NeueHealth(NEUE) - 2024 Q2 - Quarterly Report

FORWARD-LOOKING STATEMENTS The report contains forward-looking statements regarding future operations, business plans, strategies, and financial outlook, which are subject to various risks, uncertainties, and assumptions - The report contains forward-looking statements regarding future operations, business plans, strategies, and financial outlook, which are subject to various risks, uncertainties, and assumptions[5] - Key factors that could materially affect forward-looking statements include the company's ability to continue as a going concern, comply with credit facility terms, receive proceeds from asset sales, obtain financing, manage business wind-downs, and adapt to market and regulatory changes[5] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, statements of changes in equity, and cash flow statements, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial line items Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:---|:---|:---| | Total assets | $897,265 | $1,225,480 | | Total liabilities | $1,179,803 | $1,480,098 | | Total shareholders' equity (deficit) | $(1,306,822) | $(1,263,943) | - Total assets decreased by $328.2 million, primarily due to a reduction in current assets of discontinued operations[7][8] - Total liabilities decreased by $300.3 million, largely driven by a significant reduction in short-term borrowings and current liabilities of discontinued operations[7][8] Condensed Consolidated Statements of Income (Loss) (Unaudited) Condensed Consolidated Statements of Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Total revenue | $225,991 | $297,982 | $471,086 | $598,532 | | Operating loss | $(37,549) | $(23,414) | $(60,651) | $(68,286) | | Net Loss | $(57,698) | $(88,627) | $(61,875) | $(258,088) | | Net loss attributable to NeueHealth, Inc. common shareholders | $(71,390) | $(125,005) | $(99,908) | $(311,910) | | Basic and diluted loss per share | $(8.65) | $(15.70) | $(12.23) | $(39.35) | - Total revenue decreased by 24.2% for the three months ended June 30, 2024, and 21.3% for the six months ended June 30, 2024, primarily due to a decrease in ACO REACH revenue[10] - Net loss attributable to common shareholders improved significantly, decreasing from $(125,005) thousand to $(71,390) thousand for the three months ended June 30, 2024, and from $(311,910) thousand to $(99,908) thousand for the six months ended June 30, 2024[10] Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Net loss | $(57,698) | $(88,627) | $(61,875) | $(258,088) | | Other comprehensive income | $104 | $1,337 | $122 | $3,530 | | Comprehensive loss | $(57,594) | $(87,290) | $(61,753) | $(254,558) | | Comprehensive loss attributable to NeueHealth, Inc. common shareholders | $(58,526) | $(111,495) | $(74,422) | $(284,313) | - Comprehensive loss attributable to common shareholders significantly improved, decreasing from $(111,495) thousand to $(58,526) thousand for the three months ended June 30, 2024, and from $(284,313) thousand to $(74,422) thousand for the six months ended June 30, 2024[12] Condensed Consolidated Statements of Changes in Redeemable Preferred Stock and Shareholders' Equity (Deficit) (Unaudited) Changes in Shareholders' Equity (Deficit) (in thousands) | Metric | Balance at January 1, 2024 | Net Loss | Share-based Compensation | Equity Distributions | Other Comprehensive Loss | Balance at June 30, 2024 | |:---|:---|:---|:---|:---|:---|:---|\ | Total shareholders' equity (deficit) | $(1,263,943) | $(74,544) | $37,406 | $(7,020) | $122 | $(1,306,822) | - The accumulated deficit increased from $(4,307,849) thousand at January 1, 2024, to $(4,382,393) thousand at June 30, 2024, reflecting the net losses incurred during the period[14] - Additional paid-in capital increased by $31,543 thousand during the six months ended June 30, 2024, primarily due to share-based compensation and equity-classified warrants issued[14] Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|\ | Net cash used in operating activities | $(77,148) | $(724,026) | | Net cash provided by investing activities | $189,281 | $157,127 | | Net cash used in financing activities | $(225,955) | $(4,950) | | Net (decrease)/increase in cash and cash equivalents | $(113,822) | $(571,849) | | Cash and cash equivalents at end of period | $261,458 | $1,360,441 | - Net cash used in operating activities significantly decreased by $646.9 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to being further into the run-out of Commercial operations[18][221] - Net cash provided by investing activities increased by $32.2 million, driven by net proceeds from the sale of the California Medicare Advantage business[18][222] - Net cash used in financing activities increased by $221.0 million, mainly due to the payoff of short-term debt using proceeds from the California Medicare Advantage business sale, partially offset by new long-term borrowings[18][223] Notes to Condensed Consolidated Financial Statements NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION - NeueHealth operates two market-facing segments: NeueCare (value-driven care delivery) and NeueSolutions (provider enablement)[21] - The company entered into an amendment to the 2023 Credit Agreement, increasing available borrowing by $30.0 million, and a new Hercules Credit Agreement for up to $150.0 million in term loans[23][24] - During Q2 2024, AssociatesMD Medical Group, Inc. (AMD) was classified as held for sale. The California Medicare Advantage business was sold effective January 1, 2024, and the 2021 Credit Agreement was terminated with a $30.3 million gain on troubled debt restructuring[25][27][29] - The company has a history of operating losses and negative operating cash flows, leading to substantial doubt about its ability to continue as a going concern, as existing cash and investments are not believed to be sufficient for the next twelve months[31][34][35] NOTE 2. RESTRUCTURING CHARGES - Restructuring charges for continuing operations decreased significantly from $1,285 thousand in Q2 2023 to $239 thousand in Q2 2024, and from $1,586 thousand to $181 thousand for the six months ended June 30, 2024[38][39][40] - The restructuring accrual for employee termination benefits decreased from $8,389 thousand at January 1, 2024, to $3,164 thousand at June 30, 2024, after net charges of $181 thousand and cash payments of $5,406 thousand[41] NOTE 3. INTANGIBLE ASSETS Definite-Lived Intangible Assets (in thousands) | Metric | June 30, 2024 (Gross Carrying Amount) | June 30, 2024 (Accumulated Amortization) | December 31, 2023 (Gross Carrying Amount) | December 31, 2023 (Accumulated Amortization) | |:---|:---|:---|:---|:---|\ | Customer relationships | $68,770 | $25,257 | $80,021 | $26,144 | | Trade names | $40,900 | $8,373 | $48,361 | $9,000 | | Total | $109,670 | $33,630 | $128,382 | $35,144 | - An impairment of $11.4 million to definite-lived intangible assets was recognized for the three and six months ended June 30, 2024, due to classifying AMD as held-for-sale[43] Estimated Amortization Expense (in thousands) | Year | Amount | |:---|:---|\ | 2024 (July-December) | $4,976 | | 2025 | $9,952 | | 2026 | $9,952 | | 2027 | $9,952 | | 2028 | $8,673 | | 2029 | $8,673 | NOTE 4. MEDICAL COSTS PAYABLE Medical Costs Payable (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:---|:---|:---|\ | Medical costs payable - January 1 | $157,903 | $116,021 | | Total incurred | $374,555 | $505,336 | | Total paid | $395,414 | $441,502 | | Medical costs payable - June 30 | $137,044 | $179,855 | - Medical costs payable decreased by $20.8 million from December 31, 2023, to June 30, 2024, primarily due to a reduction in incurred but not reported (IBNR) claims[46][47] - Payables due to CMS, primarily for out-of-network claims related to the ACO REACH Care Partner Babylon's bankruptcy, amounted to $32,706 thousand as of June 30, 2024[47] NOTE 5. BORROWINGS AND COMMON STOCK WARRANTS - The 2021 Credit Agreement was terminated on January 2, 2024, resulting in no outstanding borrowings and a $30.3 million gain on troubled debt restructuring[50][51] - The 2023 Credit Agreement was amended to increase commitments by $30.0 million and extend the maturity date to August 31, 2028. As of June 30, 2024, $86.4 million was borrowed under this agreement with a 16.14% effective interest rate, and an additional $10.0 million is available[54][57] - A new Hercules Credit Agreement was entered into on June 21, 2024, providing up to $150.0 million in term loans, maturing on June 1, 2028. $30.0 million was drawn at closing, with an effective interest rate of 17.03%. Access to remaining tranches is subject to funding milestones[58][59][61] - Warrant liabilities increased from $13.971 million at January 1, 2024, to $21.792 million at June 30, 2024, due to newly executed warrantholders agreements and antidilutive issuances, partially offset by changes in fair value[70][71] NOTE 6. SHARE-BASED COMPENSATION - Share-based compensation expense was $39.9 million for the six months ended June 30, 2024, down from $49.1 million in the prior year[74] Share-Based Compensation Expense (in thousands) | Award Type | Six Months Ended June 30, 2024 | |:---|:---|\ | Stock Options | $13,200 | | Restricted Stock Units (RSUs) | $11,600 | | Performance-based Restricted Stock Units (PSUs) | $12,600 | | Liability Classified Share-based Award | $2,500 | | Total | $39,900 | - Unrecognized compensation expense for stock options was $14.5 million (0.6 years weighted-average period) and for RSUs was $24.3 million (1.6 years weighted-average period) as of June 30, 2024[75][77] - A new liability-classified share-based award was granted in May 2024, with a recognized expense of $2.5 million for the six months ended June 30, 2024, and an estimated unrecognized expense of $4.9 million[79][81][83] NOTE 7. REDEEMABLE CONVERTIBLE PREFERRED STOCK - Series A Preferred Stock (750,000 shares, $750.0 million aggregate purchase price) accrues dividends at 5.0% per annum, with accrued compounded dividends of $98.7 million as of June 30, 2024[85][86] - Series B Preferred Stock (175,000 shares, $175.0 million aggregate purchase price) also accrues dividends at 5.0% per annum, with accrued compounded dividends of $15.5 million as of June 30, 2024[91][92] - Both Series A and B Preferred Stock rank senior to common stock regarding dividend and liquidation rights, are convertible into common stock, and are redeemable by the Company under certain conditions after specific dates (Jan 2027 for Series A, Oct 2027 for Series B)[86][87][90][92][93][96] NOTE 8. NET LOSS PER SHARE Basic and Diluted Net Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Net loss attributable to NeueHealth, Inc. common shareholders | $(71,390) | $(125,005) | $(99,908) | $(311,910) | | Weighted-average common shares outstanding | 8,253 | 7,962 | 8,166 | 7,928 | | Basic and diluted loss per share | $(8.65) | $(15.70) | $(12.23) | $(39.35) | Potentially Dilutive Securities Excluded from EPS (in thousands) | Security Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|\ | Redeemable convertible preferred stock | 5,241 | 4,081 | | Issued and outstanding common stock warrants | 2,842 | — | | Stock options | 534 | 720 | | Restricted stock units | 3,045 | 1,108 | | Total | 11,662 | 5,909 | NOTE 9. COMMITMENTS AND CONTINGENCIES - The company is involved in a putative securities class action lawsuit filed in January 2022, alleging materially false and misleading statements, which it is vigorously defending[101] - As of June 30, 2024, the amount or range of reasonably possible losses from legal proceedings cannot be estimated, and no accrual has been made[102] - Other commitments include $16.5 million in letters of credit and $19.7 million in surety bonds, with $52.0 million in cash and cash equivalents and $8.7 million in short-term investments restricted as collateral[104][105] NOTE 10. SEGMENTS AND GEOGRAPHIC INFORMATION - The company operates two reportable segments: NeueCare (value-driven care delivery with 74 owned clinics and ~372,000 consumers) and NeueSolutions (provider enablement with ~44,000 REACH ACO members and ~113,000 enablement services lives)[107][108] Segment Revenue and Operating Income (Loss) (in thousands) | Segment | Three Months Ended June 30, 2024 (Revenue) | Three Months Ended June 30, 2024 (Operating Income (Loss)) | Six Months Ended June 30, 2024 (Revenue) | Six Months Ended June 30, 2024 (Operating Income (Loss)) | |:---|:---|:---|:---|:---|\ | NeueCare | $76,985 | $(5,902) | $150,608 | $3,910 | | NeueSolutions | $152,075 | $397 | $325,971 | $(2,535) | | Consolidated | $225,991 | $(37,549) | $471,086 | $(60,651) | - NeueCare's capitated revenue increased by 28.6% for Q2 2024 and 26.3% for the six months ended June 30, 2024, driven by increased membership through third-party payor contracts[193] - NeueSolutions's ACO REACH revenue decreased by 36.8% for Q2 2024 and 32.5% for the six months ended June 30, 2024, due to a decrease of approximately 24,000 beneficiaries aligned to its REACH ACOs[198] NOTE 11. INCOME TAXES - Income tax was a benefit of $0.2 million for the three months ended June 30, 2024, compared to an expense of $0.9 million in the prior year. For the six months, it was an expense of $0.5 million in 2024 versus $0.4 million in 2023[115] - The tax impact varies from the federal statutory rate of 21.0% due to state income taxes, changes in valuation allowance for deferred tax assets, and permanent differences[115] - A valuation allowance has been recorded for deferred tax assets due to cumulative losses, limiting the ability to consider subjective evidence for future earnings[116] NOTE 12. REDEEMABLE NONCONTROLLING INTEREST Redeemable Noncontrolling Interest Activity (in thousands) | Metric | 2024 (Six Months Ended June 30) | 2023 (Six Months Ended June 30) | |:---|:---|:---|\ | Balance at January 1 | $88,908 | $219,758 | | Earnings attributable to noncontrolling interest | $3,700 | $4,560 | | Distribution to noncontrolling interest holders | $2,290 | $(4,952) | | Measurement adjustment | $8,973 | $25,195 | | Balance at June 30 | $103,867 | $244,561 | - Redeemable noncontrolling interests increased from $88,908 thousand at January 1, 2024, to $103,867 thousand at June 30, 2024[118] NOTE 13. ACO REACH - The company participates in the CMS ACO REACH Model, assuming full risk for the total cost of care for aligned beneficiaries through three REACH ACOs[119] - Key financial components include Performance Year Benchmark, Risk-Sharing Arrangements, Financial Reconciliation, and Risk-Mitigation Options (e.g., stop-loss arrangements)[119] ACO REACH Financial Impacts (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:---|:---|:---|\ | ACO REACH performance year receivable | $425,517 | $115,878 | | ACO REACH performance year obligation | $325,599 | — | ACO REACH Amortization and Revenue (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Amortization of ACO REACH performance year receivable | $166,099 | $249,449 | $341,559 | $424,972 | | Amortization of ACO REACH performance year obligation | $149,047 | $234,893 | $325,599 | $474,700 | | ACO REACH revenue | $149,802 | $236,994 | $321,613 | $476,801 | NOTE 14. DECONSOLIDATION OF BRIGHT HEALTHCARE INSURANCE COMPANY OF TEXAS - BHIC-Texas was placed into liquidation on November 29, 2023, leading to its deconsolidation from the company's financial statements[125][126] - Upon deconsolidation, a $124.0 million risk share payable to the deconsolidated entity was recorded, representing accrued losses from a risk share contract[127] - The company recorded a full valuation allowance on its $91.5 million investment in BHIC-Texas due to uncertainties in collecting the risk share receivable[128] NOTE 15. HELD-FOR-SALE OPERATIONS - AssociatesMD Medical Group, Inc. (AMD) was classified as held-for-sale during Q2 2024, with the sale expected to complete within the next twelve months[129] AMD Held-for-Sale Assets and Liabilities (in thousands) | Metric | June 30, 2024 | |:---|:---|\ | Current assets of held-for-sale operations | $8,158 | | Current liabilities of held-for-sale operations | $3,981 | AMD Operating Results (in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:---|:---|:---|\ | Total revenue of held-for-sale operations | $5,500 | $12,137 | | Total operating expenses from held-for-sale operations | $22,171 | $30,431 | | Operating loss from held-for-sale operations | $(16,671) | $(18,294) | - An $11.4 million impairment of intangible assets was recognized due to the classification of AMD as held-for-sale, as its carrying value exceeded its estimated fair value[131] NOTE 16. DISCONTINUED OPERATIONS - Discontinued operations include the Bright HealthCare - Commercial segment (exited end of 2022) and the California Medicare Advantage business (sold effective January 1, 2024)[132][133] Financial Results of Discontinued Operations (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Total revenue from discontinued operations | $(9,898) | $449,698 | $(8,545) | $927,123 | | Net loss from discontinued operations | $(18,439) | $(56,935) | $(28,304) | $(172,478) | - Net loss from discontinued operations decreased significantly by $38.5 million for Q2 2024 and $144.2 million for the six months ended June 30, 2024, primarily due to the sale of the California MA business and the advanced run-out of the Commercial business[192] Assets and Liabilities of Discontinued Operations (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:---|:---|:---|\ | Current assets of discontinued operations | $142,375 | $822,570 | | Current liabilities of discontinued operations | $343,985 | $699,758 | | Risk adjustment payable | $286,991 | $291,146 | - The sale of the California MA business for $500.0 million was consummated on January 1, 2024, with $167.3 million of the purchase price subject to contingencies and TNE adjustments, which have not been recorded as receivable due to conditions outside the company's control[144][145][147][149] - The company's insurance subsidiaries are out of compliance with minimum capital levels for certain regulated entities as of June 30, 2024[160] NOTE 17. SUBSEQUENT EVENTS - No events or transactions have occurred through the financial statement issuance date that require adjustment or disclosure[161] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources, highlighting key business updates, performance metrics, and a detailed analysis of revenue and expenses. It also addresses the company's going concern status and debt structure Business Overview - NeueHealth aims to transform healthcare by making high-quality, coordinated care accessible and affordable, operating through two continuing segments: NeueCare and NeueSolutions[164] - NeueCare is a value-driven care delivery business with 74 owned primary care clinics, serving approximately 372,000 consumers across ACA Marketplace, Medicare, and Medicaid[165] - NeueSolutions is a provider enablement business supporting ~44,000 value-based care consumers attributed to REACH ACOs and ~113,000 enablement services lives[166] - The Bright HealthCare - Commercial segment is included in discontinued operations, having exited the commercial health plan market at the end of 2022[166] Business Update - NeueHealth delivered solid Q2 2024 results, strengthening its capital position with a new $150.0 million term loan facility from Hercules Capital[167] - The company continues to advance its value-driven, consumer-centric care model, focusing on strong relationships with consumers, payors, and providers[167][170] - Strategic growth opportunities are being evaluated for 2025 and beyond, with a robust pipeline to expand payor and provider partnerships and consumer enrollment[168] - NeueSolutions is driving strong performance in its ACO REACH business through care management, patient engagement, and health equity initiatives[171] Key Metrics and Non-GAAP Financial Measures Key Performance Metrics | Metric | As of June 30, 2024 | As of June 30, 2023 | |:---|:---|:---|\ | Value-Based Consumers served | 364,000 | 373,000 | | Enablement Services Lives | 113,000 | 31,000 | - Value-based care consumers decreased by approximately 9,000 year-over-year, driven by a decline of ~24,000 ACO REACH lives, partially offset by an increase of ~15,000 through third-party payor relationships[175] - Enablement services lives increased significantly to 113,000, reflecting the value provided to provider partner groups outside the NeueHealth owned network[177] Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Adjusted EBITDA | $3,962 | $7,797 | $7,618 | $2,480 | - Adjusted EBITDA decreased for the three months ended June 30, 2024, but increased significantly for the six months ended June 30, 2024, compared to the prior year, indicating improved core operating performance[178][182] Results of Operations Consolidated Revenue and Operating Expenses (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:---|:---|:---|:---|:---|\ | Total revenue | $225,991 | $297,982 | $471,086 | $598,532 | | Medical costs | $177,681 | $245,160 | $374,555 | $505,280 | | Operating costs | $70,217 | $70,280 | $137,039 | $149,798 | | Intangible assets impairment | $11,411 | $0 | $11,411 | $0 | | Operating loss | $(37,549) | $(23,414) | $(60,651) | $(68,286) | | Net loss attributable to common shareholders | $(71,390) | $(125,005) | $(99,908) | $(311,910) | - Total revenue decreased by 24.2% (QoQ) and 21.3% (YoY) for the three and six months ended June 30, 2024, respectively, primarily due to a decrease in ACO REACH revenue, partially offset by increased capitated revenue[186][187] - Medical costs decreased by 27.5% (QoQ) and 25.9% (YoY) for the three and six months ended June 30, 2024, driven by fewer beneficiaries aligned to REACH ACOs[187] - Operating costs decreased by 0.1% (QoQ) and 8.5% (YoY) for the three and six months ended June 30, 2024, mainly due to reduced share-based compensation from employee reductions[188] - The operating cost ratio increased to 31.1% (QoQ) and 29.1% (YoY) due to revenue decline outpacing operating cost reductions[188] - Warrant income of $2.2 million (QoQ) and $4.3 million (YoY) was recognized for the three and six months ended June 30, 2024, due to new warrantholders agreements[190] Liquidity and Capital Resources - The company believes existing cash and investments are insufficient for the next twelve months, raising substantial doubt about its ability to continue as a going concern[200] - Management is implementing plans to drive positive operating cash flow and access additional liquidity, but these are subject to conditions outside the company's control, such as collecting contingent consideration from the California MA business sale and accessing further tranches of the Hercules Credit Agreement[200][201] - Short-term cash uses include medical claims, risk adjustment obligations, and general administrative costs, while long-term needs include operating lease obligations and redeemable noncontrolling interests[203] - The company declared $28.2 million in dividends from regulated insurance entities to the parent company during the six months ended June 30, 2024[203] - As of June 30, 2024, the company had $261.5 million in cash and cash equivalents and $16.3 million in short-term investments across continuing and discontinued operations[219] - Non-regulated cash and cash equivalents were $133.4 million, with $52.0 million restricted as collateral. Regulated insurance entity cash and cash equivalents were $128.0 million[219] Critical Accounting Policies and Estimates - There have been no material changes to the critical accounting policies and estimates since the 2023 Form 10-K[224] Recently Adopted Accounting Pronouncements - No recently issued or adopted accounting pronouncements had, or are expected to have, a material impact on the company's financial position, results of operations, or cash flows[37][224] Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to the company for the reporting period - The company has no material market risk disclosures to report[225] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2024, due to a previously reported material weakness in internal control over financial reporting. Despite this, additional analyses confirm the fair presentation of financial statements - Disclosure controls and procedures were deemed not effective as of June 30, 2024, due to a material weakness in internal control over financial reporting related to the deployment of control activities[227][228] - Despite the material weakness, management performed additional procedures and concluded that the condensed consolidated financial statements fairly present the financial position, results of operations, and cash flows[227] - The company is actively working to remediate the material weakness by refining control procedures and improving documentation[229][230] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any litigation that, if determined adversely, would individually or collectively have a material adverse effect on its business, operating results, cash flows, or financial condition, beyond what is described in Note 9 - No legal proceedings are expected to have a material adverse effect on the company's business, operating results, cash flows, or financial condition[232] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2023 Form 10-K - No material changes to the risk factors disclosed in the 2023 Form 10-K[233] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities[233] Item 3. Defaults upon Senior Securities There were no defaults upon senior securities to report - No defaults upon senior securities[233] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable to the company[233] Item 5. Other Information There is no other information to report under this item - No other information to report[233] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, credit agreements, warrant agreements, incentive plans, and certifications - Exhibits include various corporate documents such as the Ninth Amended and Restated Certificate of Incorporation, Certificates of Designations for Series A and B Preferred Stock, and Fourth Amended and Restated Bylaws[235] - Key agreements filed as exhibits include the Loan and Security Agreement with Hercules Capital, Inc., Incremental Amendment No. 3, and the Second Amended and Restated 2021 Omnibus Incentive Plan[235] - Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[235]