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2023	By:	/s/ John Dobak
		John Dobak
		Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin Sun, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 of DermTech, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2023	By:	/s/ Kevin Sun
		Kevin Sun
		Chief Financial Officer (principal financial and accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 of DermTech, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies in his capacity as the specified officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 4, 2023	By:	/s/ John Dobak
		John Dobak
		Chief Executive Officer (principal executive officer)
Date: May 4, 2023	By:	/s/ Kevin Sun
		Kevin Sun
		Chief Financial Officer (principal financial and accounting officer)

This certification accompanies the Quarterly Report on Form 10-Q to which it relates and shall not be deemed filed with the Securities and Exchange Commission or incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

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Cover Page - shares	3 Months Ended
	Mar. 31, 2023	Apr. 28, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-38118
Entity Registrant Name	DERMTECH, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-2870849
Entity Address, Address Line One	12340 El Camino Real
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92130
City Area Code	858
Local Phone Number	450-4222
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	DMTK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,089,911
Entity Central Index Key	0001651944
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false
Former Address
Document Information [Line Items]
Entity Address, Address Line One	11099 N. Torrey Pines Road
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	La Jolla
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92037

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 48,438	$ 77,757
Short-term marketable securities	56,340	48,411
Accounts receivable	3,690	4,172
Inventory	1,574	1,757
Prepaid expenses and other current assets	2,348	3,940
Total current assets	112,390	136,037
Property and equipment, net	6,262	6,375
Operating lease right-of-use assets	54,800	56,007
Restricted cash	3,501	3,488
Other assets	168	168
Total assets	177,121	202,075
Current liabilities:
Accounts payable	1,680	2,419
Accrued compensation	7,556	7,894
Accrued liabilities	4,807	3,464
Short-term deferred revenue	242	109
Current portion of operating lease liabilities	1,756	1,634
Current portion of finance lease obligations	97	116
Total current liabilities	16,138	15,636
Warrant liability	12	5
Long-term finance lease obligations, less current portion	49	53
Operating lease liabilities, long-term	53,680	54,028
Total liabilities	69,879	69,722
Stockholders’ equity:
Common stock, $0.0001 par value per share; 50,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 31,088,911 and 30,297,408 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	3	3
Additional paid-in capital	461,845	456,171
Accumulated other comprehensive loss	(289)	(774)
Accumulated deficit	(354,317)	(323,047)
Total stockholders’ equity	107,242	132,353
Total liabilities and stockholders’ equity	$ 177,121	$ 202,075

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common stock, par value per share (in usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	31,088,911	30,297,408
Common stock, shares outstanding (in shares)	31,088,911	30,297,408

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues:
Total revenues	$ 3,477	$ 3,718
Cost of revenues:
Total cost of revenues	3,821	3,554
Gross (loss) profit	(344)	164
Operating expenses:
Sales and marketing	15,417	15,443
Research and development	4,409	6,338
General and administrative	11,875	8,574
Total operating expenses	31,701	30,355
Loss from operations	(32,045)	(30,191)
Other income/(expense):
Interest income, net	782	66
Change in fair value of warrant liability	(7)	17
Total other income	775	83
Net loss	$ (31,270)	$ (30,108)
Weighted average shares outstanding used in computing net loss per share, basic (in shares)	30,557,216	29,836,072
Weighted average shares outstanding used in computing net loss per share, diluted (in shares)	30,557,216	29,836,072
Net loss per share of common stock outstanding, basic (in usd per share)	$ (1.02)	$ (1.01)
Net loss per share of common stock outstanding, diluted (in usd per share)	$ (1.02)	$ (1.01)
Test revenue
Revenues:
Total revenues	$ 3,425	$ 3,518
Cost of revenues:
Total cost of revenues	3,791	3,530
Contract revenue
Revenues:
Total revenues	52	200
Cost of revenues:
Total cost of revenues	$ 30	$ 24

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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net loss	$ (31,270)	$ (30,108)
Unrealized net gain/(loss) on marketable securities and cash equivalents	485	(570)
Comprehensive loss	$ (30,785)	$ (30,678)

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Condensed Consolidated Statements of Stockholders’ Equity - USD ($) $ in Thousands	Total	Common stock	Additional paid-in capital	Accumulated other comprehensive loss	Accumulated deficit
Beginning balance (in shares) at Dec. 31, 2021		29,772,922
Beginning balance at Dec. 31, 2021	$ 229,698	$ 3	$ 436,183	$ (124)	$ (206,364)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock from option exercises and RSU releases (in shares)		109,275
Issuance of common stock from option exercises and RSU releases	40		40
Issuance of common stock from warrant exercises (in shares)		11,101
Issuance of common stock from warrant exercises	12		12
Issuance of common stock from Employee Stock Purchase Plan (in shares)		47,339
Issuance of common stock from Employee Stock Purchase Plan	515		515
Unrealized net gain/(loss) on marketable securities and cash equivalents	(570)			(570)
Stock-based compensation	3,894		3,894
Net loss	(30,108)				(30,108)
Ending balance (in shares) at Mar. 31, 2022		29,940,637
Ending balance at Mar. 31, 2022	203,481	$ 3	440,644	(694)	(236,472)
Beginning balance (in shares) at Dec. 31, 2021		29,772,922
Beginning balance at Dec. 31, 2021	229,698	$ 3	436,183	(124)	(206,364)
Ending balance (in shares) at Dec. 31, 2022		30,297,408
Ending balance at Dec. 31, 2022	132,353	$ 3	456,171	(774)	(323,047)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock at a weighted average price of $3.68 through at-the-market offering, net of $0.1 million issuance costs (in shares)		107,451
Issuance of common stock at a weighted average price of $3.68 through at-the-market offering, net of $0.1 million issuance costs	270		270
Issuance of common stock from option exercises and RSU releases (in shares)		510,027
Issuance of common stock from option exercises and RSU releases	92		92
Issuance of common stock from Employee Stock Purchase Plan (in shares)		174,025
Issuance of common stock from Employee Stock Purchase Plan	576		576
Unrealized net gain/(loss) on marketable securities and cash equivalents	485			485
Stock-based compensation	4,736		4,736
Net loss	(31,270)				(31,270)
Ending balance (in shares) at Mar. 31, 2023		31,088,911
Ending balance at Mar. 31, 2023	$ 107,242	$ 3	$ 461,845	$ (289)	$ (354,317)

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Condensed Consolidated Statements of Stockholders’ Equity (Parenthetical) - Common stock $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares
Issuance price per share (in usd per share) | $ / shares	$ 3.68
Issuance costs | $	$ 0.1

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (31,270)	$ (30,108)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	466	372
Change in fair value of warrant liability	7	(17)
Amortization of operating lease right-of-use assets	1,207	435
Stock-based compensation	4,736	3,894
Amortization of premiums, net of accretion of discounts on marketable securities	(6)	713
Gain on disposal of equipment	(29)	0
Changes in operating assets and liabilities:
Accounts receivable	482	(1,148)
Inventory	183	(283)
Prepaid expenses and other current assets	1,592	(94)
Operating lease liabilities	(227)	(271)
Accounts payable, accrued liabilities and deferred revenue	1,169	161
Accrued compensation	(338)	1,523
Net cash used in operating activities	(22,028)	(24,823)
Cash flows from investing activities:
Purchases of marketable securities	(16,481)	(13,656)
Sales and maturities of marketable securities	9,044	6,769
Purchases of property and equipment	(757)	(646)
Net cash used in investing activities	(8,194)	(7,533)
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with at-the-market offering, net	270	0
Proceeds from exercise of common stock warrants	0	12
Proceeds from exercise of stock options	92	40
Proceeds from contributions to the Employee Stock Purchase Plan	576	515
Principal repayments of finance lease obligations	(22)	(40)
Net cash provided by financing activities	916	527
Net decrease in cash, cash equivalents and restricted cash	(29,306)	(31,829)
Cash, cash equivalents and restricted cash, beginning of period	81,245	179,907
Cash, cash equivalents and restricted cash, end of period	51,939	148,078
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	48,438	145,053
Restricted cash	3,501	3,025
Total cash, cash equivalents and restricted cash	51,939	148,078
Supplemental cash flow information:
Cash paid for interest on finance lease obligations	1	3
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment recorded in accounts payable	16	318
Right-of-use assets obtained in exchange for lease obligations	0	15,755
Change in unrealized net gains/(losses) on available-for-sale marketable securities and cash equivalents	$ 485	$ (570)

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The Company and a Summary of its Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

The Company and a Summary of its Significant Accounting Policies

The Company and a Summary of its Significant Accounting Policies

(a)    Nature of Operations

On August 29, 2019, DermTech, Inc., formerly known as Constellation Alpha Capital Corp, (the “Company”), and DermTech Operations, Inc., formerly known as DermTech, Inc., (“DermTech Operations”), consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of May 29, 2019, by and among the Company, DT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and DermTech Operations. The Company refers to this agreement, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of August 1, 2019, as the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into DermTech Operations, with DermTech Operations surviving as a wholly-owned subsidiary of the Company. The Company refers to this transaction as the Business Combination. In connection with and two days prior to the completion of the Business Combination, the Company domesticated from the British Virgin Islands to Delaware. DermTech Operations changed its name from DermTech, Inc. to DermTech Operations, Inc. shortly before the completion of the Business Combination. On August 29, 2019, immediately following the completion of the Business Combination, the Company changed its name from Constellation Alpha Capital Corp. to DermTech, Inc., and then effected a one-for-two reverse stock split of its common stock.

The Company is a molecular diagnostic company developing and marketing its Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) laboratory services including molecular pathology tests to facilitate the diagnosis of dermatologic conditions including melanoma. The Company has developed a proprietary, non-invasive technique for sampling the surface layers of the skin using an adhesive patch called the DermTech Smart Sticker™ (the “Smart Sticker”) in order to collect individual biological information for commercial applications in the medical diagnostic field.

The Company has incurred operating losses since inception and has an accumulated deficit of $354.3 million at March 31, 2023. As of March 31, 2023, cash and cash equivalents totaled approximately $48.4 million and short-term marketable securities totaled approximately $56.3 million. The Company's transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. If events or circumstances occur such that change operating plans, the Company may be required to reduce operating expenses, which could have an adverse impact its ability to achieve intended business objectives. The Company's management believes that currently available resources will provide sufficient funds to meet operating plans for at least the next twelve months from the issuance of our unaudited condensed consolidated financial statements. While we believe we have enough capital to fund anticipated operating costs for at least the next twelve months, we anticipate that we will need to raise additional capital in order to support our planned operations and to continue developing and commercializing genomic tests.

(b)    Basis of Presentation

The condensed consolidated financial statements include the accounts of DermTech, Inc. and its subsidiary. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements and accompanying notes do not include all the information and disclosures required by U.S. GAAP for complete financial statements and should be read together with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2023, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

(c)    Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the amounts of revenues and expenses reported during the period. On an ongoing basis, management evaluates these estimates and judgments, including but not limited to those related to test revenue, stock-based compensation, short-term marketable securities, accounts receivable, accrued bonus, warrant liability, right-of-use (“ROU”) assets and the realization of deferred tax assets. Actual results may differ from those estimates.

(d)    Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and available-for-sale marketable securities. The Company invests its cash balances in major financial institutions that it believes have high credit quality and are insured with the Federal Deposit Insurance Corporation (“FDIC”). At times throughout the year, cash deposits might exceed FDIC insurance limits. The Company has not experienced any losses and does not believe it is exposed to any significant credit risk.

(e)    Revenue Recognition

The Company’s revenue is generated from two revenue streams: contract revenue and test revenue. The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue from its test and contract services in accordance with the core principles and key aspects considered by the Company. These considerations are described in detail below, first for test revenue and then for contract revenue.

Test Revenue

The Company generates revenues from its DermTech Melanoma Test or “DMT” which may consist at the option of the ordering clinician of either (i) the DMT or (ii) the DMT with TERT test, which assists a clinician’s diagnosis of melanoma in patients. The Company provides prescribing clinicians with its Smart Sticker to perform non-invasive skin biopsies of clinically ambiguous pigmented skin lesions on patients. The Company also offers clinicians a telemedicine solution where they can request the Smart Sticker collection kit be sent to the patient’s home for a clinician-guided remote sample collection of ambiguous pigmented skin lesions. A patient can also initiate the process by downloading the Company’s telemedicine app, DermTech Connect, which uses store-and-forward technology to allow the patient to take a picture of a suspicious lesion with their phone and have the picture reviewed by an independent clinician who is subscribing to the DermTech Connect platform to assess the suspicious lesion, and if medically necessary, order a DMT and send a collection kit to the patient. The DermTech Connect app and telemedicine service is currently available in most states where permitted by law and applicable standards of practice guidelines. Once the sample is collected by the patient via the telemedicine solution or by a healthcare clinician in person, it is returned to the Company’s CLIA laboratory for analysis. The patient’s ribonucleic acid (“RNA”) and deoxyribonucleic acid (“DNA”) are extracted from the Smart Sticker and analyzed using gene expression and sequencing technology to determine if the pigmented skin lesion contains certain genomic features indicative of melanoma. Upon completion of the gene expression analysis, test results are provided to the clinician indicating whether the sample collected is indicative of melanoma or not.

The Company periodically updates its estimate of the variable consideration recognized for previously delivered performance obligations. These updates resulted in a decrease of $0.5 million for the three months ended March 31, 2023 and a decrease of $0.1 million for the three months ended March 31, 2022. These amounts included (i) adjustments for actual collections versus estimated variable consideration as of the beginning of the reporting period and (ii) cash collections and the related recognition of revenue in the current period for tests delivered in prior periods due to the release of the constraint on variable consideration, offset by (iii) reductions in revenue for the accrual for reimbursement claims and settlements.

Contract Revenue

Contract revenue is generated from the sale of laboratory services and Smart Stickers to third-party companies through contract research agreements. Revenues are generated from providing gene expression tests to facilitate the development of drugs designed to treat dermatologic conditions. The provision of gene expression services may include sample collection using the Company’s Smart Sticker, assay development for research partners and RNA extraction, isolation, expression, amplification and detection, including data analysis and reporting. Contract revenue can be highly variable in any period as it is closely linked to the clinical trial progress of the Company’s biopharma customers.

(a) Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by revenue source during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
	2023		2022
Test Revenue
DermTech Melanoma Test	$	3,425	$	3,518
Contract Revenue
Adhesive patch kits	36		66
RNA extractions	2		110
Project management fees	14		24
Total revenues	$	3,477	$	3,718

(b) Deferred Revenue and Remaining Performance Obligations

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets.

In a majority of historical agreements that produced contract revenue, the Company received a substantial up-front payment and additional payments upon the achievement of various milestones over the life of the agreement. This results in deferred revenue and is relieved upon delivery of the applicable Smart Stickers or RNA extraction results. Changes in accounts receivable and deferred revenue were not materially impacted by any other factors.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents upfront milestone payments, for which consideration is received prior to when goods/services are completed or delivered. Upfront fees that are estimated to be recognized as revenue more than one year from the date of collection are classified as long-term deferred revenue. Short-term deferred revenue as of March 31, 2023 and December 31, 2022 was $0.2 million and $0.1 million, respectively. As of December 31, 2022, the Company reclassified $1.0 million of short-term deferred revenue to accrued liabilities for a customer refund obligation in connection with cancellation of future services.

Remaining performance obligations include deferred revenue and amounts the Company expects to receive for goods and services that have not yet been delivered or provided under existing agreements. For agreements that have an original duration of one year or less, the Company has elected the practical expedient applicable to such agreements and does not disclose the remaining performance obligations at the end of each reporting period. As of March 31, 2023, the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied for executed agreements with an original duration of one year or more was immaterial.

(f)    Accounts Receivable

Test Accounts Receivable

Due to the nature of the Company’s test revenue, it can take a significant amount of time to collect upon billed tests. The Company prepares an analysis on reimbursement collections and data obtained for each financial reporting period to determine the amount of receivables to be recorded relating to tests performed in the applicable period. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. Accounts receivable are written off when all efforts to collect the balance have been exhausted. Adjustments for implicit price concessions attributable to variable consideration are incorporated into the measurement of the accounts receivable balances. The Company recorded $3.6 million and $4.1 million of net test accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

Contract Accounts Receivable

Contract accounts receivable are recorded at the net invoice value and are not interest bearing. The Company reserves specific receivables if collectability is no longer reasonably assured, and, as of March 31, 2023, the Company did not maintain any reserves over contract receivables as they relate to large established credit worthy customers. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The Company recorded $0.1 million and $0.1 million of contract accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

(g)    Net Loss Per Share

Basic and diluted net loss per share of common stock is determined by dividing net loss applicable to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Because there is a net loss attributable to holders of common stock during the periods presented, the outstanding common stock warrants, stock options and restricted stock units (“RSUs”) have been excluded from the calculation of diluted loss per share of common stock because their effect would be anti-dilutive. Therefore, the weighted average shares used to calculate both basic and diluted loss per share are the same.

Outstanding anti-dilutive securities not included in diluted net loss per share (in thousands):

	March 31,
	2023	2022
Shares issuable upon exercise of common stock warrants	709	724
Shares issuable upon exercise of stock options	1,523	1,654
Shares issuable upon the release of restricted stock units	4,011	2,333
	6,243	4,711

(h)    Accounting Pronouncements Issued But Not Yet Effective

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03“). Under the guidance of ASU 2022-03, a contractual restriction on the sale of an equity security is not considered in measuring the security’s fair value. ASU 2022-03 also requires certain disclosures for equity securities that are subject to contractual restrictions. For public business entities, the provisions of ASU 2022-03 are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024 and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on its condensed consolidated financial statements or disclosures.

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Balance Sheet Details

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Details

Balance Sheet Details

Short-Term Marketable Securities

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of March 31, 2023 were as follows (in thousands):

	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	11,028	$	3	$	(150)	$	10,881
U.S. government debt securities	45,644		119		(304)		45,459
Total short-term marketable securities, available-for-sale	$	56,672	$	122	$	(454)	$	56,340

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of December 31, 2022 were as follows (in thousands):

	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	13,535	$	2	$	(236)	$	13,301
Municipal debt securities	1,001		—		(8)		993
U.S. government debt securities	34,675		10		(568)		34,117
Total short-term marketable securities, available-for-sale	$	49,211	$	12	$	(812)	$	48,411

As of March 31, 2023, the estimated market value of debt securities with contractual maturities of less than twelve months was $49.0 million; the remaining debt securities that the Company held at that date had an estimated market value of $7.3 million and contractual maturities of up to 21 months. As of December 31, 2022, the estimated market value of debt securities with contractual maturities of less than twelve months was $40.2 million; the remaining debt securities that the Company held at that date had an estimated market value of $8.2 million and contractual maturities of up to 23 months.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. It was determined that no credit losses existed as of March 31, 2023 or December 31, 2022, because the change in market value for those securities in an unrealized loss position has resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers. Gross realized gains and losses on the Company’s debt securities for the three months ended March 31, 2023 and 2022 were not significant.

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2023 aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	March 31, 2023
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	9,050	$	(150)	$	—	$	—	$	9,050	$	(150)
U.S. government debt securities	19,043		(235)		5,767		(69)		24,810		(304)
Total short-term marketable securities, available-for-sale	$	28,093	$	(385)	$	5,767	$	(69)	$	33,860	$	(454)

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	6,533	$	(105)	$	5,503	$	(131)	$	12,036	$	(236)
Municipal securities	—		—		992		(8)		992		(8)
U.S. government debt securities	10,907		(196)		19,026		(372)		29,933		(568)
Total short-term marketable securities, available-for-sale	$	17,440	$	(301)	$	25,521	$	(511)	$	42,961	$	(812)

Prepaid Expenses and Property and Equipment, Net

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Prepaid expenses and other current assets:
Prepaid expenses	$	1,688	$	3,207
Other current assets	660		733
Total prepaid expenses and other current assets	$	2,348	$	3,940
Property and equipment, gross:
Laboratory equipment	$	5,147	$	6,250
Computer equipment	894		872
Furniture and fixtures	1,102		913
Leasehold improvements	2,549		1,344
Total property and equipment, gross	9,692		9,379
Less accumulated depreciation	(3,430)		(3,004)
Total property and equipment, net	$	6,262	$	6,375

Accrued Compensation and Accrued Liabilities

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Accrued compensation:
Accrued bonus and commissions	$	3,168	$	3,257
Accrued salaries and wages	4,388		4,637
Total accrued compensation	$	7,556	$	7,894
Accrued liabilities:
Accrued consulting services	$	2,145	$	894
Customer refund liability	1,505		980
Other accrued expenses	1,157		1,590
Total accrued liabilities	$	4,807	$	3,464

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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 (in thousands):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	20,747	$	—	$	—	$	20,747
Corporate debt securities	—		529		—		529
U.S. government debt securities	—		5,979		—		5,979
Total cash equivalents	20,747		6,508		—		27,255
Marketable securities, available for sale:
Corporate debt securities	—		10,881		—		10,881
U.S. government debt securities	—		45,459		—		45,459
Total marketable securities, available for sale	—		56,340		—		56,340
Total assets measured at fair value on a recurring basis	$	20,747	$	62,848	$	—	$	83,595
Liabilities:
Warrant liability	$	—	$	—	$	12	$	12
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	12	$	12

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money Market	$	9,365	$	—	$	—	$	9,365
Corporate debt securities	—		7,374		—		7,374
U.S. government debt securities	—		18,396		—		18,396
Total cash equivalents	9,365		25,770		—		35,135
Marketable securities, available for sale:
Corporate debt	—		13,301		—		13,301
Municipal debt securities	—		993		—		993
U.S. government debt securities	—		34,117		—		34,117
Total marketable securities, available for sale	—		48,411		—		48,411
Total assets measured at fair value on a recurring basis	$	9,365	$	74,181	$	—	$	83,546
Liabilities:
Warrant liability	$	—	$	—	$	5	$	5
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	5	$	5

The Company’s marketable debt securities are classified as available-for-sale securities based on management's intentions and are at Level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active. The Company has classified marketable securities with original maturities of greater than one year as short-term investments based upon the Company’s ability to use all of those marketable securities to satisfy the liquidity needs of the Company’s current operations.

The fair value of the Private SPAC Warrants was determined using the Black-Scholes-Merton valuation model and included an unobservable input: expected volatility. Expected volatility is considered by the Company to be an unobservable input and is calculated using a weighted average of historical volatilities of a combination of the Company and peer companies, due to the lack of sufficient historical data of the Company’s own stock price. The model also incorporated several observable assumptions at each valuation date, including the price of the Company’s common stock on the date of valuation, the remaining contractual term of the warrant and the risk-free interest rate over the remaining term.

The following assumptions were used to calculate the fair value of the Company’s warrant liability using the Black-Scholes-Merton valuation model:

	Three Months Ended March 31,
	2023	2022
Assumed risk-free interest rate	4.35%	2.37%
Assumed volatility	123.28%	92.77%
Expected term	1.42 years	2.42 years
Expected dividend yield	—	—

The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities (in thousands):

Balance as of December 31, 2022	$	5
Change in fair value of warrant liability	7
Balance as of March 31, 2023	$	12

As of March 31, 2023 and December 31, 2022, the Company maintains letters of credit of $3.5 million and $3.5 million, respectively, related to its lease arrangements, which are secured by money market accounts in accordance with certain of its lease agreements. The amounts are recorded at fair value using Level 1 inputs and included as restricted cash in the condensed consolidated balance sheets.

The Company believes the carrying amount of cash and cash equivalents, accounts payable and accrued expenses approximate their estimated fair values due to the short-term nature of these accounts

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Stockholders' Equity

3 Months Ended

Mar. 31, 2023

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

(a)    At-The-Market Offering

On November 10, 2020, the Company entered into a sales agreement (the “2020 Sales Agreement”) with Cowen and Company, LLC (“Cowen”) relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $50.0 million. Through December 31, 2021, the Company issued an aggregate of 1,482,343 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $30.05, net of $1.6 million in issuance costs resulting in net proceeds to the Company of approximately $42.9 million. During 2022, the Company did not issue or sell any shares of common stock pursuant to the 2020 Sales Agreement. For the three months ended March 31, 2023, the Company issued an aggregate of 107,451 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $3.68 resulting in aggregate gross proceeds of approximately $0.4 million, reduced by $0.1 million in issuance costs, resulting in net proceeds to the Company of approximately $0.3 million. As of March 31, 2023, $5.1 million is available pursuant to the 2020 Sales Agreement.

On August 8, 2022, the Company entered into a second sales agreement (the “2022 Sales Agreement”) with Cowen relating to the sale of shares of the Company’s common stock from time to time with an aggregate offering price of up to $75.0 million under a second at-the-market offering program. For the three months ended March 31, 2023, the Company did not issue any shares pursuant to the 2022 Sales Agreement.

(b)    Warrants

SPAC Warrants

The Company previously issued a total of 14,936,250 SPAC warrants (the "SPAC Warrants") to purchase common stock in public and private placement offerings, which were consummated on June 23, 2017. As part of the public offering, the Company issued 14,375,000 warrants (the "Public SPAC Warrants") and, as part of the private placement offering, the Company issued 561,250 warrants (the "Private SPAC Warrants"). The SPAC Warrants have a five-year life from the date the Business Combination was consummated, and every four SPAC Warrants entitle the holder to purchase one whole share of common stock at an exercise price of $23.00 per whole share.

The Private SPAC Warrants are identical to the Public SPAC Warrants, but they (i) are exercisable either for cash or on a cashless basis at the holder’s option, (ii) are not redeemable by the Company as long as such warrants are held by the initial purchasers or their affiliates and permitted transferees, and (iii) may be subject to the limitations on exercise as specified in the warrant agreement. As a result of these difference in features between the Public SPAC Warrants and Private SPAC Warrants, the Company concluded that the Private SPAC Warrants should be classified as a liability, if still held by the original Private SPAC Warrant holder, and marked to market each financial reporting period in the Company’s statement of operations.

In 2021, a total of 12,120,397 SPAC Warrants were exercised, resulting in the Company’s issuance of 3,030,092 shares of common stock and the receipt of $69.7 million in gross proceeds. Outstanding SPAC Warrants totaled 2,815,853 as of March 31, 2023 and December 31, 2022. Private SPAC Warrants that were still owned by the original holder totaled 80,350 as of March 31, 2023 and December 31, 2022.

Placement Agent Warrants

In connection with several of DermTech Operations’ financings that took place between 2015 and 2018, DermTech Operations engaged a registered placement agent to assist in marketing and selling common and preferred units. From 2015 to 2016, DermTech Operations issued 168,522 seven-year warrants to purchase one share of common stock each at an exercise price of $8.68 per share. From 2016 to 2018, DermTech Operations issued 72,658 seven-year warrants to purchase one share of common stock at an exercise price of $9.54 per share. In 2020, the Company issued 15,724 seven-year warrants to purchase one share of common stock at an exercise price of $9.54 per share in connection with the Company’s 2018 bridge note financing. Outstanding placement agent warrants totaled 4,510 as of March 31, 2023 and December 31, 2022.

(c)    Stock-Based Compensation

Stock-based compensation expense for employee options, RSUs, the purchase rights issued under the DermTech, Inc. 2020 Employee Stock Purchase Plan, as amended (the “2020 ESPP”), and consultant options was recorded in the condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	412	$	335
Sales and marketing	1,508		1,188
Research and development	561		768
General and administrative	2,255		1,603
Total stock-based compensation	$	4,736	$	3,894

The total compensation cost related to non-vested awards not yet recognized as of March 31, 2023 was $31.7 million, which is expected to be recognized over a weighted average term of 2.18 years.

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Contingencies	3 Months Ended
	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Contingencies	Contingencies Legal ProceedingsFrom time to time, the Company may be subject to legal proceedings and claims arising in the ordinary course of business. Management does not believe that the outcome of any of these matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During 2022 and 2023, the Company engaged EVERSANA Life Science Services, LLC and its subsidiary Intouch Group, LLC (collectively, “EVERSANA”) to provide certain marketing services to the Company. Leana Wood, the spouse of Todd Wood, the Company’s Chief Commercial Officer, is an employee of EVERSANA. The Company incurred $0.5 million and $0.7 million in costs for the three months ended March 31, 2023 and 2022, respectively. Amounts due to EVERSANA were $0.5 million and $0.3 million as of March 31, 2023 and December 31, 2022, respectively.

There were no other related party transactions identified during the three months ended March 31, 2023 and 2022.

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The Company and a Summary of its Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

On August 29, 2019, DermTech, Inc., formerly known as Constellation Alpha Capital Corp, (the “Company”), and DermTech Operations, Inc., formerly known as DermTech, Inc., (“DermTech Operations”), consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of May 29, 2019, by and among the Company, DT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and DermTech Operations. The Company refers to this agreement, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of August 1, 2019, as the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into DermTech Operations, with DermTech Operations surviving as a wholly-owned subsidiary of the Company. The Company refers to this transaction as the Business Combination. In connection with and two days prior to the completion of the Business Combination, the Company domesticated from the British Virgin Islands to Delaware. DermTech Operations changed its name from DermTech, Inc. to DermTech Operations, Inc. shortly before the completion of the Business Combination. On August 29, 2019, immediately following the completion of the Business Combination, the Company changed its name from Constellation Alpha Capital Corp. to DermTech, Inc., and then effected a one-for-two reverse stock split of its common stock.

The Company is a molecular diagnostic company developing and marketing its Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) laboratory services including molecular pathology tests to facilitate the diagnosis of dermatologic conditions including melanoma. The Company has developed a proprietary, non-invasive technique for sampling the surface layers of the skin using an adhesive patch called the DermTech Smart Sticker™ (the “Smart Sticker”) in order to collect individual biological information for commercial applications in the medical diagnostic field.

The Company has incurred operating losses since inception and has an accumulated deficit of $354.3 million at March 31, 2023. As of March 31, 2023, cash and cash equivalents totaled approximately $48.4 million and short-term marketable securities totaled approximately $56.3 million. The Company's transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. If events or circumstances occur such that change operating plans, the Company may be required to reduce operating expenses, which could have an adverse impact its ability to achieve intended business objectives. The Company's management believes that currently available resources will provide sufficient funds to meet operating plans for at least the next twelve months from the issuance of our unaudited condensed consolidated financial statements. While we believe we have enough capital to fund anticipated operating costs for at least the next twelve months, we anticipate that we will need to raise additional capital in order to support our planned operations and to continue developing and commercializing genomic tests.

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements include the accounts of DermTech, Inc. and its subsidiary. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements and accompanying notes do not include all the information and disclosures required by U.S. GAAP for complete financial statements and should be read together with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of March 31, 2023, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the amounts of revenues and expenses reported during the period. On an ongoing basis, management evaluates these estimates and judgments, including but not limited to those related to test revenue, stock-based compensation, short-term marketable securities, accounts receivable, accrued bonus, warrant liability, right-of-use (“ROU”) assets and the realization of deferred tax assets. Actual results may differ from those estimates.

Concentration of Credit Risk

Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and available-for-sale marketable securities. The Company invests its cash balances in major financial institutions that it believes have high credit quality and are insured with the Federal Deposit Insurance Corporation (“FDIC”). At times throughout the year, cash deposits might exceed FDIC insurance limits. The Company has not experienced any losses and does not believe it is exposed to any significant credit risk.

Revenue Recognition

Revenue Recognition

The Company’s revenue is generated from two revenue streams: contract revenue and test revenue. The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue from its test and contract services in accordance with the core principles and key aspects considered by the Company. These considerations are described in detail below, first for test revenue and then for contract revenue.

Test Revenue

The Company generates revenues from its DermTech Melanoma Test or “DMT” which may consist at the option of the ordering clinician of either (i) the DMT or (ii) the DMT with TERT test, which assists a clinician’s diagnosis of melanoma in patients. The Company provides prescribing clinicians with its Smart Sticker to perform non-invasive skin biopsies of clinically ambiguous pigmented skin lesions on patients. The Company also offers clinicians a telemedicine solution where they can request the Smart Sticker collection kit be sent to the patient’s home for a clinician-guided remote sample collection of ambiguous pigmented skin lesions. A patient can also initiate the process by downloading the Company’s telemedicine app, DermTech Connect, which uses store-and-forward technology to allow the patient to take a picture of a suspicious lesion with their phone and have the picture reviewed by an independent clinician who is subscribing to the DermTech Connect platform to assess the suspicious lesion, and if medically necessary, order a DMT and send a collection kit to the patient. The DermTech Connect app and telemedicine service is currently available in most states where permitted by law and applicable standards of practice guidelines. Once the sample is collected by the patient via the telemedicine solution or by a healthcare clinician in person, it is returned to the Company’s CLIA laboratory for analysis. The patient’s ribonucleic acid (“RNA”) and deoxyribonucleic acid (“DNA”) are extracted from the Smart Sticker and analyzed using gene expression and sequencing technology to determine if the pigmented skin lesion contains certain genomic features indicative of melanoma. Upon completion of the gene expression analysis, test results are provided to the clinician indicating whether the sample collected is indicative of melanoma or not.

The Company periodically updates its estimate of the variable consideration recognized for previously delivered performance obligations. These updates resulted in a decrease of $0.5 million for the three months ended March 31, 2023 and a decrease of $0.1 million for the three months ended March 31, 2022. These amounts included (i) adjustments for actual collections versus estimated variable consideration as of the beginning of the reporting period and (ii) cash collections and the related recognition of revenue in the current period for tests delivered in prior periods due to the release of the constraint on variable consideration, offset by (iii) reductions in revenue for the accrual for reimbursement claims and settlements.

Contract Revenue

Contract revenue is generated from the sale of laboratory services and Smart Stickers to third-party companies through contract research agreements. Revenues are generated from providing gene expression tests to facilitate the development of drugs designed to treat dermatologic conditions. The provision of gene expression services may include sample collection using the Company’s Smart Sticker, assay development for research partners and RNA extraction, isolation, expression, amplification and detection, including data analysis and reporting. Contract revenue can be highly variable in any period as it is closely linked to the clinical trial progress of the Company’s biopharma customers.

Deferred Revenue and Remaining Performance Obligations

The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue on the condensed consolidated balance sheets.

In a majority of historical agreements that produced contract revenue, the Company received a substantial up-front payment and additional payments upon the achievement of various milestones over the life of the agreement. This results in deferred revenue and is relieved upon delivery of the applicable Smart Stickers or RNA extraction results. Changes in accounts receivable and deferred revenue were not materially impacted by any other factors.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents upfront milestone payments, for which consideration is received prior to when goods/services are completed or delivered. Upfront fees that are estimated to be recognized as revenue more than one year from the date of collection are classified as long-term deferred revenue. Short-term deferred revenue as of March 31, 2023 and December 31, 2022 was $0.2 million and $0.1 million, respectively. As of December 31, 2022, the Company reclassified $1.0 million of short-term deferred revenue to accrued liabilities for a customer refund obligation in connection with cancellation of future services.

Remaining performance obligations include deferred revenue and amounts the Company expects to receive for goods and services that have not yet been delivered or provided under existing agreements. For agreements that have an original duration of one year or less, the Company has elected the practical expedient applicable to such agreements and does not disclose the remaining performance obligations at the end of each reporting period.

Accounts Receivable

Accounts Receivable

Test Accounts Receivable

Due to the nature of the Company’s test revenue, it can take a significant amount of time to collect upon billed tests. The Company prepares an analysis on reimbursement collections and data obtained for each financial reporting period to determine the amount of receivables to be recorded relating to tests performed in the applicable period. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. Accounts receivable are written off when all efforts to collect the balance have been exhausted. Adjustments for implicit price concessions attributable to variable consideration are incorporated into the measurement of the accounts receivable balances. The Company recorded $3.6 million and $4.1 million of net test accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

Contract Accounts Receivable

Contract accounts receivable are recorded at the net invoice value and are not interest bearing. The Company reserves specific receivables if collectability is no longer reasonably assured, and, as of March 31, 2023, the Company did not maintain any reserves over contract receivables as they relate to large established credit worthy customers. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve.

Net Loss Per Share

Net Loss Per Share Basic and diluted net loss per share of common stock is determined by dividing net loss applicable to holders of common stock by the weighted average number of shares of common stock outstanding during the period. Because there is a net loss attributable to holders of common stock during the periods presented, the outstanding common stock warrants, stock options and restricted stock units (“RSUs”) have been excluded from the calculation of diluted loss per share of common stock because their effect would be anti-dilutive. Therefore, the weighted average shares used to calculate both basic and diluted loss per share are the same.

Accounting Pronouncements Issued But Not Yet Effective

Accounting Pronouncements Issued But Not Yet Effective

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03“). Under the guidance of ASU 2022-03, a contractual restriction on the sale of an equity security is not considered in measuring the security’s fair value. ASU 2022-03 also requires certain disclosures for equity securities that are subject to contractual restrictions. For public business entities, the provisions of ASU 2022-03 are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024 and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on its condensed consolidated financial statements or disclosures.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s marketable debt securities are classified as available-for-sale securities based on management's intentions and are at Level 2 of the fair value hierarchy, as these investment securities are valued based upon quoted prices for identical or similar instruments in markets that are not active. The Company has classified marketable securities with original maturities of greater than one year as short-term investments based upon the Company’s ability to use all of those marketable securities to satisfy the liquidity needs of the Company’s current operations.

The fair value of the Private SPAC Warrants was determined using the Black-Scholes-Merton valuation model and included an unobservable input: expected volatility. Expected volatility is considered by the Company to be an unobservable input and is calculated using a weighted average of historical volatilities of a combination of the Company and peer companies, due to the lack of sufficient historical data of the Company’s own stock price. The model also incorporated several observable assumptions at each valuation date, including the price of the Company’s common stock on the date of valuation, the remaining contractual term of the warrant and the risk-free interest rate over the remaining term.

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The Company and a Summary of its Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Schedule of Revenues Disaggregated by Revenue Source

The following table presents the Company’s revenues disaggregated by revenue source during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
	2023		2022
Test Revenue
DermTech Melanoma Test	$	3,425	$	3,518
Contract Revenue
Adhesive patch kits	36		66
RNA extractions	2		110
Project management fees	14		24
Total revenues	$	3,477	$	3,718

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Outstanding anti-dilutive securities not included in diluted net loss per share (in thousands):

	March 31,
	2023	2022
Shares issuable upon exercise of common stock warrants	709	724
Shares issuable upon exercise of stock options	1,523	1,654
Shares issuable upon the release of restricted stock units	4,011	2,333
	6,243	4,711

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Balance Sheet Details (Tables)

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Short-Term Marketable Securities

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of March 31, 2023 were as follows (in thousands):

	March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	11,028	$	3	$	(150)	$	10,881
U.S. government debt securities	45,644		119		(304)		45,459
Total short-term marketable securities, available-for-sale	$	56,672	$	122	$	(454)	$	56,340

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of debt securities classified as available-for-sale securities by major security type and class of security as of December 31, 2022 were as follows (in thousands):

	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	13,535	$	2	$	(236)	$	13,301
Municipal debt securities	1,001		—		(8)		993
U.S. government debt securities	34,675		10		(568)		34,117
Total short-term marketable securities, available-for-sale	$	49,211	$	12	$	(812)	$	48,411

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2023 aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	March 31, 2023
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	9,050	$	(150)	$	—	$	—	$	9,050	$	(150)
U.S. government debt securities	19,043		(235)		5,767		(69)		24,810		(304)
Total short-term marketable securities, available-for-sale	$	28,093	$	(385)	$	5,767	$	(69)	$	33,860	$	(454)

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	December 31, 2022
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	6,533	$	(105)	$	5,503	$	(131)	$	12,036	$	(236)
Municipal securities	—		—		992		(8)		992		(8)
U.S. government debt securities	10,907		(196)		19,026		(372)		29,933		(568)
Total short-term marketable securities, available-for-sale	$	17,440	$	(301)	$	25,521	$	(511)	$	42,961	$	(812)

Schedule of Prepaid Expenses and PP&E

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Prepaid expenses and other current assets:
Prepaid expenses	$	1,688	$	3,207
Other current assets	660		733
Total prepaid expenses and other current assets	$	2,348	$	3,940
Property and equipment, gross:
Laboratory equipment	$	5,147	$	6,250
Computer equipment	894		872
Furniture and fixtures	1,102		913
Leasehold improvements	2,549		1,344
Total property and equipment, gross	9,692		9,379
Less accumulated depreciation	(3,430)		(3,004)
Total property and equipment, net	$	6,262	$	6,375

Schedule of Accrued Compensation and Accrued Liabilities

Condensed consolidated balance sheet details are as follows (in thousands):

	March 31, 2023		December 31, 2022
Accrued compensation:
Accrued bonus and commissions	$	3,168	$	3,257
Accrued salaries and wages	4,388		4,637
Total accrued compensation	$	7,556	$	7,894
Accrued liabilities:
Accrued consulting services	$	2,145	$	894
Customer refund liability	1,505		980
Other accrued expenses	1,157		1,590
Total accrued liabilities	$	4,807	$	3,464

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 (in thousands):

	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	20,747	$	—	$	—	$	20,747
Corporate debt securities	—		529		—		529
U.S. government debt securities	—		5,979		—		5,979
Total cash equivalents	20,747		6,508		—		27,255
Marketable securities, available for sale:
Corporate debt securities	—		10,881		—		10,881
U.S. government debt securities	—		45,459		—		45,459
Total marketable securities, available for sale	—		56,340		—		56,340
Total assets measured at fair value on a recurring basis	$	20,747	$	62,848	$	—	$	83,595
Liabilities:
Warrant liability	$	—	$	—	$	12	$	12
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	12	$	12

The following table provides a summary of the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money Market	$	9,365	$	—	$	—	$	9,365
Corporate debt securities	—		7,374		—		7,374
U.S. government debt securities	—		18,396		—		18,396
Total cash equivalents	9,365		25,770		—		35,135
Marketable securities, available for sale:
Corporate debt	—		13,301		—		13,301
Municipal debt securities	—		993		—		993
U.S. government debt securities	—		34,117		—		34,117
Total marketable securities, available for sale	—		48,411		—		48,411
Total assets measured at fair value on a recurring basis	$	9,365	$	74,181	$	—	$	83,546
Liabilities:
Warrant liability	$	—	$	—	$	5	$	5
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	5	$	5

Summary of Assumptions Used to Calculate Fair Value of Warrant Liability Using Black-Scholes-Merton Valuation Model

The following assumptions were used to calculate the fair value of the Company’s warrant liability using the Black-Scholes-Merton valuation model:

	Three Months Ended March 31,
	2023	2022
Assumed risk-free interest rate	4.35%	2.37%
Assumed volatility	123.28%	92.77%
Expected term	1.42 years	2.42 years
Expected dividend yield	—	—

Summary of Changes in Fair Value of Level 3 Liabilities

The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities (in thousands):

Balance as of December 31, 2022	$	5
Change in fair value of warrant liability	7
Balance as of March 31, 2023	$	12

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2023

Stockholders' Equity Note [Abstract]

Disclosure of Share-Based Compensation Arrangements by Share-Based Payment Award

Stock-based compensation expense for employee options, RSUs, the purchase rights issued under the DermTech, Inc. 2020 Employee Stock Purchase Plan, as amended (the “2020 ESPP”), and consultant options was recorded in the condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	412	$	335
Sales and marketing	1,508		1,188
Research and development	561		768
General and administrative	2,255		1,603
Total stock-based compensation	$	4,736	$	3,894

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The Company and a Summary of its Significant Accounting Policies - Additional Information (Details)		3 Months Ended
	Aug. 29, 2019	Mar. 31, 2023 USD ($) revenueStream	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
The Company and Summary of its Significant Accounting Policies [Line Items]
Accumulated deficit		$ (354,317,000)		$ (323,047,000)
Cash and cash equivalents		48,438,000	$ 145,053,000	77,757,000
Short-term marketable securities		$ 56,340,000		48,411,000
Conversion ratio of reverse stock split	0.5
Number of revenue streams (in number of streams) | revenueStream		2
Increase (decrease) in revenue		$ (500,000)	$ (100,000)
Accrued liabilities				1,000,000
Short term deferred revenue		242,000		109,000
Remaining performance obligation, estimated revenue expected to be recognized		0
Accounts receivable		3,690,000		4,172,000
Contract revenue
The Company and Summary of its Significant Accounting Policies [Line Items]
Accounts receivable		100,000		100,000
Test
The Company and Summary of its Significant Accounting Policies [Line Items]
Accounts receivable gross		$ 3,600,000		$ 4,100,000

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The Company and a Summary of its Significant Accounting Policies - Schedule of Revenues Disaggregated by Revenue Source (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation Of Revenue [Line Items]
Total revenues	$ 3,477	$ 3,718
DermTech Melanoma Test
Disaggregation Of Revenue [Line Items]
Total revenues	3,425	3,518
Adhesive patch kits
Disaggregation Of Revenue [Line Items]
Total revenues	36	66
RNA extractions
Disaggregation Of Revenue [Line Items]
Total revenues	2	110
Project management fees
Disaggregation Of Revenue [Line Items]
Total revenues	$ 14	$ 24

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The Company and a Summary of its Significant Accounting Policies - Schedule of Anti-dilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive equity instruments excluded from diluted net loss per share of common stock	6,243	4,711
Common Stock Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive equity instruments excluded from diluted net loss per share of common stock	709	724
Stock option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive equity instruments excluded from diluted net loss per share of common stock	1,523	1,654
Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive equity instruments excluded from diluted net loss per share of common stock	4,011	2,333

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Balance Sheet Details - Schedule of Short-Term Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Investment Holdings [Line Items]
Amortized Cost	$ 56,672	$ 49,211
Gross Unrealized Gains	122	12
Gross Unrealized Losses	(454)	(812)
Estimated Market Value	56,340	48,411
Corporate debt securities
Investment Holdings [Line Items]
Amortized Cost	11,028	13,535
Gross Unrealized Gains	3	2
Gross Unrealized Losses	(150)	(236)
Estimated Market Value	10,881	13,301
Municipal debt securities
Investment Holdings [Line Items]
Amortized Cost		1,001
Gross Unrealized Gains		0
Gross Unrealized Losses		(8)
Estimated Market Value		993
U.S. government debt securities
Investment Holdings [Line Items]
Amortized Cost	45,644	34,675
Gross Unrealized Gains	119	10
Gross Unrealized Losses	(304)	(568)
Estimated Market Value	$ 45,459	$ 34,117

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Balance Sheet Details - Additional Information (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Estimated market value of debt securities with contractual maturities of less than 12 months	$ 49,000,000	$ 40,200,000
Estimated market value of remaining debt securities with contractual maturities of up to 21 months	7,300,000
Estimated market value of remaining debt securities with contractual maturities of up to 23 months		8,200,000
Credit losses	$ 0	$ 0

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Balance Sheet Details - Continuous Loss Position (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Summary of Investment Holdings [Line Items]
AFS, Less than 12 months, Fair Value	$ 28,093	$ 17,440
AFS, Less than 12 months, Gross Unrealized Loss	(385)	(301)
AFS, Greater than 12 months, Fair Value	5,767	25,521
AFS, Greater than 12 months, Gross Unrealized Loss	(69)	(511)
AFS, Total, Fair Value	33,860	42,961
AFS, Total, Gross Unrealized Loss	(454)	(812)
Corporate debt securities
Summary of Investment Holdings [Line Items]
AFS, Less than 12 months, Fair Value	9,050	6,533
AFS, Less than 12 months, Gross Unrealized Loss	(150)	(105)
AFS, Greater than 12 months, Fair Value	0	5,503
AFS, Greater than 12 months, Gross Unrealized Loss	0	(131)
AFS, Total, Fair Value	9,050	12,036
AFS, Total, Gross Unrealized Loss	(150)	(236)
Municipal debt securities
Summary of Investment Holdings [Line Items]
AFS, Less than 12 months, Fair Value		0
AFS, Less than 12 months, Gross Unrealized Loss		0
AFS, Greater than 12 months, Fair Value		992
AFS, Greater than 12 months, Gross Unrealized Loss		(8)
AFS, Total, Fair Value		992
AFS, Total, Gross Unrealized Loss		(8)
U.S. government debt securities
Summary of Investment Holdings [Line Items]
AFS, Less than 12 months, Fair Value	19,043	10,907
AFS, Less than 12 months, Gross Unrealized Loss	(235)	(196)
AFS, Greater than 12 months, Fair Value	5,767	19,026
AFS, Greater than 12 months, Gross Unrealized Loss	(69)	(372)
AFS, Total, Fair Value	24,810	29,933
AFS, Total, Gross Unrealized Loss	$ (304)	$ (568)

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Balance Sheet Details - Schedule of Prepaid Expenses and PP&E (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Prepaid expenses and other current assets:
Prepaid expenses	$ 1,688,000	$ 3,207,000
Other current assets	660,000	733,000
Total prepaid expenses and other current assets	2,348,000	3,940,000
Property and equipment, gross:
Laboratory equipment	5,147,000	6,250,000
Computer equipment	894,000	872,000
Furniture and fixtures	1,102,000	913,000
Leasehold improvements	2,549,000	1,344,000
Total property and equipment, gross	9,692,000	9,379,000
Less accumulated depreciation	(3,430,000)	(3,004,000)
Total property and equipment, net	$ 6,262,000	$ 6,375,000

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Balance Sheet Details - Schedule of Accrued Compensation and Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accrued compensation:
Accrued bonus and commissions	$ 3,168	$ 3,257
Accrued salaries and wages	4,388	4,637
Total accrued compensation	7,556	7,894
Accrued liabilities:
Accrued consulting services	2,145	894
Customer refund liability	1,505	980
Other accrued expenses	1,157	1,590
Total accrued liabilities	$ 4,807	$ 3,464

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Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Marketable securities, available for sale:
Total marketable securities, available for sale	$ 56,340	$ 48,411
Fair Value, Recurring
Assets:
Cash equivalents:	27,255	35,135
Marketable securities, available for sale:
Total marketable securities, available for sale	56,340	48,411
Total assets measured at fair value on a recurring basis	83,595	83,546
Liabilities:
Warrant liability	12	5
Liabilities, Fair Value Disclosure, Total	12	5
Fair Value, Recurring | Money market
Assets:
Cash equivalents:	20,747	9,365
Fair Value, Recurring | Corporate debt securities
Assets:
Cash equivalents:	529	7,374
Fair Value, Recurring | U.S. government debt securities
Assets:
Cash equivalents:	5,979	18,396
Fair Value, Recurring | Level 1
Assets:
Cash equivalents:	20,747	9,365
Marketable securities, available for sale:
Total marketable securities, available for sale	0	0
Total assets measured at fair value on a recurring basis	20,747	9,365
Liabilities:
Warrant liability	0	0
Liabilities, Fair Value Disclosure, Total	0	0
Fair Value, Recurring | Level 1 | Money market
Assets:
Cash equivalents:	20,747	9,365
Fair Value, Recurring | Level 1 | Corporate debt securities
Assets:
Cash equivalents:	0	0
Fair Value, Recurring | Level 1 | U.S. government debt securities
Assets:
Cash equivalents:	0	0
Fair Value, Recurring | Level 2
Assets:
Cash equivalents:	6,508	25,770
Marketable securities, available for sale:
Total marketable securities, available for sale	56,340	48,411
Total assets measured at fair value on a recurring basis	62,848	74,181
Liabilities:
Warrant liability	0	0
Liabilities, Fair Value Disclosure, Total	0	0
Fair Value, Recurring | Level 2 | Money market
Assets:
Cash equivalents:	0	0
Fair Value, Recurring | Level 2 | Corporate debt securities
Assets:
Cash equivalents:	529	7,374
Fair Value, Recurring | Level 2 | U.S. government debt securities
Assets:
Cash equivalents:	5,979	18,396
Fair Value, Recurring | Level 3
Assets:
Cash equivalents:	0	0
Marketable securities, available for sale:
Total marketable securities, available for sale	0	0
Total assets measured at fair value on a recurring basis	0	0
Liabilities:
Warrant liability	12	5
Liabilities, Fair Value Disclosure, Total	12	5
Fair Value, Recurring | Level 3 | Money market
Assets:
Cash equivalents:	0	0
Fair Value, Recurring | Level 3 | Corporate debt securities
Assets:
Cash equivalents:	0	0
Fair Value, Recurring | Level 3 | U.S. government debt securities
Assets:
Cash equivalents:	0	0
Corporate debt securities
Marketable securities, available for sale:
Total marketable securities, available for sale	10,881	13,301
Corporate debt securities | Fair Value, Recurring
Marketable securities, available for sale:
Total marketable securities, available for sale	10,881	13,301
Corporate debt securities | Fair Value, Recurring | Level 1
Marketable securities, available for sale:
Total marketable securities, available for sale	0	0
Corporate debt securities | Fair Value, Recurring | Level 2
Marketable securities, available for sale:
Total marketable securities, available for sale	10,881	13,301
Corporate debt securities | Fair Value, Recurring | Level 3
Marketable securities, available for sale:
Total marketable securities, available for sale	0	0
Municipal debt securities
Marketable securities, available for sale:
Total marketable securities, available for sale		993
Municipal debt securities | Fair Value, Recurring
Marketable securities, available for sale:
Total marketable securities, available for sale		993
Municipal debt securities | Fair Value, Recurring | Level 1
Marketable securities, available for sale:
Total marketable securities, available for sale		0
Municipal debt securities | Fair Value, Recurring | Level 2
Marketable securities, available for sale:
Total marketable securities, available for sale		993
Municipal debt securities | Fair Value, Recurring | Level 3
Marketable securities, available for sale:
Total marketable securities, available for sale		0
U.S. government debt securities
Marketable securities, available for sale:
Total marketable securities, available for sale	45,459	34,117
U.S. government debt securities | Fair Value, Recurring
Marketable securities, available for sale:
Total marketable securities, available for sale	45,459	34,117
U.S. government debt securities | Fair Value, Recurring | Level 1
Marketable securities, available for sale:
Total marketable securities, available for sale	0	0
U.S. government debt securities | Fair Value, Recurring | Level 2
Marketable securities, available for sale:
Total marketable securities, available for sale	45,459	34,117
U.S. government debt securities | Fair Value, Recurring | Level 3
Marketable securities, available for sale:
Total marketable securities, available for sale	$ 0	$ 0

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Fair Value Measurements - Assumptions Used to Determine Fair Value of Warrant Liability (Details) - Warranty liability	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Assumed risk-free interest rate	4.35%	2.37%
Assumed volatility	123.28%	92.77%
Expected term	1 year 5 months 1 day	2 years 5 months 1 day
Expected dividend yield	0.00%	0.00%

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Fair Value Measurements - Summary of Changes in Fair Value of Level 3 Liabilities (Details) - Level 3 - Warrant Liability $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 5
Change in fair value of warrant liability	7
Ending balance	$ 12

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Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Restricted Cash | Level 1
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Letters of credit	$ 3.5	$ 3.5

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Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Thousands				3 Months Ended		12 Months Ended			14 Months Ended	24 Months Ended	26 Months Ended	36 Months Ended
	Aug. 08, 2022 USD ($)	Nov. 10, 2020 USD ($)	Jun. 23, 2017 shares	Mar. 31, 2023 USD ($) warrant $ / shares shares	Mar. 31, 2022 USD ($)	Dec. 31, 2022 shares	Dec. 31, 2021 USD ($) shares	Dec. 31, 2020 $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2016 $ / shares shares	Dec. 31, 2022 USD ($) shares	Dec. 31, 2018 $ / shares shares
Class of Stock [Line Items]
Issuance of preferred stock, total offering amount | $				$ 270
Proceeds from issuance of common stock in connection with at-the-market offering, net | $				$ 270	$ 0
Warrants expiration period				5 years
Total proceeds from exercise of public warrants | $				$ 0	$ 12
Compensation cost related to non-vested awards not yet recognized | $				$ 31,700
Weighted average term expected to be recognized				2 years 2 months 4 days
SPAC Warrants
Class of Stock [Line Items]
Warrants issued to purchase common stock (in shares)			14,936,250
Total number exercised of public warrants (in shares)							12,120,397		12,120,397
Common shares issued upon exercise of warrants (in shares)							3,030,092
Total proceeds from exercise of public warrants | $							$ 69,700
Warrants outstanding (in shares)				2,815,853		2,815,853					2,815,853
Number of warrants entitle holder to purchase one share | warrant				4
Public SPAC Warrants
Class of Stock [Line Items]
Warrants issued to purchase common stock (in shares)			14,375,000
Private SPAC Warrants
Class of Stock [Line Items]
Warrants issued to purchase common stock (in shares)			561,250
Warrants outstanding (in shares)				80,350		80,350					80,350
Placement Agent Warrants
Class of Stock [Line Items]
Warrants issued to purchase common stock (in shares)										168,522		72,658
Warrants expiration period										7 years		7 years
Warrants outstanding (in shares)				4,510		4,510					4,510
Placement Agent Warrants | 2018 Convertible Bridge Notes
Class of Stock [Line Items]
Warrants issued to purchase common stock (in shares)								15,724
Warrants expiration period								7 years
Cowen and Company LLC
Class of Stock [Line Items]
Issuance of preferred stock, total offering amount | $	$ 75,000
Issuance of common stock, net of issuance costs shares (in shares)				0
Cowen and Company LLC | At-The Market Offering
Class of Stock [Line Items]
Issuance of preferred stock, total offering amount | $		$ 50,000		$ 5,100
Issuance of common stock, net of issuance costs shares (in shares)				107,451		0			1,482,343
Weighted average purchase price per share (in usd per share) | $ / shares				$ 3.68					$ 30.05
Issuance costs | $									$ 1,600
Gross proceeds from issuance of common stock | $				$ 400							$ 42,900
Decrease in issuance costs | $				100
Proceeds from issuance of common stock in connection with at-the-market offering, net | $				$ 300
Common stock
Class of Stock [Line Items]
Issuance of common stock, net of issuance costs shares (in shares)				107,451
Number of shares issued for each warrant (in shares)				0.25
Common stock | SPAC Warrants
Class of Stock [Line Items]
Exercise price of warrant (in usd per share) | $ / shares				$ 23.00
Number of shares issued for each warrant (in shares)				0.25
Common stock | Placement Agent Warrants
Class of Stock [Line Items]
Exercise price of warrant (in usd per share) | $ / shares										$ 8.68		$ 9.54
Number of shares issued for each warrant (in shares)										1		1
Common stock | Placement Agent Warrants | 2018 Convertible Bridge Notes
Class of Stock [Line Items]
Exercise price of warrant (in usd per share) | $ / shares								$ 9.54
Number of shares issued for each warrant (in shares)								1

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Stockholders' Equity - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 4,736	$ 3,894
Cost of revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	412	335
Sales and marketing
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	1,508	1,188
Research and development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	561	768
General and administrative
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 2,255	$ 1,603

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Related Party Transactions - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Related Party Transaction [Line Items]
Related party transaction, other	$ 0	$ 0
EVERSANA | Leana Wood
Related Party Transaction [Line Items]
Related party certain marketing cost	500,000	$ 700,000
Due to related party	$ 500,000		$ 300,000