BIODESIX INC

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (Form 10-K) and the Condensed Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, included in Part I, Item 1 of this Form 10-Q, which provide additional information regarding our financial position, results of operations and cash flows. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties, including but not limited to those set forth under the caption “Special Note Regarding Forward-Looking Statements” and Item 1A. “Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those discussed in our other filings with the Securities and Exchange Commission (SEC), including the risks described in Item 1A. “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on March 1, 2024.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (Form 10-K) and the Condensed Financial Statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, included in Part I, Item 1 of this Form 10-Q, which provide additional information regarding our financial position, results of operations and cash flows. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties, including but not limited to those set forth under the caption “Special Note Regarding Forward-Looking Statements” and Item 1A. “Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those discussed in our other filings with the Securities and Exchange Commission (SEC), including the risks described in Item 1A. “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on March 1, 2024.

Previous wording

The following MD&A discussion is provided to supplement the Condensed Financial Statements as of March 31, 2024 and 2023 and for the three months then ended included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We intend for this discussion to provide you with information that will assist you in understanding our financial statements, the changes in key items in those financial statements from period to period, and the primary factors that accounted for those changes.

Current wording

The following MD&A discussion is provided to supplement the Condensed Financial Statements as of June 30, 2024 and 2023 and for the three and six months then ended included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We intend for this discussion to provide you with information that will assist you in understanding our financial statements, the changes in key items in those financial statements from period to period, and the primary factors that accounted for those changes.

Previous wording

Data for the three months ended March 31, 2024 and 2023 has been derived from our unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Data for the three and six months ended June 30, 2024 and 2023 has been derived from our unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

We are a leading diagnostic solutions company with a primary focus in lung disease. By combining a multi-omic approach with a holistic view of the patient’s disease state, we believe our solutions provide physicians with greater insights to help personalize their patient’s care and meaningfully improve disease detection, evaluation, and treatment. Our unique approach to precision medicine provides timely and actionable clinical information, which we believe helps improve overall patient outcomes and lowers the overall healthcare cost by reducing the use of ineffective and unnecessary treatments and procedures. In addition to our diagnostic tests, we provide biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics. We also recognize revenue from other services, including amounts derived from licensing our technologies.

Current wording

We are a leading diagnostic solutions company with a focus in lung disease. By combining a multi-omic approach with a holistic view of the patient’s disease state, we believe our solutions provide physicians with greater insights to help personalize their patient’s care and meaningfully improve disease detection, evaluation, and treatment. Our unique approach to precision medicine provides timely and actionable clinical information, which we believe helps improve overall patient outcomes and lowers the overall healthcare cost by reducing the use of ineffective and unnecessary treatments and procedures. In addition to our diagnostic tests, we provide biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics. We also recognize revenue from other services, including amounts derived from licensing our technologies.

Previous wording

Our core belief is that no single technology will answer all clinical questions that we encounter. Therefore, we employ multiple technologies, including genomics, transcriptomics, proteomics, and radiomics, and AI enabled informatics to discover innovative diagnostic tests for potential clinical use. Our multi-omic approach is designed to enable us to discover diagnostic tests that answer critical clinical questions faced by physicians, researchers, and biopharmaceutical companies.

Current wording

Our core belief is that no single technology will answer all clinical questions that we encounter. Therefore, we employ multiple technologies, including genomics, transcriptomics, proteomics, radiomics, and AI enabled informatics to discover innovative diagnostic tests for potential clinical use. Our multi-omic approach is designed to enable us to discover diagnostic tests that answer critical clinical questions faced by physicians, researchers, and biopharmaceutical companies.

Previous wording

We continuously incorporate new market insights and patient data to enhance our platform through a data-driven learning loop. We regularly engage with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic treatment landscape to identify additional clinical unmet needs where a diagnostic test could help improve patient care. Additionally, we incorporate clinical and molecular profiling data from our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or other collaborative partnerships, to continue to advance our platform. We have a variety of samples with associated data in our biobank, including tumor profiles and immune profiles, which are used for both internal and external research and development initiatives.

Current wording

We regularly engage with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic treatment landscape to identify additional clinical unmet needs where a diagnostic test could help improve patient care. Additionally, we incorporate clinical and molecular profiling data from our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or other collaborative partnerships, to continue to advance our platform. We have a variety of samples with associated data in our biobank, including tumor profiles and immune profiles, which are used for both internal and external research and development initiatives.

Previous wording

We have commercialized five diagnostic tests for our lung diagnostic business, each of which have Medicare coverage, which are currently available for use by physicians. Our Nodify CDT and Nodify XL2 tests, marketed as Nodify Lung Nodule Risk Assessment testing, assess the risk of lung cancer to help identify the most appropriate treatment pathway. The Nodify CDT and XL2 tests have an established average turnaround time of one and five business days, respectively, from receipt of the blood sample, providing physicians with timely results to guide diagnostic planning. The Nodify Lung Risk Assessment testing has resulted in a change in the calculated risk of malignancy in 80-85% of the cases. We believe we are the only company to offer two commercial blood-based tests to help physicians reclassify risk of malignancy in patients with suspicious lung nodules. Our GeneStrat ddPCR, GeneStrat NGS, and VeriStrat tests, marketed as the IQLung testing strategy, are used following diagnosis of lung cancer to measure the presence of mutations in the tumor and the state of the patient’s immune system to establish the patient’s prognosis and help guide treatment decisions. The GeneStrat targeted tumor profiling test and the VeriStrat immune profiling test have an established turnaround time of two business days. The GeneStrat NGS test is our blood-based NGS test and has an established turnaround time of three business days. The 52-gene panel includes guideline recommended mutations to help physicians treating advanced-stage lung cancer patients identify all four major mutation classes and genes, such as EGFR, ALK, KRAS, MET, NTRK, ERBB2, and others, and delivers them in an expedited timeframe so patient treatment can begin sooner.

Current wording

We have commercialized five diagnostic tests for our lung diagnostic business, each of which have Medicare coverage, which are currently available for use by physicians. Our Nodify CDT and Nodify XL2 tests, marketed as Nodify Lung Nodule Risk Assessment, assess the risk of lung cancer to help identify the most appropriate treatment pathway. The Nodify CDT and XL2 tests have an established average turnaround time of one and five business days, respectively, from receipt of the blood sample, providing physicians with timely results to guide diagnostic planning. The Nodify Lung Nodule Risk Assessment has resulted in a change in the calculated risk of malignancy in 80-85% of the cases. We believe we are the only company to offer two commercial blood-based tests to help physicians reclassify risk of malignancy in patients with suspicious lung nodules. Our GeneStrat ddPCR, GeneStrat NGS, and VeriStrat tests, marketed as the IQLung testing strategy, are used following diagnosis of lung cancer to measure the presence of mutations in the tumor and the state of the patient’s immune system to establish the patient’s prognosis and help guide treatment decisions. The GeneStrat targeted tumor profiling test and the VeriStrat immune profiling test have an established average turnaround time of two business days. The GeneStrat NGS test is our blood-based NGS test and has an established average turnaround time of three business days. The 52-gene panel includes guideline recommended mutations to help physicians treating advanced-stage lung cancer patients identify all four major mutation classes and genes, such as EGFR, ALK, KRAS, MET, NTRK, ERBB2, and others, and delivers them in an expedited timeframe so patient treatment can begin sooner.

Previous wording

In addition to the five diagnostic tests currently on the market, we perform over 30 assays for research use as part of our laboratory services that have been used by over 65 biopharmaceutical companies and academic partners. All of our diagnostic and services testing is performed at one of our two accredited, high-complexity clinical laboratories in Louisville, Colorado and De Soto, Kansas.

Current wording

In addition to the five diagnostic tests currently on the market, we offer over 30 assays for research use as part of our laboratory services which have been used by over 65 biopharmaceutical companies and academic partners. All of our diagnostic and services testing is performed at one of our two accredited, high-complexity clinical laboratories in Louisville, Colorado and De Soto, Kansas.

Previous wording

Since our inception, we have performed over 600,000 clinical diagnostic tests, and continue to generate a large and growing body of clinical evidence consisting of over 300 clinical and scientific peer-reviewed publications, presentations, and abstracts. Through ongoing study of each of our tests, we continue to grow our depth of understanding of disease biology and the broad utility of each of our tests. We believe we are poised for rapid growth by leveraging our scientific development and laboratory operations expertise along with our commercial infrastructure which includes sales, marketing, reimbursement, and regulatory affairs.

Current wording

Since our inception, we have performed over 600,000 clinical diagnostic tests, and continue to generate a large and growing body of clinical evidence consisting of over 300 clinical and scientific peer-reviewed publications, presentations, and abstracts. Through ongoing study of each of our tests, we continue to grow our depth of understanding of disease biology and the broad utility of each of our tests. We believe we are poised for rapid growth by leveraging our scientific and clinical development and laboratory operations expertise along with our commercial infrastructure which includes sales, marketing, reimbursement, and regulatory affairs.

Previous wording

In the United States, we market our tests to clinical customers through our targeted sales organization, which includes sales representatives that are engaged in sales efforts and promotional activities primarily to pulmonologists, oncologists, cancer centers and nodule clinics. We market our tests and services to biopharmaceutical companies globally through our targeted business development team, which promotes the broad utility of our tests and testing capabilities throughout drug development and commercialization which is of value to pharmaceutical companies and their drug-development process.

Current wording

In the United States, we market our tests to clinical customers through our direct sales organization, which includes sales representatives that are engaged in sales efforts and promotional activities primarily to pulmonologists, oncologists, cancer centers and nodule clinics. We market our tests and services to biopharmaceutical companies globally through our targeted business development team, which promotes the broad utility of our tests and testing capabilities throughout drug development and commercialization which is of value to pharmaceutical companies and their drug-development process.

Previous wording

On July 12, 2023, we announced the prospective, real-world ORACLE study (An Observational Registry Study to Evaluate the Performance of the Nodify XL2 Test) achieved the primary endpoint of a statistically significant change in the proportion of benign lung nodules managed by Nodify XL2 experiencing invasive procedures. The ORACLE study showed patients with benign nodules managed with the Nodify XL2 test were 74% less likely to undergo an unnecessary invasive procedure compared to the control group. Additionally, the proportion of patients sent to CT surveillance with malignant nodules did not differ between the Nodify XL2 group and the control group. As of March 31, 2024, all ORACLE participants have completed the study.

Current wording

On July 12, 2023, we announced the prospective, real-world ORACLE study (An Observational Registry Study to Evaluate the Performance of the Nodify XL2 Test) achieved the primary endpoint of a statistically significant change in the proportion of benign lung nodules managed by Nodify XL2 experiencing invasive procedures. The ORACLE study showed patients with benign nodules managed with the Nodify XL2 test were 74% less likely to undergo an unnecessary invasive procedure compared to the control group. Additionally, the proportion of patients sent to CT surveillance with malignant nodules did not differ between the Nodify XL2 group and the control group. The ORACLE study officially closed on May 28, 2024.

Previous wording

First Quarter 2024 Financial and Operational Highlights

Current wording

Second Quarter 2024 Financial and Operational Highlights

Previous wording

Lung Diagnostic revenue of $13.8 million reflected a year-over-year increase of 60% driven primarily by the continued adoption of Nodify Lung Nodule Risk Assessment tests;

Current wording

Lung Diagnostic revenue of $16.5 million reflected a year-over-year increase of 44% driven primarily by the continued adoption of Nodify Lung® nodule risk assessment tests;

Previous wording

Biopharmaceutical Services and other revenue of $1.0 million increased 149% year-over-year, a result of both delivering against our increasing book of contracted business and securing new agreements with both new and existing partners;

Current wording

Biopharmaceutical Services of $1.4 million increased 228% year-over-year, a result of both delivering against the Company’s book of contracted business and securing new agreements;

Previous wording

First quarter 2024 gross profit of $11.6 million, or 79% gross margin compared to 65% gross margin in the comparable prior year period, primarily driven by growth in Lung Diagnostic Testing and optimization of testing workflows that resulted in improvements in costs per test, and increased process efficiencies in our Biopharmaceutical Services business;

Current wording

Second quarter 2024 gross profit of $14.0 million, or 78.4% gross margin compared to 72.7% gross margin in the comparable prior year period, primarily driven by growth in Lung Diagnostic testing and optimization of testing workflows that resulted in improvements in costs per test, and increased process efficiencies in the Company’s Biopharmaceutical Services business;

Previous wording

Operating expenses (excluding direct costs and expenses) of $22.7 million, an increase of approximately $0.4 million, or 2% as compared to the first quarter 2023 (includes non-cash stock compensation expense, depreciation and amortization, and asset impairment of $4.1 million as compared to $3.1 million). This increase is primarily attributable to an increase in depreciation expense related to the leasehold improvements in our new Louisville headquarters and laboratory, increased sales and marketing costs to support lung diagnostic sales growth to enhance product awareness and drive adoption, partially offset by a decrease in research and development costs;

Current wording

Operating expenses (excluding direct costs and expenses) of $22.3 million, an increase of approximately $2.7 million, or 14% as compared to the second quarter 2023 (includes $2.7 million of non-cash stock compensation expense, depreciation and amortization, and asset impairment as compared to $1.9 million). This increase is primarily attributable to an increase in sales and marketing costs to support lung diagnostic sales growth to enhance product awareness and drive adoption, an increase in depreciation expense related to the leasehold improvements in the Company’s new Louisville, Colorado offices and laboratory, partially offset by a decrease in research and development and general and administrative costs;

Previous wording

Cash and cash equivalents of $11.5 million as of March 31, 2024, a decrease of $14.8 million from December 31, 2023;

Current wording

Cash and cash equivalents of $42.2 million as of June 30, 2024, an increase of $30.7 million from March 31, 2024;

Previous wording

Cash and cash equivalents as of March 31, 2024 excludes $55.0 million in gross proceeds raised from an underwritten offering of common stock and concurrent private placement completed on April 5, 2024.

Current wording

Cash and cash equivalents as of June 30, 2024, includes $55.0 million in gross proceeds raised from an oversubscribed and upsized offering of common stock and concurrent private placement completed on April 5, 2024.

Previous wording

Includes the scheduled milestone payment of $3.4 million paid in January 2024 for the acquisition of Integrated Diagnostics in 2018. Payments include required milestone installments plus interest through the date of the payment. Subsequent to the end of the quarter the Company made the scheduled milestone payment of $5.3 million on April 1 and prepaid the July 1,2024 milestone payment of $8.4 million which included interest through the date of payment. The Company has one payment of $6.1 million remaining, which does not accrue interest.

Current wording

Includes the second quarter scheduled milestone payment of $5.3 million and pre-payment of the third quarter $8.4 million scheduled milestone payment paid in April 2024 for the acquisition of Integrated Diagnostics in 2018. The pre-payment of the third quarter milestone resulted in cash savings from interest that was eliminated by the pre-payment. The Company has one final payment of $6.1 million remaining, which does not accrue interest and is expected to be paid at the end of the third quarter 2024.

Previous wording

Research and development expenses consist of costs incurred to develop technology and include salaries, share-based compensation and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services, clinical studies, other outside costs and costs to develop our technology capabilities. Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal costs incurred in connection with the discovery and development of our product candidates.

Current wording

Research and development expenses consist of costs incurred to develop technology and include salaries, share-based compensation and benefits, reagents and supplies used in research and development laboratory work, clinical trials infrastructure expenses, including allocated facility occupancy and information technology costs, contract services, quality and regulatory support, other outside costs and costs to develop our technology capabilities. Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal costs incurred in connection with the discovery and development of our product candidates.

Previous wording

For the three months ended March 31, 2024 and 2023, interest expense consists of cash and non-cash interest from the Perceptive Term Loan Facility and changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the gross margin target in the second quarter 2021. Interest income, which is included in ‘Other income, net’ in the condensed statements of operations consists of income earned on our cash and cash equivalents.

Current wording

For the three and six months ended June 30, 2024 and 2023, interest expense consists of cash and non-cash interest from the Perceptive Term Loan Facility and changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the gross margin target in the second quarter 2021. Interest income, which is included in ‘Other income, net’ in the condensed statements of operations consists of income earned on our cash and cash equivalents.

Previous wording

Diagnostic test revenue increased $5.2 million or 60% for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to an increase of $5.7 million in the Nodify Lung Nodule Risk Assessment testing strategy driven by an increase in tests delivered as our sales efforts continue to focus on Nodify CDT and XL2 tests. This increase was partially offset by a $0.6 million decrease in the IQLung testing strategy. The Company’s diagnostic testing sales efforts continued to gain momentum during the three months ended March 31, 2024 as the number of tests delivered reached the highest in Company history for five consecutive quarters.

Current wording

Diagnostic test revenue increased $5.1 million or 44%, and increased $10.2 million or 51% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increases are primarily due to an increase of $5.3 million and $11.1 million, respectively, in the Nodify Lung Nodule Risk Assessment testing strategy driven by an increase in tests delivered as our sales efforts continue to focus on Nodify CDT and XL2 tests. These increases were partially offset by $0.2 million and $0.8 million decreases, respectively, in the IQLung testing strategy. The Company’s diagnostic testing sales efforts continued to gain momentum during the three and six months ended June 30, 2024 as the number of tests delivered reached the highest in Company history for six consecutive quarters.

Previous wording

Biopharmaceutical Services and other revenue increased $0.6 million or 149% for the three months ended March 31, 2024 compared to the same period in 2023. The increase in revenue for the three months ended March 31, 2024 was primarily a result of delivering against our expanding book of business and securing new agreements.

Current wording

Biopharmaceutical Services and other revenue increased $1.0 million or 228%, and increased $1.6 million or 189% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increases in revenue for the three and six months ended June 30, 2024 was primarily a result of delivering against our expanding book of business and securing new agreements.

Previous wording

Direct costs and expenses related to revenue increased an insignificant amount for the three months ended March 31, 2024 compared to the same period in 2023, despite the increase in Diagnostic and Biopharmaceutical Services testing volume. This is primarily driven by the optimization of testing workflows that resulted in improvements in costs per test.

Current wording

Direct costs and expenses related to revenue increased $0.6 million or 20%, and increased $0.6 million or 10% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023, primarily driven by the increase in testing volume compared to the same periods in 2023, partially offset by the optimization of testing workflows that resulted in improvements in costs per test.

Previous wording

Research and development expenses decreased $1.2 million or 37% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease in costs for the three months ended March 31, 2024 was due primarily to a decrease in internal expenses associated with compensation and benefit costs and other external costs associated with clinical trials and data acquisition costs.

Current wording

Research and development expenses decreased $0.4 million or 12%, and decreased $1.6 million or 25% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decrease in costs for the three and six months ended June 30, 2024 was due primarily to a decrease in internal expenses associated with compensation and benefit costs and other external costs associated with clinical trials and data acquisition costs.

Previous wording

The following table summarizes our external and internal costs for the three months ended March 31, 2024 and 2023 (in thousands, except percentages):

Current wording

The following table summarizes our external and internal costs for the three and six months ended June 30, 2024 and 2023 (in thousands, except percentages):

Previous wording

Sales, marketing, general and administrative expenses increased $1.6 million or 8% for the three months ended March 31, 2024 compared to the same period in 2023. The increase for the three months ended March 31, 2024 was driven primarily by increases in employee compensation and benefits associated with an increase in headcount and variable compensation as well as increases in non-employee costs associated with increased spending on various sales meetings and sales fulfillment during 2024 as compared to 2023. Of the $1.6 million increase, $0.7 million is associated with the increase in depreciation expense related to the leasehold improvements in our new Louisville headquarters and laboratory.

Current wording

Sales, marketing, general and administrative expenses increased $3.0 million or 18%, and increased $4.6 million or 13% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The increase for the three and six months ended June 30, 2024 was driven primarily by increases in employee compensation and benefits associated with an increase in headcount and variable compensation as well as increases in non-employee costs associated with increased spending on various sales meetings and sales fulfillment during 2024 as compared to 2023. Of the $3.0 million and $4.6 million increase, $0.7 million and $1.3 million, respectively, is associated with the increase in depreciation expense related to the leasehold improvements in our new Louisville headquarters and laboratory.

Previous wording

During the three months ended March 31, 2024, the Company recorded no change in fair value of warrant liability in the condensed statement of operations. During the three months ended March 31, 2023, the Company recorded a $0.1 million gain as a change in fair value in the condensed statement of operations due to changes in unobservable inputs. This was a result of changes in the probability of our ability to draw on Tranche B and C loans.

Current wording

During the three and six months ended June 30, 2024, the Company recorded no change in fair value of warrant liability in the condensed statement of operations. During the three and six months ended June 30, 2023, the Company recorded zero and a $0.1 million gain, respectively, as a change in fair value through the condensed statement of operations due to changes in unobservable inputs. This was a result of changes in the probability of our ability to draw on Tranche B and C loans.

Previous wording

During the three months ended March 31, 2024, the Company expensed approximately $0.1 million of deferred offering costs to 'Other (expense) income, net' in the condensed statement of operations as a result of changes in the probability of our ability to fully utilize the LPC Facility prior to the termination date.

Current wording

During the three and six months ended June 30, 2024, the Company recorded other expense, net of $0.4 million and $0.5 million, respectively. The expense primarily consists of deferred offering costs of approximately $0.6 million and $0.7 million, respectively, as a result of changes in the probability of our ability to fully utilize the LPC Facility prior to the termination date. Partially offsetting this expense during the three and six months ended June 30, 2024 is $0.3 million of interest and other income.

Previous wording

In addition, the Company agreed to an exit fee of approximately $6.1 million in October 2024. Interest shall accrue on the difference between the payment schedule as agreed in the August 2021 amendment and the April 2022 amended payment schedule, at an aggregate per annum rate equal to 10%, with such interest to be payable quarterly on the following installment payment date. Our ability to make these payments is subject to ongoing compliance under the Perceptive Term Loan and commencing January 1, 2024, consent from Perceptive.

Current wording

The Company amended the Indi APA agreement in April 2022 in which all parties agreed to restructure the Milestone Payments whereby the Company will make five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million beginning in July 2023, one installment of $5.0 million in April 2024, and one installment of approximately $8.4 million in July 2024. In addition, the Company agreed to an exit fee of approximately $6.1 million in October 2024. Interest shall accrue on the difference between the payment schedule as agreed in the August 2021 amendment and the April 2022 amended payment schedule, at an aggregate per annum rate equal to 10%, with such interest to be payable quarterly on the following installment payment date. Our ability to make these payments is subject to ongoing compliance under the Perceptive Term Loan and commencing January 1, 2024, consent from Perceptive. On April 22, 2024, the Company obtained consent from Perceptive and prepaid the July 1, 2024 Milestone Payment of $8.4 million to Indi. The Company has one $6.1 million Milestone Payment remaining which is due October 1, 2024.

Previous wording

On November 21, 2022, the Company funded and a term loan facility for up to $50.0 million, with funding of $30.0 million and the issuance of warrants exercisable into 3,000,000 shares of the Company’s common stock occurring on November 21, 2022, and two additional contingently issuable tranches of $10.0 million each subject to certain terms and conditions, including revenue milestones.

Current wording

On November 21, 2022, the Company entered into a Credit Agreement and Guaranty (the Credit Agreement) with Perceptive Credit Holdings IV, LP (Perceptive) as lender and administrative agent (the Lender) for up to $50.0 million, with funding of $30.0 million and the issuance of warrants exercisable into 3,000,000 shares of the Company’s common stock occurring on November 21, 2022, and two additional contingently issuable tranches of $10.0 million each subject to certain terms and conditions, including revenue milestones.

Previous wording

On August 4, 2023, the Company entered into the Second Amendment to the Credit Agreement and Guaranty (the Second Amendment) with Perceptive as lender and administrative agent and the Company, as borrower, whereby subject to the terms and conditions of the Second Amendment, the Minimum Net Revenue Covenant (as defined in the Credit Agreement) was amended to reduce the relevant threshold as of the last day of each fiscal quarter commencing on the fiscal quarter ending June 30, 2024 through and including the fiscal quarter ending December 31, 2025.

Current wording

On August 4, 2023, the Company entered into the Second Amendment to the Credit Agreement (the Second Amendment) with Perceptive as lender and administrative agent and the Company, as borrower, whereby subject to the terms and conditions of the Second Amendment, the Minimum Net Revenue Covenant (as defined in the Credit Agreement) was amended to reduce the relevant threshold as of the last day of each fiscal quarter commencing on the fiscal quarter ending June 30, 2024 through and including the fiscal quarter ending December 31, 2025.

Previous wording

Pursuant to the original terms of the Credit Agreement and Guaranty entered into on November 21, 2022, the Perceptive Term Loan Facility includes an additional Tranche B Loan, in an aggregate amount of up to $10.0 million, which is accessible by the Company so long as the Company satisfies certain customary conditions precedent, including revenue milestones. Under the terms of the Second Amendment, the conditions precedent for drawing on the Tranche B Loan were amended to (i) reduce the trailing-twelve month revenue milestone and (ii) add the receipt of aggregate cash proceeds of at least $27.5 million from an equity offering of the Company's common stock. During the three months ended September 30, 2023, the Company met the amended trailing-twelve month revenue milestone associated with the Tranche B Loan.

Current wording

Pursuant to the original terms of the Credit Agreement entered into on November 21, 2022, the Perceptive Term Loan Facility includes an additional Tranche B Loan, in an aggregate amount of up to $10.0 million, which is accessible by the Company so long as the Company satisfies certain customary conditions precedent, including revenue milestones. Under the terms of the Second Amendment, the conditions precedent for drawing on the Tranche B Loan were amended to (i) reduce the trailing-twelve month revenue milestone and (ii) add the receipt of aggregate cash proceeds of at least $27.5 million from an equity offering of the Company's common stock. During the three months ended December 31, 2023, the Company met the remaining conditions precedent associated with the Tranche B Loan and, on December 15, 2023, the Company exercised its ability to draw the Tranche B loan for $10.0 million (the Tranche B Loan).

Previous wording

On February 29, 2024 (the Third Amendment Effective Date), the Company entered into the Third Amendment to the Credit Agreement and Guaranty (the Third Amendment) with Perceptive as lender and administrative agent and the Company, as borrower, whereby subject to the terms and conditions of the Third Amendment, the Minimum Net Revenue Covenant (as defined in the Credit Agreement) was amended to reduce the relevant threshold as of the last day of each fiscal quarter commencing on the fiscal quarter ending March 31, 2024 through and including the fiscal quarter ending December 31, 2025.

Current wording

On February 29, 2024 (the Third Amendment Effective Date), the Company entered into the Third Amendment to the Credit Agreement (the Third Amendment) with Perceptive as lender and administrative agent and the Company, as borrower, whereby subject to the terms and conditions of the Third Amendment, the Minimum Net Revenue Covenant (as defined in the Credit Agreement) was amended to reduce the relevant threshold as of the last day of each fiscal quarter commencing on the fiscal quarter ending March 31, 2024 through and including the fiscal quarter ending December 31, 2025.

Previous wording

As of March 31, 2024, the Company had remaining available capacity for share issuances of approximately $28.2 million under the ATM facility and up to $46.9 million under the LPC Facility, each subject to the restrictions and limitations of the underlying facilities, as well as volume limitations under applicable SEC rules and regulations that limit their availability as sources of funding. On April 5, 2024, the Company filed Supplement No. 1 to the ATM Prospectus Supplement dated December 22, 2021. To comply with volume limitations under applicable SEC rules and regulations, Supplement No. 1 reduced the aggregate offering price to up to $100,000 of shares in order to maximize the amount the Company could offer under the April 2024 Offering.

Current wording

As of June 30, 2024, the Company had remaining available capacity for share issuances of up to $46.9 million under the LPC Facility, subject to the restrictions and limitations of the underlying facilities. On April 5, 2024, the Company filed Supplement No. 1 to the ATM Prospectus Supplement dated December 22, 2021. To comply with volume limitations under applicable SEC rules and regulations, Supplement No. 1 reduced the aggregate offering price to up to $100,000 of shares in order to maximize the amount the Company could offer under the April 2024 Offering. Following the successful completion of the Company’s April 2024 Offering, the Company is no longer subject to volume limitations under applicable SEC rules and regulations that limit their availability as sources of funding. Subsequent to June 30, 2024, the Company intends to file Supplement No. 2 to the ATM Prospectus Supplement dated December 22, 2021 to increase the aggregate offering price under the ATM facility to $50.0 million of shares.

Previous wording

As of March 31, 2024, we maintained cash and cash equivalents of $11.5 million and we have $40.0 million in outstanding aggregate principal amount on our Perceptive Term Loan Facility. We have incurred significant losses since inception and, as a result, we have funded our operations to date primarily through the sale of common stock, the sale of convertible preferred stock, the issuance of notes payable, and from our two primary revenue sources: (i) diagnostic testing, which includes lung diagnostic testing and (ii) providing biopharmaceutical companies with development and testing services and licensing our technologies. In accordance with Accounting Standards Update 2014-15 (ASC Topic 205-40), Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management projected its cash flow sources and evaluated the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued. Management considered the Company’s current projections of future cash flows, our ability to execute our current operating plan, current financial condition, sources of liquidity and debt obligations for at least one year from the date of issuance of this Form 10-Q in considering whether it has the ability to meet its obligations.

Current wording

As of June 30, 2024, we maintained cash and cash equivalents of $42.2 million and we have $40.0 million in outstanding aggregate principal amount on our Perceptive Term Loan Facility. We have incurred significant losses since inception and, as a result, we have funded our operations to date primarily through the sale of common stock, the sale of convertible preferred stock, the issuance of notes payable, and from our two primary revenue sources: (i) diagnostic testing, which includes lung diagnostic testing and (ii) providing biopharmaceutical companies with development and testing services and licensing our technologies. In accordance with Accounting Standards Update 2014-15 (ASC Topic 205-40), Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management projected its cash flow sources and evaluated the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued. Management considered the Company’s current projections of future cash flows, our ability to execute our current operating plan, current financial condition, sources of liquidity and debt obligations for at least one year from the date of issuance of this Form 10-Q in considering whether it has the ability to meet its obligations.

Previous wording

Our ability to maintain our financial covenants under our Perceptive Term Loan Facility during the next twelve months is, in part, dependent upon executing our current operating plan. If we do not execute our current operating plan and maintain our financial covenants, this could result in an Event of Default (as defined in the Perceptive Term Loan Facility), causing an acceleration and repayment of the outstanding balances. The Perceptive Term Loan Facility requires the Company to meet certain minimum net revenue threshold amounts agreed to between the Company and Perceptive as of the last day of each fiscal quarter, which commenced with the fiscal quarter ending March 31, 2023. During 2023, the Company entered into various amendments to the Perceptive Term Loan Facility to reduce the relevant Minimum Net Revenue thresholds. On February 29, 2024, the Company entered into a third amendment to the Perceptive Term Loan Facility, whereby, subject to the terms and conditions of the third amendment, the Minimum Net Revenue Covenant was amended to reduce the relevant threshold through the fiscal quarter ended December 31, 2025. Subsequent to March 31, 2024, the Company closed an underwritten offering of common stock and a concurrent private placement (the April 2024 Offering). Collectively, the Company raised net proceeds of approximately $51.5 million (see Note 14 –Subsequent Events). We have taken steps to improve our liquidity through raising debt and equity capital and have also undertaken several proactive measures including, among other things, the reduction of planned capital expenditures and certain operating expenses. If we do not execute our current operating plan, we may need to consider further measures to reduce our operating expenses. These measures would limit or reduce our operations and could include a hiring freeze, reductions in our workforce, reduction in cash compensation, deferring capital expenditures, and reducing other operating costs.

Current wording

Our ability to maintain our financial covenants under our Perceptive Term Loan Facility during the next twelve months is, in part, dependent upon executing our current operating plan. If we do not execute our current operating plan and maintain our financial covenants, this could result in an Event of Default (as defined in the Perceptive Term Loan Facility), causing an acceleration and repayment of the outstanding balances. The Perceptive Term Loan Facility requires the Company to meet certain Minimum Net Revenue threshold amounts agreed to between the Company and Perceptive as of the last day of each fiscal quarter, which commenced with the fiscal quarter ending March 31, 2023. We have taken steps to improve our liquidity through raising debt and equity capital and have also undertaken several proactive measures including, among other things, the reduction of planned capital expenditures and certain operating expenses. If we do not execute our current operating plan, we may need to consider further measures to reduce our operating expenses. These measures would limit or reduce our operations and could include a hiring freeze, reductions in our workforce, reduction in cash compensation, deferring capital expenditures, and reducing other operating costs.

Previous wording

Our cash flows resulted in a net decrease in cash and cash equivalents and restricted cash of $14.8 million during the three months ended March 31, 2024 as compared to the net decrease in cash of $17.8 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, net cash used in operating activities totaled $15.3 million, an increase of approximately $7.6 million compared to the same period in 2023 primarily due to unfavorable changes in net working capital of $12.5 million, which includes a $3.4 million payment made for contingent consideration during the three months ended March 31, 2024 and a $7.2 million decrease in tenant improvement allowances received for capital expenditures and leasehold improvements related to the CVP Lease, partially offset by a year-over-year decrease in net loss from operations of $5.0 million.

Current wording

Our cash flows resulted in a net increase in cash and cash equivalents and restricted cash of $15.9 million during the six months ended June 30, 2024 as compared to the net decrease in cash of $25.7 million for the six months ended June 30, 2023. For the six months ended June 30, 2024, net cash used in operating activities totaled $33.9 million, an increase of approximately $27.1 million compared to the same period in 2023 primarily due to unfavorable changes in net working capital of $34.5 million, which includes $17.2 million of payments made for contingent consideration during the six months ended June 30, 2024, a $13.0 million decrease in tenant improvement allowances received for capital expenditures and leasehold improvements related to the CVP Lease, and $3.2 million change in accounts receivable due to an increase in revenue. This is partially offset by a year-over-year decrease in net loss from operations of $7.6 million.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2024 totaled $0.3 million, a decrease of $7.4 million compared to the same period in 2023. The decrease in net cash used in investing activities was primarily due to decreases in purchases of property and equipment and capital expenditures for leasehold improvements related to the CVP Lease. These leasehold improvements are tenant improvements and have been reimbursed from the Landlord.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 totaled $2.3 million, a decrease of $11.9 million compared to the same period in 2023. The decrease in net cash used in investing activities was primarily due to decreases in purchases of property and equipment and capital expenditures for leasehold improvements related to the CVP Lease. These leasehold improvements are tenant improvements and have been reimbursed from the Landlord.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2024 totaled $0.8 million compared to a use of cash of $2.4 million in the same period of 2023. The net cash provided by financing activities for the three months ended March 31, 2024 primarily resulted from $0.9 million in net proceeds from the issuance of common stock under the ATM facility and the ESPP, partially offset by repayment of financing leases of $0.1 million. The net cash used in financing activities for the three months ended March 31, 2023 primarily resulted from milestone payments to Indi of $2.0 million, which beginning during the three months ended December 31, 2023 are now classified as a cash outflow from operating activities due to the applicable US GAAP requirements. In addition, the Company incurred payments of debt issuance costs of $0.8 million, partially offset by $0.4 million in proceeds from the issuance of common stock under the ESPP and exercise of stock options.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2024 totaled $52.1 million compared to a use of cash of $4.8 million in the same period of 2023. The net cash provided by financing activities for the six months ended June 30, 2024 primarily resulted from $51.3 million in net proceeds from the issuance of common stock from an underwritten offering of common stock and a concurrent private placement, $0.6 million from the issuance of common stock from our ATM facility, and $0.3 million from our ESPP, partially offset by repayment of notes payable, debt issuance costs and financing leases of $0.2 million. The net cash used in financing activities for the six months ended June 30, 2023 primarily resulted from milestone payments to Indi of $4.3 million and payments of debt issuance costs of $0.8 million, partially offset by $0.5 million in proceeds from the issuance of common stock under the ESPP and exercise of stock options.