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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number: 001-40047

 

Talis Biomedical Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

 

46-3122255

(I.R.S. Employer

Identification No.)

230 Constitution Drive

Menlo Park, California 94025

 

94025

(Address of principal executive officers)

 

(Zip Code)

Registrant’s telephone number, including area code:

 

(650) 433-3000

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

TLIS

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of November 10, 2021, there were 56,152,290 shares of the Registrant’s common stock and preferred stock outstanding, consisting of 26,288,616 shares of common stock and 29,863,674 shares of Series 1 convertible preferred stock, which is a voting common stock equivalent, subject to certain limitations.

 

 


 

Table of Contents

 

 

 

Page

 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

1

 

Summary of Risk Factors

2

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

 

Condensed Balance Sheets at September 30, 2021 (unaudited) and December 31, 2020

3

 

Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

4

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (deficit) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

5

 

Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)

7

 

Notes to Condensed Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

Item 3.

Defaults Upon Senior Securities

83

Item 4.

Mine Safety Disclosures

83

Item 5.

Other Information

83

Item 6.

Exhibits

84

Signatures

85


 

 

i


 

Special note regarding forward-looking statements

This Quarterly Report on Form 10-Q (this Quarterly Report) contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

our expectations regarding our revenue, expenses and other operating results;

 

the timing or outcome of any of our domestic and international regulatory submissions;

 

our expectations of the reliability, accuracy and performance of our products and services, as well as expectations of the benefits to patients, clinicians and providers of our products and services;

 

future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements, future revenues, expenses, reimbursement rates and needs for additional financing;

 

impact from future regulatory, judicial, and legislative changes or developments in the United States and foreign countries;

 

our ability to establish a sales force and acquire customers;

 

our expectations regarding our sales models;

 

the costs and success of our marketing efforts, and our ability to promote our brand;

 

our ability to increase demand for our products and services, obtain favorable coverage and reimbursement determinations from third-party payers and expand geographically;

 

our efforts to successfully develop and commercialize our products and services, including our ability to successfully conduct clinical trials;

 

our ability to successfully develop additional revenue opportunities and expand our product and service offerings, including our recently launched offerings;

 

the performance of our third-party suppliers and manufacturers;

 

our ability to effectively manage our growth, including our ability to retain and recruit personnel, and maintain our culture;

 

our ability to compete effectively with existing competitors and new market entrants;

 

the impact on our business of economic or political events or trends;

 

the size and growth potential of the markets for our products and services, and our ability to serve those markets; and

 

the rate and degree of market acceptance of our products and services.

In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Quarterly Report and are subject to risks and uncertainties. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. We discuss many of the risks associated with the forward-looking statements in this Quarterly Report in greater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. You should carefully read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Quarterly Report by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.

1


Summary of Risk Factors

 

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part II, Item 1A of this Quarterly Report. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully consider the risks and uncertainties described under “Risk Factors” in Part II, Item 1A of this Quarterly Report as part of your evaluation of an investment in our common stock.

 

The EUA for the Talis One COVID-19 Test System may be revoked or may terminate at the conclusion of the public health emergency, and we will be unable to sell this product in the near future and will be required to pursue 510(k) clearance or other marketing authorization, which will likely be a lengthy and expensive process, and we may not be able to obtain marketing authorization for additional assays, which would adversely affect our business, financial condition and results of operations.

 

We contract with a significant number of third parties for the manufacturing and supply of products, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

 

We have no or limited experience in developing, marketing and commercializing diagnostic platforms and tests, and we are continuing to evaluate the sales model for the Talis One system which may make it difficult to evaluate the success of our business and to assess our future viability.

 

The COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations.

 

If our products do not perform as expected, including due to errors, defects or reliability issues, our reputation and market acceptance of our products could be harmed, and our operating results, reputation and business will suffer.

 

We may be unable to manage our growth effectively, which could make it difficult to execute our business strategy.

 

We may rely on a small number of customers for a significant portion of our revenue, which may materially adversely affect our financial condition and results of operations.

 

Our commercial success could be compromised if our customers do not receive coverage and adequate reimbursement for our products,.

 

Modifications to our marketed products may require new EUAs, 510(k) clearances, PMA approvals, or other marketing authorizations, or may require us to cease marketing or recall the modified products until clearances, approvals or other marketing authorizations are obtained. If we are not able to obtain, maintain, defend or enforce patent and other intellectual property protection for products, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, which could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

 

Some of our intellectual property has been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S. manufacturers.

 

We have incurred significant losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future, which could harm our future business prospects.

 

We may need to raise additional capital to fund our existing operations, further develop our diagnostic platform, commercialize new products and expand our operations.

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Talis Biomedical Corporation

Condensed Balance Sheets

(in thousands, except for shares and par value)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

273,603

 

 

$

138,483

 

Restricted cash

 

 

 

 

 

34,650

 

Grants receivable

 

 

 

 

 

238

 

Unbilled grants receivable

 

 

219

 

 

 

233

 

Prepaid research and development expenses

 

 

938

 

 

 

12,014

 

Prepaid expenses and other current assets

 

 

2,797

 

 

 

3,106

 

Total current assets

 

 

277,557

 

 

 

188,724

 

Property and equipment, net

 

 

10,391

 

 

 

9,114

 

Operating lease right-of-use-assets

 

 

13,400

 

 

 

567

 

Other long-term assets

 

 

1,748

 

 

 

 

Total assets

 

$

303,096

 

 

$

198,405

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,388

 

 

$

4,906

 

Accrued compensation

 

 

6,635

 

 

 

2,738

 

Accrued liabilities

 

 

18,194

 

 

 

7,694

 

Operating lease liabilities, current portion

 

 

1,125

 

 

 

693

 

Total current liabilities

 

 

31,342

 

 

 

16,031

 

Operating lease liabilities, long-term portion

 

 

12,962

 

 

 

 

Total liabilities

 

$

44,304

 

 

$

16,031

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value—no shares authorized as of September 30, 2021 and 229,296,908 shares authorized as of December 31, 2020; no shares issued and outstanding as of September 30, 2021 and 53,509,351 shares issued and outstanding as of December 31, 2020; no aggregate liquidation preference as of September 30, 2021 and $475,617 as of December 31, 2020

 

 

 

 

 

290,945

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Series 1 convertible preferred stock, $0.0001 par value—60,000,000 and 57,324,227 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 29,863,674 and no Series 1 convertible preferred stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $3 as of September 30, 2021 and none as of December 31, 2020

 

 

3

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 and 230,000,000 shares authorized at

September 30, 2021 and December 31, 2020, respectively; 25,963,014 and 2,126,254 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 

 

2

 

 

 

 

Additional paid-in capital

 

 

595,075

 

 

 

64,335

 

Accumulated deficit

 

 

(336,288

)

 

 

(172,906

)

Total stockholders’ equity (deficit)

 

 

258,792

 

 

 

(108,571

)

Total liabilities, convertible preferred stock and stockholders’ equity

 

$

303,096

 

 

$

198,405

 

 

 

See accompanying notes to the unaudited condensed financial statements

3


Talis Biomedical Corporation

Condensed Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except for share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Grant revenue

 

$

218

 

 

$

9,486

 

 

$

7,335

 

 

$

10,705

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,841

 

 

 

36,011

 

 

 

140,529

 

 

 

49,909

 

Selling, general and administrative

 

 

12,792

 

 

 

3,058

 

 

 

30,102

 

 

 

7,798

 

Total operating expenses

 

 

38,633

 

 

 

39,069

 

 

 

170,631

 

 

 

57,707

 

Loss from operations

 

 

(38,415

)

 

 

(29,583

)

 

 

(163,296

)

 

 

(47,002

)

Other income (expense), net

 

 

(3

)

 

 

69

 

 

 

(86

)

 

 

68

 

Net loss and comprehensive loss

 

$

(38,418

)

 

$

(29,514

)

 

$

(163,382

)

 

$

(46,934

)

Net loss per share, basic and diluted

 

$

(1.49

)

 

$

(13.90

)

 

$

(8.41

)

 

$

(22.15

)

Weighted average shares used in the calculation of net loss per share, basic and diluted

 

 

25,787,101

 

 

 

2,122,931

 

 

 

19,427,730

 

 

 

2,118,607

 

 

See accompanying notes to the unaudited condensed financial statements

4


Talis Biomedical Corporation

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)

(in thousands, except for share amounts)

 

 

 

Convertible

Preferred Stock

 

 

 

Series 1 Convertible

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Stockholders’

Equity

 

 

 

Shares

 

 

Value

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance at December 31, 2020

 

 

53,509,351

 

 

$

290,945

 

 

 

 

 

 

 

 

 

 

2,126,254

 

 

$

 

 

$

64,335

 

 

$

(172,906

)

 

$

(108,571

)

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85,895

 

 

 

 

 

 

131

 

 

 

 

 

 

131

 

Issuance of Common Stock upon initial public offering, net of issuance costs of $21,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,870,000

 

 

 

2

 

 

 

232,546

 

 

 

 

 

 

232,548

 

Conversion of convertible preferred stock into common stock and Series 1 convertible preferred stock upon initial public offering

 

 

(53,509,351

)

 

 

(290,945

)

 

 

 

29,863,674

 

 

 

3

 

 

 

7,555,432

 

 

 

 

 

 

290,942

 

 

 

 

 

 

290,945

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,772

 

 

 

 

 

 

1,772

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,492

)

 

 

(60,492

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

29,863,674

 

 

$

3

 

 

 

25,637,581

 

 

$

2

 

 

$

589,726

 

 

$

(233,398

)

 

$

356,333

 

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,792

 

 

 

 

 

 

80

 

 

 

 

 

 

80

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,791

 

 

 

 

 

 

1,791

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,472

)

 

 

(64,472

)

Balance at June 30, 2021

 

 

 

 

$

 

 

 

 

29,863,674

 

 

$

3

 

 

 

25,690,373

 

 

$

2

 

 

$

591,597

 

 

$

(297,870

)

 

$

293,732

 

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

205,521

 

 

 

 

 

 

563

 

 

 

 

 

 

563

 

Issuance of Common Stock pursuant to employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67,120

 

 

 

 

 

 

439

 

 

 

 

 

 

439

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,476

 

 

 

 

 

 

2,476

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,418

)

 

 

(38,418

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

 

29,863,674

 

 

$

3

 

 

 

25,963,014

 

 

$

2

 

 

$

595,075

 

 

$

(336,288

)

 

$

258,792

 

 

5


 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

37,871,430

 

 

$

42,755

 

 

 

 

2,115,583

 

 

$

 

 

$

60,636

 

 

$

(81,776

)

 

$

(21,140

)

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

483

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

681

 

 

 

 

 

 

681

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,374

)

 

 

(7,374

)

Balance at March 31, 2020

 

 

37,871,430

 

 

$

42,755

 

 

 

 

2,116,066

 

 

$

 

 

$

61,322

 

 

$

(89,150

)

 

$

(27,828

)

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

2,557

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

Proceeds from second tranche of Series C-1 convertible preferred stock, net of issuance costs of $24

 

 

 

 

 

18,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from second tranche of Series D-1 convertible preferred stock, net of issuance costs of $3

 

 

 

 

 

1,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from second tranche of Series D-2 convertible preferred stock, net of issuance costs of $6

 

 

 

 

 

4,710

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of third tranche of Series C-1 convertible preferred stock

 

 

(9,314,766

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of third tranche of Series D-1 convertible preferred stock

 

 

(955,666

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of third tranche of Series D-2 convertible preferred stock

 

 

(2,387,171

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series E-1 convertible preferred stock, net of issuance costs of $11

 

 

513,746

 

 

 

3,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series E-2 convertible preferred stock, net of issuance costs of $233

 

 

11,187,189

 

 

 

82,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

407

 

 

 

 

 

 

407

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,046

)

 

 

(10,046

)

Balance at June 30, 2020

 

 

36,914,762

 

 

$

154,289

 

 

 

 

2,118,623

 

 

$

 

 

$

61,730

 

 

$

(99,196

)

 

$

(37,466

)

Issuance of Common Stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

5,821

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Issuance of Series E-1 convertible preferred stock, net of issuance costs of $37

 

 

1,776,153

 

 

 

13,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,031

 

 

 

 

 

 

1,031

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,514

)

 

 

(29,514

)

Balance at September 30, 2020

 

 

38,690,915

 

 

$

167,401

 

 

 

 

2,124,444

 

 

$

 

 

$

62,768

 

 

$

(128,710

)

 

$

(65,942

)

 

See accompanying notes to the unaudited condensed financial statements

 

6


 

Talis Biomedical Corporation

Condensed Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

Operating activities