10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 March 31, 2024


☐	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.)
1375 West Fulton Market, Suite 700 Chicago, Illinois		60607
(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.

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 May 3, 2024, there were 31,685,827 shares of the Registrant’s common stock and preferred stock outstanding, consisting of 1,822,153 shares of common stock and 29,863,674 shares of Series 1 convertible preferred stock which is convertible into 1,990,914 shares of common stock, as adjusted for the 1-for-15 Reverse Stock Split effective July 5, 2023. The conversion ratio of the outstanding Series 1 convertible preferred stock increased and the number of shares of common stock issuable upon conversion of such Series 1 convertible preferred stock decreased in proportion to the 1-for-15 ratio of the Reverse Stock Split. Our Series 1 convertible preferred stock is a voting common stock equivalent, subject to certain limitations.

Table of Contents


		Page
	SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	1
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Condensed Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023	2
	Condensed Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023 (unaudited)	3
	Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)	4
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)	5
	Notes to Condensed Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signatures		27

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:

•

the timing and availability of strategic alternatives being reviewed by our Board of Directors and our ongoing efforts to significantly reduce our expenditures on research and development activities and taking other cost cutting measures;

•

our decision to cease operations in our Redwood City, CA laboratory and office facility and consolidate our operations to our Chicago facility due to unforeseen operational challenges, setbacks in product development timelines and volatile market conditions;

•

our expectations regarding our ability to complete a strategic transaction within estimated timeframes or at all;

•

our ability to retain key personnel;

•

regulatory clearance pathways for our products;

•

clinical trials and studies necessary to develop and commercialize our products and services;

•

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;

•

impact from future regulatory, judicial, and legislative changes or developments in the United States and foreign countries;

•

the costs and success of our research and development efforts, including the potential effects of inflation; and

•

the impact on our business and the completion of any possible strategic transaction of economic or political events or trends.

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. 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 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Talis Biomedical Corporation

Condensed Balance Sheets

(in thousands, except for shares and par value)


	March 31,			December 31,
	2024			2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	70,337		$	76,732
Accounts receivable, net		6			50
Prepaid expenses and other current assets		827			901
Total current assets		71,170			77,683
Property and equipment, net		1,628			3,030
Operating lease right-of-use-assets		8,154			12,419
Other long-term assets		1,542			1,542
Total assets	$	82,494		$	94,674
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,619		$	1,339
Accrued compensation		1,958			3,836
Accrued liabilities		992			715
Operating lease liabilities, current portion		2,902			2,882
Total current liabilities		9,471			8,772
Operating lease liabilities, long-term portion		16,339			16,786
Total liabilities	$	25,810		$	25,558
Commitments and contingencies (Note 6)
Stockholders’ equity:
Series 1 convertible preferred stock, $0.0001 par value—60,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 29,863,674 shares issued and outstanding as of March 31, 2024 and December 31, 2023; aggregate liquidation preference of $3 as of March 31, 2024 and December 31, 2023		3			3
Common stock, $0.0001 par value; 200,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 1,822,153 and 1,821,986 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Additional paid-in capital		609,677			609,074
Accumulated deficit		(552,996	)		(539,961	)
Total stockholders’ equity		56,684			69,116
Total liabilities and stockholders’ equity	$	82,494		$	94,674

See accompanying notes to the unaudited condensed financial statements

Talis Biomedical Corporation

Condensed Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except for share and per share amounts)


	Three Months Ended March 31,
	2024			2023
Revenue
Grant revenue	$	—		$	1,081
Product revenue, net		73			137
Total revenue, net		73			1,218
Operating expenses:
Cost of products sold		6			20
Research and development		2,533			13,796
Selling, general and administrative		11,651			6,399
Total operating expenses		14,190			20,215
Loss from operations		(14,117	)		(18,997	)
Other income, net		1,082			1,166
Net loss and comprehensive loss	$	(13,035	)	$	(17,831	)
Net loss per share, basic and diluted	$	(7.15	)	$	(9.84	)
Weighted average shares used in the calculation of net loss per share, basic and diluted		1,822,050			1,812,723

See accompanying notes to the unaudited condensed financial statements

Talis Biomedical Corporation

Condensed Statements of 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, 2023		29,863,674	$	3		1,821,986	$	—	$	609,074	$	(539,961	)	$	69,116
Issuance of common stock upon exercise of stock options		—		—		167		—		2		—			2
Stock-based compensation expense		—		—		—		—		601		—			601
Net loss		—		—		—		—		—		(13,035	)		(13,035	)
Balance at March 31, 2024		29,863,674	$	3		1,822,153	$	-	$	609,677	$	(552,996	)	$	56,684


	Series 1 Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Stockholders’
	Shares		Value		Shares		Value		Capital		Deficit			Equity
Balance at December 31, 2022		29,863,674	$	3		1,811,396	$	3	$	604,690	$	(477,954	)	$	126,739
Issuance of common stock for restricted stock units		—		—		233		—		—		—			—
Issuance of common stock pursuant to employee stock purchase plan		—		—		4,560		—		33		—			33
Stock-based compensation expense		—		—		—		—		1,183		—			1,183
Net loss		—		—		—		—		—		(17,831	)		(17,831	)
Balance at March 31, 2023		29,863,674	$	3		1,816,189	$	3	$	605,906	$	(495,785	)	$	110,124

See accompanying notes to the unaudited condensed financial statements

Talis Biomedical Corporation

Condensed Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2024			2023
Operating activities
Net loss	$	(13,035	)	$	(17,831	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		601			1,183
Depreciation and amortization		262			174
Non-cash lease expense		403			785
Impairment of long-lived assets		4,971			—
Changes in operating assets and liabilities:
Accounts receivable		43			182
Prepaid expenses and other current assets		76			1,291
Accounts payable		2,280			(148	)
Accrued expenses and other liabilities		(2,028	)		(2,101	)
Net cash used in operating activities	$	(6,427	)	$	(16,465	)
Investing activities
Proceeds from disposal of property and equipment		30			—
Purchase of property and equipment		—			(24	)
Net cash provided by/(used in) investing activities	$	30		$	(24	)
Financing activities
Proceeds from stock option exercises		2			—
Proceeds from issuance of common stock under employee stock plans		—			33
Net cash provided by financing activities	$	2		$	33
Net decrease in cash, cash equivalents and restricted cash		(6,395	)		(16,456	)
Cash, cash equivalents and restricted cash at beginning of period		78,274			131,967
Cash, cash equivalents and restricted cash at end of period	$	71,879		$	115,511
Supplemental disclosure of noncash investing and financing activities
Remeasurement of operating lease right-of-use asset for lease modification	$	—		$	(18,696	)

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of each of the periods shown above:


	March 31,
	2024		2023
Cash and cash equivalents	$	70,337	$	112,959
Restricted cash		—		1,010
Restricted cash – other long-term assets		1,542		1,542
Total cash, cash equivalents and restricted cash	$	71,879	$	115,511

See accompanying notes to the unaudited condensed financial statements

Talis Biomedical Corporation

Notes to Condensed Financial Statements (Unaudited)

1. Organization and nature of business

Talis Biomedical Corporation (the Company) is a molecular diagnostic company focused on advancing health equity and outcomes through the delivery of accurate infectious disease testing in the moment of need, at the point of care. Prior to the announcement to consider strategic alternatives in November 2023, the Company planned to develop and commercialize innovative products on its sample-to-answer Talis One system to enable accurate, low cost, and rapid molecular testing. The Company was incorporated in 2013 under the general laws of the State of Delaware and is based in Chicago, Illinois (IL).

Liquidity

The Company has incurred significant losses and negative cash flows since inception, including a net loss of $13.0 million for the three months ended March 31, 2024.

Management expects to continue to incur additional losses in the foreseeable future while the Board of Directors considers strategic alternatives for the Company, including without limitation, equity or debt financing alternatives, an acquisition, merger, reverse merger, divestiture of assets, licensing or other strategic transactions and a voluntary reorganization, dissolution or liquidation of the Company. The Company’s activities are subject to significant risks and uncertainties, including failing to secure a strategic alternative or additional funding to continue to develop the Company’s current technology and to achieve clinical approval of its products.

As of March 31, 2024 the Company had unrestricted cash and cash equivalents of $70.3 million and $1.5 million of restricted cash. The Company expects its existing unrestricted cash and cash equivalents will be sufficient to fund its operations through at least one year from the date these financial statements are issued. The Company expects to finance its future operations with its existing unrestricted cash and cash equivalents and through one or more possible strategic alternatives. However, there is no guarantee that any of these strategic opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing stockholders.

Reverse Stock Split

On June 30, 2023, the Company filed a certificate of amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of Delaware to effect a 1-for-15 reverse stock split of the shares of the Company’s common stock, par value $0.0001 per share, effective as of 5:00 p.m., Eastern Time, on July 5, 2023 (the “Reverse Stock Split”). On this date, every 15 issued and outstanding shares of common stock were converted into one share of common stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole share. The number of outstanding shares of common stock was reduced from approximately 26.9 million shares to approximately 1.8 million shares.

The Reverse Stock Split did not change the Company's authorized shares of common stock and Series 1 convertible preferred stock, which remained at 200,000,000 and 60,000,000 shares, respectively. The Reverse Stock Split did not change the par value of the common stock and, therefore, the Company reclassified an amount equal to the reduction in the number of shares of common stock at par value to additional paid-in capital. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise of stock options and the settlement of restricted stock units and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plans, see Note 8. Additionally, the Reverse Stock Split had no impact on the number of shares of the Company's Series 1 convertible preferred stock issued and outstanding. However, the conversion ratio of the outstanding Series 1 convertible preferred stock increased and the number of shares of common stock issuable upon conversion of such preferred stock decreased in proportion to the 1-for-15 split ratio, see Note 7.

All share and per share amounts for common stock in these condensed financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.

2. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the rules and regulations of the

Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, these unaudited condensed financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed financial statements include all adjustments necessary to fairly state the financial position and the results of our operations and cash flows for interim periods in accordance with GAAP. All such adjustments are of a normal, recurring nature. The results for any interim period are not necessarily indicative of the results that may be expected for the year ended December 31, 2024 or for any future period.

The condensed balance sheet presented as of December 31, 2023 has been derived from the audited financial statements as of that date. The condensed financial statements and notes as presented do not contain all information that is included in the annual financial statements and notes thereto of the Company. The condensed financial statements and notes included in this Quarterly Report should be read in conjunction with the financial statements and notes included in the Company’s 2023 Annual Report on Form 10-K (Annual Report) filed with the SEC.

The significant accounting policies used in preparation of these condensed financial statements as of and for the three months ended March 31, 2024 are consistent with those described in our Annual Report.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions, including knowledge about current events and expectations about actions the Company may take in the future, that the Company believes are reasonable under the circumstances. Actual results could vary from the amounts derived from management’s estimates and assumptions.

Concentration of credit risk and other risks and uncertainties

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts receivables. The Company’s cash and restricted cash are deposited in accounts at large financial institutions and its cash equivalents are primarily held in prime and U.S. government money market funds. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash, restricted cash and cash equivalents are held.

Impairment of long-lived assets

A long-lived asset may be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset or asset group's carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset to its fair value and a charge to operating expense. The Company reviews the carrying amount of its long-lived assets, including property and equipment, for impairment whenever events indicate that the carrying amount of the assets may not be fully recoverable.

Operating lease impairment charges reduces the carrying value of the associated right-of-use assets to their estimated fair values. The fair values are estimated using a discounted cash flows approach on forecasted future cash flows derived from current market data including discount rate, rent and rent escalation rates, downtime and abatement assumptions. The fair value of our right-of-use assets may change as a result of a change in any of these inputs.

As the Company’s market capitalization is below the carrying value of equity, the Company regularly assesses if its long-lived assets are impaired by comparing the estimated fair value of the long-lived assets to their respective carrying amounts. During the three months ended March 31, 2024, the Company recorded long-lived asset impairment charges of $1.1 million related to property and equipment and $3.9 million related to right-of-use assets within selling, general and administrative expenses in the condensed statement of operations and comprehensive loss. The impairment losses primarily relate to the right-of-use asset and property and equipment that the Company used in its operations at its Redwood City laboratory and office facility prior to its decision to abandon this location and consolidate all of its operations to its Chicago office during the three months ended March 31, 2024.

There were no impairment charges recorded for the three months ended March 31, 2023.

New accounting pronouncements

Recently issued accounting pronouncements

There are no accounting pronouncements pending at March 31, 2024 that we expect to have a material impact on our financial statements or disclosures.

Recently adopted accounting standards

We did not adopt any new accounting standards during the three months ended March 31, 2024.

3. Fair value measurement

The following table summarizes the Company's financial assets carried at fair value and measured on a recurring basis by level within the fair value hierarchy (in thousands):


	March 31, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	63,009	$	—	$	—	$	63,009
Total assets measured at fair value	$	63,009	$	—	$	—	$	63,009


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (money market funds)	$	72,143	$	—	$	—	$	72,143
Total assets measured at fair value	$	72,143	$	—	$	—	$	72,143

4. Balance sheet components

November 2023 RIF liability

On November 14, 2023, in connection with our plans to consider strategic alternatives, reduce costs and preserve cash, we announced a reduction in force of approximately 90% of our work force ("November 2023 RIF"). As part of these actions, we provided notices to the impacted employees under the Worker Adjustment and Retraining Act ("WARN Act") for job eliminations that occurred through March 2024.

During the three months ended March 31, 2024, we incurred $0.2 million of expenses related to the November 2023 RIF which consisted primarily of costs related to retention agreements for employees if they maintain satisfactory job performance and remain employed with the Company through the completion of a sale, merger or a voluntary reorganization, liquidation or dissolution of the Company. Expenses related to the November 2023 RIF are included in Selling, general and administrative and Research and development expenses in the condensed statement of operations and comprehensive loss.

Depending on the outcome of our plans to consider strategic alternatives, the Company expects to incur approximately $0.5 million of additional expenses related to the November 2023 RIF, substantially all of which will consist of charges related to the staff reduction.

The following table summarizes the activity for the November 2023 RIF accrued liability (in thousands):


	Three Months ended March 31, 2024
Balance at December 31, 2023	$	2,330
Charges		242
Cash Payments		(1,527	)
Balance at March 31, 2024	$	1,045

The November 2023 RIF accrued liability is included in Accrued Compensation on the condensed balance sheet.

5. Revenue

Product revenue, net

The Company operates in one reportable segment. There were no sales to customers outside of the United States during the three months ended March 31, 2024 and 2023.

Grant revenue and receivables

NIH grant

In May 2018, the Company was awarded a grant from the NIH for the Diagnostics via Rapid Enrichment, Identification, and Phenotypic Antibiotic Susceptibility Testing of Pathogens from Blood project. In April 2023, the Company exercised a one-year option under the grant, extending the term through April 2024. There is $0.4 million in additional funding available under the grant as of March 31, 2024, which the Company does not expect to fully utilize.

The Company did not recognize any revenue related to this grant during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company recognized $1.1 million of revenue related to this grant.

6. Commitments and contingencies

Operating leases

In March 2023, the Company entered into a lease termination agreement with the landlord of its former Redwood City, CA facility. The original term of the lease commenced in June 2022 and was for an initial term of 10.5 years. As a result of this modification, the Company remeasured the lease liability and the corresponding right-of-use asset resulting in a reduction of each by $18.7 million. The Company incurred immaterial customary termination and broker fees during the three months ended March 31, 2023. The lease of our former Redwood City, CA facility was terminated on May 12, 2023.

In March 2023, the Company entered into a sublease for laboratory and office space in its current Redwood City, CA facility. The sublease is for a term of 7 years, with no option to extend. The minimum annual commitment under the new sublease is approximately $1.0 million with fixed escalations of 3.5% per annum. The sublease commenced for accounting purposes on May 1, 2023 and the Company recorded a lease liability and corresponding right-of-use asset and liability of $7.3 million. While the sublease is still in effect, in November 2023, the Company decided to cease operations in its Redwood City facility. During the three months ended March 31, 2024, the Company abandoned the Redwood City, CA facility and consolidated all of its operations to its Chicago office.

The Company recorded long-lived asset impairment charges related to right-of-use asset for its Redwood City laboratory and office facility of $3.9 million during the three months ended March 31, 2024. There were no impairment charges recorded during the three months ended March 31, 2023. Refer to Note 2, “Long-lived asset impairment” for more information.

The undiscounted future lease payments for operating leases as of March 31, 2024 are as follows (in thousands):


	Operating Leases
2024 (remainder)		2,237
2025		3,055
2026		3,144
2027		3,235
2028		3,329
2029 and thereafter		9,177
Total future minimum lease payments		24,177
Less: imputed interest		(4,936	)
Present value of operating lease liabilities		19,241
Less: current portion of lease liabilities		(2,902	)
Noncurrent portion of lease liabilities	$	16,339

Standby letters of credit

In January 2022, in conjunction with the Company’s former Redwood City, CA operating lease, the Company entered into a standby letter of credit (LOC) in the amount of $1.0 million to secure the lease through its expiration. In March 2023, the Company entered into a lease termination agreement with the landlord of its former Redwood City, CA facility, which accelerated the lease termination date to May 12, 2023. The Company is required to maintain a cash balance of $1.0 million as collateral for the LOC until all criteria in the termination agreement have been met. During the third quarter of 2023 all the criteria in the termination agreement were met and the landlord released the LOC of $1.0 million, which is now classified within cash and cash equivalents on the condensed balance sheet at March 31, 2024 as compared to restricted cash at March 31, 2023.

In March 2023, the Company entered into a sublease for a future laboratory and office space in a Redwood City, CA facility. The Company is required to hold a LOC in the amount of $0.7 million to secure this lease through expiration. The Company is required to maintain a cash balance of $0.7 million as collateral for the LOC, which has been classified in other long-term assets on the condensed balance sheet at March 31, 2024, because it is unavailable for a period longer than one year from the balance sheet date.

In conjunction with the Chicago, IL laboratory and office space lease, the Company is required to hold an additional LOC in the amount of $0.8 million to secure this lease through its expiration. The Company is required to maintain a cash balance of $0.8 million as collateral for the LOC, which is classified in other long-term assets on the condensed balance sheet at March 31, 2024, because it is unavailable for a period longer than one year from the balance sheet date.

The Company has not drawn upon any LOC through March 31, 2024.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, customers and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. The Company also provides indemnification to directors and officers of the Company to the maximum extent permitted under applicable Delaware law. The maximum potential amount of future payments that the Company could be required to make under these indemnification agreements is, in many cases, unlimited. As of March 31, 2024, the Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Contingencies

The Company is party to certain legal matters arising in the ordinary course of its business. In addition, third parties may, from time to time, assert claims against us in the form of letters and other communications. The Company records a provision for contingent losses when it is both probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. When management determines that it is not probable, but rather reasonably possible that a liability has been incurred at the date of the financial statements, management discloses such contingencies and the possible loss or range of loss if such estimate can be made. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Circumstances change over time and actual results may vary significantly from estimates.

On or about January 7, 2022, John Modrak filed a class action in the United States District Court for the Northern District of California against the Company, certain of its officers and directors, and J.P. Morgan Securities LLC, BofA Securities, Inc., Piper Sandler & Co., and BTIG, LLC, underwriters of the Company’s February 2021 initial public offering (“IPO”), captioned as Modrak v. Talis Biomedical Corp., et al., No. 3:22-cv-00105, purportedly on behalf of shareholders who purchased shares of the Company’s stock that were registered in the Company’s IPO. On February 18, 2022, Karen Mitcham filed a substantively identical lawsuit in the same court captioned as Mitcham v. Talis Biomedical Corp., et al., No. 3:22-cv-01039-JD, against the Company, and the same officers and directors as the Modrak lawsuit. These two cases were consolidated and co-lead plaintiffs were appointed as mandated by the applicable federal securities laws. On December 9, 2022, the Court granted the Company’s motion to dismiss and gave plaintiffs leave to amend their consolidated complaint. On January 13, 2023, the plaintiffs filed an amended complaint, asserting claims for violation of Section 11 of the Securities Act of 1933 (“Securities Act”) against all defendants and Section 15 of the Securities Act against the individual defendants. The amended complaint alleges that the Company’s registration statement and prospectus issued in connection with the Company’s IPO was false and misleading, and omitted to state material adverse facts, related to (1) instrument manufacturing, (2) the reliability and accuracy of the Company’s Talis One COVID-19 test, and (3) the comparator test used in the Company’s primary study in support of its EUA application for the Talis One COVID-19 Test System. The amended complaint seeks unspecified damages under Sections 11 and 15 of the Securities Act, reasonable attorneys’ fees, and other costs. The amended complaint does not assert claims against the above referenced underwriters. On April 28, 2023, the Court denied our motion to

dismiss. On February 9, 2024, the Court certified the class and appointed plaintiff Martin Dugan as class representative. Discovery is ongoing. Trial is currently set for February 24, 2025. The Company has not recorded an accrual related to this matter as of March 31, 2024 as it determined that any such loss contingency was not probable or reasonably estimable.

On or about March 29, 2024, Kriya Therapeutics, Inc., filed an action in the Superior Court of the State of California, County of San Mateo, against the Company captioned Kriya Therapeutics, Inc. v. Talis Biomedical Corporation, Case No. 24-CIV-01947. The complaint alleges that the Company breached the March 2023 sublease for laboratory and office space in its current Redwood City, CA facility referenced above by: (i) allegedly failing to pay rent and other costs allegedly due under the sublease; (ii) allegedly abandoning the premises; and (iii) allegedly failing to maintain certain maintenance agreements for the premises. The complaint seeks unspecified damages, pre- and post-judgment interest, costs of suit including attorneys’ fees and other unspecified costs. The Company’s response to the complaint is due on May 9, 2024. The action has been assigned for all purposes to the Honorable V. Raymond Swope in Department 23 of the Superior Court for the State of California, County of San Mateo. An initial case management conference has been set before the Civil Commissioner of the court for August 28, 2024. No trial date has been set in the action. The Company has not recorded an accrual related to this matter as of March 31, 2024 as it determined that any such loss contingency was not probable or reasonably estimable. In accordance with the provisions of Accounting Standards Codifications (ASC), Topic 842, Leases, the Company recognized a liability for all unpaid lease payments.

Other than the litigation matters discussed above, the Company currently does not believe that the ultimate outcome of any of the matters is probable or reasonably estimable, or that these matters will have a material adverse effect on its business; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation and other negotiations can have an adverse impact on the Company because of litigation and settlement costs, diversion of management resources and other factors. Legal costs are expensed as incurred.

7. Stockholders’ equity

Common stock

On July 27, 2022, the Company received a notice (Notice) from the Nasdaq Stock Market (Nasdaq) that the Company was not in compliance with the $1.00 minimum bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5450(a)(1) (Minimum Bid Price Requirement), as the minimum bid price of the Company’s common stock had been below $1.00 per share for thirty-one (31) consecutive business days as of the date of the Notice. On January 24, 2023, the Company transferred the listing of its securities to the Nasdaq Capital Market (Capital Market) and received notice from Nasdaq indicating that, while the Company had not regained compliance with the Minimum Bid Price Requirement, Nasdaq determined that the Company was eligible for an additional 180-day period, or until July 24, 2023, to regain compliance. We committed to effectuating a reverse stock split by the end of the second compliance period, if necessary, to regain compliance with the Minimum Bid Price Requirement. The Notice had no other immediate effect on the listing of the Company’s common stock, which trades on the Capital Market under the symbol “TLIS.”

Effective July 5, 2023, the Company completed a 1-for-15 reverse stock split of its issued and outstanding shares of common stock, as further described in Note 1. As a result of the Reverse Stock Split, every 15 shares of common stock issued and outstanding were converted into one share of common stock with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole share. The rights and privileges of the holders of shares of common stock are unaffected by the Reverse Stock Split.

The common stock traded on an as-adjusted basis upon market open on July 6, 2023. The purpose of the Reverse Stock Split was to enable the Company to regain compliance with the requirements of Minimum Bid Price Requirement. On July 20, 2023, we received notice from Nasdaq that we had regained compliance with the Minimum Bid Price Requirement.

The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock. All share and per share amounts for common stock in these financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in the number of shares of common stock at par value to additional paid-in capital.

Convertible preferred stock

As of March 31, 2024 and December 31, 2023 there were 29,863,674 shares of Series 1 convertible preferred stock issued and outstanding. There were 60,000,000 shares of Series 1 convertible preferred stock with a par value of $0.0001 per share authorized as of March 31, 2024 and December 31, 2023.

The Reverse Stock Split had no impact on the number of shares of the Company’s Series 1 convertible preferred stock issued and outstanding. However, the conversion ratio of the outstanding Series 1 convertible preferred stock increased and the number of shares of common stock issuable upon conversion of such Series 1 convertible preferred stock decreased in proportion to the 1-for-15 ratio. The rights and privileges of the holders of shares of Series 1 convertible preferred stock are unaffected by the Reverse Stock Split.

8. Stock-based compensation

Effective July 5, 2023, the Company completed a 1-for-15 Reverse Stock Split of its issued and outstanding shares of common stock, as further described in Note 1 and Note 7. All stock options and restricted stock units outstanding immediately prior to the Reverse Stock Split, as well as strike price and fair value amounts, were adjusted pursuant to the terms of the Company’s equity incentive plans to give effect to the Reverse Stock Split. The number of shares of common stock issuable upon the exercise of each stock option and the settlement of each restricted stock unit decreased in proportion to the 1-for-15 ratio and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plans was proportionately adjusted to give effect to the Reverse Stock Split.

Stock options

A summary of stock option activity during the three months ended March 31, 2024 is as follows:

SEC Form 10-Q filed by Talis Biomedical Corporation