DermTech (DMTKQ) 10-Q 2023 Q2 Quarterly report

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 June 30, 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

________________________

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 July 28, 2023, the registrant had 33,679,086 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 June 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 6.	Exhibits	29
	Signatures	30

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DERMTECH, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	42,790	$	77,757
Short-term marketable securities	43,406		48,411
Accounts receivable	3,865		4,172
Inventory	1,352		1,757
Prepaid expenses and other current assets	2,329		3,940
Total current assets	93,742		136,037
Property and equipment, net	6,074		6,375
Operating lease right-of-use assets	53,791		56,007
Restricted cash	3,467		3,488
Other assets	—		168
Total assets	$	157,074	$	202,075
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,324	$	2,419
Accrued compensation	7,387		7,894
Accrued liabilities	3,695		3,464
Short-term deferred revenue	295		109
Current portion of operating lease liabilities	2,246		1,634
Current portion of finance lease obligations	67		116
Total current liabilities	16,014		15,636
Warrant liability	6		5
Long-term finance lease obligations, less current portion	46		53
Operating lease liabilities, long-term	52,931		54,028
Total liabilities	68,997		69,722
Stockholders’ equity:
Common stock, $0.0001 par value per share; 100,000,000 and 50,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 33,408,810 and 30,297,408 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	473,855		456,171
Accumulated other comprehensive loss	(101)		(774)
Accumulated deficit	(385,680)		(323,047)
Total stockholders’ equity	88,077		132,353
Total liabilities and stockholders’ equity	$	157,074	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Test revenue	$	3,565	$	4,147	$	6,990	$	7,665
Contract revenue	415		86		467		286
Total revenues	3,980		4,233		7,457		7,951
Cost of revenues:
Cost of test revenue	3,909		3,236		7,700		6,766
Cost of contract revenue	63		37		93		61
Total cost of revenues	3,972		3,273		7,793		6,827
Gross profit/(loss)	8		960		(336)		1,124
Operating expenses:
Sales and marketing	13,033		15,001		28,450		30,444
Research and development	3,887		6,915		8,296		13,253
General and administrative	15,220		8,878		27,095		17,452
Total operating expenses	32,140		30,794		63,841		61,149
Loss from operations	(32,132)		(29,834)		(64,177)		(60,025)
Other income/(expense):
Interest income, net	763		149		1,545		215
Change in fair value of warrant liability	6		105		(1)		122
Total other income	769		254		1,544		337
Net loss	$	(31,363)	$	(29,580)	$	(62,633)	$	(59,688)
Weighted average shares outstanding used in computing net loss per share, basic and diluted	31,791,736		29,964,849		31,177,886		29,904,972
Net loss per share of common stock outstanding, basic and diluted	$	(0.99)	$	(0.99)	$	(2.01)	$	(2.00)

See accompanying notes to unaudited condensed consolidated financial statements.

2

DERMTECH, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(31,363)	$	(29,580)	$	(62,633)	$	(59,688)
Unrealized net gain/(loss) on marketable securities and cash equivalents	188		(171)		673		(741)
Comprehensive loss	$	(31,175)	$	(29,751)	$	(61,960)	$	(60,429)

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
Issuance of common stock at a weighted average price of $2.62 through at-the-market offering, net of $0.1 million in issuance costs	1,759,210	—		4,495		—		—		4,495
Issuance of common stock from RSU releases	560,689	—		—		—		—		—
Unrealized net gain on available-for-sale marketable securities and cash equivalents	—	—		—		188		—		188
Stock-based compensation	—	—		7,515		—		—		7,515
Net loss	—	—		—		—		(31,363)		(31,363)
Balance, June 30, 2023	33,408,810	$	3	$	473,855	$	(101)	$	(385,680)	$	88,077

See accompanying notes to unaudited condensed consolidated financial statements.

4

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, 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
Issuance of common stock from option exercises and RSU releases	88,591	—		—		—		—		—
Issuance of common stock from warrant exercises	9,219	—		10		—		—		10
Unrealized net loss on available-for-sale marketable securities	—	—		—		(171)		—		(171)
Stock-based compensation	—	—		4,837		—		—		4,837
Net loss	—	—		—		—		(29,580)		(29,580)
Balance, June 30, 2022	30,038,447	$	3	$	445,491	$	(865)	$	(266,052)	$	178,577

See accompanying notes to unaudited condensed consolidated financial statements.

5

DERMTECH, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(62,633)	$	(59,688)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	936		766
Change in fair value of warrant liability	1		(122)
Amortization of operating lease right-of-use assets	2,216		1,109
Stock-based compensation	12,251		8,731
Amortization of premiums, net of accretion of discounts on marketable securities	(202)		283
Loss on disposal of equipment	13		285
Changes in operating assets and liabilities:
Accounts receivable	307		(2,115)
Inventory	405		(952)
Prepaid expenses and other current assets	1,779		483
Operating lease liabilities	(485)		(654)
Accounts payable, accrued liabilities and deferred revenue	690		(53)
Accrued compensation	(507)		2,698
Net cash used in operating activities	(45,229)		(49,229)
Cash flows from investing activities:
Purchases of marketable securities	(25,568)		(20,171)
Sales and maturities of marketable securities	31,448		14,139
Purchases of property and equipment	(1,016)		(1,360)
Net cash provided by/(used in) investing activities	4,864		(7,392)
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with at-the-market offering, net	4,765		—
Proceeds from exercise of common stock warrants	—		22
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	(56)		(60)
Net cash provided by financing activities	5,377		517
Net decrease in cash, cash equivalents and restricted cash	(34,988)		(56,104)
Cash, cash equivalents and restricted cash, beginning of period	81,245		179,907
Cash, cash equivalents and restricted cash, end of period	$	46,257	$	123,803
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	$	42,790	$	120,333
Restricted cash	3,467		3,470
Total cash, cash equivalents and restricted cash	$	46,257	$	123,803
Supplemental cash flow information:
Cash paid for interest on finance lease obligations	$	2	$	7
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment recorded in accounts payable	$	78	$	11
Right-of-use assets obtained in exchange for lease obligations	$	—	$	17,059
Property and equipment acquired under finance leases	$	—	$	48
Change in unrealized net gains/(losses) on available-for-sale marketable securities and cash equivalents	$	673	$	(741)

See accompanying notes to unaudited condensed consolidated financial statements.

6

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 melanoma and management of skin cancer. 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 $385.7 million at June 30, 2023. As of June 30, 2023, cash and cash equivalents totaled approximately $42.8 million and short-term marketable securities totaled approximately $43.4 million. The Company's transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The timing and amount of the Company's actual expenditures will be based on many factors, including cash flows from operations and the potential growth of our business. The Company may be required to further 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. Considering the restructuring activities (Note 5) implemented in June 2023, the Company believes it has enough capital to fund anticipated operating costs for at least the next twelve months. The Company anticipates that it will need to raise additional capital in order to support its 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 June 30, 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.

7

(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 are 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.

8

The Company periodically updates its estimate of the variable consideration recognized for previously delivered performance obligations. These updates resulted in a decrease of $0.3 million and $0.7 million in revenue for the three and six months ended June 30, 2023, respectively, and an additional $0.1 million and $8,000 in revenue for the three and six months ended June 30, 2022, respectively. 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 services 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 and six months ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Test Revenue
DermTech Melanoma Test	$	3,565	$	4,147	$	6,990	$	7,665
Contract Revenue
Adhesive patch kits	388		38		424		104
RNA extractions	14		—		16		110
Project management fees	13		48		27		72
Total revenues	$	3,980	$	4,233	$	7,457	$	7,951

(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 June 30, 2023 and December 31, 2022 was $0.3 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 June 30, 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.

9

(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 $3.5 million and $4.1 million of net test accounts receivable as of June 30, 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 June 30, 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 $0.4 million and $0.1 million of contract accounts receivable as of June 30, 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):

	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Shares issuable upon exercise of common stock warrants	709	714	709	714
Shares issuable upon exercise of stock options	1,921	1,758	1,921	1,758
Shares issuable upon the release of restricted stock units	3,562	2,912	3,562	2,912
	6,192	5,384	6,192	5,384

(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.

10

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 June 30, 2023 were as follows (in thousands):

	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Short-term marketable securities, available-for-sale:
Corporate debt securities	$	10,048	$	—	$	(78)	$	9,970
U.S. government debt securities	33,524		99		(187)		33,436
Total short-term marketable securities, available-for-sale	$	43,572	$	99	$	(265)	$	43,406

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 June 30, 2023, the estimated market value of debt securities with contractual maturities of less than twelve months was $40.8 million; the remaining debt securities that the Company held at that date had an estimated market value of $2.6 million and contractual maturities of up to 18 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 June 30, 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 and six months ended June 30, 2023 and 2022 were not significant.

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The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2023 aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	June 30, 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	$	9,379	$	(73)	$	591	$	(5)	$	9,970	$	(78)
U.S. government debt securities	16,974		(168)		1,964		(19)		18,938		(187)
Total short-term marketable securities, available-for-sale	$	26,353	$	(241)	$	2,555	$	(24)	$	28,908	$	(265)

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):

	June 30, 2023		December 31, 2022
Prepaid expenses and other current assets:
Prepaid expenses	$	1,513	$	3,207
Other current assets	816		733
Total prepaid expenses and other current assets	$	2,329	$	3,940
Property and equipment, gross:
Laboratory equipment	$	6,305	$	6,250
Computer equipment	853		872
Furniture and fixtures	1,247		913
Leasehold improvements	597		1,344
Total property and equipment, gross	9,002		9,379
Less accumulated depreciation	(2,928)		(3,004)
Total property and equipment, net	$	6,074	$	6,375

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Accrued Compensation and Accrued Liabilities

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

	June 30, 2023		December 31, 2022
Accrued compensation:
Accrued bonus and commissions	$	3,778	$	3,257
Accrued salaries and wages	3,609		4,637
Total accrued compensation	$	7,387	$	7,894
Accrued liabilities:
Accrued consulting services	$	309	$	894
Customer refund liability	980		980
Restructuring liability	1,730		—
Other accrued expenses	676		1,590
Total accrued liabilities	$	3,695	$	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 June 30, 2023 (in thousands):

	June 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	17,577	$	—	$	—	$	17,577
U.S. government debt securities	—		10,227		—		10,227
Total cash equivalents	17,577		10,227		—		27,804
Marketable securities, available for sale:
Corporate debt securities	—		9,970		—		9,970
U.S. government debt securities	—		33,436		—		33,436
Total marketable securities, available for sale	—		43,406		—		43,406
Total assets measured at fair value on a recurring basis	$	17,577	$	53,633	$	—	$	71,210
Liabilities:
Warrant liability	$	—	$	—	$	6	$	6
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	6	$	6

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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 (as defined below) 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 June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Assumed risk-free interest rate	5.40%	2.96%	4.35% - 5.40%	2.37% - 2.96%
Assumed volatility	133.99%	96.21%	123.28% - 133.99%	92.77% - 96.21%
Expected term	1.17 years	2.17 years	1.17 - 1.42 years	2.17 - 2.42 years
Expected dividend yield	—	—	—	—

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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
Change in fair value of warrant liability	(6)
Balance as of June 30, 2023	$	6

As of June 30, 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, secured by cash of June 30, 2023 and money market accounts as of December 31, 2022, 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)    Common Stock

On June 2, 2023, the Company filed an amendment to its Amended and Restated Certificate of Incorporation, as amended, with the Secretary of State of Delaware to increase the authorized number of shares of common stock of the Company from 50,000,000 to 100,000,000 shares (the “Amended Certificate”). The Amended Certificate was approved by the Company’s stockholders at the 2023 Annual Meeting.

(b)    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.

During the three months ended June 30, 2023, the Company issued an aggregate of 1,759,210 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $2.62 resulting in aggregate gross proceeds of approximately $4.6 million, reduced by $0.1 million issuance costs, resulting in net proceeds to the Company of approximately $4.5 million. For the six months ended June 30, 2023, the Company issued an aggregate of 1,866,661 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $2.68 resulting in aggregate gross proceeds of approximately $5.0 million, reduced by $0.2 million in issuance costs, resulting in net proceeds to the Company of approximately $4.8 million. As of June 30, 2023, $0.5 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 and six months ended June 30, 2023, the Company did not issue any shares pursuant to the 2022 Sales Agreement.

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(c)    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 June 30, 2023 and December 31, 2022. Private SPAC Warrants that were still owned by the original holder totaled 80,350 as of June 30, 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 June 30, 2023 and December 31, 2022.

(d)    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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	435	$	298	$	847	$	633
Sales and marketing	1,548		1,067		3,056		2,528
Research and development	676		1,330		1,237		1,825
General and administrative	4,856		2,142		7,111		3,745
Total stock-based compensation	$	7,515	$	4,837	$	12,251	$	8,731

The total compensation cost related to non-vested awards not yet recognized as of June 30, 2023 was $31.2 million, which is expected to be recognized over a weighted average term of 2.43 years.

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Departure of Former Chief Executive Officer

Stock-based compensation expense for the three and six months ended June 30, 2023 includes accelerated expense of $2.9 million and $3.0 million, respectively, in connection with the transition agreement dated March 1, 2023, between the Company and its former Chief Executive Officer, John Dobak, M.D. (the "Transition Agreement"). The accelerated expense is included within general and administrative expenses in the condensed consolidated statement of operations.

Dr. Dobak resigned from his position as Chief Executive Officer and member of the board of directors of the Company (the "Board") effective May 8, 2023 and agreed to serve as a consultant to the Company on an as needed basis until January 1, 2024. The terms of the Transition Agreement allow for continuing vesting of Dr. Dobak's equity awards through the end of the consulting period on January 1, 2024. At the termination of the consulting period, consistent with Dr. Dobak's change of control and severance plan, he will immediately receive an additional 10 months vesting of equity awards and the period to exercise his vested stock options will be increased from 90 days to 12 months.

The Company assessed the consulting services under the Transition Agreement as nonsubstantive pursuant to ASC 718, Compensation – Stock Compensation (ASC 718) and recognized all stock-based compensation expense related to Dr. Dobak's equity awards vesting in connection with the Transition Agreement upon his resignation.

5.    Commitments and Contingencies

Restructuring Plan

On June 26, 2023, the Board approved a restructuring plan (the “Restructuring Plan”) to prioritize growth opportunities for the DMT, streamline operations, suspend pipeline programs, and significantly reduce overall operating expenses. The Restructuring Plan includes a reduction of the Company’s workforce by approximately 15%. The actions associated with the employee restructuring under the Restructuring Plan are expected to be substantially complete in the third quarter of 2023.

The Company incurred approximately $2.1 million in restructuring charges in connection with the Restructuring Plan for the three and six months ended June 30, 2023, which consist of $1.8 million in charges related to severance payments and employee benefits and $0.3 million in charges related to stock-based compensation for the acceleration of share-based awards. Restructuring charges are included in general and administrative expenses in the condensed consolidated statement of operations.

The restructuring liability as of June 30, 2023 is $1.7 million and is included within accrued liabilities in the condensed consolidated balance sheets.

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 former Chief Commercial Officer, is an employee of EVERSANA. Mr. Wood's last day of employment as Chief Commercial Officer of the Company was July 3, 2023. The Company incurred $0.4 million and $0.9 million in costs for the three months ended June 30, 2023 and 2022, respectively, and $0.9 million and $1.6 million in costs for the six months ended June 30, 2023 and 2022, respectively. Amounts due to EVERSANA were $0.2 million and $0.3 million as of June 30, 2023 and December 31, 2022, respectively.

There were no other related party transactions identified during the three and six months ended June 30, 2023 and 2022.

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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) 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 the MD&A 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 MD&A, 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 and its statements, estimates and expectations regarding the Restructuring Plan, its potential cost savings and any related future effects of the Restructuring Plan, 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 or in this Quarterly Report on Form 10-Q. 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 of melanoma and management of skin cancer. Our technology enhances evaluation of lesions suspicious for melanoma using non-invasive sample collection and detecting genomic markers associated with melanoma to identify higher risk lesions or to rule out melanoma with a 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 DermTech Melanoma Test (“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. We process our tests in our high complexity molecular laboratory that is Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified, 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.

Restructuring Plan

On June 26, 2023, the board of directors of the Company (the “Board”) approved restructuring actions (the "Restructuring Plan") that are intended to prioritize the significant growth opportunities for the DMT, streamline operations, suspend pipeline programs and significantly reduce overall operating expenses. These restructuring actions primarily related to sales, marketing and general and administrative functions and resulted in a workforce reduction of approximately 15% of the Company’s workforce. The Company currently estimates annualized savings of between $25 million and $30 million upon completion of the Restructuring Plan.

As part of the Restructuring Plan, the Company incurred one-time charges of $2.1 million. The one-time charges consist primarily of severance payments, employee benefits and stock-based compensation for the acceleration of share-based awards. The restructuring liability as of June 30, 2023 is $1.7 million and is included within accrued liabilities in the condensed consolidated balance sheets. The actions associated with the employee restructuring under the Restructuring Plan are expected to be substantially complete in the third quarter of 2023.

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.

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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.

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. During the three months ended June 30, 2023, the Company issued an aggregate of 1,759,210 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $2.62, net of $0.1 million issuance costs, resulting in net proceeds to the Company of approximately $4.5 million. During the six months ended June 30, 2023, the Company issued an aggregate of 1,866,661 shares of common stock pursuant to the 2020 Sales Agreement at a weighted average purchase price of $2.68, net of $0.2 million issuance costs, resulting in net proceeds of approximately $4.8 million. As of June 30, 2023, $0.5 million is available pursuant to the 2020 Sales Agreement.

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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 or second quarter of 2023.

Results of Operations

Three Months Ended June 30, 2023 and June 30, 2022

(In thousands, except per share amounts and billable test revenue samples)	Three Months Ended June 30,
	2023			2022			$ Change		% Change
Revenues:
Test revenue	$	3,565		$	4,147		$	(582)	(14)	%
Contract revenue	415			86			329		*
Total revenues	3,980			4,233			(253)		(6)	%
Cost of revenues:
Cost of test revenue	3,909			3,236			673		21	%
Cost of contract revenue	63			37			26		70	%
Total cost of revenues	3,972			3,273			699		21	%
Gross profit	8			960			(952)		(99)	%
Gross profit as a percent of total revenue	—		%	23		%
Operating expenses:
Sales and marketing	13,033			15,001			(1,968)		(13)	%
Research and development	3,887			6,915			(3,028)		(44)	%
General and administrative	15,220			8,878			6,342		71	%
Total operating expenses	32,140			30,794			1,346		4	%
Loss from operations	(32,132)			(29,834)			(2,298)		8	%
Other income:
Interest income, net	763			149			614		*
Change in fair value of warrant liability	6			105			(99)		(94)	%
Total other income	769			254			515		*
Net loss	$	(31,363)		$	(29,580)		$	(1,783)	6	%
Basic and diluted net loss per share	$	(0.99)		$	(0.99)		$	—	—	%
Other Operating Data:
Billable test revenue samples	17,450			18,320			(870)		(5)	%

* Absolute value percentage change greater than 100

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Revenue

Test Revenue

Test revenues decreased $0.6 million, or 14%, to $3.6 million for the three months ended June 30, 2023, compared to $4.1 million for the three months ended June 30, 2022. The decrease in test revenues was primarily driven by a decrease in average selling price from lower collection estimates for certain non-contracted commercial payors and a decrease in billable sample volume. Billable samples decreased to approximately 17,450 for the three months ended June 30, 2023, compared to approximately 18,320 for the three months ended June 30, 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 increased $0.3 million to $0.4 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022. The increase is attributable to significant kit shipments made to several pharmaceutical companies. 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.

Cost of Revenue

Cost of revenues increased $0.7 million, or 21%, to $4.0 million for the three months ended June 30, 2023, compared to $3.3 million for the three months ended June 30, 2022. The increase was largely attributable to higher overhead costs pertaining to our new facility and higher lab supply expenses. As of June 30, 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 expense decreased $2.0 million, or 13%, to $13.0 million for the three months ended June 30, 2023 compared to $15.0 million for the three months ended June 30, 2022. The decrease was due to reduced spend around marketing activities, reduced consulting costs and lower employee-related compensation costs. As part of the Restructuring Plan, we expect sales and marketing expenses to be reduced further in the second half of 2023.

Research and Development

R&D expenses decreased $3.0 million, or 44%, to $3.9 million for the three months ended June 30, 2023 compared to $6.9 million for the three months ended June 30, 2022. The decrease was due to reduced compensation costs from lower headcount, lower clinical study costs and lower lab supply spending.

General and Administrative

General and administrative expenses increased $6.3 million, or 71%, to $15.2 million for the three months ended June 30, 2023, compared to $8.9 million for the three months ended June 30, 2022. The increase was primarily due to $2.1 million in costs related to the Restructuring Plan, separation benefits of $3.4 million related to our former CEO, including $2.9 million of stock-based compensation for the acceleration of share-based awards, and higher overhead from our new facility. As part of the Restructuring Plan, we expect general and administrative expenses to be reduced in the second half of 2023.

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Interest Income, net

Interest income, net of $0.8 million and $0.1 million for the three months ended June 30, 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 June 30, 2023 was a gain of $6,000, compared to a gain of $105,000 for the three months ended June 30, 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.

Six Months Ended June 30, 2023 and June 30, 2022

(In thousands, except per share amounts and billable test revenue samples)	Six Months Ended June 30,
	2023			2022			$ Change		% Change
Revenues:
Test revenue	$	6,990		$	7,665		$	(675)	(9)	%
Contract revenue	467			286			181		63	%
Total revenues	7,457			7,951			(494)		(6)	%
Cost of revenues:
Cost of test revenue	7,700			6,766			934		14	%
Cost of contract revenue	93			61			32		52	%
Total cost of revenues	7,793			6,827			966		14	%
Gross (loss) profit	(336)			1,124			(1,460)		*
Gross (loss) profit as a percent of total revenue	(5)		%	14		%
Operating expenses:
Sales and marketing	28,450			30,444			(1,994)		(7)	%
Research and development	8,296			13,253			(4,957)		(37)	%
General and administrative	27,095			17,452			9,643		55	%
Total operating expenses	63,841			61,149			2,692		4	%
Loss from operations	(64,177)			(60,025)			(4,152)		7	%
Other income/(expense):
Interest income, net	1,545			215			1,330		*
Change in fair value of warrant liability	(1)			122			(123)		*
Total other income	1,544			337			1,207		*
Net loss	$	(62,633)		$	(59,688)		$	(2,945)	5	%
Basic and diluted net loss per share	$	(2.01)		$	(2.00)		$	(0.01)	1	%
Other Operating Data:
Billable test revenue samples	35,250			32,690			2,560		8	%

* Absolute value percentage change greater than 100

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Test Revenue

Test revenues decreased $0.7 million, or 9%, to $7.0 million for the six months ended June 30, 2023, compared to $7.7 million for the six months ended June 30, 2022. The decrease in test revenues was primarily driven by a decrease in average selling price from lower collection estimates for certain non-contracted commercial payors, including revenue adjustments for tests run in prior periods, partially offset by increased billable sample volume. Billable samples increased to approximately 35,250 for the six months ended June 30, 2023, compared to approximately 32,690 for the six months ended June 30, 2022.

Contract Revenue

Contract revenues with pharmaceutical companies increased $0.2 million, or 63%, to $0.5 million for the six months ended June 30, 2023, compared to $0.3 million for the six months ended June 30, 2022. Contract revenue can be highly variable as it is dependent on the pharmaceutical customers’ clinical trial progress, which can change due to variability of patient enrollment, drug safety and efficacy and other factors.

Cost of Revenue

Cost of revenues increased $1.0 million, or 14%, to $7.8 million for the six months ended June 30, 2023, compared to $6.8 million for the six months ended June 30, 2022. The increase was largely attributable to a higher billable sample volume in 2023 and higher overhead costs pertaining to our new facility. As of June 30, 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, equipment maintenance, and utilities. 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 decreased $2.0 million, or 7%, to $28.5 million for the six months ended June 30, 2023, compared to $30.4 million for the six months ended June 30, 2022. The decrease was due to reduced spend around marketing activities, reduced consulting costs and lower employee-related compensation costs. As part of the Restructuring Plan, we expect sales and marketing expenses to be reduced further in the second half of 2023.

Research and Development

R&D expenses decreased $5.0 million, or 37%, to $8.3 million for the six months ended June 30, 2023, compared to $13.3 million for the six months ended June 30, 2022. The decrease was due to reduced compensation costs from lower headcount, lower clinical study costs and lower lab supply spending.

General and Administrative

General and administrative expenses increased $9.6 million, or 55%, to $27.1 million for the six months ended June 30, 2023, compared to $17.5 million for the six months ended June 30, 2022. The increase was primarily due to $2.1 million in costs related to the Restructuring Plan, separation benefits of $3.6 million related to our former CEO, including $3.0 million of stock-based compensation for the acceleration of share-based awards, higher employee-compensation related costs and higher overhead from our new facility. As part of the Restructuring Plan, we expect general and administrative expenses to be reduced in the second half of 2023.

Interest Income, net

Interest income, net of $1.5 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively, consists primarily of interest earned on our short-term marketable securities.

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Change in Fair Value of Warrant Liability

Change in fair value of warrant liability for the six months ended June 30, 2023 was a loss of $1,000, compared to a gain of $0.1 million for the six months ended June 30, 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 $62.6 million for the six months ended June 30, 2023. As of June 30, 2023, our accumulated deficit was $385.7 million. At the end of 2020, throughout 2021 and the second quarter of 2023, we raised approximately $49.5 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 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.

As of June 30, 2023, our cash and cash equivalents totaled approximately $42.8 million and short-term marketable securities totaled approximately $43.4 million. Based on our current business operations and the Restructuring Plan, 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 ability to successfully execute and realize the intended benefits of the Restructuring Plan;

•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.

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Cash Flow Analysis

(amounts in thousands)	Six Months Ended June 30,
	2023		2022
Net cash used in operating activities	$	(45,229)	$	(49,229)
Net cash provided by/(used in) investing activities	4,864		(7,392)
Net cash provided by financing activities	5,377		517

Net cash used in operating activities for the six months ended June 30, 2023 totaled $45.2 million, primarily driven by the $62.6 million net loss, offset partially by non-cash related items, including $12.3 million in stock-based compensation, $2.2 million in amortization of operating lease ROU assets and $0.9 million in depreciation. In addition, we had a net cash inflow of $2.2 million through net changes in working capital balances driven primarily by cash inflows of $0.3 million due to decreases in accounts receivable, $0.4 million from the decrease in inventory, $1.8 million through the decrease of prepaid expenses and other current assets and $0.7 million through the increase in accounts payable, accrued liabilities and deferred revenue, partially offset by cash outflows of $0.5 million from the increase in accrued compensation and $0.5 million from the increase in operating lease liabilities.

Net cash provided by investing activities for the six months ended June 30, 2023 totaled $4.9 million, which related to the outflow from the purchase of $25.6 million of marketable securities and $1.0 million from the purchase of equipment offset by the inflow from the sales and maturities of marketable securities of $31.4 million.

Net cash provided by financing activities for the six months ended June 30, 2023 totaled $5.4 million, which was driven primarily by $4.8 million in net proceeds raised from the 2020 Sales Agreement and $0.6 million in proceeds from contributions to the 2020 ESPP.

Off-Balance Sheet Arrangements

As of June 30, 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.

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.

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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 June 30, 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 June 30, 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.

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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, except for the addition of the following risk factor:

We may fail to achieve the expected cost savings and related benefits from our Restructuring Plan.

On June 26, 2023, the Board approved the Restructuring Plan, which is intended to prioritize the significant growth opportunities for the DMT, streamline operations, suspend pipeline programs and significantly reduce overall operating expenses. The Restructuring Plan primarily relates to sales, marketing and G&A functions and resulted in a workforce reduction of approximately 15% of the Company’s workforce. As part of the Restructuring Plan, the Company incurred one-time charges of $2.2 million in the second quarter of 2023. The one-time charges consist primarily of severance payments, employee benefits and stock-based compensation for the acceleration of share-based awards.

The Company currently estimates annualized savings of between $25 million and $30 million upon completion of the Restructuring Plan. There is no guarantee that the Restructuring Plan will achieve its intended benefits. For example, the Company's cost restructuring efforts may not result in the anticipated savings or other economic benefits, or could result in total costs and expenses that are greater than expected. In addition, the Company may not be able to effectively realize all the cost savings anticipated by the Restructuring Plan and may incur termination and other costs not previously contemplated, which could be material. The Restructuring Plan may cause disruption to the Company's business operations. For example, the Restructuring Plan resulted in the loss of a number of long-term employees, which could result in the loss of institutional knowledge and expertise and the reallocation and combination of certain roles and responsibilities across the organization, all of which could adversely affect the Company's operations. In addition, the Restructuring Plan could negatively impact the Company's ability to attract, integrate, retain and motivate key employees.

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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	X
3.2	Bylaws of the Company		10-K	001-38118	3/11/20
10.1*^	Separation Agreement, by and between the Company and Todd Wood, dated June 26, 2023		8-K/A	001-38118	7/13/23
10.2*	DermTech, Inc. 2020 Equity Incentive Plan, as amended and restated on May 31, 2023		8-K	001-38118	6/05/23
10.3*^	Employment Agreement, dated May 6, 2023 by and between the Company and Bret Christensen		8-K	001-38118	5/09/23
10.4*	Second Amended and Restated 2022 Inducement Equity Incentive Plan		8-K	001-38118	5/09/23
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 June 30, 2023 has been formatted in Inline XBRL.	X
*Management contract or compensatory plan or arrangement
^Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the SEC.
** 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.

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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: August 3, 2023	By:	/s/ Bret Christensen
		Bret Christensen
		Chief Executive Officer (Principal Executive Officer)
Date: August 3, 2023	By:	/s/ Kevin Sun
		Kevin Sun
		Chief Financial Officer (Principal Financial and Accounting Officer)

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