10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended March 31, 2024

or

 

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: 001-39334

 

 

Biora Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-3950390

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4330 La Jolla Village Drive, Suite 300, San Diego, CA

 

92122

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (833) 727-2841

 

N/A

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

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

Common Stock, par value $0.001 per share

 

BIOR

 

The Nasdaq Global 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 ☐ No

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 ☒ No ☐

 

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

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

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.

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

As of May 8, 2024, the registrant had 35,883,843 shares of common stock, par value $0.001 per share, outstanding.

 


 

Table of Contents

 

 

 

 

 

Page

PART 1

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Deficit

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

4

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

5

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

27

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

 

 

 

 

 

Item 1A.

 

Risk Factors

 

28

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

61

 

 

 

 

 

Item 3.

 

Default Upon Senior Securities

 

61

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

61

 

 

 

 

 

Item 5.

 

Other Information

 

61

 

 

 

 

 

Item 6.

 

Exhibits

 

63

 

 

 

 

Signatures

 

64

EXPLANATORY NOTE

All share and per share information included in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect a 1-for-25 reverse stock split effected on January 3, 2023.

TRADEMARKS

Biora TherapeuticsTM, BiojetTM, NavicapTM, and GITracTM are trademarks of Biora Therapeutics, Inc. Any other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Biora Therapeutics, INC.

CONDENSED Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

10,820

 

 

$

15,211

 

Income tax receivable

 

 

822

 

 

 

830

 

Prepaid expenses and other current assets

 

 

2,429

 

 

 

3,030

 

Total current assets

 

 

14,071

 

 

 

19,071

 

Property and equipment, net

 

 

1,136

 

 

 

1,156

 

Right-of-use assets

 

 

1,418

 

 

 

1,614

 

Other assets

 

 

293

 

 

 

3,302

 

Goodwill

 

 

6,072

 

 

 

6,072

 

Total assets

 

$

22,990

 

 

$

31,215

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,936

 

 

$

2,843

 

Accrued expenses and other current liabilities

 

 

16,984

 

 

 

17,319

 

Warrant liabilities

 

 

27,208

 

 

 

40,834

 

Related party senior secured convertible notes, current portion

 

 

1,976

 

 

 

1,976

 

Total current liabilities

 

 

51,104

 

 

 

62,972

 

Convertible notes, net of unamortized discount of $103 and $259 as of
     March 31, 2024 and December 31, 2023, respectively

 

 

4,497

 

 

 

9,966

 

Senior secured convertible notes, net of unamortized discount of $13,992 and $11,066 as of
     March 31, 2024 and December 31, 2023, respectively (Note 6)

 

 

18,709

 

 

 

14,591

 

Related party senior secured convertible notes net of unamortized discount of $7,058
     and $
7,951 as of March 31, 2024 and December 31, 2023, respectively (including
     future interest of $
9,747 and $9,747 as of March 31, 2024 and
     December 31, 2023, respectively) (Note 6)

 

 

20,072

 

 

 

19,179

 

Derivative liabilities

 

 

26,210

 

 

 

22,899

 

Other long-term liabilities

 

 

2,583

 

 

 

3,029

 

Total liabilities

 

$

123,175

 

 

$

132,636

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock – $0.001 par value; 164,000,000 shares authorized; 31,166,719 and
   
28,574,918 shares issued as of March 31, 2024 and December 31, 2023, respectively;
   
30,429,295 and 27,837,563 shares outstanding as of March 31, 2024 and
   December 31, 2023, respectively

 

 

28

 

 

 

25

 

Additional paid-in capital

 

 

874,013

 

 

 

868,591

 

Accumulated deficit

 

 

(955,147

)

 

 

(950,958

)

Treasury stock – at cost; 737,424 and 737,355 shares as of March 31, 2024 and
   December 31, 2023, respectively

 

 

(19,079

)

 

 

(19,079

)

Total stockholders' deficit

 

 

(100,185

)

 

 

(101,421

)

Total liabilities and stockholders' deficit

 

$

22,990

 

 

$

31,215

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

1


 

Biora Therapeutics, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Revenues

 

$

542

 

 

$

2

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

7,005

 

 

 

7,190

 

Selling, general and administrative

 

 

9,053

 

 

 

8,356

 

Total operating expenses

 

 

16,058

 

 

 

15,546

 

Loss from operations

 

 

(15,516

)

 

 

(15,544

)

Interest expense, net

 

 

(2,757

)

 

 

(2,680

)

Gain on warrant liabilities

 

 

13,915

 

 

 

864

 

Other income (expense), net

 

 

217

 

 

 

(81

)

Loss before income taxes

 

 

(4,141

)

 

 

(17,441

)

Income tax expense

 

 

48

 

 

 

 

Net loss

 

 

(4,189

)

 

 

(17,441

)

Net loss per share, basic and diluted

 

$

(0.14

)

 

$

(1.59

)

Weighted average shares outstanding, basic and diluted

 

 

29,296,767

 

 

 

10,970,583

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

Biora Therapeutics, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Deficit

 

Balance at December 31, 2023

 

 

28,574,918

 

 

$

25

 

 

$

868,591

 

 

$

(950,958

)

 

 

(737,355

)

 

$

(19,079

)

 

$

(101,421

)

Issuance of common stock, net

 

 

2,591,662

 

 

 

3

 

 

 

2,821

 

 

 

 

 

 

 

 

 

 

 

 

2,824

 

Issuance of common stock upon vesting of restricted stock units

 

 

139

 

 

 

 

 

 

 

 

 

 

 

 

(69

)

 

 

 

 

 

 

Issuance of common stock warrants

 

 

 

 

 

 

 

 

1,062

 

 

 

 

 

 

 

 

 

 

 

 

1,062

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,539

 

 

 

 

 

 

 

 

 

 

 

 

1,539

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,189

)

 

 

 

 

 

 

 

 

(4,189

)

Balance at March 31, 2024

 

 

31,166,719

 

 

$

28

 

 

$

874,013

 

 

$

(955,147

)

 

 

(737,424

)

 

$

(19,079

)

 

$

(100,185

)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Deficit

 

Balance at December 31, 2022

 

 

9,098,844

 

 

$

8

 

 

$

743,626

 

 

$

(826,843

)

 

 

(170,346

)

 

$

(19,078

)

 

$

(102,287

)

Issuance of common stock, net

 

 

2,853,109

 

 

 

3

 

 

 

12,521

 

 

 

 

 

 

 

 

 

 

 

 

12,524

 

Issuance of common stock upon vesting of restricted stock units

 

 

146,321

 

 

 

 

 

 

(178

)

 

 

 

 

 

(68,938

)

 

 

 

 

 

(178

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,384

 

 

 

 

 

 

 

 

 

 

 

 

2,384

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,441

)

 

 

 

 

 

 

 

 

(17,441

)

Balance at March 31, 2023

 

 

12,098,274

 

 

$

11

 

 

$

758,353

 

 

$

(844,284

)

 

 

(239,284

)

 

$

(19,078

)

 

$

(104,998

)

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

Biora Therapeutics, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(4,189

)

 

$

(17,441

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

105

 

 

 

147

 

Stock-based compensation expense

 

 

1,539

 

 

 

2,384

 

Loss on extinguishment of convertible notes

 

 

185

 

 

 

 

Amortization of debt discount

 

 

1,939

 

 

 

374

 

Loss on disposal of property and equipment

 

 

10

 

 

 

9

 

Impairment of property and equipment

 

 

 

 

 

100

 

Change in fair value of derivative liabilities

 

 

(418

)

 

 

 

Change in fair value of warrant liabilities

 

 

(13,915

)

 

 

(864

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Income tax receivable

 

 

8

 

 

 

 

Prepaid expenses and other current assets

 

 

728

 

 

 

772

 

Accounts payable

 

 

1,806

 

 

 

(184

)

Accrued expenses and other current liabilities

 

 

(83

)

 

 

3,057

 

Other long-term liabilities

 

 

(211

)

 

 

(452

)

Net cash used in operating activities

 

 

(12,496

)

 

 

(12,098

)

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(15

)

 

 

(16

)

Proceeds from sale of property and equipment

 

 

20

 

 

 

10

 

Proceeds from sale of investment in Enumera Molecular, Inc.

 

 

3,000

 

 

 

 

Net cash provided by (used in) investing activities

 

 

3,005

 

 

 

(6

)

Financing Activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

2,800

 

 

 

12,883

 

Proceeds from issuance of convertible notes, net

 

 

2,813

 

 

 

 

Payments of offering costs

 

 

(70

)

 

 

(359

)

Payments for financing of insurance premiums

 

 

(443

)

 

 

(443

)

Net cash provided by financing activities

 

 

5,100

 

 

 

12,081

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(4,391

)

 

 

(23

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

15,211

 

 

 

30,486

 

Cash, cash equivalents and restricted cash at end of period

 

$

10,820

 

 

$

30,463

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

78

 

 

$

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

Exchange of convertibles note for senior secured notes and warrants

 

$

5,625

 

 

$

 

Lease assets obtained in exchange for operating lease liabilities

 

$

 

 

$

1,133

 

Debt issuance costs incurred but not paid

 

$

314

 

 

$

 

Purchases of property and equipment in accounts payable

 

$

107

 

 

$

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

Biora Therapeutics, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Biora Therapeutics, Inc. (the “Company” or “Biora” or "Biora Therapeutics") is a clinical-stage biotechnology company developing oral biotherapeutics that could enable new treatment approaches in the delivery of therapeutics. The Company's pipeline includes two therapeutic delivery platforms:

NaviCapTM Targeted Oral Delivery Platform: Delivery of therapeutics to the site of disease in the gastrointestinal tract designed to improve outcomes for patients with Inflammatory Bowel Disease; and
BioJetTM Systemic Oral Delivery Platform: Designed to replace injections with needle-free, oral delivery of large molecules for better management of chronic diseases.

Biora Therapeutics, a Delaware corporation, was formerly known as Progenity, Inc., and commenced operations in 2010 with its corporate office located in San Diego, California. The Company's historical operations included a licensed Clinical Laboratory Improvement Amendments and College of American Pathologists certified laboratory located in Michigan specializing in molecular testing markets serving women’s health providers in the obstetric, gynecological, fertility, and maternal fetal medicine specialty areas in the United States. Previously, the Company's core business was focused on the carrier screening and noninvasive prenatal test market, targeting preconception planning and routine pregnancy management for genetic disease risk assessment. Through its former affiliation with Mattison Pathology, LLP, a Texas limited liability partnership doing business as Avero Diagnostics (“Avero”), the Company’s operations also included anatomic and molecular pathology testing products.

On December 29, 2022, the Company filed a certificate of amendment (the "Certificate of Amendment") to its eighth amended and restated certificate of incorporation to effect, as of January 3, 2023, a 1-for-25 reverse split of the Company's common stock (the "Reverse Stock Split"). On January 3, 2023, the Company effected the Reverse Stock Split. See Note 2 for additional information.

Liquidity

As of March 31, 2024, the Company had cash and cash equivalents of $10.6 million, restricted cash of $0.2 million and a working capital deficit. The Company had an accumulated deficit of $955.1 million as of March 31, 2024. For the three months ended March 31, 2024, the Company reported a net loss of $4.2 million and cash used in operating activities of $12.5 million. The Company’s primary sources of capital have historically been the sale of common stock and warrants, private placements of preferred stock and the incurrence of debt. As of March 31, 2024, the Company had a face value of $47.5 million of 11.0%/13.0% convertible senior secured notes due 2028 ("2028 Convertible Notes") outstanding and a face value of $4.6 million of 7.25% convertible senior notes due 2025 ("2025 Convertible Notes" and together with the 2028 Convertible Notes, the "Convertible Notes") outstanding (see Note 6). Management does not expect that the Company's current cash and cash equivalents will be sufficient to fund its operations for at least 12 months from the issuance date of the condensed consolidated financial statements for the three months ended March 31, 2024, and will require additional capital to fund the Company's operations. As a result, substantial doubt exists about the Company’s ability to continue as a going concern for 12 months following the issuance date of the condensed consolidated financial statements for the three months ended March 31, 2024.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management believes that the Company’s liquidity position as of the date of this filing provides sufficient runway to achieve important research and development pipeline milestones. Management intends to raise additional capital through equity offerings and/or debt financings, or from other potential sources of liquidity, which may include new collaborations, licensing or other commercial agreements for one or more of the Company’s research programs or patent portfolios or divestitures of the Company's assets. Adequate funding, if needed, may not be available to the Company on acceptable terms, or at all. The Company’s ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or other operations. If any of these events occur, the Company’s ability to achieve its operational goals would be adversely affected.

5


 

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission, from which management derived the Company’s condensed consolidated balance sheet as of December 31, 2023.

The condensed consolidated financial statements and notes thereto give retrospective effect to the Reverse Stock Split for all periods presented. All common stock, options exercisable for common stock, restricted stock units ("RSUs"), warrants and per share amounts contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the Reverse Stock Split for all periods presented. Concurrent with the Reverse Stock Split, the Company effected a reduction in the number of authorized shares of common stock from 350,000,000 shares to 164,000,000 shares.

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements are unaudited, have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the results for the interim periods presented. Results are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include the valuation of stock options, the valuation of goodwill, the valuation of the derivative liabilities associated with the 2028 Convertible Notes, accrual for reimbursement claims and settlements, the valuation of warrant liabilities, assessing future tax exposure and the realization of deferred tax assets, and the useful lives and the recoverability of property and equipment. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.

Restricted Cash

Restricted cash consists of collateral required for the Company's bank-issued credit cards with a balance of $0.2 million as of both March 31, 2024 and December 31, 2023.

Recent Accounting Pronouncements Adopted

In August 2020, the Financial Accounting Standards ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. The standard is effective for the Company for annual reporting periods beginning after December 15, 2023. The Company adopted this standard on January 1, 2024, and it did not have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which introduces new and enhanced income tax disclosure requirements. The standard is effective for the Company for annual reporting periods beginning after December 15, 2025. The Company is currently evaluating the impact the adoption of this standard may have on its consolidated financial statements and related disclosures.

6


 

3. Strategic Transformation

In order to refocus efforts and resources on its research and development pipeline, in June 2021, the Company announced a strategic transformation ("Strategic Transformation") that included the closure of the legacy genetics laboratory and the sale of Avero, together referred to as the "Laboratory Operations".

Assets Held for Sale

In October 2023, the Company entered into a purchase and sale agreement to sell the building located in Ann Arbor, Michigan included in current assets held for sale. The transaction closed in October 2023 and the Company received gross proceeds of $2.8 million and incurred closing expenses of $0.2 million. There are no assets held for sale as of March 31, 2024 or December 31, 2023.

Investment in Enumera Molecular, Inc.

In May 2022, the Company completed the divesture of its single-molecule detection platform. Under the terms of the agreements, the Company contributed intellectual property and fixed assets related to the single-molecule detection platform to a newly-formed entity, Enumera Molecular, Inc. ("Enumera"), which intends to develop and commercialize the platform. On the transaction date, the Company received a 25% minority ownership stake, on a fully-diluted basis, of 6,000,000 Series A-1 preferred shares with an estimated value of $6.0 million in exchange for the assets. The Company concluded, based on a technical evaluation of the facts, that Enumera is not a variable interest entity. The Company also evaluated the characteristics of the investment and determined that the preferred stock is not in-substance common stock that would require equity method accounting. The Company concluded the appropriate accounting treatment for the investment in Enumera to be that of an equity security with no readily determinable fair value and has recorded the investment at cost, less impairment, adjusted for subsequent observable price changes. The Company determined the fair value was less than carrying value as of December 31, 2023 based on negative cash flows from operations and for the year ended December 31, 2023 recorded a $3.0 million impairment loss on its investment. The investment is included in other assets in the Company’s condensed consolidated balance sheets as of December 31, 2023. In March 2024, the Company entered into a stock purchase agreement with Enumera investors, pursuant to which it sold its remaining investment for $3.0 million.

Licensing Agreements

In November 2022, the Company entered into a license agreement with Northwest Pathology, doing business as Avero Diagnostics (“Northwest”), pursuant to which the Company licensed its Preecludia rule-out test for preeclampsia to Northwest for commercial development (the “Northwest License Agreement”). Under the terms of the Northwest License Agreement, Northwest received the rights to assets and intellectual property related to the Preecludia test and the Company will receive commercial milestone payments and royalties on net sales.

4. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid expenses

 

$

2,260

 

 

$

2,443

 

Other current assets

 

 

169

 

 

 

587

 

Total

 

$

2,429

 

 

$

3,030

 

 

7


 

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Computers and software

 

$

1,189

 

 

$

1,193

 

Building and leasehold improvements

 

 

852

 

 

 

803

 

Laboratory equipment

 

 

430

 

 

 

423

 

Furniture, fixtures, and office equipment

 

 

799

 

 

 

799

 

Construction in progress

 

 

49

 

 

 

45

 

Total property and equipment

 

 

3,319

 

 

 

3,263

 

Less accumulated depreciation and amortization

 

 

(2,183

)

 

 

(2,107

)

Property and equipment, net

 

$

1,136

 

 

$

1,156

 

 

Depreciation and amortization expense was $0.1 million for each of the three months ended March 31, 2024 and 2023.

Other Assets

Other assets consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Investment in Enumera

 

$

 

 

$

3,000

 

Other

 

 

293

 

 

 

302

 

Total

 

$

293

 

 

$

3,302

 

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrual for reimbursement claims and legal settlements, current (1)

 

$

3,572

 

 

$

6,337

 

Commissions and bonuses

 

 

3,146

 

 

 

2,469

 

Vacation and payroll benefits

 

 

1,442

 

 

 

1,367

 

Accrued professional services (2)

 

 

4,123

 

 

 

2,914

 

Accrued interest

 

 

1,058

 

 

 

173

 

Lease liabilities, current

 

 

920

 

 

 

896

 

Insurance financing

 

 

606

 

 

 

401

 

Contract liabilities

 

 

 

 

 

542

 

Other (3)

 

 

2,117

 

 

 

2,220

 

Total

 

$

16,984

 

 

$

17,319

 

 

(1) Laboratory Operations have been discontinued; amounts related to revenue reserves generated from the Laboratory Operations remain on the balance sheet.

(2) The Company has entered into an alternative fee arrangement with a professional services firm related to certain litigation matters; amounts related to the arrangement are included in accrued professional services. Depending on the ultimate outcome of such litigation, the fees could be materially higher than what has been accrued.

(3) Included in this amount are contracts that the Company is responsible for that were expensed in discontinued operations in 2021.

8


 

Other Long-term Liabilities

Other long-term liabilities consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Lease liabilities, net of current portion

 

 

583

 

 

 

818

 

Other (1)

 

 

2,000

 

 

 

2,211

 

Total

 

$

2,583

 

 

$

3,029

 

 

(1) Included in this amount are contracts that the Company is responsible for that were expensed in discontinued operations in 2021.

5. Fair Value Measurements

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 authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The three-level hierarchy for the inputs to valuation techniques is summarized as follows:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access.

Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data, such as quoted prices, interest rates, and yield curves.

Level 3 - Inputs that are unobservable data points that are not corroborated by market data.

There were no significant transfers between these fair value measurement classifications during the three months ended March 31, 2024 and 2023.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2024

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

 

 

$

 

 

$

26,210

 

Warrant liabilities

 

$

 

 

$

 

 

$

27,208

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

 

 

$

 

 

$

22,899

 

Warrant liabilities

 

$

 

 

$

 

 

$

40,834

 

The Company issued 2028 Convertible Notes (see Note 6) that contain conversion features that are required to be bifurcated and recorded as embedded derivative liabilities in the consolidated balance sheet. The Company utilized a binomial pricing model to determine the fair value of the conversion features, which utilizes significant unobservable inputs. The fair value of the embedded derivatives as of March 31, 2024 and December 31, 2023 were estimated using a binomial pricing model with the following inputs and assumptions:

 

 

 

March 31,
2024

 

December 31,
2023

Risk-free interest rate

 

4.2%

 

3.8% - 4.3%

Expected volatility

 

94.1%

 

84.3% - 95.7%

Stock price

 

$1.10

 

$1.35

Discount Rate

 

32.1%

 

28.7% - 28.9%

The Company’s Level 3 liabilities consist of the warrant liabilities resulting from equity financings (see Note 9) and the Convertible Note exchanges (see Note 6). The Company uses the Black-Scholes Model to value the warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, and volatility. The significant unobservable input for the Level 3 warrant liabilities includes volatility. Given the limited period of time the Company’s stock has been traded in an active market, the expected volatility is estimated by taking the

9


 

average historical price volatility for industry peers, consisting of several public companies in the Company’s industry that are similar in size, stage, or financial leverage, over a period of time commensurate to the expected term of the warrants. At March 31, 2024 and December 31, 2023, the fair value of the warrant liabilities were estimated using the Black-Scholes Model with the following inputs and assumptions:

 

 

 

March 31,
2024

 

December 31,
2023

Risk-free interest rate

 

4.2% - 4.5%

 

3.8% - 4.1%

Expected volatility

 

89.9% - 95.2%

 

95.6% - 101.8%

Stock price

 

$1.10

 

$1.35

Expected life (years)

 

2.2 - 4.9

 

2.5 - 5.0

A summary of the changes in the Level 3 classified liabilities is presented below (in thousands):

 

 

 

Warrant Liabilities

 

 

Derivative Liabilities

 

Balance at December 31, 2023

 

$

40,834

 

 

$

22,899

 

Recognition of warrant liabilities

 

 

1,351

 

 

 

 

Reclassification of warrant liabilities to equity

 

 

(1,062

)

 

 

 

Expired warrants

 

 

(1,460

)

 

 

 

Recognition of derivative liabilities

 

 

 

 

 

3,729

 

Change in fair value

 

 

(12,455

)

 

 

(418

)

Balance at March 31, 2024

 

$

27,208

 

 

$

26,210

 

 

6. Convertible Notes

The following table summarizes significant terms of the Company's Convertible Notes at March 31, 2024 (in thousands):

 

 

 

March 31, 2024

 

 

Face Value

 

 

Carrying Value

 

 

Fair Value (1)

 

 

Stated Interest Rate

 

Effective Interest Rate

2028 Convertible Notes

 

$

30,138

 

 

$

18,709

 

 

$

14,933

 

 

11-13%

 

18.4%

Related Party 2028 Convertible Notes

 

$

17,383

 

 

$

22,048

 

 

$

8,613

 

 

11-13%

 

3.0%

2025 Convertible Notes

 

$

4,600

 

 

$

4,497

 

 

$

2,690

 

 

7.25%

 

8.7%

 

(1) To estimate the fair value of the 2028 Convertible Notes, the Company used a binomial pricing model. Including the derivative liabilities of $26.2 million, the 2028 Convertible Notes fair value using the with method is $49.8 million. To estimate the fair value of the 2025 Convertible Notes, the Company used unadjusted quoted prices in the active market obtained from third-party pricing services.

The following table summarizes significant terms of the Company’s Convertible Notes at December 31, 2023 (in thousands):

 

 

 

December 31, 2023

 

 

Face Value

 

 

Carrying Value

 

 

Fair Value (2)

 

 

Stated Interest Rate

 

Effective Interest Rate

2028 Convertible Notes

 

$

23,500

 

 

$

14,591

 

 

$

14,846

 

 

11-13%

 

48.9%

Related Party 2028 Convertible Notes

 

$

17,383

 

 

$

21,155

 

 

$

10,982

 

 

11-13%

 

(22.0)%

2025 Convertible Notes

 

$

10,225

 

 

$

9,966

 

 

$

5,984

 

 

7.25%

 

8.7%

 

(2) To estimate the fair value of the 2028 Convertible Notes, the Company used a binomial pricing model. Including the derivative liabilities of $22.9 million, the 2028 Convertible Notes fair value using the with method is $48.7 million. To estimate the fair value of the 2025 Convertible Notes, the Company used unadjusted quoted prices in the active market obtained from third-party pricing services.

The carrying value of the Convertible Notes does not approximate their fair values because the carrying values reflect the balance of unamortized discount related to the derivative liabilities associated with the value of the conversion features assessed at inception. The Company amortizes the debt discount using the effective interest method over the term of the Convertible Notes. As of March 31, 2024 and December 31, 2023, the unamortized debt discount on the 2025 Convertible Notes was $0.1 million and $0.3 million, respectively. The amortization of the debt discount was less than $0.1 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively, and is included in interest expense, net in the consolidated statements of operations. As of March 31, 2024 and December 31, 2023, the unamortized debt discount on the 2028 Convertible Notes was $21.1 million and $19.0 million, respectively. The amortization of the debt discount was $1.9 million for the three months ended March 31, 2024 and is included in interest expense, net in the consolidated statements of operations.

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2025 Convertible Notes

In December 2020, the Company issued a total of $168.5 million principal amount of 2025 Convertible Notes in a private offering of the Convertible Notes pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The 2025 Convertible Notes were issued pursuant to, and are governed by, an indenture, dated as of December 7, 2020, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “2025 Convertible Notes Indenture”). The 2025 Convertible Notes are due on December 1, 2025, unless earlier repurchased, redeemed or converted, and accrue interest at a rate per annum equal to 7.25% payable semi-annually in arrears on June 1 and December 1 of each year, with the initial payment on June 1, 2021. The Company recognized interest expense on the 2025 Convertible Notes of $0.2 million and $2.4 million for the three months ended March 31, 2024 and 2023, respectively.

The 2025 Convertible Notes are the Company's senior, unsecured obligations and are (i) equal in right of payment with the Company's existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated to the 2025 Convertible Notes; (iii) effectively subordinated to the Company's existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company's subsidiaries.

At any time, noteholders may convert their 2025 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate. The initial conversion rate is 11.1204 shares of common stock per $1,000 principal amount of 2025 Convertible Notes, which represents an initial conversion price of approximately $89.92 per share of common stock. Noteholders that converted their 2025 Convertible Notes before December 1, 2022 were, in certain circumstances, entitled to an additional cash payment representing the present value of any remaining interest payments on the 2025 Convertible Notes through December 1, 2022. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain dilutive events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2025 Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The 2025 Convertible Notes are redeemable, in whole and not in part, at the Company’s option at any time on or after December 1, 2023, at a cash redemption price equal to the principal amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling the 2025 Convertible Notes will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time.

The 2025 Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the 2025 Convertible Notes Indenture). As of both March 31, 2024 and December 31, 2023, the Company was in compliance with all such covenants.

The 2025 Convertible Notes had a conversion option which was required to be bifurcated upon issuance and recorded separately as an embedded derivative remeasured at fair value each reporting period with changes in fair value recorded in the consolidated statement of operations. As of December 31, 2022, the conversion option expired and there was no longer a derivative liability.

Note Exchanges

In September 2023, certain related party holders of 2025 Convertible Notes exchanged an aggregate of $50.0 million principal amount for a combination of 9,235,281 shares of the Company's common stock, 7,399,226 pre-funded warrants at an exercise price of $0.001 per share and warrants to purchase up to 16,634,507 shares of common stock at an exercise price of $3.01 per share. The warrants are exercisable on or after September 18, 2023 until September 18, 2026 and the pre-funded warrants have no expiration date. The pre-funded warrants and the warrants (together, the "September 2023 Warrants") are subject to certain exercise limitations, including a limitation on the ability to exercise if the holder’s beneficial ownership would exceed 49.9%. As the 2025 Convertible Notes were exchanged for an amount over the fair value of shares issuable under the original conversion terms, the Company recorded an inducement loss of $53.2 million, included in other income (expense), net in the condensed consolidated statements of operations. Pursuant to Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging ("ASC") the Company deemed the September 2023 Warrants to be classified as a liability at fair value initially with subsequent changes in fair value recorded in earnings. The September 2023 Warrants were recorded at a fair value of $35.1 million determined using the Black-Scholes Model.

11


 

In December 2023, the Company entered into exchange agreements with certain holders of 2025 Convertible Notes to exchange an aggregate of $72.5 million principal amount for a combination of (i) $23.9 million in principal amount of 2028 Convertible Notes (ii) 625,000 shares of the Company's common stock, (iii) warrants to purchase 5,039,236 shares of common stock (the “Exchange Warrants”), and (iv) accrued and unpaid interest on the 2025 Convertible Notes. The Company also entered into note purchase agreements with certain investors (the "Purchasers") to purchase $17.0 million in principal amount of additional 2028 Convertible Notes from the Company for cash at par value. The Purchasers were granted warrants to purchase 5,084,613 shares of common stock (the “Additional Warrants”) and certain Purchasers were also granted warrants to purchase 7,352,941 shares of common stock (the “Commitment Warrants”). In connection with these agreements, the Company has agreed to allow certain of the parties to designate one observer to the Company's Board of Directors (the "Board").

The Exchange Warrants have an exercise price of $5.50 per share, the Commitment Warrants have an exercise price of $1.36 per share and the Additional Warrants have an exercise price of $5.00 per share. Each of the Exchange Warrants, the Commitment Warrants and the Additional Warrants (together the "December 2023 Warrants") are subject to certain exercise limitations, including a limitation on the ability to exercise if the holder’s beneficial ownership of common stock would exceed specified levels and are exercisable at any time on or after June 19, 2024. Pursuant to ASC 815, the December 2023 Warrants are classified as a liability at fair value initially with subsequent changes in fair value recorded in earnings. In connection with the March 2024 Offering (as defined below), 2,322,059 of the December 2023 Warrants were amended to (i) lower the exercise price to $1.10 per share, (ii) provide that the warrants will not be exercisable until the Stockholder Approval Date (as defined below) and (iii) extend the original expiration date to be five years from the Stockholder Approval Date.

The December note exchange with one holder of 2025 Convertible Notes constitutes a troubled debt restructuring ("TDR") under ASC Topic 470, Debt ("ACS 470") because the Company is experiencing financial difficulty and a concession has been granted by the holder. As the holder is a related party, the Company recorded the restructuring gain as a capital contribution resulting in $25.5 million of restructuring gain recorded within additional paid-in-capital as of December 31, 2023. Following the TDR guidance under ASC 470, future interest payments of approximately $11.7 million were also included in the carrying value of the 2028 Convertible Notes. The December note exchange with the other holders of 2025 Convertible Notes is considered a debt extinguishment under ASC 470. As a result, the Company recorded a loss on debt extinguishment of $6.4 million, which is the difference between the fair value of the 2028 Convertible Notes combined with the fair value of the warrants, derivative liabilities and common stock and the net carrying value of the 2025 Convertible Notes during the fourth quarter of 2023.

On March 8, 2024 the Company entered into an exchange agreement with a holder of the Company’s 2025 Convertible Notes, pursuant to which the Company agreed to acquire an aggregate of $5.6 million of 2025 Convertible Notes from the holder in exchange for (i) $3.8 million in aggregate principal amount of 2028 Convertible Notes, and (ii) accrued and unpaid interest on the 2025 Convertible Notes exchanged. The Company also entered into a note purchase agreement with the investor pursuant to which the investor agreed to purchase $2.8 million in aggregate principal amount of 2028 Convertible Notes from the Company for cash at par value. Additionally, as part of the agreements, the investor was granted warrants to purchase 2,000,000 shares of common stock. The warrants have an exercise price of $2.75 per share, are exercisable at any time on or after September 12, 2024 and expire on March 12, 2029. The warrants are subject to certain exercise limitations, including a limitation on the ability to exercise if the holder’s beneficial ownership of common stock would exceed specified levels. Pursuant to ASC 815, the warrants are classified as a liability at fair value initially with subsequent changes in fair value recorded in earnings. The exchange is considered a debt extinguishment under ASC 470. As a result, the Company recorded a loss on debt extinguishment of $0.2 million, which is the difference between the fair value of the 2028 Convertible Notes combined with the fair value of the warrants, derivative liabilities and the net carrying value of the 2025 Convertible Notes.

2028 Convertible Notes

The 2028 Convertible Notes were issued pursuant to, and are governed by, an indenture (the “2028 Convertible Notes Indenture”), dated December 19, 2023, by and between the Company and GLAS Trust Company LLC, as trustee. The 2028 Convertible Notes will mature on the earlier of December 19, 2028 and the date that is 90 days prior to the maturity of the Convertible Notes solely to the extent there are Convertible Notes outstanding in a principal amount equal to or greater than $5.0 million as of such date, unless earlier repurchased, redeemed or converted. In March 2024 the maturity date of the Convertible Notes was extended to December 19, 2028. The Notes will accrue interest at a rate of 11.0% per annum in the case of cash payment and 13.0% in the case of blended payments or payments-in-kind, payable semi-annually in arrears on June 1 and December 1 of each year, with the initial payment on June 1, 2024. The Company recognized interest expense on the 2028 Convertible Notes of $0.7 million for the three months ended March 31, 2024.

The 2028 Convertible Notes are the Company’s senior secured obligations, and are secured by substantially all of the Company’s and its subsidiaries’ assets. The 2028 Convertible Notes are (i) senior in right of payment to the Company’s existing and

12


 

future senior, unsecured indebtedness to the extent of the value of the collateral; and (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2028 Convertible Notes.

At any time, noteholders may convert their 2028 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate. The initial conversion rate is 641.02564 shares of common stock per $1,000 principal amount of 2028 Convertible Notes, which represents an initial conversion price of approximately $1.56 per share of common stock. Noteholders that convert their 2028 Convertible Notes will be entitled to an additional premium payment representing the amount of certain of the remaining interest payments on the 2028 Convertible Notes as specified in the 2028 Convertible Notes Indenture. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

The 2028 Convertible Notes are redeemable, in whole and not in part, at the Company’s option at any time on or after December 19, 2024, and in some circumstances prior to that date, at a cash redemption price equal to the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 150% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice.

If certain corporate events that constitute a “Fundamental Change” (as defined in the 2028 Convertible Notes Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the 2028 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The 2028 Convertible Notes Indenture contains covenants restricting the Company’s ability to incur indebtedness, incur liens, make restricted payments, make asset sales and engage in transactions with affiliates, subject to certain baskets. The 2028 Convertible Notes Indenture requires the Company to maintain minimum liquidity of $4.0 million and to add future assets to the collateral under the Security Agreement, dated as of December 19, 2023, among the Company, the Guarantors party thereto and GLAS Trust Company LLC, as collateral agent (the "Security Agreement") and to add future subsidiaries as guarantors under the Security Agreement. The 2028 Convertible Notes have customary provision relating to the occurrence of “Events of Default” (as defined in the 2028 Convertible Notes Indenture). As of both March 31, 2024 and December 31, 2023, the Company was in compliance with all such covenants.

The 2028 Convertible Notes have several conversion features which are required to be bifurcated upon issuance and periodically remeasured to fair value separately as an embedded derivative. The conversion features were bifurcated and recorded separately as an embedded derivative remeasured at fair value each reporting period with changes in fair value recorded in other income (expense), net in the consolidated statement of operations.

7. Related Party Transactions

As of March 31, 2024 and December 31, 2023, Athyrium Capital Management, LP (“Athyrium”) held $17.4 million aggregate principal amount of 2028 Convertible Notes (see Note 6). Athyrium also held 10,929,763 shares, or 35.9%, of the Company's common stock outstanding, 7,399,226 pre-funded warrants and warrants to purchase up to 24,583,231 shares of common stock at exercise prices ranging from of $3.01 to $8.22 as of March 31, 2024.

In November 2022, the Company entered into a securities purchase agreement with an institutional investor. Following this transaction, the institutional investor became a related party due to greater than 5% ownership. On January 12, 2023, the Company issued warrants to purchase 90,000 shares of common stock to the institutional investor in exchange for the investor’s agreement to waive the lockup provisions contained in the November 2022 securities purchase agreement. As of March 31, 2023 this institutional investor held less than 5% of the Company's outstanding common stock and is no longer considered a related party.

8. Commitments and Contingencies

Operating Leases

The Company has entered into various noncancelable operating lease agreements, primarily for office space, laboratory space, and equipment. In March 2023, the Company signed an amended lease agreement for certain office space in San Diego, California to decrease the office space and extend the term to June 2025. Cash paid for operating leases was $0.3 million and $0.4 million for the

13


 

three months ended March 31, 2024 and 2023, respectively.

The components of lease expense were as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating lease costs

 

$

235

 

 

$

384

 

Supplemental weighted-average information related to operating leases is as follows:

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Weighted-average remaining lease term (years)

 

 

2.0

 

 

 

2.5

 

Weighted-average discount rate

 

 

9.6

%

 

 

9.4

%

As of March 31, 2024, future lease payments under the non-cancelable operating leases were as follows (in thousands):

 

Year ending December 31,

 

Minimum
Operating
Lease
Payments

 

2024 (remaining)

 

$

771

 

2025

 

 

590

 

2026

 

 

264

 

2027

 

 

18

 

2028 and thereafter

 

 

 

Total minimum lease payments

 

 

1,643

 

Less: interest

 

 

(140

)

Present value of lease liabilities

 

$

1,503

 

Contingencies

The Company, in the ordinary course of its business, can be involved in lawsuits, threats of litigation, and audit and investigative demands from third parties. While management is unable to predict the exact outcome of such matters, it is management’s current belief that any potential liabilities of Biora resulting from these contingencies, individually or in the aggregate, could have a material impact on the Company’s financial position and results of operations.

The regulations governing government reimbursement programs (e.g., Medicaid, Tricare, and Medicare) and commercial payor reimbursement programs are complex and may be subject to interpretation. As a former provider of services to patients covered under government and commercial payor programs, post payment review audits, and other forms of reviews and investigations are routine. The Company believes it complied in all material respects with the statutes, regulations, and other requirements applicable to its former Laboratory Operations.

Government Investigations Settlements

In April 2018, the Company received a civil investigati