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, 2023

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)

 

(833) 727-2841

(Registrant’s telephone number, including area code)

 

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, 2023, the registrant had 11,859,095 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

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

28

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

29

 

 

 

 

 

Item 1A.

 

Risk Factors

 

31

 

 

 

 

 

Item 6.

 

Exhibits

 

64

 

 

 

 

Signatures

 

65

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, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

30,463

 

 

$

30,486

 

Income tax receivable

 

 

828

 

 

 

828

 

Prepaid expenses and other current assets

 

 

3,368

 

 

 

4,199

 

Current assets of disposal group held for sale

 

 

2,509

 

 

 

2,603

 

Total current assets

 

 

37,168

 

 

 

38,116

 

Property and equipment, net

 

 

1,498

 

 

 

1,654

 

Right-of-use assets

 

 

2,246

 

 

 

1,482

 

Other assets

 

 

6,259

 

 

 

6,201

 

Goodwill

 

 

6,072

 

 

 

6,072

 

Total assets

 

$

53,243

 

 

$

53,525

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,422

 

 

$

3,606

 

Accrued expenses and other current liabilities

 

 

18,987

 

 

 

16,161

 

Warrant liabilities

 

 

2,674

 

 

 

3,538

 

Total current liabilities

 

 

25,083

 

 

 

23,305

 

Convertible notes, net of unamortized discount of $4,540 and $4,914 as of March 31, 2023
   and December 31, 2022, respectively

 

 

128,185

 

 

 

127,811

 

Other long-term liabilities

 

 

4,973

 

 

 

4,696

 

Total liabilities

 

$

158,241

 

 

$

155,812

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock – $0.001 par value; 164,000,000 shares authorized; 12,098,274 and 9,098,844
   shares issued as of March 31, 2023 and December 31, 2022, respectively;
11,858,990 and
   
8,928,498 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

11

 

 

 

8

 

Additional paid-in capital

 

 

758,353

 

 

 

743,626

 

Accumulated deficit

 

 

(844,284

)

 

 

(826,843

)

Treasury stock – at cost; 239,284 and 170,346 shares as of March 31, 2023 and
   December 31, 2022, respectively

 

 

(19,078

)

 

 

(19,078

)

Total stockholders' deficit

 

 

(104,998

)

 

 

(102,287

)

Total liabilities and stockholders' deficit

 

$

53,243

 

 

$

53,525

 

 

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,

 

 

 

 

2023

 

 

2022

 

 

Revenues

 

$

2

 

 

$

107

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

7,190

 

 

 

6,558

 

 

Selling, general and administrative

 

 

8,356

 

 

 

13,457

 

 

Total operating expenses

 

 

15,546

 

 

 

20,015

 

 

Loss from operations

 

 

(15,544

)

 

 

(19,908

)

 

Interest expense, net

 

 

(2,680

)

 

 

(2,760

)

 

Gain on warrant liabilities

 

 

864

 

 

 

8,989

 

 

Other expense, net

 

 

(81

)

 

 

(811

)

 

Loss from continuing operations

 

 

(17,441

)

 

 

(14,490

)

 

Gain from discontinued operations

 

 

 

 

 

682

 

 

Net loss

 

 

(17,441

)

 

 

(13,808

)

 

Net loss per share from continuing operations, basic and diluted

 

$

(1.59

)

 

$

(1.97

)

 

Net gain per share from discontinued operations, basic and diluted

 

$

 

 

$

0.09

 

 

Net loss per share, basic and diluted

 

$

(1.59

)

 

$

(1.88

)

 

Weighted average shares outstanding, basic and diluted

 

 

10,970,583

 

 

 

7,328,067

 

 

 

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, 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

)

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Deficit

 

Balance at December 31, 2021

 

 

7,429,458

 

 

$

6

 

 

$

722,782

 

 

$

(788,686

)

 

 

(154,569

)

 

$

(19,078

)

 

$

(84,976

)

Issuance of common stock, net

 

 

85,213

 

 

 

 

 

 

3,626

 

 

 

 

 

 

 

 

 

 

 

 

3,626

 

Issuance of common stock upon vesting of restricted stock units

 

 

11,520

 

 

 

 

 

 

(80

)

 

 

 

 

 

(3,723

)

 

 

 

 

 

(80

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,053

 

 

 

 

 

 

 

 

 

 

 

 

2,053

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,808

)

 

 

 

 

 

 

 

 

(13,808

)

Balance at March 31, 2022

 

 

7,526,191

 

 

$

6

 

 

$

728,381

 

 

$

(802,494

)

 

 

(158,292

)

 

$

(19,078

)

 

$

(93,185

)

 

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,

 

 

 

2023

 

 

2022

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(17,441

)

 

$

(13,808

)

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

 

 

 

 

 

 

Gain from discontinued operations

 

 

 

 

 

(682

)

Non-cash revenue reserve

 

 

 

 

 

96

 

Depreciation and amortization

 

 

147

 

 

 

322

 

Stock-based compensation expense

 

 

2,384

 

 

 

2,053

 

Amortization of debt discount and non-cash interest

 

 

374

 

 

 

343

 

Loss on disposal of property and equipment

 

 

9

 

 

 

254

 

Impairment of property and equipment

 

 

100

 

 

 

545

 

Change in fair value of warrant liabilities

 

 

(864

)

 

 

(8,989

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

772

 

 

 

2,060

 

Accounts payable

 

 

(184

)

 

 

(3,377

)

Accrued expenses and other liabilities

 

 

3,057

 

 

 

(3,656

)

Other long-term liabilities

 

 

(452

)

 

 

(451

)

Net cash used in operating activities - continuing operations

 

 

(12,098

)

 

 

(25,290

)

Net cash provided by operating activities - discontinued operations

 

 

 

 

 

1,335

 

Net cash used in operating activities

 

 

(12,098

)

 

 

(23,955

)

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(16

)

 

 

(342

)

Proceeds from sale of property and equipment

 

 

10

 

 

 

 

Net cash used in investing activities

 

 

(6

)

 

 

(342

)

Financing Activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

12,883

 

 

 

3,626

 

Payment of offering costs

 

 

(359

)

 

 

 

Payments for financing of insurance premiums

 

 

(443

)

 

 

(480

)

Principal payments on capital lease obligations

 

 

 

 

 

(12

)

Net cash provided by financing activities

 

 

12,081

 

 

 

3,134

 

Net decrease in cash and cash equivalents

 

 

(23

)

 

 

(21,163

)

Cash and cash equivalents at beginning of period

 

 

30,486

 

 

 

88,397

 

Cash and cash equivalents at end of period

 

$

30,463

 

 

$

67,234

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

 

 

$

1

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

Lease assets obtained in exchange for operating lease liabilities

 

$

1,133

 

 

$

2,962

 

Purchases of property and equipment in accounts payable

 

$

 

 

$

47

 

 

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 biotechnology company developing oral biotherapeutics that could enable new treatment approaches in the delivery of therapeutics. The Company's therapeutics pipeline includes two therapeutic delivery platforms:

NAVICAPTM Targeted Oral Delivery Platform: Targeted oral 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: Systemic oral delivery of biotherapeutics 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. (“Progenity”), 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.

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 Progenity genetics laboratory and in December 2021, the Company sold Avero, together referred to as the Laboratory Operations. The Company has reported all revenues and expenses associated with its Laboratory Operations as discontinued operations, see Note 3 for additional information. In April 2022, the Company announced that it would rebrand to better reflect the current focus on its therapeutics pipeline, and changed its name to Biora Therapeutics, Inc.

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, 2023, the Company had cash and cash equivalents of $30.5 million and an accumulated deficit of $844.3 million. For the three months ended March 31, 2023, the Company reported a net loss of $17.4 million and cash used in operating activities of $12.1 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, 2023, the Company had $128.2 million of convertible senior notes, net ("Convertible Notes") outstanding (see Note 7). While the Company has greatly reduced its cash burn following the Strategic Transformation, 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, 2023, 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, 2023.

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, 2022, as filed with the Securities and Exchange Commission, (“SEC”), from which management derived the Company’s condensed consolidated balance sheet as of December 31, 2022.

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, 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, 2023, any other interim periods, or any future year or period. The balance sheet as of December 31, 2022 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, accrual for reimbursement claims and settlements, the valuation of warrant liabilities, the valuation of assets held for sale, 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.

Recent Accounting Pronouncements Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses, which requires the measurement of expected credit losses for financial instruments carried at amortized cost, such as accounts receivable, held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financing Instruments–Credit Losses, which included an amendment of the effective date. The Company adopted this standard on January 1, 2023, and it did not have a material impact on the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued 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 is currently evaluating the impact the adoption of this standard may have on its consolidated financial statements.

6


 

3. Strategic Transformation

Assets Held for Sale and Discontinued Operations

In June 2021, the Company announced its Strategic Transformation to reallocate resources to research and development to better position the business for future growth. The plan included the closure of the Company's genetics laboratory in Ann Arbor, Michigan and the divestiture of Avero. This plan represented a strategic business shift having a major effect on the Company's operations and financial results. The Company classified the results of its Laboratory Operations as discontinued operations in its condensed consolidated statements of operations and consolidated statements of cash flows. Additionally, the remaining assets have been reported as assets held for sale in the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The following table presents the combined results of discontinued operations of the Laboratory Operations (in thousands) for the three months ended March 31, 2022. There was no gain or loss from discontinued operations for the three months ended March 31, 2023:

 

 

Three Months Ended
March 31,

 

 

 

2022

 

Revenues

 

$

1,268

 

Operating expenses:

 

 

 

Selling, general and administrative

 

 

586

 

Total operating expenses

 

 

586

 

Net gain from discontinued operations

 

$

682

 

The following table presents the carrying amounts of the remaining assets held for sale related to the Laboratory Operations as of March 31, 2023 and December 31, 2022 (in thousands):

 

 

March 31,
2023

 

 

December 31,
2022

 

 

 

 

 

 

 

 

Current assets of disposal group held for sale

 

 

 

 

 

 

Property and equipment, net

 

 

2,509

 

 

 

2,603

 

Total current assets of disposal group held for sale (1)

 

$

2,509

 

 

$

2,603

 

 

(1) The remaining assets of the Laboratory Operations are classified as held for sale and are classified as current in the unaudited condensed consolidated balance sheet at March 31, 2023 and December 31, 2022, because they are expected to be sold within one year.

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. As of the transaction date, the Company received 25% minority ownership, 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 investment is included in other assets in the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022. No impairment was recorded as of March 31, 2023 or December 31, 2022.

Northwest License Agreement

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.

7


 

4. Revenues

The Company's current revenue is related to license and collaboration agreements. Revenues historically were derived from contracts with healthcare insurers, government payors, laboratory partners and patients related to tests provided to patients. The Company evaluated its contracts and identified a single performance obligation, the delivery of a test result. The Company satisfied its performance obligation at a point in time upon the delivery of the test result, at which point the Company billed for its products. The amount of revenue recognized reflected the transaction price and considered the effects of variable consideration. All of the historical test revenue is part of the Company's Laboratory Operations and has been included in discontinued operations in the condensed consolidated statements of operations.

The Company had established an accrual for refunds of payments previously made by healthcare insurers based on historical experience and executed settlement agreements with healthcare insurers. Any refunds were accounted for as reductions in revenues in the statement of operations as an element of variable consideration.

The Company periodically updated its estimate of the variable consideration recognized for previously delivered performance obligations. These updates resulted in an additional $1.4 million of revenue for the three months ended March 31, 2022. These amounts included (i) adjustments for actual collections versus estimated variable consideration as of the beginning of the reporting period and (ii) cash collections and the related recognition of revenue in the current period for tests delivered in prior periods due to the release of the constraint on variable consideration, offset by (iii) reductions in revenue for the accrual for reimbursement claims and settlements described in Note 9.

5. Balance Sheet Components

Prepaid Expenses and Other Current Assets

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

 

 

 

March 31,
2023

 

 

December 31,
2022

 

Prepaid expenses

 

$

3,059

 

 

$

3,634

 

Other current assets

 

 

309

 

 

 

565

 

Total

 

$

3,368

 

 

$

4,199

 

 

Property and Equipment, Net

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

 

 

March 31,
2023

 

 

December 31,
2022

 

Computers and software

 

$

1,421

 

 

$

2,715

 

Building and leasehold improvements

 

 

823

 

 

 

750

 

Laboratory equipment

 

 

648

 

 

 

958

 

Furniture, fixtures, and office equipment

 

 

889

 

 

 

1,138

 

Construction in progress

 

 

9

 

 

 

92

 

Total property and equipment

 

 

3,790

 

 

 

5,653

 

Less accumulated depreciation and amortization

 

 

(2,292

)

 

 

(3,999

)

Property and equipment, net

 

$

1,498

 

 

$

1,654

 

 

Depreciation expense was $0.1 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

Other Assets

Other assets consisted of the following (in thousands):

 

 

 

March 31,
2023

 

 

December 31,
2022

 

Investment in Enumera

 

$

6,000

 

 

$

6,000

 

Other

 

 

259

 

 

 

201

 

Total

 

$

6,259

 

 

$

6,201

 

 

8


 

Accrued Expenses and Other Current Liabilities

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

 

 

 

March 31,
2023

 

 

December 31,
2022

 

Accrual for reimbursement claims and settlements, current (1)

 

$

8,472

 

 

$

8,372

 

Commissions and bonuses

 

 

700