0001447362-20-000169.txt : 20200810 0001447362-20-000169.hdr.sgml : 20200810 20200810161212 ACCESSION NUMBER: 0001447362-20-000169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200810 DATE AS OF CHANGE: 20200810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASTLE BIOSCIENCES INC CENTRAL INDEX KEY: 0001447362 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 770701774 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38984 FILM NUMBER: 201089485 BUSINESS ADDRESS: STREET 1: 820 S FRIENDSWOOD DRIVE STREET 2: SUITE 201 CITY: FRIENDSWOOD STATE: TX ZIP: 77546 BUSINESS PHONE: 866-788-9007 MAIL ADDRESS: STREET 1: 820 S FRIENDSWOOD DRIVE STREET 2: SUITE 201 CITY: FRIENDSWOOD STATE: TX ZIP: 77546 10-Q 1 cstl-20200630.htm 10-Q cstl-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 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: 001-38984
CASTLE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)

Delaware77-0701774
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
820 S. Friendswood Drive, Suite 201, Friendswood, Texas
77546
(Address of principal executive offices)
(Zip Code)
(866) 788-9007
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareCSTLThe 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, a 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 filerAccelerated filer
Non-accelerated filerSmaller 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 July 31, 2020, there were 19,682,156 shares of common stock, $0.001 par value per share, issued and outstanding.


Table of Contents
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

i

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.

CASTLE BIOSCIENCES, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
June 30, 2020December 31, 2019
ASSETS(unaudited)
Current Assets  
Cash and cash equivalents$179,759  $98,845  
Accounts receivable, net12,528  14,648  
Inventory1,667  1,237  
Prepaid expenses and other current assets1,717  1,951  
Total current assets195,671  116,681  
Long-term accounts receivable, net652  870  
Property and equipment, net5,024  2,060  
Other assets – long-term199  135  
Total assets$201,546  $119,746  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable$2,495  $1,865  
Accrued compensation4,651  5,779  
Medicare advance payment8,350    
Other accrued liabilities2,746  1,812  
Current portion of long-term debt10,000  5,833  
Total current liabilities28,242  15,289  
Long-term debt14,741  19,289  
Deferred rent and other liabilities941  55  
Total liabilities43,924  34,633  
Commitments and Contingencies (Note 9)
Stockholders’ Equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of June 30, 2020 and December 31, 2019; no shares issued and outstanding as of June 30, 2020 and December 31, 2019.
    
Common stock, $0.001 par value; 200,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 19,373,869 and 17,130,907 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.
19  17  
Additional paid-in capital210,621  137,308  
Accumulated deficit(53,018) (52,212) 
Total stockholders’ equity157,622  85,113  
Total liabilities and stockholders’ equity$201,546  $119,746  

The accompanying notes are an integral part of these unaudited condensed financial statements.
1


CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended June 30,Six Months Ended
June 30,
2020201920202019
NET REVENUES$12,715  $10,739  $30,133  $19,456  
COST OF SALES2,146  1,993  4,537  3,591  
Gross margin10,569  8,746  25,596  15,865  
OPERATING EXPENSES AND OTHER OPERATING INCOME
Research and development2,704  1,317  5,617  2,711  
Selling, general and administrative10,392  6,821  21,470  12,868  
Other operating income(1,882)   (1,882)   
Total operating expenses, net11,214  8,138  25,205  15,579  
Operating income (loss)(645) 608  391  286  
Interest income38  5  336  26  
Interest expense(769) (1,693) (1,533) (2,717) 
Other expense, net  (189)   (222) 
Loss before income taxes(1,376) (1,269) (806) (2,627) 
Income tax expense        
Net loss and comprehensive loss(1,376) (1,269) (806) (2,627) 
Convertible preferred stock cumulative dividends  939    1,867  
Accretion of redeemable convertible preferred stock to redemption value
  57    113  
Net loss and comprehensive loss attributable to common stockholders$(1,376) $(2,265) $(806) $(4,607) 
Loss per share attributable to common stockholders:
Basic
$(0.08) $(1.05) $(0.05) $(2.26) 
Diluted$(0.08) $(1.05) $(0.05) $(2.26) 
Weighted-average shares outstanding:
Basic17,544  2,153  17,458  2,036  
Diluted17,544  2,153  17,458  2,036  

The accompanying notes are an integral part of these unaudited condensed financial statements.


2

CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
(in thousands, except share data)
Convertible
 Preferred
Stock Series C
Redeemable
 Convertible
Preferred Stock
Series A, B, D, E-1,
 E-2, E-2A, E-3 and F
Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmountSharesAmountSharesAmount
BALANCE, APRIL 1, 2019503,056  $1,501  9,456,775  $45,051    $  1,916,701  $2  $9,412  $(58,847) $(49,433) 
Stock compensation expense—  —  —  —  —  —  —  —  139  —  139  
Exercise of common stock options—  —  —  —  —  —  275,760  —  416  —  416  
Accretion of redeemable convertible preferred stock to redemption value:
Series E-1—  —  —  1  —  —  —  —  (1) —  (1) 
Series E-3—  —  —  3  —  —  —  —  (3) —  (3) 
Series F—  —  —  53  —  —  —  —  (53) —  (53) 
Net loss—  —  —  —  —  —  —  —  —  (1,269) (1,269) 
BALANCE, JUNE 30, 2019503,056  $1,501  9,456,775  $45,108    $  2,192,461  $2  $9,910  $(60,116) $(50,204) 
BALANCE, APRIL 1, 2020  $    $    $  17,203,496  $17  $139,559  $(51,642) $87,934  
Stock compensation expense—  —  —  —  —  —  —  —  1,653  —  1,653  
Exercise of common stock options—  —  —  —  —  —  170,373  —  330  —  330  
Public offering of common stock, net of underwriting discounts, commissions and offering costs
—  —  —  —  —  —  2,000,000  2  69,079  —  69,081  
Net loss—  —  —  —  —  —  —  —  —  (1,376) (1,376) 
BALANCE, JUNE 30, 2020  $    $    $  19,373,869  $19  $210,621  $(53,018) $157,622  

The accompanying notes are an integral part of these unaudited condensed financial statements.
3


CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(UNAUDITED)
(in thousands, except share data)
Convertible
 Preferred
Stock Series C
Redeemable
 Convertible
Preferred Stock
Series A, B, D, E-1,
 E-2, E-2A, E-3 and F
Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmountSharesAmountSharesAmount
BALANCE, JANUARY 1, 2019503,056  $1,501  9,456,775  $44,995    $  1,916,224  $2  $921  $(57,489) $(56,566) 
Stock compensation expense—  —  —  —  —  —  —  —  307  —  307  
Exercise of common stock options—  —  —  —  —  —  276,237    417  —  417  
Accretion of redeemable convertible preferred stock to redemption value:
Series E-1—  —  —  2  —  —  —  —  (2) —  (2) 
Series E-3—  —  —  6  —  —  —  —  (6) —  (6) 
Series F—  —  —  105  —  —  —  —  (105) —  (105) 
Recognition of beneficial conversion feature on convertible promissory notes
—  —  —  —  —  —  —  —  8,378  —  8,378  
Net loss—  —  —  —  —  —  —  —  —  (2,627) (2,627) 
BALANCE, JUNE 30, 2019503,056  $1,501  9,456,775  $45,108    $  2,192,461  $2  $9,910  $(60,116) $(50,204) 
BALANCE, JANUARY 1, 2020  $    $    $  17,130,907  $17  $137,308  $(52,212) $85,113  
Stock compensation expense—  —  —  —  —  —  —  —  3,230  —  3,230  
Exercise of common stock options—  —  —  —  —  —  202,975  —  401  —  401  
Issuance of common stock under the employee stock purchase plan
—  —  —  —  —  —  39,987  —  603  —  603  
Public offering of common stock, net of underwriting discounts, commissions and offering costs
—  —  —  —  —  —  2,000,000  2  69,079  —  69,081  
Net loss—  —  —  —  —  —  —  —  —  (806) (806) 
BALANCE, JUNE 30, 2020  $    $    $  19,373,869  $19  $210,621  $(53,018) $157,622  

The accompanying notes are an integral part of these unaudited condensed financial statements.
4

CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)


 Six Months Ended June 30,
 20202019
OPERATING ACTIVITIES  
Net loss$(806) $(2,627) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation193  163  
Stock compensation expense3,230  307  
Amortization of intangibles  4  
Amortization of debt discounts and issuance costs452  1,250  
Change in fair value of preferred stock warrant liability  86  
Change in fair value of embedded derivative  136  
Change in operating assets and liabilities:
Accounts receivable2,337  3,625  
Prepaid expenses and other current assets234  (99) 
Inventory(430) 331  
Other assets(62) (11) 
Accounts payable444  (524) 
Accrued compensation(1,127) (1,786) 
Medicare advance payment8,350    
Other accrued liabilities263  902  
Deferred rent and other liabilities172  13  
Net cash provided by operating activities13,250  1,770  
INVESTING ACTIVITIES
Purchases of property and equipment(2,256) (424) 
Net cash used in investing activities(2,256) (424) 
FINANCING ACTIVITIES
Proceeds from public offering of common stock, net of underwriting discounts, commissions and offering costs
69,530    
Proceeds from issuance of convertible promissory notes (including $4,756 from related parties for the six months ended June 30, 2019), net of issuance costs
  11,695  
Proceeds from issuance of term debt, net of issuance costs  1,776  
Repayments on term debt(833)   
Repayments on line of credit  (1,791) 
Payments of deferred offering costs  (454) 
Proceeds from exercise of common stock options400  417  
Proceeds from contributions to the employee stock purchase plan823    
Net cash provided by financing activities69,920  11,643  
NET CHANGE IN CASH AND CASH EQUIVALENTS80,914  12,989  
Beginning of period98,845  4,479  
End of period$179,759  $17,468  
5

CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(in thousands)
 Six Months Ended June 30,
 20202019
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and equipment$194  $12  
Property and equipment acquired with tenant improvement allowance$714  $  
Common stock and debt issuance costs incurred but not paid$451  $1,205  

The accompanying notes are an integral part of these unaudited condensed financial statements.
6

CASTLE BIOSCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)


1. Organization and Description of Business
Castle Biosciences, Inc. (the ‘‘Company’’) was incorporated in the state of Delaware on September 12, 2007. The Company is a commercial-stage dermatological cancer company focused on providing physicians and their patients with personalized, clinically actionable genomic information to make more accurate treatment decisions. The Company is based in Friendswood, Texas (a suburb of Houston, Texas) and its laboratory operations are conducted at the Company’s facility located in Phoenix, Arizona.
Impact of COVID-19 Pandemic
In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. To date, the Company has maintained uninterrupted business operations with normal turnaround times for its delivery of test reports. The Company has implemented adjustments to its operations designed to keep employees safe and comply with federal, state and local guidelines, including those regarding social distancing.
The Company experienced a decline in test report volume in the second quarter of 2020, which it believes is linked to delays and/or cancellations in patient visits, resulting in reduced diagnostic biopsies and thus reduced diagnoses of cutaneous melanoma in response to COVID-19. The extent to which COVID-19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
In response to COVID-19, the United States government