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Delaware
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27-3019889
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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9920 Jefferson Blvd.
Culver City, California
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90232
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.0001 per share
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The NASDAQ Global Select Market
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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x
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Smaller reporting company
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x
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Emerging growth company
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x
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the structural change in the market for healthcare in the United States, including uncertainty in the healthcare regulatory framework and regulatory developments in the United States and foreign countries;
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the evolving treatment paradigm for cancer, including physicians’ use of molecular information and targeted oncology therapeutics and the market size for molecular information products;
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physicians’ need for precision medicine products and any perceived advantage of our solutions over those of our competitors, including the ability of our comprehensive platform to help physicians treat their patients’ cancers;
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our ability to generate revenue from sales of products enabled by our molecular and biometric information platforms to physicians in clinical settings;
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our ability to increase the commercial success and to accelerate commercial growth of our sequencing and molecular analysis solutions and our other products and services;
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our plans or ability to obtain reimbursement for our sequencing and molecular analysis solutions, including expectations as to our ability or the amount of time it will take to achieve successful reimbursement from third-party payers, such as commercial insurance companies and health maintenance organizations, and government insurance programs, such as Medicare and Medicaid;
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our ability to effectively manage our growth, including the rate and degree of market acceptance of our solutions;
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our ability to offer new and innovative products and services, including new features and functionality for our existing products and services;
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our ability to attract new partners and clients;
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our ability to estimate the size of our target market;
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our ability to maintain and enhance our reputation and brand recognition;
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consolidation in the healthcare industry;
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competition which could limit our ability to maintain or expand market share within our industry;
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restrictions and penalties as a result of privacy and data protection laws;
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our use of “open source” software;
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our ability to use, disclose, de-identify or license data and to integrate third-party technologies;
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data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;
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breaches or failures of our security measures;
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our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our users;
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risks related to future acquisition opportunities;
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the requirements of being a public company;
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our ability to attract and retain key personnel;
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our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;
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our ability to obtain and maintain intellectual property protection for our solutions and not infringe upon the intellectual property of others;
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our ability to implement our comprehensive restructuring plan that includes a wide range of organizational efficiency initiatives and other cost reduction opportunities;
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our financial performance expectations, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in research and development, sales and marketing and general and administrative expenses, and our ability to achieve and maintain future profitability; and
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our expectations regarding our ability to comply with Nasdaq continued listing standards.
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Page
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PART I.
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Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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PART II.
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6.
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Selected Financial Data
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Item 7.
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Item 7A.
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Item 8.
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Consolidated Financial Statements and Supplementary Data
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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Item 9A.
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Item 9B.
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Other Information
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PART III.
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Item 14.
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Principal Accounting Fees and Services
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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Exhibits index
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1.
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A rapid evolution from traditional fee-for-service to patient-centered and patient-empowered, value-based models driven by quantifiable measures of outcomes relative to cost. Unsustainable escalating healthcare costs, which we believe are due to broken fee-for-service models, are driving many stakeholders and governments toward alternative delivery models. Despite significant investments in Electronic Health Records ("EHRs") and other technologies designed to enable the transition to more value-based care, we believe that, in a fee-for-service model, the economic incentives generally discourage coordination among healthcare stakeholders and encourage volume-driven (rather than outcomes-driven) decision-making. This model results in healthcare and financial data that remains largely segregated into “walled gardens.” Thus, patient data often remains static and cannot be easily shared or interpreted due to siloed legacy proprietary platforms that lack interoperability.
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2.
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A paradigm shift to molecularly precise and real-time biometric-driven medicine, with both massive volumes and rapidly expanding repositories of complex data from traditional and novel sources. Advances in molecular medicine require healthcare providers to promptly aggregate, evaluate and synthesize hundreds to thousands of relevant facts in real time to arrive at a single patient decision. Molecular profiling often generates hundreds of gigabytes of data per patient, which must then be transported, stored, analyzed and interpreted with supercomputing and/or high-performance computing environments. We believe the rapid pace of medical advancements, the massive amount of molecular data and the frequency of biometric information is overwhelming many providers’ ability to process that information at the point of care, thereby inhibiting the paradigm shift to individualized medicine.
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Driving global reimbursement and adoption while emphasizing reimbursed testing for our molecular analysis solutions. To drive the profitable growth of our molecular analysis service business in the United States, we are working to pursue FDA 510(k) authorization and Medicare coverage for the core elements of our GPS Cancer laboratory developed test offering. In the fourth quarter of 2019, we received FDA 510(k) authorization for “Omics Core”, the nation’s first FDA authorized whole exome tumor-normal in vitro diagnostic (IVD) that measures overall tumor mutational burden (TMB) in cancer tissue, completing a key step towards achieving Medicare coverage. We continue to pursue this coverage through the CMS contractor programs for molecular diagnostics (MolDX). In parallel, we are focused on disciplined growth of paid commercial tests, through our existing payer/employer contracted base and through an emphasis on cash-pay patients in the marketplace.
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Increasing sales of NantHealth solutions to healthcare providers, payers, pharma, and self-insured employers. We are marketing NantHealth solutions to healthcare providers transitioning from fee-for-service reimbursement models to value-based care models in pursuit of improved patient outcomes and lower costs. We believe we are positioning NantHealth as a next-generation payer intermediary and partner with healthcare payers and self-insured employers as they roll out value-based model partnerships and transition to value-based precision care.
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Expanding our business in international markets. We are executing our go-to-market strategies internationally, creating global awareness of our brand and taking steps towards our goal of broader adoption worldwide.
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Developing new features and functionality for NantHealth solutions. We are continuing to make significant R&D investments to create new features and functionality with NantHealth’s solutions, driving additional customer value and aiming to our vision of improved patient outcomes and lower cost of care. Also, we are continuing to emphasize the creation of valued data assets and analytics capabilities which will position to drive further value in the future.
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Complementing internal growth with strategic acquisitions. We believe opportunities exist for us to enhance our competitive position by acquiring additional companies with complementary products and technologies and/or acquiring rights to proprietary products or technologies from third parties.
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The knowledge domain, including academic centers, scientific institutions and companies that discover and commercialize medical and scientific knowledge;
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The care delivery domain, including hospitals, community practices, physicians and other constituents that deliver healthcare to patients; and
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The payer domain, including insurers, governments and self-insured employers that administer and provide funding to the healthcare system.
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Improved pharmacoeconomics, including the use of more cost-effective drugs approved for other indications (such as asthma and diabetes) in cancer treatment regimens;
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A clearer understanding of critical drug resistance information;
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Increased adoption of bundled payments as providers and payers recognize the efficiency of optimized therapies; and
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Increased awareness and published clinical results demonstrating the benefits of evidence-based molecular medicine.
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Cancer Care Solutions. Our comprehensive set of interoperability, advanced molecular analysis, risk stratification and decision support solutions (Eviti) can enable our clients to improve decision-making and coordinate care across the healthcare continuum. Our GPS Cancer molecular profiling solution is the only comprehensive and commercially available molecular profiling solution that integrates whole genome/exome (comparing both a patient’s normal and tumor tissue), RNA and molecular pathways information into a clinical report that analyzes this data and identifies actionable targets and potential clinical treatment options.
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Provider Solutions. Our provider solution software, comprised of NaviNet and Eviti Advisor, leverage the data available on our systems infrastructure to enable patient-centered engagement and coordination across care locations. Our NantHealth software solutions include clinical and administrative workflows including eligibility and benefits, claims, referrals and authorizations management solutions.
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Payer Solutions. Our NantHealth payer software solutions, including NaviNet Open and Eviti Connect, establish daily access to the clinical practice and caregiver and leverage the data available on our systems infrastructure to facilitate reduction in overall administrative costs and payment for value. We believe our position between the payer and the provider allows us to align incentives as a next-generation payer intermediary, to help payers ensure consistent evidence-based treatment pathways and to accelerate pre-adjudication and lower administrative overhead for providers. This can ultimately drive quality of care and streamline workflows while improving control over the administrative and operating costs associated with eligibility and benefits, claims processing, referrals, authorizations, information exchange and review utilization. Our multi-payer collaboration solution, NaviNet Open, offers provider end users a uniform set of workflows and services across many or all the payers with whom they routinely collaborate. This multi-payer experience benefits payers and providers alike. Providers can benefit from a uniform experience and toolset across multiple payer relationships, and the payer can benefit from the uniform application of best practices, tools, and options, as well as the reduction in costly errors and phone-based interactions that can stem from a non-uniform end-user experience.
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Access to next-generation genomic analysis technologies with near real-time bioinformatics, provided as part of GPS Cancer through our affiliate, NantOmics, LLC ("NantOmics"); and
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Access to a secure HIPAA-compliant cloud environment.
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Avoiding ineffective therapy usage: By providing molecular insight into sensitivity or resistance to specific drugs, GPS Cancer may help oncologists identify regimens that are unlikely to benefit the patient. This insight may help avoid use of high-cost therapies that are unlikely to help the patient.
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Decreasing treatment cycles through improved therapy selection: Therapies selected based on molecular evidence of likely benefit may require fewer cycles to achieve response.
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Increasing clinical trial participation: For many advanced cancers, standard-of-care drug options are quickly exhausted, and clinical trials represent a source of additional options for patients. GPS Cancer helps identify trials that may be applicable to the patient based on their tumor’s molecular profile.
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List targets based on DNA/RNA analysis that may be treated by FDA-approved drugs either in an on-label or off-label manner based on peer-reviewed clinical data;
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List findings that suggest a particular targeted therapy which the physician would otherwise use may not work due to a potential resistance marker;
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Provide information on key biomarkers that inform the use of immunotherapy, including PD-L1, tumor mutational burden, and microsatellite instability (MSI);
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Provide information on key pharmacogenomic markers of chemotherapy drug toxicity and thromboembolic risk;
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Provide the information necessary for the physician to decide whether it is appropriate to place the patient in a clinical trial; and
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Provide key information based on germline sequencing, including germline mutations in cancer predisposition genes and confirmation of provenance - i.e., that the tumor being tested comes from the intended patient.
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Device Connectivity Suite: Our device connectivity and near real-time biometric software and hardware suite allow us to aggregate data from one of the largest libraries of in-hospital and remote medical devices on the market. Utilizing our hardware and software platform, we can extract data from various disparate provider systems, payer systems and consumer devices across the care continuum. Our offerings can enable the near real-time collection and integration of quantifiable biometric and phenotypic data into EHRs and other clinical systems, resulting in the enrichment of the holistic patient health record which can improve care and treatment. In addition, our offerings can improve care coordination and data aggregation across care settings to facilitate transitioning patients to lower cost care settings such as a skilled nursing facility or the patient’s home.
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DCX (formerly DeviceConX): DCX is a device data normalization software that connects to hundreds of inpatient and outpatient clinical devices and converts data into a standard format that can be integrated into EHR systems and other clinical systems. This offering provides physicians with a real-time and integrated snapshot of a patient’s physiological data. Our software is scalable and can be embedded across the care continuum, including inpatient, outpatient and home settings. In addition, our platform can enable connectivity with both networked and non-networked medical devices and can eliminate the need for manual data entry by clinicians, which can result in time savings and potentially eliminate transcription errors and adverse events in patients. DCX is installed in over 390 client sites, including active hospitals/facilities, across the United States, Canada, Denmark, Sweden, and Singapore.
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HBox: The HBox is an Internet of Medical Things, or IoMT, and Internet of Things, or IoT, hardware hub that provides wired or wireless connectivity to multiple monitoring devices and transmits the data into remote monitoring centers and third-party EHR systems, giving providers near real-time access to physiological data. Several home monitoring devices have been tested and integrated with the HBox to support remote monitoring, readmission management and care coordination solutions and services. The HBox integrates with various weight scales, pulse oximeters and blood pressure monitors and mobile health devices. For non-networked medical devices, we use our proprietary Device Escort adapter and HBox to wirelessly connect to nearly any medical device that is capable of outputting discrete medical data. HBox is currently installed at client sites in the United States, Canada, Denmark, Sweden, and Singapore.
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VCX (formerly Vitals ConX): In addition to DCX and HBox, we also provide a tablet-optimized application that sits on top of our DCX platform to provide clinicians more convenient and ubiquitous access to capture a wide array of patient vitals such as respiratory rate, blood pressure and heart rate in addition to performing patient assessments. Our solution can enable a more efficient patient rounding and assessment workflow by providing a near real-time stream of data from the patient's bedside unlike periodic sampling typically entered into an EHR hours later.
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Plan Central: Provides our health plan partners with the ability to deliver a branded custom-content experience to their provider networks, allowing plans to own and manage their communications to users in support of their business. Plan Central is valued by our partners as a single access point for all provider and end-user communications, transactions, and content, delivering ease of use and increased provider satisfaction.
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Eligibility and Benefits: Delivers membership verification, insurance coverage, and payment information, such as copayments, deductibles, and benefit intelligence to provider offices in real-time; information that is highly valued by providers and members alike. Provider offices can verify insurance and benefit coverage at the time of a patient visit or as part of the billing cycle.
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Claims Status Inquiry: Lets provider offices access detailed financial and claim status information in real-time; automating the delivery of claim receipt confirmation, adjudication status, and payment details. This eliminates the need for provider offices to call health plans directly to maintain a healthy revenue cycle and improves provider satisfaction.
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Claims Management: A collection of powerful claim applications that consist of Claim Submission, pre- and post-adjudication Corrections and Adjustments, Claim Attachments, Claim Investigation, Claim Appeals and a multi-payer Claims Log where users manage their claim submissions. Our integrated Claims Management solution simplifies payment efforts by eliminating phone calls, costly paper claims, and other manual processes associated with claims follow-up, correction, and resubmission. Providers now gain access to a powerful set of claim tools, augmenting provider systems with self-service access, or without needing a sophisticated EMR or practice management system at all.
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Referrals: Lets provider offices submit and access referrals in real-time, guiding patients to the best specialist at the most affordable cost. Referrals empowers provider staff with more referral information - such as benefit tiers, preferred providers, and patient payment implications. Administrative staff becomes better equipped to navigate complex sub-networks, while health plans optimize in-network referrals to reduce leakage and lower costs.
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Authorizations: Lets provider offices submit authorizations to health plans and access real-time authorization information, such as status updates and approvals. The authorizations workflow is optimized to make it simple for health plans to configure fields and add additional business logic and links to third party applications. Providers can upload any documents needed for authorization processing, further streaming workflows and lowering costs.
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Document Exchange: Modernizes communication between health plans and providers by transmitting administrative and clinical information in near real-time. This application lets health plans and providers share risk adjustment information, quality measurement data, and performance reports, among other data. Providers are notified of care gaps within their existing workflows, making it easy to upload supporting documents.
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Direct sales organization: We leverage domain and subject matter expertise, market credibility, thought leadership, and relationships of our executives, senior management, and product leaders in our sales efforts. Our direct sales organization is by product ownership. These direct coverage teams include both sales professionals searching for new accounts and client engagement sales professionals responsible for developing existing accounts. Furthermore, sales professionals have unique expertise and specialized coverage for health plans, self-insured employers, health systems, and individual providers. Our account management organization is responsible for the continuity of current client relationships and the expansion of those relationships to include additional solutions and services.
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Resale and channel partnership: In the United States, we have entered strategic resale arrangements with major partners, including EHR vendors (including Allscripts), in-hospital medical devices manufacturers and health plans who resell our solutions to their customer base. Internationally, we have entered resale arrangements with other strategic distributors to accelerate our market adoption. Reseller revenue in 2019 and 2018 was $4.4 million and $14.5 million, respectively.
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Molecular analysis vendors, such as Caris Life Sciences, Inc., Foundation Medicine, Inc., Guardant Health, Inc., Paradigm Diagnostics, Inc., Personal Genome Diagnostics, Inc. and Tempus Labs;
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Payer-provider collaboration vendors, such as Availity, LLC, Change Healthcare, Inc., Experian Information Solutions, Inc. (including its Passport division), Healthx, Inc. and Health Trio, LlC;
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Payer-Provider Disease Treatment Decision Support vendors include The Advisory Board Company, Castlight Health, Evolent Health, eviCore Healthcare, HealthCatalyst, Inc., or HealthCatalyst, International Business Machines Corporation, or IBM, Inovalon Holdings, Inc., or Inovalon.
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Breadth and depth of application functionality;
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Ease of use and performance;
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Network strength and level of user adoption;
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Client testimonials and recommendations;
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Breadth of client base;
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Cloud-based delivery model;
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Competitive and understandable pricing;
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Ability to deliver actionable information in a relevant time period;
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Ability to demonstrate customer’s ROI and improvements to clinical outcomes;
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Size and scope of payer clinical policy knowledge;
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Sales and marketing capabilities of vendor;
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Financial stability of vendor;
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Ability to integrate with legacy enterprise infrastructures and third-party applications; and
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Ability to innovate and respond rapidly to client needs and regulatory changes.
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Clarity: conveying our mission clearly, coherently and intelligibly, and empowering our stakeholders with information required to make good decisions.
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Empathy: understanding and sharing the feelings of others by putting yourself in another’s place.
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Collaboration: working with others to create solutions.
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Pioneering: exploring and developing original solutions that make a meaningful impact on our community, the market, or society at large.
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Community: creating a feeling of identity and fellowship with others resulting from common values and goals.
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Integrity: always being honest, honorable and accountable with adherence to moral and ethical principles.
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increase our sales and marketing efforts to drive market adoption of NantHealth solutions (including GPS Cancer and NantHealth software solutions);
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address competitive developments;
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fund development and marketing efforts of any future platforms and solutions;
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expand adoption of GPS Cancer and Eviti platform solutions into critical illnesses outside of oncology;
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acquire, license or invest in complimentary businesses, technologies or service offerings; and
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finance capital expenditures and general and administrative expenses.
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our success in driving adoption of our molecular analysis solutions, including GPS Cancer;
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our success in making our molecular analysis solutions reimbursable by payers;
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our ability to achieve revenue growth;
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the cost of expanding our products and service offerings, including our sales and marketing efforts;
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our ability to achieve interoperability across all of our acquired businesses, technologies and service offerings to deliver networking effects to our clients;
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the effect of competing technological and market developments;
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costs related to international expansion;
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costs associated with clinical studies; and
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the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
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our ability to convince key thought leaders, physicians and caregivers and other key oncology stakeholders of the clinical utility of our entire product offering and its potential advantages over existing sequencing tests, specifically, the advantages of our RNA sequencing, which maps oncology disease pathways versus a patient’s own germline;
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the willingness of physicians, self-insured employers, payers and healthcare providers to utilize our sequencing and molecular analysis services; and
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the willingness of commercial third-party payers and government payers to reimburse for our molecular services, the scope and amount of which will affect patients’ willingness or ability to pay for our molecular analysis services and likely heavily influence our customers’ decisions to recommend our molecular analysis services.
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generate sufficient preclinical or other data to support the initiation or continuation of clinical studies;
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obtain regulatory authorization, or feedback on clinical study design, to commence a clinical study;
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identify, recruit and train suitable clinical investigators;
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reach agreement on acceptable terms with prospective Contract Research Organizations, or CROs, and clinical study sites;
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obtain and maintain institutional review board, or IRB, approval at each clinical study site (where required);
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identify, recruit and enroll suitable patients to participate in a clinical study;
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have a sufficient number of patients complete a clinical study or return for post-treatment follow-up;
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ensure clinical investigators observe clinical study protocol or continue to participate in a clinical study;
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address any patient safety concerns that arise during the course of a clinical study;
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address any conflicts with new or existing laws or regulations;
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add a sufficient number of clinical study sites;
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timely manufacture sufficient quantities of product candidate for use in clinical trials; or
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raise sufficient capital to fund a clinical study.
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the price, performance and functionality of our offerings;
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the availability, price, performance and functionality of competing solutions;
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our ability to develop complementary applications and services;
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our continued ability to access the pricing and claims data necessary to enable us to deliver reliable data in our cost estimation and price transparency offering to customers;
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the stability, performance and security of our hosting infrastructure and hosting services;
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changes in healthcare laws, regulations or trends; and
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the business environment of our clients, in particular, headcount reductions by our clients.
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damage from fire, power loss and other natural disasters;
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communications failures;
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software and hardware errors, failures and crashes;
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security breaches, computer viruses and similar disruptive problems; and
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other potential interruptions.
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Payer-provider collaboration vendors such as Availity, LLC, Change Healthcare, Inc. (formerly Emdeon), Experian Information Solutions, Inc. (including its Passport division), Healthx, Inc. and HealthTrio, LLC;
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Medical device data system and device connectivity vendors, such as Capsule Technologies, Inc., Cerner Corporation, Koninklijke Philips N.V. and Excel Medical Electronics LLC; and
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Healthcare information technology decision support vendors such as The Advisory Board Company, Castlight Health, Inc., or Castlight Health, eviCore healthcare, HealthCatalyst, Inc., or HealthCatalyst, International Business Machines Corporation, or IBM, Inovalon Holdings, Inc., or Inovalon, and Truven Health Analytics, or Truven (acquired by IBM).
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we or any collaborative partner will make timely filings with the FDA;
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the FDA will act favorably or quickly on these submissions;
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we or any collaborative partner will not be required to submit additional information, including extensive clinical data;
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we or any collaborative partner will not be required to submit an application for premarket approval, rather than a 510(k) premarket notification submission or a de novo application as described herein;
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government regulations of IVDs or LDTs may change over time, imposing additional regulatory requirements and/or regulatory clearances, approvals or authorizations before we can market or distribute our products or product candidates; or
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other significant difficulties and costs related to obtaining FDA clearance or approval will not be encountered.
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acquiring appropriate and cost-efficient supplies to produce our sequencing and molecular analysis solutions;
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delivering our sequencing and molecular analysis solutions in a timely manner to us;
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continuing to keep our sequencing and molecular analysis solutions up to date and on pace with current clinical and market developments;
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filing, prosecuting and maintaining patents that cover our sequencing and molecular analysis solutions;
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complying with CLIA regulations and maintaining a CLIA license and all other applicable state laboratory licenses, including through periodic inspections;
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obtaining required regulatory authorizations, clearances, or approvals for diagnostic tests;
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complying with applicable federal, state, and local laws and regulations pertaining to testing human samples; and
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hiring qualified personnel experienced in completing highly complex laboratory tests.
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inability to integrate or benefit from acquired technologies or services in a profitable manner;
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unanticipated costs or liabilities associated with the acquisition;
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difficulty integrating the accounting systems, operations and personnel of the acquired business;
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difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
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difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;
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difficulty in cross-selling our existing solutions and offerings to the acquired business’ customers;
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diversion of management’s attention from other business concerns;
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adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;
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•
|
the potential loss of key employees;
|
•
|
use of resources that are needed in other parts of our business; and
|
•
|
use of substantial portions of our available cash to consummate the acquisition.
|
•
|
our failure to predict physician and patient market demand accurately in terms of test platform functionality and to supply a test platform that meets this demand in a timely fashion;
|
•
|
delays in releasing to the market our new components or enhancements to our test platform to the market;
|
•
|
failing to keep our sequencing and molecular analysis solutions up to date and on pace with current clinical and market developments;
|
•
|
complexity in the implementation or utilization of the new components and enhancements;
|
•
|
negative publicity about their performance or effectiveness;
|
•
|
introduction or anticipated introduction of competing test platforms and products by our competitors;
|
•
|
poor business conditions for our physician customers, causing them to delay IT purchases.
|
•
|
requirements or preferences for domestic products or solutions, which could reduce demand for our products;
|
•
|
differing existing or future regulatory and certification requirements;
|
•
|
management communication and integration problems resulting from cultural and geographic dispersion;
|
•
|
greater difficulty in collecting accounts receivable and longer collection periods;
|
•
|
difficulties in enforcing contracts;
|
•
|
difficulties and costs of staffing and managing non-U.S. operations;
|
•
|
the uncertainty of protection for intellectual property rights in some countries;
|
•
|
tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products;
|
•
|
greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including export and antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices;
|
•
|
heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
|
•
|
potentially adverse tax consequences, including multiple and possibly overlapping tax structures;
|
•
|
the impact of public health epidemics on our employees and suppliers as well as the global economy such as the coronavirus currently impacting China; and
|
•
|
political and economic instability, political unrest and terrorism.
|
•
|
the scope of rights granted under the license agreement and other interpretation-related issues;
|
•
|
our right to sublicense intellectual property rights to third parties under collaborative development relationships; and
|
•
|
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations.
|
•
|
breach of our contractual obligations to clients, which may cause our clients to terminate their relationship with us and may result in potentially significant financial obligations to our clients;
|
•
|
investigation by the federal and state regulatory authorities empowered to enforce HIPAA and other data privacy and security laws, which include the U.S. Department of Health and Human Services, or HHS, the Federal Trade Commission and state attorneys general, and the possible imposition of civil and criminal penalties;
|
•
|
private litigation by individuals adversely affected by any misuse of their personal health information for which we are responsible; and
|
•
|
negative publicity, which may decrease the willingness of current and potential future customers to work with us and negatively affect our sales and operating results.
|
•
|
not experimental or investigational;
|
•
|
medically necessary;
|
•
|
appropriate for the specific patient;
|
•
|
cost-effective;
|
•
|
supported by peer-reviewed publications;
|
•
|
included in clinical practice guidelines; and
|
•
|
supported by clinical utility studies.
|
•
|
requires each medical device manufacturer to pay an excise tax equal to 2.3% of the price for which such manufacturer sells its medical devices. This tax could have applied to GPS Cancer and some or all of our products which are in development. The excise tax was on a 4-year moratorium for calendar years 2016 through 2019. The Further Consolidated Appropriations Act, 2020, H.R. 1865 (Pub.L.116-94), signed into law on December 20, 2019, repealed the medical device excise tax previously imposed by Section 4191 of the Code for sales of medical devices after December 31, 2019.
|
•
|
mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. In addition, a productivity adjustment is made to the fee schedule payment amount.
|
•
|
creates initiatives to promote quality indicators in payment methodologies and the coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures.
|
•
|
announcements by us or our competitors of new products, significant contracts, commercial relationships or capital commitments and the timing of these introductions or announcements;
|
•
|
adverse regulatory or reimbursement announcements;
|
•
|
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures or capital commitments;
|
•
|
the results of our efforts to develop additional offerings;
|
•
|
our dependence on our customers, partners and collaborators;
|
•
|
regulatory or legal developments in the United States or other countries;
|
•
|
reimbursement decisions regarding our molecular profiling solutions, including GPS Cancer;
|
•
|
developments or disputes concerning patent applications, issued patents or other proprietary rights;
|
•
|
the recruitment or departure of key management or other personnel;
|
•
|
our ability to successfully commercialize our future products;
|
•
|
the level of expenses related to any of our products;
|
•
|
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
|
•
|
actual or anticipated quarterly variations in our financial results or those of our competitors;
|
•
|
any change to the composition of the board of directors or key personnel;
|
•
|
sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock;
|
•
|
changes in the structure of healthcare payment systems;
|
•
|
commencement of, or our involvement in, litigation, including claims by our equityholders pertaining to our conversion from a Delaware limited liability company into a Delaware corporation or the pending class action litigation;
|
•
|
general economic, industry and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies; and
|
•
|
the other factors described in this “Risk Factors” section.
|
•
|
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
|
•
|
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
|
•
|
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
|
•
|
reduced disclosure obligations regarding executive compensation; and
|
•
|
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
|
•
|
a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer;
|
•
|
advance notice requirements for stockholder proposals and nominations for election to our board of directors; and
|
•
|
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
|
•
|
We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
|
•
|
We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.
|
•
|
We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
|
•
|
We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.
|
•
|
The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.
|
•
|
We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
|
•
|
United States
|
◦
|
Boston, Massachusetts
|
◦
|
Panama City, Florida
|
◦
|
Philadelphia, Pennsylvania
|
◦
|
Phoenix, Arizona
|
•
|
International
|
◦
|
Belfast, Northern Ireland
|
City
|
State
|
Country
|
Sq ft
|
Type
|
Business Nature/Use
|
|
Boston
|
MA
|
USA
|
31,752
|
|
Lease
|
Administrative, sales, client support, R&D, engineering, professional services
|
Panama City
|
FL
|
USA
|
51,288
|
|
Lease
|
Administrative, sales, client support, R&D, engineering, professional services
|
Belfast
|
NI
|
UK
|
15,500
|
|
Lease
|
R&D, engineering, administrative
|
Phoenix
|
AZ
|
USA
|
4,865
|
|
Lease
|
Data center
|
Philadelphia
|
PA
|
USA
|
14,183
|
|
Lease
|
Administrative, sales, client support, R&D, engineering, professional services
|
|
|
|
117,588
|
|
|
|
•
|
introduce new marketing, education and engagement efforts and foster relationships across the health care community to drive adoption of NantHealth products and services;
|
•
|
strengthen our commercial organization to increase our NantHealth solutions client base and to broaden usage of our solutions by existing clients;
|
•
|
develop new features and functionality for NantHealth solutions to address the needs of current and future healthcare provider and payer, self-insured employer and biopharmaceutical company clients;
|
•
|
pursue reimbursement of molecular sequencing and analysis services from regional and national third-party payers and government payers; and
|
•
|
publish scientific and medical advances.
|
(Dollars in thousands, except per share amounts)
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss from continuing operations
|
$
|
(62,644
|
)
|
|
$
|
(190,433
|
)
|
Adjustments to GAAP net loss from continuing operations:
|
|
|
|
||||
Loss from related party equity method investment
|
8,317
|
|
|
108,409
|
|
||
Stock-based compensation expense from continuing operations
|
2,786
|
|
|
5,657
|
|
||
Acquisition related sales incentive
|
—
|
|
|
1,420
|
|
||
Change in fair value of derivatives liability
|
—
|
|
|
(7
|
)
|
||
Change in fair value of Bookings Commitment
|
5,036
|
|
|
16,947
|
|
||
Impairment of investment in IOBS
|
—
|
|
|
1,750
|
|
||
Non-cash interest expense related to convertible notes
|
5,702
|
|
|
5,019
|
|
||
Intangible amortization from continuing operations
|
8,879
|
|
|
9,150
|
|
||
Impairment of intangible assets
|
3,977
|
|
|
—
|
|
||
Loss on sale of business
|
582
|
|
|
—
|
|
||
Securities litigation costs
|
528
|
|
|
1,317
|
|
||
Tax benefit resulting from certain non-cash tax items
|
(570
|
)
|
|
(3,760
|
)
|
||
Total adjustments to GAAP net loss from continuing operations
|
35,237
|
|
|
145,902
|
|
||
Net loss - Non-GAAP from continuing operations
|
$
|
(27,407
|
)
|
|
$
|
(44,531
|
)
|
|
|
|
|
||||
Weighted average basic shares outstanding
|
110,351,638
|
|
|
109,168,798
|
|
||
|
|
|
|
||||
Net loss per share from continuing operations - Non-GAAP
|
$
|
(0.25
|
)
|
|
$
|
(0.41
|
)
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss per common share from continuing operations - GAAP
|
$
|
(0.57
|
)
|
|
$
|
(1.74
|
)
|
Adjustments to GAAP net loss per common share from continuing operations:
|
|
|
|
||||
Loss from related party equity method investment
|
0.07
|
|
|
0.98
|
|
||
Stock-based compensation expense from continuing operations
|
0.03
|
|
|
0.05
|
|
||
Acquisition related sales incentive
|
—
|
|
|
0.01
|
|
||
Change in fair value of derivatives liability
|
—
|
|
|
—
|
|
||
Change in fair value of Bookings Commitment
|
0.05
|
|
|
0.16
|
|
||
Impairment of investment in IOBS
|
—
|
|
|
0.02
|
|
||
Non-cash interest expense related to convertible notes
|
0.05
|
|
|
0.05
|
|
||
Intangible amortization from continuing operations
|
0.08
|
|
|
0.08
|
|
||
Impairment of intangible assets
|
0.04
|
|
|
—
|
|
||
Loss on sale of business
|
0.01
|
|
|
—
|
|
||
Securities litigation costs
|
—
|
|
|
0.01
|
|
||
Tax benefit resulting from certain non-cash tax items
|
(0.01
|
)
|
|
(0.03
|
)
|
||
Total adjustments to GAAP net loss per common share from continuing operations
|
0.32
|
|
|
1.33
|
|
||
Net loss per common share from continuing operations - Non-GAAP
|
$
|
(0.25
|
)
|
|
$
|
(0.41
|
)
|
(Dollars in thousands except per share amounts)
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue
|
|
|
|
||||
Software-as-a-service related
|
$
|
72,831
|
|
|
$
|
65,646
|
|
Software and hardware related
|
8,015
|
|
|
4,534
|
|
||
Maintenance
|
10,519
|
|
|
9,834
|
|
||
Total software-related revenue
|
91,365
|
|
|
80,014
|
|
||
Sequencing and molecular analysis
|
1,733
|
|
|
3,129
|
|
||
Home health care services
|
2,863
|
|
|
6,321
|
|
||
Total net revenue
|
95,961
|
|
|
89,464
|
|
||
|
|
|
|
||||
Cost of Revenue
|
|
|
|
||||
Software-as-a-service related
|
23,233
|
|
|
23,691
|
|
||
Software and hardware related
|
2,886
|
|
|
3,335
|
|
||
Maintenance
|
1,625
|
|
|
924
|
|
||
Amortization of developed technologies
|
4,662
|
|
|
4,933
|
|
||
Total software-related cost of revenue
|
32,406
|
|
|
32,883
|
|
||
Sequencing and molecular analysis
|
4,545
|
|
|
8,055
|
|
||
Home health care services
|
1,471
|
|
|
3,331
|
|
||
Total cost of revenue
|
38,422
|
|
|
44,269
|
|
||
|
|
|
|
||||
Gross Profit
|
57,539
|
|
|
45,195
|
|
||
|
|
|
|
||||
Operating Expenses
|
|
|
|
||||
Selling, general and administrative
|
61,043
|
|
|
70,763
|
|
||
Research and development
|
19,072
|
|
|
20,916
|
|
||
Amortization of acquisition-related assets
|
4,217
|
|
|
4,217
|
|
||
Impairment of intangible asset
|
3,977
|
|
|
—
|
|
||
Total operating expenses
|
88,309
|
|
|
95,896
|
|
||
Loss from operations
|
(30,770
|
)
|
|
(50,701
|
)
|
||
Interest expense, net
|
(18,044
|
)
|
|
(17,120
|
)
|
||
Other expense, net
|
(5,625
|
)
|
|
(17,876
|
)
|
||
Loss from related party equity method investment
|
(8,317
|
)
|
|
(108,409
|
)
|
||
Loss from continuing operations before income taxes
|
(62,756
|
)
|
|
(194,106
|
)
|
||
Benefit from income taxes
|
(112
|
)
|
|
(3,673
|
)
|
||
Net loss from continuing operations
|
(62,644
|
)
|
|
(190,433
|
)
|
||
Loss from discontinued operations, net of tax
|
(118
|
)
|
|
(1,719
|
)
|
||
Net loss
|
$
|
(62,762
|
)
|
|
$
|
(192,152
|
)
|
|
|
|
|
||||
Basic and diluted net loss per share
|
|
|
|
||||
Continuing operations - common stock
|
$
|
(0.57
|
)
|
|
$
|
(1.74
|
)
|
Discontinued operations - common stock
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
Total net loss per share - common stock
|
$
|
(0.57
|
)
|
|
$
|
(1.76
|
)
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
|
|
||||
Basic - common stock
|
110,351,638
|
|
|
109,168,798
|
|
||
Diluted - common stock
|
110,468,372
|
|
|
109,168,798
|
|
|
Year Ended December 31,
|
||||
|
2019
|
|
2018
|
||
Revenue
|
|
|
|
||
Software-as-a-service related
|
75.8
|
%
|
|
73.3
|
%
|
Software and hardware related
|
8.4
|
%
|
|
5.1
|
%
|
Maintenance
|
11.0
|
%
|
|
11.0
|
%
|
Total software-related revenue
|
95.2
|
%
|
|
89.4
|
%
|
Sequencing and molecular analysis
|
1.8
|
%
|
|
3.5
|
%
|
Home health care services
|
3.0
|
%
|
|
7.1
|
%
|
Total net revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
||
Cost of Revenue
|
|
|
|
||
Software-as-a-service related
|
24.2
|
%
|
|
26.5
|
%
|
Software and hardware related
|
3.0
|
%
|
|
3.7
|
%
|
Maintenance
|
1.7
|
%
|
|
1.0
|
%
|
Amortization of developed technologies
|
4.9
|
%
|
|
5.6
|
%
|
Total software-related cost of revenue
|
33.8
|
%
|
|
36.8
|
%
|
Sequencing and molecular analysis
|
4.7
|
%
|
|
9.0
|
%
|
Home health care services
|
1.5
|
%
|
|
3.7
|
%
|
Total cost of revenue
|
40.0
|
%
|
|
49.5
|
%
|
|
|
|
|
||
Gross Profit
|
60.0
|
%
|
|
50.5
|
%
|
|
|
|
|
||
Operating Expenses
|
|
|
|
||
Selling, general and administrative
|
63.7
|
%
|
|
79.1
|
%
|
Research and development
|
19.9
|
%
|
|
23.4
|
%
|
Amortization of acquisition-related assets
|
4.4
|
%
|
|
4.7
|
%
|
Impairment of intangible asset
|
4.1
|
%
|
|
0.0
|
%
|
Total operating expenses
|
92.1
|
%
|
|
107.2
|
%
|
Loss from operations
|
(32.1
|
%)
|
|
(56.7
|
%)
|
Interest expense, net
|
(18.8
|
%)
|
|
(19.1
|
%)
|
Other expense, net
|
(5.9
|
%)
|
|
(20.0
|
%)
|
Loss from related party equity method investment
|
(8.6
|
%)
|
|
(121.2
|
%)
|
Loss from continuing operations before income taxes
|
(65.4
|
%)
|
|
(217.0
|
%)
|
Benefit from income taxes
|
(0.1
|
%)
|
|
(4.1
|
%)
|
Net loss from continuing operations
|
(65.3
|
%)
|
|
(212.9
|
%)
|
Loss from discontinued operations, net of tax
|
(0.1
|
%)
|
|
(1.9
|
%)
|
Net loss
|
(65.4
|
%)
|
|
(214.8
|
%)
|
(Dollars in thousands)
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Software-as-a-service related
|
$
|
72,831
|
|
|
$
|
65,646
|
|
|
7,185
|
|
|
10.9
|
%
|
|
Software and hardware related
|
8,015
|
|
|
4,534
|
|
|
3,481
|
|
|
76.8
|
%
|
|||
Maintenance
|
10,519
|
|
|
9,834
|
|
|
685
|
|
|
7.0
|
%
|
|||
Total software-related revenues
|
91,365
|
|
|
80,014
|
|
|
11,351
|
|
|
14.2
|
%
|
|||
Sequencing and molecular analysis
|
1,733
|
|
|
3,129
|
|
|
(1,396
|
)
|
|
(44.6
|
)%
|
|||
Home health care services
|
2,863
|
|
|
6,321
|
|
|
(3,458
|
)
|
|
(54.7
|
)%
|
|||
Total net revenue
|
$
|
95,961
|
|
|
$
|
89,464
|
|
|
$
|
6,497
|
|
|
7.3
|
%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Software-as-a-service related
|
|
$
|
23,233
|
|
|
$
|
23,691
|
|
|
$
|
(458
|
)
|
|
(1.9
|
)%
|
Software and hardware related
|
|
2,886
|
|
|
3,335
|
|
|
(449
|
)
|
|
(13.5
|
)%
|
|||
Maintenance
|
|
1,625
|
|
|
924
|
|
|
701
|
|
|
75.9
|
%
|
|||
Amortization of developed technologies
|
|
4,662
|
|
|
4,933
|
|
|
(271
|
)
|
|
(5.5
|
)%
|
|||
Total software-related cost of revenue
|
|
32,406
|
|
|
32,883
|
|
|
(477
|
)
|
|
(1.5
|
)%
|
|||
Sequencing and molecular analysis
|
|
4,545
|
|
|
8,055
|
|
|
(3,510
|
)
|
|
(43.6
|
)%
|
|||
Home health care services
|
|
1,471
|
|
|
3,331
|
|
|
(1,860
|
)
|
|
(55.8
|
)%
|
|||
Total cost of revenue
|
|
$
|
38,422
|
|
|
$
|
44,269
|
|
|
$
|
(5,847
|
)
|
|
(13.2
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
Period-To-Period Change
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Selling, general and administrative
|
|
$
|
61,043
|
|
|
$
|
70,763
|
|
|
$
|
(9,720
|
)
|
|
(13.7
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Research and development
|
|
$
|
19,072
|
|
|
$
|
20,916
|
|
|
$
|
(1,844
|
)
|
|
(8.8
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
Amount
|
|
Percentage
|
|||||||
Interest expense, net
|
|
$
|
(18,044
|
)
|
|
$
|
(17,120
|
)
|
$
|
(924
|
)
|
|
5.4
|
%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Other expense, net
|
|
$
|
(5,625
|
)
|
|
$
|
(17,876
|
)
|
|
$
|
12,251
|
|
|
(68.5
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Loss from related party equity method Investment
|
|
$
|
(8,317
|
)
|
|
$
|
(108,409
|
)
|
|
$
|
100,092
|
|
|
(92.3
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Benefit from income taxes
|
|
$
|
(112
|
)
|
|
$
|
(3,673
|
)
|
|
$
|
3,561
|
|
|
(97.0
|
)%
|
(Dollars in thousands)
|
|
Year Ended December 31,
|
|
Period-To-Period Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019 vs. 2018
|
|||||||||
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|||||||
Loss from discontinued operations, net of income taxes
|
|
$
|
(118
|
)
|
|
$
|
(1,719
|
)
|
|
$
|
1,601
|
|
|
(93.1
|
)%
|
(Dollars in thousands)
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash used in:
|
|
|
|
||||
Operating activities
|
$
|
(8,765
|
)
|
|
$
|
(29,632
|
)
|
Investing activities
|
(4,290
|
)
|
|
(10,478
|
)
|
||
Financing activities
|
(32
|
)
|
|
(2,159
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
25
|
|
|
(300
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
$
|
(13,062
|
)
|
|
$
|
(42,569
|
)
|
|
Payments Due by Period
|
||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5 years
|
||||||||||
Purchasing obligations
|
$
|
381,000
|
|
|
$
|
2,500
|
|
|
$
|
51,000
|
|
|
$
|
76,000
|
|
|
$
|
251,500
|
|
Long term debt obligations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Related party promissory note
|
154,685
|
|
|
—
|
|
|
154,685
|
|
|
—
|
|
|
—
|
|
|||||
Related party convertible notes
|
10,000
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|||||
Other convertible notes
|
97,000
|
|
|
—
|
|
|
97,000
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases and capital leases obligations
|
17,485
|
|
|
3,192
|
|
|
6,127
|
|
|
5,802
|
|
|
2,364
|
|
|||||
Total Obligations
|
$
|
660,170
|
|
|
$
|
5,692
|
|
|
$
|
318,812
|
|
|
$
|
81,802
|
|
|
$
|
253,864
|
|
•
|
Revenue from Contracts with Customers;
|
•
|
Stock-Based Compensation;
|
•
|
Change in fair value of Bookings Commitment;
|
•
|
Income Taxes;
|
•
|
Leases;
|
•
|
Business Combinations;
|
•
|
Software Developed for Internal Use;
|
•
|
Goodwill and Intangible Assets; and
|
•
|
Investment in Related Party.
|
|
/s/ Ernst & Young LLP
|
|
|
We have served as the Company's auditor since 2013.
|
|
|
|
Los Angeles, California
|
|
February 28, 2020
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
5,243
|
|
|
$
|
18,305
|
|
|
Accounts receivable, net
|
10,918
|
|
|
15,286
|
|
||
Inventories
|
798
|
|
|
496
|
|
||
Related party receivables, net
|
823
|
|
|
1,007
|
|
||
Prepaid expenses and other current assets
|
20,131
|
|
|
4,350
|
|
||
Total current assets
|
37,913
|
|
|
39,444
|
|
||
Property, plant, and equipment, net
|
16,095
|
|
|
22,978
|
|
||
Goodwill
|
115,930
|
|
|
115,930
|
|
||
Intangible assets, net
|
51,848
|
|
|
64,703
|
|
||
Investment in related party
|
31,702
|
|
|
40,000
|
|
||
Related party receivable, net of current
|
1,108
|
|
|
1,611
|
|
||
Operating lease right-of-use assets
|
10,073
|
|
|
—
|
|
||
Other assets
|
1,818
|
|
|
1,671
|
|
||
Total assets
|
$
|
266,487
|
|
|
$
|
286,337
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
3,951
|
|
|
$
|
1,650
|
|
Accrued and other current liabilities
|
32,444
|
|
|
13,832
|
|
||
Deferred revenue
|
16,748
|
|
|
16,263
|
|
||
Related party payables, net
|
4,120
|
|
|
4,791
|
|
||
Notes payable
|
238
|
|
|
—
|
|
||
Total current liabilities
|
57,501
|
|
|
36,536
|
|
||
Deferred revenue, net of current
|
1,286
|
|
|
6,704
|
|
||
Related party liabilities
|
24,227
|
|
|
17,708
|
|
||
Related party promissory note
|
112,666
|
|
|
112,666
|
|
||
Related party convertible note, net
|
8,864
|
|
|
8,378
|
|
||
Convertible notes, net
|
84,648
|
|
|
79,433
|
|
||
Deferred income taxes, net
|
1,879
|
|
|
2,437
|
|
||
Operating lease liabilities
|
11,010
|
|
|
—
|
|
||
Other liabilities
|
21,542
|
|
|
19,644
|
|
||
Total liabilities
|
323,623
|
|
|
283,506
|
|
||
Commitments and Contingencies (Note 15)
|
|
|
|
|
|
||
|
|
|
|
||||
Stockholders' equity (deficit)
|
|
|
|
||||
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 110,619,678 and 109,491,277 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
11
|
|
|
11
|
|
||
Additional paid-in capital
|
889,955
|
|
|
887,289
|
|
||
Accumulated deficit
|
(946,884
|
)
|
|
(884,122
|
)
|
||
Accumulated other comprehensive loss
|
(218
|
)
|
|
(347
|
)
|
||
Total stockholders' (deficit) equity
|
(57,136
|
)
|
|
2,831
|
|
||
Total liabilities and stockholders' equity (deficit)
|
$
|
266,487
|
|
|
$
|
286,337
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue
|
|
|
|
||||
Software-as-a-service related
|
$
|
72,831
|
|
|
$
|
65,646
|
|
Software and hardware related
|
8,015
|
|
|
4,534
|
|
||
Maintenance
|
10,519
|
|
|
9,834
|
|
||
Total software-related revenue
|
91,365
|
|
|
80,014
|
|
||
Sequencing and molecular analysis
|
1,733
|
|
|
3,129
|
|
||
Home health care services
|
2,863
|
|
|
6,321
|
|
||
Total net revenue
|
95,961
|
|
|
89,464
|
|
||
|
|
|
|
||||
Cost of Revenue
|
|
|
|
||||
Software-as-a-service related
|
23,233
|
|
|
23,691
|
|
||
Software and hardware related
|
2,886
|
|
|
3,335
|
|
||
Maintenance
|
1,625
|
|
|
924
|
|
||
Amortization of developed technologies
|
4,662
|
|
|
4,933
|
|
||
Total software-related cost of revenue
|
32,406
|
|
|
32,883
|
|
||
Sequencing and molecular analysis
|
4,545
|
|
|
8,055
|
|
||
Home health care services
|
1,471
|
|
|
3,331
|
|
||
Total cost of revenue
|
38,422
|
|
|
44,269
|
|
||
|
|
|
|
||||
Gross Profit
|
57,539
|
|
|
45,195
|
|
||
|
|
|
|
||||
Operating Expenses
|
|
|
|
||||
Selling, general and administrative
|
61,043
|
|
|
70,763
|
|
||
Research and development
|
19,072
|
|
|
20,916
|
|
||
Amortization of acquisition-related assets
|
4,217
|
|
|
4,217
|
|
||
Impairment of intangible asset
|
3,977
|
|
|
—
|
|
||
Total operating expenses
|
88,309
|
|
|
95,896
|
|
||
Loss from operations
|
(30,770
|
)
|
|
(50,701
|
)
|
||
Interest expense, net
|
(18,044
|
)
|
|
(17,120
|
)
|
||
Other expense, net
|
(5,625
|
)
|
|
(17,876
|
)
|
||
Loss from related party equity method investment
|
(8,317
|
)
|
|
(108,409
|
)
|
||
Loss from continuing operations before income taxes
|
(62,756
|
)
|
|
(194,106
|
)
|
||
Benefit from income taxes
|
(112
|
)
|
|
(3,673
|
)
|
||
Net loss from continuing operations
|
(62,644
|
)
|
|
(190,433
|
)
|
||
Loss from discontinued operations, net of tax
|
(118
|
)
|
|
(1,719
|
)
|
||
Net loss
|
$
|
(62,762
|
)
|
|
$
|
(192,152
|
)
|
|
|
|
|
||||
Basic and diluted net loss per share
|
|
|
|
||||
Continuing operations - common stock
|
$
|
(0.57
|
)
|
|
$
|
(1.74
|
)
|
Discontinued operations - common stock
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
Total net loss per share - common stock
|
$
|
(0.57
|
)
|
|
$
|
(1.76
|
)
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
|
|
||||
Basic - common stock
|
110,351,638
|
|
|
109,168,798
|
|
||
Diluted - common stock
|
110,468,372
|
|
|
109,168,798
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Net loss
|
$
|
(62,762
|
)
|
|
$
|
(192,152
|
)
|
Other comprehensive income (loss) from foreign currency translation
|
129
|
|
|
(203
|
)
|
||
Total other comprehensive income (loss)
|
129
|
|
|
(203
|
)
|
||
Comprehensive loss
|
$
|
(62,633
|
)
|
|
$
|
(192,355
|
)
|
|
Common Stock
|
|
Additional
Paid-In Capital
|
|
Accumulated Deficit
|
|
Accumulated Other
Comprehensive Loss
|
|
Total Stockholders' Equity (Deficit)
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2017
|
108,383,602
|
|
|
$
|
10
|
|
|
$
|
886,669
|
|
|
$
|
(693,233
|
)
|
|
$
|
(144
|
)
|
|
$
|
193,302
|
|
Modified retrospective adjustment on adoption of ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
1,263
|
|
|
—
|
|
|
1,263
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
5,936
|
|
|
—
|
|
|
—
|
|
|
5,936
|
|
|||||
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
|
1,107,675
|
|
|
1
|
|
|
(2,067
|
)
|
|
—
|
|
|
—
|
|
|
(2,066
|
)
|
|||||
Assignment of NantHealth Labs (see Note 20)
|
—
|
|
|
—
|
|
|
(3,249
|
)
|
|
—
|
|
|
—
|
|
|
(3,249
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(203
|
)
|
|
(203
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(192,152
|
)
|
|
—
|
|
|
(192,152
|
)
|
|||||
Balance at December 31, 2018
|
109,491,277
|
|
|
11
|
|
|
887,289
|
|
|
(884,122
|
)
|
|
(347
|
)
|
|
2,831
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
2,910
|
|
|
—
|
|
|
—
|
|
|
2,910
|
|
|||||
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
|
1,128,401
|
|
|
—
|
|
|
(264
|
)
|
|
—
|
|
|
—
|
|
|
(264
|
)
|
|||||
Assignment of NantHealth Labs (see Note 20)
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
129
|
|
|
129
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,762
|
)
|
|
—
|
|
|
(62,762
|
)
|
|||||
Balance at December 31, 2019
|
110,619,678
|
|
|
$
|
11
|
|
|
$
|
889,955
|
|
|
$
|
(946,884
|
)
|
|
$
|
(218
|
)
|
|
$
|
(57,136
|
)
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(62,762
|
)
|
|
$
|
(192,152
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Loss on sale of business
|
582
|
|
|
—
|
|
||
(Recovery of) provision for bad debt
|
(67
|
)
|
|
7
|
|
||
Depreciation and amortization
|
22,362
|
|
|
22,355
|
|
||
Impairment of intangible assets
|
3,977
|
|
|
—
|
|
||
Loss from related party equity method investment
|
8,317
|
|
|
108,409
|
|
||
Amortization of debt discounts and deferred financing offering cost
|
5,702
|
|
|
5,018
|
|
||
Change in fair value of derivatives liability
|
—
|
|
|
(7
|
)
|
||
Change in fair value of Bookings Commitment
|
5,036
|
|
|
16,947
|
|
||
Impairment of equity securities
|
—
|
|
|
1,750
|
|
||
Deferred income taxes, net
|
(560
|
)
|
|
(3,769
|
)
|
||
Stock-based compensation
|
2,786
|
|
|
5,657
|
|
||
Other noncash expense
|
—
|
|
|
219
|
|
||
Changes in operating assets and liabilities, net of business combinations and divestitures:
|
|
|
|
||||
Accounts receivable, net
|
3,316
|
|
|
406
|
|
||
Inventories
|
(302
|
)
|
|
343
|
|
||
Related party receivables, net
|
687
|
|
|
(306
|
)
|
||
Prepaid expenses and other current assets
|
(16,629
|
)
|
|
2,270
|
|
||
Deferred implementation costs
|
—
|
|
|
48
|
|
||
Accounts payable
|
1,363
|
|
|
(1,667
|
)
|
||
Accrued and other current liabilities
|
17,425
|
|
|
(4,822
|
)
|
||
Deferred revenue
|
(4,933
|
)
|
|
570
|
|
||
Related party payables, net
|
5,961
|
|
|
6,026
|
|
||
Change in operating lease right-of-use assets and liabilities
|
(418
|
)
|
|
—
|
|
||
Other operating assets and liabilities
|
(608
|
)
|
|
3,066
|
|
||
Net cash used in operating activities
|
(8,765
|
)
|
|
(29,632
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
||||
Proceeds from sale of business, net of cash disposed
|
300
|
|
|
—
|
|
||
Assignment of NantHealth Labs, net of cash acquired (see Note 20)
|
—
|
|
|
68
|
|
||
Purchase of property and equipment including internal use software
|
(4,590
|
)
|
|
(10,546
|
)
|
||
Net cash used in investing activities
|
(4,290
|
)
|
|
(10,478
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from insurance promissory note
|
1,647
|
|
|
—
|
|
||
Repayments of insurance promissory note
|
(1,409
|
)
|
|
—
|
|
||
Tax payments related to stock issued, net of stock withheld, for vested equity
|
(270
|
)
|
|
(2,066
|
)
|
||
Capital lease obligation payments
|
—
|
|
|
(93
|
)
|
||
Net cash used in financing activities
|
(32
|
)
|
|
(2,159
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
25
|
|
|
(300
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(13,062
|
)
|
|
(42,569
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period (1)
|
19,441
|
|
|
62,010
|
|
||
Cash, cash equivalents and restricted cash, end of period (1)
|
$
|
6,379
|
|
|
$
|
19,441
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Supplemental disclosure of cash flow information
|
|
|
|
||||
Income taxes paid
|
$
|
318
|
|
|
$
|
15
|
|
Interest paid
|
$
|
5,909
|
|
|
$
|
5,885
|
|
Interest received
|
—
|
|
|
13
|
|
||
Noncash investing and financing activities
|
|
|
|
||||
Purchases of property and equipment (including internal use software)
|
1,068
|
|
|
529
|
|
||
Assignment of NantHealth Labs (see Note 20)
|
—
|
|
|
8,956
|
|
•
|
Software-as-a-service (“SaaS”) related - SaaS related revenue is generated from customers’ access to and usage of the Company’s hosted software solutions on a subscription basis for a specified contract term. In SaaS arrangements, the customer cannot take possession of the software during the term of the contract and generally has the right to access and use the software and receive any software upgrades published during the subscription period.
|
•
|
Software and hardware related - Software and hardware related revenue is generated from the license of the Company’s software, on a perpetual basis, the sale of hardware and professional services that are complementary to the software and may or may not be required for the software to function as desired by the customer. The services are generally provided in the form of implementation and training services and do not include maintenance revenue. The software is installed on the customer’s site or the customer’s designated vendor’s site and is not hosted by the Company or by a vendor contracted by the Company. See the section below “Contracts with Software, Hardware, and Implementation Services” for details of management’s judgments and recognition of revenue relating to this category.
|
•
|
Maintenance - Maintenance revenue includes ongoing PCS or maintenance on software and hardware during the PCS term. Additionally, PCS includes ongoing development of software updates and upgrades provided to the client on a when and if available basis. Revenue is recognized over the maintenance term.
|
•
|
Sequencing and molecular analysis - Sequencing and molecular analysis revenue is generated by providing customers with reports of the results of performing sequencing and molecular analysis of DNA and RNA (and formerly proteomic testing) under the Company's reseller agreement with NantOmics, LLC ("NantOmics"), and from blood samples via its liquid/blood-based tumor profiling platform through the Company’s subsidiary, NantHealth Labs, Inc. ("NantHealth Labs", formerly Liquid Genomics, Inc.) (see Note 20). Revenue is recognized at a point in time, when reports of results are transferred to the ordering physician or institution, or when cash is received as described below, or ratably over time for the period of a stand-ready obligation to provide blood-based tumor profiling services.
|
•
|
Home health care services - Home health care services revenue includes the sale of nursing and therapy services provided to patients in a home care setting. These revenues are recognized at a point in time or over time, as services are provided. On June 7, 2019, the Company completed the divestiture of its home health care services business (see Note 4).
|
•
|
Software-as-a-service related - SaaS related cost of revenue includes personnel-related costs, amortization of deferred implementation costs, depreciation of internal use software, and other direct costs associated with the delivery and hosting of the Company's subscription services.
|
•
|
Software and hardware related - Software and hardware related cost of revenue includes third-party software and hardware costs directly associated with solutions, including purchasing and receiving costs, and includes direct costs associated with the Company’s software implementation services provided to its customers. Software and hardware related cost of revenue also includes hardware costs directly related to bringing manufactured products to their final selling destination.
|
•
|
Maintenance - Maintenance cost of revenue includes personnel-related costs and other direct costs associated with the ongoing support or maintenance provided to the Company’s customers.
|
•
|
Sequencing and molecular analysis - Sequencing and molecular analysis cost of revenue includes personnel-related costs associated with fulfillment of these services, including those of our subsidiary, NantHealth Labs, and amounts due to NantOmics under the reseller agreement (see Note 20) for the sequencing and molecular analysis of DNA and RNA (and previously proteomic results). It also includes depreciation of internal use software and lab equipment.
|
•
|
Home health care services - Home health care services cost of revenue includes direct expenses relating to the Company’s nursing and therapy services provided to patients in a home care setting. On June 7, 2019, the Company completed the divestiture of its home health care services business (see Note 4).
|
•
|
Level 1—Quoted prices for identical assets or liabilities in active markets;
|
•
|
Level 2—Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable; and
|
•
|
Level 3—Unobservable inputs that reflect estimates and assumptions.
|
Period
|
Significant Customers
|
|
Percentage of Total Revenues (1)
|
|
Percentage of Total Accounts Receivable (1)
|
||||||||||||||||||||||||||
|
|
|
A
|
|
B
|
|
C
|
|
D
|
|
E
|
|
A
|
|
B
|
|
C
|
|
D
|
|
E
|
||||||||||
Year Ended December 31, 2019
|
4
|
|
13.5
|
%
|
|
11.1
|
%
|
|
10.4
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
20.1
|
%
|
Year Ended December 31, 2018
|
4
|
|
15.2
|
%
|
|
12.4
|
%
|
|
11.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
11.6
|
%
|
|
10.8
|
%
|
|
—
|
%
|
|
Balance at beginning of the period
|
|
Additions to expense
|
|
(Write offs) / Recoveries
|
|
Balance at end of the period
|
||||||
Year ended December 31, 2019
|
$
|
163
|
|
|
30
|
|
(84
|
)
|
|
$
|
109
|
|
|
Year ended December 31, 2018
|
$
|
149
|
|
|
37
|
|
|
(23
|
)
|
|
$
|
163
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Finished goods
|
92
|
|
|
496
|
|
||
Raw materials
|
706
|
|
|
—
|
|
||
Inventories
|
$
|
798
|
|
|
$
|
496
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Prepaid expenses
|
$
|
1,948
|
|
|
$
|
1,179
|
|
Securities litigation insurance receivable
|
16,627
|
|
|
306
|
|
||
Other current assets
|
1,556
|
|
|
2,865
|
|
||
Prepaid expenses and other current assets
|
$
|
20,131
|
|
|
$
|
4,350
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Payroll and related costs
|
$
|
8,106
|
|
|
$
|
5,803
|
|
NaviNet acquisition accrued earn-out
|
—
|
|
|
1,700
|
|
||
Securities litigation expense payable
|
17,127
|
|
|
306
|
|
||
Operating lease liabilities
|
1,923
|
|
|
—
|
|
||
Other accrued and other current liabilities
|
5,288
|
|
|
6,023
|
|
||
Accrued and other current liabilities
|
$
|
32,444
|
|
|
$
|
13,832
|
|
|
|
|
December 31,
|
||||||
|
Useful life (in years)
|
|
2019
|
|
2018
|
||||
Computer equipment and software
|
3-5
|
|
$
|
14,689
|
|
|
$
|
14,058
|
|
Furniture and equipment
|
5-7
|
|
2,766
|
|
|
3,732
|
|
||
Leasehold and building improvements (1)
|
|
|
7,201
|
|
|
7,450
|
|
||
Construction in progress - PPE
|
|
|
949
|
|
|
—
|
|
||
Property, plant, and equipment, excluding internal use software
|
|
|
25,605
|
|
|
25,240
|
|
||
Less: Accumulated depreciation and amortization
|
|
|
(19,981
|
)
|
|
(17,884
|
)
|
||
Property, plant and equipment, excluding internal use software, net
|
|
|
5,624
|
|
|
7,356
|
|
||
Internal use software
|
3
|
|
33,351
|
|
|
31,565
|
|
||
Construction in progress - Internal use software
|
|
|
2,973
|
|
|
903
|
|
||
Less: Accumulated depreciation and amortization, internal use software
|
|
|
(25,853
|
)
|
|
(16,846
|
)
|
||
Internal use software, net
|
|
|
10,471
|
|
|
15,622
|
|
||
Property, plant and equipment, net
|
|
|
$
|
16,095
|
|
|
$
|
22,978
|
|
|
December 31, 2019
|
||||||||||||||
|
Customer
Relationships |
|
Developed Technologies
|
|
Trade Name
|
|
Total
|
||||||||
Gross carrying amount
|
$
|
52,000
|
|
|
$
|
32,000
|
|
|
$
|
3,000
|
|
|
$
|
87,000
|
|
Accumulated amortization
|
(13,866
|
)
|
|
(18,286
|
)
|
|
(3,000
|
)
|
|
(35,152
|
)
|
||||
Intangible assets, net
|
$
|
38,134
|
|
|
$
|
13,714
|
|
|
$
|
—
|
|
|
$
|
51,848
|
|
|
December 31, 2018
|
||||||||||||||
|
Customer
Relationships |
|
Developed Technologies
|
|
Trade Name
|
|
Total
|
||||||||
Gross carrying amount
|
$
|
52,000
|
|
|
$
|
36,700
|
|
|
$
|
3,000
|
|
|
$
|
91,700
|
|
Accumulated amortization
|
(10,400
|
)
|
|
(14,347
|
)
|
|
(2,250
|
)
|
|
(26,997
|
)
|
||||
Intangible assets, net
|
$
|
41,600
|
|
|
$
|
22,353
|
|
|
$
|
750
|
|
|
$
|
64,703
|
|
|
Amounts
|
||
2020
|
$
|
8,038
|
|
2021
|
8,038
|
|
|
2022
|
8,038
|
|
|
2023
|
3,467
|
|
|
2024
|
3,467
|
|
|
Thereafter
|
20,800
|
|
|
Total future intangible amortization expense
|
$
|
51,848
|
|
|
Twelve Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Revenues
|
$
|
4,126
|
|
|
$
|
5,817
|
|
Gross loss
|
(3,653
|
)
|
|
(8,528
|
)
|
||
Loss from operations
|
(22,421
|
)
|
|
(45,481
|
)
|
||
Impairments on equity
|
(12,265
|
)
|
|
(19,976
|
)
|
||
Net loss
|
(29,695
|
)
|
|
(61,031
|
)
|
||
Net loss attributable to NantOmics
|
(29,317
|
)
|
|
(59,622
|
)
|
||
Other comprehensive income (loss)
|
502
|
|
|
(4,291
|
)
|
|
Related party
|
|
Others
|
|
Total
|
||||||
Balance as of December 31, 2019
|
|
|
|
|
|
||||||
Gross proceeds
|
$
|
10,000
|
|
|
$
|
97,000
|
|
|
$
|
107,000
|
|
Unamortized debt discounts and deferred financing offering costs
|
(1,136
|
)
|
|
(12,352
|
)
|
|
(13,488
|
)
|
|||
Net carrying amount
|
$
|
8,864
|
|
|
$
|
84,648
|
|
|
$
|
93,512
|
|
Balance as of December 31, 2018
|
|
|
|
|
|
||||||
Gross proceeds
|
$
|
10,000
|
|
|
$
|
97,000
|
|
|
$
|
107,000
|
|
Unamortized debt discounts and deferred financing offering costs
|
(1,622
|
)
|
|
(17,567
|
)
|
|
(19,189
|
)
|
|||
Net carrying amount
|
$
|
8,378
|
|
|
$
|
79,433
|
|
|
$
|
87,811
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||||
|
Related party
|
|
Others
|
|
Total
|
|
Related party
|
|
Others
|
|
Total
|
||||||||||||
Accrued coupon interest expense
|
$
|
550
|
|
|
$
|
5,335
|
|
|
$
|
5,885
|
|
|
$
|
550
|
|
|
$
|
5,335
|
|
|
$
|
5,885
|
|
Amortization of debt discounts
|
473
|
|
|
4,571
|
|
|
5,044
|
|
|
419
|
|
|
4,020
|
|
|
4,439
|
|
||||||
Amortization of deferred financing offering costs
|
13
|
|
|
645
|
|
|
658
|
|
|
11
|
|
|
568
|
|
|
579
|
|
||||||
Total convertible notes interest expense
|
$
|
1,036
|
|
|
$
|
10,551
|
|
|
$
|
11,587
|
|
|
$
|
980
|
|
|
$
|
9,923
|
|
|
$
|
10,903
|
|
|
December 31, 2019
|
||||||||||||||
|
Total
fair value
|
|
Quoted price in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Bookings Commitment
|
$
|
21,983
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,983
|
|
Interest make-whole derivative
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
December 31, 2018
|
||||||||||||||
|
Total
fair value
|
|
Quoted price in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Bookings Commitment
|
$
|
16,947
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,947
|
|
Interest make-whole derivative
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
December 31, 2018
|
|
Additions
|
|
Change in fair value
|
|
December 31, 2019
|
||||||||
Interest make-whole derivative - related party and others
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Bookings Commitment
|
16,947
|
|
|
—
|
|
|
5,036
|
|
|
21,983
|
|
||||
|
$
|
16,947
|
|
|
$
|
—
|
|
|
$
|
5,036
|
|
|
$
|
21,983
|
|
|
December 31, 2017
|
|
Additions
|
|
Change in fair value
|
|
December 31, 2018
|
||||||||
Interest make-whole derivative - related party and others
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
Bookings Commitment
|
—
|
|
|
—
|
|
|
16,947
|
|
|
16,947
|
|
||||
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
16,940
|
|
|
$
|
16,947
|
|
|
Fair value
|
|
Carrying value
|
|
Face value
|
||||||
5.5% convertible senior notes due December 15, 2021:
|
|
|
|
|
|
||||||
Balance as of December 31, 2019
|
|
|
|
|
|
||||||
Related party
|
$
|
6,727
|
|
|
$
|
8,864
|
|
|
$
|
10,000
|
|
Others
|
65,257
|
|
|
84,648
|
|
|
97,000
|
|
|||
|
$
|
71,984
|
|
|
$
|
93,512
|
|
|
$
|
107,000
|
|
Balance as of December 31, 2018
|
|
|
|
|
|
||||||
Related party
|
$
|
5,879
|
|
|
$
|
8,378
|
|
|
$
|
10,000
|
|
Others
|
57,031
|
|
|
79,433
|
|
|
97,000
|
|
|||
|
$
|
62,910
|
|
|
$
|
87,811
|
|
|
$
|
107,000
|
|
|
Year Ended December 31,
|
||
|
2019
|
||
Operating lease cost
|
$
|
2,769
|
|
Short-term lease cost
|
1,056
|
|
|
Variable cost
|
343
|
|
|
Sublease income
|
(208
|
)
|
|
Total lease cost
|
$
|
3,960
|
|
|
Year Ended December 31,
|
||
|
2019
|
||
Operating cash flows for operating leases
|
$
|
(2,910
|
)
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
1,837
|
|
Operating lease liabilities arising from obtaining right-of-use assets
|
$
|
1,837
|
|
Weighted average remaining lease term - operating leases
|
5.8 years
|
|
|
Weighted average discount rate - operating leases
|
11
|
%
|
|
Amounts
|
||
2020
|
$
|
3,192
|
|
2021
|
3,043
|
|
|
2022
|
3,084
|
|
|
2023
|
3,125
|
|
|
2024
|
2,677
|
|
|
Thereafter
|
2,364
|
|
|
Total future minimum lease payments
|
17,485
|
|
|
Less: imputed interest
|
(4,552
|
)
|
|
Total
|
$
|
12,933
|
|
As reported in the Consolidated Balance Sheet
|
|
||
Accrued and other current liabilities
|
$
|
1,923
|
|
Operating lease liabilities
|
11,010
|
|
|
|
$
|
12,933
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Current:
|
|
|
|
||||
Federal
|
$
|
(14
|
)
|
|
$
|
2
|
|
State
|
358
|
|
|
42
|
|
||
Foreign
|
101
|
|
|
52
|
|
||
Total current provision
|
445
|
|
|
96
|
|
||
Deferred:
|
|
|
|
||||
Federal
|
335
|
|
|
(3,418
|
)
|
||
State
|
(875
|
)
|
|
(418
|
)
|
||
Foreign
|
(17
|
)
|
|
67
|
|
||
Total deferred benefit
|
(557
|
)
|
|
(3,769
|
)
|
||
Benefit from income taxes, net
|
$
|
(112
|
)
|
|
$
|
(3,673
|
)
|
|
Year Ended December 31,
|
||||
|
2019
|
|
2018
|
||
United States federal tax at statutory rate
|
21.00
|
%
|
|
21.00
|
%
|
Items affecting federal income tax rate:
|
|
|
|
||
State tax rate, net of federal benefit
|
2.83
|
%
|
|
3.85
|
%
|
Valuation allowance
|
(24.73
|
)%
|
|
(22.00
|
)%
|
Stock-based compensation
|
(2.51
|
)%
|
|
(0.62
|
)%
|
Other adjustments
|
3.59
|
%
|
|
(0.33
|
)%
|
Effective income tax rate
|
0.18
|
%
|
|
1.90
|
%
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Deferred income tax assets:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
7,336
|
|
|
$
|
5,581
|
|
163(j) Interest limitation
|
5,392
|
|
|
2,509
|
|
||
Inventory impairment
|
39
|
|
|
495
|
|
||
Deferred revenue
|
3,623
|
|
|
5,438
|
|
||
Allowance for doubtful accounts
|
72
|
|
|
546
|
|
||
Property, plant and equipment, net
|
761
|
|
|
691
|
|
||
Intangibles
|
3,166
|
|
|
3,409
|
|
||
Investments
|
51,349
|
|
|
48,836
|
|
||
Stock-based compensation
|
719
|
|
|
2,159
|
|
||
Other
|
1,202
|
|
|
1,321
|
|
||
Operating lease liabilities
|
3,314
|
|
|
—
|
|
||
Net operating loss carryforwards
|
109,952
|
|
|
104,404
|
|
||
Less: Valuation allowance
|
(155,755
|
)
|
|
(140,788
|
)
|
||
Total deferred income tax assets
|
31,170
|
|
|
34,601
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
State taxes
|
(6,723
|
)
|
|
(5,339
|
)
|
||
Intangible assets, net
|
(19,474
|
)
|
|
(25,630
|
)
|
||
Convertible notes
|
(3,017
|
)
|
|
(4,241
|
)
|
||
Deferred costs to obtain a customer contract
|
(980
|
)
|
|
(1,633
|
)
|
||
Other
|
(292
|
)
|
|
(195
|
)
|
||
Operating lease right-of-use assets
|
(2,563
|
)
|
|
—
|
|
||
Total deferred income tax liabilities
|
(33,049
|
)
|
|
(37,038
|
)
|
||
Deferred income taxes, net
|
$
|
(1,879
|
)
|
|
$
|
(2,437
|
)
|
|
Balance at beginning of the period
|
|
Additions (Adjustments)
|
|
Deductions
|
|
Balance at the end of the period
|
||||||
Year to Date December 31, 2019
|
$
|
140,788
|
|
|
14,967
|
|
|
—
|
|
|
$
|
155,755
|
|
Year to Date December 31, 2018
|
$
|
97,323
|
|
|
43,465
|
|
|
—
|
|
|
$
|
140,788
|
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Series C / Restricted Stock:
|
|
|
|
||||
Research and development
|
$
|
—
|
|
|
$
|
86
|
|
Phantom units:
|
|
|
|
||||
Cost of revenue
|
30
|
|
|
367
|
|
||
Selling, general and administrative
|
80
|
|
|
4
|
|
||
Research and development
|
32
|
|
|
347
|
|
||
Total phantom units stock-based compensation expense
|
142
|
|
|
718
|
|
||
Stock options:
|
|
|
|
||||
Cost of revenue
|
25
|
|
|
—
|
|
||
Selling, general and administrative
|
474
|
|
|
—
|
|
||
Research and development
|
41
|
|
|
—
|
|
||
Total stock options stock-based compensation expense
|
540
|
|
|
—
|
|
||
Restricted Stock Units:
|
|
|
|
||||
Cost of revenue
|
18
|
|
|
27
|
|
||
Selling, general and administrative
|
2,019
|
|
|
4,664
|
|
||
Research and development
|
67
|
|
|
162
|
|
||
Total restricted stock units stock-based compensation expense
|
2,104
|
|
|
4,853
|
|
||
|
|
|
|
||||
Total stock-based compensation expense
|
2,786
|
|
|
5,657
|
|
||
Amount capitalized to internal-use software
|
134
|
|
|
530
|
|
||
Total stock-based compensation cost
|
$
|
2,920
|
|
|
$
|
6,187
|
|
|
Number of Units
|
|
Weighted
Average Grant Date Value per Phantom Unit |
|||
Unvested phantom units outstanding - December 31, 2017
|
1,292,785
|
|
|
$
|
15.01
|
|
Vested
|
(518,373
|
)
|
|
$
|
15.20
|
|
Forfeited
|
(185,560
|
)
|
|
$
|
14.63
|
|
Unvested phantom units outstanding - December 31, 2018
|
588,852
|
|
|
$
|
14.95
|
|
Vested
|
(427,608
|
)
|
|
$
|
14.49
|
|
Forfeited
|
(40,682
|
)
|
|
$
|
11.26
|
|
Unvested phantom units outstanding - December 31, 2019
|
120,562
|
|
|
$
|
11.49
|
|
|
Year Ended December 31, 2019
|
||
Expected volatility
|
64.22
|
%
|
|
Expected term to exercise from grant date
|
5.8 years
|
|
|
Risk-free rate
|
1.50
|
%
|
|
Expected dividend yield
|
—
|
%
|
|
Weighted average grant date fair value per option
|
$
|
0.38
|
|
|
Number of
Shares |
|
Weighted-Average
Exercise Price |
|
Weighted Average Remaining Contractual Life (in years)
|
|
Aggregated Intrinsic Value (in thousands)
|
|||||
Stock options outstanding - December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Granted
|
5,835,724
|
|
|
$
|
0.56
|
|
|
|
|
|
||
Forfeited or expired
|
(20,000
|
)
|
|
$
|
0.55
|
|
|
|
|
|
||
Stock options outstanding - December 31, 2019
|
5,815,724
|
|
|
$
|
0.56
|
|
|
9.6 years
|
|
$
|
2,725
|
|
Stock options exercisable - December 31, 2019
|
137,500
|
|
|
$
|
0.55
|
|
|
9.6 years
|
|
$
|
66
|
|
|
Number of Units
|
|
Weighted-Average Grant-Date
Fair Value
|
|||
Unvested restricted stock units outstanding - December 31, 2017
|
3,106,024
|
|
|
$
|
3.43
|
|
Granted
|
853,736
|
|
|
$
|
1.46
|
|
Vested
|
(1,583,399
|
)
|
|
$
|
3.18
|
|
Forfeited
|
(563,400
|
)
|
|
$
|
3.39
|
|
Unvested restricted stock units outstanding - December 31, 2018
|
1,812,961
|
|
|
$
|
2.74
|
|
Granted
|
60,000
|
|
|
$
|
0.98
|
|
Vested
|
(904,096
|
)
|
|
$
|
2.67
|
|
Forfeited
|
(263,450
|
)
|
|
$
|
2.71
|
|
Unvested restricted stock units outstanding - December 31, 2019
|
705,415
|
|
|
$
|
2.68
|
|
|
Year ended December 31,
|
||||||
|
2019
|
2018
|
|||||
|
Common Stock
|
|
Common Stock
|
||||
Net loss per share numerator:
|
|
|
|
||||
Net loss from continuing operations
|
$
|
(62,644
|
)
|
|
$
|
(190,433
|
)
|
Net loss from discontinued operations
|
(118
|
)
|
|
(1,719
|
)
|
||
Net loss for basic and diluted net loss per share
|
$
|
(62,762
|
)
|
|
$
|
(192,152
|
)
|
|
|
|
|
||||
Net loss for basic and diluted net loss per share:
|
|
|
|
||||
Weighted-average shares for basic net loss per share
|
110,351,638
|
|
|
109,168,798
|
|
||
Effect of dilutive securities
|
116,734
|
|
|
—
|
|
||
Weighted-average shares for dilutive net loss per share
|
110,468,372
|
|
|
109,168,798
|
|
||
|
|
|
|
||||
Basic and diluted net loss per share from continuing operations
|
$
|
(0.57
|
)
|
|
$
|
(1.74
|
)
|
Basic and diluted net loss per share from discontinued operations
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
Basic and diluted total net loss per share
|
$
|
(0.57
|
)
|
|
$
|
(1.76
|
)
|
|
Year Ended December 31,
|
||||
|
2019
|
|
2018
|
||
Unvested restricted stock
|
—
|
|
|
—
|
|
Unvested phantom units
|
77,530
|
|
|
588,852
|
|
Unexercised stock options
|
5,815,724
|
|
|
—
|
|
Unvested restricted stock units
|
705,415
|
|
|
1,812,961
|
|
Convertible notes
|
8,815,655
|
|
|
8,815,655
|
|
|
Amounts
|
||
NantOmics Series A-2 shares transferred to NantOmics
|
$
|
8,956
|
|
Assets and liabilities of NantHealth Labs at assignment:
|
|
|
|
Goodwill
|
1,305
|
|
|
Intangible asset
|
4,429
|
|
|
Other assets
|
251
|
|
|
Liabilities assumed
|
(814
|
)
|
|
Net assets acquired at assignment
|
5,171
|
|
|
Recorded as distribution from additional paid-in capital
|
$
|
3,785
|
|
|
Year Ended December 31, 2019
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Net revenue
|
$
|
23,729
|
|
|
$
|
25,686
|
|
|
$
|
22,356
|
|
|
$
|
24,190
|
|
Cost of revenue
|
11,290
|
|
|
9,816
|
|
|
8,372
|
|
|
8,944
|
|
||||
Gross profit
|
12,439
|
|
|
15,870
|
|
|
13,984
|
|
|
15,246
|
|
||||
Operating expenses
|
22,923
|
|
|
24,792
|
|
|
20,758
|
|
|
19,836
|
|
||||
Loss from operations
|
(10,484
|
)
|
|
(8,922
|
)
|
|
(6,774
|
)
|
|
(4,590
|
)
|
||||
Net loss from continuing operations
|
(19,839
|
)
|
|
(14,682
|
)
|
|
(16,374
|
)
|
|
(11,749
|
)
|
||||
Loss from discontinued operations, net of tax
|
(84
|
)
|
|
(31
|
)
|
|
(3
|
)
|
|
—
|
|
||||
Net loss
|
(19,923
|
)
|
|
(14,713
|
)
|
|
(16,377
|
)
|
|
(11,749
|
)
|
||||
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
||||||||
Continued operations - common stock
|
$
|
(0.18
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.11
|
)
|
Discontinued operations - common stock
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total net loss per share - common stock
|
$
|
(0.18
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.11
|
)
|
|
Year Ended December 31, 2018
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Net revenue
|
$
|
22,263
|
|
|
$
|
22,047
|
|
|
$
|
22,292
|
|
|
$
|
22,862
|
|
Cost of revenue
|
11,068
|
|
|
10,582
|
|
|
11,226
|
|
|
11,393
|
|
||||
Gross profit
|
11,195
|
|
|
11,465
|
|
|
11,066
|
|
|
11,469
|
|
||||
Operating expenses
|
26,942
|
|
|
25,331
|
|
|
22,890
|
|
|
20,733
|
|
||||
Loss from operations
|
(15,747
|
)
|
|
(13,866
|
)
|
|
(11,824
|
)
|
|
(9,264
|
)
|
||||
Net loss from continuing operations
|
(21,975
|
)
|
|
(21,806
|
)
|
|
(97,432
|
)
|
|
(49,220
|
)
|
||||
(Loss) income from discontinued operations, net of tax
|
(193
|
)
|
|
(1,591
|
)
|
|
(32
|
)
|
|
97
|
|
||||
Net loss
|
(22,168
|
)
|
|
(23,397
|
)
|
|
(97,464
|
)
|
|
(49,123
|
)
|
||||
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
||||||||
Continued operations - common stock
|
$
|
(0.20
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.45
|
)
|
Discontinued operations - common stock
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Total net loss per share - common stock
|
$
|
(0.20
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.45
|
)
|
•
|
Management failed to design internal controls surrounding certain complex and non-recurring transactions that would support the identification of and consideration of all evidence in reaching certain accounting conclusions. Accordingly, management’s control activities did not effectively i) consider all required elements needed to support the measurement of fair value of a liability or ii) assess the reasonableness of assumptions underlying prospective financial information used in the fair value measurement of the Company’s investment in a related party.
|
•
|
We have implemented an agenda-driven meeting between Sales and Accounting leadership wherein specific elements of the Bookings Commitment (potential customers, amounts, expected dates and market factors) are discussed. This allows for supporting evidence to be reviewed and the key unobservable inputs for management’s fair value measurement of the liability to be quantified. This new control is performed at least quarterly and engages key Company personnel to obtain measurement inputs as well as to integrate external economic data which impact the valuation.
|
•
|
We have implemented a control whereby the best available input assumptions and financial forecasts relative to NantOmics is obtained timely so that detailed analyses of the Company’s investment in NantOmics can be assessed for impairment. Such analyses requires review and approval.
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Number
|
|
Exhibit Title
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing
|
|
Filed
|
|
Date
|
Herewith
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1***
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
10-Q
|
|
001-37792
|
|
3.1
|
|
August 15, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
10-Q
|
|
001-37792
|
|
3.2
|
|
August 15, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.1+
|
|
|
10-Q
|
|
001-37792
|
|
10.1
|
|
November 10, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1.2+
|
|
|
S-1/A
|
|
333-211196
|
|
10.1
|
|
June 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2+
|
|
|
S-1/A
|
|
333-211196
|
|
10.2
|
|
June 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3#
|
|
|
8-K
|
|
001-37792
|
|
10.1
|
|
June 11, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4#
|
|
|
S-1
|
|
333-211196
|
|
10.13
|
|
May 6, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
|
S-1/A
|
|
333-211196
|
|
10.18
|
|
May 11, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
|
S-1/A
|
|
333-211196
|
|
10.19
|
|
May 24, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
|
S-1/A
|
|
333-211196
|
|
10.21
|
|
May 23, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
|
8-K
|
|
001-37792
|
|
10.2
|
|
December 21, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
|
8-K
|
|
001-37792
|
|
4.1
|
|
December 21, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
|
8-K
|
|
001-37792
|
|
10.1
|
|
December 21, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
|
8-K
|
|
001-37792
|
|
10.2
|
|
December 21, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
|
8-K
|
|
001-37792
|
|
10.3
|
|
December 21, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Number
|
|
Exhibit Title
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing
|
|
Filed
|
|
Date
|
Herewith
|
||||||||||
10.13
|
|
|
8-K
|
|
001-37792
|
|
2.1
|
|
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14+
|
|
|
10-K
|
|
001-37792
|
|
10.14
|
|
March 16, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15
|
|
|
10-Q/A
|
|
001-37792
|
|
10.1
|
|
July 11, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16
|
|
|
10-Q
|
|
001-37792
|
|
10.1
|
|
August 9, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17#
|
|
|
10-Q
|
|
001-37792
|
|
10.2
|
|
November 21, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18#
|
|
|
10-Q
|
|
001-37792
|
|
10.3
|
|
November 21, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 *
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2 *
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS**
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
Date:
|
February 28, 2020
|
|
|
|
|
|
|
|
|
By:
|
/s/ Patrick Soon-Shiong
|
|
|
Name:
|
Patrick Soon-Shiong
|
|
|
Its:
|
Chairman, Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Bob Petrou
|
|
|
Name:
|
Bob Petrou
|
|
|
Its:
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Patrick Soon-Shiong
|
|
Chairman, Chief Executive Officer and Director
|
|
February 28, 2020
|
Patrick Soon-Shiong
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Bob Petrou
|
|
Chief Financial Officer
|
|
February 28, 2020
|
Bob Petrou
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Ron Louks
|
|
Chief Operating Officer and Director
|
|
February 28, 2020
|
Ron Louks
|
|
|
|
|
|
|
|
|
|
/s/ Michael S. Sitrick
|
|
Director
|
|
February 28, 2020
|
Michael S. Sitrick
|
|
|
|
|
|
|
|
|
|
/s/ Kirk K. Calhoun
|
|
Director
|
|
February 28, 2020
|
Kirk K. Calhoun
|
|
|
|
|
|
|
|
|
|
/s/ Michael Blaszyk
|
|
Director
|
|
February 28, 2020
|
Michael Blaszyk
|
|
|
|
|
|
|
Page
|
||
|
|
|
||
ARTICLE I PURCHASE AND SALE OF ASSETS
|
1
|
|
||
|
|
|
||
1.01
|
|
Purchase and Sale of Assets
|
1
|
|
|
|
|
||
1.02
|
|
Assigned Assets; Excluded Assets
|
2
|
|
|
|
|
||
1.03
|
|
Assumed Liabilities; Excluded Liabilities
|
2
|
|
|
|
|
||
ARTICLE II
|
2
|
|
||
|
|
|
||
2.01
|
|
Purchase Price
|
3
|
|
|
|
|
||
2.02
|
|
Determination of Estimated Working Capital
|
3
|
|
|
|
|
||
2.03
|
|
Determination of Closing Working Capital
|
3
|
|
|
|
|
||
2.04
|
|
Adjustment
|
4
|
|
|
|
|
||
ARTICLE III
|
5
|
|
||
|
|
|
||
3.01
|
|
Closing
|
5
|
|
|
|
|
||
3.02
|
|
Payment of the Closing Date
|
5
|
|
|
|
|
||
3.03
|
|
Procedures for Certain Assigned Assets Not Freely Transferable; Shared Contract; Personal Data
|
6
|
|
|
|
|
||
3.04
|
|
Withholding
|
7
|
|
|
|
|
||
3.05
|
|
Wrong Pocket Provisions
|
8
|
|
|
|
|
||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
|
8
|
|
||
|
|
|
||
4.01
|
|
Organization and Power
|
8
|
|
|
|
|
||
4.02
|
|
Authorization; No Breach; Valid and Binding Agreement
|
9
|
|
|
|
|
||
4.03
|
|
Consents
|
9
|
|
|
|
|
||
4.04
|
|
Tax Matters
|
9
|
|
|
|
|
||
4.05
|
|
Material Contracts
|
11
|
|
|
|
|
||
4.06
|
|
Intellectual Property
|
12
|
|
|
|
|
||
4.07
|
|
Title; Transferred Inventory
|
14
|
|
|
|
|
||
4.08
|
|
Transferred Real Property
|
15
|
|
|
|
|
||
4.09
|
|
Financial Information; No Undisclosed Liabilities
|
15
|
|
|
|
|
||
4.10
|
|
Absence of Certain Changes
|
15
|
|
|
|
|
||
4.11
|
|
Litigation
|
16
|
|
|
|
|
||
4.12
|
|
Accounts Receivable
|
16
|
|
|
|
|
||
4.13
|
|
Principal Customers and Suppliers
|
16
|
|
|
|
|
||
4.14
|
|
Governmental Consents
|
17
|
|
|
|
|
||
4.15
|
|
Compliance with Laws; Permits
|
17
|
|
|
|
|
||
4.16
|
|
Financial Information and Internal Controls
|
18
|
|
|
|
|
|
|
Page
|
||
ARTICLE VII CONDITIONS TO CLOSING
|
36
|
|
||
|
|
|
||
7.01
|
|
Conditions of Purchaser’s Obligation
|
36
|
|
|
|
|
||
7.02
|
|
Conditions of Seller’s Obligation
|
37
|
|
|
|
|
||
ARTICLE VIII INDEMNIFICATION
|
38
|
|
||
|
|
|
||
8.01
|
|
Survival of Representations, Warranties, Covenants, Agreements and Other Provisions
|
38
|
|
|
|
|
||
8.02
|
|
Indemnification by Seller
|
39
|
|
|
|
|
||
8.03
|
|
Indemnification by Purchaser
|
39
|
|
|
|
|
||
8.04
|
|
Limitations on Indemnification
|
40
|
|
|
|
|
||
8.05
|
|
Indemnification Procedures
|
41
|
|
|
|
|
||
8.06
|
|
Third Party Claims
|
42
|
|
|
|
|
||
8.07
|
|
Indemnification Payments
|
43
|
|
|
|
|
||
8.08
|
|
Remedies
|
43
|
|
|
|
|
||
8.09
|
|
Tax Treatment
|
43
|
|
|
|
|
||
ARTICLE IX TERMINATION
|
44
|
|
||
|
|
|
||
9.01
|
|
Termination
|
44
|
|
|
|
|
||
9.02
|
|
Effect of Termination
|
44
|
|
|
|
|
||
ARTICLE X DEFINITIONS
|
45
|
|
||
|
|
|
||
10.01
|
|
Definitions
|
45
|
|
|
|
|
||
10.02
|
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Other Definitional Provisions
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57
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ARTICLE XI MISCELLANEOUS
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57
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11.01
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Expenses
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57
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11.02
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Notices
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57
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11.03
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Assignment
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57
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11.04
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Severability
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58
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11.05
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Interpretation
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58
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11.06
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Construction
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59
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11.07
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Amendment and Waiver
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59
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11.08
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Complete Agreement
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59
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11.09
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Third-Party Beneficiaries
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60
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11.10
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Waiver of Trial by Jury
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60
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11.11
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Delivery by Facsimile or Email
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60
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11.12
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Counterparts
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60
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11.13
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Governing Law
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60
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Page
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11.14
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Jurisdiction
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61
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11.15
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Remedies Cumulative
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61
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11.16
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Specific Performance
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61
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11.17
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Representation by Legal Counsel
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61
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11.18
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Electronic Data Room Materials
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61
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•
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Board of directors vacancies. Our amended and restated certificate of incorporation and amended and restated bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by our board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.
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•
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Advance notice requirements for stockholder proposals and director nominations. Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
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•
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No cumulative voting. The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.
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•
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Amendment of charter provisions. Any amendment of the above provisions in our amended and restated certificate of incorporation requires approval by holders of at least two-thirds of our then outstanding voting securities.
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•
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Issuance of undesignated preferred stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 20,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.
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•
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Exclusive forum. Unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
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Name of Subsidiary
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Jurisdiction of Organization
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NaviNet, Inc.
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Delaware
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NaviNet Limited
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United Kingdom
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Assisteo Holding, Inc.
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Delaware
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AZ Home Health, LLC
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Delaware
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NantHealth Labs, Inc.
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Delaware
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NantHealth Singapore Pte Ltd
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Singapore
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New Nant Health Canada, Inc.
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Canada
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(1)
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Registration Statement (Form S-3 No. 333-223744) of NantHealth, Inc., and
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(2)
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Registration Statement (Form S-8 Nos. 333-211886 and 333-225670) pertaining to the 2016 Equity Incentive Plan and Phantom Unit Plan of NantHealth, Inc.
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/s/ Ernst & Young LLP
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Los Angeles, California
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February 28, 2020
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Signature
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Title
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Date
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/s/ Patrick Soon-Shiong
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Chairman, Chief Executive Officer and Director
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February 28, 2020
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Patrick Soon-Shiong
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(Principal Executive Officer)
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/s/ Bob Petrou
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Chief Financial Officer
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February 28, 2020
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Bob Petrou
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(Principal Financial and Accounting Officer)
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/s/ Ron Louks
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Chief Operating Officer and Director
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February 28, 2020
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Ron Louks
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/s/ Michael S. Sitrick
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Director
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February 28, 2020
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Michael S. Sitrick
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/s/ Kirk K. Calhoun
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Director
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February 28, 2020
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Kirk K. Calhoun
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/s/ Michael Blaszyk
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Director
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February 28, 2020
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Michael Blaszyk
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28, 2020
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By:
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/s/ Patrick Soon-Shiong
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Dr. Patrick Soon-Shiong
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Chairman, Chief Executive Officer and Director
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(Principal Executive Officer)
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28, 2020
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By:
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/s/ Bob Petrou
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Bob Petrou
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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(i)
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the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 to which this Certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act, and
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(ii)
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that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of NantHealth, Inc.
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By:
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/s/ Patrick Soon-Shiong
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Dr. Patrick Soon-Shiong
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Chairman, Chief Executive Officer and Director
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(Principal Executive Officer)
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(i)
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the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 to which this Certification is attached as Exhibit 32.2 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act, and
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(ii)
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that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of NantHealth, Inc.
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By:
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/s/ Bob Petrou
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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