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, 2016 | |
| 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: 001-36483
SIGNAL GENETICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 47-1187261 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| 5740 Fleet Street, Carlsbad, California | 92008 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (760) 537-4100
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.).
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company filer | ☒ |
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 12, 2016, there were 10,790,422 shares of the issuer’s common stock, par value $0.01 per share, outstanding.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,” “estimates,” “plans,” “believes,” “seeks,” “may,” “should,” “continue,” “could” or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Quarterly Report on Form 10-Q.
You should read this quarterly report and the documents that we reference herein and therein and have filed as exhibits to this report, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this quarterly report is accurate as of the date of this report only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. These risks and uncertainties, along with others, are described under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 21, 2016. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New risk factors may emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each risk factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
| 3 |
Item 1. Unaudited Condensed Financial Statements.
SIGNAL GENETICS, INC.
(in thousands, except share and par value data)
|
June 30,
2016 |
December 31,
2015 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,501 | $ | 10,832 | ||||
| Accounts receivable, net | 658 | 394 | ||||||
| Inventory | 213 | 187 | ||||||
| Prepaid expenses and other current assets | 594 | 321 | ||||||
| Total current assets | 7,966 | 11,734 | ||||||
| Property and equipment, net | 1,061 | 1,153 | ||||||
| Security deposits | 15 | 15 | ||||||
| Total assets | $ | 9,042 | $ | 12,902 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 94 | $ | 242 | ||||
| Accrued liabilities | 1,331 | 1,018 | ||||||
| Note payable – related party | 1,105 | 1,105 | ||||||
| Other current liabilities | 67 | 103 | ||||||
| Total current liabilities | 2,597 | 2,468 | ||||||
| Other noncurrent liabilities | 8 | 24 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding at June 30, 2016 or December 31, 2015 | — | — | ||||||
| Common stock, $0.01 par value, 50,000,000 shares authorized, 10,777,906 and 10,635,454 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively | 108 | 106 | ||||||
| Additional paid in capital | 29,562 | 28,272 | ||||||
| Accumulated deficit | (23,233 | ) | (17,968 | ) | ||||
| Total stockholders’ equity | 6,437 | 10,410 | ||||||
| Total liabilities and stockholders’ equity | $ | 9,042 | $ | 12,902 | ||||
See accompanying notes to unaudited condensed financial statements.
| 4 |
SIGNAL GENETICS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net revenue | $ | 874 | $ | 734 | $ | 1,692 | $ | 1,378 | ||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue | 628 | 678 | 1,257 | 1,439 | ||||||||||||
| Research and development | 334 | 194 | 641 | 293 | ||||||||||||
| Selling and marketing | 555 | 574 | 1,065 | 1,008 | ||||||||||||
| General and administrative | 1,841 | 1,778 | 3,948 | 3,740 | ||||||||||||
| Total operating expenses | 3,358 | 3,224 | 6,911 | 6,480 | ||||||||||||
| Loss from operations | (2,484 | ) | (2,490 | ) | (5,219 | ) | (5,102 | ) | ||||||||
| Interest expense | (23 | ) | (72 | ) | (46 | ) | (94 | ) | ||||||||
| Net loss | $ | (2,507 | ) | $ | (2,562 | ) | $ | (5,265 | ) | $ | (5,196 | ) | ||||
| Net loss per common share, basic and diluted | $ | (0.23 | ) | $ | (0.33 | ) | $ | (0.49 | ) | $ | (0.77 | ) | ||||
| Weighted-average number of shares outstanding, basic and diluted | 10,734,709 | 7,785,670 | 10,737,620 | 6,789,376 | ||||||||||||
See accompanying notes to unaudited condensed financial statements.
| 5 |
SIGNAL GENETICS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
|
Six Months Ended
June 30, |
||||||||
| 2016 | 2015 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (5,265 | ) | $ | (5,196 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | 1,348 | 1,420 | ||||||
| Depreciation and amortization | 95 | 90 | ||||||
| Noncash interest on note payable – related party | 44 | 88 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (264 | ) | 507 | |||||
| Inventory | (26 | ) | (357 | ) | ||||
| Prepaid expenses and other current assets | (273 | ) | 105 | |||||
| Accounts payable and other current liabilities | 111 | 233 | ||||||
| Lease termination/abandonment payable | — | (185 | ) | |||||
| Net cash used in operating activities | (4,230 | ) | (3,295 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | (3 | ) | (68 | ) | ||||
| Net cash used in investing activities | (3 | ) | (68 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock, net of costs to issue | — | 9,074 | ||||||
| Shares repurchased to satisfy tax withholding obligation for restricted stock awards | (56 | ) | (346 | ) | ||||
| Repayment of capital lease obligation | (42 | ) | (36 | ) | ||||
| Net cash provided by (used in) financing activities | (98 | ) | 8,692 | |||||
| Net increase (decrease) in cash | (4,331 | ) | 5,329 | |||||
| Cash and cash equivalents, beginning of period | 10,832 | 5,119 | ||||||
| Cash and cash equivalents, end of period | $ | 6,501 | $ | 10,448 | ||||
| NONCASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Conversion of amounts due to related party to note payable – related party | $ | — | $ | 1,045 | ||||
| Fair value of warrants and options for overallotment shares to underwriters issued in connection with public stock offering | $ | — | $ | 330 | ||||
See accompanying notes to unaudited condensed financial statements.
| 6 |
SIGNAL GENETICS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
Signal Genetics, Inc. (the “Company”) is a commercial stage, molecular genetics diagnostic company focused on providing innovative diagnostic services that help physicians make better-informed decisions concerning the care of their patients suffering from cancer. In 2010, the Company became the exclusive licensee to the intellectual property stemming from the renowned research on multiple myeloma (“MM”), performed at the University of Arkansas for Medical Sciences (“UAMS”). Myeloma Prognostic Risk Signature (“MyPRS ® ”) is based upon 30 years of clinical research on over 10,000 MM patients who received their care at UAMS. The Company currently generates revenues from the performance of its MyPRS ® diagnostic test, which was launched in April 2011.
Basis of Presentation and Liquidity
The Company's unaudited condensed financial statements for the three and six months ended June 30, 2016 have been prepared on the assumption that it will continue as a going concern, which assumes that the Company will continue to operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.
Since its inception, the Company has devoted substantial effort in developing its products and services and has incurred losses and negative cash flows from operations. Existing cash resources will not be sufficient to meet the Company’s operating plan for the full 12-month period after the date of this filing. Based on current plans and available resources, the Company believes it can maintain current operations through June 2017. As a result, to continue to fund ongoing operations beyond June 2017, the Company would need to (1) raise additional capital through the issuance of equity, debt or other securities, (2) convert existing debt into equity, (3) enter into strategic partnerships, alliances, collaborations or other similar transactions or (4) a combination thereof.
Due to current market conditions, the Company’s current liquidity position and its depressed stock price, the Company believes it is unlikely that it will be able to obtain additional equity or debt financing on acceptable terms, if at all, and raise substantial doubt about the Company’s ability to continue as a going concern. If it is unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction, the Company will need to delay or reduce expenses or limit or curtail operations, any of which would have a material adverse effect on its business. Further, if the Company is unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction on a timely basis and on terms that are acceptable, the Company would also be required to sell or license its assets, sell the Company or otherwise liquidate all or a portion of assets and/or cease operations altogether. The unaudited condensed financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual audited financial statements prepared in accordance with generally accepted accounting principles have been omitted. The accompanying unaudited financial statements include all known adjustments necessary for a fair presentation of the results of interim periods as required by accounting principles generally accepted in the United States. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Actual results may materially differ from these estimates. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2015, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 21, 2016.
| 2. | Significant Accounting Policies |
Use of Estimates
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Company’s financial statements and accompanying notes. Significant estimates in the financial statements have been made for revenue, accounts receivable and allowance for doubtful accounts, accounting for income taxes, depreciation of property and equipment and stock-based compensation. Actual results could differ materially from those estimates.
| 7 |
Cash and Cash Equivalents
Cash is comprised of cash on hand and deposits in banks. The Company considers all highly liquid investments with a maturity at date of purchase of three months or less to be cash equivalents, which, at June 30, 2016, are comprised of money market funds.
Accounts Receivable, Contractual Allowances and Allowance for Doubtful Accounts
Accounts receivable are recorded net of contractual allowances and an allowance for doubtful accounts. At June 30, 2016 and December 31, 2015, accounts receivable were $658,000 and $394,000, respectively, and are net of contractual allowances of $2.7 million and $2.1 million, respectively. The Company estimates an allowance for doubtful accounts based on the aging of the accounts receivable and the historical collection experience for each type of payor. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered.
During the three months ended June 30, 2016 and 2015, the Company recognized $0 and $4,000, respectively, in bad debt expense. During the six months ended June 30, 2016 and 2015, the Company recognized $2,000 and $28,000, respectively, in bad debt expense. At June 30, 2016 and December 31, 2015, there were no allowances for doubtful accounts.
Inventory
Inventory, which consists entirely of raw materials, and includes laboratory materials and supplies, is valued at the lower of cost or market using the first-in, first-out (“FIFO”) method.
Revenue Recognition
Revenues that are derived from testing services are recognized in accordance with revenue recognition accounting guidance, which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.
Revenues are recorded on an accrual basis when the contractual obligations are completed as tests are processed through the Company’s laboratory and test results are delivered to ordering physicians. Revenues are billed to various payors, including Medicare, contracted insurance companies, directly billed customers (UAMS, pharmaceutical companies, reference laboratories and hospitals) and non-contracted insurance companies. Revenues from Medicare, contracted insurance companies and directly billed customers are reported based on the contractual rate. The difference between the amounts billed and the contractual rates from Medicare and contracted insurance companies are recorded as contractual allowances at the same time the revenue is recognized, to arrive at reported net revenue. The contractual rate is based on established agreed upon rates between the Company and the respective payor. Directly billed customers are invoiced at the contractual rate by the Company. Revenues from non-contracted insurance companies are reported based on the amount expected to be collected, which is based on the historical collection experience of each payor or payor group, as appropriate, and anticipated effects of changes in the healthcare industry, if any. The difference between the amount billed and the amount estimated to be collected from non-contracted insurance companies is recorded as a contractual allowance at the same time the revenue is recognized, to arrive at reported net revenue. The Company does not record revenue from individuals for billings until cash is collected; as collectability is not assured at the time services are provided, therefore there are no accounts receivable from self-payors. Gross revenues from individuals have been immaterial to date.
The Company’s estimates of net revenue for non-contracted insurance companies are subject to change based on the contractual status and payment policies of the third-party payors with whom the Company deals. The Company regularly refines its estimates in order to make estimated revenue as accurate as possible based on its most recent collection experience with each third-party payor. The Company regularly reviews its historical collection experience for non-contracted payors and anticipated changes in the healthcare industry and adjusts expected revenues for current and subsequent periods accordingly. During the three and six months ended June 30, 2016, net favorable changes in estimates were recorded to revenue related to non-contracted revenues recorded in the prior year of $82,000 and $224,000, respectively. During the three and six months ended June 30, 2015, net unfavorable changes in estimates were recorded to revenue related to non-contracted revenues recorded in the prior year of $43,000 and $73,000, respectively.
| 8 |
The table below shows the adjustments made to gross revenues to arrive at net revenues, the amount reported in the statements of operations:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Gross revenues | $ | 2,109 | $ | 1,457 | $ | 4,159 | $ | 2,754 | ||||||||
| Less: contractual allowances | (1,235 | ) | (723 | ) | (2,467 | ) | (1,376 | ) | ||||||||
| Net revenue | $ | 874 | $ | 734 | $ | 1,692 | $ | 1,378 | ||||||||
| Contractual allowances as a percentage of gross revenues | 59 | % | 50 | % | 59 | % | 50 | % | ||||||||
The increase in the contractual allowances is due to an increase in the volume of tests billed to third-party payors including non-contracted payors for which we estimate net revenues based on historical collections.
Stock-Based Compensation
Compensation expense for all stock-based payments made to employees, directors, and consultants are measured and recognized based on estimated fair value. These stock-based awards include stock options and restricted stock units. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton (“BSM”), option-pricing model, which requires the use of estimates such as stock price volatility and expected option lives. The fair value of stock options granted to employees and directors is estimated at the date of grant.
The fair value of restricted stock units issued to employees and directors is based on the market price of the Company’s common stock on the date of grant and, for nonemployees, at the date when performance is complete. For stock-based compensation awards granted to non-employees, the fair value of the awards are remeasured at each reporting date until vested, with changes in the estimated fair value recognized as an adjustment to compensation expense in the period of change. Upon settlement of all or a portion of the award in cash, the recognized fair value of the corresponding amount of awards is reversed from additional paid-in capital and the excess of the cash payment over this amount is recognized as additional stock-based compensation expense.
Stock-based compensation cost is recognized on a straight-line basis over the requisite service period of the award. The Company accounts for forfeitures when they occur and reverses any compensation cost previously recognized for awards for which the requisite service has not been completed in the period that the awards are forfeited.
Due to the Company’s net loss position, no tax benefits for stock-based compensation have been recognized in the statements of cash flows. The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to stock-based compensation cost as a result of its full valuation allowance on net deferred tax assets, including those related to net operating loss carryforwards.
Fair Value of Financial Instruments
The Company’s financial instruments that are measured at fair value on a recurring basis consist principally of cash and cash equivalents, accounts receivable, accounts payable and note payable-related party.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Includes other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.
At June 30, 2016 and December 31, 2015, the Company’s cash equivalent instruments consisted of $6.5 million and $10.4 million, respectively, in money market funds that were measured at fair value using the net asset value per share that have not been classified using the fair value hierarchy. The fund invests primarily in short-term U.S. Treasury and government securities.
The carrying amounts of financial instruments such as accounts receivable, accounts payable and note payable-related party approximate their relative fair values due to the short-term maturities and market rates of interest of these instruments.
Net Loss Per Share
Basic and diluted net loss per common share for the periods presented is computed by dividing net loss by the weighted-average number of common shares outstanding during the respective periods, without consideration of common stock equivalents. Basic and diluted net loss per common share includes vested, but unissued restricted stock units from the date of vesting.
| 9 |
Common stock equivalents, determined on a weighted-average outstanding basis, that could potentially reduce net income per common share in the future that were not included in the determination of diluted loss per common share as their effects were antidilutive are as follows:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Unvested restricted stock units | 789,550 | 506,330 | 515,444 | 518,821 | ||||||||||||
| Options to purchase common stock | 586,092 | 176,857 | 611,927 | 176,687 | ||||||||||||
| Warrants to purchase common stock | 203,214 | 203,214 | 203,214 | 157,678 | ||||||||||||
| Total | 1,578,856 | 886,401 | 1,330,585 | 853,186 | ||||||||||||
Concentration of Credit Risk, Major Customers and Suppliers
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. Cash is maintained at two financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. The Company invests excess cash in money market funds under the custodianship of a major financial institution. This diversification of risk is consistent with the Company's policy to ensure safety of principal and maintain liquidity.
During the three and six months ended June 30, 2016, the Company had three major customers, including UAMS. Revenue sourced either from or through UAMS as a percentage of net revenue during the three months ended June 30, 2016 and 2015 accounted for 18% and 72%, respectively, and 22% and 75% during the six months ended June 30, 2016 and 2015, respectively. Revenue sourced either from or through the other two major customers as a percentage of net revenue during the three months ended June 30, 2016 and 2015 accounted for 27% and 0%, and 12% and 5%, respectively, and 26% and 0%, and 12% and 5% during the six months ended June 30, 2016 and 2015, respectively.
Accounts receivable from UAMS as a percentage of total accounts receivable as of June 30, 2016 and December 31, 2015 were 9% and 19%, respectively. The Company has no accounts receivable from the other two major customers as of June 30, 2016 or December 31, 2015 since revenue sourced through them is billed to various third-party payors, depending on a patient’s medical insurance policy.
Inventory used in the Company’s testing process is procured from one supplier. Any supply interruption or an increase in demand beyond such supplier’s capabilities could have an adverse impact on the Company’s business. Management believes it could identify alternative suppliers, if necessary, but it is possible such suppliers may not be identified in a timely manner to avoid an adverse impact on the Company’s business.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The update is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2016, with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures are applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement is applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement are applied prospectively. The Company elected to early adopt this guidance effective January 1, 2016. The impact of adoption of this guidance had no effect on the Company’s financial position, statements of operations or statements of cash flows.
In May 2015, the FASB issued ASU No. 2015-07 that eliminates the requirement to categorize investments within the fair value hierarchy if their fair value is measured using the net asset value per share practical expedient in the FASB’s fair value measurement guidance. The amendments also limit certain disclosures to investments for which the entity has elected to measure at fair value using the net asset value per share practical expedient. The amendments were applied retrospectively by removing from the fair value hierarchy any investments for which fair value is measured using the net asset value per share practical expedient. Adoption of this guidance did not have an impact on the Company’s financial position or results of operations.
| 10 |
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, which replaces the existing accounting guidance for leases. This standard requires entities that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on the balance sheet. The standard is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2018. The guidance is required to be applied by the modified retrospective transition approach and early adoption is permitted. The Company is currently assessing the impact that adoption of this guidance will have on its financial statements and footnote disclosures.
In November 2015, the FASB issued ASU 2015-17 that provides guidance on the presentation of deferred income taxes which requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as noncurrent on the balance sheet. As a result, each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The new guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early application permitted. The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on its financial statements.
In July 2015, the FASB issued ASU 2015-11, which simplifies the measurement of inventories valued under most methods, including the Company’s inventories valued under the FIFO method. Under this new guidance, inventories valued under these methods would be valued at the lower of cost and net realizable value, with net realizable value defined as the estimated selling price less reasonable costs to sell the inventory. The new guidance is effective prospectively for the Company’s quarterly reporting period beginning January 1, 2017, with early adoption permitted. The Company is currently assessing the impact that this standard will have on its financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most current revenue recognition guidance in FASB ASC 605, Revenue Recognition, including industry-specific guidance. This standard is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard also requires additional disclosure about the nature, amount, timing and uncertainty of assets recognized from costs incurred to fulfill a contract and was originally effective for the Company’s annual reporting period beginning January 1, 2018, including interim periods within that reporting period. In July 2015, the FASB voted to defer the effective date of this ASU by one year, which is effective for the Company’s annual reporting period beginning January 1, 2019, with early adoption permitted beginning with the annual reporting period ending December 31, 2017. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company is currently assessing the impact that this standard will have on its financial statements.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern, which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and the related footnote disclosure. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financials are issued. When management identifies conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, this standard also outlines disclosures that are required in the company’s footnotes based on whether or not there are any plans intended to mitigate the relevant conditions or events to alleviate the substantial doubt. This standard becomes effective for the Company’s annual reporting period ending December 31, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on its financial statements.
| 3. | Balance Sheet Accounts and Supplemental Disclosures |
Property and Equipment
Property and equipment consist of the following:
| (in thousands) |
June 30,
2016 |
December 31,
2015 |
||||||
| Laboratory and computer equipment | $ | 1,820 | $ | 1,817 | ||||
| Furniture and fixtures | 69 | 69 | ||||||
| Leasehold improvements | 6 | 6 | ||||||
| 1,895 | 1,892 | |||||||
| Less: accumulated depreciation and amortization | (834 | ) | (739 | ) | ||||
| Total property and equipment, net | $ | 1,061 | $ | 1,153 | ||||
| 11 |
An asset with a cost of $300,000 recorded under a capital lease is included in the laboratory equipment balances at June 30, 2016 and December 31, 2015.
Accrued Expenses
Accrued expenses consist of the following:
| (in thousands) |
June 30,
2016 |
December 31,
2015 |
||||||
| Accrued bonuses | $ | 634 | $ | 592 | ||||
| Accrued compensation and related expenses | 303 | 234 | ||||||
| Accrued contract research and development | 194 | 35 | ||||||
| Accrued interest payable – related party | 117 | 73 | ||||||
| Other | 83 | 84 | ||||||
| Total accrued expenses | $ | 1,331 | $ | 1,018 | ||||
| 4. | Note Payable – Related Party and Capital Lease Obligations |
Note Payable — Related Party
On March 6, 2015, the amounts due to related party, aggregating $1,045,000, were converted into an unsecured note payable – related party, bearing interest at 8% per annum and due on demand. The principal amount of the note was increased by $60,000 over the amounts due to related party to $1,105,000 to provide the equivalent of 8% per annum interest for the period of time the amounts due to related party were held as a payable in exchange for a provision that the related party would not call the note prior to June 30, 2015. The increase in the principal amount of the note was deferred and amortized to interest expense over the initial term of the note to June 30, 2015. Interest expense related to this note during the three months ended June 30, 2016 and 2015 was $22,000 and $69,000, respectively, and $44,000 and $88,000 during the six months ended June 30, 2016 and 2015, respectively. The note balance at June 30, 2016 and December 31, 2015 was $1,105,000. Accrued interest payable of $117,000 and $73,000 is included in accrued liabilities in the balance sheets at June 30, 2016 and December 31, 2015, respectively.
Capital Lease Obligation
The Company has a two-year capital lease obligation for laboratory equipment which expires in January 2017, and provides for monthly rent of $7,200. The lease obligations at June 30, 2016 and December 31, 2015 were $46,000 and $88,000, which are net of $4,000 and $6,000, respectively, in unamortized discounts. Future maturities of this obligation at June 30, 2016 are $43,000 and $7,000 during the remainder of 2016 and 2017, respectively. Laboratory equipment with a net book value of $255,000 at June 30, 2016 serves as collateral for this obligation.
| 5. | Stockholders’ Equity |
Changes in common shares outstanding and total stockholders’ equity during the six months ended June 30, 2016 were as follows:
| Shares of Common Stock |
Total Stockholders’ Equity
(in thousands) |
|||||||
| Balance, December 31, 2015 | 10,635,454 | $ | 10,410 | |||||
| Stock-based compensation | — | 1,348 | ||||||
| Shares issued under employee stock incentive plan, net of shares repurchased to satisfy tax withholding obligations | 142,452 | (56 | ) | |||||
| Net loss | — | (5,265 | ) | |||||
| Balance, June 30, 2016 | 10,777,906 | $ | 6,437 | |||||
| 12 |
Common Shares
The Company has authorized 50,000,000 shares of common stock, of which 10,777,906 and 10,635,454 shares were issued and outstanding at June 30, 2016 and December 31, 2015, respectively. Common shares reserved for future issuance upon the exercise, issuance or conversion of the respective equity instruments at June 30, 2016 is as follows:
| Issued and Outstanding: | ||||
| Restricted stock units | 683,865 | |||
| Stock options | 622,837 | |||
| Warrants | 203,214 | |||
| Shares reserved for future award grants | 637,708 | |||
| Total | 2,147,624 |
Public Offering of Common Stock
On February 20, 2015, the Company completed a public offering of 3,214,285 shares of its common stock, at $2.80 per share, for total cash proceeds of $7.8 million, which is net of $1.2 million in underwriter commissions and offering expenses. In connection with the offering, the Company granted a 45-day option to the underwriter to purchase up to 482,142 shares of common stock to cover overallotments, with an aggregate grant date fair value of $132,000. On February 26, 2015, the underwriters exercised the overallotment option for total cash proceeds of $1.3 million, which is net of $95,000 in underwriter commissions. In connection with this offering, as a portion of the underwriting compensation payable to the underwriters, the Company issued warrants to purchase 160,714 shares of its common stock to the representative of the underwriters with an aggregate grant date fair value of $198,000. The warrants are exercisable at any time from February 2016 through February 2020 at an exercise price of $3.50 per share. The aggregate fair values of the warrants and overallotment option issued were recorded as an increase to additional paid-in capital with an offset to the proceeds from the offering. The net contribution to additional paid-in capital was $8.8 million after deducting the noncash fair values of warrants and overallotment option issued in connection with the offering.
The estimated fair values of the warrants and overallotment option were determined on their respective measurement dates using the BSM option valuation model with the following assumptions:
| Warrants |
Overallotment
Option |
|||||||
| Fair value of underlying common stock | $ | 2.57 | $ | 2.62 | ||||
| Exercise price | $ | 3.50 | $ | 2.60 | ||||
| Risk-free interest rate | 1.61 | % | 0.02 | % | ||||
| Volatility | 65.5 | % | 73.0 | % | ||||
| Dividend yield | 0 | % | 0 | % | ||||
| Contractual term (in years) | 5.0 | 0.12 | ||||||
| Weighted-average measurement date fair value per share | $ | 1.23 | $ | 0.27 | ||||
| 6. | Stock Compensation Plan |
The Company’s 2014 Stock Incentive Plan, as amended (the “Plan”), provides for stock awards that may be made in the form of incentive or non-statutory stock options, stock appreciation rights, restricted or unrestricted stock awards, restricted stock units, performance awards, or other stock-based awards. No awards may be granted after June 16, 2024. The Plan provides for an annual increase in the number of shares of common stock available for grant on the first day of each calendar year that is equal to the lesser of four percent of the shares of common stock outstanding on the last day of the immediately preceding fiscal year or a smaller number of shares as determined by the board of directors. Under this provision, the number of shares of common stock reserved for issuance under the Plan was increased from 2,100,000 to 2,525,418 as of January 1, 2016. At June 30, 2016, up to 1,944,410 shares of common stock may be issued under the Plan, of which 1,306,702 shares are reserved for issuance upon the exercise of outstanding options and issuance of outstanding restricted stock units, and 637,708 shares are available for future grants.
Restricted Stock Units (“RSUs”)
All of the Company’s outstanding RSU agreements provide for the settlement of the vested RSUs in shares of the Company’s common stock equal to the number of vested RSUs or an amount in cash equal to the product of the fair market value of the common stock on the respective payment date and the number of vested RSUs, or some combination of common shares and cash as determined by the plan administrator as of each settlement date.
| 13 |
RSUs generally vest over a period of one to four years, subject to earlier cancellation or forfeiture prior to vesting upon cessation of service to the Company. The total fair value of RSUs that vested during the three and six months ended June 30, 2016 was $60,000 and $61,000, respectively, and during the three and six months ended June 30, 2015 was $216,000 and $538,000, respectively. A summary of the activity related to RSUs is as follows:
| Number of Shares | Weighted-Average Grant Date Fair Value per Share | |||||||
| Unvested at December 31, 2015 | 215,992 | $ | 8.43 | |||||
| Granted during the period | 596,045 | $ | 0.51 | |||||
| Vested during the period | (128,956 | ) | $ | 10.00 | ||||
| Unvested at June 30, 2016 | 683,081 | $ | 1.22 | |||||
The Company issued shares of common stock in settlement of RSUs that vested and were issued during the period aggregating 68,826 and 142,452 shares during the three and six months ended June 30, 2016, respectively, and 340,540 and 366,474 shares during the three and six months ended June 30, 2015, respectively. As permitted under the Plan, to satisfy tax withholding obligations for employees in connection with the vesting of restricted stock units previously granted, the Company repurchased 64,835 and 121,486 shares of common stock, with aggregate values of $30,000 and $56,000 during the three and six months ended June 30, 2016, respectively, and 165,878 and 176,333 shares with aggregate values of $319,000 and $346,000 during the three and six months ended June 30, 2015, respectively.
Stock Options
Stock options generally vest over a four-year period and have a maximum term of ten years from the date of grant, subject to earlier cancellation prior to vesting upon cessation of service to the Company. A summary of the activity related to stock option awards is as follows:
| Shares Subject to Options | Weighted-Average Exercise Price per Share |
Weighted-Average Remaining Contractual Term
(in years) |
Aggregate Intrinsic Value
(in thousands) |
|||||||||||||
| Outstanding at December 31, 2015 | 631,567 | $ | 2.28 | |||||||||||||
| Granted | 86,800 | $ | 0.51 | |||||||||||||
| Forfeitures and cancellations | (95,530 | ) | $ | 2.92 | ||||||||||||
| Outstanding at June 30, 2016 | 622,837 | $ | 1.94 | 9.1 | $ | — | ||||||||||
| Options exercisable at June 30, 2016 | 148,798 | $ | 2.22 | 8.9 | $ | — | ||||||||||
| Options vested and expected to vest as of June 30, 2016 | 622,837 | $ | 1.94 | 9.1 | $ | — | ||||||||||
Stock-Based Compensation Expense
The estimated fair value of each stock option award was determined on the date of grant using the BSM option valuation model with the following assumptions:
|
Six Months Ended
June 30, |
||||||||
| 2016 | 2015 | |||||||
| Risk-free interest rate | 0.52% | - | 1.38% | 1.34% | - | 1.94% | ||
| Expected volatility | 66.2% | - | 75.4% | 64.3% | - | 67.8% | ||
| Weighted-average volatility | 73.9% | 65.7% | ||||||
| Dividend yield | 0% | 0% | ||||||
| Weighted-average expected term (in years) | 1.8 | 6.3 | ||||||
| Weighted-average grant date fair value per share | $0.17 | $1.43 | ||||||
The fair value of each stock option is estimated on the date of grant using the BSM option pricing model which requires the input of highly subjective assumptions. Because the option-pricing model is sensitive to change in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the options. The risk-free interest rate is based on the rate currently available on U.S. Treasury issues with terms approximating the expected term of the option. Due to the Company’s limited historical stock data, the estimated future stock price volatility is based upon the average historical volatilities of a group of peer companies. The Company has not paid any dividends on common stock and does not anticipate paying dividends on common stock in the foreseeable future. Due to the Company’s limited historical stock option exercise data, the ‘simplified’ method has been used to estimate the expected term of options.
| 14 |
Total non-cash stock-based compensation expense for all stock awards, net of forfeitures recognized as they occur, that was recognized in the statements of operations is as follows:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Cost of revenue | $ | 7 | $ | 11 | $ | 12 | $ | 33 | ||||||||
| Research and development | 4 | 27 | 10 | 42 | ||||||||||||
| Selling and marketing | 18 | 11 | 35 | 23 | ||||||||||||
| General and administrative | 606 | 663 | 1,291 | 1,322 | ||||||||||||
| Total | $ | 635 | $ | 712 | $ | 1,348 | $ | 1,420 | ||||||||
At June 30, 2016, there was $545,000 of unamortized compensation cost related to unvested RSUs which is expected to be recognized over a remaining weighted-average vesting period of 3.0 years. At June 30, 2016, there was $407,000 of unamortized compensation cost related to unvested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 2.5 years.
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2016.
Overview
We are a commercial stage, molecular genetics diagnostic company focused on providing innovative diagnostic services that help physicians make better-informed decisions concerning the care of their patients suffering from cancer. Our mission is to develop, validate and deliver innovative diagnostic services that enable better patient-care decisions.
We were founded in January 2010 and hold an exclusive license to the intellectual property stemming from the renowned research on multiple myeloma (“MM”) performed at UAMS. Our flagship service offering is the MyPRS ® test, which is a microarray-based Gene Expression Profiling (“GEP”) assay that tests for the presence of specific groups of genes that can predict low or high level risk of early relapse in patients suffering from MM. The information provided by our MyPRS ® test aids physicians in selecting the optimal treatment regimen for each patient’s unique MM condition.
To our knowledge, we are the only company marketing a GEP test for assessing the status of MM in the United States. The MyPRS ® test is protected by a substantial patent portfolio of issued and pending patents.
Our growth strategy includes the following key elements:
| • | Expanding the U.S. market penetration of our MyPRS ® test by increasing the geographic coverage of our commercial organization. |
| • | Broadening the base of health care insurance companies that have approved reimbursements for MyPRS ® . |
| • | Expanding the diagnostic indications for MyPRS ® to include asymptomatic monoclonal gammopathy (“AMG”), the precursor conditions to MM. |
| • | Pursuing additional collaborations with pharmaceutical companies who focus on developing therapies to treat MM and its precursor disease. |
| • | Expanding our information technology infrastructure to further improve our customer service experience. |
| • | Continuing to leverage our relationship with UAMS and other key academic centers. |
| • | Expanding our test offering with the addition of other molecular tests useful to physicians who care for MM patients. |
| • | Expanding and leveraging our capabilities into additional blood cancer indications. |
| • | Pursuing additional collaborations, mergers and acquisitions, and in-licensing to expand our service offering. |
| • | Continuing to reduce the costs associated with the development, manufacture and interpretation of our proprietary genomic tests and services. |
We believe a key challenge to achieving our growth strategy will be our ability to become contracted with additional payors beyond Medicare and Arkansas Blue Cross Blue Shield (“AR-BCBS”). In order to broaden our coverage policy approval to include a number of the major health care insurance providers in the United States, we are currently presenting our clinical validity and utility dossier and health economic model to various non-contracted third-party payors and accountable care organizations to support our request for their reimbursement approval. MyPRS ® has been studied extensively and there are more than 30 peer-reviewed scientific publications that describe the validity and utility of the test. MyPRS ® is one of the most extensively validated genomic assays available today. Further, the MyPRS ® assay has been validated on patient cohorts totaling over 4,500 patients and detailed in 17 peer-reviewed publications. Please visit our website at www.signalgenetics.com in the “Publications” section under the “Physicians” tab for a list of these publications. These publications were used to help create the aforementioned clinical utility dossier that justifies reimbursement approval by the majority of health care payors.
Other challenges to our growth strategy include: (1) if medical oncologists do not adopt the use of MyPRS ® to evaluate the risk of developing MM in patients with AMG, our growth strategy could be adversely affected, (2) if other tests that more accurately predict the severity of MM, the risk of progression of AMG to MM or the likelihood of response to therapy, are developed, physicians could stop ordering MyPRS ® , adversely affecting our ability to generate revenue, and (3) if payors, including our currently contracted payors, decide to reduce payment for MyPRS ® .
We operate in only one segment and, currently, have no operations outside of the United States.
| 16 |
Sources of Revenues and Expenses
Revenues
We generate revenues primarily from the completion of tests processed through our CAP-accredited and CLIA certified laboratory when test results are delivered to ordering physicians. During the first six months of 2016, we had three major customers, including UAMS. Revenue sourced either from or through UAMS as a percentage of net revenue during the first six months of 2016 and 2015 were 22% and 75%, respectively. Revenue sourced either from or through our other two major customers as a percentage of net revenue during the first six months of 2016 and 2015 were 26% and 0%, and 12% and 5%, respectively.
A significant portion of our revenues consist of payments or reimbursements received from various payors, including Medicare, contracted insurance companies, directly billed customers (UAMS, pharmaceutical companies, reference laboratories and hospitals) and non-contracted insurance companies. We report revenues from contracted payors and directly billed customers based on the contractual rate. Medicare reimburses MyPRS ® based on the local coverage determination at approximately $1,900 per test and AR-BCBS reimburses MyPRS ® based on the contractual rate of approximately $2,000 per test. Revenues from non-contracted payors are reported based on the amount expected to be collected, which is based on the historical collection experience of each payor or payor group, as appropriate. Our estimates of net revenue are subject to change based on the contractual status and payment policies of third-party payors with whom we deal as well as anticipated changes in the healthcare industry and related legislation. We regularly refine our estimates in order to make our estimated revenue as accurate as possible based on our most recent collection experience with each third-party payor.
Cost of Revenue
Our cost of revenue consists primarily of the cost of materials and supplies, labor, and other costs associated with processing specimens including pathological review, quality control analyses, delivery charges necessary to render an individualized test result, depreciation, amortization and royalty expense. Costs associated with performing tests are recorded as the tests are processed.
Research and Development Expenses
Our research and development expenses primarily include personnel costs, laboratory supplies, reagents, consulting costs associated with developing and validating new testing services and sponsored research agreements with leading academic institutions for clinical trials and other studies to further validate the use of MyPRS ® for MM and AMG.
Selling and Marketing Expenses
Our selling and marketing expenses consist primarily of sales commissions and support costs, salaries and related employee benefits, travel, and marketing costs for our commercial, business development, medical affairs and managed care functions.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs, professional service fees and other costs related to our being a publicly-traded company.
Interest Expense
Interest expense primarily reflects interest on our note payable - related party.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates:
| • | Revenue Recognition |
| • | Accounts Receivable, Contractual Allowance and Allowance for Doubtful Accounts |
| • | Stock-Based Compensation |
| • | Accounting for Income Taxes |
| 17 |
During the six months ended June 30, 2016, other than as discussed below, there were no significant changes in our critical accounting policies and estimates. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2015 for a more complete discussion of our critical accounting policies.
Revenue Recognition
We recognize revenue from testing services in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), 605, Revenue Recognition, which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.
Revenues are recorded on an accrual basis when the contractual obligations are completed as tests are processed through our laboratory and test results are delivered to ordering physicians. Revenues are billed to various payors, including Medicare, contracted insurance companies, directly billed customers (UAMS, pharmaceutical companies, reference laboratories and hospitals) and non-contracted insurance companies. Revenues from Medicare, contracted insurance companies and directly billed customers are reported based on the contractual rate. The difference between the amounts billed and the contractual rates from Medicare and contracted insurance companies are recorded as contractual allowances at the same time the revenue is recognized, to arrive at reported net revenue. The contractual rate is based on established agreed upon rates between us and the respective payor. Directly billed customers are invoiced at the contractual rate by us. Revenues from non-contracted insurance companies are reported based on the amount expected to be collected, which is based on the historical collection experience of each payor or payor group, as appropriate, and anticipated effects of changes in the healthcare industry, if any. The difference between the amount billed and the amount estimated to be collected from non-contracted insurance companies is recorded as a contractual allowance at the same time the revenue is recognized, to arrive at reported net revenue. We do not record revenue from individuals for billings until cash is collected; as collectability is not assured at the time services are provided, therefore there are no accounts receivable from self-payors. Gross revenues from individuals have been immaterial to date.
Our estimates of net revenue for non-contracted insurance companies are subject to change based on the contractual status and payment policies of the third-party payors with whom we deal. We regularly refine our estimates in order to make estimated revenue as accurate as possible based on its most recent collection experience with each third-party payor. We regularly review our historical collection experience for non-contracted payors and anticipated changes in the healthcare industry and adjust expected revenues for current and subsequent periods accordingly, including previously recorded revenues related to outstanding accounts receivable for such non-contracted payors.
Accounts Receivable, Contractual Allowances and Allowance for Doubtful Accounts
We record accounts receivable net of contractual allowances and an allowance for doubtful accounts. At June 30, 2016 and December 31, 2015, contractual allowances were $2.7 million and $2.1 million, respectively. We estimate an allowance for doubtful accounts based on the aging of the accounts receivable and the historical collection experience for each of our contracted payors. When the amounts are determined to be uncollectible, they are expensed as bad debt and subsequently charged-off against the allowance. During the second quarters of 2016 and 2015, we recognized $0 and $4,000, respectively, in bad debt expense. During first six months of 2016 and 2015, we recognized $2,000 and $28,000, respectively, in bad debt expense. At June 30, 2016 and December 31, 2015, there were no allowances for doubtful accounts. Uncollectability of accounts receivable for a non-contracted payor is typically a reflection of an estimate in excess of actual collections and is adjusted in the period of collection as a change in estimate resulting in an increase in contractual allowances and, therefore, a reduction in current period net revenue.
The following tables present our gross accounts receivable from customers outstanding by aging category reduced by total contractual allowances to arrive at the net accounts receivable balances at June 30, 2016 and December 31, 2015. Other than our direct bill customers, all of our receivables were pending approval by third-party payors as of the date that the receivables were recorded:
| June 30, 2016 | ||||||||||||||||||||
| (in thousands) | 0 - 30 Days | 31 - 60 Days | 61 - 90 Days | Over 90 Days | Total | |||||||||||||||
| Medicare | $ | 177 | $ | 18 | $ | 22 | $ | 17 | $ | 234 | ||||||||||
| Contracted insurance companies | 18 | — | 4 | 10 | 32 | |||||||||||||||
| Direct bill | 163 | 10 | — | — | 173 | |||||||||||||||
| Non-contracted insurance companies | 314 | 317 | 341 | 1,991 | 2,963 | |||||||||||||||
| Accounts receivable, gross | 672 | 345 | 367 | 2,018 | 3,402 | |||||||||||||||
| Less: contractual allowances | (366 | ) | (272 | ) | (299 | ) | (1,807 | ) | (2,744 | ) | ||||||||||
| Accounts receivable, net | $ | 306 | $ | 73 | $ | 68 | $ | 211 | $ | 658 | ||||||||||
| 18 |
| December 31, 2015 | ||||||||||||||||||||
| (in thousands) | 0 - 30 Days | 31 - 60 Days | 61 - 90 Days | Over 90 Days | Total | |||||||||||||||
| Medicare | $ | 116 | $ | 55 | $ | 32 | $ | 16 | $ | 219 | ||||||||||
| Contracted insurance companies | 13 | — | 9 | 16 | 38 | |||||||||||||||
| Direct bill | 101 | 12 | 24 | 14 | 151 | |||||||||||||||
| Non-contracted insurance companies | 336 | 256 | 215 | 1,244 | 2,051 | |||||||||||||||
| Accounts receivable, gross | 566 | 323 | 280 | 1,290 | 2,459 | |||||||||||||||
| Less: contractual allowances | (347 | ) | (245 | ) | (230 | ) | (1,243 | ) | (2,065 | ) | ||||||||||
| Accounts receivable, net | $ | 219 | $ | 78 | $ | 50 | $ | 47 | $ | 394 | ||||||||||
The day sales outstanding (“DSO”) at June 30, 2016 has increased to 71 days, compared to 53 days at December 31, 2015, attributable to the growth in net accounts receivable which was influenced by the increase in both test volume and average selling price for billings to non-contracted insurance payors. Since private non-contracted insurance payors are slower to pay, we expect our DSO’s to increase as net revenues from these payors increase.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The update is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2016, with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures are applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement is applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement are applied prospectively. We elected to early adopt this guidance effective January 1, 2016. The impact of adoption of this guidance had no effect on our financial position, statements of operations or statements of cash flows.
In May 2015, the FASB issued ASU No. 2015-07 that eliminates the requirement to categorize investments within the fair value hierarchy if their fair value is measured using the net asset value per share practical expedient in the FASB’s fair value measurement guidance. The amendments also limit certain disclosures to investments for which the entity has elected to measure at fair value using the net asset value per share practical expedient. The amendments were applied retrospectively by removing from the fair value hierarchy any investments for which fair value is measured using the net asset value per share practical expedient. Adoption of this guidance did not have an impact on the Company’s financial position or results of operations.
Recent Accounting Pronouncements
We have reviewed all recently issued standards and have determined that other than as disclosed above and in Note 2 to the financial statements included herein, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.
Future Accounting Pronouncements
Section 107 of the JOBS Act provides that an emerging growth company, such as our company, can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Although to date, we have not yet taken advantage of this delay, we have elected to avail ourselves of this extended transition period for adopting new or revised accounting standards in the future. Therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. In the future, we may elect to opt out of the extended period for adopting new or revised accounting standards. If we do so, we will be required to disclose such decision, which will be irrevocable.
| 19 |
Results of Operations
Second Quarter of 2016 Compared to the Second Quarter of 2015
Net Revenue
Our net revenue was $874,000 during the second quarter of 2016, an increase of $140,000, or 19%, compared to $734,000 during the second quarter of 2015. Net revenue and tests billed during the second quarters of 2016 and 2015 were as follows:
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Net Revenue (in 000s) | Tests Billed | |||||||||||||||||||||||||||||||
| Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||
| 2016 | 2015 | $ | % | 2016 | 2015 | # | % | |||||||||||||||||||||||||
| Clinical patients at U.S. hospitals and direct billed customers | $ | 774 | $ | 329 | $ | 445 | 135 | % | 481 | 283 | 198 | 70 | % | |||||||||||||||||||
| Research testing services | 40 | 405 | (365 | ) | (90 | )% | 47 | 486 | (439 | ) | (90 | )% | ||||||||||||||||||||
| Pharmaceutical services | 60 | — | 60 | 100 | % | 12 | — | 12 | 100 | % | ||||||||||||||||||||||
| Total | $ | 874 | $ | 734 | $ | 140 | 19 | % | 540 | 769 | (229 | ) | (30 | )% | ||||||||||||||||||
The number of tests we billed for clinical patients at U.S. hospitals and direct billed customers increased 70% during the second quarter of 2016 compared to the same period in 2015 due to an increase in new hospital customers and an increase in tests sourced from existing customers, a direct result of our increased marketing efforts. Net revenue recognized for such tests billed increased 135% during the second quarter of 2016 when compared to the same period in 2015. The increase in net revenue was driven primarily by the increased test volume and an increase in test average selling price estimates used to calculate revenue for billings to non-contracted insurance payors based on our positive collections experience with such payors. Additionally, net favorable changes in estimates of $82,000 were recorded in the second quarter of 2016, related to revenues recorded in prior years. Net revenue of $329,000 in the second quarter of 2015 was reduced by $43,000 of net unfavorable changes in estimates related to revenue recorded in 2014.
Both the net revenue recognized and number of tests reported and billed for UAMS research testing services decreased 90% during the second quarter of 2016 compared to the second quarter of 2015 primarily due to the decrease in funds available at UAMS for such services. As previously reported, we expect continued declining revenue sourced from UAMS testing services.
In our pharmaceutical services business, MyPRS ® will be run across multiple clinical trials in connection with the development of novel treatments for patients with multiple myeloma. We recognized net revenue of $60,000 for services rendered during the second quarter of 2016. We are pursuing additional projects for our pharmaceutical services business.
Cost of Revenue
Cost of revenue was $628,000, or 72% of net revenues, during the second quarter of 2016, a decrease of $50,000, or 7%, compared to $678,000, or 92% of net revenues, during the second quarter of 2015. The decrease in cost of revenue is primarily attributable to an $86,000 decrease in laboratory supply costs, a reflection of lower test volumes from UAMS, offset by a $27,000 increase in royalty expense, related to an increase in revenues, and a $9,000 increase in labor related to re- assignment of laboratory personnel from internal research projects.
Research and Development Expenses
Research and development expenses were $334,000 during the second quarter of 2016, an increase of $140,000, or 72%, when compared to $194,000 during the second quarter of 2015. The increase is primarily attributable to $195,000 increase in sponsored research programs related to research to further validate the use of MyPRS ® in MM and AMG, offset by a $55,000 decrease in our usage of labor, materials and supplies for internal research projects compared to the second quarter of 2015.
Selling and Marketing Expenses
Selling and marketing expenses were $555,000 during the second quarter of 2016, a decrease of $19,000, or 3%, when compared to $574,000 during the second quarter of 2015. The decrease is primarily attributed to a $51,000 decrease in marketing projects and conference expenses, offset by a $32,000 increase in personnel costs related to establishing our medical affairs function.
General and Administrative Expenses
General and administrative expenses were $1.8 million during the second quarter of 2016, an increase of $63,000, or 4%, when compared to the second quarter of 2015. The increase was primarily attributable to: $44,000 in increased personnel costs related to hiring of accounting, internal billing and IT staff; $72,000 in increased expenses related to investor relations and board of directors compensation; and $21,000 in increased expenses related to facility costs and other administrative costs; offset by a $58,000 decrease in stock-based compensation expense and $16,000 in reduced spending related to professional services.
| 20 |
Interest Expense
Interest expense was $23,000 during the second quarter of 2016, compared to $72,000 during the second quarter of 2015. The decrease was primarily due to interest expense recorded in the second quarter of 2015 related to the increase in the principal amount of an unsecured note payable due to a related party. The increase in the principal amount of the note was deferred and was amortized to interest expense over the initial term of the note to June 30, 2015.
First Six Months of 2016 Compared to the First Six Months of 2015
Net Revenue
Our net revenue was $1.7 million during the first six months of 2016, an increase of $314,000, or 23%, compared to $1.4 million during the first six months of 2015. Net revenue and tests billed during the first six months of 2016 and 2015 were as follows:
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| Net Revenue (in 000s) | Tests Billed | |||||||||||||||||||||||||||||||
| Increase (Decrease) | Increase (Decrease) | |||||||||||||||||||||||||||||||
| 2016 | 2015 | $ | % | 2016 | 2015 | # | % | |||||||||||||||||||||||||
| Clinical patients at U.S. hospitals and direct billed customers | $ | 1,547 | $ | 553 | $ | 994 | 180 | % | 965 | 535 | 430 | 80 | % | |||||||||||||||||||
| Research testing services | 80 | 825 | (745 | ) | (90 | )% | 98 | 1,012 | (914 | ) | (90 | )% | ||||||||||||||||||||
| Pharmaceutical services | 65 | — | 65 | 100 | % | 12 | — | 12 | 100 | % | ||||||||||||||||||||||
| Total | $ | 1,692 | $ | 1,378 | $ | 314 | 23 | % | 1,075 | 1,547 | (472 | ) | (31 | )% | ||||||||||||||||||
The number of tests we billed for clinical patients at U.S. hospitals and direct billed customers increased 80% during the first six months of 2016 compared to the same period in 2015 due to an increase in new hospital customers and an increase in tests sourced from existing customers, a direct result of our increased marketing efforts. Net revenue recognized for such tests billed increased 180% during the first six months of 2016 when compared to the same period in 2015. The increase in net revenue was driven primarily by the increased test volume and an increase in test average selling price estimates used to calculate revenue for billings to non-contracted insurance payors based on our positive collections experience with such payors. Additionally, net favorable changes in estimates of $224,000 were recorded in the first six months of 2016, related to revenues recorded in prior years. Net revenue of $553,000 in the first six months of 2015 was reduced by $73,000 of net unfavorable changes in estimates related to revenue recorded in 2014.
Both the net revenue recognized and number of tests reported and billed for UAMS research testing services decreased 90% during the first six months of 2016 compared to the first six months of 2015 primarily due to the decrease in funds available at UAMS for such services. As previously reported, we expect continued declining revenue sourced from UAMS testing services.
In our pharmaceutical services business, MyPRS ® will be run across multiple clinical trials in connection with the development of novel treatments for patients with multiple myeloma. We recognized net revenue of $65,000 for services rendered during the first six months of 2016. We are pursuing additional projects for our pharmaceutical services business.
Cost of Revenue
Cost of revenue was $1.3 million, or 74% of net revenues, during the first six months of 2016, a decrease of $182,000, or 13%, compared to $1.4 million, or 104% of net revenues, during the first six months of 2015. The decrease in cost of revenue is primarily attributable to a decrease of $57,000 of assigned laboratory personnel and $167,000 decrease in laboratory supply costs, a reflection of lower test volumes from UAMS, offset by a $42,000 increase in royalty expense, related to an increase in revenues.
Research and Development Expenses
Research and development expenses were $641,000 during the first six months of 2016, an increase of $348,000, or 119%, when compared to $293,000 during the first six months of 2015. The increase is primarily attributable to a $381,000 increase in sponsored research programs related to research to further validate the use of MyPRS ® in MM and AMG, offset by a $33,000 decrease in our usage of labor, materials and supplies for internal research projects compared to the first six months of 2015.
| 21 |
Selling and Marketing Expenses
Selling and marketing expenses were $1.1 million during the first six months of 2016, an increase of $57,000, or 6%, when compared to $1.0 million during the first six months of 2015. The increase is primarily attributed to a $74,000 increase in personnel costs related to the establishment of our medical affairs function, offset by a $17,000 decrease in marketing projects and conferences expenses.
General and Administrative Expenses
General and administrative expenses were $3.9 million during the first six months of 2016, an increase of $208,000, or 6%, when compared to $3.7 million during the first six months of 2015. The increase was primarily attributable to: $202,000 in increased personnel costs related to hiring of accounting, internal billing and IT staff; $118,000 in increased expenses related to investor relations and board of directors; and $18,000 in expenses related to facility costs and other administrative costs; partially offset by $130,000 in reduced spending related to professional services.
Interest Expense
Interest expense was $46,000 during the first six months of 2016, compared to $94,000 during the first six months of 2015. The decrease was primarily due to interest expense recorded in the second quarter of 2015 related to the increase in the principal amount of an unsecured note payable due to a related party. The increase in the principal amount of the note was deferred and was amortized to interest expense over the initial term of the note to June 30, 2015.
Liquidity and Capital Resources
We had cash and cash equivalents of $6.5 million at June 30, 2016 compared to $10.8 million at December 31, 2015. At June 30, 2016, we had working capital of $5.4 million.
Our existing cash resources will not be sufficient to meet our operating plan for the full 12-month period after the date of this filing. Based on our current plans and available resources, we believe we can maintain our current operations through June 2017. As a result, to continue to fund our ongoing operations beyond June 2017, we would need to (1) raise additional capital through the issuance of equity, debt or other securities, (2) convert our existing debt into equity, (3) enter into strategic partnerships, alliances, collaborations or other similar transactions or (4) a combination thereof.
Due to current market conditions, our current liquidity position and our depressed stock price, we believe it is unlikely that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all, and raise substantial doubt about our ability to continue as a going concern. If we are unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction, we will need to delay or reduce expenses or limit or curtail operations, any of which would have a material adverse effect on our business. Further, if we are unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction on a timely basis and on terms that are acceptable to us, we would also be required to sell or license our assets, sell the Company or otherwise liquidate all or a portion of our assets and/or cease our operations altogether.
We have no material commitments for capital expenditures at this time.
Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we cannot continue as a viable entity, our stockholders might lose some or all of their investment in us.
Operating activities
Cash used by operations during the first six months of 2016 was $4.2 million, compared to $3.3 million during the first six months of 2015.
During the first six months of 2016, the use of cash from changes in operating assets and liabilities of $452,000 includes a $264,000 increase in accounts receivable, which primarily reflects an increase in our net revenue during the first six months of 2016 when compared to the fourth quarter of 2015, an increase in inventory of $26,000 and an increase in prepaid expenses and other current assets of $273,000, partially offset by an increase in accounts payable and accrued liabilities of $111,000.
During the first six months of 2015, the provision of cash from changes in operating assets and liabilities of $303,000 includes a $507,000 decrease in accounts receivable, a $233,000 increase in accounts payable and accrued liabilities, primarily due to higher accrued compensation and offering costs, and a $105,000 reduction in our prepaid expenses and other current assets, partially offset by an increase in inventory of $357,000 and a reduction in our lease termination/abandonment payable of $185,000.
Investing activities
Net cash used by investing activities during the first six months of 2016 and 2015 of $3,000 and $68,000, respectively, were for the purchase of property and equipment.
| 22 |
As of this time, we plan to focus on our growth strategies and do not plan to use a material amount of our cash resources for the purchase of property and equipment during the remainder of 2016.
Financing activities
Net cash used by financing activities during the first six months of 2016 of $98,000 consisted of $56,000 used to repurchase shares from employees to satisfy tax withholding obligations for restricted stock awards and $42,000 for repayment of our capital lease obligation.
Net cash provided by financing activities during the first six months of 2015 of $8.7 million consisted primarily of the net proceeds from our public offering of common stock in February 2015 of $9.1 million, partially offset by $346,000 used to repurchase shares from employees to satisfy tax withholding obligations for restricted stock awards and $36,000 for repayment of our capital lease obligation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this report to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, (1) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial
reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
| 23 |
We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. In addition to the additional risk factor set forth below and other information set forth in this report, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 21, 2016, which could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause operating results to vary significantly from period to period. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
Risks Related to our Financial Condition
We will require, and may not be able to obtain, substantial additional financial resources in order to carry out our planned activities and to continue as a going concern beyond June 2017.
As of June 30, 2016, we had cash and cash equivalents totaling $6.5 million. Our existing cash resources will not be sufficient to meet our operating plan for the full 12-month period after the date of this filing. Based on our current plans and available resources, we believe we can maintain our current operations through June 2017. As a result, to continue to fund our ongoing operations beyond June 2017, we would need to (1) raise additional capital through the issuance of equity, debt or other securities, (2) convert our existing debt into equity, (3) enter into strategic partnerships, alliances, collaborations or other similar transactions or (4) a combination thereof. Due to current market conditions, our current liquidity position and our depressed stock price, we believe it is unlikely that we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all. If we are unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction, we will need to delay or reduce expenses or limit or curtail operations, any of which would have a material adverse effect on our business. Further, if we are unable to raise additional capital or successfully complete a strategic partnership, alliance, collaboration or other similar transaction on a timely basis and on terms that are acceptable to us, we would also be required to sell or license our assets, sell the Company or otherwise liquidate all or a portion of our assets and/or cease our operations altogether. Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we cannot continue as a viable entity, our stockholders might lose some or all of their investment in us.
The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report has been identified.
|
Exhibit Number |
Description of Exhibit | |
| 3.1 | Amended and Restated Bylaws of the Company, as amended and restated on June 21, 2016. | |
| 10.1 | Second Amendment to the Signal Genetics, Inc. 2014 Stock Incentive Plan. | |
| 31.1 | Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended. | |
| 32* | Section 1350 Certification. | |
| 101.INS** | XBRL Instance Document | |
| 101.SCH** | XBRL Taxonomy Extension Schema | |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase |
_______________
| * | This certification is being furnished pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof. |
| ** | In accordance with Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections. |
| 24 |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: August 15, 2016 | SIGNAL GENETICS, INC. | ||
| By: | / s / Samuel D. Riccitelli | ||
|
Samuel D. Riccitelli, President and Chief
Executive Officer |
|||
| By: | / s / Tamara A. Seymour | ||
|
Tamara A. Seymour, Chief Financial Officer
(Principal Financial Officer) |
|||
Exhibit 3.1
AMENDED AND RESTATED BYLAWS
OF
SIGNAL GENETICS, INC.
ARTICLE 1
OFFICES
Section 1.01. Registered Office. The registered office of Signal Genetics, Inc. (hereinafter, the “Corporation”) shall be in the City of Wilmington, County of New Castle, State of Delaware 19810.
Section 1.02. Other Offices . The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of the Corporation may require.
Section 1.03. Books . The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.01. Time and Place of Meetings . All meetings of the stockholders shall be held at such place, if any, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors).
Section 2.02. Annual Meetings . An annual meeting of the stockholders, commencing with the year 2015, shall be held for the election of directors and to transact such other business as may properly be brought before the meeting. Any other proper business may be transacted at the annual meeting. The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board of Directors.
Section 2.03. Special Meetings . Special meetings of the stockholders for any purpose or purposes may be called by the Board of Directors, the Chairman of the Board of Directors or the President of the Corporation, and may not be called by any other person. Business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice. The Board of Directors may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board of Directors. Notwithstanding the foregoing, whenever holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, such holders may call, pursuant to the terms of the resolution or resolutions adopted by the Board of Directors pursuant to Article 4 hereto, special meetings of holders of such Preferred Stock.
Section 2.04. Notice of Meetings and Adjourned Meetings; Waivers of Notice .
(a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting) and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”), the Certificate of Incorporation or these Bylaws, such notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting. Except as otherwise provided herein or permitted by applicable law, notice of stockholders shall be in writing and delivered personally or mailed to the stockholders at their address appearing on the books of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, notice of meetings may be given to stockholders by means of electronic transmission in accordance with applicable law.
| 1 |
(b) Any meeting of the stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, if any. Unless these Bylaws otherwise require, when a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time, place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.
(c) A written waiver of any such notice signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of the meeting shall be bound by the proceedings of the meeting in all respects as if due notice thereof had been given. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.05. Quorum . Unless otherwise provided in the Certificate of Incorporation or these Bylaws, and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have adjourn the meeting in the manner provided in Section 2.04, without notice other than announcement at the meeting, until a quorum shall be present or represented. A quorum once established, shall not be broken by the subsequent withdrawal of enough votes to leave less than a quorum. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Shares of stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation, or any subsidiary of the Corporation, to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
Section 2.06. Voting; Proxies .
(a) Unless otherwise provided in the Certificate of Incorporation and subject to Delaware Law, each stockholder shall be entitled to one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Any share of capital stock of the Corporation held by the Corporation shall have no voting rights. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Subject to the rights of the holders of any series of preferred stock to elect additional directors under specific circumstances, directors shall be elected by a plurality of the votes cast at a meeting of the stockholders by the holders of stock entitled to vote in the election of directors.
(b) Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to a corporate action in writing without a meeting, may authorize another person or persons to act for such stockholder by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, or by proxy sent by cable, telegram or by any means of electronic communication permitted by law, which results in a writing from such stockholder or by his attorney, and delivered to the secretary of the meeting. No proxy shall be voted or acted upon after three (3) years from its date, unless said proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.
(c) Voting at meetings of stockholders need not be by written ballot. Votes may be cast by any stockholder entitled to vote in person or by his proxy. In determining the number of votes cast for or against a proposal or nominee, shares abstaining from voting on a matter (including elections) will not be treated as a vote cast, but will be counted for purposes of determining a quorum. A non-vote by a broker will be counted for purposes of determining a quorum but not for purposes of determining the number of votes cast.
| 2 |
(d) All other elections and questions presented to the stockholders at a meeting at which a quorum is present shall, unless otherwise provided by the Certificate of Incorporation, these Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock of the Corporation which are present in person or by proxy and entitled to vote thereon.
Section 2.07. Inspector of Elections; Opening and Closing the Polls . The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the presiding officer of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by law. The presiding officer of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.
Section 2.08. Written Consent of Stockholders Without a Meeting . Any action to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action to be so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.08, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable law, be given to those stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.
Section 2.09. Organization . At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or in the Chairman's absence or if one shall not have been elected, the director designated by the vote of the majority of the directors present at such meeting, shall act as chairman of, and preside at, the meeting. The Secretary, or in the Secretary's absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 2.10. Order of Business . The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.
| 3 |
Section 2.11. Nomination of Directors . Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 2.11, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 2.11. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the sixtieth (60 th ) day, nor earlier than the close of business on the ninetieth (90 th ) day in advance of the first anniversary of the preceding year's annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation no later than the later of the close of business on the seventieth (70 th ) day prior to the date of the meeting or the close of business on the tenth (10 th ) day following the day on which public announcement of the date of the meeting was made. In no event shall the public announcement of the new meeting date commence a new notice time period (or extend any notice time period). Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder, and of the beneficial owner, if any, on whose behalf the nomination is being made, (ii) the class and number of shares of the Corporation which are owned (beneficially and of record) by such stockholder and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the stockholder’s notice, and a representation that the stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (iii) a description of any agreement, arrangement or understanding with respect to such nomination between or among the stockholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (iv) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into as of the date of the proposing stockholder’s notice, by or on behalf of such stockholder with respect to the Corporation’s securities, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder with respect to the Corporation's securities, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed; (v) a representation that the proposing stockholder is a holder of record of the shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and (vi) a representation whether the proposing stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from the stockholders in support of the nomination. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination that pertains to the nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this bylaw. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 2.11, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11.
| 4 |
Section 2.12. Notice of Business . At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 2.12, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 2.12. In addition, any proposal of business must be a proper matter for stockholder action. For business to be properly brought before a stockholder meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the sixtieth (60 th ) day, nor earlier than the close of business on the ninetieth (90 th ) day in advance of the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation no later than the later of the close of business on the seventieth (70 th ) day prior to the date of the meeting or the close of business on the tenth (10 th ) day following the day on which public announcement of the date of the meeting was made. In no event shall the public announcement of the new meeting date commence a new notice time period (or extend any notice time period). A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and of the beneficial owner, if any, on whose behalf the proposal is being made, (c) the class and number of shares of the Corporation which are owned (beneficially and of record) by such stockholder and owned by the beneficial owner, if any, on whose behalf the proposal is being made, as of the date of the stockholder’s notice, and a representation that the stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (d) a description of any agreement, arrangement or understanding with respect to such nomination between or among the stockholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (e) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into as of the date of the proposing stockholder’s notice, by or on behalf of such stockholder with respect to the Corporation’s securities, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder with respect to the Corporation's securities, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (f) a representation that the proposing stockholder is a holder of record of the shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the business specified in the notice, (g) a representation whether the proposing stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the proposal and/or otherwise to solicit proxies from the stockholders in support of the proposal, (h) any material interest of the stockholder in such business, and (i) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a stockholder meeting except in accordance with the procedures set forth in this Section 2.12. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing, provisions of this Section 2.12, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.12.
| 5 |
Section 2.13. Proxy Rules . The foregoing notice requirements of Section 2.12 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with the applicable rules and regulations promulgated under Regulation 14A under the Securities Exchange Act of 1934 and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.
Section 2.14. Effect of Noncompliance . Notwithstanding anything in these Bylaws to the contrary: (i) no nominations shall be made or business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Article 2, and (ii) unless otherwise required by law, if a stockholder intending to propose business or make nominations at an annual meeting pursuant to this Article 2 does not provide the information required under this Article 2 to the Corporation promptly following the later of the record date or the date notice of the record date is first publicly disclosed, or the proposing stockholder (or a qualified representative of the proposing stockholder) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation. The requirements of this Article 2 shall apply to any business or nominations to be brought before an annual meeting by a stockholder whether such business or nomination are to be included in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act or presented to stockholders by means of an independently financed proxy solicitation. The requirements of this Article 2 are included to provide the Corporation notice of a stockholder’s intention to bring business or nominations before an annual meeting and shall in no event be construed as imposing upon any stockholder the requirement to seek approval from the Corporation as a condition precedent to bringing any such business or making such nominations before an annual meeting.
ARTICLE 3
DIRECTORS
Section 3.01. General Powers . Except as otherwise provided by Delaware Law or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may adopt such rules and procedures, not inconsistent with the Certificate of Incorporation, these Bylaws, Delaware Law or other applicable law as it may deem proper for the conduct of its meetings and the management of the Corporation
| 6 |
Section 3.02. Number, Election and Term of Office. The Board of Directors shall consist of not less than three (3) nor more than eleven (11) directors, with the exact number of directors to be determined from time to time solely by resolution adopted by the affirmative vote of a majority of the entire Board of Directors. Except as otherwise provided in the Certificate of Incorporation, each director shall serve for a term ending on the date of the annual meeting of stockholders next following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director shall hold office until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders.
Section 3.03. Quorum and Manner of Acting . Unless the Certificate of Incorporation or these Bylaws require a greater number, the presence of a majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat shall adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 3.04. Time and Place of Meetings . The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).
Section 3.05. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.07 herein or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.
Section 3.06. Regular Meetings . After the place and time of regular meetings of the Board of Directors shall have been determined and notice thereof shall have been once given to each member of the Board of Directors, regular meetings may be held without further notice being given.
Section 3.07. Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board, President or Secretary on the written request of three or more directors. Notice of special meetings of the Board of Directors shall be given to each director at least three days before the date of the meeting in such manner as is determined by the Board of Directors.
Section 3.08. Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or by applicable law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matter: (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by Delaware Law to be submitted to the stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation. Unless the Board of Directors provides otherwise, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at the meeting at which there is a quorum shall be the act of the Committee. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
| 7 |
Section 3.09. Action by Consent . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions, are filed with the minutes of proceedings of the Board of Directors or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 3.10. Telephonic Meetings . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
Section 3.11. Resignation . Any director may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 3.12. Vacancies . Unless otherwise provided in the Certificate of Incorporation, vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors may be filled solely by the affirmative vote of a majority of the remaining directors then in office (although less than a quorum) or by the sole remaining director. Each director so elected shall hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified or the earlier of such director’s death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the Certificate of Incorporation, when one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such future vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of the other vacancies.
Section 3.13. Removal . No director may be removed from office by the stockholders except for cause with the affirmative vote of the holders of not less than a majority of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, voting together as a single class.
Section 3.14. Compensation . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.
Section 3.15. Preferred Stock Directors . Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filing of vacancies, removal and other features of such directorships shall be governed by the terms of the resolutions applicable thereto adopted by the Board of Directors pursuant to the Certificate of Incorporation, and such directors so elected shall not be subject to the provisions of Sections 3.02, 3.12 and 3.13 of this Article 3 unless otherwise provided therein.
ARTICLE 4
OFFICERS
Section 4.01. Principal Officers . The officers of the Corporation shall be elected by the Board of Directors and shall include a president, a treasurer and a secretary. The Board of Directors, in its discretion, may also elect a chairman (who must be a director), one or more vice chairmen (who must be directors) and one or more vice presidents, assistant treasurers, assistant secretaries and other officers. Any two or more offices may be held by the same person.
(a) President . The President shall have general responsibility for the management and control of the operations of the corporation. The President shall have the power to affix the signature of the Corporation to all contracts that have been authorized by the Board of Directors. The President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree to or as the Board of Directors may from time to time determine.
(b) Treasurer . The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation, the deposit of all moneys and other valuables to the credit of the Corporation in depositories of the Corporation, borrowings and compliance with the provisions of all indentures, agreements and instruments governing such borrowings to which the Corporation is a party, the disbursement of funds of the Corporation and the investment of its funds, and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the President or as the Board of Directors may from time to time determine.
| 8 |
(c) Secretary . The powers and duties of the Secretary are: (i) to act as Secretary at all meetings of the Board of Directors, of the committees of the Board of Directors and of the stockholders and to record the proceedings of such meetings in a book or books to be kept for that purpose; (ii) to see that all notices required to be given by the Corporation are duly given and served; (iii) to act as custodian of the seal of the Corporation and affix the seal or cause it to be affixed to all certificates of stock of the Corporation and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws; (iv) to have charge of the books, records and papers of the Corporation and see that the reports, statements and other documents required by law to be kept and filed are properly kept and filed; and (v) to perform all of the duties incident to the office of Secretary. The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the President or as the Board of Directors may from time to time determine.
Section 4.02. Term of Office; Vacancy; and Remuneration . Each officer shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine. The remuneration of all officers of the Corporation shall be fixed by the Board of Directors.
Section 4.03. Subordinate Officers . The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees.
Section 4.04. Removal . Except as otherwise permitted with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by the majority vote of the members of the Board of Directors then in office.
Section 4.05. Resignations . Any officer may resign at any time by giving written notice to the Board of Directors (or to a principal officer if the Board of Directors has delegated to such principal officer the power to appoint and to remove such officer) of such person’s resignation. The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 4.06. Powers and Duties . The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.
ARTICLE 5
CAPITAL STOCK
Section 5.01. Certificates for Stock; Uncertificated Shares . The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares that may be evidenced by a book entry system maintained by the registrar of such stock. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of shares represented by certificates of the same class and series shall be identical. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an assistant Secretary of such Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. A Corporation shall not have power to issue a certificate in bearer form.
Section 5.02. Transfer of Shares . Shares of the stock of the Corporation may be transferred on the record of stockholders of the Corporation by the holder thereof or by such holder’s duly authorized attorney upon surrender of a certificate therefor properly endorsed or upon receipt of proper transfer instructions from the registered holder of uncertificated shares or by such holder’s duly authorized attorney and upon compliance with appropriate procedures for transferring shares in uncertificated form, unless waived by the Corporation.
| 9 |
Section 5.03. Authority for Additional Rules Regarding Transfer. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of the stock of the Corporation, as well as for the issuance of new certificates in lieu of those which may be lost or destroyed, and may require of any stockholder requesting replacement of lost or destroyed certificates, bond in such amount and in such form as they may deem expedient to indemnify the Corporation, and/or the transfer agents, and/or the registrars of its stock against any claims arising in connection therewith.
Section 5.04. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
ARTICLE 6
INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
Section 6.01. Right to Indemnification . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation.
Section 6.02. Prepayment of Expenses . The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article VI or otherwise.
Section 6.03. Nonexclusivity of Rights . The rights conferred on any Covered Person by this Article VI shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 6.04. Other Sources . The Corporation’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other Corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
Section 6.05. Amendment or Repeal . Any right to indemnification or to advancement of expenses of any Covered Person arising hereunder shall not be eliminated or impaired by an amendment to or repeal of these Bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.
Section 6.06. Other Indemnification and Advancement of Expenses . This Article VI shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
| 10 |
ARTICLE 7
GENERAL PROVISIONS
Section 7.01. Fixing the Record Date .
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes the record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided that the Board of Directors may fix a new record date for the determination of stockholders entitled to vote at the adjourned meeting and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for the determination of stockholders entitled to vote therewith at the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 7.02. Dividends . Subject to limitations contained in Delaware Law and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital stock of the Corporation.
Section 7.03. Year . The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year. The fiscal year of the Corporation may be changed by the Board of Directors.
Section 7.04. Corporate Seal . The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 7.05. Voting of Stock Owned by the Corporation . The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any Corporation (except this Corporation) in which the Corporation may hold stock.
Section 7.06. Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.
Section 7.07. Amendments . These Bylaws or any of them, may be altered, amended or repealed, or new Bylaws may be made, by the stockholders entitled to vote thereon at any annual or special meeting thereof or by the Board of Directors. Unless a higher percentage is required by the Certificate of Incorporation as to any matter which is the subject of these Bylaws, all such amendments must be approved by the affirmative vote of the holders of the majority of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, voting together as a single class or by a majority of the Board of Directors.
| 11 |
ARTICLE 8
FORUM FOR ADJUDICATION OF DISPUTES
Section 8.01. Forum for Adjudication of Disputes . Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of Delaware Law, the certificate of incorporation or the bylaws of the Corporation, or (d) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 8.01.
12
Exhibit 10.1
Second AMENDMENT
TO
THE Signal Genetics, Inc. 2014 Stock Incentive Plan
WHEREAS, Signal Genetics, Inc., a Delaware corporation (the “ Company ”) established and sponsors the Signal Genetics, Inc. 2014 Stock Incentive Plan, effective as of June 17, 2014 (the “ Plan ”);
WHEREAS, the Company amended the Plan on June 18, 2015 to increase the shares of Common Stock reserved for issuance under the Plan;
WHEREAS, pursuant to section 7(g) of the Plan, the Board of Directors of the Company (the “ Board ”) has reserved the right to amend the Plan at any time;
WHEREAS, the Financial Accounting Standards Board issued Accounting Standards Update 2016-09 that modifies Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“Topic 718”), now permitting an employer to withhold shares to cover taxes upon exercise or settlement or an award up to the maximum statutory tax withholding rate without the award being classified as a liability for accounting purposes, whereas currently under Topic 718, an award must be classified and accounted for as a liability if shares are withheld (or may be withheld at the employee’s election) to cover taxes in excess of the minimum statutory tax withholding rate; and
WHEREAS, the Board believes it to be in the best interests of the Corporation and its shareholders to adopt the Second Amendment to permit the Corporation to withhold shares of Common Stock underlying Awards up to the maximum stated tax withholding rate, provided that shares of common stock withheld in excess of the minimum statutory tax withholding obligation will not return to the Plan’s share reserve.
NOW, THEREFORE, pursuant to the power reserved by section 7(g) of the Plan, the Plan be and hereby is amended in the following particulars:
| 1. |
By substituting the following for section 7(b) of the Plan in its entirety:
|
“(b) Withholding of Taxes . Grantees and holders of Awards shall pay to the Company or its Affiliate, or make provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Company or its Affiliate may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Company or its Affiliate of such tax obligations is made in shares of Common Stock, such shares shall be valued at Fair Market Value on the applicable date for such purposes and the number of shares of Common Stock that may be so withheld may not exceed the maximum statutory tax withholding rate provided that the number of shares of Common Stock that may revert to the Plan to be available for further Awards under Section 4(a) of the Plan shall not exceed in amount the minimum statutory tax withholding obligation.”
IN WITNESS WHEREOF, this First Amendment, having been first duly authorized, approved and adopted by the Board of Directors of the Company on June 23, 2016 is hereby executed below by a duly authorized officer of the Company on this 23rd day of June, 2016.
| Signal Genetics, Inc. | |||
| By: | /s/ Tamara A. Seymour | ||
| Its: | Chief Financial Officer | ||
Exhibit 31.1
CERTIFICATION
I, Samuel D. Riccitelli, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Signal Genetics, Inc., a Delaware corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: August 15, 2016 | /s/ Samuel D. Riccitelli |
|
Samuel D. Riccitelli President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Tamara A. Seymour, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Signal Genetics, Inc., a Delaware corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: August 15, 2016 | /s/ Tamara A. Seymour | |
|
Tamara A. Seymour Chief Financial Officer (Principal Financial Officer) |
Exhibit 32
SECTION 1350 CERTIFICATION
Each of the undersigned, Samuel D. Riccitelli, President and Chief Executive Officer of Signal Genetics, Inc., a Delaware corporation (the “Company”), and Tamara A. Seymour, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge (1) the quarterly report on Form 10-Q of the Company for the quarterly period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Samuel D. Riccitelli | ||
| Name: Samuel D. Riccitelli | ||
| Title: President and Chief Executive Officer (Principal Executive Officer) | ||
| Dated: August 15, 2016 | ||
| /s/ Tamara A. Seymour | ||
| Name: Tamara A. Seymour | ||
| Title: Chief Financial Officer (Principal Financial Officer) | ||
| Dated: August 15, 2016 |
This certification accompanies and is being “furnished” with this Report, shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.