hlth-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

FORM 10-Q

_________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40824

_________________

Cue Health Inc.

(Exact Name of Registrant as Specified in its Charter)

_________________


Delaware			27-1562193
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
4980 Carroll Canyon Rd. Suite 100 San Diego, CA			92121
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (858) 412-8151

_________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, par value $0.00001 per share

HLTH

Nasdaq Global Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 1, 2023 the registrant had 154,632,057 shares of common stock, $0.00001 par value per share, outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words, variations of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:

•our expectations regarding our revenue, expenses and other operating results;

•the extent and duration of the COVID-19 pandemic and the impact of the end of the COVID-19 pandemic on our business and our expectations regarding customer and user demand for our COVID-19 test;

•our ability to increase demand for, and the rate of market adoption of, the Cue Health Monitoring System and our platform, tests and other products generally, including with consumers, healthcare professionals, enterprises, insurers and other payors and public health officials;

•our ability to effectively scale our manufacturing capacity and other operations in a timely manner in order to meet contractual obligations, market demand and to be able to successfully operate our business;

•our ability to meet our contractual obligations under our agreements with customers;

•our ability to successfully develop and commercialize additional tests and other products for use with our Cue Integrated Care Platform;

•our expectations of the reliability, accuracy and performance of our products and services, as well as expectations of the benefits to patients, clinicians and providers of our products and services;

•our ability to obtain and maintain regulatory authorizations, clearances or approvals for our tests, including our existing Federal Drug Administration (the “FDA”) Emergency Use Authorizations (“EUAs”) for our COVID-19 test;

•our ability to accurately forecast demand for the Cue Health Monitoring System, our tests and other products;

•our ability to successfully build out our sales and marketing infrastructure, the costs and success of our marketing efforts, and our ability to promote our brand;

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

•our ability to continue as a going concern;

•our expectations regarding our current or future litigation;

•our intellectual property position and our expectations regarding our ability to obtain and maintain intellectual property protection;

•our ability to effectively manage our growth, including our ability to retain and recruit personnel, and maintain our culture;

•the impact of U.S. and international laws and regulations;

•our competitive position and expectations regarding developments and projections relating to our competitors and any competing products and services;

•future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements, future revenue, expenses, the ability to obtain reimbursement for our products and any needs for additional financing;

•our expectations regarding technology trends and developments in the healthcare industry and our ability to address those trends and developments with our offerings;

•our expectations concerning relationships with third parties, including healthcare professionals, enterprises, insurance companies and other payors, public health officials and other stakeholders in the healthcare system;

•the degree to which we are able to help bring about a new healthcare paradigm, and be a significant participant in any such new paradigm;

•our ability to grow our business internationally, in addition to within the United States;

•inflationary pressures, supply chain disruptions and other macroeconomic factors;

•our ability to implement, maintain and improve effective internal controls and remediate material weaknesses; and

•our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects.

The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly

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changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

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TABLE OF CONTENTS


		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (U naudited)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Stockholders’ Equit y	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Cue Health Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts and share data)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	111,454	$	241,530
Restricted cash	800		800
Accounts receivable, net	1,320		18,751
Inventories, net - current	63,555		82,210
Prepaid expenses	9,862		15,728
Other current assets	5,248		12,134
Total current assets	192,239		371,153

Non-current inventories, net	27,640		25,436
Property and equipment, net	166,311		189,275

Operating lease right-of-use assets	80,829		85,321
Intangible assets, net	21,539		16,867
Other non-current assets	3,735		6,528
Total assets	$	492,293	$	694,580
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,109	$	7,150
Accrued liabilities and other current liabilities	39,920		52,378

Deferred revenue, current	623		1,566

Operating lease liabilities, current	5,109		7,739
Finance lease liabilities, current	1,646		2,362
Total current liabilities	58,407		71,195


Operating leases liabilities, net of current portion	42,961		44,045
Finance lease liabilities, net of current portion	—		849
Other non-current liabilities	2,091		1,997
Total liabilities	103,459		118,086
Commitments and contingencies (Note 14)
Stockholders’ Equity

Common stock, $0.00001 par value; 500,000,000 and 500,000,000 shares authorized, 154,601,335 and 150,406,014 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	2		1
Additional paid-in-capital	831,938		794,567
Accumulated deficit	(443,106)		(218,074)
Total stockholders’ equity	388,834		576,494
Total liabilities and stockholders’ equity	$	492,293	$	694,580

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

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Cue Health Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue
Product revenue	$	14,757	$	66,660	$	46,842	$	328,465
Grant and other revenue	2,720		2,929		5,296		8,234
Total revenue	17,477		69,589		52,138		336,699

Operating costs and expenses:
Cost of product revenue	22,180		50,595		91,349		239,190
Sales and marketing	7,051		18,129		26,358		69,268
Research and development	37,103		42,516		118,372		115,303
General and administrative	15,848		25,625		47,489		77,946
Restructuring expense	—		137		14,518		2,020
Total operating costs and expenses	82,182		137,002		298,086		503,727
Loss from operations	(64,705)		(67,413)		(245,948)		(167,028)

Interest expense	(304)		(346)		(815)		(413)


Tax credits	20,939		—		20,939		—
Other income, net	1,833		409		5,525		458
Loss before income taxes	(42,237)		(67,350)		(220,299)		(166,983)

Income tax expense (benefit)	4,733		(1,047)		4,733		(4,433)
Net loss	$	(46,970)	$	(66,303)	$	(225,032)	$	(162,550)
Net loss per share – basic	$	(0.31)	$	(0.45)	$	(1.48)	$	(1.10)
Weighted-average number of shares used in computation of net loss per share – basic	153,699,408		148,582,721		152,226,999		147,443,196
Net loss per share – diluted	$	(0.31)	$	(0.45)	$	(1.48)	$	(1.10)
Weighted-average number of shares used in computation of net loss per share – diluted	153,699,408		148,582,721		152,226,999		147,443,196

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

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Cue Health Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)


	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total Stockholders’ Equity
						Shares			Amount
Balance at June 30, 2023			152,662,162	$	2		$	819,311		$	(396,136)	$	423,177




Exercise of common stock options, including ESPP activity, 825,973 shares			825,973				259			—		259

Issuance of common stock upon vesting of restricted stock units			1,714,320	—			—			—		—
Tax withholding on stock option exercises and restricted stock unit issuance			(601,120)	—			(319)			—		(319)


Stock-based compensation			—	—			12,687			—		12,687

Net loss			—	—			—			(46,970)		(46,970)
Balance at September 30, 2023			154,601,335	$	2		$	831,938		$	(443,106)	$	388,834


	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total Stockholders’ Equity
						Shares			Amount
Balance at June 30, 2022			147,834,377	$	1		$	760,637		$	(120,265)	$	640,373


Exercise of common stock options, including ESPP activity, 147,463 shares			790,530	—			1,468			—		1,468






Issuance of common stock upon vesting of restricted stock units			911,364	—			—			—		—
Tax withholding on stock option exercises and restricted stock unit issuance			(358,580)	—			(1,268)			—		(1,268)
Stock-based compensation			—	—			15,690			—		15,690
Net loss			—	—			—			(66,303)		(66,303)
Balance at September 30, 2022			149,177,691	$	1		$	776,527		$	(186,568)	$	589,960

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

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Cue Health Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at Balance at December 31, 2022	150,406,014	$	1	$	794,567	$	(218,074)	$	576,494
Exercise of common stock options, including ESPP activity, 1,299,053 shares	1,468,568	1		371		—		372
Issuance of common stock upon vesting of restricted stock units	4,243,128	—		—		—		—
Tax withholding on stock option exercises and restricted stock unit issuance	(1,516,375)	—		(

SEC Form 10-Q filed by Cue Health Inc.