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	)		(6,469	)
Net cash used in investing activities		(2,003	)		(46,731	)
Cash flows from financing activities:
Proceeds from public offerings, net of underwriting discounts and commissions