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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
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04-3462475
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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¨
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Accelerated filer
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x
|
|
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|
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
|
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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September 30,
2015 |
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December 31,
2014 |
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
19,917,926
|
|
|
$
|
25,554,064
|
|
Accounts receivable, net of allowance for doubtful accounts
|
5,165,093
|
|
|
5,028,620
|
|
||
Other current assets
|
1,540,501
|
|
|
1,172,750
|
|
||
Total current assets
|
26,623,520
|
|
|
31,755,434
|
|
||
FIXED ASSETS, net of accumulated depreciation
|
3,778,605
|
|
|
4,310,126
|
|
||
OTHER ASSETS
|
|
|
|
||||
Restricted cash
|
300,000
|
|
|
6,300,000
|
|
||
Patents
|
585,259
|
|
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502,767
|
|
||
Investment in joint venture
|
300,225
|
|
|
1,047,744
|
|
||
Goodwill
|
3,187,495
|
|
|
3,187,495
|
|
||
Deposit for acquisition
|
880,000
|
|
|
—
|
|
||
Other
|
324,641
|
|
|
1,564
|
|
||
Total other assets
|
5,577,620
|
|
|
11,039,570
|
|
||
Total Assets
|
$
|
35,979,745
|
|
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$
|
47,105,130
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
CURRENT LIABILITIES
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
4,437,373
|
|
|
$
|
3,762,567
|
|
Obligations under capital leases, current portion
|
61,079
|
|
|
58,950
|
|
||
Deferred revenue
|
1,173,128
|
|
|
544,446
|
|
||
Bank term note, current portion
|
833,333
|
|
|
—
|
|
||
Total current liabilities
|
6,504,913
|
|
|
4,365,963
|
|
||
Obligations under capital leases
|
254,021
|
|
|
300,385
|
|
||
Deferred rent payable and other
|
289,319
|
|
|
347,840
|
|
||
Line of credit
|
—
|
|
|
6,000,000
|
|
||
Warrant liability
|
34,000
|
|
|
52,000
|
|
||
Acquisition note payable
|
657,744
|
|
|
560,341
|
|
||
Deferred revenue, long-term
|
782,818
|
|
|
924,850
|
|
||
Bank term note
|
5,138,783
|
|
|
—
|
|
||
Total liabilities
|
13,661,598
|
|
|
12,551,379
|
|
||
STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Preferred stock, authorized 9,764,000 shares, $0.0001 par value, none issued
|
—
|
|
|
—
|
|
||
Common stock, authorized 100,000,000 shares, $0.0001 par value, 9,861,340 and 9,821,169 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
|
986
|
|
|
982
|
|
||
Additional paid-in capital
|
114,754,824
|
|
|
112,520,268
|
|
||
Accumulated (deficit)
|
(92,437,663
|
)
|
|
(77,967,499
|
)
|
||
Total Stockholders’ Equity
|
22,318,147
|
|
|
34,553,751
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
35,979,745
|
|
|
$
|
47,105,130
|
|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenue
|
$
|
4,000,332
|
|
|
$
|
3,221,850
|
|
|
$
|
12,555,806
|
|
|
$
|
6,163,895
|
|
Cost of revenues
|
3,103,227
|
|
|
2,565,715
|
|
|
9,342,399
|
|
|
5,358,872
|
|
||||
Gross profit
|
897,105
|
|
|
656,135
|
|
|
3,213,407
|
|
|
805,023
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
1,801,813
|
|
|
1,390,189
|
|
|
4,335,235
|
|
|
3,092,733
|
|
||||
General and administrative
|
3,487,242
|
|
|
3,104,100
|
|
|
9,535,723
|
|
|
8,230,966
|
|
||||
Sales and marketing
|
1,242,803
|
|
|
1,070,531
|
|
|
3,543,047
|
|
|
2,737,967
|
|
||||
Total operating expenses
|
6,531,858
|
|
|
5,564,820
|
|
|
17,414,005
|
|
|
14,061,666
|
|
||||
Loss from operations
|
(5,634,753
|
)
|
|
(4,908,685
|
)
|
|
(14,200,598
|
)
|
|
(13,256,643
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(111,620
|
)
|
|
(36,166
|
)
|
|
(227,140
|
)
|
|
(408,087
|
)
|
||||
Interest income
|
4,906
|
|
|
18,789
|
|
|
30,288
|
|
|
57,130
|
|
||||
Change in fair value of acquisition note payable
|
315,453
|
|
|
—
|
|
|
(90,714
|
)
|
|
—
|
|
||||
Change in fair value of warrant liability
|
214,000
|
|
|
129,000
|
|
|
18,000
|
|
|
324,000
|
|
||||
Total other income (expense)
|
422,739
|
|
|
111,623
|
|
|
(269,566
|
)
|
|
(26,957
|
)
|
||||
Loss before income taxes
|
(5,212,014
|
)
|
|
(4,797,062
|
)
|
|
(14,470,164
|
)
|
|
(13,283,600
|
)
|
||||
Income tax provision (benefit)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,813,941
|
)
|
||||
Net (loss)
|
$
|
(5,212,014
|
)
|
|
$
|
(4,797,062
|
)
|
|
$
|
(14,470,164
|
)
|
|
$
|
(11,469,659
|
)
|
Basic net (loss) per share
|
$
|
(0.54
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(1.49
|
)
|
|
$
|
(1.22
|
)
|
Diluted net (loss) per share
|
$
|
(0.56
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.49
|
)
|
|
$
|
(1.25
|
)
|
Basic Weighted-Average Shares Outstanding
|
9,726,067
|
|
|
9,575,789
|
|
|
9,714,824
|
|
|
9,386,613
|
|
||||
Diluted Weighted-Average Shares Outstanding
|
9,727,597
|
|
|
9,575,789
|
|
|
9,716,214
|
|
|
9,403,245
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net (loss)
|
$
|
(14,470,164
|
)
|
|
$
|
(11,469,659
|
)
|
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
|
|
|
|
||||
Depreciation
|
971,192
|
|
|
487,656
|
|
||
Amortization
|
26,177
|
|
|
20,146
|
|
||
Provision for bad debts
|
212,914
|
|
|
—
|
|
||
Equity-based consulting and compensation expenses
|
2,177,554
|
|
|
2,129,880
|
|
||
Change in fair value of acquisition note payable
|
90,714
|
|
|
—
|
|
||
Change in fair value of Gentris contingent consideration
|
(162,000
|
)
|
|
—
|
|
||
Change in fair value of warrant liability
|
(18,000
|
)
|
|
(324,000
|
)
|
||
Amortization of loan guarantee fees, financing fees and debt issuance costs
|
4,960
|
|
|
310,500
|
|
||
Loss in equity method investment
|
747,519
|
|
|
659,426
|
|
||
Changes in:
|
|
|
|
||||
Accounts receivable
|
(349,387
|
)
|
|
(521,429
|
)
|
||
Other current assets
|
(367,751
|
)
|
|
(169,940
|
)
|
||
Other non-current assets
|
(85,856
|
)
|
|
—
|
|
||
Accounts payable, accrued expenses and deferred revenue
|
1,330,145
|
|
|
985,644
|
|
||
Deferred rent and other
|
(58,521
|
)
|
|
(18,050
|
)
|
||
Net cash (used in) operating activities
|
(9,950,504
|
)
|
|
(7,909,826
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of fixed assets
|
(439,671
|
)
|
|
(944,423
|
)
|
||
Decrease (increase) in restricted cash
|
6,000,000
|
|
|
(6,000,000
|
)
|
||
Patent costs
|
(108,669
|
)
|
|
(95,408
|
)
|
||
Investment in JV
|
—
|
|
|
(1,000,000
|
)
|
||
Deposit for acquisition of Response Genetics
|
(880,000
|
)
|
|
—
|
|
||
Cash used in acquisition of Gentris, net of cash received
|
—
|
|
|
(3,180,930
|
)
|
||
Cash from acquisition of BioServe
|
—
|
|
|
311,264
|
|
||
Net cash provided by (used in) investing activities
|
4,571,660
|
|
|
(10,909,497
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Principal payments on capital lease obligations
|
(44,235
|
)
|
|
(21,554
|
)
|
||
Payments for deferred equity offering costs
|
(237,221
|
)
|
|
—
|
|
||
Proceeds from warrant exercises
|
—
|
|
|
178,102
|
|
||
Proceeds from option exercises
|
23,480
|
|
|
79,018
|
|
||
Proceeds from offering of common stock, net of offering costs
|
33,526
|
|
|
—
|
|
||
Principal payments on notes payable
|
—
|
|
|
(127,532
|
)
|
||
Payment of debt issuance costs
|
(32,844
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
(257,294
|
)
|
|
108,034
|
|
||
Net (decrease) in cash and cash equivalents
|
(5,636,138
|
)
|
|
(18,711,289
|
)
|
||
CASH AND CASH EQUIVALENTS
|
|
|
|
||||
Beginning
|
25,554,064
|
|
|
49,459,564
|
|
||
Ending
|
$
|
19,917,926
|
|
|
$
|
30,748,275
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURE
|
|
|
|
||||
Cash paid for interest
|
$
|
157,603
|
|
|
$
|
92,692
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
||||
Fixed assets acquired through capital lease arrangements
|
$
|
—
|
|
|
40,922
|
|
|
Cashless exercise of derivative warrants
|
—
|
|
|
125,000
|
|
||
Value of shares issued as partial consideration of Gentris and BioServe
|
—
|
|
|
1,515,992
|
|
||
Net tangible assets acquired via acquisition
|
—
|
|
|
1,255,084
|
|
|
Amount
|
||
Accounts receivable
|
$
|
151,002
|
|
Other current assets
|
102,064
|
|
|
Fixed assets
|
488,481
|
|
|
Other assets
|
378,440
|
|
|
Goodwill
|
734,925
|
|
|
Current liabilities
|
(758,614
|
)
|
|
Other liabilities
|
(22,049
|
)
|
|
Total Purchase Price
|
$
|
1,074,249
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
September 30, 2014
|
|
September 30, 2014
|
||||
Revenue
|
$
|
3,493,345
|
|
|
$
|
10,329,910
|
|
Net loss
|
(6,039,858
|
)
|
|
(13,325,068
|
)
|
||
|
|
|
|
|
|
||
Basic net loss per share
|
$
|
(0.63
|
)
|
|
$
|
(1.40
|
)
|
Diluted net loss per share
|
(0.64
|
)
|
|
(1.43
|
)
|
|
Amount
|
||
Accounts receivable
|
$
|
350,000
|
|
Prepaid expenses and other current assets
|
500,000
|
|
|
Property and equipment
|
1,000,000
|
|
|
Intangible assets
|
550,000
|
|
|
Goodwill
|
11,550,000
|
|
|
Accrued expenses
|
(425,000
|
)
|
|
Obligations under capital leases
|
(125,000
|
)
|
|
Total Purchase Price
|
$
|
13,400,000
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenue
|
$
|
6,879,587
|
|
|
$
|
7,686,841
|
|
|
$
|
23,043,458
|
|
|
$
|
18,805,055
|
|
Net loss
|
(10,353,822
|
)
|
|
(8,181,903
|
)
|
|
(27,522,585
|
)
|
|
(21,450,482
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic net loss per share
|
$
|
(0.98
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(2.62
|
)
|
|
$
|
(2.11
|
)
|
Diluted net loss per share
|
(1.00
|
)
|
|
(0.80
|
)
|
|
(2.62
|
)
|
|
(2.14
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Biopharma Services
|
$
|
2,608,427
|
|
|
$
|
1,930,799
|
|
|
8,614,441
|
|
|
$
|
2,830,687
|
|
|
Clinical Services
|
1,149,241
|
|
|
1,237,831
|
|
|
3,273,585
|
|
|
3,279,988
|
|
||||
Discovery Services
|
242,664
|
|
|
53,220
|
|
|
667,780
|
|
|
53,220
|
|
||||
|
$
|
4,000,332
|
|
|
$
|
3,221,850
|
|
|
$
|
12,555,806
|
|
|
$
|
6,163,895
|
|
|
September 30,
2015 |
|
December 31,
2014 |
||||
Biopharma Services
|
$
|
2,879,064
|
|
|
$
|
3,203,335
|
|
Clinical Services
|
2,401,775
|
|
|
1,925,176
|
|
||
Discovery Services
|
348,344
|
|
|
151,285
|
|
||
Allowance for doubtful accounts
|
(464,090
|
)
|
|
(251,176
|
)
|
||
|
$
|
5,165,093
|
|
|
$
|
5,028,620
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Medicare
|
12%
|
|
9%
|
|
8%
|
|
13%
|
Other insurers
|
7%
|
|
14%
|
|
7%
|
|
21%
|
Other healthcare facilities
|
9%
|
|
15%
|
|
8%
|
|
19%
|
|
28%
|
|
38%
|
|
23%
|
|
53%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net (loss) for basic earnings per share
|
$
|
(5,212,014
|
)
|
|
$
|
(4,797,062
|
)
|
|
$
|
(14,470,164
|
)
|
|
$
|
(11,469,659
|
)
|
Change in fair value of warrant liability
|
214,000
|
|
|
129,000
|
|
|
18,000
|
|
|
324,000
|
|
||||
Net (loss) for diluted earnings per share
|
$
|
(5,426,014
|
)
|
|
$
|
(4,926,062
|
)
|
|
$
|
(14,488,164
|
)
|
|
$
|
(11,793,659
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average basic common shares outstanding
|
9,726,067
|
|
|
9,575,789
|
|
|
9,714,824
|
|
|
9,386,613
|
|
||||
Assumed conversion of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Common stock purchase warrants
|
1,530
|
|
|
—
|
|
|
1,390
|
|
|
16,632
|
|
||||
Potentially dilutive common shares
|
1,530
|
|
|
—
|
|
|
1,390
|
|
|
16,632
|
|
||||
Denominator for diluted earnings per share – adjusted weighted-average shares
|
9,727,597
|
|
|
9,575,789
|
|
|
9,716,214
|
|
|
9,403,245
|
|
||||
Basic net (loss) per share
|
$
|
(0.54
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(1.49
|
)
|
|
$
|
(1.22
|
)
|
Diluted net (loss) per share
|
$
|
(0.56
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(1.49
|
)
|
|
$
|
(1.25
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Common stock purchase warrants
|
1,041,725
|
|
|
1,531,696
|
|
|
1,041,725
|
|
|
1,531,696
|
|
Stock options
|
2,008,466
|
|
|
1,461,724
|
|
|
2,008,466
|
|
|
1,461,724
|
|
Restricted shares of common stock
|
132,167
|
|
|
105,833
|
|
|
132,167
|
|
|
105,833
|
|
|
3,182,358
|
|
|
3,099,253
|
|
|
3,182,358
|
|
|
3,099,253
|
|
|
September 30,
2015 |
||
Term Note, principal balance
|
$
|
6,000,000
|
|
Less unamortized debt issuance costs
|
27,884
|
|
|
Term Note, net
|
5,972,116
|
|
|
Less current maturities
|
833,333
|
|
|
Long-term portion
|
$
|
5,138,783
|
|
|
|
|
Options Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
|
Aggregate
Intrinsic
Value
|
|||||||
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
||||||||
Outstanding January 1, 2015
|
1,839,458
|
|
|
$
|
10.58
|
|
|
8.49
|
|
$
|
618,250
|
|
Granted
|
292,150
|
|
|
9.91
|
|
|
|
|
|
|||
Exercised
|
(4,371
|
)
|
|
5.37
|
|
|
|
|
|
|||
Canceled or expired
|
(118,771
|
)
|
|
9.63
|
|
|
|
|
|
|||
Outstanding September 30, 2015
|
2,008,466
|
|
|
$
|
10.55
|
|
|
7.93
|
|
$
|
1,313,377
|
|
Exercisable September 30, 2015
|
881,027
|
|
|
$
|
9.89
|
|
|
6.66
|
|
$
|
862,492
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Volatility
|
55.71
|
%
|
|
75.02
|
%
|
|
61.16
|
%
|
|
75.04
|
%
|
Risk free interest rate
|
1.63
|
%
|
|
2.02
|
%
|
|
1.65
|
%
|
|
1.84
|
%
|
Dividend yield
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Term (years)
|
6.16
|
|
|
6.29
|
|
|
6.15
|
|
|
6.10
|
|
Weighted-average fair value of options granted during the period
|
5.41
|
|
|
6.13
|
|
|
5.65
|
|
|
6.86
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Volatility
|
69.56
|
%
|
|
71.30
|
%
|
|
69.97
|
%
|
|
71.87
|
%
|
Risk free interest rate
|
2.02
|
%
|
|
2.43
|
%
|
|
2.11
|
%
|
|
2.53
|
%
|
Dividend yield
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
Term (years)
|
8.58
|
|
|
9.58
|
|
|
8.84
|
|
|
9.79
|
|
|
Non-vested Restricted Stock Awards
|
|||||
|
Number of
Shares |
|
Weighted-Average Grant Date Fair Value
|
|||
Non-vested at January 1, 2015
|
132,500
|
|
|
$
|
8.14
|
|
Granted
|
43,000
|
|
|
9.70
|
|
|
Vested
|
(33,333
|
)
|
|
9.27
|
|
|
Canceled
|
(10,000
|
)
|
|
$
|
8.42
|
|
Non-vested at September 30, 2015
|
132,167
|
|
|
$
|
8.36
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Cost of revenues
|
$
|
59,081
|
|
|
$
|
26,200
|
|
|
$
|
163,006
|
|
|
$
|
67,109
|
|
Research and development
|
92,726
|
|
|
188,633
|
|
|
316,306
|
|
|
345,803
|
|
||||
General and administrative
|
530,301
|
|
|
593,715
|
|
|
1,585,869
|
|
|
1,615,359
|
|
||||
Sales and marketing
|
41,820
|
|
|
27,551
|
|
|
112,373
|
|
|
101,609
|
|
||||
Total stock-based compensation
|
$
|
723,928
|
|
|
$
|
836,099
|
|
|
$
|
2,177,554
|
|
|
$
|
2,129,880
|
|
Issued With / For
|
Exercise
Price |
|
Warrants
Outstanding January 1, 2015 |
|
2015 Warrants Expired
|
|
Warrants Outstanding September 30, 2015
|
|||||
Non-Derivative Warrants:
|
|
|
|
|
|
|
|
|||||
Financing
|
$
|
10.00
|
|
|
243,334
|
|
|
—
|
|
|
243,334
|
|
Financing
|
15.00
|
|
|
436,079
|
|
|
—
|
|
|
436,079
|
|
|
Debt guarantee
|
15.00
|
|
|
352,312
|
|
|
—
|
|
|
352,312
|
|
|
Consulting
|
10.00
|
|
|
29,138
|
|
|
(19,138
|
)
|
|
10,000
|
|
|
Total non-derivative warrants
|
$
|
13.78
|
|
B
|
1,060,863
|
|
|
(19,138
|
)
|
|
1,041,725
|
|
Derivative Warrants:
|
|
|
|
|
|
|
|
|||||
Financing
|
$
|
10.00
|
|
A
|
60,000
|
|
|
—
|
|
|
60,000
|
|
Series B pref. stock
|
10.00
|
|
A
|
15,015
|
|
|
—
|
|
|
15,015
|
|
|
Consulting
|
10.00
|
|
A
|
200
|
|
|
—
|
|
|
200
|
|
|
Total derivative warrants
|
10.00
|
|
B
|
75,215
|
|
|
—
|
|
|
75,215
|
|
|
Total
|
$
|
13.53
|
|
B
|
1,136,078
|
|
|
(19,138
|
)
|
|
1,116,940
|
|
A
|
These warrants are subject to fair value accounting and contain an exercise price adjustment feature. See Note 8. Assuming the offering described in Note 14 closes, the exercise price of these warrants will adjust to
$4.00
on November 12, 2015.
|
B
|
Weighted-average exercise prices are as of
September 30, 2015
.
|
Issued with/for
|
Fair value of
warrants outstanding as of December 31, 2014 |
|
Change in
fair value of warrants |
|
Fair value of
warrants outstanding as of September 30, 2015 |
||||||
Series B preferred stock
|
$
|
8,000
|
|
|
$
|
(6,000
|
)
|
|
$
|
2,000
|
|
Financing
|
44,000
|
|
|
(12,000
|
)
|
|
32,000
|
|
|||
|
$
|
52,000
|
|
|
$
|
(18,000
|
)
|
|
$
|
34,000
|
|
Issued with Debt Guarantee
|
Exercised During the Nine Months Ended September 30, 2014
|
||
Exercise price
|
$
|
10.00
|
|
Expected life (years)
|
0.60
|
|
|
Expected volatility
|
49.01
|
%
|
|
Risk-free interest rate
|
0.08
|
%
|
|
Expected dividend yield
|
—
|
%
|
Issued with Series B Preferred Shares
|
|
As of September 30, 2015
|
|
As of December 31, 2014
|
|
Exercised During the Nine Months Ended September 30, 2014
|
||||||
Exercise price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Expected life (years)
|
|
0.13
|
|
|
0.88
|
|
|
1.72
|
|
|||
Expected volatility
|
|
57.27
|
%
|
|
49.95
|
%
|
|
46.60
|
%
|
|||
Risk-free interest rate
|
|
—
|
%
|
|
0.25
|
%
|
|
0.33
|
%
|
|||
Expected dividend yield
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Issued for Consulting
|
As of September 30, 2015
|
|
As of December 31, 2014
|
||||
Exercise price
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Expected life (years)
|
0.39
|
|
|
1.14
|
|
||
Expected volatility
|
49.38
|
%
|
|
49.25
|
%
|
||
Risk-free interest rate
|
0.08
|
%
|
|
0.25
|
%
|
||
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
Issued with Financing
|
|
As of September 30, 2015
|
|
As of December 31, 2014
|
|
Exercised During the Nine Months Ended September 30, 2014
|
||||||
Exercise price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
$
|
13.34
|
|
Expected life (years)
|
|
0.48
|
|
|
1.23
|
|
|
9.78
|
|
|||
Expected volatility
|
|
49.99
|
%
|
|
50.23
|
%
|
|
74.70
|
%
|
|||
Risk-free interest rate
|
|
0.08
|
%
|
|
0.25
|
%
|
|
1.95
|
%
|
|||
Expected dividend yield
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
September 30, 2015
|
||||||||||||||
|
Total
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Warrant liability
|
$
|
34,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,000
|
|
Gentris contingent consideration
|
45,000
|
|
|
—
|
|
|
—
|
|
|
45,000
|
|
||||
Note payable to VenturEast
|
626,101
|
|
|
—
|
|
|
—
|
|
|
626,101
|
|
||||
|
$
|
705,101
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
705,101
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
||||||||||||||
|
Total
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Warrant liability
|
$
|
52,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,000
|
|
Gentris contingent consideration
|
293,400
|
|
|
—
|
|
|
—
|
|
|
293,400
|
|
||||
Note payable to VenturEast
|
534,828
|
|
|
—
|
|
|
—
|
|
|
534,828
|
|
||||
|
$
|
880,228
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
880,228
|
|
|
|
|
|
|
|
|
|
|
Note Payable
|
|
Gentris Contingent
|
||||
|
to VenturEast
|
|
Consideration
|
||||
Fair value at December 31, 2014
|
$
|
534,828
|
|
|
$
|
293,400
|
|
Change in fair value
|
91,273
|
|
|
(162,000
|
)
|
||
Partial settlement of liability
|
$
|
—
|
|
|
(86,400
|
)
|
|
Fair value at September 30, 2015
|
$
|
626,101
|
|
|
$
|
45,000
|
|
•
|
Enable us to have a West Coast facility by adding Response Genetics' Los Angeles, California-based laboratory.
We assumed the lease of Response Genetics' approximately 27,000 square foot, CLIA-certified and CAP-accredited laboratory located in Los Angeles, California, which has performed clinical oncology diagnostic testing for over 3,000 unique physicians, laboratories and hospital sites across the United States.
|
•
|
Expand the size and geographic presence of our clinical sales force.
Through this acquisition, we added 9 salespeople and increased our geographic presence, particularly in the Western and Southeastern United States. We expect that our joint clinical sales force will have national reach and be among the largest oncology-focused clinical sales groups in the molecular diagnostics field.
|
•
|
Acquire Response Genetics' Tissue of Origin® (TOO®) test, which we believe is the only FDA-cleared and Medicare-reimbursed test for identifying the primary site of otherwise unclassifiable malignant tumors.
TOO® is a gene expression-based microarray that targets over 2,000 genetic sites to classify the originating tissue type of cancerous cells. TOO® will represent our first test with FDA clearance.
|
•
|
Gain expertise in solid tumor cancer types and expand our portfolio of proprietary genomic tests and services.
Response Genetics is a leader in solid tumor molecular diagnostics, particularly in lung cancer, colorectal cancer and melanoma, with these tests assisting clinical decision-making based on a patient's genomic information. Solid tumors account for eight of the ten most common cancer types in the United States, impacting nearly 1.2 million patient lives annually. The acquisition provides us with the immediate opportunity to offer our existing customers an expanded test menu in solid tumors as well as the TOO® test. We expect to start marketing the combined entity's comprehensive portfolio of tests and services immediately.
|
•
|
Expand our biopharma customer base and our biopharma service offering.
Through this acquisition, we expanded our biopharma customer base and contracts, including the multi-year ALCHEMIST Trial contract with the National Cancer Institute, or NCI, focused on biomarker-based treatment for lung cancer, which was awarded to Response Genetics in 2014. Further, this acquisition provides us with an opportunity to capitalize on our expanded portfolio of oncology diagnostics by upselling to our and Response Genetics' existing biopharma customers.
|
•
|
Expand our collaborative relationships with leading research centers and research and development of next-generation sequencing panels.
Through the acquisition, we acquired the rights to offer and market a lung cancer next-generation sequencing panel developed by leading genomic scientists and clinicians at Knight Laboratories at Oregon Health & Science University.
|
|
Three Months Ended September 30,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
Revenue
|
$
|
4,000
|
|
|
$
|
3,222
|
|
|
$
|
778
|
|
|
24
|
%
|
Cost of revenues
|
3,103
|
|
|
2,566
|
|
|
537
|
|
|
21
|
%
|
|||
Research and development expenses
|
1,802
|
|
|
1,390
|
|
|
412
|
|
|
30
|
%
|
|||
General and administrative expenses
|
3,487
|
|
|
3,104
|
|
|
383
|
|
|
12
|
%
|
|||
Sales and marketing expenses
|
1,243
|
|
|
1,071
|
|
|
172
|
|
|
16
|
%
|
|||
Loss from operations
|
(5,635
|
)
|
|
(4,909
|
)
|
|
(726
|
)
|
|
15
|
%
|
|||
Interest income (expense)
|
(106
|
)
|
|
(17
|
)
|
|
(89
|
)
|
|
524
|
%
|
|||
Change in fair value of acquisition note payable
|
315
|
|
|
—
|
|
|
315
|
|
|
100
|
%
|
|||
Change in fair value of warrant liability
|
214
|
|
|
129
|
|
|
85
|
|
|
66
|
%
|
|||
Loss before income taxes
|
(5,212
|
)
|
|
(4,797
|
)
|
|
(415
|
)
|
|
9
|
%
|
|||
Income tax provision (benefit)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|||
Net (loss)
|
$
|
(5,212
|
)
|
|
$
|
(4,797
|
)
|
|
$
|
(415
|
)
|
|
9
|
%
|
|
Three Months Ended September 30,
|
|
Change
|
|||||||||||||||||
|
2015
|
|
2014
|
|
|
|
|
|||||||||||||
(dollars in thousands)
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|||||||||
Biopharma Services
|
$
|
2,608
|
|
|
65
|
%
|
|
$
|
1,931
|
|
|
60
|
%
|
|
$
|
677
|
|
|
35
|
%
|
Clinical Services
|
1,149
|
|
|
29
|
%
|
|
1,238
|
|
|
38
|
%
|
|
(89
|
)
|
|
(7
|
)%
|
|||
Discovery Services
|
243
|
|
|
6
|
%
|
|
53
|
|
|
2
|
%
|
|
190
|
|
|
358
|
%
|
|||
Total Revenue
|
$
|
4,000
|
|
|
100
|
%
|
|
$
|
3,222
|
|
|
100
|
%
|
|
$
|
778
|
|
|
24
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|||||||||||
(dollars in thousands)
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
Revenue
|
$
|
12,556
|
|
|
$
|
6,164
|
|
|
$
|
6,392
|
|
|
104
|
%
|
Cost of revenues
|
9,342
|
|
|
5,359
|
|
|
3,983
|
|
|
74
|
%
|
|||
Research and development expenses
|
4,335
|
|
|
3,093
|
|
|
1,242
|
|
|
40
|
%
|
|||
General and administrative expenses
|
9,536
|
|
|
8,231
|
|
|
1,305
|
|
|
16
|
%
|
|||
Sales and marketing expenses
|
3,543
|
|
|
2,738
|
|
|
805
|
|
|
29
|
%
|
|||
Loss from operations
|
(14,200
|
)
|
|
(13,257
|
)
|
|
(943
|
)
|
|
7
|
%
|
|||
Interest income (expense)
|
(197
|
)
|
|
(351
|
)
|
|
154
|
|
|
(44
|
)%
|
|||
Change in fair value of acquisition note payable
|
(91
|
)
|
|
—
|
|
|
(91
|
)
|
|
100
|
%
|
|||
Change in fair value of warrant liability
|
18
|
|
|
324
|
|
|
(306
|
)
|
|
(94
|
)%
|
|||
Loss before income taxes
|
(14,470
|
)
|
|
(13,284
|
)
|
|
(1,186
|
)
|
|
9
|
%
|
|||
Income tax provision (benefit)
|
—
|
|
|
(1,814
|
)
|
|
1,814
|
|
|
(100
|
)%
|
|||
Net (loss)
|
$
|
(14,470
|
)
|
|
$
|
(11,470
|
)
|
|
$
|
(3,000
|
)
|
|
26
|
%
|
|
Nine Months Ended September 30,
|
|
Change
|
|||||||||||||||||
|
2015
|
|
2014
|
|
|
|
|
|||||||||||||
(dollars in thousands)
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|||||||||
Biopharma Services
|
$
|
8,614
|
|
|
69
|
%
|
|
$
|
2,831
|
|
|
46
|
%
|
|
$
|
5,783
|
|
|
204
|
%
|
Clinical Services
|
3,274
|
|
|
26
|
%
|
|
3,280
|
|
|
53
|
%
|
|
(6
|
)
|
|
—
|
%
|
|||
Discovery Services
|
668
|
|
|
5
|
%
|
|
53
|
|
|
1
|
%
|
|
615
|
|
|
1,160
|
%
|
|||
Total Revenue
|
$
|
12,556
|
|
|
100
|
%
|
|
$
|
6,164
|
|
|
100
|
%
|
|
$
|
6,392
|
|
|
104
|
%
|
|
Nine Months Ended
September 30, |
||||||
(in thousands)
|
2015
|
|
2014
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
(9,951
|
)
|
|
$
|
(7,910
|
)
|
Investing activities
|
4,572
|
|
|
(10,909
|
)
|
||
Financing activities
|
(257
|
)
|
|
108
|
|
||
Net (decrease) in cash and cash equivalents
|
$
|
(5,636
|
)
|
|
$
|
(18,711
|
)
|
•
|
our ability to consummate the public offering on the terms set forth in the Underwriting Agreement, or at all;
|
•
|
our ability to achieve revenue growth and profitability;
|
•
|
the costs for funding the operations we recently acquired, including Response Genetics, and our ability to successfully integrate those operations with and into our own;
|
•
|
our ability to obtain approvals for our new diagnostic tests;
|
•
|
our ability to execute on our marketing and sales strategy for our genomic tests and gain acceptance of our tests in the market;
|
•
|
our ability to obtain adequate reimbursement from governmental and other third-party payors for our tests and services;
|
•
|
the costs, scope, progress, results, timing and outcomes of the clinical trials of our diagnostic tests;
|
•
|
the costs of operating and enhancing our laboratory facilities;
|
•
|
the costs of additional general and administrative personnel;
|
•
|
the timing of and the costs involved in regulatory compliance, particularly if the regulations change;
|
•
|
the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;
|
•
|
our ability to manage the costs of manufacturing our NGS panels, microarrays and FHACT® probe;
|
•
|
our rate of progress in, and cost of research and development activities associated with, products in research and early development;
|
•
|
the effect of competing technological and market developments;
|
•
|
costs related to expansion;
|
•
|
our ability to secure financing and the amount thereof; and
|
•
|
other risks and uncertainties discussed in our annual report on Form 10-K for the year ended December 31, 2014, as updated in our quarterly reports on Form 10-Q, current reports on Form 8-K and other reports, as applicable, we file with the Securities and Exchange Commission.
|
•
|
Revenue recognition;
|
•
|
Accounts receivable and bad debts;
|
•
|
Stock-based compensation; and
|
•
|
Warrant liability.
|
•
|
our ability to consummate the public offering on the terms set forth in the Underwriting Agreement, or at all;
|
•
|
our ability to achieve profitability by increasing sales of our laboratory tests and services and to continually develop and commercialize novel and innovative genomic-based diagnostic tests and services for cancer patients;
|
•
|
our ability to successfully fund and integrate our recently acquired operations;
|
•
|
our ability to raise additional capital to meet our liquidity needs;
|
•
|
our ability to clinically validate our pipeline of genomic microarray tests currently in development;
|
•
|
our ability to execute on our marketing and sales strategy for our genomic tests and gain acceptance of our tests in the market;
|
•
|
our ability to keep pace with rapidly advancing market and scientific developments;
|
•
|
our ability to satisfy U.S. (including FDA) and international regulatory requirements with respect to our tests and services, many of which are new and still evolving;
|
•
|
our ability to obtain reimbursement from governmental and other third-party payors for our tests and services;
|
•
|
competition from clinical laboratory services companies, genomic-based diagnostic tests currently available or new tests that may emerge;
|
•
|
our ability to maintain our clinical collaborations and enter into new collaboration agreements with highly regarded organizations in the cancer field so that, among other things, we have access to thought leaders in the field and to a robust number of samples to validate our genomic tests;
|
•
|
our ability to maintain our present customer base and obtain new customers;
|
•
|
potential product liability or intellectual property infringement claims;
|
•
|
our dependency on third-party manufacturers to supply or manufacture our products;
|
•
|
our ability to manage significant fluctuations in our quarterly operating results, which may occur as a result of the timing, size and duration of our contracts with biopharmaceutical companies and clinical research organizations;
|
•
|
our ability to attract and retain a sufficient number of scientists, clinicians, sales personnel and other key personnel with extensive experience in oncology, who are in short supply;
|
•
|
our ability to obtain or maintain patents or other appropriate protection for the intellectual property in our proprietary tests and services;
|
•
|
our dependency on the intellectual property licensed to us or possessed by third parties;
|
•
|
our ability to expand internationally and launch our tests in emerging markets, such as India and Brazil;
|
•
|
our ability to adequately support future growth; and
|
•
|
the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2014, as updated in our quarterly reports on Form 10-Q, current reports on Form 8-K and other reports, as applicable, that we file with the Securities and Exchange Commission.
|
•
|
the results of clinical trials;
|
•
|
the cost, performance and reliability of the combined company's tests and services, and the tests and services offered by competitors;
|
•
|
Requires each medical device manufacturer to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices, beginning in 2013. This tax may apply to some or all of our current products and products which are in development.
|
•
|
Mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. In addition, a productivity adjustment is made to the fee schedule payment amount. These changes in payments apply to some or all of the clinical laboratory test services we furnish to Medicare beneficiaries.
|
•
|
Establishes an Independent Payment Advisory Board to reduce the per capita rate of growth in Medicare spending. The Independent Payment Advisory Board has broad discretion to propose policies, which may have a negative impact on payment rates for services, including clinical laboratory services, beginning in 2016, and for hospital services beginning in 2020.
|
•
|
the federal Anti-kickback Statute, which prohibits, among other things, persons or entities from soliciting, receiving, offering or providing remuneration, directly or indirectly, in return for or to induce either the referral of an individual for, or the purchase order or recommendation of, any item or services for which payment may be made under a federal health care program such as the Medicare and Medicaid programs;
|
•
|
the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of "designated health services" with whom the physician or a member of the physician's immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies;
|
•
|
HIPAA, which established federal crimes for knowingly and willfully executing a scheme to defraud any health care benefit program or making false statements in connection with the delivery of or payment for health care benefits, items or services;
|
•
|
the federal civil monetary penalties law, which prohibits, among other things, offering or transferring remuneration, including waivers of co-payments and deductible amounts (or any part thereof), to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary's decision to order or receive items or services reimbursable by the government from a particular provider or supplier;
|
•
|
federal false claims laws, which, prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; and
|
•
|
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
|
|
|
|
|
|
|
Cancer Genetics, Inc.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|||
Date: November 9, 2015
|
|
|
|
|
|
/s/ Panna L. Sharma
|
|
|
|
|
|
|
Panna L. Sharma
|
|
|
|
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|||
Date: November 9, 2015
|
|
|
|
|
|
/s/ Edward J. Sitar
|
|
|
|
|
|
|
Edward J. Sitar
|
|
|
|
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
Date: November 9, 2015
|
|
|
|
/s/ Panna L. Sharma
|
|
|
|
|
Panna L. Sharma
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date: November 9, 2015
|
|
|
|
/s/ Edward J. Sitar
|
|
|
|
|
Edward J. Sitar
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
/s/ Panna L. Sharma
|
Panna L. Sharma
|
President and Chief Executive Officer
|
|
/s/ Edward J. Sitar
|
Edward J. Sitar
|
Chief Financial Officer
|