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The Company has evaluated subsequent events that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Other than as disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
On August 3, 2022 the Company received approval from Nant Capital for a $6,000 advance on its Second Amended and Restated Promissory Note, which matures on December 31, 2026. The note allows the Company to request advances up to a maximum commitment of $125,000 and bears interest at a per annum rate of 5.50%. As of June 30, 2022, no advances had been made under the promissory note. As of June 30, 2022, the Company was in compliance with the covenants (see to Note 16).
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022  
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From                 to                
Commission file number: 001-37792
NantHealth, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
27-3019889
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3000 RDU Center Drive, Suite 200
27560
Morrisville,
North Carolina(Zip Code)
(Address of principal executive offices)
(855) 949-6268
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per share
NH
The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 4, 2022, the registrant had 115,550,244 shares of common stock, par value $0.0001 per share, outstanding.



NantHealth, Inc.
Form 10-Q
As of and for the quarterly period ended June 30, 2022
Table of contents

Page
PART I.
Item 1.
Consolidated Balance Sheets
Consolidated Statement of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Exhibits Index

We own or have rights to trademarks and service marks that we use in connection with the operation of our business. NantHealth, Inc. and our logo as well as other brands such as NaviNet, Eviti, NaviNet Open, Eviti | Connect, OpenNMS, Quadris and other marks relating to our product lines are used in this Quarterly Report on Form 10-Q. Solely for convenience, the trademarks and service marks referred to in this Quarterly Report on Form 10-Q are listed without the (sm) and (TM) symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. Additionally, we do not intend for our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
- 2 -


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q this ("Quarterly Report"), including, without limitation, Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors,” contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “project,” “plan,” “outlook,” “target,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
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;
any impact of the COVID-19 pandemic, or responses to the pandemic, on our operations or personnel, or on commercial activity or demand across our and our customers’ businesses;
physician, payer and pharmaceutical business needs for clinical decision support, payer/provider collaboration and data analytics solutions and any perceived advantage of our solutions over those of our competitors, including the ability of our platforms to help physicians treat their patients;
our ability to increase the commercial success and to accelerate commercial growth of our clinical decision support, payer/provider collaboration, network monitoring and management, and data analytics solutions and our other products and services;
our plans or ability to develop, implement and commercialize a cloud/SaaS-based version of our network monitoring and management solutions;
our ability to effectively implement, offer and manage delegated entity services to health plans in a compliant and timely manner in connection with our decision support solutions;
our ability to effectively manage our growth, including the rate and degree of market acceptance of our solutions;
our ability to offer new and innovative products and services, including new features and functionality for our existing products and services;
our ability to attract new partners and customers and our ability to retain or renew contracts with partners and customers;
our ability to estimate the size of our target market;
our ability to maintain and enhance our reputation and brand recognition;
our ability to maintain compliance with the continued listing standards of Nasdaq, which may result in the delisting of our common stock from the Nasdaq Global Select Market;
consolidation in the healthcare industry;
competition which could limit our ability to maintain or expand market share within our industry;
restrictions and penalties as a result of privacy and data protection laws;
our use of “open source” software;
our ability to use, disclose, de-identify or license data and to integrate third-party technologies;
data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;
breaches or failures of our security measures;
our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our users;
risks related to future acquisition opportunities;
the requirements of being a public company;
our ability to attract and retain key personnel;
our ability to obtain and maintain intellectual property protection for our solutions and not infringe upon the intellectual property of others;
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
our expectations regarding our ability to comply with Nasdaq continued listing standards.
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report.
- 3 -


These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. These statements are within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements appear throughout this Quarterly Report and are statements regarding our intent, belief, or current expectations, primarily based on our current assumptions, expectations and projections about future events and trends that may affect our business, financial conditions, operating results, cash flows or prospects, as well as related industry developments. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A, “Risk Factors,” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Quarterly Report. We undertake no obligation to update any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations, except as required by law.
- 4 -


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
- 5 -

NantHealth, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
June 30,
2022
December 31,
2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents$5,711 $29,084 
Accounts receivable, net5,049 5,810 
Related party receivables, net476 506 
Prepaid expenses and other current assets3,628 4,010 
Total current assets14,864 39,410 
Property, plant, and equipment, net12,066 12,366 
Goodwill98,333 98,333 
Intangible assets, net34,575 39,039 
Related party receivable, net of current1,041 1,012 
Operating lease right-of-use assets5,038 6,048 
Other assets971 1,620 
Total assets$166,888 $197,828 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$4,847 $3,204 
Accrued and other current liabilities13,312 16,358 
Deferred revenue2,518 2,440 
Related party payables, net2,914 5,161 
Notes payable— 782 
Total current liabilities23,591 27,945 
Deferred revenue, net of current1,562 2,024 
Related party liabilities42,019 38,278 
Related party promissory note112,666 112,666 
Related party convertible note, net62,301 62,268 
Convertible notes, net74,643 74,603 
Deferred income taxes, net1,568 1,775 
Operating lease liabilities5,141 6,248 
Other liabilities31,495 34,013 
Total liabilities354,986 359,820 
Commitments and Contingencies (Note 11)
Stockholders' deficit
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 115,550,244 and 115,505,244 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
12 12 
Additional paid-in capital893,835 891,105 
Accumulated deficit(1,081,359)(1,052,897)
Accumulated other comprehensive loss(586)(212)
Total stockholders' deficit(188,098)(161,992)
Total liabilities and stockholders' deficit$166,888 $197,828 

The accompanying notes are an integral part of these Consolidated Financial Statements.
- 6 -

NantHealth, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue
Software-as-a-service related$15,861 $15,504 $31,632 $31,261 
Maintenance428 413 892 795 
Professional services208 173 346 200 
Total software-related revenue16,497 16,090 32,870 32,256 
Other— 
Total net revenue16,498 16,090 32,871 32,259 
Cost of Revenue
Software-as-a-service related5,621 5,444 11,184 10,979 
Maintenance469 270 838 477 
Professional services
Amortization of developed technologies1,247 1,247 2,494 2,494 
Total software-related cost of revenue7,346 6,962 14,525 13,957 
Other47 93 
Total cost of revenue7,347 7,009 14,526 14,050 
Gross Profit9,151 9,081 18,345 18,209 
Operating Expenses
Selling, general and administrative14,017 11,837 28,997 24,340 
Research and development5,861 4,849 11,576 9,862 
Amortization of acquisition-related assets
986 985 1,971 1,971 
Total operating expenses20,864 17,671 42,544 36,173 
Loss from operations(11,713)(8,590)(24,199)(17,964)
Interest expense, net(3,470)(3,803)(6,920)(7,371)
Other income (expense), net2,642 (3,051)2,648 (5,621)
Loss from continuing operations before income taxes(12,541)(15,444)(28,471)(30,956)
Provision for (benefit from) income taxes(29)(9)(2)
Net loss from continuing operations(12,512)(15,450)(28,462)(30,954)
Income from discontinued operations, net of tax attributable to NantHealth— 19 — 24 
Net loss(12,512)(15,431)(28,462)(30,930)
Net loss attributable to noncontrolling interests— (128)(219)
Net loss attributable to NantHealth$(12,512)$(15,303)$(28,462)$(30,711)
Basic and diluted net loss per share attributable to NantHealth:
Total net loss per share - common stock$(0.11)$(0.13)$(0.25)$(0.27)
Weighted average shares outstanding
Basic and diluted - common stock115,550,244 114,512,542 115,535,822 112,924,619 

The accompanying notes are an integral part of these Consolidated Financial Statements.
- 7 -

NantHealth, Inc.
Consolidated Statements of Comprehensive Loss
(Dollars in thousands)
(Unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net loss$(12,512)$(15,431)$(28,462)$(30,930)
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments(278)18 (374)46 
Total other comprehensive (loss) income(278)18 (374)46 
Comprehensive loss(12,790)(15,413)(28,836)(30,884)
Less: Comprehensive loss attributable to noncontrolling interests— (128)— (219)
Comprehensive loss attributable to NantHealth$(12,790)$(15,285)$(28,836)$(30,665)

The accompanying notes are an integral part of these Consolidated Financial Statements.
- 8 -

NantHealth, Inc.
Consolidated Statements of Stockholders’ Deficit
(Dollars in thousands)
(Unaudited)
Additional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal NantHealth Stockholders' DeficitNoncontrolling InterestsTotal Stockholders' Deficit
Common Stock
SharesAmount
Balance at December 31, 2021115,505,244 $12 $891,105 $(1,052,897)$(212)$(161,992)$— $(161,992)
Stock-based compensation cost— — 1,417 — — 1,417 — 1,417 
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
45,000 — 24 — — 24 — 24 
Other comprehensive loss— — — — (96)$(96)— $(96)
Net loss— — — (15,950)— $(15,950)— $(15,950)
Balance at March 31, 2022115,550,244 $12 $892,546 $(1,068,847)$(308)$(176,597)$— $(176,597)
Stock-based compensation cost— — 1,289 — — 1,289 — 1,289 
Other comprehensive loss— — — — (278)(278)— (278)
Net loss— — — (12,512)— (12,512)— (12,512)
Balance at June 30, 2022115,550,244 $12 $893,835 $(1,081,359)$(586)$(188,098)$— $(188,098)
    
The accompanying notes are an integral part of these Consolidated Financial Statements.
- 9 -

NantHealth, Inc.
Consolidated Statements of Stockholders’ Deficit
(Dollars in thousands)
(Unaudited)

Additional
Paid-In Capital
Accumulated
Deficit
Accumulated Other
Comprehensive Loss
Total NantHealth Stockholders' DeficitNoncontrolling InterestsTotal Stockholders' Deficit
Common Stock
SharesAmount
Balance at December 31, 2020111,284,733 $11 $891,583 $(1,003,210)$(168)$(111,784)$384 $(111,400)
Modified retrospective adjustment on adoption of ASU No. 2020-06— — (14,318)8,572 — (5,746)— (5,746)
Stock-based compensation cost— — 912 — — 912 — 912 
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
81,400 — 64 — — 64 — 64 
Other comprehensive income— — — — 28 28 — 28 
Net loss— — — (15,408)— (15,408)(91)(15,499)
Balance at March 31, 2021111,366,133 $11 $878,241 $(1,010,046)$(140)$(131,934)$293 $(131,641)
Stock-based compensation expense— — 887 — — 887 — 887 
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes222,553 — 61 — — 61 — 61 
Stock issued on Exchange of 2016 Notes3,615,970 10,000 — — 10,001 — 10,001 
Other comprehensive income— — — — 18 18 — 18 
Net loss— — — (15,303)— (15,303)(128)(15,431)
Balance at June 30, 2021115,204,656 $12 $889,189 $(1,025,349)$(122)$(136,270)$165 $(136,105)
    
The accompanying notes are an integral part of these Consolidated Financial Statements.
- 10 -

 NantHealth, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
20222021
Cash flows from operating activities:
Net loss$(28,462)$(30,930)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
7,896 7,705 
Amortization of debt discounts and deferred financing offering cost
73 510 
Change in fair value of derivatives liability
— (4)
Change in fair value of Bookings Commitment
(2,500)4,803 
Stock-based compensation
2,653 1,742 
Deferred income taxes, net(214)(181)
Provision for bad debt expense
20 29 
Impairment of ROU asset208 — 
Loss on exchange and prepayment of 2016 Notes— 742 
Changes in operating assets and liabilities:
Accounts receivable, net741 (1,385)
Related party receivables, net
Prepaid expenses and other current assets226 506 
Accounts payable1,638 (2,799)
Accrued and other current liabilities(3,069)(2,047)
Deferred revenue(384)932 
Related party payables, net1,157 3,922 
Change in operating lease right-of-use assets and liabilities(228)(204)
Other assets and liabilities50 (32)
Net cash used in operating activities(20,194)(16,685)
Cash flows from investing activities:
Purchases of property and equipment, including internal-use software(2,861)(2,411)
Net cash used in investing activities(2,861)(2,411)
Cash flows from financing activities:
Repayments of insurance promissory note and notes payable(782)(227)
Proceeds from related party convertible notes— 62,500 
Proceeds from convertible notes— 75,000 
Payment of convertible notes— (87,500)
Proceeds from exercises of stock options24 125 
Payment of deferred financing costs, related party— (268)
Payment of deferred financing costs— (390)
Net cash (used in) provided by financing activities(758)49,240 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(78)
Net (decrease) increase in cash, cash equivalents and restricted cash(23,891)30,149 
Cash, cash equivalents and restricted cash, beginning of period (1)
31,402 24,162 
Cash, cash equivalents and restricted cash, end of period (1)
$7,511 $54,311 
(1) Cash and cash equivalents included restricted cash of $1,800 and $2,318 at June 30, 2022 and December 31, 2021, respectively, and $2,318 and $1,375 at June 30, 2021 and December 31, 2020, respectively. At June 30, 2022, restricted cash of $1,180 is included in prepaid expenses and other current assets and $620 is included in other assets. At June 30, 2021, restricted cash of $1,180 is included in prepaid expenses and other current assets and $1,138 is included in other assets. Restricted cash is included in prepaid expenses and other current assets and other assets and consists of funds that are contractually restricted as to usage or withdrawal related to the Company's performance bond related to a contract with a customer, and security deposits in the form of standby letters of credit for leased facilities. No amounts have been drawn upon the letters of credit as of June 30, 2022.
- 11 -

NantHealth, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
20222021
Supplemental disclosure of cash flow information:
Interest paid$3,099 $2,447 
Non-cash transactions:
Purchases of property and equipment, including internal-use software18 57 
Common stock issued in Exchange for 2016 Notes— 10,000 
The accompanying notes are an integral part of these Consolidated Financial Statements.
- 12 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)

Note 1. Description of Business and Basis of Presentation
Nature of Business
Nant Health, LLC was formed on July 7, 2010, as a Delaware limited liability company. On June 1, 2016, Nant Health, LLC converted into a Delaware corporation (the “LLC Conversion”) and changed its name to NantHealth, Inc. (“NantHealth”). NantHealth, together with its subsidiaries (the “Company”), is a healthcare IT company converging science and technology. The Company works to transform clinical delivery with actionable clinical intelligence at the moment of decision, enabling clinical discovery through real-time machine learning systems. The Company markets certain of its solutions as a comprehensive integrated solution that includes its clinical decision support, payer engagement solutions, data analysis and network monitoring and management. The Company also markets its clinical decision support, payer engagement solutions, data analysis and network monitoring and management on a stand-alone basis. NantHealth is a majority-owned subsidiary of NantWorks, LLC (“NantWorks”), which is a subsidiary of California Capital Equity, LLC (“Cal Cap”). The three companies were founded by and are led by Dr. Patrick Soon-Shiong.

On July 22, 2020, the Company acquired The OpenNMS Group, Inc. ("OpenNMS") pursuant to an assignment agreement with Cambridge Equities, L.P. ("Cambridge"), a related party. In August 2021, the Company purchased the remaining 9%, or 241,485 shares of outstanding OpenNMS common stock held by the remaining shareholders.

The Company is integrating OpenNMS with NantHealth’s software portfolio and service offerings, as well as expanding the Company’s capabilities in cloud, Software-as-a-Service ("SaaS"), and artificial intelligence ("AI") technologies, providing customers with services to maintain reliable network connections for critical data flows that enable patient data collaboration and decision making at the point of care. At the same time, this transaction will allow the Company to expand penetration of OpenNMS services in the healthcare industry.

As of June 30, 2022, the Company conducted the majority of its operations in the United States, Canada, and the United Kingdom.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a pandemic. In the same month, the President of the United States declared a State of National Emergency due to the COVID-19 pandemic. The COVID-19 pandemic has resulted in intermittent worldwide government restrictions on the movement of people, goods, and services resulting in increased volatility in and disruptions to global markets. To date, there has been no material adverse impact to the Company's business from the COVID-19 pandemic. Given the unprecedented and evolving nature of the pandemic, the future impact of these changes and potential changes on the Company and its contractors, consultants, customers, resellers and partners is unknown at this time.

However, in light of the uncertainties regarding economic, business, social, health and geopolitical conditions, the Company’s revenues, earnings, liquidity, and cash flows could be adversely affected, whether on an annual or quarterly basis. Continued impacts of the COVID-19 pandemic could materially adversely affect the Company’s current and long-term accounts receivable collectability, as its negatively impacted customers from the pandemic may request temporary relief, delay, or not make scheduled payments. In addition, the deployment of the Company’s solutions may represent a large portion of its customers' investments in software technology. Decisions to make such an investment are impacted by the economic environment in which the customers operate. Uncertain global geopolitical, economic and health conditions and the lack of visibility or the lack of financial resources may cause some customers to reduce, postpone or terminate their investments, or to reduce or not renew ongoing paid services, adversely impacting the Company’s revenues or timing of revenue. Health conditions in some geographic areas where the Company’s customers operate could impact the economic situation of those areas. These conditions, including the COVID-19 pandemic, may present risks for health and limit the ability to travel for Company employees, which could further lengthen the Company’s sales cycle and delay revenue and cash flows in the near-term.

- 13 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Basis of Presentation and Principles of Consolidation
The accompanying unaudited Consolidated Financial Statements include the accounts of NantHealth and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and, in the opinion of management, include all adjustments, which are normal and recurring in nature, necessary for a fair presentation of the Company's financial position and results of operations. In accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as issued by the Securities and Exchange Commission ("SEC"), these unaudited Consolidated Financial Statements do not include all of the information and disclosures required by GAAP for complete financial statements. These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2021. The accompanying Consolidated Balance Sheet as of December 31, 2021 has been derived from the audited Consolidated Financial Statements at that date. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
The Company believes its existing cash and cash equivalents, and its ability to borrow on the $125,000 promissory note with Nant Capital, LLC ("Nant Capital") (see Note 16) will be sufficient to fund operations through at least 12 months following the issuance date of the financial statements. The Company continues to have its Chairman and CEO’s intent and ability to support the Company’s operations with additional funds as required. The Company may also seek to sell additional equity, through one or more follow-on public offerings or in separate financings, or sell additional debt securities, or obtain a credit facility. However, the Company may not be able to secure such financing in a timely manner or on favorable terms. The Company may also consider selling off components of its business. Without additional funds, the Company may choose to delay or reduce its operating or investment expenditures. Further, because of the risk and uncertainties associated with the launch, commercialization and marketing of the Company's existing products and services as well as products in development, the Company may need additional funds to meet its needs sooner than planned. To date, the Company's primary sources of capital have been the private placement of membership interests prior to its IPO, debt financing agreements, including promissory notes with Nant Capital and affiliates, convertible notes, the sale of its common stock, revenue generated from our products and services and proceeds from the sale of components of its business.


Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates. The estimates and assumptions used in the accompanying unaudited Consolidated Financial Statements are based upon management’s evaluation of the relevant facts and circumstances at the balance sheet date. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, accounts receivable allowance, useful lives of long-lived assets and intangible assets, income taxes, stock-based compensation, impairment of long-lived assets and intangible assets, and the expected performance against minimum reseller commitments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented.
Segment Reporting

The chief operating decision maker for the Company is its Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results, or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company operates in one reportable segment.
- 14 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Upcoming Accounting Standard Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes how companies measure credit losses on most financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Rather than generally recognizing credit losses when it is probable that the loss has been incurred, the revised guidance requires companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the Company expects to collect over the instrument's contractual life. ASU No. 2016-13 is effective for fiscal periods beginning after December 15, 2022 for smaller reporting companies and must be adopted as a cumulative effect adjustment to retained earnings. Early adoption is permitted. The Company is still evaluating the effects of this ASU.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not have, nor are believed by management to have, a material impact on the Company's present or future Consolidated Financial Statements.


Note 3. Revenue Recognition
Contract Balances
The Company records deferred revenue when cash payments are received, or payment is due, in advance of its fulfillment of performance obligations. During the three months ended June 30, 2022 and 2021, there were revenues of $795 and $490 recognized, respectively, that were included in the deferred revenue balance at the beginning of the period. During the six months ended June 30, 2022 and 2021, there were revenues of $1,522 and $1,028 recognized, respectively.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company recognizes an asset for the incremental costs to obtain a contract with a customer, where the stated contract term, with expected renewals, is longer than one year. The Company amortizes these assets over the expected period of benefit. These costs are generally employee sales commissions, with amortization of the balance recorded in selling, general and administrative expenses. The value of these assets was $556 at June 30, 2022 and $810 at December 31, 2021. During the three months ended June 30, 2022 and 2021, the Company recorded amortization of $93 and $155, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded amortization of $235 and $315, respectively.

Where management is not able to conclude that the costs of a contract will be recovered, costs to obtain the contract are expensed as incurred.
Performance Obligations
As of June 30, 2022, the Company has allocated a total transaction price of $3,186 to unfulfilled performance obligations that are expected to be fulfilled within 9 years. Excluded from this amount are contracts of less than one year and variable consideration that relates to the value of services provided.

Note 4. Accounts Receivable, net
Accounts receivable are included in the Consolidated Balance Sheets, net of the allowance for doubtful accounts. The allowance for doubtful accounts at June 30, 2022 and December 31, 2021 was $3 and $2, respectively.

- 15 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 5. Prepaid Expenses and Other Current Assets and Accrued and Other Current Liabilities
Prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021 consisted of the following:
June 30,
2022
December 31,
2021
Prepaid expenses$2,052 $2,256 
Restricted cash1,180 1,180 
Other current assets396 574 
Prepaid expenses and other current assets$3,628 $4,010 

Accrued and other current liabilities as of June 30, 2022 and December 31, 2021 consisted of the following:
June 30,
2022
December 31,
2021
Payroll and related costs$5,602 $8,545 
Accrued liabilities2,264 2,640 
Bookings Commitment (see Note 9)1,679 1,661 
Interest payable703 703 
Operating lease liabilities2,002 1,912 
Other accrued and other current liabilities1,062 897 
Accrued and other current liabilities$13,312 $16,358 

Note 6. Property, Plant and Equipment, net
Property, plant and equipment, net as of June 30, 2022 and December 31, 2021 consisted of the following:
June 30,
2022
December 31,
2021
Computer equipment and software$7,596 $9,267 
Furniture and equipment1,055 1,060 
Leasehold improvements3,778 3,821 
Property, plant, and equipment, excluding internal-use software, gross12,429 14,148 
Less: Accumulated depreciation and amortization(10,147)(10,857)
Property, plant and equipment, excluding internal-use software, net2,282 3,291 
Internal-use software45,942 43,314 
Construction in progress - Internal-use software1,368 1,082 
Less: Accumulated depreciation and amortization, internal-use software(37,526)(35,321)
Internal-use software, net9,784 9,075 
Property, plant and equipment, net$12,066 $12,366 
 
Depreciation expense from continuing operations was $1,559 and $3,196, respectively, for the three and six months ended June 30, 2022, of which $1,078 and $2,206, respectively, related to internal-use software costs. Depreciation expense from continuing operations was $1,515 and $2,926, respectively, for the three and six months ended June 30, 2021, of which $1,022 and $2,011, respectively, related to internal-use software costs.

Amounts capitalized to internal-use software related to continuing operations for the three and six months ended June 30, 2022 were $1,713 and $2,919, respectively. Amounts capitalized to internal-use software related to continuing operations for the three and six months ended June 30, 2021 were $742 and $1,632, respectively.


- 16 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 7. Intangible Assets, net
The Company’s definite-lived intangible assets as of June 30, 2022 and December 31, 2021 consisted of the following:
June 30,
2022
December 31,
2021
Customer relationships$53,000 $53,000 
Developed technologies34,500 34,500 
Trade name3,300 3,300 
Installed user base1,400 1,400 
Intangible assets, gross92,200 92,200 
Less: Accumulated amortization(57,625)(53,161)
Intangible assets, net$34,575 $39,039 

Amortization of definite-lived intangible assets is provided over their estimated useful lives on a straight-line basis or the pattern in which economic benefits are consumed, if reliably determinable. The Company reviews its definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Amortization expense from continuing operations for the three months ended June 30, 2022 and 2021 was $2,233 and $2,232, respectively. Amortization expense from continuing operations for the six months ended June 30, 2022 and 2021 was $4,465 and $4,464, respectively.

The estimated future amortization expense over the next five years and thereafter for the intangible assets that exist as of June 30, 2022 is as follows:
Amounts
Remainder of 2022$4,466 
20234,346 
20244,283 
20254,147 
20263,467 
Thereafter13,866 
Total future intangible amortization expense$34,575 

Note 8. Convertible Notes
2021 4.5% Convertible Senior Notes ("2021 Notes")
On April 13, 2021, the Company and its wholly owned subsidiary, NaviNet (the "Guarantor") entered into a note purchase agreement (the “Note Purchase Agreement”) with Highbridge and certain other buyers, including Nant Capital to issue and sell $137,500 in aggregate principal amount of its 4.5% convertible senior notes in a private placement pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. The 2021 Notes were issued on April 27, 2021. The total net proceeds from this offering were approximately $136,772, comprised of $62,223 from Nant Capital and $74,549 from Highbridge, after deducting Highbridge’s debt issuance costs of $118 and $610 in debt issuance costs paid to third parties in connection with the 2021 Notes offering.

The Company used part of the proceeds from the 2021 Notes issuance to repurchase the remaining $31,945 of principal amount of the 2016 5.5% Convertible Senior Notes ("2016 Notes") held by Highbridge (“Repurchased Notes”) and pay $644 of accrued and unpaid interest. On April 27, 2021, in connection with the issuance of the 2021 Notes, the Company provided a notice of a "Fundamental Change" (as defined in the indenture governing the Company's 2016 Notes) and an offer to repurchase all the outstanding 2016 Notes. On May 25, 2021, the Company purchased $55,555 of the outstanding 2016 Notes via a Fundamental Change repurchase and paid $1,358 of accrued and unpaid interest thereon.

On April 27, 2021, the 2021 Notes were issued to the investors under an indenture (the “2021 Indenture”) dated April 27, 2021 entered into between the Company and U.S. Bank National Association (the “Trustee”).
- 17 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)

Interest rates on the 2021 Notes are fixed at 4.5% per year, payable semi-annually on October 15th and April 15th of each year, beginning on October 15, 2021. The 2021 Notes will mature on April 15, 2026, unless earlier repurchased by the Company or converted pursuant to their terms.

The deferred financing offering costs on the 2021 Notes are being amortized to interest expense over the contractual terms of the 2021 Notes, using the effective interest method at an effective interest rate of 4.61%.

The initial conversion rate of the 2021 Notes is 259.8753 shares of common stock per $1 principal amount of 2021 Notes (which is equivalent to an initial conversion price of approximately $3.85 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events in accordance with the terms of the 2021 Indenture but will not be adjusted for accrued and unpaid interest.

Holders of the 2021 Notes may convert all or a portion of their 2021 Notes, in multiples of $1 principal amount, at any time prior to the close of business on the business day immediately preceding the maturity date. Upon conversion, the 2021 Notes will be settled in cash, shares of the Company's common stock or any combination thereof at the Company's option.
As of June 30, 2022, the remaining life of the Convertible Notes is approximately 45.5 months.

The 2021 Notes are the Company’s general unsecured obligations and are initially guaranteed on a senior unsecured basis by the Guarantor.

The Company may not redeem the 2021 Notes prior to April 20, 2024. The Company may redeem for cash all or any portion of the 2021 Notes, at its option, on or after April 20, 2024, if the last reported sale price of the common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2021 Notes to be redeemed, plus any accrued and unpaid special interest up to, but excluding, the redemption date. No sinking fund is provided for the 2021 Notes, which means that the Company is not required to redeem or retire the 2021 Notes periodically. If the Company exercises this option to redeem the 2021 Notes owned by Highbridge and Highbridge is unable to convert such 2021 Notes as a result of the application of the beneficial ownership limitations, at the request of Highbridge, the Company shall convert such 2021 Notes into the number of shares of the Company’s Series 1 Preferred Stock equal to the number of shares that the 2021 Notes are convertible into pursuant to the Conversion Option (as defined in the 2021 Indenture) into common stock.

Upon the occurrence of a fundamental change (as defined in the 2021 Indenture), holders may require the Company to purchase all or a portion of the 2021 Notes in principal amounts of $1 or an integral multiple thereof, for cash at a price equal to 100% of the principal amount of the 2021 Notes to be purchased plus any accrued and unpaid interest to, but excluding, the fundamental change purchase date.

For so long as at least $25,000 principal amount of the 2021 Notes are outstanding, the 2021 Indenture restricts the Company or any of its subsidiaries from creating, assuming, or incurring any indebtedness owing to any of the Company's affiliates (other than intercompany indebtedness between the Company and its subsidiaries and other than any of the Company's 2021 Notes), or prepaying any such indebtedness, subject to certain exceptions, unless certain conditions described in the 2021 Indenture have been satisfied. Under the 2021 Indenture, the Company may incur affiliate debt if there is (i) no default or event of default at the time of such incurrence or would occur as a consequence of such incurrence; (ii) such affiliate debt is unsecured and subordinated to the 2021 Notes; and (iii) no principal of such affiliate debt is scheduled to mature earlier than the date that is 181 days after April 15, 2026, the maturity date of the 2021 Notes. See Note 11 Commitments and Contingencies for default provisions.
- 18 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
The following table summarizes how the issuance of the 2021 Notes is reflected in the Company's Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.
Related PartyOthersTotal
Balance as of June 30, 2022
Gross proceeds
$62,500 $75,000 $137,500 
Unamortized debt discounts and deferred financing offering costs
(199)(357)(556)
Net carrying amount
$62,301 $74,643 $136,944 
Balance as of December 31, 2021
Gross proceeds
$62,500 $75,000 $137,500 
Unamortized debt discounts and deferred financing offering costs
(232)(397)(629)
Net carrying amount
$62,268 $74,603 $136,871 
 
The following tables set forth the Company's interest expense recognized in the Company's Consolidated Statements of Operations:
Three Months Ended
 June 30, 2022
Six Months Ended
 June 30, 2022
2021 Notes
Related Party
Others
Total
Related PartyOthersTotal
Accrued coupon interest expense$703 $844 $1,547 $1,406 $1,688 $3,094 
Amortization of deferred financing offering costs
17 19 36 34 39 73 
Total convertible notes interest expense$720 $863 $1,583 $1,440 $1,727 $3,167 
Three Months Ended
 June 30, 2021
Six Months Ended
 June 30, 2021
2021 NotesRelated PartyOthersTotalRelated PartyOthersTotal
Accrued coupon interest expense$492 $591 $1,083 $492 $591 $1,083 
Amortization of deferred financing offering costs11 15 26 11 15 26 
2016 Notes
Accrued coupon interest expense $79 $657 $736 $216 $1,991 $2,207 
Amortization of debt discounts37 42 13 113 126 
Amortization of deferred financing offering costs116 119 350 358 
Total convertible notes interest expense$590 $1,416 $2,006 $740 $3,060 $3,800 

- 19 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 9. Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 consisted of the following:
June 30, 2022
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$31,974 $— $— $31,974 
December 31, 2021
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$34,474 $— $— $34,474 

The Company’s intangible assets and goodwill are initially measured at fair value and any subsequent adjustment to the initial fair value occurs only if an impairment charge is recognized.
Level 3 Inputs
Bookings Commitment
On August 3, 2017, the Company entered into an asset purchase agreement (the “APA”) with Allscripts Healthcare Solutions, Inc. (“Allscripts”), pursuant to which the Company agreed to sell to Allscripts substantially all of the assets of the Company’s provider/patient engagement solutions business, including the Company’s FusionFX solution and components of its NantOS software connectivity solutions (the “Business”). On August 25, 2017, the Company and Allscripts completed the sale of the Business (the "Disposition") pursuant to the APA.

Concurrent with the closing of the Disposition and as contemplated by the APA, (a) the Company and Allscripts modified the amended and restated mutual license and reseller agreement dated June 26, 2015, which was further amended on December 30, 2017, such that, among other things, the Company committed to deliver a minimum of $95,000 of total bookings over a ten-year period (“Bookings Commitment”) from referral transactions and sales of certain Allscripts products; (b) the Company and Allscripts each licensed certain intellectual property to the other party pursuant to a cross license agreement; (c) the Company agreed to provide certain transition services to Allscripts pursuant to a transition services agreement; and (d) the Company licensed certain software and agreed to sell certain hardware to Allscripts pursuant to a software license and supply agreement. The Company also agreed that Allscripts shall receive at least $500 per year in payments from bookings (the “Annual Minimum Commitment”). If the total payments received by Allscripts from bookings during such period are less than the Annual Minimum Commitment, the Company shall pay to Allscripts the difference between the Annual Minimum Commitment and the total amount received by Allscripts from bookings during such period. As of both June 30, 2022 and December 31, 2021, the accrued Annual Minimum Commitment was $1,200. In the event of a Bookings Commitment shortfall at the end of the ten-year period, the Company may be obligated to pay 70% of the shortfall, subject to certain credits. The Company will earn 30% commission from Allscripts on each software referral transaction that results in a booking with Allscripts. The Company accounts for the Bookings Commitment at its estimated fair value over the life of the agreement.

The Company values the Bookings Commitment, assumed upon the disposal of the provider/patient engagement solutions business, using a Monte Carlo Simulation model to calculate average payments due under the Bookings Commitment, based on management's estimate of its performance in securing bookings and resulting annual payments, discounted at the cost of debt based on a yield curve. The cost of debt used for discounting was between 14% and 15% at June 30, 2022 and 11% at December 31, 2021. The change in fair value is recorded within other income (expense), net in the Company's Consolidated Statements of Operations.

The fair value of the Bookings Commitment is dependent on management's estimate of the probability of success on individual opportunities and the cost of debt applied in discounting the liability. The higher the probability of success on each opportunity, the lower the fair value of the Bookings Commitment liability. The lower the cost of debt applied, the higher the value of the liability.
- 20 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)

Management believes the assumptions used on projected financial information is reasonable, but those assumptions require judgment and are forward looking in nature. However, actual results may differ materially from those projections. The fair value of the Bookings Commitment is most sensitive to management's estimate of the discount rate applied to present value the liability. If the discount rate applied was 2% lower at June 30, 2022, the fair value of the liability would increase by $3,226.

The fair market value for level 3 securities may be highly sensitive to the use of unobservable inputs and subjective assumptions. Generally, changes in significant unobservable inputs may result in significantly lower or higher fair value measurements.

The following tables set forth a summary of changes in the fair value of Level 3 liabilities for the six months ended June 30, 2022:
December 31, 2021Transfers in (out) Change in fair value recognized in earningsJune 30, 2022
Liabilities
Bookings Commitment34,474 — (2,500)31,974 
$34,474 $— $(2,500)$31,974 
Fair Value of Convertible Notes held at amortized cost
As of June 30, 2022 and December 31, 2021, the fair value and carrying value of the Company's Convertible 2021 Notes were:
 
Fair valueCarrying valueFace value
2021 Notes
Balance as of June 30, 2022
Related party
$43,886 $62,301 $62,500 
Others
52,664 74,643 75,000 
$96,550 $136,944 $137,500 
Balance as of December 31, 2021
Related party
$51,466 $62,268 $62,500 
Others
61,760 74,603 75,000 
$113,226 $136,871 $137,500 

The fair value of the 2021 Notes was determined by using unobservable inputs that are supported by minimal non-active market activity and that are significant to determining the fair value of the debt instrument. The fair value is level 3 in the fair value hierarchy.

- 21 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 10. Leases
The Company has operating leases for corporate offices, data centers, and certain equipment. The Company's leases have lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. Options to extend are included in the lease term where the Company is reasonably certain to exercise the options. Variable payments on the Company's leases are expensed as incurred, as they do not depend on an index or rate. The Company concluded certain leases for data centers had a term of less than 1 year at inception, as arrangements are only renewed following marketplace assessments and negotiations with vendors.

Future minimum lease payments under the Company's operating leases at June 30, 2022 were:

Maturity AnalysisAmounts
Remainder of 2022$1,345 
20232,679 
20242,524 
2025671 
2026604 
2027427 
Thereafter660 
Total future minimum lease payments8,910 
Less: imputed interest(1,767)
Total$7,143 
As reported in the Consolidated Balance Sheet
Accrued and other current liabilities$2,002 
Operating lease liabilities5,141 
$7,143 

In June 2022, the Company entered into a sublease for 27 percent of our Boston office space which is expected to commence in September 2022. We recorded an ROU asset impairment charge in the three months ended June 30, 2022 of $208, which was the amount by which the carrying value of the ROU asset allocated to the sublease exceeded the fair value. We estimated the fair value of the ROU asset using an income approach based on the net present value of the sublease rental income during the sublease term. The ROU asset impairment charge is included in other income (expense), net.
- 22 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 11. Commitments and Contingencies
The Company's principal commitments consist of obligations under its outstanding debt obligations, non-cancelable leases for its office space and certain equipment and vendor contracts to provide research services, and purchase obligations under license agreements and reseller agreements.
Related Party Promissory Note
On January 4, 2016, the Company executed a $112,666 demand promissory note in favor of Nant Capital to fund the acquisition of NaviNet (see Note 16). On May 9, 2016 and December 15, 2016, the promissory note with Nant Capital was amended to provide that all outstanding principal and accrued interest is due and payable on June 15, 2022, and not on demand. On April 27, 2021, in connection with the issuance of the 2021 Notes, the Company entered into a Third Amended and Restated Promissory Note which amends and restates its promissory note, dated January 4, 2016, as amended on May 9, 2016, and on December 16, 2016, between the Company and Nant Capital, to, among other things, extend the maturity date of the promissory note to October 1, 2026 and to subordinate the promissory note in right of payment to the 2021 Notes (see Note 8).
Indenture Obligations Under Convertible Notes
On April 27, 2021, the Company and the Guarantor entered into an indenture (the “2021 Indenture”) by and among NantHealth, the Guarantor and U.S. Bank National Association, as trustee (the “Trustee”), pursuant to which the Company issued the 2021 Notes. The 2021 Notes will bear interest at a rate of 4.5% per year, payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021. The 2021 Notes will mature on April 15, 2026, unless earlier repurchased, redeemed or converted.

The following events are considered “events of default” with respect to the 2021 Notes, which may result in the acceleration of the maturity of the 2021 Notes:

(1) the Company defaults in any payment of interest on the 2021 Notes when due and payable and the default continues for a period of 30 days;

(2) the Company defaults in the payment of principal on the 2021 Notes when due and payable at the stated maturity, upon redemption, upon any required repurchase, upon declaration of acceleration or otherwise;

(3) failure by the Company to comply with its obligation to convert the 2021 Notes in accordance with the 2021 Indenture upon exercise of a holder’s conversion right and such failure continues for a period of five business days;

(4) failure by the Company to give a fundamental change notice or notice of a specified corporate transaction when due with respect to the 2021 Notes;

(5) failure by the Company to comply with its obligations under the 2021 Indenture with respect to consolidation, merger and sale of assets of the Company;

(6) failure by the Company to comply with any of its other agreements contained in the 2021 Notes or the 2021 Indenture, for a period 60 days after written notice from the Trustee or the holders of at least 25% in principal amount of the 2021 Notes then outstanding has been received;

(7) default by the Company or any of its significant subsidiaries (as defined in the 2021 Indenture) with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $17,500 (or its foreign currency equivalent) in the aggregate of the Company and/or any such subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal of any such indebtedness when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise, and, in the case of clauses (i) and (ii), such default is not rescinded or annulled or such failure to pay or default shall not have been cured or waived, such acceleration is not rescinded or such indebtedness is not discharged, as the case may be, within 30 days after notice to the Company by the Trustee or to the Company and the Trustee by holders of at least 25% in aggregate principal amount of 2021 Notes then outstanding in accordance with the 2021 Indenture; or

(8) certain events of bankruptcy, insolvency, or reorganization of the Company or any of its significant subsidiaries (as defined in the 2021 Indenture).

- 23 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
If such an event of default, other than an event of default described in clause (8) above with respect to the Company, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding 2021 Notes by notice to the Company and the Trustee, may, and the Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the 2021 Notes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal of and accrued and unpaid interest on the 2021 Notes will automatically become due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest on the 2021 Notes, if any, will be due and payable immediately.
Unconditional Purchase Obligations
In 2020, NantWorks entered into agreements with various vendors related to an enterprise resource planning (“ERP”) implementation project on behalf of its subsidiaries, including NantHealth. NantWorks bills the Company for its portion of these expenses through the Shared Services Agreement (see Note 16). During the six months ended June 30, 2022, the Company made payments of approximately $162 for the amounts purchased related to the unconditional purchase obligations for the ERP implementation project. As of June 30, 2022, the Company has fulfilled its share of the unconditional purchase obligations for the ERP implementation project.
Regulatory Matter
The Company is subject to the Health Insurance Portability and Accountability Act (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act and related patient confidentiality laws and regulations with respect to patient information. The Company reviews the applicable laws and regulations regarding effects of such laws and regulations on its operations on an on-going basis and modifies operations as appropriate. The Company believes it is in substantial compliance with all applicable laws and regulations. Failure to comply with regulatory requirements could have a significant adverse effect on the Company’s business and operations.
Legal Matters
The Company is, from time to time, subject to claims and litigation that arise in the ordinary course of its business. Except as discussed below, in the opinion of management, the ultimate outcome of proceedings of which management is aware, even if adverse to the Company, would not have a material adverse effect on the Company’s consolidated financial condition or results of operations. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
Securities and Derivative Litigation
In March 2017, a number of putative class action securities complaints were filed in U.S. District Court for the Central District of California, naming as defendants the Company and certain of our current or former executive officers and directors. These complaints have been consolidated with the lead case captioned Deora v. NantHealth, Inc., 2:17-cv-01825 ("Deora"). In June 2017, the lead plaintiffs filed an amended consolidated complaint, which generally alleges that defendants violated federal securities laws by making material misrepresentations in NantHealth’s IPO registration statement and in subsequent public statements. In particular, the complaint refers to various third-party articles in alleging that defendants misrepresented NantHealth’s business with the University of Utah, donations to the university by non-profit entities associated with the Company's founder Dr. Patrick Soon-Shiong, and orders for GPS Cancer. The lead plaintiffs seek unspecified damages and other relief on behalf of putative classes of persons who purchased or acquired NantHealth securities in the IPO or on the open market from June 1, 2016 through May 1, 2017. In March 2018, the Court largely denied Defendants’ motion to dismiss the consolidated amended complaint. On July 30, 2019, the Court certified the case as a class action. On October 23, 2019, the parties notified the Court that they had reached a settlement in principle to resolve the action on a class wide basis in the amount of $16,500, which was included in accrued and other current liabilities in the Consolidated Balance Sheet at December 31, 2019. The Court granted preliminary approval of the settlement on January 31, 2020. A hearing for final approval of the settlement was scheduled for June 15, 2020, but on June 5, 2020, the Court decided to take the final approval motion on submission, and on July 17, 2020, the Court directed Plaintiff’s counsel to submit evidence substantiating all costs incurred. The $16,500 settlement was paid into a settlement fund prior to the payment deadline of March 2, 2020. The majority of the settlement amount was funded by the Company’s insurance carriers, and a portion was by the Company. On September 10, 2020, the Court entered an order granting final approval of the settlement, and the order and settlement are now final.

- 24 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
In May 2017, a putative class action complaint was filed in California Superior Court, Los Angeles County, asserting claims for violations of the Securities Act based on allegations similar to those in Deora. That case is captioned Bucks County Employees Retirement Fund v. NantHealth, Inc., BC 662330. At a case management conference on December 3, 2019, the parties informed the court of the pending settlement of the federal class action in the Deora action. During a status conference on February 4, 2021, the Court scheduled a further status conference for April 7, 2021 and stated that if Plaintiff did not voluntarily dismiss the action, the Court would entertain a motion to dismiss in light of the finalization of the Deora settlement. Plaintiff filed an unopposed request for voluntarily dismissal on March 15, 2021. On March 22, 2021, the court issued an order granting plaintiff’s request and dismissing the action with prejudice.

In April 2018, two putative shareholder derivative actions, captioned Engleman v. Soon-Shiong, Case No. 2018-0282-AGB, and Petersen v. Soon-Shiong, Case No. 2018-0302-AGB were filed in the Delaware Court of Chancery. The plaintiff in the Engleman action previously filed a similar complaint in California Superior Court, Los Angeles County, which was dismissed based on a provision in the Company’s charter requiring derivative actions to be brought in Delaware. The Engleman and Petersen complaints contain allegations similar to those in the Deora action but asserted causes of action on behalf of NantHealth against various of the Company’s current or former executive officers and directors for alleged breaches of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment. The Company is named solely as a nominal defendant. In July 2018, the court issued an order consolidating the Engleman and Petersen actions as In re NantHealth, Inc. Stockholder Litigation, Lead C.A. No. 2018-0302, appointing Petersen as lead plaintiff, and designating the Petersen complaint as the operative complaint. On September 20, 2018, the defendants moved to dismiss the complaint. In October 2018, in response to the motion to dismiss, Petersen filed an amended complaint. In November 2018, the defendants moved to dismiss the amended complaint, which asserts claims for breach of fiduciary duty, waste of corporate assets (which Petersen subsequently withdrew), and unjust enrichment. On January 14, 2020, the court issued an order granting in part and denying in part the defendants’ motion to dismiss. The court dismissed all claims except one claim against Dr. Patrick Soon-Shiong for breach of fiduciary duty. Dr. Soon-Shiong and the Company filed answers to the amended complaint on March 30, 2020. On June 29, 2021, the Court granted the Unopposed Motion to Substitute Lead Plaintiff, following Plaintiff Petersen’s sale of his NantHealth stock, and appointed Engleman as Lead Plaintiff.

In April 2018, a putative shareholder derivative action captioned Shen v. Soon-Shiong was filed in U.S. District Court for the District of Delaware. In November 2018, a putative shareholder derivative action captioned Manuel v. Soon-Shiong was filed in the U.S. District Court for the District of Delaware. The complaints contain allegations similar to those in the Deora action but also asserted causes of action on behalf of NantHealth against various of the Company’s current or former executive officers and directors for alleged breaches of fiduciary duty and unjust enrichment, as well as alleged violations of the federal securities laws based on alleged misstatements or omissions in the Company’s 2017 proxy statement. The Company is named solely as a nominal defendant. On January 15, 2019, the Shen and Manuel actions were consolidated in a case captioned In re NantHealth, Inc. Derivative Litigation. The parties agreed to stay the consolidated case pending a decision on defendants’ motion to dismiss in the derivative action in the Delaware Court of Chancery. The stay was lifted after the Delaware Court of Chancery's January 14, 2020 decision granting in part and denying in part the motion to dismiss. On October 5, 2020, an amended consolidated complaint was filed which brings claims only against Dr. Soon-Shiong for alleged violations of the federal securities laws and breach of fiduciary duty based on alleged misstatement or omissions in the Company’s 2017 and 2018 proxy statements and other public filings. On December 4, 2020, defendant moved to dismiss the amended complaint. On February 2, 2021, plaintiffs filed an answering brief in opposition to defendant’s motion to dismiss. On March 18, 2021, defendant filed a reply brief in further support of his motion to dismiss the amended complaint. On May 12, 2021, the District Court granted defendant’s motion to dismiss the amended complaint in full with prejudice.


Note 12. Income Taxes

The benefit for income taxes for the three and six months ended June 30, 2022 from continuing operations was a benefit of $29 and a benefit of $9, respectively. The provision for (benefit from) income taxes for the three and six months ended June 30, 2021 from continuing operations was a provision of $6 and a benefit of $2, respectively. The provision for (benefit from) income taxes for the three and six months ended June 30, 2022 and 2021 from continuing operations included an income tax provision for (benefit from) the consolidated group based on an estimated annual effective tax rate.

The effective tax rates for the three and six months ended June 30, 2022 from continuing operations were a benefit of 0.20% and a benefit of 0.02%, respectively. The effective tax rates for the three and six months ended June 30, 2021 from continuing operations were a provision of 0.04% and a benefit of 0.01%, respectively. The effective tax rates for the three and six months ended June 30, 2022 and 2021 differed from the U.S. federal statutory rates of 21% primarily as a result of a valuation allowance on the Company's deferred tax assets.

- 25 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
The Company has evaluated all available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the U.S. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a valuation allowance on substantially all deferred tax assets in excess of deferred tax liabilities. If / when the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period(s) such determination is made. The Company files income tax returns in the U.S. Federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. The Company has recently completed an IRS audit for the tax year 2016 with no adjustments. The Company is no longer subject to income tax examination by the U.S. federal, state or local tax authorities for years ended December 31, 2016 or prior, however, its tax attributes, such as net operating loss (“NOL”) carryforwards and tax credits, are still subject to examination in the year they are used.

Note 13. Stockholders’ Equity
Amended Certificate of Incorporation
In accordance with the Company’s amended and restated certificate of incorporation, which was filed immediately following the closing of its IPO, the Company is authorized to issue 750,000,000 shares of common stock, with a par value of $0.0001 per share, and 20,000,000 shares of undesignated preferred stock, with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share held on all matters submitted to a vote of its stockholders. Holders of the Company’s common stock have no cumulative voting rights. Further, as of June 30, 2022 and December 31, 2021, holders of the Company’s common stock have no preemptive, conversion, redemption or subscription rights and there are no sinking fund provisions applicable to the Company’s common stock. Upon liquidation, dissolution or winding-up of the Company, holders of the Company’s common stock are entitled to share ratably in all assets remaining after payment of all liabilities and the liquidation preferences of any outstanding shares of preferred stock. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of the Company’s common stock are entitled to receive dividends, if any, as may be declared from time to time by the Company’s board of directors. As of June 30, 2022, and December 31, 2021, there were no outstanding shares of preferred stock.

On April 13, 2021, the Company exchanged with Cambridge and Highbridge, $10,000 principal of the 2016 Notes ($5,000 with each party), for 1,689,189 and 1,926,781 common shares, respectively.

On November 12, 2021, the Company entered into a certain Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) relating to shares of our common stock, $0.0001 par value per share, offered pursuant to an effective shelf registration statement on Form S-3 that was declared effective on May 6, 2021. In accordance with the terms of the Sale Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $30,000 from time to time through Jefferies acting as our agent.
- 26 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 14. Stock-Based Compensation
The following table reflects the components of stock-based compensation expense recognized in the Company's Consolidated Statements of Operations:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Stock options:
Cost of revenue42 68 84 
Selling, general and administrative1,1355702,2751,268
Research and development80105221203
Total stock options stock-based compensation expense1,2237172,5641,555
Restricted stock units:
Selling, general and administrative27255474
Total restricted stock units stock-based compensation expense27255474
Related party share based payments:
Selling, general and administrative12 67 24 67 
Research and development46 11 46 
Total related party stock-based compensation expense13 113 35 113 
Total stock-based compensation expense1,263855 2,6531,742 
Amount capitalized to internal-use software2632 5357 
Total stock-based compensation cost$1,289 $887 $2,706 $1,799 
2016 Equity Incentive Plan
In May and June of 2016, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2016 Equity Incentive Plan (the "2016 Plan”) in connection with the Company’s IPO. The 2016 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to employees, directors and consultants. In April 2018, the Company’s Board of Directors adopted and, in June 2018, the Company’s stockholders approved an amendment to the 2016 Plan, to reserve a further 6,800,000 shares of common stock for issuance pursuant to the 2016 Plan. In May 2020, the Company’s stockholders approved an amendment to the 2016 Plan, to reserve a further 12,000,000 shares of common stock for issuance pursuant to the 2016 Plan. In June 2022, the Company's stockholders approved an amendment to the 2016 Plan, to reserve a further 3,000,000 shares of common stock for issuance pursuant to the 2016 Plan. Following the approval of the amendments, a total of 27,800,000 shares of common stock were reserved for issuance pursuant to the 2016 Plan.

- 27 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Stock Options

The following table summarizes the activity related to stock options during the three and six months ended June 30, 2022:
 
Number of 
Shares
Weighted-Average 
Exercise Price
Stock options outstanding - December 31, 202114,475,636 $2.06 
Exercised(45,000)$0.55 
Forfeited(118,750)$3.60 
Stock options outstanding - March 31, 202214,311,886 $2.05 
   Granted300,000 $0.58 
   Forfeited(247,500)$2.43 
Stock options outstanding - June 30, 202214,364,386 $2.01 
Stock options exercisable - June 30, 20224,720,636 $1.46 
As of June 30, 2022, the Company had $9,844 of unrecognized stock-based compensation expense related to stock options. This cost is expected to be recognized over a weighted-average period of 1.7 years.
The Company settles all exercised stock options by issuing shares of the Company's common stock without netting down the portion related to payroll withholding tax obligations.
Restricted Stock Units
The following table summarizes the activity related to the unvested restricted stock units during the three and six months ended June 30, 2022:
 
Number of
Units
Weighted-Average Grant Date Fair Value
Unvested restricted stock units outstanding - December 31, 2021119,705 $1.81 
Vested(59,852)$1.81 
Unvested restricted stock units outstanding - March 31, 202259,853 $1.81 
Unvested restricted stock units outstanding - June 30, 202259,853 $1.81 
Vested and exercisable - June 30, 202259,852 $1.81 
Vested and unvested restricted stock units outstanding - June 30, 2022119,705 $1.81 
As of June 30, 2022, the Company had $75 of unrecognized stock-based compensation expense related to restricted stock units. This cost is expected to be recognized over a weighted-average period of 0.7 years.
During the six months ended June 30, 2022, the Company issued 0 shares of common stock to participants of the 2016 Plan based in the United States.

- 28 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 15. Net Loss Per Share
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net loss per share of common stock attributable to NantHealth for the three and six months ended June 30, 2022 and 2021:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Common StockCommon StockCommon StockCommon Stock
Net loss per share numerator:
Net loss from continuing operations
$(12,512)$(15,450)$(28,462)$(30,954)
Net loss attributable to noncontrolling interests— (128)(219)
Net loss from continuing operations attributable to NantHealth(12,512)(15,322)(28,462)(30,735)
Income from discontinued operations attributable to NantHealth— 19 — 24 
Net loss attributable to NantHealth for basic and diluted net loss per share$(12,512)$(15,303)$(28,462)$(30,711)
Weighted-average shares for basic and diluted net loss per share115,550,244 114,512,542 115,535,822 112,924,619 
Basic and diluted net loss per share attributable to NantHealth:
Total net loss per share - common stock$(0.11)$(0.13)$(0.25)$(0.27)

The following number of potential common shares at the end of each period were excluded from the calculation of diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive for the periods presented:
June 30,
20222021
Unvested and vested and unissued restricted stock units119,705 119,705 
Unexercised stock options14,364,386 9,448,724 
Convertible notes35,732,853 36,515,562 

Note 16. Related Party Transactions
NantWorks Shared Services Agreement
In October 2012, the Company entered into a shared services agreement with NantWorks that provides for ongoing services from NantWorks in areas such as public relations, information technology and cloud services, human resources and administration management, finance and risk management, environmental health and safety, sales and marketing services, facilities, procurement and travel, and corporate development and strategy (the "Shared Services Agreement"). The Company is billed quarterly for such services at cost, without mark-up or profit for NantWorks, but including reasonable allocations of employee benefits, facilities and other direct or fairly allocated indirect costs that relate to the associates providing the services. NantHealth also bills NantWorks and affiliates for services such as information technology and cloud services, finance and risk management, and facilities management, on the same basis. During the three and six months ended June 30, 2022, the Company incurred $387 and $152, respectively, from selling, general and administrative expenses for services provided to the Company by NantWorks and affiliates, net of services provided to NantWorks and affiliates by the Company. During the three and six months ended June 30, 2021, the Company incurred $201 and $307, respectively, from selling, general and administrative expenses for services provided to the Company by NantWorks and affiliates, net of services provided to NantWorks and affiliates by the Company.
- 29 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Nant Capital Note Purchase Agreement
On April 13, 2021, the Company entered into a Note Purchase Agreement with Nant Capital to issue and sell $62,500 in aggregate principal amount of its 2021 Notes (see Note 8). The accrued and unpaid interest on the 2021 Notes held by Nant Capital was $586 and $586 at June 30, 2022 and December 31, 2021, respectively, and was included as part of current related party payables, net in the Consolidated Balance Sheets.
Related Party Receivables and Payables
As of June 30, 2022 and December 31, 2021, the Company had related party receivables of $1,517 and $1,518, respectively, primarily consisting of a receivable from Ziosoft KK of $1,144 in both periods, which was related to the sale of Qi Imaging. As of June 30, 2022 and December 31, 2021, the Company had related party payables and related party liabilities of $44,933 and $43,439, respectively, which primarily relate to interest payable on the $112,666 promissory note in favor of Nant Capital and amounts owed to NantWorks pursuant to the Shared Services Agreement. The balance of the related party receivables and payables represent amounts paid by affiliates on behalf of the Company or vice versa.
Amended Reseller Agreement
On June 19, 2015, the Company entered into a five and a half year exclusive Reseller Agreement with NantOmics for sequencing and bioinformatics services (the "Original Reseller Agreement"). NantOmics is a majority owned subsidiary of NantWorks and is controlled by the Company's Chairman and CEO. On May 9, 2016, the Company and NantOmics executed an Amended and Restated Reseller Agreement (the “Amended Reseller Agreement”), pursuant to which the Company received the worldwide, exclusive right to resell NantOmics’ quantitative proteomic analysis services, as well as related consulting and other professional services, to institutional customers (including insurers and self-insured healthcare providers) throughout the world. The Company retained its existing rights to resell NantOmics’ molecular analysis and bioinformatics services. Under the Amended Reseller Agreement, the Company is responsible for various aspects of delivering its sequencing and molecular analysis solutions, including patient engagement and communications with providers such as providing interpretations of the reports delivered to the physicians and resolving any disputes, ensuring customer satisfaction, and managing billing and collections. On September 20, 2016, the Company and NantOmics further amended the Amended Reseller Agreement (the "Second Amended Reseller Agreement"). The Second Amended Reseller Agreement permits the Company to use vendors other than NantOmics to provide any or all of the services that are currently being provided by NantOmics and clarifies that the Company is responsible for order fulfillment and branding.

The Second Amended Reseller Agreement grants to the Company the right to renew the agreement (with exclusivity) for up to three renewal terms, each lasting three years, if the Company achieves projected volume thresholds, as follows: (i) the first renewal option can be exercised if the Company completes at least 300,000 tests between June 19, 2015 and June 30, 2020; (ii) the second renewal option can be exercised if the Company completes at least 570,000 tests between July 1, 2020 and June 30, 2023; and (iii) the third renewal option can be exercised if the Company completes at least 760,000 tests between July 1, 2023 and June 30, 2026. If the Company does not meet the applicable volume threshold during the initial term or the first or second exclusive renewal terms, the Company can renew for a single additional three-year term, but only on a non-exclusive basis.

The Company agreed to pay NantOmics noncancellable annual minimum fees of $2,000 per year for each of the calendar years from 2016 through 2020 and, subject to the Company exercising at least one of its renewal options described above. The Company was also required to pay annual minimum fees to from 2021 through 2029. These annual minimum fees are no longer applicable with the execution of Amendment No. 3 to the Second Amended Reseller Agreement.
On December 18, 2017, the Company and NantOmics executed Amendment No. 1 to the Second Amended Reseller Agreement. The Second Amended Reseller Agreement was amended to allow fee adjustments with respect to services completed by NantOmics between the amendment effective date of October 1, 2017 to June 30, 2018.
On April 23, 2019, the Company and NantOmics executed Amendment No. 2 to the Second Amended Reseller Agreement. The Second Amended Reseller Agreement was amended to set a fixed fee with respect to services completed by NantOmics between the amendment effective date and the end of the Initial Term, December 31, 2020.
On December 31, 2020, the Company and NantOmics executed Amendment No. 3 to the Second Amended Reseller Agreement to automatically renew at the end of December 2020 for a non-exclusive renewal term and to waive the annual minimum fee for the 2020 calendar year and calendar years 2021 through 2023.

As of June 30, 2022 and December 31, 2021, the Company had no outstanding related party payables under the Second Amended Reseller Agreement. During the three and six months ended June 30, 2022 and June 30, 2021, no direct costs were recorded as cost of revenue related to the Second Amended Reseller Agreement.
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NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Related Party Promissory Notes
In January 2016, we executed a demand promissory note with Nant Capital (the "Nant Capital Note"), a personal investment vehicle for Dr. Soon-Shiong, our Chairman and CEO. As of June 30, 2022, the total advances made by Nant Capital to us pursuant to the note was approximately $112,666. On May 9, 2016, the Nant Capital Note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due and payable on June 30, 2021, and not on demand. On December 15, 2016, in connection with the offering of the 2016 Notes, we entered into a Second Amended and Restated Promissory Note which amended and restated the Amended and Restated Promissory Note, dated May 9, 2016, between us and Nant Capital, to, among other things, extend the maturity date of the Nant Capital Note to June 15, 2022 and to subordinate the Nant Capital Note in right of payment to the 2016 Notes. The Nant Capital Note bears interest at a per annum rate of 5.0% compounded annually and computed on the basis of the actual number of days in the year. When a repayment is made, Nant Capital has the option, but not the obligation, to require us to repay any such amount in cash, Series A-2 units of NantOmics (based on a per unit price of $1.484 held by us, shares of our common stock based on a per share price of $18.6126 (if such equity exists at the time of repayment), or any combination of the foregoing at the sole discretion of Nant Capital. On April 27, 2021, in connection with the issuance of the 2021 Notes, we entered into a Third Amended and Restated Promissory Note which amends and restates its promissory note, dated January 4, 2016, as amended on May 9, 2016, and on December 16, 2016, between the Company and Nant Capital, to, among other things, extend the maturity date of the promissory note to October 1, 2026 and to subordinate the promissory note in right of payment to the 2021 Notes. As of June 30, 2022 and December 31, 2021, the total principal and interest outstanding on the promissory note amounted to $154,685 and $150,944, respectively. The accrued and unpaid interest on the promissory note as of June 30, 2022 and December 31, 2021 was $42,019 and $38,278, respectively, included as part of noncurrent related party liabilities in the Consolidated Balance Sheets.

On March 3, 2017, NantHealth Labs (formerly Liquid Genomics, Inc.), executed a promissory note with NantWorks. The principal amount of the advance made by NantWorks totaled $250 as of June 30, 2022 and December 31, 2021. On June 30, 2017, the promissory note was amended and restated to provide that all outstanding principal and accrued and unpaid interest is due on demand. The note bears interest at a per annum rate of 5.0%, compounded annually. As of June 30, 2022 and December 31, 2021, the total interest outstanding on this note amounted to $74 and $66, respectively, and is included in related party payables, net.

On August 8, 2018, the Company executed a promissory note in favor of Nant Capital, with a maturity date of June 15, 2022. On December 31, 2020, the Company and Nant Capital executed an agreement to amend and restate the original promissory note allowing us to request advances up to a maximum commitment of $125,000 that bears interest at a per annum rate of 5.50%, extended the maturity date to December 31, 2023, and created an option for the securitization of the debt under the promissory note upon full repayment of the 2016 Notes. Interest payments on outstanding amounts are due on December 15th of each calendar year. The promissory note includes customary negative covenants. On April 27, 2021, in connection with the issuance of the 2021 Notes, the Company and Nant Capital entered into a Second Amended and Restated Promissory Note which amends and restates its promissory note, dated August 8, 2018, as amended on December 31, 2020, between the Company and Nant Capital, to, among other things, extend the maturity date of the promissory note to December 31, 2026 and to subordinate the promissory note in right of payment to the 2021 Notes. As of June 30, 2022, no advances had been made under the promissory note. As of June 30, 2022, the Company was in compliance with the covenants.
Related Party Share-based Payments
On December 21, 2020, ImmunityBio, Inc. (formerly known as NantKwest, Inc.) ("ImmunityBio"), NantCell, and Nectarine Merger Sub, Inc., a wholly owned subsidiary of ImmunityBio, entered into an Agreement and Plan of Merger, which was completed on March 9, 2021 (the "Merger"). The newly merged entity is majority owned by entities controlled by Dr. Soon-Shiong, Chairman and Chief Executive Officer of the Company. On March 4, 2021, prior to the Merger, NantCell awarded restricted stock units to its employees, including certain NantHealth employees working on behalf of ImmunityBio, which vest over defined service periods, subject to completion of a liquidity event. At the effective time of the Merger on March 9, 2021, the performance condition was met and each share of common stock of NantCell that was issued and outstanding immediately prior to the Merger was automatically converted into the right to receive as consideration newly issued common shares of ImmunityBio. The Company accounts for these awards as compensation cost at its estimated fair value over the vesting period with a corresponding credit to equity to reflect a capital contribution from, or on behalf of, the common controlling entity, to the extent that those services provided by its employees associated with these awards benefit NantHealth. The fair value is dependent on management's estimate of the benefit to NantHealth. The higher the estimate of benefit to the Company, the higher the fair value of compensation cost. The compensation cost attributed to NantHealth associated with these awards was $13 and $35 for the three and six months ended June 30, 2022, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of our financial condition and the results of operations as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the “Consolidated Financial Statements” and notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report"). This discussion contains forward-looking statements that are based on the beliefs, assumptions, and information currently available to our management, and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, those described in greater detail elsewhere in this Quarterly Report and in our Annual Report on Form 10-K, particularly in Item 1A, “Risk Factors”.
Overview
NantHealth, Inc. (“we” or “us”) provides enterprise solutions that help businesses transform complex data into actionable insights. By offering efficient ways to move, interpret, and visualize complex and highly sensitive information, we help our customers in healthcare, life sciences, logistics, telecommunications, and other industries, to automate, understand, and act on data while keeping it secure and scalable.

Our product portfolio comprises the latest technology in payer/provider collaboration platforms for real-time coverage decision support (NaviNet and Eviti), and data solutions that include multi-data analysis, reporting and professional services offerings (Quadris). In addition, OpenNMS, a subsidiary of ours, helps businesses monitor and manage network health and performance. Altogether, we generally derive revenue from SaaS subscription fees, support services, professional services, and revenue sharing through collaborations with complementary businesses.

We market certain of our solutions as a comprehensive integrated solution that includes our clinical decision support, payer engagement solutions, data analysis and network monitoring and management. We also market our clinical decision support, payer engagement solutions, data analysis and network monitoring and management on a stand-alone basis. To accelerate our commercial growth and enhance our competitive advantage, we intend to continue to:

introduce new marketing, education and engagement efforts and foster relationships across the health care community to drive adoption of our products and services;
strengthen our commercial organization to increase our NantHealth solutions customer base and to broaden usage of our solutions by existing customers;
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 customers, as well as logistics, telecommunications and other customers through OpenNMS; and
publish scientific and medical advances.

The acquisition of OpenNMS, an enterprise-grade open-source network management company, expands and diversifies our software portfolio and service offerings, adding AI technologies, and enhancing cloud and SaaS capabilities. We believe OpenNMS will provide our customers with a new set of services to maintain reliable network connections for critical data flows that enable patient data collaboration and decision making at the point of care.
Since our inception, we have devoted substantially all our resources to the development and commercialization of NantHealth solutions. To complement our internal growth and expertise, we have made several strategic acquisitions of companies, products and technologies. We have incurred significant losses since our inception and, as of June 30, 2022, our accumulated deficit was approximately $1.1 billion. We expect to continue to incur operating losses over the near term as we expand our commercial operations and invest further in NantHealth solutions.
We plan to (i) continue investing in our infrastructure, including but not limited to solution development, sales and marketing, implementation and support, (ii) continue efforts to make infrastructure investments within an overall context of maintaining reasonable expense discipline, (iii) add new customers through maintaining and expanding sales, marketing and solution development activities, (iv) expand our relationships with existing customers through delivery of add-on and complementary solutions and services and (v) continue our commitment of service in support of our customer satisfaction programs.
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Purchase of Convertible Notes
On April 13, 2021, we and our wholly owned subsidiary, NaviNet (the “Guarantor”) entered into a note purchase agreement (the “Note Purchase Agreement”) with Highbridge Capital Management, LLC and one of its affiliates (“Highbridge”) and Nant Capital, LLC ("Nant Capital"), an entity affiliated with Dr. Patrick Soon-Shiong, our Executive Chairman, to issue and sell $137.5 million in aggregate principal amount of our 4.5% convertible senior notes due 2026 (the “2021 Notes”) in a private placement pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. The Note Purchase Agreement includes customary representations, warranties and covenants by us. Under the terms of the Note Purchase Agreement, we have agreed to indemnify the buyers against certain liabilities. The 2021 Notes were issued on April 27, 2021. The 2021 Notes will mature on April 15, 2026, unless earlier repurchased, redeemed or converted.

On April 27, 2021, in connection with the issuance of the 2021 Notes, we entered into a Third Amended and Restated Promissory Note which amends and restates our promissory note, dated January 4, 2016, as amended on May 9, 2016, and on December 15, 2016, between us and Nant Capital, to, among other things, extend the maturity date of the promissory note to October 1, 2026 and to subordinate the promissory note in right of payment to the 2021 Notes.

On April 27, 2021, in connection with the issuance of the 2021 Notes, we entered into a Second Amended and Restated Promissory Note which amends and restates our promissory note, dated August 8, 2018, as amended on December 31, 2020, between us and Nant Capital, to, among other things, extend the maturity date of the promissory note to December 31, 2026 and to subordinate the Second Promissory Note in right of payment to the 2021 Notes.

COVID-19 Pandemic
In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a pandemic. In the same month, the President of the United States declared a State of National Emergency due to the COVID-19 outbreak. The COVID-19 pandemic has resulted in intermittent worldwide government restrictions on the movement of people, goods, and services resulting in increased volatility in and disruptions to global markets. To date, there has been no material adverse impact to our business from the COVID-19 pandemic. Given the unprecedented and evolving nature of the pandemic, the future impact of these changes and potential changes on us and our contractors, consultants, customers, resellers and partners is unknown at this time.

However, in light of the uncertainties regarding economic, business, social, health and geopolitical conditions, our revenues, earnings, liquidity, and cash flows could be adversely affected, whether on an annual or quarterly basis. Continued impacts of the COVID-19 pandemic could materially adversely affect our current and long-term accounts receivable, as our negatively impacted customers from the pandemic may request temporary relief, delay, or not make scheduled payments. In addition, the deployment of our solutions may represent a large portion of our customers' investments in software technology. Decisions to make such an investment are impacted by the economic environment in which the customers operate. Uncertain global geopolitical, economic and health conditions and the lack of visibility or the lack of financial resources may cause some customers to reduce, postpone or terminate their investments, or to reduce or not renew ongoing paid services, adversely impacting our revenues or timing of revenue. Health conditions in some geographic areas where our customers operate could impact the economic situation of those areas. These conditions, including the COVID-19 pandemic, may present risks for health and limit the ability to travel for our employees, which could further lengthen our sales cycle and delay revenue and cash flows in the near-term.
Nasdaq Delisting
On February 18, 2022, we received a notice (the “Notice”) from The Nasdaq Stock Market LLC ("Nasdaq”) informing us that for the last 30 consecutive business days, the bid price of our common stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on Nasdaq pursuant to Listing Rule 5450(a)(1) (the “Bid Price Requirement”). The Notice has no immediate effect on our Nasdaq listing or trading of our common stock. We have 180 calendar days, or until August 17, 2022, to regain compliance. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days. If we do not regain compliance by August 17, 2022 (the “Compliance Date”), we may be eligible for additional time to regain compliance or if we are otherwise not eligible, we may request a hearing before a Hearings Panel.
If we do not regain compliance with the Bid Price Requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would be required to transfer to The Nasdaq Capital Market and meet the continued listing requirement for the market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Bid Price Requirement, and we would need to provide written notice to Nasdaq of our intention to cure the deficiency during the additional compliance period. We intend to apply to transfer our securities to Nasdaq Capital Market and request a second 180-day period to regain compliance with the Bid Price Requirement.
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2017 Asset Purchase Agreement with Allscripts
On August 3, 2017, we entered into an asset purchase agreement (the "APA") with Allscripts Healthcare Solutions, Inc.(“Allscripts”), pursuant to which we agreed to sell to Allscripts substantially all of the assets of our provider/patient engagement solutions business, including our FusionFX solution and components of its NantOS software connectivity solutions (the “Business”). On August 25, 2017, we and Allscripts completed the sale pursuant to the APA.

Allscripts conveyed to us 15,000,000 shares of our common stock at par value of $0.0001 per share that were previously owned by Allscripts as consideration for the transaction. We retired the shares of stock. Allscripts also paid $1.7 million of cash consideration to us as an estimated working capital payment, and we recorded a receivable of $1.0 million related to final working capital adjustments. We are also responsible for paying Allscripts for fulfilling certain customer service obligations of the business post-closing.

Concurrent with the closing and as contemplated by the APA, we and Allscripts modified the amended and restated mutual license and reseller agreement dated June 26, 2015, which was further amended on December 30, 2017, such that, among other things, we committed to deliver a minimum of $95.0 million of total bookings over a ten-year period (“Bookings Commitment”) from referral transactions and sales of certain Allscripts products under this agreement (see Note 9 of the Consolidated Financial Statements). We also agreed that Allscripts shall receive at least $0.5 million per year in payments from bookings (the “Annual Minimum Commitment”). If the total payments received by Allscripts from bookings during such period are less than the Annual Minimum Commitment, we shall pay to Allscripts the difference between the Annual Minimum Commitment and the total amount received by Allscripts from bookings during such period. In the event of a Bookings Commitment shortfall at the end of the ten-year period, we may be obligated to pay 70% of the shortfall, subject to certain credits. We will earn 30% commission from Allscripts on each software referral transaction that results in a booking with Allscripts. We account for the Bookings Commitment at its estimated fair value over the life of the agreement. The total estimated liability was $33.2 million and $35.7 million as of June 30, 2022 and December 31, 2021, respectively.

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Non-GAAP Net Loss from Continuing Operations and Non-GAAP Net Loss Per Share from Continuing Operations
Adjusted net loss from continuing operations and adjusted net loss per share from continuing operations are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Our management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor’s overall understanding of the financial results for our core business. Additionally, it provides a basis for the comparison of the financial results for our core business between current, past and future periods. Other companies may define these measures in different ways. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP.

Non-GAAP net loss from continuing operations excludes the effects of (1) stock-based compensation expense, (2) change in fair value of derivatives liability, (3) change in fair value of the Bookings Commitment, (4) noncash interest expense related to convertible notes, (5) intangible amortization, (6) ROU asset impairment and (7) the impacts of certain income tax benefits and provisions from noncash activity.

The following table reconciles Net loss from continuing operations attributable to NantHealth to Net loss from continuing operations attributable to NantHealth - Non-GAAP for the three and six months ended June 30, 2022 and 2021 (Unaudited):
(Dollars in thousands, except per share amounts)
Three Months Ended
June 30,
Six Months Ended June 30,
2022202120222021
Net loss from continuing operations attributable to NantHealth$(12,512)$(15,322)$(28,462)$(30,735)
Adjustments to GAAP net loss from continuing operations attributable to NantHealth:
Loss on Exchange and Prepayment of 2016 Notes— 742 — 742 
Stock-based compensation expense from continuing operations
1,263 851 2,653 1,734 
Change in fair value of derivatives liability— — — (4)
Change in fair value of Bookings Commitment(2,594)2,340 (2,500)4,803 
Impairment of ROU asset208 — 208 — 
Noncash interest expense related to convertible notes
36 187 73 510 
Intangible amortization from continuing operations
2,233 2,212 4,465 4,425 
Tax benefit resulting from certain noncash tax items(4)(45)(44)(88)
Total adjustments to GAAP net loss from continuing operations attributable to NantHealth1,142 6,287 4,855 12,122 
Net loss from continuing operations attributable to NantHealth - Non-GAAP$(11,370)$(9,035)$(23,607)$(18,613)
Weighted average basis common shares outstanding115,550,244 114,512,542 115,535,822 112,924,619 
Net loss per common share from continuing operations attributable to NantHealth - Non-GAAP$(0.10)$(0.08)$(0.20)$(0.16)

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The following table reconciles Net loss per common share from continuing operations attributable to NantHealth to Net loss per common share from continuing operations attributable to NantHealth - Non-GAAP for the three and six months ended June 30, 2022 and 2021 (Unaudited):
(Dollars in thousands, except per share amounts)Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net loss per common share from continuing operations attributable to NantHealth$(0.11)$(0.13)$(0.25)$(0.27)
Adjustments to GAAP net loss per common share from continuing operations attributable to NantHealth:
Loss on Exchange and Prepayment of 2016 Notes— 0.01 — 0.01 
Stock-based compensation expense from continuing operations
0.01 0.01 0.02 0.02 
Change in fair value of derivatives liability— — — — 
Change in fair value of Bookings Commitment(0.02)0.01 (0.01)0.04 
Impairment of ROU asset— — — — 
Noncash interest expense related to convertible notes
— — — — 
Intangible amortization from continuing operations
0.02 0.02 0.04 0.04 
Tax benefit resulting from certain noncash tax items— — — — 
Total adjustments to GAAP net loss per common share from continuing operations attributable to NantHealth0.01 0.05 0.05 0.11 
Net loss per common share from continuing operations attributable to NantHealth - Non-GAAP$(0.10)$(0.08)$(0.20)$(0.16)



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Components of Our Results of Operations
Revenue
We generate our revenue from the sale of SaaS, maintenance, and services. Our systems infrastructure and platforms support the delivery and implementation of value-based care models across the healthcare continuum, and the maintenance of reliable network connections. We generate revenue from the following sources:

Software-as-a-service related - SaaS related revenue is generated from our customers’ access to and usage of our 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 only has the right to access and use the software and receive any software upgrades published during the subscription period. Solutions sold under a SaaS model include our Eviti platform solutions and NaviNet.

Maintenance - Maintenance revenue includes technical support or maintenance on OpenNMS software during the contract term. Our networking monitoring solutions typically consist of a term-based subscription to the OpenNMS software license and maintenance, which entitle customers to unspecified software updates and upgrades on a when-and-if-available basis. Revenue is recognized over the maintenance or support term.

Professional services - Professional services revenue is generated from consulting services to help customers install, integrate and optimize OpenNMS, sponsored development, and training to assist customers deploy and use OpenNMS solutions. Sponsored development relates to professional services to build customer specific functionality, features, and enhancements into the OpenNMS open source platform. Typically, revenue is recognized over time using direct labor hours as a measure of progress.
Cost of Revenue
Cost of revenue includes associated salaries and fringe benefits, stock-based compensation, consultant costs, direct reimbursable travel expenses, depreciation related to software developed for internal use, depreciation related to lab equipment, and other direct engagement costs associated with the design, development, sale and installation of systems, including system support and maintenance services for customers. System support includes ongoing customer assistance for software updates and upgrades, installation, training and functionality. All service costs, except development of internal use software and deferred implementation costs, are expensed when incurred. Amortization of deferred implementation costs are also included in cost of revenue. Cost of revenue associated with each of our revenue sources consists of the following types of costs:

Software-as-a-service related - SaaS related cost of revenue includes personnel-related costs, amortization of deferred implementation costs, amortization of internal-use software, and other direct costs associated with the delivery and hosting of our subscription services.

Maintenance - Maintenance cost of revenue includes personnel-related costs, amortization of internal-use software, and other direct costs associated with the ongoing support or maintenance provided to our customers.

Professional services - Professional services cost of revenue include personnel-related costs and other direct costs associated with consulting, sponsored development, and training provided to our customers.

We plan to continue to expand our capacity to support our growth, which will result in higher cost of revenue in absolute dollars. We expect cost of revenue to decrease as a percentage of revenue over time as we expand NantHealth solutions and realize economies of scale.
Operating Expenses
Our operating expenses consist of selling, general and administrative, research and development, amortization of acquisition-related assets, and impairment of intangible assets, including internal-use software.

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Selling, general and administrative

Selling, general and administrative expense consists primarily of personnel-related expenses for our sales and marketing, finance, legal, human resources, and administrative associates, stock-based compensation, advertising and marketing promotions of NantHealth solutions, and corporate shared services fees from NantWorks. This includes amortization of deferred commission costs. It also includes trade show and event costs, sponsorship costs, point of purchase display expenses and related amortization as well as legal costs, facility costs, consulting and professional fees, insurance and other corporate and administrative costs.

We continue to review our other selling, general and administrative investments and expect to drive cost savings through greater efficiencies and synergies across our company. Additionally, we expect to continue to incur additional costs for legal, accounting, insurance, investor relations and other costs associated with operating as a public company, including costs associated with other regulations governing public companies as well as increased costs for directors’ and officers’ liability insurance and an enhanced investor relations function. However, we expect our selling, general and administrative expense to decrease as a percentage of revenue over the long term as our revenue increases and we realize economies of scale.

Research and development

Research and development expenses consist primarily of personnel-related costs for associates working on development of solutions, including salaries, benefits and stock-based compensation. Also included are non-personnel costs such as consulting and professional fees to third-party development resources.
Substantially all our research and development expenses are related to developing new software solutions and improving our existing software solutions.
We expect our research and development expenses to continue to increase in absolute dollars and as a percentage of revenue as we continue to make investments in developing new solutions and enhancing the functionality of our existing solutions. However, we expect our research and development expenses to decrease as a percentage of revenue over the long term as we realize economies of scale from our developed technology.

Amortization of acquisition related assets

Amortization of acquisition related assets consists of noncash amortization expense related to our non-revenue generating technology as well as amortization expense that we recognize on intangible assets that we acquired through our investments.
Interest Expense, Net
Interest expense, net primarily consists of interest expense associated with our outstanding borrowings, including coupon interest expense, amortization of debt discounts and amortization of deferred financing offering cost, offset by interest income earned on our cash and cash equivalents.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency gains (losses), changes in the fair value of the Bookings Commitment and other non-recurring items.
Provision for (Benefit from) Income Taxes
Provision for income taxes consists of U.S. federal and state and foreign income taxes. We are required to allocate the provision for income taxes between continuing operations and other categories of earnings, such as discontinued operations. To date, we have no significant U.S. federal, state and foreign cash income taxes because of our current and accumulated net operating losses ("NOLs").
We record a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, we consider all the available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. When we establish or reduce the valuation allowance against the deferred tax assets, our provision for income taxes will increase or decrease, respectively, in the period such determination is made.
Net Loss Attributable to Noncontrolling Interests
Net loss attributable to noncontrolling interests consists of losses related to minority ownership of components of our business.
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Results of Operations
The following table sets forth our Consolidated Statements of Operations data for each of the periods indicated (Unaudited):
(Dollars in thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue
Software-as-a-service related$15,861 $15,504 $31,632 $31,261 
Maintenance428 413 892 795 
Professional services208 173 346 200 
Total software-related revenue16,497 16,090 32,870 32,256 
Other— 
Total net revenue16,498 16,090 32,871 32,259 
Cost of Revenue
Software-as-a-service related5,621 5,444 11,184 10,979 
Maintenance469 270 838 477 
Professional services
Amortization of developed technologies1,247 1,247 2,494 2,494 
Total software-related cost of revenue7,346 6,962 14,525 13,957 
Other47 93 
Total cost of revenue7,347 7,009 14,526 14,050 
Gross Profit9,151 9,081 18,345 18,209 
Operating Expenses
Selling, general and administrative14,017 11,837 28,997 24,340 
Research and development5,861 4,849 11,576 9,862 
Amortization of acquisition-related assets
986 985 1,971 1,971 
Total operating expenses20,864 17,671 42,544 36,173 
Loss from operations(11,713)(8,590)(24,199)(17,964)
Interest expense, net(3,470)(3,803)(6,920)(7,371)
Other income (expense), net2,642 (3,051)2,648 (5,621)
Loss from continuing operations before income taxes(12,541)(15,444)(28,471)(30,956)
Provision for (benefit from) income taxes(29)(9)(2)
Net loss from continuing operations(12,512)(15,450)(28,462)(30,954)
Income from discontinued operations, net of tax attributable to NantHealth— 19 — 24 
Net loss(12,512)(15,431)(28,462)(30,930)
Net loss attributable to noncontrolling interests— (128)(219)
Net loss attributable to NantHealth$(12,512)$(15,303)$(28,462)$(30,711)
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The following table sets forth our Consolidated Statements of Operations data as a percentage of revenue for each of the periods indicated (Unaudited):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue
Software-as-a-service related96.1 %96.4 %96.2 %96.9 %
Maintenance2.6 %2.6 %2.7 %2.5 %
Professional services1.3 %1.0 %1.0 %0.6 %
Total software-related revenue100.0 %100.0 %100.0 %100.0 %
Other— %— %— %— %
Total net revenue100.0 %100.0 %100.0 %100.0 %
Cost of Revenue
Software-as-a-service related34.1 %33.8 %34.0 %34.0 %
Maintenance2.8 %1.7 %2.5 %1.5 %
Professional services— %— %0.1 %0.1 %
Amortization of developed technologies7.6 %7.8 %7.6 %7.7 %
Total software-related cost of revenue44.5 %43.3 %44.2 %43.3 %
Other— %0.3 %— %0.3 %
Total cost of revenue44.5 %43.6 %44.2 %43.6 %
Gross Profit55.5 %56.4 %55.8 %56.4 %
Operating Expenses
Selling, general and administrative85.0 %73.6 %88.2 %75.5 %
Research and development35.5 %30.1 %35.2 %30.6 %
Amortization of acquisition-related assets
6.0 %6.1 %6.0 %6.0 %
Total operating expenses126.5 %109.8 %129.4 %112.1 %
Loss from operations(71.0)%(53.4)%(73.6)%(55.7)%
Interest expense, net(21.0)%(23.6)%(21.1)%(22.8)%
Other income (expense), net16.0 %(19.0)%8.1 %(17.5)%
Loss from continuing operations before income taxes(76.0)%(96.0)%(86.6)%(96.0)%
Provision for (benefit from) income taxes(0.2)%— %— %— %
Net loss from continuing operations(75.8)%(96.0)%(86.6)%(96.0)%
Income from discontinued operations, net of tax attributable to NantHealth— %0.1 %— %0.1 %
Net loss(75.8)%(95.9)%(86.6)%(95.9)%
Net loss attributable to noncontrolling interests— %(0.8)%— <