psnl-10q_20200930.htm

 

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, 2020

OR

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

For the transition period from ________ to ________

Commission File Number: 001-38943

 

Personalis, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-5411038

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

1330 O’Brien Drive

Menlo Park, California 94025

94025

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (650) 752-1300

 

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, par value $0.0001

 

PSNL

 

The Nasdaq Global Market

 

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 2, 2020, the registrant had 38,932,805 shares of common stock, $0.0001 par value per share, outstanding.

 


Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

3

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Comprehensive Loss

6

 

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

7

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

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

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 3.

Defaults Upon Senior Securities

72

Item 4.

Mine Safety Disclosures

73

Item 5.

Other Information

73

Item 6.

Exhibits

74

Signatures

75

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

the evolution of cancer therapies and market adoption of our services;

 

estimates of our total addressable market, future revenue, expenses, capital requirements, and our needs for additional financing;

 

the impact of the COVID-19 pandemic on our business, our customers’ and suppliers’ businesses and the general economy;

 

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

 

our ability to scale our infrastructure;

 

our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers;

 

expectations regarding our relationship with the U.S. Department of Veterans Affairs’ Million Veteran Program;

 

our ability to establish and maintain intellectual property protection for our products or avoid claims of infringement;

 

potential effects of extensive government regulation;

 

our ability to hire and retain key personnel;

 

our ability to obtain financing in future offerings;

 

the volatility of the trading price of our common stock;

 

our belief that approval of personalized cancer therapies by the Food and Drug Administration may drive benefits to our business; and

 

our expectation regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”).

Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “company,” “Personalis,” “we,” “us” and “our” refer to Personalis, Inc.

 

 

 

3


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PERSONALIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

133,245

 

 

$

55,046

 

Short-term investments

 

 

72,818

 

 

 

73,243

 

Accounts receivable, net

 

 

5,903

 

 

 

3,300

 

Inventory and other deferred costs

 

 

6,268

 

 

 

4,606

 

Prepaid expenses and other current assets

 

 

5,359

 

 

 

3,383

 

Total current assets

 

 

223,593

 

 

 

139,578

 

Property and equipment, net

 

 

12,735

 

 

 

14,106

 

Operating lease right-of-use assets

 

 

10,632

 

 

 

1,845

 

Other long-term assets

 

 

1,852

 

 

 

1,762

 

Total assets

 

$

248,812

 

 

$

157,291

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,514

 

 

$

7,337

 

Accrued and other current liabilities

 

 

8,797

 

 

 

6,648

 

Contract liabilities

 

 

20,593

 

 

 

35,977

 

Total current liabilities

 

 

35,904

 

 

 

49,962

 

Long-term operating lease liabilities

 

 

8,897

 

 

 

639

 

Other long-term liabilities

 

 

471

 

 

 

 

Total liabilities

 

 

45,272

 

 

 

50,601

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value — 10,000,000 shares authorized; none issued

 

 

 

 

 

 

Common stock, $0.0001 par value — 200,000,000 shares authorized; 38,790,189 and 31,243,029 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

4

 

 

 

3

 

Additional paid-in capital

 

 

372,027

 

 

 

247,282

 

Accumulated other comprehensive income (loss)

 

 

37

 

 

 

(6

)

Accumulated deficit

 

 

(168,528

)

 

 

(140,589

)

Total stockholders’ equity

 

 

203,540

 

 

 

106,690

 

Total liabilities and stockholders’ equity

 

$

248,812

 

 

$

157,291

 

 

See accompanying notes to condensed consolidated financial statements.

4


PERSONALIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

$

19,816

 

 

$

17,153

 

 

$

58,472

 

 

$

47,053

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of revenues

 

 

14,483

 

 

 

11,524

 

 

 

44,428

 

 

 

31,538

 

Research and development

 

 

7,193

 

 

 

5,303

 

 

 

20,048

 

 

 

15,045

 

Selling, general and administrative

 

 

7,793

 

 

 

6,056

 

 

 

22,772

 

 

 

15,692

 

Total costs and expenses

 

 

29,469

 

 

 

22,883

 

 

 

87,248

 

 

 

62,275

 

Loss from operations

 

 

(9,653

)

 

 

(5,730

)

 

 

(28,776

)

 

 

(15,222

)

Interest income

 

 

117

 

 

 

756

 

 

 

873

 

 

 

1,040

 

Interest expense

 

 

 

 

 

(204

)

 

 

(2

)

 

 

(1,133

)

Loss on debt extinguishment

 

 

 

 

 

(1,704

)

 

 

 

 

 

(1,704

)

Other income (expense), net

 

 

(4

)

 

 

(2

)

 

 

5

 

 

 

(1,415

)

Loss before income taxes

 

 

(9,540

)

 

 

(6,884

)

 

 

(27,900

)

 

 

(18,434

)

Provision for income taxes

 

 

(5

)

 

 

(1

)

 

 

(39

)

 

 

(5

)

Net loss

 

$

(9,545

)

 

$

(6,885

)

 

$

(27,939

)

 

$

(18,439

)

Net loss per share, basic and diluted

 

$

(0.27

)

 

$

(0.22

)

 

$

(0.85

)

 

$

(1.35

)

Weighted-average shares outstanding, basic and diluted

 

 

35,460,092

 

 

 

31,133,683

 

 

 

32,845,583

 

 

 

13,613,444

 

 

See accompanying notes to condensed consolidated financial statements.

5


PERSONALIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(9,545

)

 

$

(6,885

)

 

$

(27,939

)

 

$

(18,439

)

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

6

 

 

 

(2

)

 

 

(2

)

 

 

(2

)

Change in unrealized (loss) gain on available-for-sale debt securities

 

 

(75

)

 

 

(12

)

 

 

45

 

 

 

(12

)

Comprehensive loss

 

$

(9,614

)

 

$

(6,899

)

 

$

(27,896

)

 

$

(18,453

)

 

See accompanying notes to condensed consolidated financial statements.

 

6


PERSONALIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance—June 30, 2019

 

 

31,121,605

 

 

$

3

 

 

$

244,089

 

 

$

(15

)

 

$

(127,059

)

 

$

117,018

 

Costs related to initial public offering

 

 

 

 

 

 

 

 

(197

)

 

 

 

 

 

 

 

 

(197

)

Proceeds from exercise of stock options

 

 

21,038

 

 

 

 

 

 

68

 

 

 

 

 

 

 

 

 

68

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,402

 

 

 

 

 

 

 

 

 

1,402

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Unrealized loss on available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,885

)

 

 

(6,885

)

Balance—September 30, 2019

 

 

31,142,643

 

 

$

3

 

 

$

245,362

 

 

$

(29

)

 

$

(133,944

)

 

$

111,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance—June 30, 2020

 

 

31,872,122

 

 

$

3

 

 

$

251,997

 

 

$

106

 

 

$

(158,983

)

 

$

93,123

 

Proceeds from follow-on offering, net of expenses

 

 

6,578,947

 

 

 

1

 

 

 

117,064

 

 

 

 

 

 

 

 

 

117,065

 

Exercise of common stock warrants

 

 

79,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

226,637

 

 

 

 

 

 

1,276

 

 

 

 

 

 

 

 

 

1,276

 

Restricted stock units released

 

 

32,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,690

 

 

 

 

 

 

 

 

 

1,690

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Unrealized loss on available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

(75

)

 

 

 

 

 

(75

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,545

)

 

 

(9,545

)

Balance—September 30, 2020

 

 

38,790,189

 

 

$

4

 

 

$

372,027

 

 

$

37

 

 

$

(168,528

)

 

$

203,540

 

 

See accompanying notes to condensed consolidated financial statements.

7


PERSONALIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (unaudited)

(in thousands, except share data)

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

Convertible

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Stockholders'

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance—December 31, 2018

 

 

18,474,742

 

 

$

89,404

 

 

 

 

3,085,307

 

 

$

1

 

 

$

9,131

 

 

$

(15

)

 

$

(115,505

)

 

$

(106,388

)

Issuance of common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

572

 

 

 

 

 

 

 

 

 

572

 

Elimination of fractional shares upon reverse stock split (see Note 8)

 

 

(39

)

 

 

 

 

 

 

(34

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

Exercise of common stock warrants

 

 

 

 

 

 

 

 

 

207,712

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Conversion of Series A, B and C redeemable convertible preferred stock to common stock

 

 

(18,474,703

)

 

 

(89,404

)

 

 

 

18,474,703

 

 

 

2

 

 

 

89,402

 

 

 

 

 

 

 

 

 

89,404

 

Conversion of redeemable convertible preferred stock warrants to common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,086

 

 

 

 

 

 

 

 

 

2,086

 

Proceeds from initial public offering, net of expenses

 

 

 

 

 

 

 

 

 

9,109,725

 

 

 

1

 

 

 

139,827

 

 

 

 

 

 

 

 

 

139,828

 

Proceeds from exercise of stock options

 

 

 

 

 

 

 

 

 

265,230

 

 

 

 

 

 

678

 

 

 

 

 

 

 

 

 

678

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,657

 

 

 

 

 

 

 

 

 

3,657

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Unrealized loss on available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,439

)

 

 

(18,439

)

Balance—September 30, 2019

 

 

 

 

$

 

 

 

 

31,142,643

 

 

$

3

 

 

$

245,362

 

 

$

(29

)

 

$

(133,944

)

 

$

111,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance—December 31, 2019

 

 

 

 

$

 

 

 

 

31,243,029

 

 

$

3

 

 

$

247,282

 

 

$

(6

)

 

$

(140,589

)

 

$

106,690

 

Proceeds from follow-on offering, net of expenses

 

 

 

 

 

 

 

 

 

6,578,947

 

 

 

1

 

 

 

117,064

 

 

 

 

 

 

 

 

 

117,065

 

Exercise of common stock warrants

 

 

 

 

 

 

 

 

 

79,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

 

 

 

 

740,630

 

 

 

 

 

 

2,289

 

 

 

 

 

 

 

 

 

2,289

 

Proceeds from Employee Stock Purchase Plan purchases

 

 

 

 

 

 

 

 

 

71,480

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

631

 

Restricted stock units released

 

 

 

 

 

 

 

 

 

76,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,761

 

 

 

 

 

 

 

 

 

4,761

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Unrealized gain on available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

45

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,939

)

 

 

(27,939

)

Balance—September 30, 2020

 

 

 

 

$

 

 

 

 

38,790,189

 

 

$

4

 

 

$

372,027

 

 

$

37

 

 

$

(168,528

)

 

$

203,540

 

 

See accompanying notes to condensed consolidated financial statements.

 

8


PERSONALIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(27,939

)

 

$

(18,439

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,279

 

 

 

3,382

 

Noncash operating lease cost

 

 

1,048

 

 

 

673

 

Stock-based compensation expense

 

 

4,761

 

 

 

3,657

 

Loss on debt extinguishment

 

 

 

 

 

1,704

 

Change in fair value of convertible preferred stock warrant liability

 

 

 

 

 

1,403

 

Accretion of noncash interest and debt reduction

 

 

 

 

 

156

 

Other

 

 

63

 

 

 

73

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,603

)

 

 

(75

)

Inventory and other deferred costs

 

 

(1,662

)

 

 

(1,173

)

Prepaid expenses and other current assets

 

 

(2,065

)

 

 

(3,410

)

Accounts payable

 

 

(1,628

)

 

 

474

 

Accrued and other current liabilities

 

 

1,174

 

 

 

988

 

Contract liabilities

 

 

(15,383

)

 

 

(9,170

)

Operating lease liabilities

 

 

(637

)

 

 

(717

)

Other long-term liabilities

 

 

471

 

 

 

 

Net cash used in operating activities

 

 

(40,121

)

 

 

(20,474

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of available-for-sale debt securities

 

 

(80,104

)

 

 

(40,262

)

Proceeds from maturities of available-for-sale debt securities

 

 

80,510

 

 

 

 

Purchases of property and equipment

 

 

(2,409

)