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•	Level I: Inputs which include quoted prices in active markets for identical assets and liabilities.

•	Level II: Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•	Level III: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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•	Revenue was $16.4 million, an increase of 21%;

•	Operating Expenses were $23.9 million, an increase of 3%;

•	Net Loss and Comprehensive Loss was $8.2 million, an 18% improvement;

•	Cash Burn (which is defined as net cash used in operating activities and net capital expenditures) was $8.3 million, a 28% improvement; and

•	Cash and Cash Equivalents was $51.5 million at March 31, 2017.

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•	Grew GEC volume by 9% during the first quarter of 2017, compared to the first quarter of 2016.

•	Executed agreement with Quest Diagnostics, which is now offering the Afirma GEC to its large network of physician customers through its AmeriPath anatomic pathology business.

•	Announced ten new coverage policies for the Afirma GEC with Blues plans and secured coverage from the Blues Federal Employee Program. This brings the total number of covered lives for the test to nearly 230 million, including more than 75 million Blues plan members.

•	Expanded the number of health plan members with in-network access to the Afirma GEC to approximately 160 million, including more than 30 million through Blues plans.

•	Secured final Medicare coverage and pricing for the Percepta classifier for use in lung cancer screening and diagnosis, that is in line with our expectations and similar to the Medicare price for the Afirma GEC.

•	Unveiled data from our pivotal clinical validation study demonstrating that the next-generation Afirma Genomic Sequencing Classifier achieved its endpoint of identifying 30% more benign patients than the current GEC. The new data will be shared May 4, 2017 during the American Association of Clinical Endocrinologists annual meeting in Austin, Texas.

•	A study demonstrating the cost-effectiveness of the Percepta classifier was accepted for publication in a major pulmonology journal.

•	the number of samples that we receive that meet the medical indication for each test performed;

•	the quantity and quality of the sample received;

•	receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests;

•	the patient's ability to pay or provide necessary insurance coverage for the tests performed;

•	the time it takes us to perform our tests and report the results; and

•	the seasonality inherent in our business, such as the impact of work days per period, timing of industry conferences and the timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers.

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(a)	Evaluation of Disclosure Controls and Procedures

(b)	Changes in Internal Control over Financial Reporting

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•	not experimental or investigational;

•	pre-authorized and appropriate for the specific patient;

•	cost-effective;

•	supported by peer-reviewed publications; and

•	included in clinical practice guidelines.

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•	differences between the list price for our tests and the reimbursement rates of payers;

•	compliance with complex federal and state regulations related to billing Medicare;

•	risk of government audits related to billing Medicare;

•	disputes among payers as to which party is responsible for payment;

•	differences in coverage and in information and billing requirements among payers, including the need for prior authorization and/or advanced notification;

•	the effect of patient co-payments or co-insurance;

•	changes to billing codes used for our tests;

•	incorrect or missing billing information; and

•	the resources required to manage the billing and claims appeals process.

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•	expend significant funds to conduct substantial research and development;

•	conduct successful analytical and clinical studies;

•	scale our laboratory processes to accommodate new tests; and

•	build the commercial infrastructure to market and sell new products.

•	failure to identify a genomic signature in biomarker discovery;

•	inability to secure sufficient numbers of samples at an acceptable cost and on an acceptable timeframe to conduct analytical and clinical studies; or

•	failure of clinical validation studies to support the effectiveness of the test.

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•

the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made in 2013 to HIPAA under the Health Information Technology for Economic and Clinical Health Act, or HITECH, which strengthen and expand HIPAA privacy and security compliance requirements, increase penalties for violators, extend enforcement authority to state attorneys general, and impose requirements for breach notification;

•	Medicare billing and payment regulations applicable to clinical laboratories;

•	the Federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal healthcare program;

•

the Federal Stark physician self-referral law (and state equivalents), which prohibits a physician from making a referral for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls within an applicable exception to the prohibition;

•

the Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state health care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies;

•	the Federal False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;

•	other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers;

•	the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party;

•	the rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier;

•	state laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving co-insurance, co-payments, deductibles, and other amounts owed by patients, and billing a state Medicaid program at a price that is higher than what is charged to other payers; and

•	the Foreign Corrupt Practices Act of 1977, and other similar laws, which apply to our international activities.

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•	multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

•	failure by us to obtain regulatory approvals where required for the use of our solutions in various countries;

•	complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems;

•	logistics and regulations associated with shipping tissue samples, including infrastructure conditions and transportation delays;

•	challenges associated with establishing laboratory partners, including proper sample collection techniques, inventory management, sample logistics, billing and promotional activities;

•	limits on our ability to penetrate international markets if we are not able to process tests locally;

•	financial risks, such as longer payment cycles, difficulty in collecting from payers, the effect of local and regional financial crises, and exposure to foreign currency exchange rate fluctuations;

•	natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

•	regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, including both its books and records provisions and its anti-bribery provisions.

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•	actual or anticipated variations in our and our competitors’ results of operations;

•	announcements by us or our competitors of new products, commercial relationships or capital commitments;

•	changes in reimbursement by current or potential payers, including governmental payers;

•	issuance of new securities analysts’ reports or changed recommendations for our stock;

•	fluctuations in our revenue, due in part to the way in which we recognize revenue;

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•	actual or anticipated changes in regulatory oversight of our products;

•	developments or disputes concerning our intellectual property or other proprietary rights;

•	commencement of, or our involvement in, litigation;

•	announced or completed acquisitions of businesses or technologies by us or our competitors;

•	any major change in our management; and

•	general economic conditions and slow or negative growth of our markets.

•	authorize our board of directors to issue, without further action by the stockholders, up to 5.0 million shares of undesignated preferred stock;

•	require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•	specify that special meetings of our stockholders can be called only by our board of directors, our chairman of the board, or our chief executive officer;

•	establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

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•	establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms;

•	provide that our directors may be removed only for cause;

•	provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum;

•	specify that no stockholder is permitted to cumulate votes at any election of directors; and

•	require a super-majority of votes to amend certain of the above-mentioned provisions.

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