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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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 to

Commission File Number: 001-39334

 

 

Progenity, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-3950390

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4330 La Jolla Village Drive, Suite 200, San Diego, CA

 

92122

(Address of principal executive offices)

 

(Zip Code)

 

(855) 293-2639

(Registrant’s telephone number, including area code)

 

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 $0.001 per share

 

PROG

 

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 4, 2021, the registrant had 163,749,556 shares of common stock, par value $0.001 per share, outstanding.

 

 


 

Progenity, Inc.

INDEX

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Deficit

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

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

 

33

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

45

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

45

 

PART II—OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

46

 

 

 

 

 

Item 1A.

 

Risk Factors

 

47

 

 

 

 

 

Item 6.

 

Exhibits

 

94

 

 

 

 

Signatures

 

95

 

 

TRADEMARKS AND CERTAIN TERMS

In this Quarterly Report on Form 10-Q, “Progenity,” “we,” “us” and “our” refer to Progenity, Inc., and our wholly-owned subsidiaries on a consolidated basis, unless the context otherwise provides.

Progenity® is a registered service mark of Progenity. Any other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PROGENITY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

 

September 30,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,136

 

 

$

91,520

 

Accounts receivable, net

 

 

1,917

 

 

 

6,634

 

Prepaid expenses and other current assets

 

 

10,372

 

 

 

8,107

 

Current assets of disposal group held for sale

 

 

26,545

 

 

 

20,077

 

Total current assets

 

 

92,970

 

 

 

126,338

 

Property and equipment, net

 

 

4,564

 

 

 

8,106

 

Other assets

 

 

147

 

 

 

169

 

Long-term assets of disposal group held for sale

 

 

 

 

 

19,827

 

Total assets

 

$

97,681

 

 

$

154,440

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,989

 

 

$

12,657

 

Accrued expenses and other current liabilities

 

 

40,850

 

 

 

51,206

 

Warrant liability

 

 

42,402

 

 

 

 

Current portion of mortgages payable

 

 

75

 

 

 

72

 

Current portion of capital lease obligations

 

 

35

 

 

 

266

 

Current liabilities of disposal group held for sale

 

 

11,922

 

 

 

8,469

 

Total current liabilities

 

 

103,273

 

 

 

72,670

 

Capital lease obligations, net of current portion

 

 

 

 

 

42

 

Mortgages payable, net of current portion

 

 

1,219

 

 

 

1,275

 

Convertible notes, net of unamortized discount of $8,255 and $9,614 as of September 30, 2021
   and December 31, 2020, respectively

 

 

156,045

 

 

 

158,886

 

Embedded derivative liability

 

 

 

 

 

18,370

 

Other long-term liabilities

 

 

14,110

 

 

 

8,239

 

Long-term liabilities of disposal group held for sale

 

 

 

 

 

1,952

 

Total liabilities

 

$

274,647

 

 

$

261,434

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock – $0.001 par value. 350,000,000 shares authorized as of September 30, 2021
   and December 31, 2020;
123,279,683 and 59,287,331 shares issued as of
   September 30, 2021 and December 31, 2020, respectively;
119,567,684 and 55,772,303 
   shares outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

83

 

 

 

59

 

Additional paid-in capital

 

 

537,548

 

 

 

452,992

 

Accumulated deficit

 

 

(695,813

)

 

 

(541,274

)

Treasury stock – at cost; 3,711,999 and 3,515,028 shares of common stock
   as of September 30, 2021 and December 31, 2020, respectively

 

 

(18,784

)

 

 

(18,771

)

Total stockholders' deficit

 

 

(176,966

)

 

 

(106,994

)

Total liabilities and stockholders' deficit

 

$

97,681

 

 

$

154,440

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

1


 

PROGENITY, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

182

 

 

$

56

 

 

$

812

 

 

$

56

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

182

 

 

 

56

 

 

 

812

 

 

 

56

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,226

 

 

 

13,043

 

 

 

37,300

 

 

 

36,519

 

Selling and marketing

 

 

573

 

 

 

1,563

 

 

 

4,437

 

 

 

4,798

 

General and administrative

 

 

17,944

 

 

 

16,116

 

 

 

56,753

 

 

 

40,537

 

Total operating expenses

 

 

30,743

 

 

 

30,722

 

 

 

98,490

 

 

 

81,854

 

Loss from operations

 

 

(30,561

)

 

 

(30,666

)

 

 

(97,678

)

 

 

(81,798

)

Interest expense

 

 

(3,458

)

 

 

(2,457

)

 

 

(10,450

)

 

 

(7,228

)

Loss on warrant liability

 

 

(3,322

)

 

 

 

 

 

(5,818

)

 

 

 

Interest and other income (expense), net

 

 

467

 

 

 

(19

)

 

 

18,211

 

 

 

(3,790

)

Loss before income taxes

 

 

(36,874

)

 

 

(33,142

)

 

 

(95,735

)

 

 

(92,816

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

(37,697

)

Loss from continuing operations

 

 

(36,874

)

 

 

(33,142

)

 

 

(95,735

)

 

 

(55,119

)

Loss from discontinued operations

 

 

(6,870

)

 

 

(13,923

)

 

 

(58,804

)

 

 

(61,881

)

Net loss

 

 

(43,744

)

 

 

(47,065

)

 

 

(154,539

)

 

 

(117,000

)

Dividend paid to preferred stockholders

 

 

 

 

 

 

 

 

 

 

 

(268

)

Net loss attributable to common stockholders

 

$

(43,744

)

 

$

(47,065

)

 

$

(154,539

)

 

$

(117,268

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations,
   basic and diluted

 

$

(0.38

)

 

$

(0.71

)

 

$

(1.32

)

 

$

(2.73

)

Net loss per share from discontinued operations,
   basic and diluted

 

$

(0.07

)

 

$

(0.30

)

 

$

(0.81

)

 

$

(3.06

)

Net loss per share, basic and diluted

 

$

(0.46

)

 

$

(1.01

)

 

$

(2.13

)

 

$

(5.79

)

Net loss per share attributable to common stockholders,
    basic and diluted

 

$

(0.46

)

 

$

(1.01

)

 

$

(2.13

)

 

$

(5.80

)

Weighted average shares outstanding, basic and diluted

 

 

95,846,672

 

 

 

46,632,043

 

 

 

72,590,873

 

 

 

20,201,325

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

PROGENITY, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Deficit

 

Balance at December 31, 2020

 

 

59,287,331

 

 

$

59

 

 

$

452,992

 

 

$

(541,274

)

 

 

(3,515,028

)

 

$

(18,771

)

 

$

(106,994

)

Issuance of common stock, net

 

 

4,370,629

 

 

 

4

 

 

 

11,258

 

 

 

 

 

 

 

 

 

 

 

 

11,262

 

Issuance of common stock upon exercise
   of options

 

 

71,284

 

 

 

 

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

88

 

Issuance of common stock upon vesting
   of restricted stock unit awards

 

 

174,730

 

 

 

 

 

 

(228

)

 

 

 

 

 

(48,581

)

 

 

(1

)

 

 

(229

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,630

 

 

 

 

 

 

 

 

 

 

 

 

2,630

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(32,264

)

 

 

 

 

 

 

 

 

(32,264

)

Balance at March 31, 2021

 

 

63,903,974

 

 

$

63

 

 

$

466,740

 

 

$

(573,538

)

 

 

(3,563,609

)

 

$

(18,772

)

 

$

(125,507

)

Issuance of common stock, net

 

 

15,694,332

 

 

 

16

 

 

 

11,991

 

 

 

 

 

 

 

 

 

 

 

 

12,007

 

Issuance of common stock upon exercise
   of options

 

 

25,498

 

 

 

 

 

 

26

 

 

 

 

 

 

(5,050

)

 

 

(6

)

 

 

20

 

Issuance of common stock under employee stock purchase plan

 

 

254,832

 

 

 

1

 

 

 

560

 

 

 

 

 

 

 

 

 

 

 

 

561

 

Issuance of common stock upon vesting
   of restricted stock unit awards

 

 

237,388

 

 

 

 

 

 

(251

)

 

 

 

 

 

(79,442

)

 

 

 

 

 

(251

)

Issuance of stock purchase warrant

 

 

 

 

 

 

 

 

41,926

 

 

 

 

 

 

 

 

 

 

 

 

41,926

 

Issuance of common stock upon conversion of debt, net

 

 

611,616

 

 

 

1

 

 

 

2,068

 

 

 

 

 

 

 

 

 

 

 

 

2,069

 

Issuance of common stock upon conversion of interest, net

 

 

1,268,116

 

 

 

1

 

 

 

3,626

 

 

 

 

 

 

 

 

 

 

 

 

3,627

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,470

 

 

 

 

 

 

 

 

 

 

 

 

4,470

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(78,531

)

 

 

 

 

 

 

 

 

(78,531

)

Balance at June 30, 2021

 

 

81,995,756

 

 

$

82

 

 

$

531,156

 

 

$

(652,069

)

 

 

(3,648,101

)

 

$

(18,778

)

 

$

(139,609

)

Issuance of common stock, net

 

 

40,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise
   of options

 

 

7,087

 

 

 

 

 

 

6

 

 

 

 

 

 

(4,442

)

 

 

(6

)

 

 

 

Issuance of common stock upon vesting
   of restricted stock unit awards

 

 

190,822

 

 

 

 

 

 

(99

)

 

 

 

 

 

(59,456

)

 

 

 

 

 

(99

)

Issuance of common stock upon exercise
   of warrants

 

 

530,000

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

30

 

Issuance of stock purchase warrant

 

 

 

 

 

 

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

938

 

Issuance of common stock upon conversion of debt, net

 

 

556,018

 

 

 

1

 

 

 

1,645

 

 

 

 

 

 

 

 

 

 

 

 

1,646

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,872

 

 

 

 

 

 

 

 

 

 

 

 

3,872

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(43,744

)

 

 

 

 

 

 

 

 

(43,744

)

Balance at September 30, 2021

 

 

123,279,683

 

 

$

83

 

 

$

537,548

 

 

$

(695,813

)

 

 

(3,711,999

)

 

$

(18,784

)

 

$

(176,966

)

 

3


 

PROGENITY, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Series A and A-1
Preferred Stock

 

 

Series B Preferred Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital