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, 2022

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.)
3400 Bridge Parkway Redwood City, California	94065
(Address of principal executive offices)	(Zip Code)
(650) 433-3000
(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, $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 October 31, 2022, there were 56,645,589 shares of the Registrant’s common stock and preferred stock outstanding, consisting of 26,781,915 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	3
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Condensed Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021	4
	Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	5
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	6
	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	7
	Notes to Condensed Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	74
Item 6.	Exhibits	75
Signatures		76

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 planned regulatory clearance pathways;

•our efforts to successfully develop and commercialize our products and services, including our ability to successfully conduct clinical trials and studies and expand our product menu;

•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 maintain and utilize our commercial capabilities and acquire customers;

•our expectations regarding our sales models;

•the costs and success of our research and development efforts;

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

•the performance of our third-party suppliers and manufacturers;

•our ability to retain and recruit personnel and maintain our culture;

•the impact of the ongoing COVID-19 pandemic, including the resurgence of cases related to the spread of new variants, on our business, clinical trials, financial conditions, liquidity and results of operations;

•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

1

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.

2

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.

•We have realigned our business strategy from primarily responding to the COVID-19 pandemic with our Talis One COVID-19 Test System to focusing on women's health and STI assays, including CT/NG/TV, which will require pursuing marketing authorization through the FDA’s standard 510(k) clearance process. We may not be able to obtain marketing authorization for these assays, which would adversely affect our business, financial condition and results of operations.

•We will likely need to raise additional capital to fund our existing operations, further develop our diagnostic platform, commercialize products, if and when approved, and expand our operations.

•We have no products approved for commercial sale. 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.

•We may not be able to sell our remaining inventory of the Antigen Tests at a profit, or at all.

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

•We rely on a significant number of third-party manufacturers and suppliers for our instrument and cartridges, which has created and may continue to create delays due to the complexity of our manufacturing lines and supply chain, as well as exposure to manufacturing and supply limitations or interruptions and quality and quantity issues.

•We may be unable to validate our manufacturing for the Talis One instrument and cartridges at scale, which may impact our ability to support our research and development pipeline.

•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.

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

•Modifications to our products may require new 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.

•If we are unable to regain compliance with the listing requirements of the Nasdaq Global Market, our common stock may be delisted from the Nasdaq Global Market which could have a material adverse effect on our financial condition and could make it more difficult for you to sell your shares.

3

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,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	143,783		$	232,545
Accounts receivable, net		433			183
Inventory		2,027			—
Prepaid expenses and other current assets		4,134			3,387
Total current assets		150,377			236,115
Property and equipment, net		6,869			10,528
Operating lease right-of-use-assets		35,072			12,907
Other long-term assets		1,776			6,278
Total assets	$	194,094		$	265,828
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,111		$	5,122
Accrued compensation		3,483			6,369
Accrued liabilities		789			6,383
Operating lease liabilities, current portion		2,995			1,232
Total current liabilities		11,378			19,106
Operating lease liabilities, long-term portion		30,330			12,745
Total liabilities	$	41,708		$	31,851
Commitments and contingencies (Note 5)
Stockholders’ equity:
Series 1 convertible preferred stock, $0.0001 par value—60,000,000 shares authorized and 29,863,674 shares issued and outstanding as of September 30, 2022 and December 31, 2021; aggregate liquidation preference of $3 as of September 30, 2022 and December 31, 2021		3			3
Common stock, $0.0001 par value; 200,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 26,781,915 and 26,408,031 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		3			3
Additional paid-in capital		603,405			598,913
Accumulated deficit		(451,025	)		(364,942	)
Total stockholders’ equity		152,386			233,977
Total liabilities and stockholders’ equity	$	194,094		$	265,828

See accompanying notes to the unaudited condensed financial statements

4

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,
	2022			2021			2022			2021
Revenue
Grant revenue	$	66		$	218		$	1,010		$	7,335
Product revenue, net		730			—			3,545			—
Total revenue, net		796			218			4,555			7,335
Cost of product sold		1,236			—			6,059			—
Gross profit (loss)		(440	)		218			(1,504	)		7,335
Operating expenses:
Research and development		17,521			25,841			55,589			140,529
Selling, general and administrative		8,825			12,792			29,933			30,102
Total operating expenses		26,346			38,633			85,522			170,631
Loss from operations		(26,786	)		(38,415	)		(87,026	)		(163,296	)
Other income (expense), net		765			(3	)		943			(86	)
Net loss and comprehensive loss	$	(26,021	)	$	(38,418	)	$	(86,083	)	$	(163,382	)
Net loss per share, basic and diluted	$	(0.98	)	$	(1.49	)	$	(3.24	)	$	(8.41	)
Weighted average shares used in the calculation of net loss per share, basic and diluted		26,646,205			25,787,101			26,553,603			19,427,730

See accompanying notes to the unaudited condensed financial statements

5

Talis Biomedical Corporation

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

(in thousands, except for share amounts)

	Series 1 Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		Deficit			Equity
Balance at December 31, 2021		29,863,674	$	3		26,408,031	$	3	$	598,913	$	(364,942	)	$	233,977
Issuance of Common Stock upon exercise of stock options		—		—		65,862		—		98		—			98
Issuance of Common Stock pursuant to employee stock purchase plan		—		—		145,027		—		216		—			216
Stock-based compensation expense		—		—		—		—		1,545		—			1,545
Net loss		—		—		—		—		—		(33,051	)		(33,051	)
Balance at March 31, 2022		29,863,674	$	3		26,618,920	$	3	$	600,772	$	(397,993	)	$	202,785
Stock-based compensation expense		—		—		—		—		1,245		—			1,245
Net loss		—		—		—		—		—		(27,011	)		(27,011	)
Balance at June 30, 2022		29,863,674	$	3		26,618,920	$	3	$	602,017	$	(425,004	)	$	177,019
Issuance of Common Stock pursuant to employee stock purchase plan		—		—		120,195		—		92		—			92
Issuance of Common Stock pursuant to vesting of awards under equity incentive plan		—		—		42,800		—		—		—			—
Stock-based compensation expense		—		—		—		—		1,296		—			1,296
Net loss		—		—		—		—		—		(26,021	)		(26,021	)
Balance at September 30, 2022		29,863,674	$	3		26,781,915	$	3	$	603,405	$	(451,025	)	$	152,386

	Convertible Preferred Stock						Series 1 Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Stockholders’
	Shares			Value			Shares		Value		Shares		Value		Capital		Deficit			Equity (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

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,
	2022			2021
Operating activities
Net loss	$	(86,083	)	$	(