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 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.

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 September 30, 2024 and for the three and nine months ended September 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 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.

Current wording

The following MD&A discussion is provided to supplement the Condensed Financial Statements as of September 30, 2024 and 2023 and for the three and nine 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 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.

Current wording

Data for the three and nine months ended September 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 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 on 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, 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 artificial intelligence 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

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.

Current wording

In addition to the five diagnostic tests currently on the market, we offer a broad range of 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

On July 6, 2023, the Company announced that the Centers for Medicare & Medicaid Services (CMS) has designated the Nodify CDT Test as an Advanced Diagnostic Laboratory Test (ADLT) effective June 30, 2023. Obtaining ADLT status is a recognition that the Nodify CDT test meets the stringent criteria established under the Protecting Access to Medicare Act of 2014. ADLT status is reserved for innovative tests with Medicare coverage that provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests.

Current wording

On July 6, 2023, the Company announced that the Centers for Medicare & Medicaid Services (CMS) has designated the Nodify CDT Test as an Advanced Diagnostic Laboratory Test (ADLT) effective June 30, 2023. Obtaining ADLT status is a recognition that the Nodify CDT test meets the stringent criteria established under the Protecting Access to Medicare Act of 2014. ADLT status is reserved for innovative tests with Medicare coverage that provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests. Nodify CDT joins our Nodify XL2 and VeriStrat tests with the ADLT designation.

Previous wording

Investment in clinical studies and product innovation to support growth. A significant aspect of our business is our investment in research and development, including the development of new products and our investments in clinical utility studies. We have invested heavily in clinical studies for our on market and pipeline products. Our studies focus primarily on the clinical utility of our tests including the ongoing INSIGHT study to continue our clinical understanding of the predictive and prognostic value of the VeriStrat test. On June 27, 2023, we completed enrollment of 5,000 patients with non-small cell lung cancer. The ALTITUDE randomized control study, launched during the fourth quarter 2020, seeks to further demonstrate the efficacy of the Nodify CDT and XL2 tests. A secondary focus of our studies is understanding the economic impact of our tests in assisting with decisions related to patient management and the potential impact of our tests in reducing overall healthcare costs.

Current wording

Investment in clinical studies and product innovation to support growth. A significant aspect of our business is our investment in research and development, including the development of new products and our investments in clinical studies for our on-market and pipeline products. Our studies focus on generating evidence to support expanded payer coverage, commercial adoption, and regulatory approvals. Current efforts are focused primarily on clinical utility as well as understanding the economic impact of our tests in assisting with decisions related to patient management and the potential impact of our tests in reducing overall healthcare costs.

Previous wording

Second Quarter 2024 Financial and Operational Highlights

Current wording

Third Quarter 2024 Financial and Operational Highlights

Previous 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;

Current wording

Lung Diagnostic revenue of $17.2 million reflected a year-over-year increase of 40% driven by the continued adoption of Nodify XL2 and Nodify CDT nodule risk assessment tests and strong reimbursement. However, test volumes were impacted at the end of the third quarter by disruption to patients, healthcare providers, and Biodesix teammates in the southeast due to Hurricane Helene;

Previous 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;

Current wording

Third quarter 2024 gross profit of $14.0 million, or 77.0% gross margin compared to 76.1% gross margin in the comparable prior year period. Our steady margin performance is primarily driven by volume growth in Lung Diagnostic testing that continues to drive down the per test costs;

Previous 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;

Current wording

Operating expenses (excluding direct costs and expenses) of $22.6 million, an increase of 29% as compared to the third quarter 2023, which includes $3.0 million of non-cash stock compensation expense and depreciation and amortization as compared to $1.7 million in third quarter of 2023. This increase is primarily attributable to an increase in sales and marketing costs to support both business lines’ sales growth to enhance product awareness and drive adoption, and an increase in depreciation expense related to the leasehold improvements in the Company’s Louisville, CO offices and laboratory which opened in January 2024;

Previous wording

Net loss of $10.8 million, an improvement of approximately $2.5 million, or 19% as compared to the same period of 2023. Net loss included $0.6 million of one-time cash and non-cash Other Expenses, net primarily related to our probability of not utilizing the Lincoln Park Capital Equity Line of Credit prior to expiration and costs associated with debt-extinguishment;

Current wording

Net loss of $10.3 million, an improvement of 6% as compared to the same period of 2023;

Previous wording

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

Current wording

Cash and cash equivalents of $31.4 million as of September 30, 2024, a decrease from $42.2 million from June 30, 2024;

Previous 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.

Current wording

Cash and cash equivalents as of September 30, 2024 includes the final milestone payment of $6.1 million for the acquisition of Integrated Diagnostics in 2018.

Previous wording

Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing, communications and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers. These expenses consist primarily of salaries, commissions, bonuses, employee benefits, share-based compensation, and travel, as well as marketing and educational activities and allocated overhead expenses. We expect our sales and marketing expenses to increase in dollars as we expand our sales force, increase our presence within the United States, and increase our marketing activities to drive further awareness and adoption of our tests and our future products. These expenses, though expected to increase in dollars, are expected to decrease as a percentage of revenue in the long term, though they may fluctuate as a percentage of our revenues from period to period due to the timing and nature of these expenses.

Current wording

Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing, public relations, communications and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers. These expenses consist primarily of salaries, commissions, bonuses, employee benefits, share-based compensation, and travel, as well as marketing and educational activities and allocated overhead expenses. We expect our sales and marketing expenses to increase in dollars as we expand our sales force, increase our presence within the United States, and increase our marketing activities to drive further awareness and adoption of our tests and our future products and services. These expenses, though expected to increase in dollars, are expected to decrease as a percentage of revenue in the long term, though they may fluctuate as a percentage of our revenues from period to period due to the timing and nature of these expenses.

Previous 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.

Current wording

For the three and nine months ended September 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 $5.1 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.

Current wording

Diagnostic test revenue increased $4.9 million or 40%, and increased $15.1 million or 47% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increases are primarily due to an increase of $4.7 million and $15.8 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. The increase in revenue for the nine months ended September 30, 2024 was partially offset by a $0.7 million decrease in the IQLung testing strategy. The Company’s diagnostic testing sales efforts continued to gain momentum during the three and nine months ended September 30, 2024 as the number of tests delivered reached the highest in Company history for seven consecutive quarters.

Previous 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.

Current wording

Biopharmaceutical Services and other revenue decreased $0.2 million or 17%, and increased $1.4 million or 68% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decrease in revenue for the three months ended September 30, 2024 was primarily due to the timing of sample receipts from certain biopharmaceutical partners, while the increase in revenue for the nine months ended September 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 $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.

Current wording

Direct costs and expenses related to revenue increased $1.0 million or 29%, and increased $1.6 million or 17% for the three and nine months ended September 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 $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.

Current wording

Research and development expenses increased $0.6 million or 31%, and decreased $1.0 million or 12% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increase in costs for the three months ended September 30, 2024 was due primarily to an increase in internal expenses associated with compensation and benefit costs resulting from an increase in headcount, while the decrease for the nine months ended September 30, 2024 was primarily a result of a decrease in external costs associated with clinical trials and data acquisition costs.

Previous 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):

Current wording

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

Previous 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.

Current wording

Sales, marketing, general and administrative expenses increased $4.5 million or 29%, and increased $9.1 million or 18% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increase for the three and nine months ended September 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 $4.5 million and $9.1 million increase, $0.7 million and $2.1 million, respectively, is associated with the increase in depreciation expense related to the leasehold improvements in our new Louisville headquarters and laboratory.

Previous wording

Interest expense decreased $0.5 million or 20%, and decreased $0.4 million or 7% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decrease in interest expense for the three and six months ended June 30, 2024 is primarily related to the decrease in interest associated with the contingent consideration as Milestone Payments are made.

Current wording

Interest expense decreased $0.3 million or 14%, and decreased $0.7 million or 10% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decrease in interest expense for the three and nine months ended September 30, 2024 was primarily related to the interest associated with the declining contingent consideration balance as the remaining Milestone Payments and final exit fee payment were made.

Previous wording

Loss on extinguishment of liabilities increased $0.2 million or 100% for both the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. On April 22, 2024, the Company obtained consent from Perceptive and prepaid the July 1, 2024 contingent consideration Milestone Payment of $8.4 million to Indi. As a result of prepaying the Milestone Payment, the Company performed a fair value analysis through April 22, 2024 and recorded a loss on early extinguishment of $0.2 million.

Current wording

Loss on extinguishment of liabilities increased $0.2 million or 100% for the nine months ended September 30, 2024, compared to the same period in 2023. On April 22, 2024, the Company obtained consent from Perceptive and prepaid the July 1, 2024 contingent consideration Milestone Payment of $8.4 million to Indi. As a result of prepaying the Milestone Payment, the Company performed a fair value analysis through April 22, 2024 and recorded a loss on early extinguishment of $0.2 million.

Previous 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.

Current wording

During the three and nine months ended September 30, 2024, the Company recorded no change in fair value of warrant liability in the condensed statements of operations. The Tranche C loan had a commitment date through September 30, 2024 and, as of that date, the Company did not exercise its ability to draw the Tranche C loan. Therefore, the associated Tranche C Warrants expired and are no longer exercisable. During the three and nine months ended September 30, 2023, the Company recorded a $1.4 million and $1.3 million net loss, respectively, as a change in fair value through the condensed statements 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 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.

Current wording

During the three and nine months ended September 30, 2024, the Company recorded other income, net of $0.4 million and other expense, net of $0.1 million, respectively. The other income, net for the three months ended September 30, 2024 was comprised primarily of interest income. The other expense, net for the nine months ended September 30, 2024 primarily consisted of deferred offering costs of approximately $0.7 million as a result of changes in the probability of our ability to fully utilize the LPC Facility prior to the termination date, offset by $0.6 million of interest and other income.

Previous 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.

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. On September 30, 2024, the Company obtained consent from Perceptive and prepaid the October 1, 2024 exit fee of $6.1 million to Indi. The Company has no remaining obligations to Indi.

Previous 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.

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. The Tranche C loan had a commitment date through September 30, 2024 and, as of that date, the Company did not exercise its ability to draw the Tranche C loan.

Previous 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.

Current wording

As of September 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. On August 7, 2024, the Company filed Supplement No. 2 to the ATM Prospectus Supplement dated December 22, 2021 to increase the aggregate offering price under the ATM facility up to the original $50.0 million of shares. As of September 30, 2024, the Company had remaining available capacity for share issuances of up to $28.2 million under the ATM facility. On November 1, 2024, the Company expects to file a shelf registration statement on Form S-3 and enter into a new sales agreement with a financial institution, pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $50.0 million, subject to terms and conditions (the 2024 ATM Program). The shares of common stock offered pursuant to the 2024 ATM Program will be offered and sold by the Company pursuant to its registration statement on Form S-3 once declared effective by the SEC. Sales of common stock under the 2024 ATM Program, if any, will be made at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Market, or any other existing trading market for our common stock. In connection with establishing the 2024 ATM Program, the Company terminated its prior $50.0 million ATM program established in November 2021, and no additional stock can be issued thereunder.

Previous 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.

Current wording

As of September 30, 2024, we maintained cash and cash equivalents of $31.4 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 meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our Perceptive Term Loan Facility or to obtain waivers or amendments that impact the related covenants. As of June 30, 2024, the Company was in compliance with all restrictive and financial covenants associated with its borrowings.

Current wording

Our ability to meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our Perceptive Term Loan Facility or to obtain waivers or amendments that impact the related covenants. As of September 30, 2024, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. In addition, on October 30, 2024, the Company entered into the Fourth Amendment to the Credit Agreement (the Fourth Amendment), whereby, subject to the terms and conditions of the Fourth 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, 2025 through and including the fiscal quarter ending December 31, 2027.

Previous 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.

Current wording

Our cash flows resulted in a net increase in cash and cash equivalents and restricted cash of $5.1 million during the nine months ended September 30, 2024 as compared to the net decrease in cash of $23.2 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, net cash used in operating activities totaled $44.6 million, an increase of approximately $34.0 million compared to the same period in 2023 primarily due to unfavorable changes in net working capital of $40.4 million, which includes $23.2 million of payments made for contingent consideration during the nine months ended September 30, 2024 and an $18.3 million decrease in tenant improvement allowances received for capital expenditures and leasehold improvements related to the CVP Lease. This is partially offset by a year-over-year decrease in net loss from operations of $8.3 million.

Previous 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.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2024 totaled $2.6 million, a decrease of $17.5 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 primarily for leasehold improvements related to the CVP Lease. These leasehold improvements were tenant improvements and were reimbursed from the Landlord.

Previous 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.

Current wording

Net cash provided by financing activities during the nine months ended September 30, 2024 totaled $52.2 million, an increase of $44.8 million compared to the same period in 2023. The net cash provided by financing activities for the nine months ended September 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. The net cash provided by financing activities for the nine months ended September 30, 2023 primarily resulted from $15.3 million net proceeds from the issuance of common stock from the Subscription Agreements, partially offset by milestone payments to Indi of $7.6 million and payments of debt issuance costs of $0.8 million.

Previous wording

In addition, other revenue includes amounts derived from licensing our digital sequencing technologies to our international laboratory partners. We are compensated through royalty-based payments for the licensed technology, and depending on the nature of the technology licensing arrangements and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur.

Current wording

In addition, other revenue includes amounts derived from licensing our PCR technologies to our international laboratory partners. We are compensated through royalty-based payments for the licensed technology and, depending on the nature of the technology licensing arrangements and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur.