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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 September 30, 2023  
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_RGB Logo.jpg
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.)
760 W Fire Tower Rd, Suite 107
28590
Winterville,
North Carolina(Zip Code)
(Address of principal executive offices)
(855) 949-6268
(Registrant’s telephone number, including area code)
3000 RDU Drive, Suite 200
27560
Morrisville,
North Carolina(Zip Code)
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
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 November 20, 2023, the registrant had 27,471,346 shares of common stock, par value $0.0001 per share, outstanding.



NantHealth, Inc.
Form 10-Q
As of and for the quarterly period ended September 30, 2023
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:
our estimates regarding expenses, future revenues, capital requirements and our need to raise substantial additional capital to fund our operations for at least the next 12 months as a going concern;
our ability to renegotiate our debt arrangements, including the 2021 Convertible Notes and the Senior Secured Term Loan Facility, and successfully negotiate with Highbridge regarding its exercise of its 2021 Convertible Notes repurchase right;
the result of the evaluation of strategic alternatives, including restructuring or refinancing our debt, seeking additional debt or equity capital, reducing or delaying our business activities and strategic initiatives, or sell assets, other strategic transactions and/or other measures, and the terms, value and timing of any transaction resulting from that process;
our ability to increase cash flow to support our operating activities and fund our obligations and working capital needs;
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;
general economic conditions including supply chain disruptions, labor shortages, wage pressures, rising inflation and the ongoing military conflicts between Russia and Ukraine and in the Middle East;
security threats, catastrophic events and other disruptions that affect our information technology and related systems;
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;
the impact of cost-savings measures;
current and future debt financings placing restrictions on our operating and financial flexibility;
our inability to generate sufficient cash to service all of our indebtedness or our ability to access additional capital;
our ability to estimate the size of our target market;
our ability to maintain and enhance our reputation and brand recognition;
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;
- 3 -


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
other factors including but not limited to those detailed under the section entitled “Risk Factors.”
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report.
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)
September 30,
2023
December 31,
2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents$5,822 $1,759 
Accounts receivable, net4,576 5,948 
Related party receivables, net372 476 
Prepaid expenses and other current assets4,568 4,402 
Total current assets15,338 12,585 
Property, plant, and equipment, net4,652 12,383 
Goodwill98,333 98,333 
Intangible assets, net25,133 30,110 
Related party receivable, net of current 937 
Operating lease right-of-use assets2,885 4,285 
Other assets142 918 
Total assets$146,483 $159,551 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$6,671 $10,408 
Accrued and other current liabilities18,571 20,006 
Deferred revenue2,145 2,724 
Related party payables, net5,168 1,933 
Related party notes payable9,642  
Notes payable12,161 560 
Related party convertible note, net62,385  
Convertible notes, net74,351  
Total current liabilities191,094 35,631 
Deferred revenue, net of current516 1,050 
Related party liabilities52,005 45,908 
Related party promissory note113,666 123,666 
Related party convertible note, net 62,335 
Convertible notes, net 74,683 
Deferred income taxes, net1,222 1,206 
Operating lease liabilities2,176 4,054 
Other liabilities35,979 36,411 
Total liabilities396,658 384,944 
Commitments and Contingencies (Note 11)
Stockholders' deficit
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 27,471,346 and 7,703,306 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
14 12 
Additional paid-in capital915,802 895,897 
Accumulated deficit(1,165,389)(1,120,676)
Accumulated other comprehensive loss(602)(626)
Total stockholders' deficit(250,175)(225,393)
Total liabilities and stockholders' deficit$146,483 $159,551 

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
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenue
Software-as-a-service related$11,971 $16,161 $45,099 $47,793 
Maintenance492 398 1,603 1,290 
Professional services5 73 71 419 
Total software-related revenue12,468 16,632 46,773 49,502 
Other 1 2 2 
Total net revenue12,468 16,633 46,775 49,504 
Cost of Revenue
Software-as-a-service related4,797 5,172 15,361 16,356 
Maintenance509 509 1,870 1,347 
Professional services   9 
Amortization of developed technologies104 1,247 313 3,741 
Total software-related cost of revenue5,410 6,928 17,544 21,453 
Other   1 
Total cost of revenue5,410 6,928 17,544 21,454 
Gross Profit7,058 9,705 29,231 28,050 
Operating Expenses
Selling, general and administrative8,718 16,580 38,053 45,577 
Research and development2,362 6,299 14,189 17,875 
Amortization of acquisition-related assets
985 985 2,956 2,956 
Impairment of long-lived assets, including intangibles and internal-use software5,506  5,506  
Total operating expenses17,571 23,864 60,704 66,408 
Gain (loss) from operations(10,513)(14,159)(31,473)(38,358)
Interest expense, net(4,867)(3,511)(13,819)(10,431)
Other income (expense), net447 4,003 612 6,651 
Income (loss) before income taxes(14,933)(13,667)(44,680)(42,138)
Provision for (benefit from) income taxes54 (10)34 (19)
Net income (loss)$(14,987)$(13,657)$(44,714)$(42,119)
Basic and diluted net income (loss) per share:
Total net income (loss) per share - common stock$(1.00)$(1.77)$(4.40)$(5.47)
Weighted average shares outstanding
Basic and diluted - common stock15,008,883 7,703,349 10,165,256 7,702,712 

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
September 30,
Nine Months Ended
September 30,
2023202220232022
Net income (loss)$(14,987)$(13,657)$(44,714)$(42,119)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments(156)(322)24 (696)
Total other comprehensive income (loss) (156)(322)24 (696)
Comprehensive income (loss)$(15,143)$(13,979)$(44,690)$(42,815)

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' Deficit
Common Stock
SharesAmount
Balance at December 31, 20227,703,306 $12 $895,897 $(1,120,676)$(626)$(225,393)
Stock-based compensation cost— — 908 — — 908 
Share repurchase(2)— — — — — 
Other comprehensive income (loss)— — — — 81 81 
Net income (loss)— — — (12,241)— (12,241)
Balance at March 31, 20237,703,304 $12 $896,805 $(1,132,917)$(545)$(236,645)
Stock-based compensation cost— — 796 — — 796 
Other comprehensive income (loss)— — — — 99 99 
Net income (loss)— — — (17,485)— (17,485)
Balance at June 30, 20237,703,304 $12 $897,601 $(1,150,402)$(446)$(253,235)
Stock-based compensation cost— — 702 — — 702 
Shares issued in connection with stock purchase agreement19,768,042 2 17,499 — — 17,501 
Other comprehensive income (loss)— — — — (156)(156)
Net income (loss)— — — (14,987)— (14,987)
Balance at September 30, 202327,471,346 $14 $915,802 $(1,165,389)$(602)$(250,175)
    
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' Deficit
Common Stock
SharesAmount
Balance at December 31, 20217,700,349 $12 $891,105 $(1,052,897)$(212)$(161,992)
Stock-based compensation cost— — 1,417 — — 1,417 
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
3,000 — 24 — — 24 
Other comprehensive income (loss)— — — — (96)(96)
Net income (loss)— — — (15,950)— (15,950)
Balance at March 31, 20227,703,349 $12 $892,546 $(1,068,847)$(308)$(176,597)
Stock-based compensation expense
— — 1,289 — — 1,289 
Other comprehensive income (loss)— — — — (278)(278)
Net income (loss)— — — (12,512)— (12,512)
Balance at June 30, 20227,703,349 $12 $893,835 $(1,081,359)$(586)$(188,098)
Stock-based compensation cost— — 915 — 915 
Other comprehensive income (loss)— — — — (322)(322)
Net income (loss)— — — (13,657)— (13,657)
Balance at September 30, 20227,703,349 $12 $894,750 $(1,095,016)$(908)$(201,162)
    
The accompanying notes are an integral part of these Consolidated Financial Statements.
- 10 -

 NantHealth, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income (loss)$(44,714)$(42,119)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
9,766 11,911 
Impairment of intangible assets, including internal-use software5,506  
Amortization of debt discounts and deferred financing offering cost
786 110 
Change in fair value of Bookings Commitment
(456)(6,156)
Stock-based compensation
2,310 3,542 
Deferred income taxes, net38 (282)
Provision for bad debt expense
69 26 
Gain on partial lease termination(2) 
Impairment of ROU asset23 208 
Changes in operating assets and liabilities:
Accounts receivable, net1,300 480 
Related party receivables, net1,041 105 
Prepaid expenses and other current assets(884)(1,995)
Accounts payable(3,741)3,026 
Accrued and other current liabilities(2,297)1,878 
Deferred revenue(1,110)(400)
Related party payables, net10,391 4,647 
Change in operating lease right-of-use assets and liabilities(355)(370)
Other assets and liabilities1,735 171 
Net cash provided by (used in) operating activities(20,594)(25,218)
Cash flows from investing activities:
Purchases of property and equipment, including internal-use software(2,062)(4,156)
Net cash provided by (used in) investing activities(2,062)(4,156)
Cash flows from financing activities:
Proceeds from insurance promissory note 1,657 
Repayments of insurance promissory note and notes payable(560)(1,327)
Proceeds from related party notes10,125  
Proceeds from promissory notes12,375  
Proceeds from the issuance of common stock7,500  
Proceeds from exercises of stock options 24 
Payment of deferred financing costs, related party(767) 
Payment of deferred financing costs(997) 
Net cash provided by (used in) financing activities27,676 354 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(903)53 
Net increase (decrease) in cash, cash equivalents and restricted cash4,117 (28,967)
Cash, cash equivalents and restricted cash, beginning of period (1)
3,559 31,402 
Cash, cash equivalents and restricted cash, end of period (1)
$7,676 $2,435 
(1) Cash and cash equivalents included restricted cash of $1,854 and $1,800 at September 30, 2023 and December 31, 2022, respectively.
Restricted cash is included in the financial statement line items noted below at September 30, 2023 and 2022:

- 11 -

NantHealth, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
September 30,
Financial statement line item20232022
Other current assets$1,854 $1,180 
Other assets 620 
Total restricted cash1,854 1,800 
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.

The Company’s product portfolio comprises the latest technology in payer/provider collaboration platforms for real-time coverage decision support (Eviti and NaviNet) and data solutions that include multi-data analysis, reporting and professional services offerings (Quadris). In addition, The OpenNMS Group, Inc. ("OpenNMS"), the Company’s wholly-owned subsidiary, helps businesses monitor and manage network health and performance. Altogether, we generally derive revenue from software as a service ("SaaS') subscription fees, support services, professional services, and revenue sharing through collaborations with complementary businesses.

The Company believes it is uniquely positioned to benefit from multiple significant market opportunities as healthcare providers and payers transition from fee-for-service to value-based reimbursement models. They need solutions that increase operational efficiency, manage costs, improve care collaboration and accelerate their pursuit of evidence-based clinical practice. The Company also believes that its core business lines enable opportunities to create data analytics services and assets which further drive value and efficiency for its customers. The Company is investing to further integrate big data and automated intelligence technologies within our core business lines and to create new product and service offerings.

As of September 30, 2023, the Company conducted the majority of its operations in the United States, Canada, and the United Kingdom.
Nasdaq Delisting and OTCQB Quotation and Subsequent Transfer to OTC Pink

On October 31, 2022, the Company received a notice (the “Notice”) from Nasdaq informing it that the Company was not in compliance with the minimum $15,000,000 market value of publicly held shares requirement for continued listing on the Nasdaq Global Select Market pursuant to Listing Rule 5450(b)(2)(C) (the “Public Float Requirement”). The Notice had no immediate effect on the Company's Nasdaq listing or trading of its common stock.

In accordance with Listing Rule 5810(c)(3)(D), the Company had a period of 180 calendar days, or until May 1, 2023, to regain compliance with the Public Float Requirement (the "Compliance Period").

On May 2, 2023, the Company received written notice from Nasdaq stating that it had not complied with the Public Float Requirement prior to the expiration of the Compliance Period (the “Delisting Notice”). The Delisting Notice indicated that the Company's common stock would be suspended from trading on Nasdaq on May 11, 2023 unless the Company requested a hearing pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series, by requesting a hearing before the Nasdaq Hearings Panel (the “Panel”) by 4:00 p.m. Eastern Time on May 9, 2023. On May 8, 2023, the Company timely requested a hearing before the Panel, which temporarily stayed the suspension of trading and delisting of the Company’s common stock from Nasdaq. The hearing was scheduled for June 8, 2023.

After additional consideration, the Company determined that it was no longer in its best interest to pursue continued listing of its common stock on the Nasdaq Global Select Market and withdrew its request for a hearing on May 19, 2023. On May 22, 2023, the Company received notice from Nasdaq that its shares would be suspended at the open of business on May 24, 2023, and the Company’s common stock began trading on the OTC Pink under a new symbol “NHIQ” on May 24, 2023. On May 30, 2023, the Company’s common stock began trading on the OTCQB Venture Market (the “OTCQB”), and Nasdaq filed a Form 25 Notification of Delisting with the Securities Exchange Commission (“SEC”) on July 27, 2023.

After consummation of the August 2023 Stock Purchase Agreement (as defined below), the Company received notice on September 6, 2023 from the OTC Markets Group, Inc. that the Company no longer met the public float requirement to remain quoted
- 13 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
on the OTCQB and had until October 6, 2023 to regain compliance. The Company was unable to cure the public float deficiency and was automatically transferred to the OTC Pink in October 2023, where it remains quoted under the symbol “NHIQ.”

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, 2022. The accompanying Consolidated Balance Sheet as of December 31, 2022 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 has incurred significant losses and negative cash flows from operations. As of September 30, 2023, the Company had cash and cash equivalents of $5,822 and an accumulated deficit of $1,165,389. The Company had a net loss of $44,714 and used cash of $20,594 for operating activities for the nine month period ended September 30, 2023. In accordance with Accounting Standards Update ("ASU") 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management is required to perform a two-step analysis over the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date the financial statements are issued. If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt.
As a result of continuing anticipated operating cash outflows the Company believes that substantial doubt exists regarding its ability to continue as a going concern without additional funding or financing. The Company’s ability to continue as a going concern is dependent upon its success in obtaining additional equity or debt financing, attaining further operating efficiencies, reducing expenditures and ultimately, generating significant revenue growth. The Company is evaluating strategies to obtain the required additional funding for future operations. 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 delaying its business activities and strategic initiatives, or selling off components of its business. Additionally, the Company continues to consider all strategic alternatives. The Company is undertaking a number of actions in order to improve its financial position and stabilize its results of operations including but not limited to, cost cutting, lowering capital expenditures, and implementing hiring freezes. 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 its affiliates, convertible notes, the sale of its common stock, and proceeds from the sale of components of its business. The accompanying financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.


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.
- 14 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
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.
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. We adopted this standard effective January 1, 2023. The impact of adoption on our unaudited Consolidated Financial Statements was not material.

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 September 30, 2023 and 2022 there were $583 and $543, recognized, respectively, that were included in the deferred revenue balance at the beginning of the period. During the nine months ended September 30, 2023 and 2022, there were revenues of $2,121 and $2,065 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 $289 at September 30, 2023 and $686 at December 31, 2022. During the three months ended September 30, 2023 and 2022 the Company recorded amortization of $93 and $163, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded amortization of $333 and $398, 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 September 30, 2023, the Company has allocated a total transaction price of $2,725 to unfulfilled performance obligations that are expected to be fulfilled within 8 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 September 30, 2023 and December 31, 2022 was $70 and $15, 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 September 30, 2023 and December 31, 2022 consisted of the following:
September 30,
2023
December 31,
2022
Prepaid expenses$2,555 $1,574 
Restricted cash1,854 1,180 
Securities litigation insurance receivable 1,250 
Other current assets159 398 
Prepaid expenses and other current assets$4,568 $4,402 

Accrued and other current liabilities as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30,
2023
December 31,
2022
Payroll and related costs$1,108 $7,949 
Accrued liabilities6,234 4,279 
Bookings Commitment (see Note 9)2,629 2,153 
Interest payable2,368 703 
Operating lease liabilities2,249 2,105 
Securities litigation and cyber estimated liability220 1,470 
Other accrued and other current liabilities3,763 1,347 
Accrued and other current liabilities$18,571 $20,006 

Note 6. Property, Plant and Equipment, net
Property, plant and equipment, net as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30,
2023
December 31,
2022
Computer equipment and software$7,538 $7,592 
Furniture and equipment1,037 1,054 
Leasehold improvements3,780 3,776 
Property, plant, and equipment, excluding internal-use software, gross12,355 12,422 
Less: Accumulated depreciation and amortization(12,092)(11,073)
Property, plant and equipment, excluding internal-use software, net263 1,349 
Internal-use software52,080 49,479 
Construction in progress - Internal-use software1,088 1,464 
Less: Accumulated depreciation and amortization, internal-use software(48,779)(39,909)
Internal-use software, net4,389 11,034 
Property, plant and equipment, net$4,652 $12,383 
 
Depreciation expense was $3,820 and $9,766 for the three and nine months ended September 30, 2023, of which $2,393 and $5,092, related to internal-use software costs, respectively. Depreciation expense was $1,620 and $4,817 for the three and nine months ended September 30, 2022, respectively, of which $1,134 and $3,340 related to internal-use software costs.

Amounts capitalized to internal-use software related to continuing operations for the three and nine months ended September 30, 2023 and 2022 were $1,389 and $1,392 and $3,910 and $4,311, respectively.

- 16 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
In the third quarter of 2023 the Company, as part of a review of certain internally developed software related to our OpenNMS business, determined that the assets were not recoverable and recognized an impairment charge of approximately $3.8 million.


Note 7. Intangible Assets, net
The Company’s definite-lived intangible assets as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30,
2023
December 31,
2022
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(67,067)(62,090)
Intangible assets, net$25,133 $30,110 

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 and nine months ended September 30, 2023 and 2022 was $1,089 and $2,232 and $3,269 and $6,697, respectively.

The estimated future amortization expense over the next five years and thereafter for the intangible assets that exist as of September 30, 2023 is as follows:
Amounts
Remainder of 2023$865 
20243,467 
20253,467 
20263,467 
20273,467 
Thereafter10,400 
Total future intangible amortization expense$25,133 

In the third quarter of 2023 the Company, as part of a review of certain intangible assets related to its OpenNMS business, determined that the assets were not recoverable and recognized an impairment charge of approximately $1.7 million to fully amortize the remainder of the customer relationships, developed technology, trade name, and installed user base assets.
Note 8. Debt
2021 4.5% Convertible Senior Notes ("2021 Convertible Notes")
On April 13, 2021, the Company and its wholly owned subsidiary, NaviNet, Inc. (the "NaviNet") entered into a note purchase agreement with Highbridge Capital Management, LLC and one of its affiliates (“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 Convertible 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 Convertible Notes offering.

- 17 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
The Company used part of the proceeds from the 2021 Convertible 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 Convertible 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 Convertible Notes were issued to the investors under an indenture (as amended and restated, the “2021 Indenture”) dated April 27, 2021 entered into between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association) (the “Trustee”).

Interest rates on the 2021 Convertible 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 Convertible 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 Convertible Notes are being amortized to interest expense over the contractual terms of the 2021 Convertible Notes, using the effective interest method at an effective interest rate of 4.61%.

The initial conversion rate of the 2021 Convertible Notes is 17.3250 shares of common stock per $1 principal amount of 2021 Convertible Notes (which is equivalent to an initial conversion price of approximately $57.72 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 Convertible Notes may convert all or a portion of their 2021 Convertible 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 Convertible Notes will be settled in cash, shares of the Company's common stock or any combination thereof at the Company's option.
As of September 30, 2023, the remaining life of the Convertible Notes is approximately 2.5 years.

Prior to May 17, 2023, the 2021 Convertible Notes were the Company’s general unsecured obligations and were initially guaranteed on a senior unsecured basis by NaviNet.

The Company may not redeem the 2021 Convertible Notes prior to April 20, 2024. The Company may redeem for cash all or any portion of the 2021 Convertible 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 Convertible 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 Convertible Notes, which means that the Company is not required to redeem or retire the 2021 Convertible Notes periodically. If the Company exercises this option to redeem the 2021 Convertible Notes owned by Highbridge and Highbridge is unable to convert such 2021 Convertible Notes as a result of the application of the beneficial ownership limitations, at the request of Highbridge, the Company shall convert such 2021 Convertible Notes into the number of shares of the Company’s Series 1 Preferred Stock equal to the number of shares that the 2021 Convertible 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 Convertible 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 Convertible Notes to be purchased plus any accrued and unpaid interest to, but excluding, the fundamental change purchase date. A fundamental change has occurred as a result of the Company's delisting from Nasdaq resulting in current classification of the 2021 Convertible Notes as of September 30, 2023.

For so long as at least $25,000 principal amount of the 2021 Convertible 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 Convertible 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 Convertible Notes; and (iii) no principal of such affiliate debt is scheduled to mature earlier than the date
- 18 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
that is 181 days after April 15, 2026, the maturity date of the 2021 Convertible Notes. See Note 11 Commitments and Contingencies for default provisions.

On May 17, 2023, pursuant to the terms of the Credit Agreement (as defined below), the Company amended and restated the 2021 Indenture to, among other things, cause the 2021 Convertible Notes to be (i) guaranteed by the Company’s subsidiaries that provided guarantees under the Credit Agreement, (ii) secured by second priority liens on the assets that secure borrowings made pursuant to the Credit Agreement, and (iii) governed by covenants that are substantially similar to the covenants in Articles VI and VII of the Credit Agreement. In connection with this post-closing covenant, the 2021 Indenture was also amended to add certain related events of default consistent with Article VIII of the Credit Agreement.

On September 29, 2023, the Company received notice from the Trustee that, pursuant to the terms of 2021 Indenture that Highbridge, as holders of approximately $75.0 million in aggregate principal amount of the 2021 Convertible Notes, have exercised their right under the 2021 Indenture to require the Company to repurchase their 2021 Convertible Notes (the “Repurchase Right”), and the repurchase of Highbridge’s 2021 Convertible Notes was due on October 18, 2023. As of the date of this Quarterly Report on Form 10-Q, the Company has not repurchased the 2021 Convertible Notes held by Highbridge and therefore is in technical default. However, the Company is currently in discussions with Highbridge regarding the exercise of its Repurchase Right, and amendments and/or waivers of certain covenants in the 2021 Indenture and under the Credit Agreement, including the Repurchase Right.

The following table summarizes how the issuance of the 2021 Convertible Notes is reflected in the Company's Consolidated Balance Sheets.
2021 Convertible Notes - Nant CapitalSeptember 30, 2023December 31, 2022
Gross proceeds$62,500 $62,500 
Unamortized debt discounts and deferred financing offering costs(115)(165)
Net carrying amount - related party convertible note$62,385 $62,335 
2021 Convertible Notes - Highbridge
Gross proceeds$75,000 $75,000 
Unamortized debt discounts and deferred financing offering costs(649)(317)
Net carrying amount - convertible note$74,351 $74,683 

Promissory Notes
On March 2, 2023, the Company entered into a credit agreement (the “Credit Agreement”) with Nant Capital and Highbridge as lenders. The Credit Agreement provides for a senior secured term loan facility in an aggregate principal amount of $22,500 in a single drawdown made by the Company at closing (the “Senior Secured Term Loan Facility”). The maturity date of the Credit Agreement was originally December 15, 2023 (the “Maturity Date”) and accrues interest at an annual rate of 13% per annum with a 1% original issue discount. The proceeds from the Senior Secured Term Loan Facility will be used by the Company to fund working capital needs, expenditures and general corporate purposes of the Company.

The holders have agreed to amend the Credit Agreement (a) to extend the Maturity Date to May 17, 2024 and (b) to defer cash interest payments that would otherwise have been payable pursuant to the Credit Agreement and the 2021 Notes until May 17, 2024.

- 19 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Concurrently with the execution of, and pursuant to, the Credit Agreement, the Company also entered into (1) a subordination agreement (the “Subordination Agreement”) with Nant Capital and Airstrip (collectively, the “Affiliated Lenders”), who are holders of certain affiliated debt of the Company, and (2) a letter agreement (the “Letter Agreement”) with certain entities affiliated with Highbridge and Nant Capital, who are holders of the 2021 Convertible Notes issued pursuant to the 2021 Indenture. The Subordination Agreement provides, among other things, that any payment of principal of, premium, if any, or interest on certain subordinated debt held by the Affiliated Lenders shall be subordinated and subject in right of payment to the prior payment of the full Senior Secured Term Loan Facility so long as such Senior Secured Term Loan Facility is outstanding. The Letter Agreement provides that, among other things, (1) the holders of the 2021 Convertible Notes shall waive compliance with certain provisions of the 2021 Indenture, including, but not limited to, restrictions on borrowings from an affiliate lender of the Company and any current or future Default or Event of Default (as each term is defined in the 2021 Indenture) pursuant to any breach of Section 4.10 of the 2021 Indenture arising from any borrowing made by the affiliated lender to the Company, each such waiver is solely in connection with the Senior Secured Term Loan Facility, (2) prohibit the holders of the 2021 Convertible Notes from exercising any right to require the Company to repurchase any or all of the 2021 Convertible Notes upon the occurrence of a Fundamental Change (as defined in the 2021 Indenture) solely in connection with the Company’s common stock being delisted from the Nasdaq Global Select Market or similar securities exchange for a period beginning on the Closing Date (as defined in the Credit Agreement) and ending on the date that is five (5) months after the Closing Date, and (3) restricting the holders of the 2021 Convertible Notes from disposing of or otherwise transferring the 2021 Convertible Notes to any person other than an affiliate of such holder, until the approval of the Indenture Consent (as defined in the Letter Agreement).

On November 21, 2022, the Company entered into an unsecured subordinated promissory note (the “2022 Nant Capital Note”) with Nant Capital, whereby Nant Capital loaned $7,000 to the Company. Nant Capital is an entity affiliated with Dr. Patrick Soon-Shiong, our Chairman of the Board of Directors and former Chief Executive Officer. The 2022 Nant Capital Note contains an interest rate equal to the Term Secured Overnight Financing Rate (“SOFR”) plus 8.5% per annum, compounded annually and a maturity date of October 31, 2026. The Nant Capital Note also contains semiannual interest payments due on April 15th and October 15th of each year. The payment of the 2022 Nant Capital Note shall be subordinated and subject in right of payment to the prior payment in full of the 2021 Convertible Notes, and, as disclosed above, is subordinated and subject in right of payment to the prior payment of the full Senior Secured Term Loan Facility so long as such Senior Secured Term Loan Facility is outstanding pursuant to the Subordination Agreement.

On October 3, 2022, the Company entered into an unsecured subordinated promissory note (the “Airstrip Note”) with Airstrip Technologies, Inc., a Delaware corporation (“Airstrip”), whereby AirStrip loaned $4,000 to the Company. AirStrip is an entity affiliated with Dr. Patrick Soon-Shiong, our Chairman of the Board of Directors (the "Board") and former CEO. The Airstrip Note contains an 8.5% interest rate compounded annually and a maturity date of October 31, 2026. The payment of the Airstrip Note shall be subordinated and subject in right of payment to the prior payment in full of the 2021 Convertible Notes, and, as disclosed above, is subordinated and subject in right of payment to the prior payment of the full Senior Secured Term Loan Facility so long as such Senior Secured Term Loan Facility is outstanding pursuant to the Subordination Agreement.

In January 2016, the Company executed the Subordinated Nant Capital Note with Nant Capital (the "Nant Capital Note"), a personal investment vehicle for Dr. Soon-Shiong, our Chairman and former CEO. As of September 30, 2023, 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, the Company 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 Convertible 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 Convertible Notes. On August 28, 2023, pursuant to the August 2023 Stock Purchase Agreement, Nant Capital converted $10.0 million aggregate principal amount for shares of Common Stock in accordance with the terms and conditions of the Nant Capital Note. See Note 13 for further information on the August 2023 Stock Purchase Agreement.

- 20 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
The following tables summarize how the issuances of the Credit Agreement, Nant Capital Note, 2022 Nant Capital Note, Airstrip Note, and insurance promissory note are reflected in the Company's Consolidated Balance Sheets.
September 30, 2023December 31, 2022
Credit Agreement - Nant Capital
Gross proceeds, related party promissory note$10,125 $ 
Unamortized debt discounts and deferred financing offering costs(483) 
Total net carrying amount, related party notes payable$9,642 $ 
Credit Agreement - Highbridge
Gross proceeds, note payable$12,375 $ 
Unamortized debt discounts and deferred financing offering costs(214) 
Total net carrying amount, Highbridge$12,161 $ 
Insurance promissory note$ $560 
Total net carrying amount, notes payable current$12,161 $560 
September 30, 2023December 31, 2022
Nant Capital Note
Gross proceeds, related party promissory note$102,666 $112,666 
2022 Nant Capital Note
Gross proceeds, related party promissory note7,000 7,000 
Airstrip Note
Gross proceeds, related party promissory note4,000 4,000 
Total net carrying amount, related party promissory note$113,666 $123,666 

The accrued and unpaid interest on the Nant Capital Note and Airstrip Note was included as part of non-current related party liabilities in the Consolidated Balance Sheets.
September 30, 2023December 31, 2022
Nant Capital Note
Accrued Interest$51,668 $45,825 
Airstrip Note
Accrued Interest337 83 
Total related party liabilities$52,005 $45,908 

The accrued and unpaid interest on the 2021 Convertible Notes, 2022 Nant Capital Note, and Credit Agreement Note are included as part of related party payables in the Consolidated Balance Sheets.

- 21 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
September 30, 2023December 31, 2022
2021 Convertible Notes - Nant Capital
Accrued interest$2,695 $586 
2022 Nant Capital Note
Accrued interest789 103 
Credit Agreement - Nant Capital
Accrued interest666  
Total accrued interest$4,150 $689 

The accrued and unpaid interest on the 2021 Convertible Notes and Credit Agreement Note are included as part of accrued and other current liabilities in the Consolidated Balance Sheets.

September 30, 2023December 31, 2022
2021 Convertible Notes - Highbridge
Accrued interest$1,547 $703 
Credit Agreement - Highbridge
Accrued interest821  
Total accrued interest$2,368 $703 

- 22 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
The following tables set forth the Company's interest expense recognized in the Company's Consolidated Statements of Operations for the three months ended September 30, 2023 and 2022 and for the nine months ended September 30, 2023 and 2022. The amounts below are gross interest expense and do not reflect interest income which is also included in the interest expense, net amount in the Company's Consolidated Statements of Operations.

Related-PartyOtherTotal
Three Months Ended September 30, 2023
Nant Capital Note
Accrued coupon interest$1,957 $ $1,957 
Amortization of deferred financing offering costs   
Total notes interest expense$1,957 $ $1,957 
2021 Convertible Notes
Accrued coupon interest$703 $844 $1,547 
Amortization of deferred financing offering costs53 17 70 
Total notes interest expense$756 $861 $1,617 
Credit Agreement
Accrued coupon interest$338 $413 $751 
Amortization of deferred financing offering costs123 155 278 
Total notes interest expense$461 $568 $1,029 
2022 Nant Capital Note
Accrued coupon interest$232 $ $232 
Amortization of deferred financing offering costs   
Total notes interest expense$232 $ $232 
Airstrip Note
Accrued coupon interest$86 $ $86 
Amortization of deferred financing offering costs   
Total notes interest expense$86 $ $86 
Total interest expense$3,492 $1,429 $4,921 



- 23 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Related-PartyOtherTotal
Three Months Ended September 30, 2022
Nant Capital Note
Accrued coupon interest$1,903 $ $1,903 
Amortization of deferred financing offering costs   
Total notes interest expense$1,903 $ $1,903 
2021 Convertible Notes
Accrued coupon interest$703 $844 $1,547 
Amortization of deferred financing offering costs20 17 37 
Total notes interest expense$723 $861 $1,584 
Total interest expense$2,626 $861 $3,487 





- 24 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
Nine Months Ended September 30, 2023Related-PartyOtherTotal
Nant Capital Note
Accrued coupon interest$5,885 $ $5,885 
Amortization of deferred financing offering costs   
Total notes interest expense$5,885 $ $5,885 
2021 Convertible Notes
Accrued coupon interest$2,109 $2,531 $4,640 
Amortization of deferred financing offering costs93 50 143 
Total notes interest expense$2,202 $2,581 $4,783 
Credit Agreement
Accrued coupon interest$767 $937 $1,704 
Amortization of deferred financing offering costs284 359 643 
Total notes interest expense$1,051 $1,296 $2,347 
2022 Nant Capital Note
Accrued coupon interest$685 $ $685 
Amortization of deferred financing offering costs   
Total notes interest expense$685 $ $685 
Airstrip Note
Accrued coupon interest$254 $ $254 
Amortization of deferred financing offering costs   
Total notes interest expense$254 $ $254 
Total interest expense$10,077 $3,877 $13,954 
Nine Months Ended September 30, 2022Related-PartyOtherTotal
Nant Capital Note
Accrued coupon interest$5,644 $ $5,644 
Amortization of deferred financing offering costs   
Total notes interest expense$5,644 $ $5,644 
2021 Convertible Notes
Accrued coupon interest$2,109 $2,531 $4,640 
Amortization of deferred financing offering costs60 50 110 
Total notes interest expense$2,169 $2,581 $4,750 
Total interest expense$7,813 $2,581 $10,394 

- 25 -

NantHealth, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
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 September 30, 2023 and December 31, 2022. 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 September 30, 2023 and December 31, 2022, the total interest outstanding on this note amounted to $95 and $82, respectively, and is included in related party payables, net.


Note 9. Fair Value Measurements
Liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 consisted of the following:
September 30, 2023
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$36,407 $ $ $36,407 
December 31, 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$36,863 $ $ $36,863 

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