Biora Therapeutics(US:BIOR)2021-05-12 16:00PART I—FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for Q1 2021 show a 45.7% revenue increase, narrowed operating loss, and a significant cash decrease, with a going concern warning Condensed Consolidated Balance Sheets Total assets decreased to $128.6 million as of March 31, 2021, from $154.4 million at year-end 2020, driven by a $26.8 million reduction in cash, while total liabilities slightly decreased and stockholders' deficit widened Condensed Consolidated Balance Sheet Highlights (in thousands USD) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $65,276 | $92,076 | | Total current assets | $101,171 | $126,338 | | Total assets | $128,577 | $154,440 | | Total current liabilities | $80,062 | $72,670 | | Total liabilities | $254,084 | $261,434 | | Total stockholders' deficit | ($125,507) | ($106,994) | Condensed Consolidated Statements of Operations Q1 2021 revenues increased to $24.5 million from $16.8 million in Q1 2020, achieving a $2.3 million gross profit, narrowing the operating loss to $46.2 million, but net loss widened to $32.3 million due to a prior-year tax benefit Q1 2021 vs. Q1 2020 Statement of Operations (in thousands USD, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $24,526 | $16,828 | | Gross Profit (Loss) | $2,292 | ($9,742) | | Loss from Operations | ($46,248) | ($52,526) | | Net Loss | ($32,264) | ($17,152) | | Net Loss Per Share | ($0.56) | ($3.43) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $48.6 million in Q1 2021, partially offset by $22.2 million from financing, resulting in a $26.8 million net decrease in cash and equivalents Cash Flow Summary (in thousands USD) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($48,564) | ($30,886) | | Net cash used in investing activities | ($463) | ($1,094) | | Net cash provided by financing activities | $22,227 | $10,584 | | Net decrease in cash and cash equivalents | ($26,800) | ($21,396) | Notes to Condensed Consolidated Financial Statements Notes reveal a going concern warning due to insufficient cash, detail revenue recognition, payor concentration, convertible note terms, and significant legal contingencies including government settlements and patent litigation - Management has concluded there is substantial doubt about the Company's ability to continue as a going concern for 12 months, as current cash of $65.3 million is not sufficient to fund planned expenditures without raising additional capital20 Revenue by Payor Type (in thousands USD) | Payor Type | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Commercial third-party payors | $16,453 | $21,562 | | Government health benefit programs | $5,726 | ($6,143) | | Patient/laboratory distribution partners | $2,347 | $1,409 | | Total revenues | $24,526 | $16,828 | - The fair value of the derivative liability associated with the Convertible Notes decreased from $18.4 million to $3.5 million during the quarter, resulting in a non-cash gain of $14.9 million84 - In February 2021, the company raised approximately $25.0 million through a private placement of 4,370,629 units, each consisting of one share of common stock and one warrant to purchase a share of common stock129 - The company has significant legal contingencies, including remaining payments for government settlements, a $12.0 million remaining obligation to UnitedHealthcare, and a dispute with Anthem seeking recoupment of approximately $27.4 million112114118 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 45.7% Q1 2021 revenue increase, impacted by a prior-year refund reserve, strategic shift to in-network contracts, and ongoing R&D, reiterating a going concern risk due to insufficient cash for the next 12 months Results of Operations Q1 2021 revenue increased by $7.7 million (45.7%) to $24.5 million, primarily due to a $13.2 million prior-year refund reserve, while cost of sales decreased and G&A expenses rose by 29.9% - The primary driver for the 45.7% year-over-year revenue increase was a $13.2 million refund reserve related to a DOJ settlement recorded in Q1 2020, which did not recur in Q1 2021198 - Cost of sales decreased by 16.3% primarily due to lower core test volumes, a reduction in indirect overhead, and lower royalty fees200 - General and administrative expenses increased by 29.9% due to higher salaries and personnel costs ($2.1 million), business insurance ($1.5 million), and reimbursement service costs ($0.9 million)205 - A non-cash gain of $14.9 million was recognized due to the decrease in the fair value of the embedded derivative liability related to the Convertible Notes208 Liquidity and Capital Resources As of March 31, 2021, the company held $65.3 million in cash, deemed insufficient for the next 12 months, raising substantial doubt about its going concern ability and necessitating further capital raises - The company does not expect its current cash and cash equivalents of $65.3 million to be sufficient to fund operations for at least 12 months from the financial statement issuance date211213 Cash Flow Summary for Q1 2021 (in thousands USD) | Cash Flow Activity | Amount | | :--- | :--- | | Cash used in operating activities | ($48,564) | | Cash used in investing activities | ($463) | | Cash provided by financing activities | $22,227 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Progenity is exempt from providing quantitative and qualitative disclosures about market risk - Progenity is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk242 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period243 PART II—OTHER INFORMATION Item 1. Legal Proceedings This section details significant legal matters, including $49 million in government settlement payments for past billing practices, ongoing patent infringement lawsuits, and a class-action lawsuit alleging misleading IPO statements - The company has entered into settlement agreements with the DOJ and 45 states to resolve investigations into legacy billing practices, with remaining payments of approximately $5.1 million due in 2021, $6.9 million in 2022, and $0.2 million in 2023248252258 - The company is involved in ongoing patent infringement lawsuits filed by Natera, Inc. and Ravgen, Inc., and believes the claims are without merit261262263 - A class-action lawsuit was filed against the company following its IPO, alleging that the registration statement contained false and misleading statements regarding overbilling of government payors and negative business trends264 Item 1A. Risk Factors Significant risks include the ongoing impact of COVID-19, a history of financial losses, the critical need for additional capital to avoid going concern issues, potential declines in COVID-19 testing demand, and financial inflexibility due to $171.5 million in outstanding debt - The COVID-19 pandemic could continue to materially affect operations, disrupt the supply chain, and cause delays in preclinical and clinical trials265267269 - The company has a history of losses and expects to need to raise additional capital to fund operations; failure to do so may require curtailing or ceasing operations272276 - Future demand for COVID-19 testing is difficult to predict and may decrease as the pandemic subsides, potentially making the company's investment in this area less profitable275 - As of March 31, 2021, the company had approximately $171.5 million of outstanding indebtedness, which may impair financial and operating flexibility284 Item 6. Exhibits This section lists key exhibits filed with the Form 10-Q, including the Form of Warrant, a Securities Purchase Agreement from February 2021, and officer certifications - Key exhibits filed with this report include the Securities Purchase Agreement dated February 22, 2021, and certifications from the principal executive and financial officers298